Vascular Biogenics Ltd.
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 20-F (Mark One) [ ]REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ]SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report: Not applicableFor the transition period from______ to _______Commission file number 001-36581 Vascular Biogenics Ltd.(Exact name of registrant as specified in its charter) N/A(Translation of Registrant’s name into English)Israel(Jurisdiction of incorporation or organization)8 HaSatat StModi’inIsrael 7178106(Address of principal executive offices)Dror Harats, Chief Executive Officer8 HaSatat St.Modi’inIsrael 7178106Tel: +972-8-9935000(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of Each Class Name of Each Exchange on which RegisteredOrdinary Shares, par value NIS 0.01 each The NASDAQ Stock Market LLC Securities registered or to be registered pursuant to Section 12(g) of the Act. NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2018, the Registrant had 35,881,128 Ordinary Shares outstanding. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] If this report is an annual report or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files) Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. Seedefinition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]Emerging Growth Company [X] If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected notto use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of theExchange Act. [ ] † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP [ ] International Financing Reporting Standards as issuedby the International Accounting Standards Board [X] Other [ ] If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 [ ] Item 18 [ ] If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]  TABLE OF CONTENTS PART I5Item 1. Identity of Directors, Senior Management and Advisers5Item 2. Offer Statistics and Expected Timetable5Item 3. Key Information5Item 4. Information on the Company37Item 4A. Unresolved Staff Comments50Item 5. Operating and Financial Review and Prospects50Item 6. Directors, Senior Management and Employees62Item 7. Major Shareholders and Related Party Transactions78Item 8. Financial Information81Item 9. The Offer and Listing81Item 10. Additional Information82Item 11. Quantitative and Qualitative Disclosures About Market Risk99Item 12. Description of Securities Other Than Equity Securities99PART II100Item 13. Defaults, Dividend Arrearages and Delinquencies100Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds100Item 15. Controls and Procedures100Item 16. [Reserved]101Item 16A. Audit committee financial expert101Item 16B. Code of Ethics101Item 16C. Principal Accountant Fees and Services102Item 16D. Exemptions from the Listing Standards for Audit Committees102Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers102Item 16F. Change in Registrant’s Certifying Accountant102Item 16G. Corporate Governance102Item 16H. Mine Safety Disclosure103PART IIIF-1Item 17. Financial StatementsF-1Item 18. Financial StatementsF-1Item 19. Exhibits104 2Table of Contents General Matters In this Annual Report on Form 20-F (“Annual Report”), unless the context indicates otherwise, references to “NIS” are to the legal currency of Israel,“U.S. dollars,” “$” or “dollars” are to United States dollars, and the terms “we,” “us,” “our company,” “our,” and “Vascular Biogenics” refer to VascularBiogenics Ltd. Cautionary Note Regarding Forward-Looking Statements This Annual Report contains forward-looking statements that relate to future events or our future financial performance, which express the currentbeliefs and expectations of our management. Such statements involve a number of known and unknown risks, uncertainties and other factors that couldcause our actual future results, performance or achievements to differ materially from any future results, performance or achievements expressed or impliedby such forward-looking statements. Forward-looking statements include all statements that are not historical facts and can be identified by words such as,but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “will,” “would,” “could,” and similar expressionsor phrases. We have based these forward-looking statements largely on our management’s current expectations and future events and financial trends thatwe believe may affect our financial condition, results of operations, business strategy and financial needs. Forward-looking statements include, but are notlimited to, statements about: ●the initiation, timing, progress and results of our pre-clinical and clinical trials, and our research and development programs; ●our expectations about the availability of data from our clinical trials; ●our ability to advance product candidates into, and successfully complete, clinical trials; ●our plans for future trials; ●our ability to manufacture our product candidates in sufficient quantities for clinical trials; ●the timing or likelihood of regulatory filings and approvals; ●the commercialization of our product candidates, if approved; ●potential advantages of our product candidates; ●the pricing and reimbursement of our product candidates, if approved; ●our ability to develop and commercialize additional product candidates based on our platform technologies; ●our business strategy; ●the implementation of our business model, strategic plans for our business, product candidates and technology; ●the scope and duration of protection we are able to establish and maintain for intellectual property rights covering our product candidates andtechnology; ●estimates of our expenses, future revenues, capital requirements and our needs for additional financing; ●our ability to establish and maintain collaborations and the benefits of such collaborations; ●our ability to maintain our level of grant funding or obtain additional grant funding; ●developments relating to our competitors and our industry; and ●other risks and uncertainties, including those listed under the caption “Risk Factors.” 3Table of Contents All forward-looking statements involve risks, assumptions and uncertainties. You should not rely upon forward-looking statements as predictors offuture events. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are notpredictable or within our control. Actual results may differ materially from expected results. See the sections “Item 3. Key Information-D. Risk Factors,”“Item 5. Operating and Financial Review and Prospectus” and elsewhere in this Annual Report for a more complete discussion of these risks, assumptionsand uncertainties and for other risks and uncertainties. These risks, assumptions and uncertainties are not necessarily all of the important factors that couldcause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also couldharm our results. All of the forward-looking statements we have included in this Annual Report are based on information available to us on the date of this AnnualReport. We undertake no obligation, and specifically decline any obligation, to update publicly or revise any forward-looking statements, whether as aresult of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in thisAnnual Report might not occur. The audited financial statements for the years ended December 31, 2018, 2017 and 2016 in this Annual Report have been prepared in accordancewith the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). 4Table of Contents PART I Item 1. Identity of Directors, Senior Management and Advisers Not applicable. Item 2. Offer Statistics and Expected Timetable Not applicable. Item 3. Key Information A. Selected Financial Data The following table summarizes our financial data. We have derived the summary statements of operations data for the years ended December 31, 2018,2017, and 2016, and the balance sheet data as of December 31, 2018 and 2017 from our audited financial statements included elsewhere in this AnnualReport. The statements of operations data for the years ended December 31, 2015 and 2014, and the balance sheet data as of December 31, 2016, 2015 and2014 is derived from audited financial statements not included in this Annual Report. The summary of our financial data set forth below should be read together with our audited financial statements and the related notes, as well as thesection entitled “Item 5. Operating and Financial Review and Prospects,” included elsewhere in this Annual Report. (in thousands, except share and per-share data) 2018 2017 2016 2015 2014 Statements of operations data: Revenues $585 $13,864 $- $- $- Cost of revenues (235) (340) - - - Gross Profit $350 $13,524 $- $- $- Research and development expenses, net $15,940 $17,770 $12,447 $11,198 $10,974 Marketing expenses 397 562 - - - General and administrative expenses 5,220 5,847 3,828 3,673 3,804*Operating loss 21,207 10,655 16,275 14,871 14,778 Financial income (908) (544) (285) (100) (15)Financial expenses: Loss from change in fair value of convertible loan - - - - 2,342 Other financial expenses 159 27 12 117 302 Financial (income) expenses, net (749) (517) (273) 17 2,629 Other comprehensive loss (income) (25) 24 5 (6) (10)Comprehensive loss 20,433 $10,162 $16,007 14,882 $17,397 Loss per ordinary share, basic and diluted 0.62 $0.37 $0.64 $0.73 $3.09 Weighted average ordinary shares outstanding, basic anddiluted 32,969,094 27,398,169 24,970,585 20,309,596 5,627,324 * Includes a one-time expense related to the IPO grant of options to our Chief Executive Officer of $2.2 million. December 31, 2018 2017 2016 2015 2014 (in thousands) Statements of financial position data: Cash and cash equivalents and short-term bankdeposits $50,482 $54,729 $45,254 $37,146 $36,783 Total assets 60,678 65,689 47,274 39,238 38,138 Total liabilities 7,585 9,789 4,874 4,231 3,036 Ordinary shares 73 57 50 38 32 Total equity 53,093 55,900 42,400 35,007 35,102 5Table of Contents B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report, includingthe financial statements and the related notes included elsewhere in this Annual Report. The risks and uncertainties described below are not the only oneswe face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors thatadversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospectscould be materially and adversely affected. Risks Related to Our Financial Condition and Capital Requirements We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. We are a clinical-stage biotechnology company, and we have not yet generated any regular revenue streams. We have incurred losses in each year since ourinception in 2000, including net losses of $20.5 million, $10.1 million and $16.0 million for the years ended December 31, 2018, 2017 and 2016,respectively. As of December 31, 2018, we had an accumulated deficit of $188.6 million. We have devoted most of our financial resources to research and development, including our clinical and pre-clinical development activities. To date, wehave financed our operations primarily through the sale of equity securities and convertible debt and, to a lesser extent, through grants from governmentalagencies. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity ordebt financings, strategic collaborations or additional grants. We have completed only a single pivotal clinical trial for our product candidates and it will bea few years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to market a product candidate, ourfuture revenues will depend upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficientmarket acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increasesubstantially if and as we: ●continue our research and pre-clinical and clinical development of our product candidates; ●expand the scope of our current clinical trials for our product candidates; ●initiate additional pre-clinical, clinical or other studies for our product candidates; ●seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials; ●further develop the manufacturing process for our product candidates; ●Operate and possibly expand our new, commercial scale manufacturing facility; ●change or add additional manufacturers or suppliers; ●establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; ●seek to identify and validate additional product candidates; ●acquire or in-license other product candidates and technologies; 6Table of Contents ●make milestone or other payments under any in-license or other intellectual property related agreements, including our agreement with TelHashomer-Medical Research, Infrastructure and Services Ltd. and our license from Janssen Vaccines & Prevention B.V., or Janssen (formerly knownas Crucell Holland B.V.), and any other licensing arrangements we may enter into the future; ●maintain, protect and expand our intellectual property portfolio; ●attract and retain skilled personnel; ●create additional infrastructure to support our operations as a public company; and ●experience any delays or encounter issues with any of the above. The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results ofoperations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectationsof securities analysts or investors, which could cause our share price to decline. We have never generated any revenue from product sales and may never be profitable. Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete thedevelopment of, obtain the regulatory approvals of, and commercialize our product candidates. We do not anticipate generating revenues from product salesfor the foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in: ●completing research and pre-clinical and clinical development of our product candidates; ●seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical trials; ●developing a sustainable, scalable, reproducible, and transferable manufacturing process for our product candidates; ●establishing and maintaining supply and manufacturing relationships with third parties that can provide products and services adequate, in amountand quality, to support clinical development and the market demand for our product candidates, if approved; ●And/or successfully establishing, validating and operating our own manufacturing facilities to produce our products in amount and quality, tosupport clinical development and the market demand for our product candidates, if approved, as well as gaining the health authorities, such as theFDA and EMEA, approval for our manufacturing facility and product. ●launching and commercializing any product candidates for which we obtain regulatory and marketing approval, either by collaborating with apartner or, if launched independently, by establishing a sales, marketing and distribution infrastructure; ●obtaining market acceptance of any product candidates that receive regulatory approval as viable treatment options; ●addressing any competing technological and market developments; ●implementing additional internal systems and infrastructure, as needed; ●identifying and validating new product candidates; ●negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; ●maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and ●attracting, hiring and retaining qualified personnel. 7Table of Contents Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing anyapproved product candidate. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency, or the EMA,or other regulatory agencies, domestic or foreign, to perform clinical and other studies in addition to those that we currently anticipate. Even if we are able togenerate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations. We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital whenneeded may force us to delay, limit or terminate our product development efforts or other operations. We are currently advancing VB-111 for solid cancer indications. We intend to advance this current clinical product candidate through clinical developmentand other product candidates through pre-clinical and clinical development. Developing pharmaceutical products is expensive, and we expect our researchand development expenses to increase substantially in connection with our ongoing activities, particularly as we advance our product candidates in clinicaltrials. As of December 31, 2018, our cash and cash equivalents and short-term bank deposits were $50.5 million. As of December 31, 2018, we estimate that ourexisting cash, cash equivalents and short-term bank deposits will be sufficient to fund our operations for about 3 years. However, our operating plan maychange as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned through public or private equityor debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances andlicensing arrangements or a combination of these approaches. In any event, we might require additional capital to obtain regulatory approval for our productcandidates, and to commercialize any that receive regulatory approval. Raising funds in the current economic environment may present additionalchallenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions arefavorable or if we have specific strategic considerations. Any additional fundraising efforts may divert our management from their day-to-day activities, which may compromise our ability to develop andcommercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptableto us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders, and the issuance of additionalsecurities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our ordinary shares to decline. The sale ofadditional equity or convertible securities would dilute all of our shareholders. The incurrence of indebtedness would result in increased fixed paymentobligations and we may be required to agree to certain restrictive covenants such as limitations on our ability to incur additional debt, limitations on ourability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable,and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research ordevelopment programs or the commercialization of any product candidates, and we may be unable to expand our operations or otherwise capitalize on ourbusiness opportunities, as desired. We have received and may continue to receive Israeli governmental grants to assist in the funding of our research and development activities. If we loseour funding from these research and development grants, we may encounter difficulties in the funding of future research and development projects andimplementing technological improvements, which would harm our operating results. Through December 31, 2018 we had received an aggregate of $22.6 million in the form of grants from the Israeli Office of the Chief Scientist, or OCS, whichhas later transformed to the Israeli Innovation Authority, or IIA. The requirements and restrictions for such grants are found in the Israel Encouragement ofResearch and Development in Industries, or the Research Law. Under the Research Law, royalties of 3% to 3.5% on the revenues derived from sales ofproducts or services developed in whole or in part using these IIA grants are payable to the Israeli government. We developed both of our platformtechnologies, at least in part, with funds from these grants, and accordingly we would be obligated to pay these royalties on sales of any of our productcandidates that achieve regulatory approval. The maximum aggregate royalties paid generally cannot exceed 100% of the grants made to us, plus annualinterest equal to the 12-month LIBOR applicable to dollar deposits, as published on the first business day of each calendar year. As of December 31, 2018,the balance of the principal and interest in respect of our commitments for future payments to the IIA totaled approximately $27.8 million. As part of fundingour current and planned product development activities, we submitted follow-up grant application. These grants have funded some of our personnel, development activities with subcontractors and other research and development costs and expenses.However, if these awards are not funded in their entirety or if new grants are not awarded in the future, due to, for example, IIA budget constraints orgovernmental policy decisions, our ability to fund future research and development and implement technological improvements would be impaired, whichwould negatively impact our ability to develop our product candidates. 8Table of Contents The Israeli government grants we have received for research and development expenditures restrict our ability to manufacture products and transfertechnologies outside of Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions, we may be required to refund grantspreviously received together with interest and penalties. Our research and development efforts have been financed, in part, through the grants that we have received from the IIA. We, therefore, must comply with therequirements of the Research Law. Under the Research Law, we are required to manufacture the major portion of each of our products developed using these grants in the State of Israel orotherwise ask for special approvals. We may not receive the required approvals for any proposed transfer of manufacturing activities. Even if we do receiveapproval to manufacture products developed with government grants outside of Israel, the royalty rate may be increased and we may be required to pay up to300% of the grant amounts plus interest, depending on the manufacturing volume that is performed outside of Israel. This restriction may impair our abilityto outsource manufacturing or engage in our own manufacturing operations for those products or technologies. See “Item 5. Operating and Financial Reviewand Prospects-Financial Overview-Research and Development Expenses” for additional information. Additionally, under the Research Law, we are prohibited from transferring, including by way of license, the IIA-financed technologies and related intellectualproperty rights and know-how outside of the State of Israel, except under limited circumstances and only with the approval of the IIA Research Committee.We may not receive the required approvals for any proposed transfer and, even if received, we may be required to pay the IIA a portion, to be set by the IIAupon their approval of such transaction, of the consideration or milestone and royalties payments that we receive upon any sale or out licensing of suchtechnology to a non-Israeli entity, up to 600% of the grant amounts plus interest. The scope of the support received, the royalties that we have already paid tothe IIA, the amount of time that has elapsed between the date on which the know-how or the related intellectual property rights were transferred and the dateon which the IIA grants were received and the sale price and the form of transaction will be taken into account in order to calculate the amount of thepayments to the IIA. Approval of the transfer of technology to residents of the State of Israel is required, and may be granted in specific circumstances only ifthe recipient abides by the provisions of applicable laws, including the restrictions on the transfer of know-how and the obligation to pay royalties. Noassurance can be made that approval to any such transfer, if requested, will be granted. These restrictions may impair our ability to sell our technology assets or to perform or outsource manufacturing outside of Israel, engage in change of controltransactions or otherwise transfer our know-how outside of Israel and may require us to obtain the approval of the IIA for certain actions and transactions andpay additional royalties and other amounts to the IIA. In addition, any change of control and any change of ownership of our ordinary shares that would makea non-Israeli citizen or resident an “interested party,” as defined in the Research Law, requires prior written notice to the IIA, and our failure to comply withthis requirement could result in criminal liability. These restrictions will continue to apply even after we have repaid the full amount of royalties on the grants. For the years ended December 31, 2018, 2017and, 2016, we recorded grants totaling $2.0 million, $2.7 million, and $1.7 million from the IIA, respectively. The grants represented 11.22%, 14%, and 12%respectively, of our gross research and development expenditures for the years ended December 31, 2018, 2017 and, 2016. If we fail to satisfy the conditionsof the Research Law, we may be required to refund certain grants previously received together with interest and penalties, and may become subject tocriminal charges. Risks Related to the Discovery and Development of Our Product Candidates We have planned on the future success of our lead product candidate, VB-111, that missed the primary end points in the Phase 3 study and continue toadvance it for other indications. Any failure to successfully develop, obtain regulatory approval for and commercialize VB-111 for cancer indications,independently or in cooperation with a third party collaborator, or the experience of significant delays in doing so, would compromise our ability togenerate revenue and become profitable. We have invested a significant portion of our efforts and financial resources in the development of VB-111 for rGBM and VB-201 for psoriasis and ulcerativecolitis for which we have completed clinical trials in which they did not meet their primary endpoints. Our ability to generate product revenue from ourproduct candidate depends heavily on the successful development and commercialization of our products, which, in turn, depends on several factors,including the following: ●our ability to continue and support the VTS platform technology and its lead candidate VB-111; ●successfully completing our ongoing and future trials of VB-111; ●our ability to raise additional funding sufficient to conduct future clinical trials; ●demonstrating that VB-111 for cancer indications is safe and effective at a sufficient level of statistical or clinical significance and otherwiseobtaining marketing approvals from regulatory authorities; ●establishing successful manufacturing arrangements with third-party manufacturers that are compliant with current good manufacturing practices, orcGMP, and which will ensure the development of a large scale manufacturing process and adequate facilities or being able to conduct suchmanufacturing ourselves; ●operating our facility for the manufacture of commercial quantities of our candidate products, if approved; 9Table of Contents ●establishing successful sales and marketing arrangements for our products, if approved; ●maintaining an acceptable safety and efficacy profile for our products; ●the availability of coverage and reimbursement to patients from healthcare payors for our products, if approved; and ●other risks described in these “Risk Factors.” Our product candidates are based on novel technologies, which makes it difficult to predict the time and cost of product candidate development andpotential regulatory approval. We have concentrated our product research and development efforts on our three distinct platform technologies, and our future success depends on thesuccessful development of these technologies. We could experience development problems in the future related to our technologies, which could causesignificant delays or unanticipated costs, and we may not be able to solve such development problems. We may also experience delays in developing asustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, if we decide to do so, which may prevent usfrom completing our clinical trials or commercializing our products on a timely or profitable basis, if at all. In addition, the clinical trial requirements of the FDA, the EMA and other regulatory agencies and the criteria these regulators use to determine the safety andefficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. Theregulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensivelystudied pharmaceutical or other product candidates. Approvals by the FDA may not be indicative of what the EMA or other regulatory agencies may requirefor approval, and vice versa. Regulatory requirements governing pharmaceutical products have changed frequently and may continue to change in the future. Also, before a clinical trialcan begin at an institution funded by the U.S. National Institutes of Health, or the NIH, that institution’s institutional review board, or IRB, and itsInstitutional Biosafety Committee will have to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinicaltrials of pharmaceutical products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of ourproduct candidates. These regulatory agencies and review committees and the new requirements and guidelines they promulgate may lengthen the regulatory review process,require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or preventapproval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions. As we advance our productcandidates, we will be required to consult with these regulatory groups, and comply with applicable requirements and guidelines. If we fail to do so, we maybe required to delay or discontinue development of our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatoryapproval necessary to bring a potential product candidate to market could impair our ability to generate product revenue and to become profitable. We may find it difficult to enroll patients in our clinical trials, and patients could discontinue their participation in our clinical trials, which could delayor prevent clinical trials of our product candidates. Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials dependson the speed at which we can recruit patients to participate in testing our product candidates. We have experienced delays in some of our clinical trials, andwe may experience similar delays in the future. If patients are unwilling to participate in our clinical trials because of negative publicity from adverse eventsin the biotechnology or pharmaceutical industries or for other reasons, including competitive clinical trials for similar patient populations, the timeline forrecruiting patients, conducting trials and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs,delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether. We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in atrial, to complete our clinical trials in a timely manner. Patient enrollment is affected by factors including: ●severity of the disease under investigation; ●design of the trial protocol; ●size of the patient population; ●eligibility criteria for the trial in question; 10Table of Contents ●perceived risks and benefits of the product candidate under study, and specifically in reference to studies in other indications, with the sameproduct; ●proximity and availability of clinical trial sites for prospective patients; ●availability of competing therapies and clinical trials; ●efforts to facilitate timely enrollment in clinical trials; ●patient referral practices of physicians; and ●ability to monitor patients adequately during and after treatment. In particular, VB-111 for ovarian cancer is intended for a rare disorder with limited patient pools from which to draw for clinical trials. The eligibility criteriaof our clinical trials will further limit the pool of available trial participants. Additionally, the process of finding and diagnosing patients may prove costly. We plan to seek initial marketing approval in Europe in addition to the United States. We may not be able to initiate or continue clinical trials if we cannotenroll a sufficient number of eligible patients to participate in the clinical trials required by the EMA or other foreign regulatory agencies. Our ability tosuccessfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreigncountries, including: ●difficulty in establishing or managing relationships with contract research organizations, or CROs, and physicians; ●different standards for the conduct of clinical trials; ●our inability to locate qualified local consultants, physicians and partners; and ●the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation ofpharmaceutical and biotechnology products and treatment. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing orplanned clinical trials. In addition, patients enrolled in our clinical trials may discontinue their participation at any time during the trial as a result of a number of factors, includingwithdrawing their consent or experiencing adverse clinical events, which may or may not be judged related to our product candidates under evaluation. Thediscontinuation of patients in any one of our trials may cause us to delay or abandon our clinical trial, or cause the results from that trial not to be positive orsufficient to support a filing for regulatory approval of the applicable product candidate. We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatoryauthorities. We are currently in Phase 3 clinical trial for VB-111 for ovarian cancer and expect to launch a couple of Investigator Initiated trials one for rGBM and theother for GI tumors in combination with immune-oncology drug. Before obtaining marketing approval from regulatory authorities for the sale of our productcandidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing isexpensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed onschedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinicaldevelopment include: ●delays in reaching a consensus with regulatory agencies on trial design; ●delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites; ●delays in obtaining required IRB approval at each clinical trial site; ●delays in recruiting suitable patients to participate in our clinical trials including in particular for those trials for rare diseases such as ovarian cancer; ●imposition of a clinical hold by regulatory agencies, including after an inspection of our clinical trial operations or trial sites; ●failure by our CROs, other third parties or us to adhere to clinical trial requirements; 11Table of Contents ●failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory requirements in other countries; ●delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites; ●delays in having patients complete participation in a trial or return for post-treatment follow-up; ●clinical trial sites or patients dropping out of a trial; ●occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or ●changes in regulatory requirements and guidance that require amending or submitting new clinical trial protocols. ●Discontinuation or other hurdles in the expected Investigators’ Initiated trials, which are conducted by academic and other investigational thirdparties and are not controlled by us. Any inability to successfully complete pre-clinical and clinical development could result in additional costs to us or impair our ability to generate revenuefrom product sales. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional studies tobridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive rightto commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfullycommercialize our product candidates. If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may: ●fail to obtain, or be delayed in obtaining, marketing approval for our product candidates; ●obtain approval for indications or patient populations that are not as broad as intended or desired; ●obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; ●need to change the way the product is administered; ●be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements; ●have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a risk evaluation andmitigation strategy, or REMS, or modified REMS; ●be subject to the addition of labeling statements, such as warnings or contraindications; ●be sued; or ●experience damage to our reputation. Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize ourproduct candidates. Side effects may occur following treatment with our product candidates, which could make it more difficult for our product candidates to receiveregulatory approval. Treatment with our product candidates may cause side effects or adverse events. In addition, since our product candidates are in some cases administered incombination with other therapies, patients or clinical trial participants may experience side effects or other adverse events that are unrelated to our productcandidate, but may still impact the success of our clinical trials. Additionally, our product candidates could potentially cause other adverse events that havenot yet been predicted. The inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to other therapiesor medications that such patients may be using or the severity of the medical condition treated. The experience of side effects and adverse events in ourclinical trials could make it more difficult to achieve regulatory approval of our product candidates or, if approved, could negatively impact the marketacceptance of such products. 12Table of Contents Success in early and prior clinical trials may not be indicative of results obtained in later trials. There is a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnologyindustries have suffered significant setbacks in later stage clinical trials even after achieving promising results in earlier stage and prior clinical trials. Dataobtained from pre-clinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition,regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of productdevelopment. The results from our clinical trials may not be sufficiently robust to support the submission for marketing approval for our product candidates. Beforewe submit our product candidates for marketing approval, the FDA and the EMA may require us to conduct additional clinical trials, or evaluatesubjects for an additional follow-up period. It is possible that, even if we achieve favorable results in our clinical trials, the FDA may require us to conduct additional clinical trials, possibly involving alarger sample size or a different clinical trial design, particularly if the FDA does not find the results from our completed clinical trials to be sufficientlypersuasive to support a Biologics License Application, or BLA, or a New Drug Application, or NDA. For example, because the dose we used in our Phase 2trial was limited by our production capacity, the dose of VB-111 that we intend to use in our Phase 3 potential registration trial may not be the maximumefficacious dose. The FDA might require data on higher doses of VB-111, this will likely delay development. The FDA may also require that we conduct alonger follow-up period of subjects treated with our product candidates prior to accepting our BLA or NDA. It is possible that the FDA or the EMA may not consider the results of our clinical trials to be sufficient for approval of our product candidates for their targetindications. If the FDA or the EMA requires additional studies for any reason, we would incur increased costs and delays in the marketing approval process,which may require us to expend more resources than we have available. In addition, it is possible that the FDA and the EMA may have divergent opinions onthe elements necessary for a successful BLA or NDA and Marketing Authorization Application, which is the equivalent of a BLA, respectively, which maycause us to alter our development, regulatory or commercialization strategies. Even if we complete the necessary pre-clinical studies and clinical trials, we cannot predict when or if we will obtain regulatory approval tocommercialize a product candidate or the approval may be for a more narrow indication than we expect. We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our productcandidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we maynot be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from futurelegislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process.Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to theperformance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successfulcommercialization of our treatment candidates. A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process. If a drug is intended for the treatment of a serious or life-threatening disease or condition and the drug demonstrates the potential to address unmet medicalneeds for this disease or condition, the drug sponsor may apply for FDA fast track designation. If fast track designation is obtained, the FDA may initiatereview of sections of a new drug application, or NDA, before the application is complete. This “rolling review” is available if the applicant provides, and theFDA approves, a schedule for submission of the individual sections of the application. We have received fast track designation from the FDA for VB-111 for prolongation of survival in patients with glioblastoma that has recurred followingtreatment with temozolomide, a chemotherapeutic agent commonly used to treat newly diagnosed glioblastoma, and radiation. We may seek fast trackdesignation for other product candidates and other indications. Even though we have received fast track designation, we may not experience a fasterdevelopment process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that thedesignation is no longer supported by data from our clinical development program. Our fast track designation does not guarantee that we will qualify for orbe able to take advantage of the expedited review procedures or that we will ultimately obtain regulatory approval of VB-111. 13Table of Contents Even though we have obtained orphan drug designation for VB-111 for treatment of malignant glioma in the United States and glioma in Europe, andfor the treatment of ovarian cancer in Europe, we may not be able to obtain orphan drug exclusivity for this drug or for any of our other productcandidates. Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphandrugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which isgenerally defined as a patient population of fewer than 200,000 individuals annually in the United States. For VB-111, we have obtained orphan drugdesignation from the FDA for the treatment of malignant glioma and the EMA for the treatment of glioma and ovarian cancer, and we may seek orphan drugdesignation for other drug candidates. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has suchdesignation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing applicationfor the same drug for the same use or indication for that time period. The applicable period is seven years in the United States and ten years in Europe. TheEuropean exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficientlyprofitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request fordesignation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the raredisease or condition. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugscan be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition ifthe FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny. Even if we obtain regulatory approval in a jurisdiction, the regulatory authority may still impose significant restrictions on the indicated uses or marketing ofour product candidates, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. For example, the holder ofan approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. The holder of anapproved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling ormanufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentiallyapplicable federal and state laws. In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and otherregulatory authorities for compliance with cGMP, and adherence to commitments made in the BLA or NDA as the case may be. If we or a regulatory agencydiscover previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facility where theproduct is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall orwithdrawal of the product from the market or suspension of manufacturing. If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may: ●issue a warning letter asserting that we are in violation of the law; ●seek an injunction or impose civil or criminal penalties or monetary fines; ●suspend or withdraw regulatory approval; ●suspend any ongoing clinical trials; ●refuse to approve a pending BLA or NDA or supplements to a BLA or NDA submitted by us for other indications or new drug products; ●seize our product; or ●refuse to allow us to enter into supply contracts, including government contracts. Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negativepublicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenues. 14Table of Contents We have only limited experience in regulatory affairs and intend to rely on consultants and other third parties for regulatory matters, which may affectour ability or the time we require to obtain necessary regulatory approvals. We have limited experience in filing and prosecuting the applications necessary to gain regulatory approvals for drug and biologics candidates. Moreover,the product candidates that are likely to result from our development programs are based on new technologies that have not been extensively tested inhumans. The regulatory requirements governing these types of product candidates may be less well defined or more rigorous than for conventional products.As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals of any products that we develop. We intend torely on independent consultants for purposes of our regulatory compliance and product development and approvals in the United States and elsewhere. Anyfailure by our consultants to properly advise us regarding, or properly perform tasks related to, regulatory compliance requirements could compromise ourability to develop and seek regulatory approval of our product candidates. In addition to the level of commercial success of our product candidates, if approved, our future prospects are also dependent on our ability tosuccessfully develop a pipeline of additional product candidates, and we may not be successful in our efforts in using our platform technologies toidentify or discover additional product candidates. The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our two platform technologies. Ourresearch programs may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodology may beunsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have othercharacteristics that may make the products unmarketable or unlikely to receive marketing approval. If any of these events occur, we may be forced to abandon our development efforts for a program or programs. Research programs to identify new productcandidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidatesthat ultimately prove to be unsuccessful. 15Table of Contents Risks Related to Our Reliance on Third Parties We expect to rely on third parties to conduct some or all aspects of our product manufacturing, protocol development, research and pre-clinical andclinical testing, and these third parties may not perform satisfactorily. We do not expect to independently conduct all aspects of our product manufacturing, protocol development, research and pre-clinical and clinical testing.We currently rely, and expect to continue to rely, on third parties with respect to these items. In addition, we may pursue further clinical development of VB-111 for thyroid cancer or other indications with a strategic partner. Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it could delay our productdevelopment activities. Our reliance on these third parties for research and development activities will reduce our control over these activities but will notrelieve us of our responsibility to ensure compliance with all required regulations and study protocols. For example, for product candidates that we developand commercialize on our own, we will remain responsible for ensuring that each of our Investigational New Drug, or IND, enabling studies and clinical trialsare conducted in accordance with the study plan and protocols. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatoryrequirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the pre-clinical studies and clinicaltrials required to support future IND submissions and approval of our product candidates. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including: ●the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms; ●reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities; ●termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and ●disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, includingthe bankruptcy of the manufacturer or supplier. Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize futureproducts. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production. We and our contract manufacturers are subject to significant regulation with respect to manufacturing our product candidates. The manufacturingfacilities on which we rely may not continue to meet regulatory requirements and have limited capacity. We currently have relationships with a limited number of suppliers for the manufacturing of our product candidates. Each supplier may require licenses tomanufacture components of our product candidates or to utilize certain processes for the manufacture of our product candidates. If such components orlicenses are not owned by the supplier or in the public domain, we may be unable to transfer or sublicense the intellectual property rights we may have withrespect to such activities. All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our productcandidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinicaltrials must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures (including record keeping) and theimplementation and operation of systems to control and assure the quality of investigational products and products approved for sale. Poor control ofproduction processes can lead to the introduction of contaminants, or to inadvertent changes in the properties or stability of our product candidates that maynot be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of a BLA or NDA, asapplicable, on a timely basis and must adhere to the FDA’s good laboratory practices, or GLP, and cGMP regulations enforced by the FDA through itsfacilities inspection program. Our contract manufacturer for VB-111 has not produced a commercially approved product based on viral vectors and thereforehas not yet obtained the requisite FDA approvals to do so. Our facilities and controls and the facilities and controls of some or all of our third-partycontractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our productcandidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involvedwith the preparation of our product candidates or our other potential products or the associated controls for compliance with the regulations applicable to theactivities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted. 16Table of Contents The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-partycontractors. If any such inspection or audit identifies a failure to comply with applicable regulations or our product specifications or if a violation ofapplicable regulations, including a failure to comply with the product specifications, occurs independent of such an inspection or audit, we or the relevantregulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include thetemporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things,refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval. Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply. An alternativemanufacturer would need to be qualified through a BLA or NDA supplement which could result in further delay. The regulatory agencies may also requireadditional studies if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely toresult in a delay in our desired clinical and commercial timelines. These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us toincur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and weare unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed or we couldlose potential revenue. We expect to rely on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, itmay harm our business. We expect to rely on CROs and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have agreements governingtheir activities, we will have limited influence over their actual performance. We will control only some aspects of our CROs’ activities. Nevertheless, we willbe responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientificrequirements and standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results of IND-enabling studies and clinical trialsto assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected.The FDA enforces these GCPs through periodic inspections of study sponsors, principal investigators and clinical trial sites. If we or our CROs fail to complywith applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA may require us to perform additionalclinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. Inaddition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our product candidates.Recruitment may be challenging in the event of rare diseases and may require the performance of trials in a significant number of sites which may be harder tomonitor. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat suchclinical trials, which would delay the regulatory approval process. Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical andnonclinical programs. These CROs may also have relationships with other commercial entities, including parties developing potentially competitiveproducts, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our CROs donot successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtainis compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reason, our clinical trials may be extended,delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates. As a result, thecommercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed. We also expect to rely on other third parties to store and distribute our product candidates for any clinical trials that we may conduct. Any performancefailure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of ourproducts, if approved, producing additional losses and depriving us of potential product revenue. 17Table of Contents Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our tradesecrets will be misappropriated or disclosed. Because we rely on third parties to manufacture our product candidates, and because we collaborate with various organizations and academic institutions onthe advancement of our technology, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering intoconfidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similaragreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreementstypically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite these contractual provisions, theneed to share trade secrets and other confidential information increases the risk that such trade secrets become known by potential competitors, areinadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position isbased, in part, on our know-how and trade secrets, discovery by a third party of our trade secrets or other unauthorized use or disclosure would impair ourintellectual property rights and protections in our product candidates. In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to ourtrade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for aspecified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively byus, although in some cases we may share these rights with other parties. Despite our efforts to protect our trade secrets, our competitors may discover our tradesecrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we donot have proprietary or otherwise protected rights at the time of publication. Risks Related to Commercialization of Our Product Candidates We intend to fully rely or partially rely on third-party manufacturers to produce commercial quantities of any of our product candidates that receivesregulatory approval, but we have not entered into binding agreements with any such manufacturers to support commercialization. Additionally, thesemanufacturers do not have experience producing our product candidates at commercial levels and may not achieve the necessary regulatory approvalsor produce our product candidates at the quality, quantities, locations and timing needed to support commercialization. We have not yet secured manufacturing capabilities for commercial quantities of our product candidates to support commercialization of our productcandidates. Although we intend to partially rely on third-party manufacturers for commercialization, we have only entered into agreements with suchmanufacturers to assist in the scaling up of the manufacturing process of VB-111. We may be unable to negotiate binding agreements with the manufacturersto support our commercialization activities on commercially reasonable terms, which agreements will further be required to comply with the restrictionsimposed under the Research Law. We may encounter technical or scientific issues related to manufacturing or development that we may be unable to resolve in a timely manner or withavailable funds. Although we have established a site in which we are planning to apply a commercial scale manufacturing, the available capacity tomanufacture our product candidates on a commercial scale is still limited. In addition, our product candidates are novel, and no manufacturer currently hasthe experience or ability to produce our product candidates at commercial levels. If we are unable to produce or engage manufacturing partners to produceour product candidates on a larger scale on reasonable terms, our commercialization efforts will be harmed. Even if we timely complete the development of a manufacturing process and successfully transfer it to the third- party manufacturers of our productcandidates, if we or such third-party manufacturers are unable to produce the necessary quantities of our product candidates, or in compliance with cGMP orwith pertinent regulatory requirements, and within our planned time frame and cost parameters, the development and sales of our product candidates, ifapproved, may be impaired. In addition, any significant disruption in our supplier relationships could harm our business. We source key materials from third parties, either directlythrough agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers. There are a small number of suppliers forcertain key materials that are used to manufacture our product candidates. Such suppliers may not sell these key materials to our manufacturers at the timeswe need them or on commercially reasonable terms. We do not have any control over the process or timing of the acquisition of these key materials by ourmanufacturers. Moreover, we currently do not have any agreements for the commercial production of these key materials. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell any of our productcandidates that obtain regulatory approval, we may be unable to generate any revenue. We have no experience selling and marketing our product candidates or any other products. To successfully commercialize any products that may result fromour development programs and obtain regulatory approval, we will need to develop these capabilities, either on our own or with others. We may seek to enterinto collaborations with other entities to utilize their marketing and distribution capabilities, but we may be unable to do so on favorable terms, if at all. Ifany future collaborative partners do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessarymarketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We will be competing with manycompanies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to performmarketing and sales functions, we may be unable to compete successfully against these more established companies or successfully commercialize any of ourproduct candidates. 18Table of Contents We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced oreffective than ours, which could impair our ability to successfully commercialize our product candidates. We are engaged in pharmaceutical development, which is a rapidly changing field. We have competitors both in the United States and internationally,including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Many of our potential competitors have substantially greater financial, technical and other resources, such as larger research and development staff andexperienced marketing and manufacturing organizations. Competition may increase further as a result of advances in the commercial applicability oftechnologies and greater availability of capital for investment in these industries. Our potential competitors may succeed in developing, acquiring orlicensing on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patentprotection, regulatory approval, product commercialization and market penetration than us. Additionally, technologies developed by others may render ourpotential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors. In particular, VB-111 may face competition from currently approved drugs and drug candidates under development by others to treat rGBM or ovariancancer. In May 2009, the FDA granted accelerated approval to Avastin (bevacizumab), which is an angiogenesis inhibitor, to treat patients with rGBM atprogression after standard first-line therapy. In addition to bevacizumab, a number of companies are conducting late-stage clinical trials to test targeted drugsfocused on angiogenesis inhibition for the treatment of ovarian cancer, including, among others, Amgen’s trebananib, Boehringer Ingelheim’s nintedanib,AstraZeneca’s cediranib and Novartis’s Votrient. The expansion of PARP inhibitors (such as olaparib) for ovarian cancer, and clinical studies evaluating thepotential use of checkpoint inhibitors for ovarian cancer may also affect the prior lines of therapy, or the segment of patient population who will seektreatment with VB-111. Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, we may face competition frombiosimilars. In the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biologicalproducts that are demonstrated to be “highly similar,” or biosimilar, to or “interchangeable” with an FDA-approved biological product. This pathway couldallow competitors to reference data from biological products already approved after 12 years from the time of approval. In Europe, the European Commissionhas granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issuedover the past few years. In Europe, a competitor may reference data from biological products already approved, but will not be able to market a biosimilaruntil ten years after the time of approval. This 10-year period will be extended to 11 years if, during the first eight of those 10 years, the marketingauthorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existingtherapies. In addition, companies may be developing biosimilars in other countries that could compete with our products. If competitors are able to obtainmarketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendantcompetitive pressure and consequences. Expiration or successful challenge of our applicable patent rights could also trigger competition from other products,assuming any relevant exclusivity period has expired. In addition, although VB-111 has been granted orphan drug status by the FDA and EMA for a specified indication, there are limitations to the exclusivity. Inthe United States, the exclusivity period for orphan drugs is seven years, while pediatric exclusivity adds six months to any existing patents or exclusivityperiods. In Europe, orphan drugs may be able to obtain 10 years of marketing exclusivity and up to an additional two years on the basis of qualifyingpediatric studies. However, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria. Additionally, amarketing authorization holder may lose its orphan exclusivity if it consents to a second orphan drug application or cannot supply enough drug. Orphandrug exclusivity also can be lost when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug. Finally, as a result of the expiration or successful challenge of our patent rights, we could face more litigation with respect to the validity or scope of patentsrelating to other parties’ products. The availability of other parties’ products could limit the demand, and the price we are able to charge, for any products thatwe may develop and commercialize. Since some of our product candidates are aimed for rare diseases, loss of exclusivity or competition as described above may be very significant in light of thelimited size of the relevant market. 19Table of Contents The commercial success of any current or future product candidate, if approved, will depend upon the degree of market acceptance by physicians,patients, third-party payors and others in the medical community. Even if we obtain the requisite regulatory approvals, the commercial success of our product candidates will depend in part on the medical community,patients, and third-party payors accepting our product candidates as medically useful, cost-effective, and safe. Any product that we bring to the market maynot gain market acceptance by physicians, patients, third-party payors and others in the medical community. If these products do not achieve an adequatelevel of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of these productcandidates, if approved for commercial sale, will depend on a number of factors, including: ●the potential efficacy and potential advantages over alternative treatments; ●the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling; ●the prevalence and severity of any side effects resulting from the procedure by which our product candidates are administered; ●relative convenience and ease of administration; ●the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; ●the strength of marketing and distribution support and timing of market introduction of competitive products; ●publicity concerning our products or competing products and treatments; and ●sufficient third-party insurance coverage or reimbursement. Even if a potential product displays a favorable efficacy and safety profile in pre-clinical studies and clinical trials, market acceptance of the product will notbe known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates mayrequire significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required byconventional technologies. A variety of risks associated with international operations could hurt our business. If any of our product candidates are approved for commercialization, it is our current intention to market them on a worldwide basis, either alone or incollaboration with others. In addition, we conduct development activities in various jurisdictions throughout the world. We expect that we will be subject toadditional risks related to engaging in international operations, including: ●different regulatory requirements for approval of drugs and biologics in foreign countries; ●reduced protection for intellectual property rights; ●unexpected changes in tariffs, trade barriers and regulatory requirements; ●economic weakness, including inflation, or political instability in particular foreign economies and markets; ●compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ●foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doingbusiness in another country; ●workforce uncertainty in countries where labor unrest is more common than in the United States and Israel; ●production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and ●business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floodsand fires. The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage andreimbursement for any of our product candidates that are approved could limit our ability to market those products and compromise our ability togenerate revenue. The availability of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of ourproduct candidates will depend substantially, both in the U.S. and abroad, on the extent to which the costs of our product candidates will be paid by healthmaintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administrationauthorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may notbe able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough toallow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. 20Table of Contents There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principaldecisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S.Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare.Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentallynovel products such as ours, as there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may bemore conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement in the United States and have not been approvedfor reimbursement in certain European countries. The intended use of a drug product by a physician can also affect pricing. For example, CMS could initiate a National Coverage Determinationadministrative procedure, by which the agency determines which uses of a therapeutic product would and would not be reimbursable under Medicare. Thisdetermination process can be lengthy, thereby creating a long period during which the future reimbursement for a particular product may be uncertain. Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and webelieve the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries is likely to put pressure on the pricing and usage ofany of our product candidates that are approved for marketing. In many countries, the prices of medical products are subject to varying price controlmechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Othercountries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changesin pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, thereimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue andprofits. Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs, resulting inlegislation and reforms such as the Patient Protection and Affordable Care Act of 2010, may cause such organizations to limit both coverage and level ofreimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect toexperience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasinginfluence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularlyprescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entryof new products. The prescription for or promotion of off-label uses of our products by physicians could adversely affect our business. Any regulatory approval of our products is limited to those specific diseases and indications for which our products have been deemed safe and effective bythe FDA or similar authorities in other jurisdictions. In addition, any new indication for an approved product also requires regulatory approval. If we producean approved therapeutic product, we will rely on physicians to prescribe and administer it as we have directed and for the indications described on thelabeling. It is not, however, uncommon for physicians to prescribe medication for unapproved, or “off-label,” uses or in a manner that is inconsistent with themanufacturer’s directions. To the extent such off-label uses and departures from our administration directions become pervasive and produce results such asreduced efficacy or other adverse effects, the reputation of our products in the marketplace may suffer. In addition, off-label uses may cause a decline in ourrevenue or potential revenue, to the extent that there is a difference between the prices of our product for different indications. Furthermore, while physicians may choose to prescribe our drugs for off-label uses, our ability to promote the products is limited to those indications that arespecifically approved by the FDA or other regulators. Although regulatory authorities generally do not regulate the behavior of physicians, they do restrictcommunications by companies with respect to off-label use. If our promotional activities fail to comply with these regulations or guidelines, we may besubject to warnings from, or enforcement action by, these authorities. In addition, failure to follow FDA rules and guidelines relating to promotion andadvertising can result in the FDA’s refusal to approve a product, the suspension or withdrawal of an approved product from the market, product recalls, fines,disgorgement of money, operating restrictions, injunctions or criminal prosecution. Due to the small target patient populations for some of our product candidates, we face uncertainty related to pricing and reimbursement for theseproduct candidates. Some of our target patient populations for our initial product candidates are relatively small, as a result of which the pricing and reimbursement of ourproduct candidates, if approved, must be adequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, ourability to successfully market and sell our product candidates will be adversely affected. Inadequate reimbursement for such services may lead to physicianresistance and adversely affect our ability to market or sell our products. 21Table of Contents Risks Related to Our Business Operations Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel. We are highly dependent on principal members of our executive team listed under “Management” in this report, including Prof. Dror Harats, our chiefexecutive officer, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment agreementswith each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. Recruiting andretaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to oursuccess. There is currently a shortage of skilled executives in our industry, which is likely to continue. As a result, competition for skilled personnel is intenseand the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerouspharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, failure to succeed in pre-clinical studies or clinical trialsmay make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive, key employee,consultant or advisor may impede the progress of our research, development and commercialization objectives. Our collaborations with outside scientists and consultants may be subject to restriction and change. We work with medical experts, chemists, biologists and other scientists at academic and other institutions, and consultants who assist us in our research,development and regulatory efforts, including the members of our scientific advisory board. In addition, these scientists and consultants have provided, andwe expect that they will continue to provide, valuable advice regarding our programs and regulatory approval processes. These scientists and consultants arenot our employees and may have other commitments that would limit their future availability to us. If a conflict of interest arises between their work for usand their work for another entity, we may lose their services. In addition, we are limited in our ability to prevent them from establishing competing businessesor developing competing products. For example, if a key scientist acting as a principal investigator in any of our clinical trials identifies a potential productor compound that is more scientifically interesting to his or her professional interests, his or her availability to remain involved in our clinical trials could berestricted or eliminated. We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations. As of March 1, 2019, we had 39 employees. As we mature and undertake the activities required to advance our product candidates into later stage clinicaldevelopment and to operate as a public company, we expect to expand our full-time employee base and to hire more consultants and contractors. Ourmanagement may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time tomanaging these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in ourinfrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expectedgrowth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional productcandidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate or growrevenue could be compromised, and we may not be able to implement our business strategy. Our future financial performance and our ability tocommercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth. Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading. We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by theseparties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, provide accurate information to the FDA andnon-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or dataaccurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject toextensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations mayrestrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other businessarrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatorysanctions and cause serious harm to our reputation. We have adopted a code of conduct applicable to all of our employees, but it is not always possible toidentify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these lawsor regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have asignificant impact on our business, including the imposition of significant fines or other sanctions. 22Table of Contents We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our productcandidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvalscould be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims. The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of productliability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling orotherwise coming into contact with our product candidates. There is a risk that our product candidates may induce adverse events. If we cannot successfullydefend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liabilityclaims may result in: ●impairment of our business reputation; ●withdrawal of clinical trial participants; ●costs due to related litigation; ●distraction of management’s attention from our primary business; ●substantial monetary awards to patients or other claimants; ●the inability to commercialize our product candidates; ●decreased demand for our product candidates, if approved for commercial sale; and ●impairment of our ability to obtain product liability insurance coverage. We carry combined public and products liability (including human clinical trials extension) insurance of $5.0 million per occurrence and $5.0 millionaggregate limit, with extension to $10.0 million for the Phase 3 study in rGBM and for the Phase 3 study in ovarian cancer. We believe our product liabilityinsurance coverage is sufficient in light of our current clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost orin sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for any product candidates, we intend to expand ourinsurance coverage to include the sale of commercial products, but we may not be able to obtain product liability insurance on commercially reasonableterms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that hadunanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our share price to decline and, ifjudgments exceed our insurance coverage, could materially and adversely affect our financial position. Patients with the diseases targeted by some of our product candidates are often already in severe and advanced stages of disease and have both known andunknown significant pre- existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, includingdeath, for reasons that may be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts ofmoney to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us tosuspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our productcandidate, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may harm our reputation, delay ourregulatory approval process, limit the type of regulatory approvals our product candidates receive or maintain, and compromise the market acceptance of anyof our product candidates that receive regulatory approval. As a result of these factors, a product liability claim, even if successfully defended, could hurt ourbusiness and impair our ability to generate revenue. If our existing or future manufacturing facility is damaged or destroyed, or production at any of those facilities is otherwise interrupted, our businessand prospects would be negatively affected. We have a manufacturing facility for commercial scale production. If our existing or future manufacturing facilities, or the equipment in it, is damaged ordestroyed, we likely would not be able to quickly or inexpensively replace our manufacturing capacity and possibly would not be able to replace it at all.Any new facility needed to replace our existing or future manufacturing facility would need to comply with the necessary regulatory requirements, and betailored to our manufacturing requirements and processes. We would need FDA approval before using any product candidates manufactured at a new facilityin clinical trials or selling any products that are ultimately approved. Such an event could delay our clinical trials or, if any of our product candidates areapproved by the FDA, reduce or eliminate our product sales. If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldhave a material adverse effect on the success of our business. We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use,storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicalsand biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materialsand wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use ofhazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costsassociated with civil or criminal fines and penalties. 23Table of Contents Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from theuse of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we mayincur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws andregulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines,penalties or other sanctions. If our shipping capabilities become unavailable due to an accident, an act of terrorism, a labor strike or other similar event, our supply, production anddistribution processes could be disrupted. Some of our raw materials for the manufacturing of VB-111, and VB-111 itself, must be transported at a temperature controlled cold chain at temperaturesvarying between -4 degrees Celsius to -70 degrees Celsius (25 to -94 degrees Fahrenheit) to ensure their quality and vitality. Not all shipping or distributionchannels are equipped to transport at these temperatures. If any of our shipping or distribution channels become inaccessible because of a serious accident, anact of terrorism, a labor strike or other similar event, we may experience disruptions in our continued supply of raw materials, delays in our productionprocess or a reduction in our ability to distribute our therapeutics to our customers. We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs orproduct candidates that may be more profitable or for which there is a greater likelihood of success. Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that laterprove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitablemarket opportunities. Our spending on current and future research and development programs for product candidates may not yield any commercially viableproducts. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights tothat product candidate through strategic collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous forus to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in atherapeutic area in which it would have been more advantageous to enter into a collaboration arrangement. We will continue to incur significant increased costs as a result of operating as a public company, and our management will continue to be required todevote substantial time to new compliance initiatives. As a public company, we will continue to incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act, as well as rulessubsequently implemented by the Securities and Exchange Commission, or SEC, and The NASDAQ Global Market have imposed various requirements onpublic companies. Recent legislation permits smaller “emerging growth companies” to implement many of these requirements over a longer period and up tofive years from the pricing of our offering. We intend to take advantage of this new legislation but cannot guarantee that we will not be required to implementthese requirements sooner than budgeted or planned and thereby incur unexpected expenses. Shareholder activism, the current political environment and thecurrent high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead toadditional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and otherpersonnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal andfinancial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make itmore difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain ourcurrent levels of such coverage. While compliance with these additional requirements will result in increased costs to us, we cannot accurately predict orestimate at this time the amount of additional costs we may incur as a public company under both U.S. and Israeli laws. We are subject to foreign currency exchange risk, and fluctuations between the U.S. dollar and the NIS, the Euro and other non-U.S. currencies maynegatively affect our earnings and results of operations. We operate in a number of different currencies. While the dollar is our functional and reporting currency and investments in our share capital have beendenominated in dollars, our financial results may be adversely affected by fluctuations in currency exchange rates as a significant portion of our operatingexpenses, including our salary-related and manufacturing expenses are denominated in the NIS, and a significant portion of our clinical trials andmanufacturing expenses are denominated in euros. 24Table of Contents We are exposed to the risks that the NIS may appreciate relative to the dollar, or, if the NIS instead devalues relative to the dollar, that the inflation rate inIsrael may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollarcost of our operations in Israel would increase and our dollar- denominated results of operations would be adversely affected. We cannot predict any futuretrends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against the dollar. For example, the average exchange rate of the dollaragainst the NIS decreased in 2018, in 2017 and in 2016. Market volatility and currency fluctuations may limit our ability to cost- effectively hedge againstour foreign currency exposure and, in addition, our ability to hedge our exposure to currency fluctuations in certain emerging markets may be limited.Hedging strategies may not eliminate our exposure to foreign exchange rate fluctuations and may involve costs and risks of their own, such as devotion ofmanagement time, external costs to implement the strategies and potential accounting implications. Foreign currency fluctuations, independent of theperformance of our underlying business, could lead to materially adverse results or could lead to positive results that are not repeated in future periods. Risks Related to Our Intellectual Property We depend on our license agreement with Janssen Vaccines & Prevention B.V. and if we cannot meet requirements under such license agreement, wecould lose the rights to our products, which could have a material adverse effect on our business. VB-111 incorporates an adenoviral vector as the delivery vehicle based on our rights under a license agreement with Janssen Vaccines & Prevention B.V. Ifwe fail to meet our obligations under this license agreement, including various diligence, milestone payment, royalty and other obligations, Janssen Vaccines& Prevention B.V. has the right to terminate our license, and upon the effective date of such termination, our right to use the licensed technology wouldterminate. We may enter into additional agreements in the future with Janssen Vaccines & Prevention B.V. that may impose similar obligations on us. Whilewe would expect to exercise all rights and remedies available to us, including attempting to cure any breach by us, and otherwise seek to preserve our rightsunder the patents and other technology licensed to us, we may not be able to do so in a timely manner, at an acceptable cost or at all. Any uncured, materialbreach under the license agreement could result in our loss of rights and may lead to a complete termination of our product development and anycommercialization efforts for the applicable product candidates since there are currently no significant similar alternatives on the market. If we are unable to obtain or protect intellectual property rights related to our product candidates, we may not be able to obtain exclusivity for ourproduct candidates or prevent others from developing similar competitive products. We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our productcandidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. Thepatent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates in the United States or in otherforeign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which caninvalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents coverour product candidates, third parties may challenge their validity, enforceability or scope, which may result in the patent claims being narrowed orinvalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provideexclusivity for our product candidates or prevent others from designing around our claims. Any of these outcomes could impair our ability to preventcompetition from third parties. If the patent applications we hold or have in-licensed with respect to our programs or product candidates fail to issue, if the breadth or strength of our patentprotection is threatened, or if our patent portfolio fails to provide meaningful exclusivity for our product candidates, it could dissuade companies fromcollaborating with us to develop product candidates and threaten our ability to commercialize future products. Several patent applications covering ourproduct candidates have been filed recently. We cannot offer any assurances about which, if any, applications will issue as patents, the breadth of any suchissued patent claims or whether any issued claims will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition tothese patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any productcandidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a productcandidate under patent protection could be reduced. Since patent applications in the United States and most other countries are confidential for a period oftime after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to a productcandidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by a third party todetermine who was the first to invent any of the subject matter covered by the patent claims of our applications. In addition, patents have a limited lifespan.In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available, but the life of a patent, andthe protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may beopen to competition from generic medications. This risk is material in light of the length of the development process of our products and lifespan of ourcurrent patent portfolio. 25Table of Contents In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that isnot patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discoveryand development processes that involve proprietary know- how, information or technology that is not covered by patents. However, trade secrets can bedifficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees,consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintainingphysical security of our premises and physical and electronic security of our information technology systems. Security measures may be breached, and wemay not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any thirdparties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurancesthat all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or thatcompetitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on ourbusiness. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties formisappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as partof its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including informationthat we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may changein the future, if at all. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As aresult, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable toprevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will haveany such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market. Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts. Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount oflitigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceuticalindustries, including patent infringement lawsuits, interferences, oppositions and inter partes review proceedings before the U.S. Patent and Trademark Office,or U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by thirdparties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patentsare issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applicationswith claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Becausepatent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our productcandidates may be accused of infringing. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes uponthese patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates,any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability tocommercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-partypatents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, the holders of anysuch patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until suchpatent expires. In either case, such a license may not be available on commercially reasonable terms or at all. Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop andcommercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense andwould be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to paysubstantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one ormore licenses from third parties, which may be impossible or require substantial time and monetary expenditure. We may not be successful in obtaining or maintaining necessary rights to pharmaceutical product components and processes for our developmentpipeline through acquisitions and in- licenses. Presently we have rights to the intellectual property, through licenses from Janssen Vaccines & Prevention B.V. and under patents that we own, to developour product candidates. Because our programs may involve additional product candidates that may require the use of proprietary rights held by third parties,the growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates mayrequire specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license anycompositions, methods of use, processes or other third- party intellectual property rights from third parties that we identify. The licensing and acquisition ofthird-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquirethird-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to theirsize, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may beunwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us tomake an appropriate return on our investment. 26Table of Contents We may enter into license agreements with third parties, and if we fail to comply with our obligations in such agreements under which we licenseintellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose licenserights that are important to our business. We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so fromtime to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expendsignificant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize theaffected product candidates. In many cases, patent prosecution of our in-licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or otherprotection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respectto those rights, and our competitors could market competing products using the intellectual property. In some cases, we control the prosecution of patentsresulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to ourlicensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and iscomplicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a licensing agreement,including: ●the scope of rights granted under the license agreement and other interpretation-related issues; ●the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; ●the sublicensing of patent and other rights under any collaboration relationships we might enter into in the future; ●our diligence obligations under the license agreement and what activities satisfy those diligence obligations; ●the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners;and ●the priority of invention of patented technology. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms,we may be unable to successfully develop and commercialize the affected product candidates. We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming andunsuccessful. Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringementclaims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors isnot valid, is unenforceable or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do notcover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidatedor interpreted narrowly and could put our patent applications at risk of not issuing. Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents orpatent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights toit from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense oflitigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. Wemay not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may notprotect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results ofhearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have amaterial adverse effect on the trading price of our ordinary shares. 27Table of Contents Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcementor defense of our issued patents. Patent reform legislation (the Leahy-Smith Act) enacted in 2013 continues to increase the uncertainties and costs surrounding the prosecution of our patentapplications and the enforcement or defense of our issued patents. The Leahy-Smith Act introduced a number of significant changes to U.S. patent law,including provisions that affect the way patent applications are prosecuted and patent litigation is conducted. The U.S. PTO continues to develop regulationsand procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Act, in particular, theInter Partes Review (IPR) proceedings. It remains to be seen what impact the Leahy-Smith Act will have on the operation of our business. However, the Actand its implementation increases the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of ourissued patents, all of which could have a material adverse effect on our business and financial condition. We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information ofthird parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. Certain of our key employees and personnel are or were previously employed at universities, medical institutions or other biotechnology or pharmaceuticalcompanies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in theirwork for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosedintellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation maybe necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuableintellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be adistraction to management and other employees. Furthermore, universities or medical institutions who employ some of our key employees and personnel inparallel to their engagement by us may claim that intellectual property developed by such person is owned by the respective academic or medical institutionunder the respective institution intellectual property policy or applicable law. We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigationand adversely affect our business. A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law,5727-1967, or the Patent Law, inventions conceived by an employee during the term and as part of the scope of his or her employment with a company areregarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employeeservice invention rights. The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensationand Royalties Committee, or the Committee, a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration forhis inventions. Recent decisions by the Committee (which have been upheld by the Israeli Supreme Court on appeal) have created uncertainty in this area, asit held that employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights. Further, theCommittee has not yet determined the method for calculating this remuneration nor the criteria or circumstances under which an employee’s waiver of hisright to remuneration will be disregarded. We generally enter into assignment-of-invention agreements with our employees pursuant to which suchindividuals assign to us all rights to any inventions created in the scope of their employment or engagement with us. Although our employees have agreed toassign to us service invention rights, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims,we could be required to pay additional remuneration or royalties to our current or former employees, or be forced to litigate such claims, which couldnegatively affect our business. We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property. We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectualproperty. We may have to in the future, ownership disputes arising, for example, from conflicting obligations of consultants or others who are involved indeveloping our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail indefending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, orright to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to management and other employees. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications will be due to be paid to the U.S. PTOand various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and applications. The U.S. PTO andvarious non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisionsduring the patent application process. There are situations in which non-compliance can result in abandonment or lapse of the patent or patent application,resulting in partial or complete loss of patent rights in the relevant jurisdiction. 28Table of Contents Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court. If we or one of our licensing partners initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, thedefendant may contend that the patent covering our product candidate is invalid, unenforceable or fails to cover the product candidate or the infringingproduct. In patent litigation in the United States, defendants commonly allege that asserted patent claims are invalid and unenforceable. Grounds for avalidity challenge could be an alleged failure to meet one or more of several statutory requirements, including lack of novelty, obviousness, lack of writtendescription, indefiniteness and non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecutionof the patent withheld relevant information from the U.S. PTO, or made a misleading statement, during prosecution. Third parties may also raise similar claimsbefore administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grantreview, and equivalent proceedings in foreign jurisdictions, such as opposition proceedings. Such proceedings could result in revocation, amendments to ourpatent claims or statements being made on the record such that our claims may no longer be construed to cover our product candidates. The outcomefollowing legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain thatthere is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion ofinvalidity, unenforceability or non-infringement, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Even ifresolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and coulddistract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results ofhearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have asubstantial adverse effect on the market price of our ordinary shares. Such litigation or proceedings could substantially increase our operating losses andreduce the resources available for development activities or any future sales, marketing or distribution activities. Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products. As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcingpatents in the biotechnology industry involve both technological and legal complexity, and is therefore is costly, time- consuming and inherently uncertain.In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulingshave narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in some situations. In addition toincreasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value ofpatents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. PTO, the laws and regulations governing patents couldchange in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in thefuture. We have not yet registered trademarks for a commercial trade name for some of our product candidates and failure to secure such registrations couldadversely affect our business. We have not yet registered trademarks for a commercial trade name for some of our product candidates. During trademark registration proceedings, we mayreceive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, inthe U.S. PTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications andto seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive suchproceedings. Moreover, any name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether wehave registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation ofpotential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expendsignificant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe theexisting rights of third parties and be acceptable to the FDA. We may not be able to protect our intellectual property rights throughout the world. Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectualproperty rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreigncountries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Potential competitors may use our technologies in jurisdictions where we have not obtainedpatent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, butenforcement is not as strong as that in the United States. These products may compete with our product candidates, if approved, and our patents or otherintellectual property rights may not be effective or sufficient to prevent them from competing. 29Table of Contents Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systemsof certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual propertyprotection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing ofcompeting products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result insubstantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpretednarrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits thatwe initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectualproperty rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Under applicable employment laws, we may not be able to enforce covenants not to compete. We generally enter into non-competition agreements with our employees. These agreements prohibit our employees, if they cease working for us, fromcompeting directly with us or working for our competitors or clients for a limited period. We may be unable to enforce these agreements under the laws of thejurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employeesor consultants developed while working for us. For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings of aformer employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employerwhich have been recognized by the courts, such as the protection of a company’s trade secrets or other intellectual property. Risks Related to Ownership of Our Ordinary Shares The market price of our ordinary shares may be highly volatile, and you may not be able to resell your shares at the purchase price. An active trading market for our ordinary shares may not be available. You may not be able to sell your shares quickly or at the market price if trading in ourordinary shares is not active. The market price of our ordinary shares has been and is likely to remain volatile. Our share price could be subject to wide fluctuations in response to a varietyof factors, including the following: ●adverse results or delays in pre-clinical studies or clinical trials, and resulting changes in our clinical development programs; ●reports of adverse events in other similar products or clinical trials of such products; ●inability to obtain additional funding; ●any delay in filing an IND or BLA for any of our product candidates and any adverse development or perceived adverse development with respect tothe FDA’s review of that IND or BLA; ●failure to develop successfully and commercialize our product candidates for the proposed indications and future product candidates for otherindications or new candidates; ●failure to maintain our licensing arrangements or enter into strategic collaborations; ●failure by us or our licensors and strategic collaboration partners to prosecute, maintain or enforce our intellectual property rights; ●changes in laws or regulations applicable to future products; ●inability to scale up our manufacturing capabilities (including in Israel), inability to obtain adequate product supply for our product candidates orthe inability to do so at acceptable prices; ●adverse regulatory decisions, including by the IIA under the Research Law; ●introduction of new products, services or technologies by our competitors; ●failure to meet or exceed financial projections we may provide to the public; ●failure to meet or exceed the financial expectations of the investment community; 30Table of Contents ●the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; ●announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; ●disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for ourtechnologies; ●additions or departures of key scientific or management personnel; ●significant lawsuits, including patent or shareholder litigation; ●changes in the market valuations of similar companies; ●sales of our ordinary shares by us or our shareholders in the future; and ●trading volume of our ordinary shares. In addition, companies trading in the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volumefluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors maynegatively affect the market price of our ordinary shares, regardless of our actual operating performance. There has been limited trading volume for our ordinary shares. Even though our ordinary shares have been listed on the NASDAQ Global Market, there has been limited liquidity in the market for the ordinary shares,which could make it more difficult for holders to sell their ordinary shares. There can be no assurance that an active trading market for our ordinary shares willbe sustained. In addition, the stock market generally has experienced extreme price and volume fluctuations that have often been unrelated ordisproportionate to the operating performance of listed companies. Broad market and industry factors may negatively affect the market price of our ordinaryshares, regardless of our actual operating performance. The market price and liquidity of the market for our ordinary shares that will prevail in the market maybe higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control. Our principal shareholders and management own a significant percentage of our shares and will be able to exert significant control over matterssubject to shareholder approval. As of December 31, 2018, to the best of our information, our executive officers, directors, five percent shareholders and their affiliates beneficially ownedapproximately 42.0% of our voting shares. Therefore, these shareholders have the ability to control us through their ownership positions. These shareholdersmay be able to determine all matters requiring shareholder approval. For example, these shareholders, if they were to act together, may be able to controlelections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This mayprevent or discourage unsolicited acquisition proposals or offers for our ordinary shares that you may believe are in your best interest as one of ourshareholders. We are an “emerging growth company” and a “foreign private issuer,” and we cannot be certain if the reduced reporting requirements applicable toemerging growth companies and foreign private issuers will make our ordinary shares less attractive to investors. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be anemerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that arenot emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Actof 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxystatements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any goldenparachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to losethat status earlier, including if the market value of our ordinary shares held by non-affiliates exceeds $700.0 million as of any June 30 before that time or ifwe have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growthcompany as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, wewould cease to be an emerging growth company immediately. For more details please refer to item 4. below. 31Table of Contents Furthermore, as a foreign private issuer, we are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under theSecurities Exchange Act of 1934, or the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequentthan those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports, proxy statements that comply with therequirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S.domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be requiredto file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will beexempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of theExchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have beeneligible in relation to a U.S. domestic reporting companies. See “Item 16G. Corporate Governance” for more information. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these reduced requirements. If some investors find ourordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile. Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply toprivate companies. We are electing to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new orrevised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of suchstandards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to not take advantage of the extendedtransition period for complying with new or revised accounting standards is irrevocable. Our ordinary shares are subject to substantial dilution in their book value. As of December 31, 2018, options and warrants to purchase 12,211,676 ordinary shares at a weighted average exercise price of $3.50 per share wereoutstanding. The exercise of any of these options and warrants would result in additional dilution. Sales of a substantial number of our ordinary shares in the public market could cause our share price to fall. If our existing shareholders sell, indicate an intention to sell or the market perceives that they intend to sell, substantial amounts of our ordinary shares in thepublic market, the market price of our ordinary shares could decline significantly. As of December 31, 2018, we had outstanding a total of 35,881,128ordinary shares. Substantially all of the shares are available for sale in the public market. As of December 31, 2018, 10,467,971 ordinary shares are held by directors, executive officers and other affiliates (holders of more than 10% of theCompany’s share capital) and are subject to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. In addition, as of March 1, 2019, an aggregate of 9,784,907 ordinary shares that are either subject to outstanding options, reserved for future issuance underour 2014 Plan or subject to outstanding warrants will or may become eligible for sale in the public market to the extent permitted by the provisions of variousvesting schedules and Rule 144 and Rule 701 under the Securities Act. If these additional ordinary shares are sold, or if it is perceived that they will be sold,in the public market, the market price of our ordinary shares could decline. Future sales and issuances of our ordinary shares or rights to purchase ordinary shares, including pursuant to our equity incentive plans, could result inadditional dilution of the percentage ownership of our shareholders and could cause our share price to fall. Additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, ourshareholders may experience substantial dilution. We may sell ordinary shares, convertible securities or other equity securities in one or more transactions atprices and in a manner we determine from time to time. If we sell ordinary shares, convertible securities or other equity securities in more than one transaction,investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing shareholders, and new investors couldgain rights superior to our existing shareholders. Pursuant to our Employee Share Ownership and Option Plan (2014), or the 2014 Plan, our management is authorized to grant share options and other equity-based awards to our employees, directors and consultants. Currently, we plan to register the increased number of shares available for issuance under the 2014Plan each year. If our board of directors elects to increase the number of shares available for future grant by the maximum amount each year, our shareholdersmay experience additional dilution, which could cause our share price to fall. 32Table of Contents We could be subject to securities class action litigation. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk isespecially relevant for us because pharmaceutical companies have experienced significant share price volatility in recent years. For example, the price of ourordinary shares, which reached its high record of $17.02 per share at the close of the trading on January 27, 2015, decreased as low as $2.8 per share at theclose of the trading on February 1, 2016 a drop of about 84%. In addition, the price of our ordinary shares, which was $6.80 per share at the close of thetrading on March 7, 2018, decreased to $2.65 per share at the close of the trading on March 8, 2018 and to its low record of $0.6 per share at the close of thetrading on December 21, 2018. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, whichcould harm our business. We do not intend to pay dividends on our ordinary shares in the foreseeable future, so any returns will be limited to the value of our shares. We have never declared or paid any cash dividends on our share capital. We currently anticipate that we will retain future earnings for the development,operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to shareholderswill therefore be limited to the appreciation of their shares. In addition, Israeli law limits our ability to declare and pay dividends, and may subject ourdividends to Israeli withholding taxes. Furthermore, our payment of dividends (out of tax- exempt income) may retroactively subject us to certain Israelicorporate income taxes, to which we would not otherwise be subject. If equity research analysts do not publish research reports about our business or if they issue unfavorable commentary or downgrade our ordinaryshares, the price of our ordinary shares could decline. The trading market for our ordinary shares relies in part on the research and reports that equity research analysts publish about us and our business. The priceof our ordinary shares could decline if we do not obtain research analyst coverage, or one or more securities analysts downgrade our ordinary shares or ifthose analysts issue other unfavorable commentary or cease publishing reports about us or our business. Risks Related to Our Incorporation and Operations in Israel We are a “foreign private issuer” and intend to follow certain home country corporate governance practices, and our shareholders may not have thesame protections afforded to shareholders of companies that are subject to all NASDAQ corporate governance requirements. As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise requiredunder the NASDAQ Stock Market for domestic U.S. issuers. For instance, we intend to follow home country practice in Israel with regard to the quorumrequirement for shareholder meetings. As permitted under the Israeli Companies Law, 5759-1999, or the Companies Law, our articles of association providethat the quorum for any meeting of shareholders shall be the presence of at least two shareholders present in person, by proxy or by a voting instrument, whohold at least 25% of the voting power of our shares instead of the 33 1/3% of the issued share capital requirement. We may in the future elect to follow homecountry practices in Israel (and consequently avoid the requirements that would otherwise apply to a U.S. company listed on The NASDAQ Global Market)with regard to other matters, as well, such as the formation of compensation, nominating and governance committees, separate executive sessions ofindependent directors and non-management directors and the requirement to obtain shareholder approval for certain dilutive events (such as for theestablishment or amendment of certain equity-based compensation plans, issuances that will result in a change of control of the company, certain transactionsother than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company).Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on The NASDAQGlobal Market may provide less protection to you than what is accorded to investors under the NASDAQ Stock Market rules applicable to domestic U.S.issuers. See “Item 16G. Corporate Governance” for more information. In addition, as a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxystatements, including the requirement for an emerging growth company to disclose the compensation of the chief executive officer and other two highestcompensated executive officers on an individual, rather than aggregate, basis. A recent amendment to regulations under the Israeli Companies Law requiresus to disclose in the notice for our annual meeting of shareholders, the annual compensation of our five most highly compensated officers on an individual,rather than aggregate, basis. However, this disclosure is not as extensive as that required of a U.S. domestic issuer. We would lose our foreign private issuer status if a majority of our directors or executive officers are U.S. citizens or residents and we fail to meet additionalrequirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss offoreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domesticreporting company may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements onU.S. domestic reporting company forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We will haveto change our reporting from IFRS to US GAAP accounting standards and we may also be required to modify certain of our policies to comply with acceptedgovernance practices associated with U.S. domestic reporting companies. Such conversion and modifications will involve additional costs. In addition, wemay lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign privateissuers. 33Table of Contents Potential political, economic and military instability in the State of Israel, where the majority of our senior management and our research anddevelopment facilities are located, may adversely affect our results of operations. We are incorporated under Israeli law and our offices and operations are located in the State of Israel. In addition, our key employees, officers and all but twoof our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. Since the State of Israelwas established in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in theeconomic or financial condition of Israel, could affect adversely our operations. Since October 2000, there have been increasing occurrences of terroristviolence. Ongoing and revived hostilities or other Israeli political or economic factors could harm our operations, product development and results ofoperations. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there has been an increase in unrest and terroristactivity, which began in October 2000 and has continued with varying levels of severity. The establishment in 2006 of a government in the PalestinianAuthority by representatives of the Hamas militant group has created additional unrest and uncertainty in the region. In 2006, a conflict between Israel andthe Hezbollah in Lebanon resulted in thousands of rockets being fired from Lebanon up to 50 miles into Israel. Starting in December 2008, for approximatelythree weeks, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involved missile strikes against civilian targets in various parts of Israeland negatively affected business conditions in Israel. In November 2012, for approximately one week, Israel experienced a similar armed conflict, resulting inhundreds of rockets being fired from the Gaza Strip and disrupting most day-to-day civilian activity in southern Israel. Beginning in July 2014, forapproximately seven weeks, Israel experienced additional armed conflict between Israel and Hamas, which included rocket strikes against civilian targets invarious parts of Israel. If renewed, these hostilities may negatively affect business conditions in Israel. In addition, Israel faces threats from more distantneighbors, in particular, Iran. Our insurance policies do not cover us for the damages incurred in connection with these conflicts or for any resultingdisruption in our operations. The Israeli government, as a matter of law, provides coverage for the reinstatement value of direct damages that are caused byterrorist attacks or acts of war; however, the government may cease providing such coverage or the coverage might not be enough to cover potential damages.In the event that hostilities disrupt the ongoing operation of our facilities or the airports and seaports on which we depend to import and export our suppliesand products, our operations may be materially adversely affected. In addition, since the end of 2010, numerous acts of protest and civil unrest have taken place in several countries in the Middle East and North Africa, manyof which involved significant violence. The civil unrest in Egypt, which borders Israel, resulted in the resignation of its president Hosni Mubarak, and tosignificant changes to the country’s government. In Syria, also bordering Israel, a civil war is continuing to take place. The ultimate effect of thesedevelopments on the political and security situation in the Middle East and on Israel’s position within the region is not clear at this time. Such instabilitymay lead to deterioration in the political and trade relationships that exist between the State of Israel and certain other countries. Popular uprisings in various countries in the Middle East and North Africa are affecting the political stability of those countries. Such instability may lead todeterioration in the political and trade relationships that exist between the State of Israel and these countries. Several countries, principally in the MiddleEast, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israelicompanies if hostilities in Israel or political instability in the region continues or increases. Any hostilities involving Israel or the interruption or curtailmentof trade between Israel and its present trading partners, or significant downturns in the economic or financial condition of Israel, could adversely affect ouroperations and product development and adversely affect our share price. Similarly, Israeli companies are limited in conducting business with entities fromseveral countries. For instance, in 2008, the Israeli legislature passed a law forbidding any investments in entities that transact business with Iran. Our operations may be disrupted by the obligations of personnel to perform military service. As of March 1, 2019, we had 39 employees, all of whom were based in Israel. Some of our employees may be called upon to perform up to 36 days (and insome cases more) of annual military reserve duty until they reach the age of 40 (and in some cases, up to 45 or older) and, in emergency circumstances, couldbe called to immediate and unlimited active duty. In the event of severe unrest or other conflict, individuals could be required to serve in the military forextended periods of time. Since September 2000, in response to increased tension and hostilities, there have been occasional call-ups of military reservists,including in connection with the 2006 conflict in Lebanon, and the December 2008 and November 2012 conflicts with Hamas, and it is possible that therewill be additional call-ups in the future. Our operations could be disrupted by the absence of a significant number of our employees related to military serviceor the absence for extended periods of one or more of our key employees for military service. Such disruption could materially adversely affect our businessand results of operations. Additionally, the absence of a significant number of the employees of our Israeli suppliers and contractors related to military serviceor the absence for extended periods of one or more of their key employees for military service may disrupt their operations. 34Table of Contents The tax benefits that are available to us if and when we generate taxable income require us to meet various conditions and may be prevented or reducedin the future, which could increase our costs and taxes. If and when we generate taxable income, we would be eligible for certain tax benefits provided to “Benefited Enterprises” under the Israeli Law for theEncouragement of Capital Investments, 1959, as amended, or the Investment Law. In order to remain eligible for the tax benefits for “Benefited Enterprises”we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. In addition, we informed the Israeli TaxAuthority of our choice of 2012 as a “Benefited Enterprise” election year, all under the Investment Law. The benefits available to us under this tax regulationare subject to the fulfillment of conditions stipulated in the regulation. Further, in the future these tax benefits may be reduced or discontinued. If these taxbenefits are reduced, cancelled or discontinued, our Israeli taxable income would be subject to regular Israeli corporate tax rates. The standard corporate taxrate for Israeli companies is 25% for 2016, 24% for 2017 and 23% for 2018 and thereafter. Additionally, if we increase our activities outside of Israel throughacquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs. See “Item 10E. Taxation-IsraeliTax Considerations and Government Programs-Law for the Encouragement of Capital Investments, 5719-1959.” It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this prospectus in Israel or theUnited States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts. We were incorporated in Israel, and our corporate headquarters and substantially all of our operations are located in Israel. All of our executive officers and allbut two of our directors, and the Israeli experts named in this prospectus, are located in Israel. The majority of our assets and the assets of these persons arelocated outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon thecivil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon thesepersons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in originalactions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws against us or our officers and directorson the grounds that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determinethat Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact,which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israeladdressing the matters described above. Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights andresponsibilities of shareholders of U.S. corporations. Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law.These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders of U.S. corporations. In particular, ashareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards thecompany and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting ofshareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, amerger of the company and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain fromdiscriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine theoutcome of a shareholder vote or to appoint or prevent the appointment of an officer of the company has a duty to act in fairness towards the company withregard to such vote or appointment. However, Israeli law does not define the substance of this duty of fairness. There is limited case law available to assist usin understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations andliabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations. See “Item 6. Directors, Senior Management andEmployees-Approval of Related Party Transactions Under Israeli Law-Shareholders’ Duties.” Provisions of Israeli law and our amended and restated articles of association could make it more difficult for a third party to acquire us or increase thecost of acquiring us, even if doing so would benefit our shareholders. Israeli law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involvingdirectors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a tender offer for allof a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issuedshare capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unlessat least 98% of the company’s outstanding shares are tendered. Furthermore, the shareholders, including those who indicated their acceptance of the tenderoffer (unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek appraisal rights), may, at any time within sixmonths following the completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition. See “Item 10B. Memorandum andArticles of Association-Acquisitions under Israeli Law” for additional information. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not havea tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to thesame extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on thefulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales anddispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the taxdeferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. 35Table of Contents Certain U.S. shareholders may be subject to adverse tax consequences if we are characterized as “Controlled Foreign Corporation.” Each “Ten Percent Shareholder” in a non-U.S. corporation that is classified as a “controlled foreign corporation,” or a CFC, for U.S. federal income taxpurposes generally is required to include in income for U.S. federal tax purposes such Ten Percent Shareholder’s pro rata share of the CFC’s “Subpart Fincome” and investment of earnings in U.S. property, even if the CFC has made no distributions to its shareholders. A non-U.S. corporation generally will beclassified as a CFC for U.S. federal income tax purposes if Ten Percent Shareholders own, directly or indirectly, more than 50% of either the total combinedvoting power of all classes of stock of such corporation entitled to vote or of the total value of the stock of such corporation. A “Ten Percent Shareholder” is aU.S. person (as defined by the U.S. Internal Revenue Code of 1986, as amended), who owns or is considered to own 10% or more of the total combined votingpower of all classes of stock entitled to vote of such corporation. The determination of CFC status is complex and includes attribution rules, the applicationof which is not entirely certain. We do not believe that we were a CFC for the taxable year ended December 31, 2018 or that we are currently a CFC. It is possible, however, that a shareholdertreated as a U.S. person for U.S. federal income tax purposes will acquire, directly or indirectly, enough shares to be treated as a Ten Percent Shareholder afterapplication of the constructive ownership rules and, together with any other Ten Percent Shareholders of our company, cause us to be treated as a CFC forU.S. federal income tax purposes. We believe that certain of our shareholders are Ten Percent Shareholders for U.S. federal income tax purposes. Holdersshould consult their own tax advisors with respect to the potential adverse U.S. federal income tax consequences of becoming a Ten Percent Shareholder in aCFC. We might be classified as a passive foreign investment company in future years, and our U.S. shareholders may suffer adverse tax consequences as aresult. Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets thatproduce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investmentcompany, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale orexchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the activeconduct of a trade or business. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realizedon the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on ourordinary shares by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of share sales. See “Item 10E.Taxation-Certain Material U.S. Federal Income Tax Considerations-Passive Foreign Investment Company Considerations.” Since PFIC status depends on the composition of our income and the composition and value of our assets (which may be determined in part by reference tothe market value of our ordinary shares, which may be volatile) from time to time, there can be no assurance that we will not be considered a PFIC for anytaxable year. We had no revenue-producing operations until and including table year 2016. We believe that we were not a PFIC for our 2017 and 2018taxable years. In addition, unless and until we generate sufficient revenue from active licensing and other non-passive sources and otherwise satisfy the assettest above, we might be treated as a PFIC in future taxable years. 36Table of Contents Item 4. Information on the Company Corporate Information The legal name of our company is Vascular Biogenics Ltd. and we conduct business under the name VBL Therapeutics. We were incorporated in Israel onJanuary 27, 2000 as a company limited by shares under the name Medicard Ltd. In January 2003, we changed our name to Vascular Biogenics Ltd. Ourregistered and principal office is located 8 HaSatat St., Modi’in, Israel 7178106. Our service agent in the United States is located at c/o CT CorporationSystem, 111 8th Avenue, New York, New York 10011 and our telephone number is 972-8-9935000. Throughout this prospectus, we refer to varioustrademarks, service marks and trade names that we use in our business. The “Vascular Biogenics” design logo, “VBL Therapeutics,” “Vascular TargetingSystem,” “VTS,” “Lecinoxoids,” “VB-111,” “VB-201,” the “OVAL” design logo and other trademarks or service marks of Vascular Biogenics Ltd. appearingin this prospectus are the property of Vascular Biogenics Ltd. We have several other registered trademarks, service marks and pending applications relating toour products. Although we have omitted the “ ® ” and “” trademark designations for such marks in this prospectus, all rights to such trademarks arenevertheless reserved. Other trademarks and service marks appearing in this prospectus are the property of their respective holders. Emerging Growth Company We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. Thus, we may take advantage of certainexemptions from various reporting requirements that are applicable to public companies generally. For example, we have elected not to have ourindependent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting, as wouldotherwise be required by Section 404(b) of the Sarbanes-Oxley Act, or SOX. We will cease to be an “emerging growth company” upon the earliest of: ●December 31, 2019, which is the last day of the fiscal year in which the fifth anniversary of our initial public offering in the United States hasoccurred; ●the last day of the fiscal year in which our annual gross revenues are $1.07 billion or more; ●the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or ●the last day of any fiscal year in which the market value of our ordinary shares held by non-affiliates exceeded $700.0 million as of the end of thesecond quarter of that fiscal year. The JOBS Act also provides that an “emerging growth company” can utilize the extended transition period provided in Section 7(a)(2)(B) of the SecuritiesAct, for complying with new or revised accounting standards. However, we have chosen to “opt out” of such extended transition period, and, as a result, wewill comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not“emerging growth companies.” Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with newor revised accounting standards is irrevocable. Capital Expenditures For a discussion of our capital expenditures, see “Item 5. Operating and Financial Review and Prospects-Liquidity and Capital Resources.” Business Overview We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of first-in-class treatments for cancer. Ourprogram is based on our proprietary Vascular Targeting System, or VTS, platform technology, which utilizes genetically targeted therapy to destroy newlyformed, or angiogenic, blood vessels, and which we believe will allow us to develop product candidates for multiple oncology indications. 37Table of Contents Our lead product candidate, VB-111 (ofranergene obadenovec), is a gene-based biologic that we are developing for solid tumor indications, and which wehave advanced to programs for recurrent glioblastoma, or rGBM, an aggressive form of brain cancer, ovarian cancer and thyroid cancer. We have obtained fasttrack designation for VB-111 in the United States for prolongation of survival in patients with glioblastoma that has recurred following treatment withstandard chemotherapy and radiation. We have also received orphan drug designation for GBM in both the United States and Europe. VB-111 has alsoreceived an orphan designation for the treatment of ovarian cancer by the European Medicines Agency. In September 2015, we reported complete resultsfrom our Phase 2 trial of VB-111 in rGBM, demonstrating a statistically-significant benefit in overall survival and favorable response rate in patients treatedwith VB-111 in combination with bevacizumab. Our pivotal Phase 3 GLOBE study in rGBM began in August 2015 and was comparing a combination of VB-111 and bevacizumab to bevacizumab alone. The study, which enrolled a total of 256 patients in the US, Canada and Israel was conducted under a specialprotocol assessment, or SPA, agreement with the U.S. Food and Drug Administration, or FDA, with full endorsement by the Canadian Brain TumorConsortium (CBTC). On March 8, 2018, we announced top-line results from the GLOBE study, which showed that the study did not meet its pre-specifiedprimary endpoint of overall survival (OS). No new safety concerns associated with VB-111 have been identified in the GLOBE study. In November 2018, fulldata from the GLOBE trial were presented at the 2018 Society for Neuro-Oncology Annual Meeting. Analyses pointed to the regimen in GLOBE trial as thepotential reason for its negative outcome, indicating that priming with VB-111 without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic mechanism of VB-111 in rGBM. We do not think that results of the GLOBE study in rGBM will necessarily have implications onthe prospects for VB-111 in other regimens or tumor types. Accordingly, following independent MRI analyses at UCLA which validated the overall clinicaland survival benefit of VB-111 among patients who were primed with VB-111 in our prior Phase 2 study in rGBM, a new investigator-sponsored Phase 2 trialevaluating VB-111 in rGBM patients is expected to be launched in the first half of 2019. Our OVAL phase 3 potential registration study of VB-111 inplatinum resistant ovarian cancer was launched in December 2017 and is conducted in collaboration with the GOG Foundation, Inc., a leading organizationfor research excellence in the field of gynecologic malignancies. An interim analysis in the OVAL study is expected in year-end 2019. In addition, acollaborative Phase 2 study evaluating VB-111 in combination with a checkpoint-inhibitor in gastrointestinal tumors is expected to be launched in thesecond half of 2019. We also have been conducting a program targeting anti-inflammatory diseases, based on the use of our Lecinoxoid platform technology. Lecinoxoids are anovel class of small molecules we developed that are structurally and functionally similar to naturally occurring molecules known to modulate inflammation.The lead product candidate from this program, VB-201, is a Phase 2-ready molecule that demonstrated efficacy in reducing vascular inflammation in a Phase2 sub-study in psoriatic patients with cardiovascular risk. Due to business limitations associated with the heavy burden of developing medications forcardiovascular diseases, we chose to test it in psoriasis and ulcerative colitis; however, as we reported in February 2015, VB-201 failed to meet the primaryendpoint in Phase 2 clinical trials for psoriasis and for ulcerative colitis. As a result, we have terminated our development of VB-201 in those indications.Nevertheless, based on recent pre-clinical studies, we believe that VB-201 and some second generation molecules such as VB-703 may be applicable forNASH and renal fibrosis. Since the company intends to focus its efforts and resources on advancing our oncology program, we will seek to advance ourLecinoxoid assets via strategic deals. Accordingly, in March 2019, we announced a strategic exclusive option license agreement with one of the world-leading European animal health companies, for the development of VB-201 for veterinary use. We retain the VB-201 rights for treatment of humans,worldwide. We are also conducting a research program exploring the potential of targeting of MOSPD2 for immuno-oncology applications. In January 2017, we reportedthat targeting of MOSPD2 inhibits chemotaxis of monocytes and neuropils. In 2018, we published a manuscript showing that MOSPD2 can play a major rolein breast cancer cell migration and metastasis, and that targeting MOSPD2 may be employed to prevent the spreading of breast cancer cells. We alsopresented proof-of-concept data demonstrating antibody-mediated killing of MOSPD2-expressing cancer cells. We believe that targeting of MOSPD2 mayhave several therapeutic applications, including inhibition of monocyte migration in chronic inflammatory conditions, inhibition of tumor cell metastasesand targeting of MOSPD2-expressing tumor cells. We are developing our “VB-600 series” of pipeline candidates towards inflammatory and oncologyapplications. We are developing our lead oncology product candidate, VB-111, for solid tumor indications, with current clinical programs in rGBM, thyroid cancer andovarian cancer. In interim analyses of data from our ongoing open-label Phase 2 clinical trial of VB-111 in rGBM, we observed dose-dependent attenuationof tumor growth and an increase in median overall survival, which is the time interval from initiation of treatment to the patient’s death. The U.S. Food andDrug Administration, or FDA, has granted VB-111 fast track designation for prolongation of survival in patients with glioblastoma that has recurredfollowing treatment with temozolomide, a chemotherapeutic agent commonly used to treat newly diagnosed glioblastoma, and radiation. On July 1, 2014,the FDA concurred with the design and planned analyses of our Phase 3 pivotal trial of VB-111 in rGBM pursuant to an SPA. While VBL's request was to usethe same regimen of the Phase 2 clinical trial in rGBM for the Phase 3 study, the agency requested that the Phase 3 study design would be revised.Accordingly, whereas in the Phase 2 study the experimental arm received VB-111 monotherapy and upon disease progression to continue VB-111 incombination with bevacizumab, the SPA language defined that subjects in the Phase 3 experimental arm were to receive VB-111 in combination withbevacizumab, from start. At the time, commencement of the trial was subject to our providing the agency with more information regarding our potencyrelease assay for the trial. We developed this assay and submitted initial information to the FDA on May 26, 2014. On February 5, 2015 the FDA has foundour data satisfactory and removed the partial hold. We began our Phase 3 pivotal trial of VB-111 in rGBM in August 2015 and completed patient enrollment for the study in December 2016, five months aheadof our initial plan. Following positive safety reviews announced in December 2016, in April 2017 and the third and final safety review that was announced inOctober 2017, the GLOBE trial continued to completion. On March 8, 2018, we announced top-line results from the GLOBE study, which showed that thestudy did not meet its pre-specified primary endpoint of overall survival (OS). In November 2018, full data from the GLOBE trial were presented at the 2018Society for Neuro-Oncology Annual Meeting by Dr. Timothy Cloughesy, MD, Professor of Clinical Neurology and Director of the Neuro-Oncology Program,UCLA School of Medicine and principal investigator of the GLOBE trial. Thorough analyses of the baseline risk factors of the Phase 2 and the Phase 3treatment groups did not reveal any differences. Therefore, patient selection or different patient populations could not explain the difference between theresults of the two studies. The analyses pointed to the regimen in GLOBE trial as the potential reason for its failure, indicating that priming with VB-111without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic mechanism of VB-111 in rGBM. Following independent MRIanalyses at UCLA which validated the overall clinical and survival benefit of VB-111 among patients who were primed with VB-111 in our prior Phase 2study in rGBM, a new investigator-sponsored trial evaluating VB-111 in rGBM patients is expected to be launched in the first half of 2019. 38Table of Contents VB-111 was also being studied in a Phase 2 trial for recurrent platinum-resistant Ovarian Cancer and in a Phase 2 study in recurrent, iodine-resistantdifferentiated Thyroid Cancer. In a Phase 2 trial for recurrent platinum-resistant ovarian cancer, VB-111 demonstrated a statistically significant increase inoverall survival and about 60% durable response rate (as measured by reduction in CA-125), approximately twice the historical response with bevacizumabplus chemotherapy in ovarian cancer. In December 2016, we had an end-of-Phase-2 meeting with the FDA, in which we received approval from the FDA toadvance VB-111 for a Phase 3 study in platinum-resistant ovarian cancer, which we launched in December 2017. The OVAL study is conducted incollaboration with the Gynecologic Oncology Group (GOG) Foundation, Inc., a leading organization for research excellence in the field of gynecologicmalignancies. An interim analysis in the OVAL study is expected to occur in year-end 2019. In March 2019, at the Society of Gynecologic Oncologyconference, we presented data from of ovarian cancer patients, showing the potential of VB-111 to stimulate the immune system and drive immune cells toinfiltrate the tumor microenvironment. In February 2017, we reported full data from our exploratory Phase 2 study of VB-111 in recurrent, iodine-resistant differentiated thyroid cancer. The primaryendpoint of the trial, defined as 6-month progression-free-survival (PFS-6) of 25%, was met with a dose response. Forty-seven percent of patients in thetherapeutic-dose cohort reached PFS-6, versus 25% in the sub-therapeutic cohort, both groups meeting the primary endpoint. An overall survival benefit wasseen, with a tail of more than 40% at 3.7 years for the therapeutic-dose cohort, similar to historical data for pazopanib (Votrient®), a tyrosine kinase inhibitor;however, most patients in the VB-111 study had tumors that previously had progressed on pazopanib or other kinase inhibitors. As of December 31, 2016, wehad studied VB-111 in over 200 patients and have observed it to be well-tolerated. In December 2015, we have been granted a US composition of matterpatents that provides intellectual property protection for VB-111 in the US until October 2033 before any patent term extension. In October 2017, we announced the opening of our new gene therapy manufacturing plant in Modiin, Israel. This plant can be the commercial facility forproduction of VB-111, if approved. The Modiin facility is the first commercial-scale gene therapy manufacturing facility in Israel and currently one of thelargest gene-therapy designated ones in the world (20,000 sq. ft.). In November 2017, we signed an exclusive license agreement with NanoCarrier Co., Ltd. (TSE Mothers:4571) for the development, commercialization, andsupply of VB-111 in Japan. VBL retains rights to VB-111 in the rest of the world. Under terms of the agreement, VBL has granted NanoCarrier an exclusivelicense to develop and commercialize VB-111 in Japan for all indications. VBL will supply NanoCarrier with VB-111, and NanoCarrier will be responsiblefor all regulatory and other clinical activities necessary for commercialization in Japan. In exchange, we received an up-front payment of $15 million, and areentitled to receive greater than $100 million in development and commercial milestone payments. VBL will also receive tiered royalties on net sales in thehigh-teens. Based on support from pre-clinical data, which we presented at the American Society of Gene & Cell Therapy (ASGCT) conference in May 2017, and thehistological data in ovarian cancer showing ability of VB-111 to turn an immunologically “cold” to “hot” tumor, an exploratory Phase 2 study for VB-111 incombination a checkpoint inhibitor, is planned in gastrointestinal tumors. Launch of this trial is expected in the second half of 2019. Our Strategy Our goal is to become a leading biopharmaceutical company focused on discovering, developing and commercializing innovative therapeutics that leverageour proprietary technologies for oncology indications. We intend to achieve this goal by pursuing the following strategies: ●Pursue regulatory approval for our lead oncology compound, VB-111 We believe VB-111 has the potential for applications in various solid tumors, and that the outcome of the GLOBE study in rGBM will not necessarily haveimplications on the prospects for VB-111 in other regimens or tumor types. A new investigator-sponsored Phase 2 trial evaluating VB-111 in rGBM patientsis expected to be launched in the first half of 2019. We have conducted Phase 2 clinical trials of VB-111 in both ovarian and thyroid cancer, with positive results. We intend to continue development of VB-111 for platinum-resistant ovarian cancer, and launched a Phase 3 study for this indication in December 2017. An interim analysis in the OVAL trial isexpected in year-end 2019. We intend to advance VB-111 to additional cancer indications, either independently or through investigator-sponsored studies orstrategic collaborations. Accordingly, the launch of an exploratory Phase 2 study for VB-111 in combination a checkpoint inhibitor in gastrointestinaltumors is expected in the second half of 2019. 39Table of Contents ●Selectively enter into licensing and collaboration arrangements to supplement our internal development capabilities As we advance our pipeline of anti-cancer product candidates, we will evaluate opportunities to selectively form collaborative alliances for our non-oncology assets to expand our capabilities and accelerate the development and commercialization of our oncology products. Accordingly, in March 2019,we announced a strategic exclusive option license agreement with one of the world-leading European animal health companies, for the development of VB-201 for veterinary use. We retain the VB-201 rights for treatment of humans, worldwide, as well as the global rights for other Lecinoxoids and VB-600candidates. We engage in conversations with third parties to evaluate such potential collaborations on an ongoing basis. ●Expand our manufacturing capacity to support clinical trials and possible commercialization of VB-111 We previously manufactured clinical quantities of VB-111 at our facility in Or-Yehuda, Israel and through a third party in the United States. In October 2017,we announced the opening of our new gene therapy manufacturing plant in Modiin, Israel. This plant can be the first commercial facility for production ofVB-111 if it receives regulatory approval. On the longer term, we intend to have more than one manufacturing site for VB-111, if regulatory approved. Our Product Candidates and Technology The following table summarizes the status of pipeline: 40Table of Contents Our VTS Platform Overview Our innovative, proprietary VTS platform technology enables systemic administration of gene therapy to either destroy or promote angiogenic blood vessels.VTS is both tissue- and condition-specific, allowing for targeted and limited gene expression in endothelial cells, the thin layer of cells that lines the interiorsurface of blood vessels undergoing angiogenesis. Our VTS platform technology comprises three components, a viral vector, a promoter and a transgene: 1. Viral vector-a modified virus that is used as a delivery vehicle to distribute the promoter and the transgene throughout the body. 2. Promoter-our proprietary, genetically modified promoter, called PPE-1-3X, that specifically targets the endothelial cells of angiogenic blood vessels. Whenpresent in these cells, the promoter initiates the expression of the transgene. 3. Transgene-a genetic sequence designed to yield a specific biologic effect, the expression of which is directed by PPE-1-3X. The particular transgene willvary depending on the therapeutic objectives of the product candidate. Once the gene therapy has reached the angiogenic blood vessels, the PPE-1-3X promoter activates expression of the transgene to produce a desired RNA orprotein in the endothelial cells of those vessels. For oncology applications, the transgene selected is designed to destroy angiogenic blood vessels that feedsolid tumors. For other potential applications, such as the treatment of ischemia, a different transgene can be selected that is designed to promote thedevelopment of angiogenic blood vessels instead of their destruction. VB-111 (ofranergene obadenovec) VB-111 is a unique biologic agent that uses a dual mechanism to target solid tumors. Its mechanism combines blockade of tumor vasculature with an anti-tumor immune response. Based on a non-integrating, non-replicating, Adeno 5 vector, VB-111 utilizes VBL’s proprietary Vascular Targeting System (VTS) to target the tumorvasculature for cancer therapy. We designed VB-111 to address oncology indications, specifically solid tumors, by selectively targeting the blood vesselsrequired for tumor growth and encouraging the programmed cell-death process, or apoptosis, of cells in those blood vessels. VB-111 is administeredintravenously. PPE-1-3X is activated specifically in angiogenic endothelial cells and regulates a transgene consisting of a combination of two genesequences known as Fas and TNFR1. When expressed, the transgene produces a unique pro-apoptotic protein, the Fas-TNFR1 chimera, that interacts with anative inflammatory molecule, Tumor Necrosis Factor, or TNF- alpha, and results in the destruction of newly formed or immature blood vessels. Whenactivated by PPE-1-3X, specifically in angiogenic endothelial cells, this combination enables VB-111 to reduce tumor growth in a highly targeted manner. In addition, VB-111 induces a specific anti-tumor immune response. In 2004, we published preclinical data, which suggested that there is an immuneinflammatory response to the presence of the viral vector and the Fas-TNFR1 chimera. Further support for a potential role of the immune system as part of VB-111’s mechanism of action came from an observation that patients who developed fever as a response to VB-111 administration, at least once along thetreatment course, had a survival benefit over those who did not experience post-dosing fever. Moreover, an immunotherapeutic effect was also observed inbiopsies taken from ovarian cancer patients. Immunohistochemistry staining showed regions of apoptotic cancer cells and infiltration of cytotoxic CD8 T-cells following treatment with VB-111. In November 2017, at the Society for Neuro-Oncology conference, we presented data, which support the relationship between VB-111’s novel dual immuno-oncology and vascular targeting mechanisms of action to overall survival, and show that molecular and radiographic biomarkers may serve as predictors ofclinical benefit. 41Table of Contents VB-111’s mechanism of action is illustrated below: Unlike anti-VEGF agents (such as Avastin®) or tyrosine-kinase inhibitors (TKIs), VB-111 does not aim to block a specific pro-angiogenic pathway; instead, ituses an angiogenesis-specific sensor (VBL’s PPE-1-3x proprietary promoter) to specifically induce cell death in angiogenic endothelial cells in the tumormilieu. This mechanism may retain activity regardless of baseline tumor mutations or the identity of the pro-angiogenic factors secreted by the tumor andshows activity even after failure of prior treatment with other anti-angiogenics. Moreover, VB-111 induces specific anti-tumor immune response, which isaccompanied by recruitment of CD8 T-cells and apoptosis of tumor cells. We believe that this mode of action makes VB-111 less susceptible to resistanceand, therefore, potentially applicable for a broader patient population than current therapies. We have conducted pre-clinical studies in animal models of lung cancer, colon cancer, thyroid cancer, rGBM and melanoma. Based on those studies, andclinical results to date, we believe that VB-111 has anti-tumoral activity that may hold clinical promise and may be suitable for treatment of some solidtumors. We initially decided to focus on rGBM as our first indication because we expected the rapid kinetics of this disease would enable us to accumulateclinical data in a short time, but we also advanced VB-111 to a randomized-controlled Phase 3 study in platinum-resistant ovarian cancer. VB-111 Clinical Programs- Overview We initially studied VB-111 in a Phase 1 “all comers” trial involving patients with multiple types of advanced metastatic cancer types, including thyroidcancer, neuroendocrine cancer, renal cell carcinoma and lung cancer. In that trial, VB-111 was well-tolerated and showed a dose- dependent extension inmedian overall survival across a range of tumor types. Based on these results, we decided to proceed with the development of VB-111 for the lead indicationof rGBM, as well as to investigate VB-111 as a monotherapy for the treatment of thyroid cancer and, in combination with chemotherapy, for ovarian cancer.We have an open IND for VB-111 with the Office of Cellular, Tissue, and Gene Therapeutics within FDA’s Center for Biologics Evaluation and Research. 42Table of Contents VB-111 Clinical Program in GBM Glioblastoma is a brain cancer that affects approximately 12,000 to 13,000 newly diagnosed people each year in the United States. It is a devastating, rapidlyprogressing tumor, with a median time from diagnosis to the patient’s death of 12 to 15 months. In recurrent glioblastoma, treatment consists of bothsymptomatic and palliative therapies. However, with currently available therapies, glioblastoma typically remains fatal within a very short period of time. We conducted an open-label Phase 2 trial in rGBM, which was originally initiated as an adaptive Phase 1/2 trial. The trial was intended to evaluate the safetyand efficacy of VB-111, both by itself and in combination with bevacizumab, an anti-angiogenesis agent approved by the FDA for use in rGBM. In this trial,patients were initially dosed with VB-111 alone. After disease progression on VB-111 alone, they receive either bevacizumab alone as standard of care, or, ina second cohort, a combination of VB-111 and bevacizumab. Disease progression was defined as a worsening of the patient’s cancer with an increase of atleast 25% in the overall mass of measurable tumors, the appearance of new tumors, the worsening of non-measurable tumors since beginning of treatment, aneed for an increased dose of corticosteroids or clinical deterioration. Our Phase 2 trial results include 46 patients with rGBM treated with VB-111; upon disease progression, 23 patients were treated with VB-111 in combinationwith Avastin® , and 22 received Avastin® alone. One patient, who achieved a complete response, is still stable on VB-111 alone for more than 5 years as ofJanuary 2019, and was included in the continuous exposure cohort. The median number of bi-monthly VB-111 doses was four for the cohort, which wastreated with VB-111 through progression, versus one in the limited exposure cohort (average of 4.7 vs. 2.2, respectively). Continuous exposure to VB-111demonstrated significant improvement in overall survival, with median overall survival of 59.1 weeks (414 days), compared to 31.9 weeks (223 days) inpatients on limited VB-111 exposure (p=0.043), meeting the primary endpoint of the trial. Two complete responses and five partial responses were seen in theVB-111 continuous exposure cohort (n=24), compared to only two partial responses in VB-111 limited exposure cohort (n=22). VB-111 was found to be welltolerated. Trial data also showed that VB-111 may induce an immuno-therapeutic effect. Of the 46 patients who received VB-111, 25 patients experienced a fever post-dosing of VB-111 at least once, while 21 patients did not. Patients with fevers demonstrated increased overall survival of 16 months, compared to patientswithout fevers, who had a median overall survival of 8.5 months (p=0.03). Additional biomarkers analyses presented at the SNO conference in November2017 have demonstrated that in addition to fever, VB-111 is also associated with immune-mediated responses, including secretion of immune-stimulatorycytokines that correlate with OS, further supporting a role of the immune system as part of VB-111’s dual mechanism of action. In June 2016 at the ASCO conference, we presented clinical data that demonstrate a significant overall survival benefit in rGBM patients receiving VB-111compared with historical Avastin® meta-analysis data. In the Phase 2 VB-111 trial, the median overall survival of patients who received continuous exposureof VB-111 in combination with Avastin was 59.1 weeks. This is compared to 32.1 weeks in the pooled data from the 8 studies in the meta-analysis (p=0.0295;Hazard Ratio 0.62, 95% CI: 0.40-0.96). Median survival ranged from 26.0 weeks to 45.7 weeks in the meta-analysis. Overall survival at 12 months forpatients on continuous exposure of VB-111 was 57%, compared with 24% overall survival (range 16%-38%) for the pooled Avastin® treated rGBM data(p=0.03). In 62 patients with rGBM, the most frequent toxicity was self-limited fever, starting several hours post therapy and usually resolving within 24 hours andcontrolled with anti-pyretics. There were 22 adverse events classified as grade 3 or higher, of which 7 were considered possibly related to VB-111 includingasthenia, pyrexia, brain edema, depressed consciousness, pulmonary embolism, or PE (in a patient with PE prior to enrollment in the trial) and hypertension.Safety results were reviewed five times by the trial Data and Safety Monitoring Board, as well as by the FDA, without safety concerns. Based on interim Phase2 data of VB-111 in rGBM, the FDA has allowed VBL to launch a Phase 3 study of VB-111 in rGBM patients even prior to the completion of the Phase 2trial. In June 2016 at the ASCO conference, we presented clinical data that demonstrate a significant overall survival benefit in rGBM patients receiving VB-111compared with historical Avastin® meta-analysis data. In the Phase 2 VB-111 trial, the median overall survival of patients who received continuous exposureof VB-111 in combination with Avastin was 59.1 weeks. This is compared to 32.1 weeks in the pooled data from the 8 studies in the meta-analysis (p=0.0295;Hazard Ratio 0.62, 95% CI: 0.40-0.96). Median survival ranged from 26.0 weeks to 45.7 weeks in the meta-analysis. Overall survival at 12 months forpatients on continuous exposure of VB-111 was 57%, compared with 24% overall survival (range 16%-38%) for the pooled Avastin® treated rGBM data(p=0.03). VBL’s pivotal Phase 3 GLOBE study was conducted under a Special Protocol Assessment (SPA) granted by the FDA, with full endorsement by the CanadianBrain Tumor Consortium (CBTC). Enrollment in the study, 256 patients in total, started in August 2015 and has been completed in December 2016, fivemonths ahead of schedule. 43Table of Contents Three safety reviews were conducted during the GLOBE trial, by the independent Data Safety Monitoring Committee (DSMC). The DSMC is an independentmultidisciplinary group that conducts detailed review of un-blinded study data, discusses potential safety concerns and provides recommendations regardingtrial continuation. In December 2016, we announced that the independent Data Safety Monitoring Committee (DSMC) met to conduct its first safety reviewof the Phase 3 GLOBE Study investigating ofranergene obadenovec (VB-111) in recurrent glioblastoma (rGBM). The committee reviewed the GLOBE safetydata collected through a cutoff date in September 2016, and did not find any adverse events that would be cause for concern. As a result, the DSMCrecommended that the study continue as planned. In April 2017, we announce that the committee reviewed the GLOBE safety data collected through a cutoffdate in March 2017 and unanimously recommended that the study continue as planned. The Third and final DSMC review took place in September 2017.The committee reviewed the GLOBE safety data, including mortality data, collected through a cutoff date in August 2017 and stated that they did notidentify any safety concerns. The DSMC confirmed that no additional follow up will be necessary. Accordingly, the DSMC unanimously recommended thatthe study continue as planned, to completion. On March 8, 2018 we announced top-line data from the GLOBE study. These results show that the GLOBE study did not meet its pre-specified primaryendpoint of overall survival (OS), or the secondary endpoint of progression-free-survival (PFS). No new safety concerns associated with VB-111 have beenidentified in the GLOBE study. In November 2018, full data from the GLOBE trial were presented at the 2018 Society for Neuro-Oncology Annual Meeting by Dr. Timothy Cloughesy, MD,Professor of Clinical Neurology and Director of the Neuro-Oncology Program, UCLA School of Medicine and principal investigator of the GLOBE trial.Thorough analyses of the baseline risk factors of the Phase 2 and the Phase 3 treatment groups did not reveal any differences. Therefore, patient selection ordifferent patient populations could not explain the difference between the results of the two studies. The analyses pointed to the regimen in GLOBE trial asthe potential reason for its failure, indicating that priming with VB-111 without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic mechanism of VB-111 in rGBM. Following independent MRI analyses at UCLA which validated the overall clinical and survival benefit of VB-111 among patients who were primed with VB-111 in our prior Phase 2 study in rGBM, a new investigator-sponsored trial evaluating VB-111 in rGBMpatients is expected to be launched in the first half of 2019. VB-111 Clinical Program in Ovarian Cancer In addition to GBM, based on observations from early clinical trials, we have advanced VB-111 into tumor specific, repeat-dose trials, in ovarian cancer andthyroid cancer. Ovarian cancer was diagnosed in approximately 22,000 American women in 2013, according to the National Cancer Institute. In ovarian cancer, clinicaltrials of bevacizumab, which, like VB-111, is an anti-angiogenic agent, demonstrated some improvement in progression free survival in women with high-risk advanced ovarian cancer. Therefore, we conducted a Phase 1/2 clinical trial in ovarian cancer using VB-111 in combination with paclitaxel, a commonchemotherapeutic agent. This trial was designed as a Phase 1/2 dose escalation study. The primary objectives were to evaluate the safety and tolerability and identify dose limitingtoxicity in combination of VB-111 and weekly paclitaxel; and explore the efficacy in an expanded cohort of the optimally tolerated dose of combinationVB-111 and weekly paclitaxel, based on RECIST response, CA-125 response, progression free survival (PFS) and overall survival (OS) in patients withrecurrent platinum-resistant ovarian cancer. Twenty one patients with recurrent platinum-resistant Müllerian/ovarian cancer were enrolled at Massachusetts General Hospital and Dana Farber CancerInstitute, and received up to 7 doses of treatment. Patients were treated in two consecutive cohorts: Low Dose Treatment (n=4, 3x1012 VPs + 40mg/80 mgpaclitaxel) or a Therapeutic Dose (n=17, 1x1013 VPs + 80 mg paclitaxel). All patients had measurable disease, with a grade at diagnosis of: 1A (1, 5%), 1B (1,5%), 1C (1, 5%); IIIC (12, 57%); or IV (6, 29%). The patients included in the study were of particularly adverse prognosis as 48% of the patients were primaryplatinum refractory and 52% had tumors that failed to respond to prior anti-angiogenic agents, including Avastin. Trial results showed a significant increase in overall survival at the therapeutic dose of VB-111 vs. the low dose level (498 vs. 172 days, p=0.03). About 60%of patients on the therapeutic dose had a response, as defined by a 50% reduction in CA-125. Durable RECIST responses and disease stabilizations were seen.This represents an approximate doubling in response rate, compared to historical data with ovarian cancer patients treated with a combination of Avastin®and chemotherapy in the AURELIA trial which reported CA-125 response in 11.6% of patients treated with chemotherapy and 31.8% CA-125 response inovarian cancer patients treated with a combination of chemotherapy and Avastin®. 44Table of Contents An immunotherapeutic effect was also observed in biopsies taken from patients. H&E and immunohistochemistry staining showed regions of apoptoticcancer cells and infiltration of cytotoxic CD8 T-cells following treatment with VB-111. VB-111 was found to be safe and well tolerated. Toxicity was similarto what would be expected with antiangiogenics and taxanes in this patient population. Eight serious adverse events were reported, 2 were considered by theinvestigator to be possibly related to be VB-111. No dose limiting toxicities were reported at any dose level. In December 2016 we had an end-of-Phase 2 meeting with the FDA to discuss the clinical path of VB-111 in ovarian cancer. We reached agreement with theFDA on our clinical plan to proceed to a Phase 3 potential registration study of VB-111 in platinum-resistant patients. We intend to advance VB-111 for thispatient population, for which most current therapies fail to prolong patient survival, and in December 2017 announce the enrollment of the first patient in theOVAL potential registration Phase 3 study of VB-111 in platinum-resistant ovarian cancer. The OVAL study is conducted in collaboration with theGynecologic Oncology Group (GOG) Foundation, Inc., a leading organization for research excellence in the field of gynecologic malignancies. In March 2019, at the Society of Gynecologic Oncology conference, we presented data from of ovarian cancer patients treated with VB-111 and paclitaxel,showing the potential of VB-111 to stimulate the immune system and drive immune cells to infiltrate the tumor microenvironment. The randomized, controlled, double-blind, Phase 3 OVAL study in recurrent platinum-resistant ovarian cancer has been designed to enroll up to 400 adultpatients at approximately 75 clinical sites in the United States and Israel. Patients are randomized 1:1 to VB-111 (1x1013 VPs once every 8 weeks) incombination with chemotherapy (80mg/m2 paclitaxel once weekly), or to placebo with chemotherapy. The primary endpoint is overall survival. Additionalendpoints include objective response rate (ORR), progression free survival (PFS), CA-125, RECIST 1.1 response and patient reported outcome measures.Given the GLOBE trial results, we added an interim analysis to the OVAL study, which is expected to occur in year-end 2019. VB-111 Program in Thyroid Cancer We conducted an exploratory Phase 2 clinical trial to evaluate safety and efficacy of VB-111 in advanced thyroid cancer. According to the National CancerInstitute, there are an estimated 535,000 people currently living with thyroid cancer in the United States, with an estimated 60,000 new cases of thyroidcancer each year. Most cases can be treated by surgery and radioactive iodine. If radioactive iodine is ineffective, other treatments are prescribed, suchtyrosine kinase inhibitors and systemic chemotherapy. However, if such treatments are unsuccessful, the therapeutic options for patients are currently verylimited. There are an estimated 2,000 annual deaths in the U.S. as a result of the disease. This subset of patients has an unmet need for novel therapeuticoptions such as VB-111. Our open-label dose-escalating study enrolled patients with advanced, recently-progressive, differentiated thyroid cancer that was unresponsive toradioactive iodine, in two cohorts. Most patients had tumors that had not responded to multiple therapies prior to enrollment, including radiation and kinaseinhibitors. In the first cohort, thirteen patients received a single intravenous infusion of VB-111 at a sub-therapeutic dose of 3X1012 viral particles (VPs). Thesecond cohort included seventeen patients, who received VB-111 at a therapeutic dose of 1013 VPs every two months until disease progression. One patientproceeded from a single low dose to receive later multiple high doses at progression and was included in both groups (for PFS only). On February 21, 2017 we announced full data from this trial. The primary endpoint of the trial, defined as 6-month progression-free-survival (PFS-6) of 25%,was met with a dose response. Forty-seven percent (47%; 8/17) of patients in the therapeutic-dose cohort reached PFS-6, versus 25% (4/12) in the sub-therapeutic cohort, both groups meeting the primary endpoint. Reduction in tumor measurement after the first dose was seen in 44% (7/16) of patients in thetherapeutic-dose cohort, compared to 9% (1/11) in the sub-therapeutic-dose cohort. An overall survival benefit was seen with a tail of more than 40% at 3.7years for the therapeutic-dose cohort (mOS 684 days). This is similar to historical data for pazopanib (Votrient® ), a tyrosine kinase inhibitor; however, mostpatients in the VB-111 study had tumors that previously had progressed on pazopanib or other kinase inhibitors. VB-111 was observed to be well-tolerated inthis study, with no signs of clinically significant safety issues. We see these positive data as additional proof-of-concept for VB-111 in another advanced solid tumor, particularly important for investigating thetherapeutic potential of VB-111 even as monotherapy. Our primary focus continues to be advancement of VB-111 towards commercialization, if approved, inovarian cancer. Further clinical development of VB-111 for thyroid cancer may also be pursued, potentially with a strategic partner, or via an investigator-sponsored study. Additional VB-111 Program Based on support from pre-clinical data, which we presented at the American Society of Gene & Cell Therapy (ASGCT) conference in May 2017, and therecently presented histological data in ovarian cancer showing ability of VB-111 to turn an immunologically “cold” to “hot” tumor, an exploratory Phase 2study for VB-111 in combination a checkpoint inhibitor, is planned in gastrointestinal tumors. Launch of this trial is expected in the second half of 2019. Additional VTS Pipeline candidates Our VTS platform technology enables systemic administration of gene therapy to either destroy or promote angiogenic blood vessels. Beyond VB-111, wehave generated additional product candidates which utilize the same vector and promoter as in VB-111, yet comprise alternative functional transgenes. VB-511 is an anti-angiogenic candidate, while VB-211 and VB-411 are pro-angiogenic candidates that may be employed for ischemic conditions like peripheralvascular disease. All three candidates have demonstrated pre-clinical efficacy and are ready for toxicology. 45Table of Contents Our Lecinoxoid Platform Technology Our proprietary Lecinoxoid platform technology comprises a family of orally administered small molecules designed to modulate the body’s inflammatoryresponse. Lecinoxoids are compounds that are structurally and functionally similar to naturally occurring molecules, known as oxidized phospholipids,which possess immune modulating anti-inflammatory properties, modified to enhance stability and activity. We believe that Lecinoxoids hold significantpromise in their ability to treat a range of chronic immune-based inflammatory diseases. The inflammatory response is a complex physiologic process balancing both pro- and anti- inflammatory components that interact intimately with the body’simmune system. Oxidized phospholipids are instrumental in the interplay of these components that maintain equilibrium. When the inflammatory response isnot adequately balanced, excess inflammation results and may cause both acute and chronic disease states. The Lecinoxoid platform seeks to harness the ability of oxidized phospholipids to regulate and attenuate key immune-inflammatory signaling. We believethat our approach-identifying naturally occurring anti-inflammatory compounds and modifying them to enhance stability and activity-may lead to morephysiologically balanced responses than other available anti-inflammatory therapies. 46Table of Contents VB-201 Our lead Lecinoxoid-based compound, VB-201, was designed as an oral agent for the control of chronic inflammatory disorders. It was clinically developedfor psoriasis and ulcerative colitis, however, our recent Phase 2 data do not support further development for these indications. We believe that VB-201 maystill have potential in other disorders in which TLR-2 and TLR-4 or monocytes play a role. In this regard, in April 2016 we announced a scientificpublication of preclinical findings demonstrating that VB-201, and its next-generation derivative VB-703, can inhibit Non-Alcoholic Steatohepatitis, orNASH, and liver fibrosis in a murine NASH model. Non-alcoholic fatty liver disease is the most common liver disease in the western world. This pathological condition is characterized by lipid accumulationin hepatocytes and ranges from the non-progressive form termed steatosis to NASH, the progressive form that is prone to the development of cirrhosis, livercancer, and liver failure. NASH is characterized by fatty liver inflammation. Several studies have implicated TLR4 and its co-receptor CD14 in NASH andfibrosis. In addition, studies have emphasized the crucial role of infiltrating monocytes/macrophages for the progression of liver inflammation and fibrosis inexperimental mouse models and in patients with liver cirrhosis. It has become clear that the macrophage compartment of the liver, traditionally called Kupffercells, is greatly augmented by an overwhelming number of infiltrating monocytes upon acute or chronic liver injury. VB-201 inhibits the CD-14/TLR4 and TLR2 pathways as well as monocyte migration. Using an external CRO, we studied VB-201 in a mouse model ofNASH and found that while treatment with VB-201 did not reduce steatosis, it significantly decreased liver lobular inflammation and liver fibrosis comparedto vehicle treated mice. Furthermore, in April 2017 VBL presented findings of a post-hoc, hypothesis-driven analysis of data from completed Phase 2 studieswith VB-201, indicating that VB-201 may reduce certain liver enzymes in blood samples from treated patients, in a time-dependent and dose-dependentmanner. Beyond VB-201, we have developed second and third generations of Lecinoxoid product candidates. Our results highlight the potential of some of thesemolecules, such as VB-703, a third generation candidate whose IP life-cycle can extend to the mid-2030s. In May 2015 at the DDW conference, we presentedthat VB-703 inhibits liver fibrosis by blocking TLR4 signaling pathways. Recent preclinical studies which we performed also demonstrate efficacy of VB-201 and VB-703 in a rat model of renal fibrosis. Renal fibrosis is a directconsequence of the kidney’s limited capacity to regenerate after injury. Renal scarring results in a progressive loss of renal function, ultimately leading toend-stage renal failure and a requirement for dialysis or kidney transplantation. Our lead Lecinoxoid molecule, VB-201, is a Phase-2 ready oral molecule which has demonstrated safety in > 600 patients and proof-of-concept in a Phase 2study for vascular inflammation. Our next-generation molecule VB-703, offers long IP lifecycle with demonstrated efficacy in liver and renal fibrosis models. 47Table of Contents We believe that Lecinoxoids have therapeutic potential in disorders in which TLR-2 and TLR-4 or monocytes play a role, such as atherosclerosis,NASH/Liver fibrosis and renal fibrosis. In spite of that potential, we have decided strategically to focus our efforts and resources on development of novelanti-cancer therapies, such as VB-111 and MOSPD2. Therefore, we intend to seek one or more strategic partners that would help us to exploit the potential ofour Lecinoxoid assets. Accordingly, in March 2019, we announced a strategic exclusive option license agreement with one of world-leading European animal health companies, forthe development of VB-201 for veterinary use. Under terms of the agreement, VBL has granted an exclusive option license to explore the potential of VB-201for animal health indications. In exchange, VBL is receiving an undisclosed up-front payment, and is entitled to receive additional development milestonepayments. Upon exercising the option to license, VBL will receive additional milestones and royalties on net sales, which may exceed €50 million over thecourse of the license term. We retain the VB-201 rights for treatment of humans, worldwide. Expanding our Pipeline-The VB-600 series of monoclonal antibodies targeting MOSPD2 for Oncology and Inflammation We are conducting two parallel drug development programs that are exploring the potential of MOSPD2, a protein which we identified as a key regulator ofcell motility, as a therapeutic target for inflammatory diseases and cancer. MOSPD2 is a membrane protein whose function was unknown. We discovered new biological findings, which seem to position MOSPD2 as a criticalpathway controlling monocyte migration and as a key regulator of disease pathogenesis in different inflammatory autoimmune settings. Our data show thatinhibition of MOSPD2 by either knockdown, silencing or proprietary antibodies, results in a significant reduction in the ability of monocytes to migrate,regardless of the inflammatory signals employed to attract them. Since many of the receptors involved in regulation of immune cell migration are also utilized by cancer cells in the process of dissemination through thebody and formation of metastases, we asked whether MOSPD2 plays a role in this setting as well. We found that MOSPD2 was detected in the majority ofcancerous organs, including colon, esophagus, liver and breast. In a manuscript published in International Journal of Cancer as well as in scientificconferences, we showed that MOSPD2 is required for the migration and invasion of breast cancer cells in vitro, and that it promotes breast cancer cellmetastasis in vivo. Given the specificity of MOSPD2 expression and its highly elevated expression in tumors, we believe MOSPD2 can serve as a novelmechanism for targeting of tumor cells. Accordingly, we are developing our VB-600 platform of monoclonal antibodies targeting MOSPD2 for oncology and inflammatory indications. Bi-specific mAbs for Oncology Indications We are developing bi-specific antibodies aimed to kill tumor cells, based on MOSPD2 as a target whose expression is induced in multiple tumors. MOSPD2 can be found in many types of solid tumors, and it seems to be highly expressed on tumor cells when they start invading tissues or creatingmetastatic lesions. This correlates with the role we identified for MOSPD2 as a key regulator of cell motility in tumor cells. Our preliminary data indicate thatknock-out of MOSPD2 in tumor cells may reduce metastasis by 95% in some pre-clinical settings. In July 2018, we published a manuscript demonstrating, for the first time, that MOSPD2 can play a major role in breast cancer cell migration and metastasis.Histological analysis of human specimens shows that MOSPD2 levels were correlated with the stage of tumor invasiveness, and were profoundly elevated ininvasive and metastatic breast cancer. Based on these findings, our approach is to utilize MOSPD2 as a target for attacking the tumor cells in the treatment of late-stage breast cancer and othertumor types. To this end, we are developing bi-specific antibodies that aim to induce killing of MOSPD2-positive tumors cells through binding andactivation of T-cells. We have presented proof-of-concept for this approach at the AACR conference in April 2018 using a BiTE antibody, and are currentlyadvancing our lead bi-specific candidates towards an IND filing, which is expected in the second half of 2020. Classical mAbs for Inflammatory Indications Our data show, that MOSPD2 which is predominantly expressed on the surface of human monocytes, is essential for their migration. By inhibiting thisprotein, we seek to block this migration of monocytes to sites of inflammation, and accordingly to reduce inflammation and tissue damage. At the ECTRIMS 2018 meeting, we presented the critical role of MOSPD2 in the development of multiple sclerosis, and its potential as a novel target fortreatment of inflammation in the Central Nervous System (or CNS) and other organs. One of the key cell types that causes inflammation in MS, is themonocyte. In MS, monocytes that circulate in the peripheral blood infiltrate into the CNS and play a key role in the inflammatory process, particularlythrough damaging the myelin coating which protects the nerve fibers, therefore leading to acute neurological symptoms. Using MOSPD2 knockout mice, ourdata show that MOSPD2 was critical for the development of the disease in the experimental autoimmune encephalomyelitis (or EAE) model for MS, asknockout mice essentially do not develop the disease. Furthermore, we developed proprietary monoclonal antibodies against MOSPD2 that successfullyprevented development of EAE, and were also effective in treatment of the animals after the neurological symptoms had already appeared. These data suggestthat MOSPD2 is a critical path in MS. In February 2019, we presented additional data implicating the potential of our VB-600 platform of antibodies targeting MOSPD2 for treatment of NASH andRA. Data presented at Keystone symposia in February 2019 showed that mice in which the MOSPD2 gene was knocked out, had minimal or no disease in thecollagen antibody-induced arthritis model for RA. Knockout of MOSPD2 also lead to significant reduction in liver fibrosis in a high-fat-high-carbohydratemodel for NASH. Collectively, these data point to MOSPD2 as a key pathway through which the body is recruiting monocytes to specific sites ofinflammation. Accordingly, we believe that antibodies targeting MOSPD2 have potential for treatment of various inflammatory indications, and areadvancing lead candidates towards an IND submission which is expected in the first half of 2020. Intellectual Property Our success depends, at least in part, on our ability to protect our proprietary technology and intellectual property, and to operate without infringing orviolating the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws, know- how, intellectual propertylicenses and other contractual rights, including confidentiality and invention assignment agreements to protect our intellectual property rights. Patents As of January 30, 2019, we had 234 granted patents and 34 applications pending worldwide for our oncology program and VTS platform technology and 120granted patents and 26 patent applications pending worldwide for our anti-inflammatory program and Lecinoxoid family of compounds. Our lead VTS asset,VB-111, is covered by US granted patent extending to 2033 before any extensions. Our lead Lecinoxoid, VB-201, is protected by US granted composition-of-matter patent extending to 2027 before any extensions. In addition, we have pending patent applications covering use of VB-201, VB-703 and additionalLecinoxoid for NASH and fibrosis indications that may extend, if granted, to the 2030s. For MOSPD2, there are 19 applications pending worldwide. Trademarks We rely on trade names, trademarks and service marks to protect our name brands. Our registered trademarks in several countries include the following:“VTS,” “VBL THERAPEUTICS,” “VASCULAR TARGETING SYSTEM VTS,” “VBL,” “V VBL THERAPEUTICS & Design,” “VASCULAR BIOGENICS,”“VASCULAR THERAPEUTICS,” “V & Design,” “GLOBE & Design,” and “OVAL & Design”. Trade Secrets and Confidential Information In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how. We rely on, among otherthings, confidentiality and invention assignment agreements to protect our proprietary know-how and other intellectual property that may not be patentable,or that we believe is best protected by means that do not require public disclosure. For example, we require our employees to execute confidentialityagreements in connection with their employment relationships with us, and to disclose and assign to us inventions conceived in connection with theirservices to us. However, there can be no assurance that these agreements will be enforceable or that they will provide us with adequate protection. 48Table of Contents We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and may be subject to claims that weinfringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For a more comprehensive summary of therisks related to our intellectual property, see “Risk Factors.” Sales and Marketing We have not yet established sales, marketing or product distribution operations because our lead candidates are still in early clinical development. Manufacturing We generally perform process development for our drug substance candidates and manufacture quantities of our drug candidates necessary to conduct pre-clinical studies and clinical trials of our drug candidates. We rely on third-party manufacturers to produce bulk drug substance required for our clinical trialsand expect to continue to rely on third parties to manufacture clinical trial drug supplies for the foreseeable future. We also contract with additional thirdparties for the formulating, labeling, packaging, storage and distribution of the final drug products. VB-111 Until late 2017, we manufactured the active pharmaceutical ingredient and the formulated drug product of VB-111 for the clinical development at our small-scale cGMP-compliant production facility in Or-Yehuda, Israel and pursuant to an arrangement with a third party in the United States. In October 2017, we announced the opening of our new gene therapy manufacturing plant in Modiin, Israel. This plant will be the commercial facility forproduction of the Company’s lead product candidate, ofranergene obadenovec (VB-111), if approved. The site design enables modular expansion of themanufacturing capacity, to supply growing demand following commercialization. The Modiin facility shall also enable us to comply with the restrictions ofthe Research Law and our undertaking to the OCS that an essential portion of our VB-111 production, and in any event not less than the majority of VB-111production, will remain in Israel. Employees As of March 1, 2019, we employed 39 employees, including 31 in research and development, and 8 in general and administrative positions, and of which 13employees have either MDs or PhDs. All of our employees are located in Israel. We believe our employee relations are good. Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination ofseverance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti- discrimination laws and other conditionsof employment. Subject to specified exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of an employee, andrequires us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Ouremployees have defined benefit pension plans that comply with the applicable Israeli legal requirements. 49Table of Contents None of our employees currently work under any collective bargaining agreements. Property Our corporate headquarters and research facilities are currently located in Modi’in, Israel, where we lease an aggregate of approximately 21,500 square feet ofoffice and laboratory space, pursuant to a lease agreement that expires in June 2023. This facility additionally houses our clinical development, clinicaloperations, regulatory and management functions, as well as our local biological drugs manufacturing facility. Organizational Structure We do not have any subsidiaries. Legal Proceedings We are not a party to any legal proceedings. Item 4A. Unresolved Staff Comments Not applicable. Item 5. Operating and Financial Review and Prospects The following discussion of our financial condition and results of operations should be read in conjunction with “Item 3. Key Information-SelectedFinancial Data” and our financial statements and the related notes to those statements included elsewhere in this Annual Report. In addition to historicalfinancial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Ouractual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors,including those discussed under “Item 3. Key Information-D. Risk Factors” and elsewhere in this Annual Report. The audited financial statements for the years ended December 31, 2018, 2017 and 2016 and as of December 31, 2018 and 2017 in this AnnualReport have been prepared in accordance with IFRS as issued by the IASB. None of the financial information in this Annual Report has been prepared inaccordance with U.S. GAAP. Overview We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of first-in-class treatments for cancer. Ourprogram is based on our proprietary Vascular Targeting System, or VTS, platform technology, which utilizes genetically targeted therapy to destroy newlyformed, or angiogenic, blood vessels, and which we believe will allow us to develop product candidates for multiple oncology indications. 50Table of Contents Our lead product candidate, VB-111 (ofranergene obadenovec), is a gene-based biologic that we are developing for solid tumor indications, and which wehave advanced to programs for recurrent glioblastoma, or rGBM, an aggressive form of brain cancer, ovarian cancer and thyroid cancer. We have obtained fasttrack designation for VB-111 in the United States for prolongation of survival in patients with glioblastoma that has recurred following treatment withstandard chemotherapy and radiation. We have also received orphan drug designation for GBM in both the United States and Europe. VB-111 has alsoreceived an orphan designation for the treatment of ovarian cancer by the European Medicines Agency. In September 2015, we reported complete resultsfrom our Phase 2 trial of VB-111 in rGBM, demonstrating a statistically-significant benefit in overall survival and favorable response rate in patients treatedwith VB-111 in combination with bevacizumab. Our pivotal Phase 3 GLOBE study in rGBM began in August 2015 and was comparing a combination of VB-111 and bevacizumab to bevacizumab alone. The study, which enrolled a total of 256 patients in the US, Canada and Israel was conducted under a specialprotocol assessment, or SPA, agreement with the U.S. Food and Drug Administration, or FDA, with full endorsement by the Canadian Brain TumorConsortium (CBTC). On March 8, 2018, we announced top-line results from the GLOBE study, which showed that the study did not meet its pre-specifiedprimary endpoint of overall survival (OS). No new safety concerns associated with VB-111 have been identified in the GLOBE study. In November 2018, fulldata from the GLOBE trial were presented at the 2018 Society for Neuro-Oncology Annual Meeting. Analyses pointed to the regimen in GLOBE trial as thepotential reason for its negative outcome, indicating that priming with VB-111 without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic mechanism of VB-111 in rGBM. We do not think that results of the GLOBE study in rGBM will necessarily have implications onthe prospects for VB-111 in other regimens or tumor types. Accordingly, following independent MRI analyses at UCLA which validated the overall clinicaland survival benefit of VB-111 among patients who were primed with VB-111 in our prior Phase 2 study in rGBM, a new investigator-sponsored Phase 2 trialevaluating VB-111 in rGBM patients is expected to be launched in the first half of 2019. Our OVAL phase 3 potential registration study of VB-111 inplatinum resistant ovarian cancer was launched in December 2017 and is conducted in collaboration with the GOG Foundation, Inc., a leading organizationfor research excellence in the field of gynecologic malignancies. An interim analysis in the OVAL study is expected in year-end 2019. In addition, acollaborative Phase 2 study evaluating VB-111 in combination with a checkpoint-inhibitor in gastrointestinal tumors is expected to be launched in thesecond half of 2019. We also have been conducting a program targeting anti-inflammatory diseases, based on the use of our Lecinoxoid platform technology. Lecinoxoids are anovel class of small molecules we developed that are structurally and functionally similar to naturally occurring molecules known to modulate inflammation.The lead product candidate from this program, VB-201, is a Phase 2-ready molecule that demonstrated efficacy in reducing vascular inflammation in a Phase2 sub-study in psoriatic patients with cardiovascular risk. Due to business limitations associated with the heavy burden of developing medications forcardiovascular diseases, we chose to test it in psoriasis and ulcerative colitis; however, as we reported in February 2015, VB-201 failed to meet the primaryendpoint in Phase 2 clinical trials for psoriasis and for ulcerative colitis. As a result, we have terminated our development of VB-201 in those indications.Nevertheless, based on recent pre-clinical studies, we believe that VB-201 and some second generation molecules such as VB-703 may be applicable forNASH and renal fibrosis. Since the company intends to focus its efforts and resources on advancing our oncology program, we will seek to advance ourLecinoxoid assets via strategic deals. Accordingly, in March 2019, we announced a strategic exclusive option license agreement with one of the world-leading European animal health companies, for the development of VB-201 for veterinary use. We retain the VB-201 rights for treatment of humans,worldwide. We are also conducting a research program exploring the potential of targeting of MOSPD2 for immuno-oncology applications. In January 2017, we reportedthat targeting of MOSPD2 inhibits chemotaxis of monocytes and neuropils. In 2018, we published a manuscript showing that MOSPD2 can play a major rolein breast cancer cell migration and metastasis, and that targeting MOSPD2 may be employed to prevent the spreading of breast cancer cells. We alsopresented proof-of-concept data demonstrating antibody-mediated killing of MOSPD2-expressing cancer cells. We believe that targeting of MOSPD2 mayhave several therapeutic applications, including inhibition of monocyte migration in chronic inflammatory conditions, inhibition of tumor cell metastasesand targeting of MOSPD2-expressing tumor cells. We are developing our “VB-600 series” of pipeline candidates towards inflammatory and oncologyapplications. We are developing our lead oncology product candidate, VB-111, for solid tumor indications, with current clinical programs in rGBM, thyroid cancer andovarian cancer. In interim analyses of data from our ongoing open-label Phase 2 clinical trial of VB-111 in rGBM, we observed dose-dependent attenuationof tumor growth and an increase in median overall survival, which is the time interval from initiation of treatment to the patient’s death. The U.S. Food andDrug Administration, or FDA, has granted VB-111 fast track designation for prolongation of survival in patients with glioblastoma that has recurredfollowing treatment with temozolomide, a chemotherapeutic agent commonly used to treat newly diagnosed glioblastoma, and radiation. On July 1, 2014,the FDA concurred with the design and planned analyses of our Phase 3 pivotal trial of VB-111 in rGBM pursuant to an SPA. At the time, commencement ofthe trial was subject to our providing the agency with more information regarding our potency release assay for the trial. We developed this assay andsubmitted initial information to the FDA on May 26, 2014. On February 5, 2015 the FDA has found our data satisfactory and removed the partial hold. We began our Phase 3 pivotal trial of VB-111 in rGBM in August 2015 and completed patient enrollment for the study in December 2016, five months aheadof our initial plan. Following positive safety reviews announced in December 2016, in April 2017 and the third and final safety review that was announced inOctober 2017, the GLOBE trial continued to completion. On March 8, 2018, we announced top-line results from the GLOBE study, which showed that thestudy did not meet its pre-specified primary endpoint of overall survival (OS). In November 2018, full data from the GLOBE trial were presented at the 2018Society for Neuro-Oncology Annual Meeting by Dr. Timothy Cloughesy, MD, Professor of Clinical Neurology and Director of the Neuro-Oncology Program,UCLA School of Medicine and principal investigator of the GLOBE trial. Thorough analyses of the baseline risk factors of the Phase 2 and the Phase 3treatment groups did not reveal any differences. Therefore, patient selection or different patient populations could not explain the difference between theresults of the two studies. The analyses pointed to the regimen in GLOBE trial as the potential reason for its failure, indicating that priming with VB-111without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic mechanism of VB-111 in rGBM. Following independent MRIanalyses at UCLA which validated the overall clinical and survival benefit of VB-111 among patients who were primed with VB-111 in our prior Phase 2study in rGBM, a new investigator-sponsored trial evaluating VB-111 in rGBM patients is expected to be launched in the first half of 2019. 51Table of Contents VB-111 was also being studied in a Phase 2 trial for recurrent platinum-resistant Ovarian Cancer and in a Phase 2 study in recurrent, iodine-resistantdifferentiated Thyroid Cancer. In a Phase 2 trial for recurrent platinum-resistant ovarian cancer, VB-111 demonstrated a statistically significant increase inoverall survival and about 60% durable response rate (as measured by reduction in CA-125), approximately twice the historical response with bevacizumabplus chemotherapy in ovarian cancer. In December 2016, we had an end-of-Phase-2 meeting with the FDA, in which we received approval from the FDA toadvance VB-111 for a Phase 3 study in platinum-resistant ovarian cancer, which we launched in December 2017. The OVAL study is conducted incollaboration with the Gynecologic Oncology Group (GOG) Foundation, Inc., a leading organization for research excellence in the field of gynecologicmalignancies. An interim analysis in the OVAL study is expected to occur in year-end 2019. In March 2019, at the Society of Gynecologic Oncology conference, we presented data from of ovarian cancer patients, showing the potential of VB-111 tostimulate the immune system and drive immune cells to infiltrate the tumor microenvironment. In February 2017, we reported full data from our exploratory Phase 2 study of VB-111 in recurrent, iodine-resistant differentiated thyroid cancer. The primaryendpoint of the trial, defined as 6-month progression-free-survival (PFS-6) of 25%, was met with a dose response. Forty-seven percent of patients in thetherapeutic-dose cohort reached PFS-6, versus 25% in the sub-therapeutic cohort, both groups meeting the primary endpoint. An overall survival benefit wasseen, with a tail of more than 40% at 3.7 years for the therapeutic-dose cohort, similar to historical data for pazopanib (Votrient® ), a tyrosine kinase inhibitor;however, most patients in the VB-111 study had tumors that previously had progressed on pazopanib or other kinase inhibitors. As of December 31, 2016, wehad studied VB-111 in over 200 patients and have observed it to be well-tolerated. In December 2015, we have been granted a US composition of matterpatents that provides intellectual property protection for VB-111 in the US until October 2033 before any patent term extension. In October 2017, we announced the opening of our new gene therapy manufacturing plant in Modiin, Israel. This plant can be the commercial facility forproduction of VB-111, if approved. The Modiin facility is the first commercial-scale gene therapy manufacturing facility in Israel and currently one of thelargest gene-therapy designated ones in the world (20,000 sq. ft.). It is capable of manufacturing in large-scale capacity of 1,000 liters and is scalable to 2,000liters. In November 2017, we signed an exclusive license agreement with NanoCarrier Co., Ltd. (TSE Mothers:4571) for the development, commercialization, andsupply of VB-111 in Japan. VBL retains rights to VB-111 in the rest of the world. Under terms of the agreement, VBL has granted NanoCarrier an exclusivelicense to develop and commercialize VB-111 in Japan for all indications. VBL will supply NanoCarrier with VB-111, and NanoCarrier will be responsiblefor all regulatory and other clinical activities necessary for commercialization in Japan. In exchange, we received an up-front payment of $15 million, and areentitled to receive greater than $100 million in development and commercial milestone payments to the extent they are achieved. VBL will also receivetiered royalties on net sales in the high-teens. Based on support from pre-clinical data, which we presented at the American Society of Gene & Cell Therapy (ASGCT) conference in May 2017, and thehistological data in ovarian cancer showing ability of VB-111 to turn an immunologically “cold” to “hot” tumor, an exploratory Phase 2 study for VB-111 incombination a checkpoint inhibitor, is planned in gastrointestinal tumors. Launch of this trial is expected in the second half of 2019. We commenced operations in 2000, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital,developing our VTS and Lecinoxoid platform technologies and developing our product candidates, including conducting pre-clinical studies and clinicaltrials of VB-111 and VB-201. To date, we have funded our operations through private sales of preferred shares, a convertible loan, public offering and grantsfrom the Israeli Office of Chief Scientist, or OCS, which has later transformed to the Israeli Innovation Authority, or IIA, under the Israel Encouragement ofResearch and Development in Industry, or the Research Law. We have no products that have received regulatory approval and accordingly have nevergenerated regular revenue streams. Since our inception and through December 31, 2018, we had raised an aggregate of $248.9 million to fund our operations,of which $113.4 million was from sales of our equity securities, $40.5 from our initial public offering, or IPO, $15 million from a November 3, 2015underwritten offering, approximately $24.0 million from a June 7, 2016 registered direct offering, $17.9 million from a November 16, 2017 underwrittenoffering, $15.5 million from a June 27, 2018 registered direct offering and $22.6 million from IIA grants. Since inception, we have incurred significant losses. For the years ended December 31, 2018, 2017 and 2016, our loss was $20.5 million, $10.1 million, and$16.0 million, respectively. We expect to continue to incur significant expenses and losses for at least the next several years. As of December 31, 2018, wehad an accumulated deficit of $188.6 million. Our losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of ourclinical trials, the receipt of payments under any future collaborations we may enter into, and our expenditures on other research and development activities. As of December 31, 2018, we had cash, cash equivalents and short-term bank deposits of $50.5 million. To fund further operations, we may need to raiseadditional capital. We may seek to raise more capital to pursue additional activities, which may be through a combination of private and public equityofferings, government grants, strategic collaborations and licensing arrangements. Additional financing may not be available when we specifically need it ormay not be available on terms that are favorable to us. As of March 1, 2019, we had 39 employees. 52Table of Contents Financial Overview Revenues and Cost of Revenues To date, we have generated approximately $14.5 million revenue from an exclusive license agreement for the development, commercialization, and supply ofofranergene obadenovec (“VB-111”) in Japan for all indications for a $15.0 million upfront payment, in addition to a $2.0 million incurred milestonepayment. The cost of revenues associated with these payments was approximately $0.3 million to Tel Hashomer for a 2% consideration that was received forgranting a license or similar rights to this intellectual property. We do not expect to receive any other revenue from any product candidates that we developunless and until we obtain regulatory approval and commercialize our products or enter into collaborative agreements with third parties. Research and Development Expenses Research and development expenses consist of costs incurred for the development of both of our platform technologies and our product candidates. Thoseexpenses include: ●employee-related expenses, including salaries and share-based compensation expenses for employees in research and development functions; ●expenses incurred in operating our laboratories and small-scale manufacturing facility; 53Table of Contents ●expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials; ●expenses relating to outsourced and contracted services, such as external laboratories, consulting and advisory services; ●supply, development and manufacturing costs relating to clinical trial materials; ●maintenance of facilities, depreciation and other expenses, which include direct and allocated expenses for rent and insurance; and ●costs associated with pre-clinical and clinical activities. Research and development activities are the primary focus of our business. Product candidates in later stages of clinical development generally have higherdevelopment costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Ourresearch and development expenses may increase in absolute dollars in future periods as we continue to invest in research and development activities relatedto the development of our platform technologies and product candidates. In particular, our research and development expenses may increase as we developVB-111 beyond rGBM, and continue its clinical development in ovarian cancer and thyroid cancer. In addition, our research and development expenses mayincrease as we develop our VB-600 series of product candidates. Research expenses are recognized as incurred. An intangible asset arising from the development of our product candidates is recognized if certaincapitalization conditions are met. As of December 31, 2018, we did not have any capitalized development costs. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and dataprovided to us by our vendors and clinical sites. Nonrefundable advance payments for goods or services to be received in future periods for use in researchand development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and the services areperformed. We have received grants from the IIA as part of the research and development programs for our VTS and Lecinoxoid platform technologies. The requirementsand restrictions for such grants are found in the Research Law. These grants are subject to repayment through future royalty payments on any productsresulting from these research and development programs, including VB-111 and VB-201. Under the Research Law, royalties of 3% to 3.5% on the revenuesderived from sales of products or services developed in whole or in part using these IIA grants are payable to the Israeli government. The maximum aggregateroyalties paid generally cannot exceed 100% of the grants made to us, plus annual interest generally equal to the 12-month LIBOR applicable to dollardeposits, as published on the first business day of each calendar year. The total gross amount of grants actually received by us from the IIA, including accruedLIBOR interest as of December 31, 2018 and 2017, totaled $27.8 million and $26.9 million, respectively. The Research Law is targeted at maintaining the intellectual property and manufacturing rights relating to IIA-funded projects in Israel. Under certaincircumstances, where the above is not followed, the royalty rate might be higher and accordingly calculated to a formula based on the ratio of theparticipation by the State in the project to the total project costs incurred us. In addition to paying any royalty due, we must abide by other restrictions associated with receiving such grants under the Research Law that continue toapply following repayment to the IIA. These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions orotherwise transfer our know-how outside of Israel, and may require us to obtain the approval of the IIA for certain actions and transactions and pay additionalroyalties and other amounts to the IIA. In addition, any change of control and any change of ownership of our ordinary shares that would make a non-Israelicitizen or resident an “interested party,” as defined in the Research Law, requires prior written notice to the IIA. If we fail to comply with the Research Law,we may be subject to criminal charges. 54Table of Contents Under applicable accounting rules, the grants income from the IIA have been accounted for as an off-set against the related research and developmentexpenses in our financial statements. As a result, our research and development expenses are shown on our financial statements net of the IIA grants. General and Administrative Expenses General and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions such as salaries, benefitsand share-based compensation. Other general and administrative expenses include facility costs not otherwise included in research and developmentexpenses, communication expenses, and professional fees for legal services, patent counseling and portfolio maintenance, consulting, auditing andaccounting services. Marketing Expenses Marketing expenses consists principally of salaries and related cost for personnel in marketing and commercialization functions such as salaries, benefits andshare-based compensation, in addition to commercialization consulting services. Financial Expenses (Income), Net Financial income is comprised of interest income generated from interest earned on our cash, cash equivalents and short-term bank deposits and gains andlosses due to fluctuations in foreign currency exchange rates mainly in the appreciation and depreciation of the NIS exchange rate against the U.S. dollar. Financial expenses primarily consist of fluctuations in foreign currency exchange rates. Taxes on Income We have not generated taxable income since our inception, and had carry forward tax losses as of December 31, 2018 of $164.9 million. We anticipate thatwe will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxableincome after the full utilization of our carry forward tax losses. We recognize deferred tax assets on losses for tax purposes carried forward to subsequent years if utilization of the related tax benefit against a future taxableincome is expected. We have not created deferred taxes on our tax loss carry forward since their utilization is not expected in the foreseeable future. Critical Accounting Policies and Significant Judgments and Estimates This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have beenprepared in accordance with IFRS. The preparation of these financial statements requires us to make estimates and assumptions that affect the reportedamounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expensesincurred during the reporting periods. Estimates and judgments are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances. We make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Theestimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the nextfinancial year are discussed below. Revenue In 2017, the Company signed a license and supply agreement as more fully described in note 8. In determining the amounts to be recognized as revenue, theCompany used its judgement in the following main issues: Identifying the performance obligations in the agreement and determining whether the license provided is distinct - based on the Company’s analysis, thelicense is distinct as the licensee is able to benefit from the license on its own at its current stage (inter alia, due to sublicensing rights, rights andresponsibility for development in the territory, etc.). Allocation of the transaction price - the Company estimated the standalone selling prices of the services to be provided based on expected cost plus a marginand used the residual approach to estimate the standalone selling price of the license as the Company has not yet established a price for the license, and it hasnot previously been sold on a standalone basis. Share-Based Compensation We operate a number of equity-settled, share-based compensation plans for employees (as defined in IFRS 2 “Share-Based Payments”), directors and serviceproviders. As part of the plans, we grant employees, directors and service providers, from time to time and at our discretion, options to purchase our ordinaryshares. The fair value of the services received in exchange for the grant of the options is recognized as an expense in our statements of comprehensive lossand is carried to additional paid in capital in our statements of financial position. The total amount is recognized as an expense ratably over the vestingperiod of the options, which is the period during which all vesting conditions are expected to be met. 55Table of Contents We estimate the fair value of our share-based awards to employees, directors and service providers using the Black-Scholes option pricing model, whichrequires the input of highly subjective assumptions, including (a) the expected volatility of our shares, (b) the expected term of the award, (c) the risk-freeinterest rate, and (d) expected dividends. Due to the lack of a public market for the trading of our shares until October 2014 and a lack of company-specifichistorical and implied volatility data, we have based our estimate of expected volatility on the historic volatility of a group of similar companies that arepublicly traded. For options granted since 2015, the expected volatility was calculated using weighted average and was based on the stock price volatility ofthe Company since October 1st, 2014 (IPO date) and the remaining years on the stock price volatility of similar companies. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own share price becomes available. We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from the estimates.Vesting conditions are included in assumptions about the number of options that are expected to vest. At the end of each reporting period, we revise ourestimates of the number of options that are expected to vest based on the nonmarket vesting conditions. We recognize the impact of the revision to originalestimates, if any, in profit or loss, with a corresponding adjustment to additional paid in capital. The following table summarizes the weighted average assumptions we have used in our Black-Scholes calculations for the years ended December 31, 2018,2017 and 2016: Year ended December 31, 2018 2017 2016 Employee share options: Risk-free interest rate 2.46%-2.86% 2.15%-2.44% 1.64%-1.78%Expected dividend yield 0% 0% 0%Expected volatility 97.0% -100% 97.0% 86%-97.0%Expected term (years) 11 11 11 The following table summarizes the allocation of our share compensation expense: Year ended December 31, 2018 2017 2016 (in thousands) Research and development $2,255 $2,027 $900 General and administrative 1,541 1,977 520 Marketing 71 148 - Total $3,867 $4,152 $1,420 Share-based compensation expense for the year ended December 31, 2018 were $3,867 thousand, compared to $4,152 thousand for the year ended December31, 2017, a decrease of $285 thousand. Clinical trial accruals Clinical trial expenses are charged to research and development expense as incurred. The Company accrues for expenses resulting from obligations undercontracts with clinical research organizations (CROs). The financial terms of these contracts are subject to negotiations, which vary from contract to contractand may result in payment flows that do not match the periods over which materials or services are provided. The Company’s objective is to reflect theappropriate trial expense in the financial statements by matching the appropriate expenses with the period in which services and efforts are expended. As ofDecember 31, 2018, the company had clinical accruals in the amount of approximately $1.2 million. 56Table of Contents Results of Operations Comparison of Years Ended December 31, 2018, 2017 and 2016 Year ended December 31, 2018 Increase(Decrease) 2017 Increase(Decrease) 2018 2017 2016 $ % $ % (in thousands) Revenues $585 13,864 - $(13,279) -96% 13,864 100%Cost of Revenues (235) (340) 105 -31% (340) 100%Gross profit 350 13,524 - (13,174) -97% 13,524 100%Expenses: Research and development, gross $17,955 $19,959 $14,147 $(2,004) -10% $5,812 41%Government grants (2,015) (2,189) (1,700) 174 -8% (489) 29%Research and development, net $15,940 $17,770 $12,447 $(1,830) -10% $5,323 43%General and administrative 5,220 5,847 3,828 (627) -11% 2, 019 53%Marketing 397 562 - (165) -29% 562 100%Operating loss 21,207 10,655 16,275 10,552 99% (5,620) -35%Financial expense (income), net (749) (517) (273) (232) 45% (244) 89%Loss $20,458 $10,138 $16,002 $(10,320) 102% $(5,864) -37% Revenues. On November 3, 2017 the Company entered into an exclusive license agreement with NanoCarrier Co., Ltd. for the development, commercialization, andsupply of ofranergene obadenovec (“VB-111”) in Japan for all indications. In exchange, the Company received an up-front and a milestone payment of $17.0million in aggregate, of which $13.9 million was recognized in 2017 and $0.6 million was recognized in 2018. We expect to recognize the balance duringthe coming 2-3 years. Research and development expenses, net. Research and development expenses are shown net of IIA grants. Research and development expenses, net for the year ended December 31, 2018 were $15.9million, compared to $17.8 million for the year ended December 31, 2017 and $12.4 million for the year ended December 31, 2016, a decrease of $1.8million or 10% and an increase of $5.3 million, or 43%, respectively. The decrease in research and development expenses, net, in 2018 was comprised ofapproximately $4.3 million decrease in costs incurred for the Phase 3 pivotal trial of VB-111 in rGBM that was at its peak activity in 2017 and ended in 2018and of approximately $1.5 million in contract manufacturing, partially offset by increased internal manufacturing and facility expenses at our own newmanufacturing facility of approximately $3.3 million for operations (approximately $0.6 million), utilities and maintenance (approximately $0.8 million),materials (approximately $0.9 million) and depreciation (approximately $1.0 million). In addition, costs incurred for the Ovarian Phase 3 trial thatcommenced in 2017 increased by approximately $0.5 million in 2018. The increase in research and development expenses, net in 2017 was mainly due toincreased expenses for the VB-111 subcontractors and consultants of $4.0 million as the Phase 3 pivotal trial of VB-111 in rGBM continued with thecompletion of patient recruitment and trial progression, in addition to costs incurred for the Ovarian Phase 3 trial that commenced in 2017, and an increase ofpayroll related costs due to an overall increase of share based compensation of approximately $1.0 million. This was offset by an increase in the amounts ofIIA grants received of $0.5 million in 2017 due to the realization of the 2016 approved grant for the GBM program. General and administrative expenses. General and administrative expenses for the year ended December 31, 2018 were $5.2 million, compared to $5.8 million for the year ended December 31,2017 and $3.8 million for the year ended December 31, 2016, a decrease of $0.6 million or 11%, and an increase of $2.0 million or 53%, respectively. Thedecrease in 2018 is mainly due to lower share-based compensation of approximately $0.6 million and lower bonuses (approximately $0.3 million, partiallyoffset by increase in facility and other costs, mostly due to the move of the Company to the new site in Modiin. The increase in 2017 is mainly due to payrollrelated costs for management share-based compensation expense of approximately $1.0 million, in addition to an increase to share-based compensationexpense for options granted to independent directors of approximately $600 thousand. Marketing expenses Marketing expenses for the year ended December 31, 2018 were $0.4 million compared to $0.6 million for the year ended December 31, 2017 a decrease of$0.2 million or 29% respectively. 57Table of Contents Financial expense (income), net. Financial expense (income), net for the year ended December 31, 2018 was ($749) thousand, compared to ($517) thousand for the year ended December 31,2017, and ($273) thousand for the year ended December 31, 2016, a decrease of $232 thousand and $244 thousand or 45% and 89%, respectively. Thedecrease in 2018 and 2017 was mainly related to higher interest received due to more favorable interest rates and favorable exchange rates each year incomparison to its preceding year. Liquidity and Capital Resources Since our inception and through December 31, 2018, we have raised a total of $113.4 million from sales of our equity securities before the initial publicoffering, $40.5 million gross in our initial public offering ($34.9 million net), $15.0 million from a November 3, 2015 underwritten offering ($13.6 millionnet), $24.0 million from a June 7, 2016 registered direct offering ($21.9 million net), $17.9 million from a November 16, 2017 underwritten offering, $15.5million from a June 27 registered direct offering and $22.6 million from IIA grants. Our primary uses of cash have been to fund working capital requirementsand research and development, and we expect these will continue to represent our primary uses of cash. We intend to use our cash resources, together with theproceeds from the offerings described above, to advance clinical programs, working capital, and other general corporate purposes. We expect that our cashresources as of December 31, 2018 would provide sufficient funding for our operations through 2021. In December 2016, we entered into separate Equity Distribution Agreements with JMP Securities LLC and Chardan Capital Markets, LLC, as sales agents, toimplement an “at the market offering” ("ATM") program under which we, from time to time, may offer and sell our ordinary shares, having an aggregateoffering price of up to $20.0 million. Sales agents were entitled to a fixed commission of 3.0% of the aggregate gross proceeds. For the year ended December31, 2017, we have sold an aggregate of 224,695 ordinary shares under the ATM, the total consideration for which amounted to $1,322 thousand, net ofissuance costs. In the year ended December 31, 2018 we have not sold any shares under the ATM. The ATM expired on October 18, 2018. Funding Requirements At December 31, 2018, we had cash, cash equivalents and short-term bank deposits of $50.5 million and working capital of $47.0 million. We expect that ourcash and cash equivalents and short-term bank deposits will enable us to fund our operating expenses and capital expenditure requirements through 2021.We are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of VB-111 and ourother product candidates. Our future capital requirements will depend on many factors, including: ●the costs, timing and outcome of regulatory review of VB-111 and any other product candidates we may pursue; ●the costs of future development activities, including clinical trials, for VB-111 and any other product candidates we may pursue; ●the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defendingintellectual property-related claims; ●the extent to which we acquire or in-license other products and technologies; and ●our ability to establish any future collaboration arrangements on favorable terms, if at all. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debtfinancings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raiseadditional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of thesesecurities may include liquidation or other preferences that adversely affect your rights as a holder of our ordinary shares. Debt financing, if available, mayinvolve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capitalexpenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, wemay have to relinquish valuable rights to our technologies, future revenue streams or research programs or grant licenses on terms that may not be favorableto us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate ourproduct development or future commercialization efforts or grant rights to develop and market VB-111 and any other product candidates that we wouldotherwise prefer to develop and market ourselves. 58Table of Contents Cash Flows The following table sets forth the primary sources and uses of cash for each of the periods set forth below: Year ended December 31, 2018 2017 2016 (in thousands) Cash used in operating activities $(15,680) $(3,821) $(13,412)Cash generated from (used in) investing activities 24,733 (20,840) (4,091)Cash provided by financing activities 13,671 19,510 21,980 Net (decrease) increase in cash and cash equivalents $22,724 $(5,151) $(4,477) Operating Activities Cash used in operating activities for the year ended December 31, 2018 was $15.7 million and consisted of primarily net loss of $20.5 million arisingprimarily from research and development activities, partially offset by a net reduction of working capital of $0.2 million and net aggregate non-cash chargesof $4.2 million, comprised mostly of share based compensation at fair value and depreciation. Cash used in operating activities for the year ended December 31, 2017 was $3.8 million and consisted primarily of net loss of $10.1 million arising primarilyfrom research and development activities, partially offset by net reduction in working capital of $2.3 million and net aggregate non-cash charges of $3.7million, comprised mostly of share based compensation at fair value and depreciation, partially offset by deferred revenues. Cash used in operating activities for the year ended December 31, 2016 was $13.4 million and consisted of primarily net loss of $16.0 million arisingprimarily from research and development activities, partially offset by a net reduction of working capital of $1.1 million and net aggregate non-cash chargesof $1.3 million, comprised mostly of share based compensation at fair value and depreciation. Investing Activities Net cash generated from investing activities was $24.7 million for the year ended December 31, 2018. This was primarily due to the maturity of short-termbank deposits and the purchases of Property Plant & Equipment in relation to the new Modiin facility. Net cash used in investing activities was $20.8 million for the year ended December 31, 2017. This was primarily due to the purchases of short-term bankdeposits and the purchases of Property Plant & Equipment in relation to the new Modiin facility. Net cash used in investing activities was $4.1 million for the year ended December 31, 2016. This was primarily due to the purchases of short-term bankdeposits. Financing Activities Net cash provided by financing activities was $13.7 million for the year ended December 31, 2018 was the result of the net receipt of $13.7 million from theissuance of ordinary shares per the closing of the June 28, 2018 underwritten offering. Net cash provided by financing activities was $19.5 million for the year ended December 31, 2017 was mainly the result of the net receipt of $17.9 millionfrom the issuance of ordinary shares per the closing of November 16, 2017 securities offering. Net cash provided by financing activities was $22.0 million for the year ended December 31, 2016 was the result of the net receipt of $21.9 million from theissuance of ordinary shares per the closing of June 7, 2016 securities offering. 59Table of Contents Contractual Obligations and Commitments The following tables summarize our contractual obligations and commitments as of December 31, 2018 that will affect our future liquidity: Total Less than 1 Year 1-3 Years 3-5 Years More than 5Years (in thousands) Licenses $345 $115 $230 $- $- Operating Leases 2,100 516 811 640 133 Total $2,445 $631 $1,041 $640 $133 We also have obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatory andcommercial milestones, such as the start of a clinical trial, filing of an NDA, approval by the FDA or product launch, or royalties upon sale of products. Wehave not included these commitments on our statements of financial position or in the table above because the achievement and timing of these milestones isnot fixed and determinable. These potential future commitments include: ●Agreement with the Contact Research Organization (“CRO”). In January 2015, the Company entered into an agreement with a CRO according towhich it will receive project management, clinical development and other related services from the CRO for the execution of the Phase 3 rGBMclinical trial study in consideration for up to $18.7 million. Additional expenses related to changes in the study and in the estimated servicesinvolved were agreed upon and are being negotiated with the CRO during the execution of the study. Through December 31, 2018, expenses in thetotal amount of $21.7 million were incurred. ●Agreement with the Contact Research Organization (“CRO”). In December 2017, the Company entered into an agreement with a Contact ResearchOrganization (“CRO”) according to which it will receive project management, clinical development and other related services from the CRO for theexecution of the Phase 3 study in platinum-resistant ovarian cancer in consideration for approximately $19.0 million. Through December 31, 2018,expenses in the total amount of $800 thousand were incurred. ●Agreement with Tel Hashomer. On February 3, 2013, we entered into an agreement with Tel Hashomer-Medical Research, Infrastructure and ServicesLtd., or Tel Hashomer, a private company whose purpose is to promote the welfare of the Sheba Medical Center, or the Hospital, and Prof. DrorHarats, our chief executive officer. The agreement with Tel Hashomer resolved claims of the Hospital regarding the ownership of certain inventionsand patent rights owned by us and developed in part by Prof. Harats and other inventors who were engaged by us and by the Hospital in parallel. Theagreement provided us with a waiver of rights by the Hospital and Tel Hashomer in connection with intellectual property developed by theseinventors prior to the date of the agreement. In consideration for the waiver, we undertook to pay 1% of any net sales of any product covered by theintellectual property covered under the agreement, which includes all of our current product candidates, and 2% of any consideration that we receivefor granting a license or similar rights to this intellectual property. Such amounts will be recorded as part of our cost of revenues. In addition, uponthe occurrence of an exit event such as a merger, sale of all shares or assets or the closing of an initial public offering, we are required to pay to TelHashomer 1% of the proceeds received by us or our shareholders as the case may be. In November 2014, following the completion of our IPO, wepaid to Tel Hashomer the amount of $0.4 million. In November 2017, we entered into a license agreement. For the cash payment received to date inthis transaction, we paid Tel Hashomer an additional $340 thousand royalty and all other payment obligations under this agreement will expire oncewe have paid an aggregate sum of NIS 100 million (approximately $29 million) to Tel Hashomer by way of pay out, exit proceeds and licensingconsideration. Amounts previously paid as royalties on any net sales will not be taken into account when calculating this aggregate sum. 60Table of Contents ●Agreement with Janssen Vaccines & Prevention B.V. On April 15, 2011, we entered into a Commercial License Agreement with Janssen Vaccines &Prevention B.V., or Janssen, for incorporating the adenovirus 5 in VB- 111 and other drug candidates for cancer for consideration including thefollowing potential future payments: ■an annual license fee of € 100,000 ($144,000), continuing until the termination of the agreement, which will occur upon (i) the laterof the expiration date of the last related patent or 10 years from the first commercial sale of VB-111 or (ii) the termination of theagreement by us, which is permitted, upon three months’ written advance notice to Janssen; ■a milestone payment of € 400,000 ($460,000) upon receipt of the first regulatory approval for the marketing of the first indication foreach product covered under the agreement; and ■royalties of 0.5%-2.0% on net sales. There are no limits or caps on the amount of potential royalties. Pursuant to the agreement, the Company has the right to terminate the agreement by givingJanssen Vaccines & Prevention B.V. three months’ written notice. ●Participation by the IIA. We receive grants from the IIA, as part of the oncology and anti-inflammatory research and development programs. Therequirements and restrictions for such grants are set forth in the Research Law. These grants are subject to repayment through future royaltypayments on sales of any products resulting from these research and development programs, including VB-111 and VB-201. Under the ResearchLaw, we are obligated to pay royalties of 3% to 3.5%. The maximum aggregate royalties paid generally cannot exceed 100% of the grants made tous, plus annual interest generally equal to the 12-month LIBOR applicable to dollar deposits, as published on the first business day of each calendaryear. The total gross amount of grants actually received by us from the IIA as of December 31, 2018 totaled approximately $22.6 million, and thebalance of the principal and interest in respect of our commitments for future payments to the IIA totaled approximately $27.8 million licenseagreement. Off-Balance Sheet Arrangements Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC, such as relationships withunconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose offacilitating financing transactions that are not required to be reflected on our statements of financial position. Recently Issued and Adopted Accounting Pronouncements The recent accounting pronouncements are set forth in Note 2 to our audited financial statements beginning on page F-1 of this Annual Report. 61Table of Contents JOBS Act On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an“emerging growth company.” As an “emerging growth company,” we are electing to not take advantage of the extended transition period afforded by theJOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on therelevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decisionto not take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable. Safe Harbor See “Cautionary Note Regarding Forward-Looking Statements” in the introduction to this Annual Report. Item 6. Directors, Senior Management and Employees Executive Officers and Directors The following table sets forth certain information relating to our executive officers and directors, including their ages as of February 1, 2019. Unlessotherwise stated, the address for our directors and executive officers is c/o Vascular Biogenics Ltd., 8 Hasatat St. Modiin, Israel. Name Age PositionExecutive Officers and Director Dror Harats (3) 62 Chief Executive Officer and DirectorAmos Ron 63 Chief Financial Officer and Company SecretaryErez Feige 45 Vice President, Business OperationsTami Rachmilewitz 49 Vice President, Clinical DevelopmentEyal Breitbart 52 Vice President, Research and OperationsNaamit Sher 64 Vice President, Drug DevelopmentAyelet Horn 48 General CounselNon-Executive Directors Bennett M. Shapiro (1)(3)(4) 79 Chairman and DirectorRuth Arnon (1)(3)(4) 86 DirectorRuth Alon (3)(4) 67 DirectorRon Cohen (1)(4) 63 DirectorSusan L. Kelley (4) 64 DirectorDavid Hastings (2)(4) 57 DirectorShmuel (Muli) Ben Zvi (2)(4) 58 Director (1)Member of the compensation committee.(2)Member of the audit committee.(3)Member of the nominating and corporate governance committee.(4)Independent director under the rules of the NASDAQ Stock Market. 62Table of Contents Executive Officers Prof. Dror Harats founded our company in 2000 and has served as our chief executive officer since our inception. He has been a member of our board ofdirectors since January 2001. Prof. Harats is the Chairman of the Bert W. Strassburger Lipid Center and chair of the R&D division at the Chaim ShebaMedical Center at Tel Hashomer and chairman of its Institute Review Board. Prof. Harats received his M.D. from Hadassah Medical School at the HebrewUniversity of Jerusalem, Israel, following which he conducted post-doctoral work at the University of California, San Francisco. Prof. Harats is also a Professorof Medicine in the Departments of Internal Medicine and Biochemistry at the Sackler Faculty of Medicine of Tel-Aviv University, Israel. Prof. Harats has alsoserved as a visiting scientist at Syntax Discovery Research. Prof. Harats currently serves as an observer on the board of directors of Art Healthcare Ltd. Webelieve Prof. Harats is qualified to serve on our board of directors because of his extensive technical and industry experience, as well as his knowledge of ourcompany. Amos Ron has served as our chief financial officer since May 2011. Prior to joining our company, from July 2008 to April 2011, Mr. Ron was the chieffinancial officer of Atlantium Technologies Ltd., a privately held start-up in the field of clean-tech. Prior to that, Mr. Ron served as the chief financial officerand chief operating officer of Medical Compression Systems, and prior to that, Mr. Ron served as the chief financial officer of Interpharm Laboratories Group,a wholly owned subsidiary of Serono S.A. Mr. Ron holds an M.Sc. (Honors) in Chemical Technology Management from the Hebrew University of Jerusalem,a B.Sc. in Business Administration, Empire State College (SUNY) (Jerusalem Branch) and a B.Sc. in Chemistry from the Hebrew University of Jerusalem. Dr. Erez Feige has served as our vice president of business operations since January 2014. Prior to that, from 2012 to 2014, Dr. Feige served as our director ofbusiness development and, from 2006 to 2012, Dr. Feige served as our head of biochemistry. Dr. Feige holds a B.Sc., and M.B.A. and a Ph.D. from Bar-IlanUniversity, Israel and completed a post-doctoral fellowship at the Dana-Farber Cancer Institute and Harvard Medical School. Dr. Tami Rachmilewitz has served as our vice president of clinical development since June 2018. Prior to joining our company, from 2016 to 2018, Dr. TamiRachmilewitz served as Medical Director and Head of Pharmacovigilance for NeuroDerm, holding responsibility for all development aspects of clinical phaseprojects. Prior to that, from 2013 to 2016, she acted as Clinical Program Leader for Teva, leading a pivotal phase III trial in Multiple Sclerosis. From 2009 to2013 she was a Clinical Development Medical Advisor for Novartis with expertise in Immunology. Dr. Rachmilewitz holds an M.D. from the HadassahMedical School at the Hebrew University in Jerusalem, which is where she did her internship and residency in Psychiatry. Dr. Eyal Breitbart has served as our vice president, research and operations since January 2014. Prior to that, from 2006 to 2013, Dr. Breitbart served as ourvice president, research. Prior to that, Dr. Breitbart served as head of research from 2002 to 2006 and prior to that as project manager from 2001 to 2002. Dr.Breitbart holds a B.Sc., M.Sc. and Ph.D. from Bar-Ilan University, Israel, and completed a post-doctoral fellowship at Tufts University School of Medicine. Dr. Naamit Sher has served as our vice president of drug development and regulatory affairs since 2006. Prior to joining our company, from 2005 to 2006, Dr.Sher was head of QC laboratories, operations division at Teva Pharmaceutical Industries Ltd. From 1992 to 2005, Dr. Sher acted as quality control/qualityassurance director at InterPharm, a subsidiary of Ares-Serono. Dr. Sher holds a B.Sc., M.Sc. and Ph.D. from the Hebrew University of Jerusalem, Israel. Shecompleted post-doctoral fellowships at each of the Hebrew University, Jerusalem, Israel, and Rutgers University. Adv. Ayelet Horn has served as our general counsel since our inception in 2000, and has served as our company secretary between 2007 to 2016. Adv. Hornholds an LL.B from Tel-Aviv University, Israel, and an M.B.A. from Herriot Watt University, Edinburgh, Scotland. 63Table of Contents Non-Executive Directors Dr. Bennett M. Shapiro, M.D. has served on our board of directors since September 2004 and as Chairman since 2007. In addition to serving on our board ofdirectors, Dr. Shapiro has been a senior partner at Puretech Ventures, an innovation enterprise, since 2004, and as chairman from 2009-2015; he nowcontinues as a Non-Executive Director of PureTech HealthPLC-PRTC. From 1990 to 2003, Dr. Shapiro served as executive vice president, Merck ResearchLaboratories. Prior to that, from 1970 to 1990, Dr. Shapiro was a professor of the Department of Biochemistry at the University of Washington and served aschairman from 1985 to 1990. Prior to joining the University of Washington, from 1965 to 1970 Dr. Shapiro served as a research associate, then section head,in the Laboratory of Biochemistry of the National Heart Institute of the U.S. National Institutes of Health. Dr. Shapiro has served as an external director on theboard of directors of Momenta Pharmaceuticals from 2003-2016, various private companies, and the Drugs for Neglected Diseases Initiative, an independent,non-profit drug development partnership. Dr. Shapiro previously served on the board of directors of Celera Corporation prior to its acquisition by QuestDiagnostics Inc. Dr. Shapiro received his B.S. in chemistry from Dickinson College and his M.D. from Jefferson Medical College. Dr. Shapiro has been aGuggenheim Fellow, a fellow of the Japan Society for the Promotion of Science and a visiting professor at the University of Nice. We believe Dr. Shapiro isqualified to serve on our board of directors because of his extensive technical and industry background, and his experience serving on boards of directors ofcompanies in our industry, including public companies. Prof. Ruth Arnon has served on our board of directors since August 2007. Prof. Arnon is an immunologist with the Weizmann Institute of Science in Israel.Prof. Arnon joined the staff of the Weizmann Institute in 1960, and served as vice president of the Institute from 1988 to 1997. Prof. Arnon is a member of theIsrael Academy of Sciences, and from 2010 until 2015 served as its president. Prof. Arnon is also an elected member of the European Molecular BiologyOrganization. She has served as president of the European Federation of Immunological Societies, and as secretary-general of the International Union ofImmunological Societies. Her awards and honors include the Robert Koch Prize in Medical Sciences, Spain’s Jimenez Diaz Memorial Award, France’s Legionof Honor, the Hadassah World Organization’s Women of Distinction Award, the Wolf Prize for Medicine, the Rothschild Prize for Biology, and the IsraelPrize. Prof. Arnon earned her M.Sc. in Chemistry from the Hebrew University, Jerusalem, Israel, and her Ph.D. from the Hebrew University. We believe Prof.Arnon is qualified to serve on our board of directors because of her extensive technical and industry background. Ruth Alon has served on our board of directors since March 2010. Ms. Alon is currently the founder and CEO of Medstrada. Since 1997 and until December24, 2016, Ms. Alon has served as a general partner in Pitango Venture Capital. Prior to her tenure at Pitango, Ms. Alon held senior positions withMontgomery Securities from 1981 to 1987, Genesis Securities, LLC from 1993 to 1996, and Kidder Peabody & Co. from 1987 to 1993, and managed her ownindependent consulting business in San Francisco in the medical devices industry from 1995 to 1996. Ms. Alon is the chairperson of Israel Life ScienceIndustry, a not-for-profit organization representing the mutual goals of approximately 700 Israeli life science companies. Ms. Alon has a B.A. in Economicsfrom the Hebrew University of Jerusalem, Israel, an M.B.A. from Boston University, and an M.S. from the Columbia University School of Physicians andSurgeons. We believe Ms. Alon is qualified to serve on our board of directors because of her extensive business and industry background, as well as herexperience as a seasoned investor. 64Table of Contents Dr. Ron Cohen, M.D. joined our board in February 2015. In addition to serving on our board of directors, Dr. Cohen has served as President, Chief ExecutiveOfficer and founder of Acorda Therapeutics, Inc., since 1995. Previously he was a principal in the startup and an officer of Advanced Tissue Sciences, Inc., abiotechnology company engaged in the growth of human organ tissues for transplantation, from 1986 to 1992. Dr. Cohen received his B.A. with honors inPsychology from Princeton University, and his M.D. from the Columbia College of Physicians & Surgeons. He completed his residency in Internal Medicineat the University of Virginia Medical Center, and is Board Certified in Internal Medicine. Dr. Cohen is a Director on the Board of the BiotechnologyInnovation Organization (BIO) and previously served as Chair of the Board. He served as a Director of Dyax Corporation until the end of 2015, and alsopreviously served as Director and Chair of the New York Biotechnology Association. He is a recipient of the NY CEO Lifetime Achievement Award and theErnst & Young Entrepreneur of the Year Award for the New York Metropolitan Region, and has been recognized by PharmaVOICE Magazine as one of the100 Most Inspirational People in the Biopharmaceutical Industry. We believe Dr. Cohen is qualified to serve on our board of directors because of hisextensive business and industry background. Dr. Susan L. Kelley, M.D. joined our board in January 2018. Dr. Kelley is a medical oncologist with extensive experience in drug development andcommercialization. Dr. Kelley worked with Bristol-Myers Squibb in Oncology and Immunology drug development from 1987 to 2001. From 2001 to 2008,Dr. Kelley worked with Bayer Healthcare Pharmaceuticals as Vice President, Global Clinical Development and Therapeutic Area Head - Oncology. From2008 to 2011, she was Chief Medical Officer of the Multiple Myeloma Research Consortium, Dr. Kelley served as a member of the Board of Directors ofAlchemia from 2013-2015. She is currently a Director at ArQule, Immune Design, and Daré Bioscience (formerly Cerulean Pharmaceuticals), all publicly-traded, US-based biotechnology companies. Susan Kelley received her M.D. from Duke University School of Medicine and completed oncology training atthe Dana-Farber Cancer Institute in Boston. She was also a Fellow in Medical Oncology and Pharmacology at Yale University School of Medicine. Webelieve Dr. Kelley is qualified to serve on our board of directors because of her extensive industry background. David Hastings joined our board in January 2018. Mr. Hastings has more than 18 years of finance, accounting and operations experience in the bio-pharmaceutical industry. Mr. Hastings joined Arbutus BioPharma in June 2018 and currently serves as its Chief Financial Officer. Mr. Hastings previouslyserved as the Chief Financial Officer and Executive Vice President of Incyte Corporation from 2003 until 2014. During this time, Mr. Hastings oversaw allfinancial aspects as Incyte transitioned from research and development to commercialization, following the launch of Jakafi®(ruxolitinib). Mr. Hastings alsopreviously served as Vice President, Chief Financial Officer and Treasurer of ArQule Inc. During his tenure at ArQule, he played an important role in ArQule’stransition into a drug discovery and development organization, and in two strategic acquisitions, including the purchase of Cyclis Pharmaceuticals Inc. Priorto that, Mr. Hastings was with Genzyme Corporation as its Vice President and Corporate Controller, and with Sepracor, Inc. where he was Director of Finance.Most recently, Mr. Hastings served as the Chief Financial Officer and Senior Vice President of Unilife Corporation (a medical device company) from 2015 to2017 and as its Chief Accounting Officer and Treasurer from 2016 to 2017. He is a member of the Board Director of SCYNEXIS, Inc. and Entasis, Inc. andchairs their Audit Committees. We believe Mr. Hastings is qualified to serve on our board of directors because of his extensive financial and businessbackground. Dr. Shmuel (Muli) Ben Zvi joined our board in September 2018. Dr. Ben Zvi is currently a board member at Bank Leumi, the second largest bank in Israel, anda member of its audit, risk management, technology and strategy committees. Dr. Ben Zvi is also a board member of SOL-GEL Technologies (NASDAQSLGL) and a member of the audit and compensation committees. From 2004 to 2014, Dr. Ben Zvi held various managerial positions at Teva PharmaceuticalsIndustries Ltd., dual listed on Nasdaq and the TASE, including VP Finance and VP Strategy. From 2000 to 2004, Dr. Ben Zvi was the financial advisor to theChief of General Staff of the Israel Defense Forces and head of the Defense Ministry budget department. Dr. Ben Zvi holds a Ph.D. in economics from Tel-Aviv University, Israel and participated in the Harvard Business School Advanced Management Program (AMP). Arrangements Concerning Election of Directors; Family Relationships Our current board of directors consists of eight directors. We are not a party to, and are not aware of, any voting agreements among our shareholders. In addition, there are no family relationships among our executiveofficers and directors. Advisory Boards We established an advisory board with specific expertise in oncology. In addition we have an advisory board comprised of industry experts with significantexperience in the pharmaceutical industry. Head of Scientific Advisory Board-Rachel W. Humphrey, M.D. Oncology Experts Glioblastoma (GBM) Andrew J. Brenner , MD, PhD, The University of Texas Health Science CenterNicholas Butowski , MD, University of CaliforniaTimothy Cloughesy, MD, UCLAPatrick Y. Wen , MD, Dana-Farber Cancer Institute Ovarian Cancer Rebecca C. Arend, MD, University of Alabama at BirminghamRobert A. Burger , MD, University of PennsylvaniaThomas Herzog , MD, University of Cincinnati Cancer InstituteBradley J. Monk , MD, FACS, FACOG, Univ. of Arizona& Creighton Univ.Kathleen Moore , MD, University of Oklahoma Health Sciences CenterRichard T. Penson , MD, MRCP, Massachusetts General HospitalRonnie Shapira-Frommer, MD, Sheba Medical Center Thyroid Cancer Keith Bible, MD, PhD, Mayo Clinic Cancer Center 65Table of Contents Additional ExpertsRonald Goldblum, M.D.Bonnie Goldman, M.D.Melanie Hartsough, PhDJohn Konz, Ph.D.David Smolin, Ph.D. Compensation of Executive Officers and Directors The aggregate compensation paid by us to our current directors and executive officers, including share based compensation, for the year ended December 31,2018, was $4.3 million. This amount includes any amounts set aside or accrued to provide pension, severance, retirement, annual leave and recuperation orsimilar benefits or expenses. It does not include any business travel, relocation, professional and business association dues and expenses reimbursed to officeholders, and other benefits commonly reimbursed or paid by companies in Israel. The above also includes the provision for bonuses for the year endedDecember 31, 2018 in the amount of $0.4 million. As of December 31, 2018, options and RSU’s to purchase an aggregate of 3,408,587 ordinary sharesgranted to our directors and executive officers were outstanding under the Employee Share Ownership and Option Plan (2000), or the 2000 Plan, and theEmployee Share Ownership and Option Plan (2011), or the 2011 Plan, and the Employee Share Ownership and Option Plan (2014), or the 2014 Plan at aweighted average exercise price of $2.81 per share. Board of Directors Under the Israeli Companies Law, 5759-1999, or the Companies Law, the management of our business is vested in our board of directors. Our board ofdirectors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers areresponsible for our day-to-day management and have individual responsibilities established by our board of directors. Our chief executive officer isappointed by, and serves at the discretion of, our board of directors, subject to the employment agreement that we have entered into with him. All otherexecutive officers are also appointed by our board of directors, and are subject to the terms of any applicable employment agreements that we may enter intowith them. Under our amended and restated articles of association, our board of directors must consist of at least three and not more than nine directors, including theexternal directors. Our board of directors currently consists of seven directors, including two directors who were formerly defined as external directors. Ouramended and restated articles of association further provides that external directors are elected according to the special election requirements under theCompanies Law and two of our directors were nominated as external directors in compliance with the Companies Law. Following the adoption by theCompany of certain reliefs provided under the Companies Law, the Company is exempt from the requirement to appoint external directors and theindividuals formerly appointed as external directors continue to serve as part of our board of directors until the end of their term and may be removed fromoffice in the same manner as any other director. We have only one class of directors. The following of our directors were elected in accordance with the terms of our articles of association in effect prior to the initial public offering of our shareson NASDAQ and are nominated for re-election by our shareholders at any consecutive annual general meeting: ●Dr. Shapiro was appointed as an industry expert by a majority of the other directors, a majority that included representatives of our majorshareholders. ●Prof. Harats was entitled to be a board member for so long as Prof. Harats is either (i) the chief executive officer of our company; or (ii) a holder of 3%or more of our issued and outstanding share capital; 66Table of Contents ●Ms. Alon was originally appointed by persons affiliated with Pitango Venture Capital; Since 2017 Ms. Alon is not related to Pitango She was re-elected by the General Meeting of shareholders as an independent director. ●Prof. Ruth Arnon was appointed by a majority of the other directors, which included representatives of our major shareholders. Upon the adoption of our amended and restated articles of association upon the closing of our initial public offering, the rights set forth in the previousarticles were terminated and no additional agreements exist with respect to the nomination of our board members. On February 11, 2015, at a general meeting of our shareholders, each of Dr. Ron Cohen and Mr. Philip Serlin was appointed as an external director by amajority of the shareholders who have no personal interest in his nomination for a period of three years. In accordance with the exemption available to certainIsraeli public companies, whose shares are traded on NASDAQ, we chose as of November 7, 2016 not to follow the requirements of Companies Law withregard to the appointment of “external directors” as defined in the Companies Law, and instead, to follow the NASDAQ rules applicable to US domesticcompanies with respect to the appointment of independent directors. Dr. Ron Cohen and Mr. Philip Serlin shall continue to serve as part of our board ofdirectors until the end of their term and may be removed from office in the same manner as any other director. As long as we follow such reliefs, any referenceto the election of our external directors in our amended articles of association shall have no actual expression. We comply with NASDAQ rules that a majority of our directors are independent. Our board of directors has determined that with the exception of Prof. Harats,all of our directors are independent under such rules. In accordance with the exemption available to foreign private issuers under NASDAQ rules, we do not intend to follow the requirements of NASDAQ ruleswith regard to the process of nominating directors, and instead, will follow Israeli law and practice, in accordance with which our board of directors (or acommittee thereof) is authorized to recommend to our shareholders director nominees for election. See “Item 16G. Corporate Governance” for moreinformation. Under the Companies Law and our amended and restated articles of association, nominees for directors may also be proposed by any shareholder holding atleast 1% of our outstanding voting power. However, any such shareholder may propose a nominee only if a written notice of such shareholder’s intent topropose a nominee has been given to our company secretary (or, if we have no such company secretary, our chief executive officer). Any such notice mustinclude certain information, including, among other things, a description of all arrangements between the nominating shareholder and the proposed directornominee(s) and any other person pursuant to which the nomination(s) are to be made by the nominating shareholder, the consent of the proposed directornominee(s) to serve as our director(s) if elected and a declaration signed by the nominee(s) declaring that there is no limitation under the Companies Lawpreventing their election, and that all of the information that is required under the Companies Law to be provided to us in connection with such election hasbeen provided. In addition, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for aterm of office equal to the remaining period of the term of office of the director(s) whose office(s) have been vacated. Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financialexpertise (as defined in the Companies Law). In accordance with the exemption available to certain Israeli public companies, whose shares are traded onNASDAQ, our board of directors elected not to follow the requirements of Companies Law with regard to the appointment of directors with accounting andfinancial expertise as defined in the Companies Law, and instead, to follow the NASDAQ rules applicable to US domestic companies with respect to thefinancial expertise of the directors. The exemption applies as long as the Company has no controlling shareholder, is in compliance with applicable US lawand regulations and complies with the NASDAQ rules applicable to US domestic companies with respect to the appointment of independent directors and tothe composition of the compensation and audit committees. Our board may further resolve at any time that we shall no longer follow the reliefs and in suchevent we shall be required to appoint directors with accounting and financial expertise as defined in the Companies Law. Our board of directors hasdetermined that the minimum number of directors who are required to have accounting and financial expertise is one. External Directors Under the Companies Law, a public company is required to have at least two directors who qualify as external directors. In accordance with the exemptionavailable to certain Israeli public companies, whose shares are traded on NASDAQ and which do not have a controlling shareholder (the “Exemption toForeign-listed Israeli Companies”), our board of directors elected not to follow the requirements of Companies Law with regard to the appointment of“external directors” as defined in the Companies Law, and instead, to follow the NASDAQ rules applicable to US domestic companies with respect to theappointment of independent directors. The exemption applies as long as the Company has no controlling shareholder, is in compliance with applicable USlaw and regulations and complies with the NASDAQ rules applicable to US domestic companies with respect to the appointment of independent directors andto the composition of the compensation and audit committees. Our board may further resolve at any time that we shall no longer follow the reliefs ordetermine that we are no longer in compliance with the requirements of such exemption, and in such event we shall be required to appoint two directors asexternal directors. 67Table of Contents Role of Board in Risk Oversight Process Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote aculture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operationalrisks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion andanalysis of the risks facing us. Throughout the year, senior management reviews these risks with the board of directors at regular board meetings as part ofmanagement presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate oreliminate such risks. Leadership Structure of the Board In accordance with the Companies Law and our amended and restated articles of association, our board of directors is required to appoint one of its membersto serve as chairman of the board of directors. Our board of directors has appointed Dr. Shapiro to serve as chairman of the board of directors. Committees of the Board of Directors We have an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of thesecommittees. Audit Committee Under the Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all ofthe external directors, one of whom must serve as chairman of the committee. In accordance with the exemption available to certain Israeli public companies,whose shares are traded on NASDAQ, we chose as of November 7, 2016 and for as long the required conditions precedent are met and unless otherwisedecided by our board of directors, not to follow the requirements of Companies Law with regard to the composition of the audit committee, and instead, willfollow the NASDAQ rules applicable to US domestic companies with respect to the appointment and composition of the audit committee. Under the NASDAQ listing requirements, we are required to maintain an audit committee consisting of at least three independent directors, all of whom arefinancially literate and at least one of whom has accounting or related financial management expertise. Our audit committee consists of Mr. David Hastings,Ms. Ruth Alon and Dr. Shmuel (Muli) Ben Zvi and is chaired by Mr. Hastings. Mr. Hastings and Dr. Ben Zvi are the audit committee financial experts asdefined by the Securities and Exchange Commission rules and all of the members of our audit committee have the requisite financial literacy as defined bythe NASDAQ Stock Market rules. All the members of our audit committee are “independent” as such term is defined in Rule 10A-3(b)(1) under the ExchangeAct and under the listing standards of NASDAQ. Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee consistent with the rules of theSecurities and Exchange Commission and NASDAQ rules as well as the requirements for such committee under the Companies Law, including the following: ●oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement ofour independent registered public accounting firm to the board of directors in accordance with Israeli law; 68Table of Contents ●recommending the engagement or termination of the person filling the office of our internal auditor; and ●recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by ourboard of directors. Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting,auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants andreviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees theaudit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent ofmanagement. Under the Companies Law, our audit committee is responsible for: ●determining whether there are deficiencies in our business management practices, including in consultation with our internal auditor or theindependent auditor, and making recommendations to the board of directors to improve such practices; ●determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest) andwhether such transaction is extraordinary or material under the Companies Law (see “-Approval of Related Party Transactions Under Israeli Law”); ●where the board of directors approves the work plan of the internal auditor, to examine such work plan before its submission to the board andpropose amendments thereto; ●establishing the approval process for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest; ●examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools todispose of its responsibilities; ●examining the scope of our independent auditor’s work and compensation and submitting a recommendation with respect thereto to our board ofdirectors or shareholders, depending on which of them is considering the appointment of our auditor; and ●establishing procedures for the handling of employees’ complaints as to deficiencies in the management of our business and the protection to beprovided to such employees. Our audit committee may not approve any actions requiring its approval (see “-Approval of Related Party Transactions Under Israeli Law”), unless at the timeof approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director. Compensation Committee Our compensation committee consists of Dr. Ben Shapiro, Dr. Cohen and of Dr. Ruth Arnon. Dr. Ben Shapiro serves as the chairman of the compensationcommittee. The members of our compensation committee are independent under the NASDAQ listing requirements. Under the Companies Law, the board of directors of a public company must appoint a compensation committee. In accordance with the exemption availableto certain Israeli public companies, whose shares are traded on NASDAQ, we chose as of November 7, 2016 and for as long the required conditions precedentare met and unless otherwise decided by our board of directors, not to follow the requirements of Companies Law with regard to the composition of thecompensation committee, and instead, will follow the NASDAQ rules applicable to US domestic companies with respect to the appointment and compositionof the compensation committee. 69Table of Contents The duties of the compensation committee include the recommendation to our board of directors of a policy regarding the terms of engagement of officeholders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering therecommendations of the compensation committee, and will need to be brought every three years for approval by the company’s shareholders, which approvalrequires what we refer to as a special majority. A special majority approval requires shareholder approval by a majority vote of the shares present and votingat a meeting of shareholders called for such purpose, provided that either: (a) such majority includes at least a majority of the shares held by all shareholderswho are not controlling shareholders and do not have a personal interest in such compensation arrangement; or (b) the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement doesnot exceed 2% of the company’s aggregate voting rights. On May 27, 2015 our shareholders approved our compensation policy and we intend to extend thecompensation policy for an additional three-year term. Our compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, includingexculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensationpolicy must relate to certain factors, including advancement of the company’s objectives, the company’s business plan and its long term strategy, andcreation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and nature of itsoperations. The term office holder is defined under the Companies Law as the general manager, chief executive officer, chief business manager, deputygeneral manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director, ora manager directly subordinate to the general manager. The compensation policy must furthermore consider the following additional factors: ●the knowledge, skills, expertise, and accomplishments of the relevant office holder; ●the office holder’s roles and responsibilities and prior compensation agreements with him or her; ●the relationship between the terms offered and the average compensation of the other employees of the company, including those employed throughmanpower companies; ●the impact of disparities in salary upon work relationships in the company; ●the possibility of reducing variable compensation at the discretion of the board of directors; ●the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and ●as to severance compensation, the period of service of the office holder, the terms of his or her compensation during such service period, thecompany’s performance during that period of service, the person’s contributions towards the company’s achievement of its goals and themaximization of its profits, and the circumstances under which the person is leaving the company. The compensation policy must also include the following principles: ●the link between variable compensation and long term performance and measurable criteria; ●the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation; ●the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data uponwhich such compensation was based was inaccurate and was required to be restated in the company’s financial statements; ●the minimum holding or vesting period for variable, equity-based compensation; and ●maximum limits for severance compensation. 70Table of Contents The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (andsubsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well asfunctions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders,including: ●recommending whether a compensation policy should continue in effect, if the then- current policy has a term of greater than three years (approvalof either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); ●recommending to the board of directors periodic updates to the compensation policy; ●assessing implementation of the compensation policy; and ●determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders. Our board of directors has adopted a compensation committee charter setting forth the responsibilities of the committee, which include: ●the responsibilities set forth in the compensation policy; ●reviewing and approving the granting of options and other incentive awards to the extent such authority is delegated by our board of directors; and ●reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors. Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Dr. Shapiro, Mr. Gonczarowski, Ms. Alon and Dr. Arnon, and is chaired by Dr. Shapiro. Eachof the members of our nominating and corporate governance committee are independent under the listing requirements of The NASDAQ Global Market. Our board of directors has adopted a nominating and governance committee charter sets forth the responsibilities of the nominating and governancecommittee which include: ●overseeing and assisting our board in reviewing and recommending nominees for election as directors; ●assessing the performance of the members of our board; and ●establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and recommending toour board a set of corporate governance guidelines applicable to our company. Internal Auditor Under the Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee.The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committeeis required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. Our internalauditor is Mr. Zachi Refaeli from Ernst & Young Israel. An internal auditor may not be: ●a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; 71Table of Contents ●a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; ●an office holder or director of the company; or ●a member of the company’s independent accounting firm, or anyone on its behalf. Approval of Related Party Transactions Under Israeli Law Fiduciary Duties of Directors and Executive Officers The Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Management-ExecutiveOfficers and Directors” is an office holder under the Companies Law. An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care withwhich a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act ingood faith and in the best interests of the company. The duty of care includes a duty to use reasonable means to obtain: ●information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and ●all other important information pertaining to these actions. The duty of loyalty includes a duty to: ●refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs; ●refrain from any activity that is competitive with the company; ●refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and ●disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or herposition as an office holder. Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions The Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may be aware of and all relatedmaterial information or documents concerning any existing or proposed transaction by the company. An interested office holder’s disclosure must be madepromptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. An office holder is not obliged todisclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered as an extraordinarytransaction. A “personal interest” is defined under the Companies Law to include a personal interest of any person in an act or transaction of a company, including thepersonal interest of such person’s relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director orgeneral manager or in which he or she has the right to appoint at least one director or the general manager, but excluding a personal interest stemming fromone’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the officeholder with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.An office holder is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction thatis not considered an extraordinary transaction. 72Table of Contents Under the Companies Law, an extraordinary transaction is defined as any of the following: ●a transaction other than in the ordinary course of business; ●a transaction that is not on market terms; or ●a transaction that may have a material impact on the company’s profitability, assets or liabilities. If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless thecompany’s articles of association provide for a different method of approval. Further, so long as an office holder has disclosed his or her personal interest in atransaction, the board of directors may approve an action by the office holder that would otherwise be deemed a breach of duty of loyalty. However, acompany may not approve a transaction or action that is adverse to the company’s interest or that is not performed by the office holder in good faith. Anextraordinary transaction in which an office holder has a personal interest requires approval first by the company’s audit committee and subsequently by theboard of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requires approval first by thecompany’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking to indemnify orinsure is inconsistent with the company’s stated compensation policy or if the office holder is the chief executive officer (apart from a number of specificexceptions), then such arrangement is subject to a special majority approval. Arrangements regarding the compensation, indemnification or insurance of adirector require the approval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certaincircumstances, a special majority approval. If shareholders of a company do not approve the compensation terms of office holders, other than directors, butincluding the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision, subject to certainconditions. Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not bepresent at such a meeting or vote on that matter unless the chairman of the relevant committee or board of directors (as applicable) determines that he or sheshould be present in order to present the transaction that is subject to approval. If a majority of the members of the audit committee or the board of directors(as applicable) has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board ofdirectors (as applicable) on such transaction and the voting on approval thereof, but shareholder approval is also required for such transaction. Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controllingshareholder of a public company. See “-Major Shareholders and Related Party Transactions” for a definition of controlling shareholder. In the context of atransaction involving a shareholder of the company, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in thecompany if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have apersonal interest in the same transaction will be aggregated. The approval of the audit committee, the board of directors and a special majority, in that order,is required for (a) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (b) the engagementwith a controlling shareholder or his or her relative, directly or indirectly, for the provision of services to the company, (c) the terms of engagement andcompensation of a controlling shareholder or his or her relative who is not an office holder or (d) the employment of a controlling shareholder or his or herrelative by the company, other than as an office holder. 73Table of Contents To the extent that any such transaction with a controlling shareholder is for a period extending beyond three years, approval is required once every threeyears, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstancesrelated thereto. Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require theapproval of the compensation committee, board of directors and shareholders by a special majority and the terms thereof may not be inconsistent with thecompany’s stated compensation policy. Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder or his or her relative, or with directors, thatwould otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the audit committeeand board of directors. Under these regulations, a shareholder holding at least 1% of the issued share capital of the company may require, within 14 days ofthe publication of such determinations, that despite such determinations by the audit committee and the board of directors, such transaction will requireshareholder approval under the same majority requirements that would otherwise apply to such transactions. Employment Agreements with Executive Officers and Directors We have entered into written employment agreements with each of Dror Harats, Erez Feige, Amos Ron, Tami Rachmilewitz, Eyal Breitbart and Naamit Sher.All such agreements contain provisions regarding non-competition, confidentiality of information and assignment of inventions. The non-competitionprovisions apply for a period of 24 months following termination of the respective officer’s employment. In addition, we are required to provide notice ofbetween three and six months prior to terminating the employment of such executive officers other than in the case of a termination for cause. Other than withrespect to Prof. Harats, these agreements do not provide for benefits upon the termination of these executives’ respective employment with us, other thanpayment of salary and benefits during the required notice period for termination of these agreements, which varies under these individual agreements. Prof.Harats’s agreement provides for six months of severance in the event Prof. Harats’s employment is terminated by us without cause or terminated by Prof.Harats for good reason. Pursuant to his employment agreement, “Cause” means Prof. Harats’s conviction of any felony related to our business, a seriousbreach of trust by Prof. Harats, including theft, embezzlement of our funds, self-dealing, prohibited disclosure of confidential or proprietary information andProf. Harats’s engagement in any prohibited business competitive to our own, Prof. Harats’s disregard of lawful instructions of our board of directors withrespect to his duties to us following notice, or Prof. Harats’s willful failure to perform any of his fundamental functions or duties. Pursuant to his employmentagreement, “Good reason” means a material reduction in Prof. Harats’s status, title, position or responsibilities, a reduction in Prof. Harats’s salary which is notpart of a general reduction in salary applicable to all of our employees, a failure by us to continue any material compensation or benefit plan, program orpractice in which Prof. Harats is participating, or a material breach by us of any provision of Prof. Harats’s employment agreement. In addition, we have entered into compensation agreements with certain of our directors. The amounts payable pursuant to these arrangements have beenapproved by our board of directors and shareholders. Our directors do not receive compensation for their service as our directors or otherwise, unless such compensation is approved by our compensationcommittee, and then by the board of directors followed by the shareholders. The compensation of our directors may be fixed, as an all-inclusive payment or aspayment for participation in meetings, or as a combination thereof. In addition, such compensation may include: (i) in the case of a director who is also anofficer, a salary or other compensation in respect of his or her work as an officer, as may be agreed upon by the director and us; and (ii) reimbursement ofexpenses, including travel expenses, expended in connection with his or her duties as a member of the board of directors. 74Table of Contents Employees As of March 1, 2019, we employed 39 employees, including 31 in research and development, and 8 in general and administrative positions, and of which 13employees have either MDs or PhDs. All of our employees are located in Israel. We believe our employee relations are good. Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination ofseverance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti- discrimination laws and other conditionsof employment. Subject to specified exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of an employee, andrequires us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Ouremployees have defined benefit pension plans that comply with the applicable Israeli legal requirements. None of our employees currently work under any collective bargaining agreements. Share Ownership For information regarding the share ownership of our directors and executive officers, please refer to “-Equity Compensation Plans” below and “Item 7. MajorShareholders and Related Party Transactions-Major Shareholders.” As of March 1, 2019, our directors and executive officers hold, in the aggregate, options, warrants and RSU’s outstanding for 3,408,587 ordinary shares.These options have an average exercise price of $2.81 per share and have expiration dates generally twenty years after the grant date of the option. 1,846,317 options and warrants are exercisable as of February 1, 2019 and have a weighted average exercise price of $3.06 per share. Equity Compensation Plans The 2000 Plan, the 2011 Plan and the 2014 Plan, allow us to grant options to purchase our ordinary shares to our directors, officers, employees, consultants,advisers and service providers. The option plans are intended to enhance our ability to attract and retain desirable individuals by increasing their ownershipinterests in us. We no longer intend to grant options under the 2000 Plan or the 2011 Plan, and the remaining shares reserved for future grants under theoption plans will constitute the initial share reserve for the 2014 Plan. Additionally, upon the expiration of options granted under the 2000 Plan or the 2011Plan, the ordinary shares underlying such expired options will increase the pool reserved for allocation under the 2014 Plan. As of March 1, 2019, we hadreserved an aggregate of 6,955,287 ordinary shares under the option plans. As of March 1, 2019, options to purchase an aggregate of 5,024,981 ordinaryshares were outstanding and options to purchase 650,993 ordinary shares had been exercised. The plans are designed to reflect the provisions of the Israeli Income Tax Ordinance [New Version]-1961, as amended, mainly Sections 102 and 3(i), of theOrdinance, which affords certain tax advantages to Israeli employees, officers and directors that are granted options in accordance with its terms. Section 102 of the Ordinance allows employees, directors and officers, who are not controlling shareholders and who are Israeli residents, to receive favorabletax treatment for compensation in the form of shares or options. Section 102 of the Ordinance includes two alternatives for tax treatment involving theissuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directlyto the grantee. Section 102(b)(2) of the Ordinance, which provides the most favorable tax treatment for grantees, permits the issuance to a trustee under the“capital gains track.” In order to comply with the terms of the capital gains track, all options granted under a specific plan and subject to the provisions ofSection 102 of the Ordinance, as well as the shares issued upon exercise of such options and other shares received following any realization of rights withrespect to such options, such as share dividends and share splits, must be registered in the name of a trustee selected by the board of directors and held in trustfor the benefit of the relevant employee, director or officer. The trustee may not release these options or shares to the relevant grantee before the secondanniversary of the registration of the options in the name of the trustee. However, under this track, we are not allowed to deduct an expense with respect to theissuance of the options or shares. Section 3(i) does not provide for a similar tax benefits. 75Table of Contents The plans may be administered by our board of directors either directly or upon the recommendation of a committee appointed by our board of directors. The compensation committee recommends to the board of directors, and the board of directors determines or approves the eligible individuals who receiveoptions under the plans, the number of ordinary shares covered by those options, the terms under which such options may be exercised, and other terms andconditions of the options, all in accordance with the provisions of the plans. Option holders may not transfer their options except in the event of death or ifthe compensation committee determines otherwise. Our compensation committee or board of directors may at any time amend or terminate each of the plans;however, any amendment or termination may not adversely affect any options or shares granted under such plan prior to such action. The option exercise price is determined by the compensation committee and specified in each option award agreement. In general, the option exercise price isthe fair market value of the shares on the date of grant as determined in good faith by our board of directors. Employee Share Ownership and Option Plan (2014) In June 2014, we adopted and obtained shareholder approval for our 2014 Plan and the U.S. Appendix thereto. The 2014 Plan provides for the grant ofoptions, restricted shares, restricted share units and other share- based awards to our directors, employees, officers, consultants, advisors and service providers,among others and to any other person whose services are considered valuable to us. Following the approval of the 2014 Plan by the Israeli tax authorities, wewill only grant options or other equity incentive awards under the 2014 Plan, although previously-granted options and awards will continue to be governedby our 2000 Plan and 2011 Plan. The initial reserved pool under the 2014 Plan was 928,288 ordinary shares, and was adjusted as set forth in the 2014 Plan,including an automatic annual increase on January 1 of each year such that the number of shares issuable under the 2014 Plan will equal 4% of our issuedand outstanding share capital on a fully diluted basis on each such January 1, or a lesser number of shares determined by the board of directors. As of March1, 2019, the outstanding reserved pool under the 2014 Plan stands on 1,279,486. The 2014 Plan is administered by our board of directors or by a committee designated by the board of directors, which shall determine, subject to Israeli law,the grantees of awards and the terms of the grant, including, exercise prices, vesting schedules, acceleration of vesting and the other matters necessary in theadministration of the 2014 Plan. The 2014 Plan enables us to issue awards under various tax regimes including, without limitation, pursuant to Sections 102and 3(i) of the Ordinance, and under Section 422 of the Code. Options granted under the 2014 Plan to U.S. residents may qualify as “incentive stock options”within the meaning of Section 422 of the Code, or may be non-qualified. The exercise price for “incentive stock options” must not be less than the fair marketvalue on the date on which an option is granted, or 110% of the fair market value if the option holder holds more than 10% of our share capital. We currently intend to grant awards under the 2014 Plan only to our employees, directors and officers who are not controlling shareholders and areconsidered Israeli residents, under the capital gains track of Section 102(b)2 of the Ordinance. 76Table of Contents Awards under the 2014 Plan may be granted until June 8, 2034, 20 years from the date on which the 2014 Plan was approved by our board of directors,provided that awards granted to any U.S. participants may be granted until June 8, 2024, 10 years from the date on which the 2014 Plan was approved by ourboard of directors. The options granted under the 2014 Plan generally vest over four years commencing on the date of grant such that 25% vest on the first anniversary of thedate of grant and an additional 6.25% vest at the end of each subsequent three-month period thereafter for 36 months. Options, other than certain incentiveshare options, that are not exercised within 20 years from the grant date expire, unless otherwise determined by our board of directors or its designatedcommittee, as applicable. Share options that qualify as “incentive stock options” granted to a person holding more than 10% of our voting power under theU.S. appendix to the 2014 Plan will expire within five years from the date of the grant and any other options granted under the U.S. appendix to the 2014Plan will expire within 10 years from the date of grant. Except as otherwise determined by the board of directors or as set forth in an individual’s awardagreement, in the event of termination of employment or services for reasons of disability or death, or retirement, the grantee, or in the case of death, his or herlegal successor, may exercise options that have vested prior to termination within a period of one year from the date of disability or death, or within 180 daysfollowing retirement. If we terminate a grantee’s employment or service for cause, all of the grantee’s vested and unvested options will expire on the date oftermination. If a grantee’s employment or service is terminated for any other reason, the grantee may exercise his or her vested options within 90 days of thedate of termination. Any expired or unvested options return to the pool for reissuance. In the event of a merger or consolidation of our company, or a sale of all, or substantially all, of our shares or assets or other transaction having a similar effecton us, then without the consent of the option holder, our board of directors may determine, at its absolute discretion, whether outstanding awards held by orfor the benefit of any grantee and which have not yet vested, is to be assumed or substituted and whether acceleration of such awards will be available. Employee Share Ownership and Option Plan (2011) In April 2011, we adopted the 2011 Plan. The term of the 2011 Plan is twenty years. Each option granted under the 2011 Plan entitles the grantee to purchaseour ordinary shares. The options granted under the 2011 Plan generally vest during a four-year period following the date of the grant in 13 installments: 25%of the options vest one year following the grant date, and additional 1/16 of the options vest at the end of each subsequent quarter over the course of thefollowing three years. The options expire twenty years after the date of grant if not exercised earlier. In the case of certain changes in our share capital structure, such as a consolidation or share split or dividend, appropriate adjustments will be made to thenumbers of shares and exercise prices under outstanding options. Unless otherwise determined by the board of directors, upon the consummation of certainkinds of transactions, such as a liquidation, a merger, reorganization or sale of all or substantially all of our assets, any unexercised outstanding options shallexpire, provided that in case of merger or consolidation or the sale, transfer or exchange of all or substantially all our assets or shares, the survivingcorporation does not assume the options or substitute them with appropriate options in the surviving corporation. In general, when an option holder’s employment or service with us terminates, his or her option will no longer continue to vest following termination, and theholder may exercise any vested options for a period of 90 days following termination without cause. If an option holder’s employment with us terminates dueto disability (as determined by the board of directors) or if the termination of employment results from his or her death then the option holder or his or herestate (as applicable) has twelve months to exercise the option. If an option holder retires from our company, then, with the approval of the board of directors,the option holder or his or her estate (as applicable) has six months to exercise the option. If termination of employment results from cause, his or heroutstanding options will expire upon termination. No option may be exercised after its scheduled expiration date. 77Table of Contents Employee Share Ownership and Option Plan (2000) In February 2000, we adopted the 2000 Plan, which was amended and restated in 2003 due to changes in applicable tax law. The original term of the 2000Plan was ten years. In 2013, the terms of outstanding options were extended by 10 years. Each option granted under the 2000 Plan entitles the grantee to purchase one of our ordinary shares. The options granted under the 2000 Plan generally vestduring a four-year period following the date of the grant in three installments: 50% of the options vest two years following the grant date, 25% of the optionsvest three years following the grant date and the remaining 25% of the options vest four years following the grant date. The options under the plan expire tenyears after the date of grant if not exercised earlier. In the case of certain changes in our share capital structure, such as a consolidation or share split or dividend, appropriate adjustments will be made to thenumbers of shares and exercise prices under outstanding options. In the event of certain transactions, such as an acquisition, or a merger or reorganization or asale of all or substantially all of our assets, there shall be an acceleration of exercise of unvested options, immediate or otherwise, which depends on, amongother things, the nature of such transaction, and provided that in case of merger or consolidation the surviving corporation does not assume the options orsubstitute them with appropriate options in the surviving corporation. In general, when an option holder’s employment or service with us terminates, his or her option will no longer continue to vest following termination, and theholder may exercise any vested options for a period of 90 days following termination without cause. If an option holder’s employment with us terminates dueto disability (as determined by the board of directors) or if the termination of employment results from his or her death or due to retirement after age 60, thenwith the approval of the board of directors, the option holder or his or her estate (as applicable) has twelve months to exercise the option; however, the optionmay not be exercised after its scheduled expiration date. If termination of employment results from cause, his or her outstanding options will expire upontermination. Item 7. Major Shareholders and Related Party Transactions Major Shareholders The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of February 1, 2019: ●each person or entity known by us to own beneficially more than 5% of our outstanding ordinary shares; ●each of our executive officers and directors individually; and ●all of our executive officers and directors as a group. The beneficial ownership of our ordinary shares is determined in accordance with the rules of the SEC and generally includes any shares over which aperson exercises sole or shared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, wedeem ordinary shares issuable pursuant to options that are currently exercisable or exercisable within 60 days of February 1, 2019 to be outstanding and to bebeneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person, but we do not treat them asoutstanding for the purpose of computing the percentage ownership of any other person. The percentage of ordinary shares beneficially owned is based on35,881,128 ordinary shares outstanding as of February 1, 2019. According to our transfer agent, as of February 23, 2019 there were 12 record holders of our ordinary shares, of which two record holders were located inthe United States. None of our shareholders has different voting rights from other shareholders. 78Table of Contents Except as described in the footnotes below, we believe each shareholder has voting and investment power with respect to the ordinary shares indicated inthe table as beneficially owned. Unless otherwise indicated, the address of each beneficial owner is c/o Vascular Biogenics Ltd., 8 HaSatat St., Modi’in, Israel7178106. Name Number ofOrdinary SharesBeneficially Owned Percentage ofOwnership 5% Shareholders Thai Lee Family Trust 5,447,811 15.18%Aurum Ventures M.K.I. Ltd (1) 4,254,778 11.86%Sabby Management LLC 2,373,768 6.61%The Estate of Mr. Jecheskiel Gonczarowski (2) 2,168,337 6.03%Executive Officers and Directors Dr. Bennett M. Shapiro (3) 314,122 0.87%Prof. Dror Harats (4) 1,731,436 4.69%Prof. Ruth Arnon - * Ms. Ruth Alon - * Dr. Ron Cohen - * Dr. Susan L. Kelley - * David Hastings - * Dr. Shmuel (Muli) Ben Zvi - * Mr. Amos Ron - * Dr. Erez Feige - * Dr. Eyal Breitbart - * Dr. Naamit Sher - * Dr. Corinne Epperly - * Adv. Ayelet Horn - * All directors and executive officers as a group (5) 2,705,833 7.09% *Less than 1% (1)Consists of 4,254,778 shares held by Aurum Ventures M.K.I. Ltd. Voting and investment power over such shares are vested with Mr. Morris Kahn, whocontrols Aurum Ventures M.K.I. Ltd. As such, Mr. Kahn may be deemed to have beneficial ownership over our shares held by Aurum Ventures M.K.I. Ltd.The address of Aurum Ventures M.K.I. Ltd. is 16 Abba Hillel Silver Rd., Ramat Gan, 5250608, Israel. (2)Consists of 1,503,779 shares held directly by the estate of Mr. Jecheskiel Gonczarowski and 664,558 shares held by D.S.N.I. Investments Ltd.(collectively, the “J.J.D. Funds”). The shares held by D.S.N.I. Investments Ltd. may be deemed to be beneficially owned by the estate of JecheskielGonczarowski. (3)Consists of (a) 24,440 outstanding shares held by Puretech Ventures LLC, which may be deemed to be beneficially owned by Bennett M. Shapiro, ourchairman and a senior partner and chairman of Puretech Ventures LLC; (b) 42,808 outstanding shares held by Bennett M. Shapiro and Fredericka F.Shapiro, JTWROS; and (c) options to purchase 246,874 shares exercisable within 60 days of February 1, 2018 held by Bennett M. Shapiro. 79Table of Contents (4)Consists of (a) 705,907 outstanding shares held by or for Prof. Harats; (b) options to purchase 993,597 shares exercisable within 60 days of February 1,2019; and (c) warrants exercisable for 31,932 shares within 60 days of February 1, 2019. (5)Consists of (a) options to purchase 1,814,386 shares exercisable within 60 days of February 1, 2019; (b) warrants exercisable for 31,932 shares within 60days of February 1, 2019; and (c) 859,515 outstanding shares. Related Party Transactions The following is a description of the material terms of those transactions with related parties to which we are party since January 1, 2018. On May 27, 2015 our shareholders approved our written compensation policy and we intend in to extend the compensation policy for an additional three-year term. We have adopted a written policy which provides that the approval of the audit committee is required to effect specified actions and transactionswith our directors, executive officers and controlling shareholders, or in which such persons have an interest. See “Item 6. Directors, Senior Management andEmployees-Approval of Related Party Transactions Under Israeli Law.” The term “controlling shareholder” means a shareholder with the ability to direct theactivities of our company, other than by virtue of being an executive officer or director. A shareholder is presumed to be a controlling shareholder if theshareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its generalmanager. For the purpose of approving transactions with controlling shareholders, as well as corporate approval of executive compensation, the term alsoincludes any shareholder (or two or more shareholders having a personal interest in the same matter being brought for approval) that holds 25% or more of thevoting rights of a company if the company has no shareholder that owns more than 50% of its voting rights. The transactions described below were enteredinto prior to the effectiveness of this policy. Indemnification Agreements We have in place indemnification agreements with each of our executive officers exculpating them from a breach of their duty of care to us to the fullestextent permitted by law, subject to limited exceptions, and undertaking to indemnify them to the fullest extent permitted by Israeli law, subject to limitedexceptions, including with respect to liabilities resulting from the initial public offering to the extent such liabilities are not covered by insurance. Employment Agreements We have entered into employment agreements with our executive officers and key employees. The employment agreements contain standard provisions,including assignment of invention provisions and non-competition clauses. See “Item 6. Directors, Senior Management and Employees-EmploymentAgreements with Executive Officers.” Registration Rights Agreement Our investor rights agreement entitles our preferred shareholders to certain registration rights following the closing of our initial public offering. Inaccordance with this agreement, and subject to conditions described below, the following executives, directors and entities, which as of the date of theprospectus relating to the initial public offering beneficially owned more than 5% of our ordinary shares are entitled to registration rights: the estate ofJecheskiel Gonczarowski and entity affiliated therewith, Thai Lee Family Trust, Aurum Ventures and Pitango Ventures. Form F-1 Demand Rights. Upon the request of the holders of more than 50% of the shares held by our former preferred shareholders given more than 180 daysafter the effective date of the registration statement related to our initial public offering, we are required to file a registration statement on Form F-1 in respectof the ordinary shares held by our former preferred shareholders. Following a request to effect such a registration, we are required to give notice of the requestto the other holders of registrable securities and offer them an opportunity to include their shares in the registration statement. We are not required to effectmore than two registrations on Form F-1 in the aggregate and not more than one registration in any 12 month period and we are only required to do so if theaggregate proceeds from any such registration are estimated in good faith to be in excess of $6.0 million. 80Table of Contents Form F-3 Demand Rights. Upon filing an F-3 and at the request of the holders of more than 20% of the shares held by our former preferred shareholders, weare required to file a registration statement on Form F-3 in respect of the ordinary shares held by our former preferred shareholders. Following a request toeffect such a registration, we are required to give notice of the request to the other holders of registrable securities and offer them an opportunity to includetheir shares in the registration statement. We are not required to effect a registration on Form F-3 more than twice in any 12 month period and are onlyrequired to do so if the aggregate proceeds from any such registration are estimated in good faith to be in excess of $2.0 million. Piggyback Registration Rights. Following our initial public offering, shareholders holding registrable securities also have the right to request that we includetheir registrable securities in any registration statement filed by us in the future for the purposes of a public offering for cash, subject to specified exceptions. Cutback. In the event that the managing underwriter advises the registering shareholders that marketing factors require a limitation on the number of sharesthat can be included in a registered offering, the shares will be included in the registration statement in an agreed order of preference among the holders ofregistration rights. The same preference also applies in the case of a piggyback registration, but we have first preference and the number of shares ofshareholders that are included may not be less than 30% of the total number of shares included in the offering. Termination. All registration rights granted to holders of registrable securities terminate on the fifth anniversary of the closing of our initial public offeringand, with respect to any of our holders of registrable securities when the shares held by such shareholder can be sold within a 90 day period under Rule 144. Expenses. We will pay all expenses in carrying out the foregoing registrations other than selling shareholders’ underwriting discounts and transfer taxes. Item 8. Financial Information Financial statements are set forth under Item 18. We have never declared or paid any cash dividends to our shareholders. We currently anticipate that we will retain all of our future earnings, if any, for use inthe operation of our business. Additionally, our ability to pay dividends on our ordinary shares is limited by restrictions under the terms of the agreementsgoverning our indebtedness and under Israeli law. Item 9. The Offer and Listing Our ordinary shares are quoted on the Nasdaq Global Market under the symbol “VBLT.” 81Table of Contents Nasdaq Global Market The following table sets forth, for the periods indicated since October 1, 2014, which was the date on which our ordinary shares began trading on the NasdaqGlobal Market under the symbol “VBLT,” the high and low sales prices of our ordinary shares as reported by the Nasdaq Global Market. Price Per Ordinary Share High Low Annual: 2014 $7.56 $4.65 2015 17.02 3.09 2016 7.58 2.76 2017 9.05 3.90 2018 8.50 0.60 Quarterly: First Quarter 2017 $6.50 $4.20 Second Quarter 2017 $6.70 $4.35 Third Quarter 2017 $7.25 $3.90 Fourth Quarter 2017 $9.05 $5.60 First Quarter 2018 8.50 2.30 Second Quarter 2018 2.80 2.10 Third Quarter 2018 2.175 1.55 Fourth Quarter 2018 1.72 1.26 First Quarter 2019 (through March 11, 2019) $1.64 $0.94 Most Recent Six Months: September 2018 1.70 1.55 October 2018 $1.72 $1.25 November 2018 $1.43 $1.10 December 2018 $1.26 $0.60 January 2019 $1.29 $0.939 February 2019 $1.63 $1.26 On March 11, 2019, the last reported sale price of our ordinary shares on the Nasdaq Global Market was $1.64 per share. Item 10. Additional Information A. Share Capital Not applicable. B. Memorandum and Articles of Association Ordinary Shares Voting All ordinary shares will have identical voting and other rights in all respects. Transfer of Shares Our fully paid ordinary shares are issued in registered form and may be freely transferred under our amended and restated articles of association, unless thetransfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trade. Theownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our amended and restated articles of association or thelaws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel. 82Table of Contents Election of Directors Our ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented ata shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors described under “Item 6.Directors, Senior Management and Employees-Board of Directors.” Under our amended and restated articles of association, our board of directors must consist of not less than three, not including two external directors, but nomore than nine directors (including the external directors). Pursuant to our amended and restated articles of association, other than the external directors, forwhom special election requirements apply under the Companies Law, the vote required to appoint a director is a simple majority vote of holders of our votingshares, participating and voting at the relevant meeting. Each director will serve until his or her successor is duly elected and qualified or until his or herearlier death, resignation or removal by a vote of the majority voting power of our shareholders at a general meeting of our shareholders or until his or heroffice expires by operation of law, in accordance with the Companies Law. In addition, our amended and restated articles of association allow our board ofdirectors to appoint directors to fill vacancies on the board of directors to serve for a term of office equal to the remaining period of the term of office of thedirectors(s) whose office(s) have been vacated. External directors are elected for an initial term of three years, may be elected for additional terms of threeyears each under certain circumstances, and may be removed from office pursuant to the terms of the Companies Law. See “Item 6. Directors, SeniorManagement and Employees-Board of Directors.” Dividend and Liquidation Rights We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Companies Law,dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company’sarticles of association provide otherwise. Our amended and restated articles of association do not require shareholder approval of a dividend distribution andprovide that dividend distributions may be determined by our board of directors. Pursuant to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years,according to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to thedate of the distribution, or we may otherwise only distribute dividends that do not meet such criteria only with court approval. In each case, we are onlypermitted to distribute a dividend if our board of directors and the court, if applicable, determines that there is no reasonable concern that payment of thedividend will prevent us from satisfying our existing and foreseeable obligations as they become due. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion totheir shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to theholders of a class of shares with preferential rights that may be authorized in the future. Shareholder Meetings Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 monthsafter the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in our amended andrestated articles of association as extraordinary general meetings. Our board of directors may call extraordinary general meetings whenever it sees fit, at suchtime and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene anextraordinary general meeting upon the written request of (i) any two of our directors or one- quarter of the members of our board of directors or (ii) one ormore shareholders holding, in the aggregate, either (a) 5% or more of our outstanding issued shares and 1% of our outstanding voting power or (b) 5% ormore of our outstanding voting power. One or more shareholders, holding 1% or more of the outstanding voting power, may ask the board to add an item tothe agenda of a prospective meeting, if the proposal merits discussion at the general meeting. 83Table of Contents Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at generalmeetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to the date of themeeting. Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of our shareholders: ●amendments to our articles of association; ●appointment or termination of our auditors; ●appointment of external directors; ●approval of certain related party transactions; ●increases or reductions of our authorized share capital; ●a merger; and ●the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any ofits powers is required for our proper management. The Companies Law and our amended and restated articles of association require that a notice of any annual general meeting or extraordinary generalmeeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors,the approval of transactions with office holders or interested or related parties, or an approval of a merger, notice must be provided at least 35 days prior to themeeting. Under the Companies Law and our amended and restated articles of association, shareholders are not permitted to take action via written consent in lieu of ameeting. Quorum Requirements Pursuant to our amended and restated articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matterssubmitted to a vote before the shareholders at a general meeting. As a foreign private issuer, the quorum required for our general meetings of shareholdersconsists of at least two shareholders present in person, by proxy or written ballot who hold or represent between them at least 25% of the total outstandingvoting rights. A meeting adjourned for lack of a quorum is generally adjourned to the same day in the following week at the same time and place or to a latertime or date if so. Vote Requirements Our amended and restated articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required bythe Companies Law or by our amended and restated articles of association. Under the Companies Law, each of (i) the approval of an extraordinary transactionwith a controlling shareholder and (ii) the terms of employment or other engagement of the controlling shareholder of the company or such controllingshareholder’s relative (even if not extraordinary) requires, the approval described above under “Management-Approval of Related Party Transactions UnderIsraeli Law-Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions.” Under our amended and restated articles ofassociation, the alteration of the rights, privileges, preferences or obligations of any class of our shares requires a simple majority vote of the class so affected(or such other percentage of the relevant class that may be set forth in the governing documents relevant to such class), in addition to the ordinary majorityvote of all classes of shares voting together as a single class at a shareholder meeting. An exception to the simple majority vote requirement is a resolution forthe voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Companies Law,which requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by voting deed and voting on theresolution. 84Table of Contents Access to Corporate Records Under the Companies Law, shareholders are provided access to: minutes of our general meetings; our shareholders register and principal shareholders register,articles of association and financial statements; and any document that we are required by law to file publicly with the Israeli Companies Registrar or theIsrael Securities Authority. In addition, shareholders may request to be provided with any document related to an action or transaction requiring shareholderapproval under the related party transaction provisions of the Companies Law. We may deny this request if we believe it has not been made in good faith or ifsuch denial is necessary to protect our interest or protect a trade secret or patent. Acquisitions Under Israeli Law Full Tender Offer A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target company’s issued and outstandingshare capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued andoutstanding shares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued andoutstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the relevant class for thepurchase of all of the issued and outstanding shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued andoutstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offeraccept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will alsobe accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicableclass of shares. Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted thetender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the tender offer wasfor less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions, the offeror may include in theterms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above. If (a) the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company or of theapplicable class or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance ofthe tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or ofthe applicable class), the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued andoutstanding share capital or of the applicable class from shareholders who accepted the tender offer. Special Tender Offer The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of theacquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This requirement does not apply if there is alreadyanother holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public companymust be made by means of a special tender offer if, as a result of the acquisition, the purchaser would become a holder of more than 45% of the voting rightsin the company, provided that there is no other shareholder of the company who holds more than 45% of the voting rights in the company, subject to certainexceptions. 85Table of Contents A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5% of thevoting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may beconsummated only if (i) outstanding shares representing at least 5% of the voting power of the company will be acquired by the offeror and (ii) the number ofshares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser, controlling shareholders, holders of25% or more of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer). If a special tender offer isaccepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may notmake a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of oneyear from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer. Merger The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under theCompanies Law are met, by a majority vote of each party’s shareholders, and, in the case of the target company, a majority vote of each class of its shares,voted on the proposed merger at a shareholders meeting. For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of shares represented atthe shareholders meeting that are held by parties other than the other party to the merger, or by any person (or group of persons acting in concert) who holds(or hold, as the case may be) 25% or more of the voting rights or the right to appoint 25% or more of the directors of the other party, vote against the merger.If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger,then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders (asdescribed under “Item 6. Directors, Senior Management and Employees-Disclosure of Personal Interests of Controlling Shareholders and Approval of CertainTransactions”). If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of thevotes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of acompany, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered tothe shareholders of the target company. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonableconcern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further giveinstructions to secure the rights of creditors. In addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed byeach party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders ofeach party. 86Table of Contents Anti-takeover Measures The Companies Law allow us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certainpreferred rights with respect to voting, distributions or other matters and shares having preemptive rights. No preferred shares are currently authorized underour amended and restated articles of association. In the future, if we do authorize, create and issue a specific class of preferred shares, such class of shares,depending on the specific rights that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders fromrealizing a potential premium over the market value of their ordinary shares. The authorization and designation of a class of preferred shares will require anamendment to our amended and restated articles of association, which requires the prior approval of the holders of a majority of the voting power attaching toour issued and outstanding shares at a general meeting. The convening of the meeting, the shareholders entitled to participate and the majority vote requiredto be obtained at such a meeting will be subject to the requirements set forth in the Companies Law as described above in “Voting Rights”. Tax Law Israeli tax law treats some acquisitions, such as stock-for-stock swaps between an Israeli company and a foreign company, less favorably than U.S. tax law. Forexample, Israeli tax law may subject a shareholder who exchanges ordinary shares in an Israeli company for shares in a non-Israeli corporation to immediatetaxation unless such shareholder receives authorization from the Israeli Tax Authority for different tax treatment. Modification of Class Rights Under the Companies Law and our amended and restated articles of association, the rights attached to any class of share, such as voting, liquidation anddividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that class present at a separate class meeting, orotherwise in accordance with the rights attached to such class of shares, as set forth in our amended and restated articles of association. Establishment Our registration number with the Israeli Registrar of Companies is 51-289976-6. Our purpose as set forth in our amended and restated articles of association isto engage in any lawful activity. Transfer Agent and Registrar The transfer agent and registrar for our ordinary shares is American Stock Transfer & Trust Company, LLC. C. Material Contracts We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on theCompany”, “Item 6. Directors, Senior Management and Employees” or elsewhere in this Annual Report. D. Exchange Controls There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the shares or interestor other payments to non- residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel. In 1998, Israeli currency control regulations were liberalized significantly, so that Israeli residents generally may freely deal in foreign currency and foreignassets, and non-residents may freely deal in Israeli currency and Israeli assets. There are currently no Israeli currency control restrictions on remittances ofdividends on the ordinary shares or the proceeds from the sale of the shares provided that all taxes were paid or withheld; however, legislation remains ineffect pursuant to which currency controls can be imposed by administrative action at any time. 87Table of Contents Non-residents of Israel may freely hold and trade our securities. Neither our articles of association nor the laws of the State of Israel restrict in any way theownership or voting of ordinary shares by non-residents, except that such restrictions may exist with respect to citizens of countries which are in a state of warwith Israel. Israeli residents are allowed to purchase our ordinary shares. E. Taxation [Note: subject to the review of company’s tax advisors] The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition ofour ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequencesthat may arise under the laws of any state, local, foreign or other taxing jurisdiction. Israeli Tax Considerations and Government Programs The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that may benefit us. This sectionalso contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our ordinary shares purchased by investors. Thissummary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstancesor to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities whoare subject to special tax regimes not covered in this discussion. Because parts of this discussion are based on new tax legislation that has not yet beensubject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed inthis discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial oradministrative interpretations of Israeli law, which change could affect the tax consequences described below. General Corporate Tax Structure in Israel Israeli companies are generally subject to corporate tax, currently at the rate of 23% of a company’s taxable income. However, the effective tax rate payableby a company that derives income from an Approved Enterprise, a Benefited Enterprise, a Preferred Enterprise or a Preferred Technology Enterprise (asdiscussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to tax at the prevailing corporate tax rate. Law for the Encouragement of Industry (Taxes), 5729-1969 The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for“Industrial Companies.” The Industry Encouragement Law defines an “Industrial Company” as a company incorporated and resident in Israel, of which 90% or more of its income inany tax year, other than income from defense loans, is derived from an “Industrial Enterprise” owned by it that is located in Israel. An “Industrial Enterprise”is defined as an enterprise whose principal activity in a given tax year is industrial production. 88Table of Contents The following corporate tax benefits, among others, are available to Industrial Companies: ●amortization over an eight-year period of the cost of patents and rights to use patents and know-how which were purchased in good faith and areused for the development or advancement of the Industrial Enterprise; ●under certain conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and ●expenses related to a public offering are deductible in equal amounts over three years. There is no assurance that we qualify as an Industrial Company or that the benefits described above are currently available to us or will be available to us inthe future. Law for the Encouragement of Capital Investments, 5719-1959 The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capitalinvestments in productive assets, such as production facilities, by “Industrial Enterprises” (as defined under the Investment Law). The Investment Law was significantly amended effective April 1, 2005 (the “2005 Amendment”), and further amended as of January 1, 2011 (the “2011Amendment”) and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisionsof the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the2005 Amendment. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Lawin effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitledto choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have thebenefits of the 2011 Amendment apply. Finally, the 2017 Amendment provided another benefits track, which represents an alternative to the tracks availableunder the 2005 Amendment and the 2011 Amendment. We have examined the possible effect, if any, of these provisions of the 2011 Amendment and the2017 Amendment on our financial statements and have decided, at this time, not to opt to apply the new benefits under the 2011 Amendment or the 2017Amendment. Tax Benefits Prior to the 2005 Amendment An investment program that is implemented in accordance with the provisions of the Investment Law prior to the 2005 Amendment, referred to as an“Approved Enterprise,” is entitled to certain benefits. A company that wished to receive benefits as an Approved Enterprise must have received approval fromthe Investment Center of the Israeli Ministry of the Economy (formerly the Ministry of Industry, Trade and Labor), or the Investment Center. Each certificateof approval for an Approved Enterprise relates to a specific investment program in the Approved Enterprise, delineated both by the financial scope of theinvestment and by the physical characteristics of the facility or the asset. In general, an Approved Enterprise is entitled to receive a grant from the Government of Israel or an alternative package of tax benefits, known as thealternative benefits track. The tax benefits from any certificate of approval relate only to taxable income attributable to the specific Approved Enterprise.Income derived from activity that is not integral to the activity of the Approved Enterprise does not enjoy tax benefits. In addition, a company that has an Approved Enterprise program is eligible for further tax benefits if it qualifies as a Foreign Investors’ Company (“FIC”),which is a company with a level of foreign investment, as defined in the Investment Law, of more than 25%. The level of foreign investment is measured asthe percentage of rights in the company (in terms of shares, rights to profits, voting and appointment of directors), and of combined share capital and loans,that are owned, directly or indirectly, by persons who are not residents of Israel. The determination as to whether a company qualifies as an FIC is made on anannual basis. 89Table of Contents If a company elects the alternative benefits track and distributes a dividend out of income derived by its Approved Enterprise during the tax exemptionperiod it will be subject to corporate tax in respect of the amount of the dividend (grossed-up to reflect the pre-tax income that it would have had to earn inorder to distribute the dividend) at the corporate tax rate which would have been applicable without the tax exemption under the alternative benefits track. Inaddition, dividends paid out of income attributed to an Approved Enterprise are generally subject to withholding tax at source at the rate of 15% or suchlower rate as may be provided in an applicable tax treaty. The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in anApproved Enterprise program during the first five years in which the equipment is used. The benefits available to an Approved Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations and thecriteria in the specific certificate of approval. If a company does not meet these conditions, it would be required to repay the amount of tax benefits, asadjusted by the Israeli consumer price index, and interest. We do not have Approved Enterprise programs. Tax Benefits Subsequent to the 2005 Amendment The 2005 Amendment applies to new investment programs commencing after 2004, but does not apply to investment programs approved prior to April 1,2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment becameeffective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect on the date of such approval. The 2005 Amendment provides that a certificate of approval from the Investment Center will only be necessary for receiving cash grants. As a result, it was nolonger necessary for a company to obtain an Approved Enterprise certificate of approval in order to receive the tax benefits previously available under thealternative benefits track. Rather, a company may claim the tax benefits offered by the alternative benefits track directly in its tax returns, provided that itmeets the criteria for tax benefits set forth in the amendment. In order to receive the tax benefits, the 2005 Amendment states, inter alia , that a company mustmake an investment which meets all of the conditions, including a minimum qualifying investment in certain productive assets as specified in the InvestmentLaw. Such investment, along with the fulfillment of certain export requirements, allows a company to receive “Benefited Enterprise” status, and may be madeover a period of no more than three years culminating with the end of the Benefited Enterprise election year. The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Benefited Enterprise depends on, among other things, thegeographic location in Israel of the Benefited Enterprise. The location will also determine the period for which tax benefits are available. Such tax benefitsinclude an exemption from corporate tax on undistributed income generated by the Benefited Enterprise for a period of between two to ten years, dependingon the geographic location of the Benefited Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefitsperiod, depending on the level of foreign investment in the company in each year. The benefits period is limited to 12 years from the beginning of theBenefited Enterprise election year. With respect to an establishment Benefited Enterprise plan located in certain specific locations, the benefits period islimited to 14 years from the beginning of the Benefited Enterprise election year, depending on the location of the Benefited Enterprise. We informed theIsraeli Tax Authority of our choice of 2012 as a Benefited Enterprise election year. A company qualifying for tax benefits under the 2005 Amendment whichpays a dividend out of income derived by its Benefited Enterprise during the tax exemption period will be subject to corporate tax in respect of the amount ofthe dividend (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate which wouldhave otherwise been applicable. Dividends paid out of income attributed to a Benefited Enterprise are generally subject to withholding tax at source at therate of 15% or such lower rate as may be provided in an applicable tax treaty. 90Table of Contents The benefits available to a Benefited Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a companydoes not meet these conditions, in a given tax year during the benefits period, it would generally not be eligible for tax benefits during such tax year;however, the company’s eligibility for tax benefits in prior and future years should not be impacted. We currently have one Benefited Enterprise program under the Investments Law, which, we believe, may entitle us to certain tax benefits. The tax benefitperiod for this program has not yet commenced but is expected to end no later than the end of tax year 2023. During the benefits period, which shallcommence with the year we will first earn taxable income relating to such enterprise, subject to the 12 years limitation described above, and shall run for aperiod of up to 10 years (assuming FIC status), a corporate tax exemption is expected to apply with respect to the taxable income from our BenefitedEnterprise program (once generated) generated during the first two years of the benefits period (so long as it remains undistributed) and reduced corporate taxrates are expected to apply to such taxable income generated in the remaining years of the benefits period. There is no assurance that our future taxable income will qualify as Benefited Enterprise income or that the benefits described above will be available to us inthe future. Tax Benefits Under the 2011 Amendment The 2011 Amendment canceled the availability of the benefits granted to companies under the Investment Law prior to 2011, subject to certain exceptions,and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in theInvestment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not wholly-owned by agovernmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011Amendment, in 2014 and thereafter a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to its income derived by its PreferredEnterprise unless the Preferred Enterprise is located in development zone A, in which case the rate will be 9%. This latter rate was reduced to 7.5% as ofJanuary 1, 2017. It should be noted, that the classification of income generated from the provision of usage rights in know-how or software that weredeveloped in the Preferred Enterprise, as well as royalty income received with respect to such usage, as Preferred Enterprise income may be subject to theissuance of a pre-ruling from the Israel Tax Authority stipulating that such income is associated with the productive activity of the Preferred Enterprise inIsrael. Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate asmay be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if suchdividends are subsequently distributed to individuals or a non-Israeli company, withholding tax at a rate of 20% or such lower rate as may be provided in anapplicable tax treaty will apply). The 2011 Amendment also provided transitional provisions to address companies that may be eligible for tax benefits under the Approved Enterprise orBenefited Enterprise regimes. These transitional provisions provide, among other things, that unless an irrevocable request is made to apply the provisions ofthe Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011: (1) the terms and benefits included in any certificate ofapproval that was granted to an Approved Enterprise which chose to receive grants before the 2011 Amendment became effective will remain subject to theprovisions of the Investment Law as in effect on the date of such approval, and subject to certain other conditions, (2) terms and benefits included in anycertificate of approval that was granted to an Approved Enterprise which had participated in an alternative benefits track before the 2011 Amendment becameeffective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, provided that certain conditions are met, and(3) a Benefited Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certainconditions are met. 91Table of Contents We have examined the potential Israeli tax implications associated with the adoption and implementation of the provisions of the 2011 Amendment andhave decided, at this time, not to apply the new benefits under the 2011 Amendment. There is no assurance that our future taxable income will qualify asPreferred Enterprise income or that the benefits described above will be available to us in the future. The termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities. Tax Benefits Under the 2017 Amendment The 2017 Amendment introduced new benefits for income generated by a “Preferred Company” (as defined above) through its “Preferred TechnologyEnterprise” (as defined in the Investment Law) as of January 1, 2017. Pursuant to the 2017 Amendment, in 2017 and thereafter a Preferred Company isentitled to a reduced corporate tax rate of 12% with respect to its income derived by its Preferred Technology Enterprise unless the Preferred Enterprise islocated in development zone A, in which case the rate will be 7.5%. It should be noted that the calculation of a Preferred Company’s Preferred TechnologyEnterprise income is based on a complex formula and the income not classified as such may be classified as Preferred Enterprise income or ordinary incomedepending on the circumstances. In addition, a Preferred Company must generally fulfill certain conditions to be eligible for Preferred Technology Enterprisestatus including, inter alia, an R&D expenses level of at least 7% of total revenues or NIS 75 million per year. Dividends paid out of Preferred Technology Enterprise income are generally subject to withholding tax at source at the rate of 20% or such lower rate as maybe provided in an applicable tax treaty. However, subject to the fulfillment of certain conditions, to the extent that the dividends are paid to a direct foreignparent company holding at least 90% of the shares of the Preferred Company, a reduced withholding tax rate of 4% shall apply. Notwithstanding the above, ifsuch dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or anon-Israeli company, withholding tax at a rate of 20% or such lower rate as may be provided in an applicable tax treaty will apply). We have examined the potential Israeli tax implications associated with the adoption and implementation of the provisions of the 2017 Amendment andhave decided, at this time, not to apply the new benefits under the 2017 Amendment. There is no assurance that our future taxable income will qualify asPreferred Technology Enterprise income or that the benefits described above will be available to us in the future. The termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities. Taxation of Our Shareholders This discussion does not address the tax consequences applicable to shareholders that own, or have owned at any time, directly or indirectly, 10% or more ofour shares (“Controlling Shareholders”), and such shareholders should consult their tax advisers as to the tax consequences of owning or disposing of ourshares. Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were purchased after the Company was listed fortrading on a stock exchange outside of Israel will be exempt from Israeli tax so long as, inter alia, such capital gains were not attributable to a permanentestablishment that the non-resident maintains in Israel. However, non-Israeli resident corporations will not be entitled to the foregoing exemption if the Israeli residents: (i) have a controlling interest, directly orindirectly, alone, together with another (i.e., together with a relative, or together with someone who is not a relative but with whom, according to anagreement, there is regular cooperation in material matters of the company, directly or indirectly), or together with another Israeli resident, of more than 25%in one or more of the means of control in such non-Israeli resident corporation, or (ii) Israeli residents are the beneficiaries of, or are entitled to, 25% or moreof the revenues or profits of such non-Israeli resident corporation, whether directly or indirectly. Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. Forexample, under the United States- Israel Tax Treaty, the disposition of shares by a shareholder who (1) is a U.S. resident (for purposes of the treaty), (2) holdsthe shares as a capital asset, and (3) is entitled to claim the benefits afforded to such person by the treaty, is generally exempt from Israeli capital gains tax.Such exemption will not apply if: (1) the capital gain arising from the disposition can be attributed to a permanent establishment in Israel, (2) the shareholderholds, directly or indirectly, shares representing 10% or more of the voting power of the company during any part of the 12-month period preceding thedisposition, subject to certain conditions, or (3) such U.S. resident is an individual and was present in Israel for 183 days or more during the relevant taxableyear. In such case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable; however, under the UnitedStates-Israel Tax Treaty, the taxpayer would be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to suchsale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign tax credits. The United States-Israel Tax Treaty does not relate toU.S. state or local taxes. In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject tothe withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoidwithholding at source at the time of sale. 92Table of Contents Taxation of Non-Israeli Shareholders on Receipt of Dividends Non-Israeli residents are generally subject to Israeli withholding tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, unless relief isprovided in a treaty between Israel and the shareholder’s country of residence, subject to receipt of a valid certificate from the Israeli Tax Authority allowingfor such reduced rate. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or at any time during the precedingtwelve months, the applicable withholding tax rate is 30%. Furthermore, an additional 3% tax might be applicable to individual shareholders if certainconditions are met. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborateswith such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control”generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holdsany of the aforesaid rights how to act, regardless of the source of such right. Notwithstanding the above, dividends paid to a non-Israeli resident “substantialshareholder” on publicly traded shares, like our ordinary shares, which are held via a “nominee company” (as defined under the Securities Law, 1968), aregenerally subject to Israeli withholding tax at a rate of 25%, unless a different rate is provided under an applicable tax treaty, provided that a certificate fromthe Israeli Tax Authority allowing for a reduced withholding tax rate is obtained in advance. Under the United States-Israel Tax Treaty, the maximum rate oftax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident (for purposes of the United States- Israel Tax Treaty)is 25%. Unless a reduced tax rate is provided under an applicable tax treaty, a distribution of dividends to non-Israeli residents is subject to withholding taxat source at a rate of 15% if the dividend is distributed from income attributed to an Approved Enterprise or a Benefited Enterprise, while a 20% rate applies ifthe dividend is distributed from Preferred Enterprise income or Preferred Technology Enterprise income (unless the dividend is paid to a foreign parentcompany directly holding at least 90% of the shares of the Preferred Company, in which case a 4% withholding tax rate shall apply). We cannot assure youthat in the event we declare a dividend we will designate the income out of which the dividend is paid in a manner that will reduce shareholders’ tax liability. If the dividend is attributable partly to Approved Enterprise income, Benefited Enterprise income, Preferred Enterprise income or Preferred TechnologyEnterprise income, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types ofincome. U.S. residents who are subject to Israeli withholding tax on a dividend may be entitled to a credit or deduction for Untied States federal income taxpurposes in the amount of the taxes withheld, subject to detailed rules contained in U.S. tax legislation. Estate and Gift Tax Israeli law presently does not impose estate or gift taxes. Certain Material U.S. Federal Income Tax Considerations The following is a description of the material U.S. federal income tax considerations relating to the ownership and disposition of our ordinary shares by a U.S.Holder (as defined below). This description addresses only the U.S. federal income tax considerations to U.S. Holders that will hold such ordinary shares ascapital assets. This description does not address tax considerations applicable to U.S. Holders that may be subject to special tax rules, including, withoutlimitation: ●banks, financial institutions or insurance companies; ●real estate investment trusts, regulated investment companies or grantor trusts; ●brokers, dealers or traders in securities, commodities or currencies; ●tax exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408 or 408A of the Code (asdefined below), respectively; ●certain former citizens or long term residents of the United States; ●persons that received our shares as compensation for the performance of services; ●persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S. federalincome tax purposes; 93Table of Contents ●partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or holders that willhold our shares through such an entity; ●S corporations; ●persons that acquire ordinary shares as a result of holding or owning our preferred shares; ●persons whose “functional currency” is not the U.S. dollar; or ●persons that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares. Moreover, this description does not address the U.S. federal estate, gift, or alternative minimum tax considerations, or any U.S. state, local or non-U.S. taxconsiderations of the ownership and disposition of our ordinary shares. This description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, changes to the code based on the U.S. tax reform (as describedbelow) existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof, in eachcase as in effect and available on the date hereof. All the foregoing is subject to change, which change could apply retroactively, and to differinginterpretations, all of which could affect the tax considerations described below. There can be no assurances that the U.S. Internal Revenue Service, or theIRS, will not take a different position concerning the tax consequences of the ownership and disposition of our ordinary shares or that such a position wouldnot be sustained. Holders should consult their own tax advisers concerning the U.S. federal, state, local and foreign tax consequences of owning anddisposing of our ordinary shares in their particular circumstances. For purposes of this description, the term “U.S. Holder” means a beneficial owner of our ordinary shares that, for U.S. federal income tax purposes, is (i) acitizen or resident of the United States, (ii) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in orunder the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxregardless of its source, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration andone or more U.S. persons have the authority to control all of its substantial decisions. If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our ordinary shares, the U.S. federal income taxconsequences relating to an investment in our ordinary shares will depend in part upon the status of the partner and the activities of the partnership. Such apartner or partnership should consult its tax advisor regarding the U.S. federal income tax considerations of acquiring, owning and disposing of our ordinaryshares in its particular circumstances. As indicated below, this discussion is subject to U.S. federal income tax rules applicable to a “passive foreign investment company,” or a PFIC. Persons considering an investment in our ordinary shares should consult their own tax advisors as to the particular tax consequences applicable tothem relating to the ownership and disposition of our ordinary shares, including the applicability of U.S. federal, state and local tax laws and non-U.S.tax laws. Distributions Subject to the discussion under “-Passive Foreign Investment Company Considerations,” below, if you are a U.S. Holder, the gross amount of any distributionmade to you with respect to our ordinary shares before reduction for any Israeli taxes withheld therefrom, other than certain distributions, if any, of ourordinary shares distributed pro rata to all our shareholders, generally will be includible in your income as dividend income to the extent such distribution ispaid out of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. To the extent that the amount of anydistribution by us exceeds our current and accumulated earnings and profits as determined under U.S. federal income tax principles, it will generally betreated first as a return of your adjusted tax basis in our ordinary shares and thereafter as either long-term or short-term capital gain depending upon whetherthe U.S. Holder has held our ordinary shares for more than one year as of the time such distribution is received. We do not expect to maintain calculations ofour earnings and profits under U.S. federal income tax principles. Therefore, U.S. Holders should expect that the entire amount of any distribution generallywill be reported as dividend income. Non-corporate U.S. Holders may qualify for the preferential rates of taxation with respect to dividends on ordinary sharesapplicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) applicable to qualified dividend income (asdiscussed below). The Company, which is incorporated under the laws of the State of Israel, believes that it qualifies as a resident of Israel for purposes of, andis eligible for the benefits of, the Convention between the Government of the United States of America and the Government of the State of Israel with Respectto Taxes on Income, signed on November 20, 1975, as amended and currently in force, or the U.S.-Israel Tax Treaty, although there can be no assurance inthis regard. Further, the IRS has determined that the U.S.-Israel Tax Treaty is satisfactory for purposes of the qualified dividend rules and that it includes anexchange-of-information program. Therefore, subject to the discussion under “-Passive Foreign Investment Company Considerations,” below, if the U.S.-Israel Tax Treaty is applicable, such dividends will generally be “qualified dividend income” in the hands of individual U.S. Holders, provided that certainconditions are met, including holding period and the absence of certain risk reduction transaction requirements are met. The dividends will not be eligible forthe dividends received deduction generally allowed to corporate U.S. Holders. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, or the TCJA. The TCJA provides a 100% deduction for the foreign-source portion of dividends received after January 1, 2018 from “specified 10-percent owned foreign corporations” by U.S. corporate holders, subject to aone-year holding period. No foreign tax credit, including Israeli withholding tax (or deduction for foreign taxes paid with respect to qualifying dividends)would be permitted for foreign taxes paid or accrued with respect to a qualifying dividend. Deduction would be unavailable for “hybrid dividends.” Thedividend received deduction enacted under the TCJA may not apply to dividends from a passive foreign investment company. 94Table of Contents U.S. Holders, other than certain U.S. Holder’s that are U.S. corporations, generally may claim the amount of Israeli withholding tax withheld either as adeduction from gross income or as a credit against U.S. federal income tax liability. However, the foreign tax credit is subject to numerous complexlimitations that must be determined and applied on an individual basis. Generally, the credit cannot exceed the proportionate share of a U.S. Holder’s U.S.federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying thislimitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Inaddition, this limitation is calculated separately with respect to specific categories of income. The amount of a distribution with respect to the ordinary sharesthat is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Israeli income tax purposes, potentially resulting in a reducedforeign tax credit for the U.S. Holder. Each U.S. Holder should consult its own tax advisors regarding the foreign tax credit rules. In general, the amount of a distribution paid to a U.S. Holder in a foreign currency will be the dollar value of the foreign currency calculated by reference tothe spot exchange rate on the day the U.S. Holder receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at thattime. Any foreign currency gain or loss a U.S. Holder realizes on a subsequent conversion of foreign currency into U.S. dollars will be U.S. source ordinaryincome or loss. If dividends received in foreign currency are converted into U.S. dollars on the day they are received, a U.S. Holder generally should not berequired to recognize foreign currency gain or loss in respect of the dividend. Sale, Exchange or Other Taxable Disposition of Our Ordinary Shares Subject to the discussion below under “-Passive Foreign Investment Company Considerations,” if you are a U.S. Holder, you generally will recognize gain orloss on the sale, exchange or other taxable disposition of our ordinary shares equal to the difference between the amount realized on such sale, exchange orother taxable disposition and your adjusted tax basis in our ordinary shares, and such gain or loss will be capital gain or loss. The adjusted tax basis in anordinary share generally will be equal to the cost of such ordinary share. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or othertaxable disposition of ordinary shares is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period determined atthe time of such sale, exchange or other taxable disposition for such ordinary shares exceeds one year (i.e., such gain is long-term capital gain). Thedeductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. Holderrecognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes. 95Table of Contents For a cash basis taxpayer, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the settlement date of the purchase orsale. In that case, no foreign currency exchange gain or loss will result from currency fluctuations between the trade date and the settlement date of such apurchase or sale. An accrual basis taxpayer, however, may elect the same treatment required of cash basis taxpayers with respect to purchases and sales of ourordinary shares that are traded on an established securities market, provided the election is applied consistently from year to year. Such election may not bechanged without the consent of the IRS. For an accrual basis taxpayer who does not make such election, units of foreign currency paid or received aretranslated into U.S. dollars at the spot rate on the trade date of the purchase or sale. Such an accrual basis taxpayer may recognize exchange gain or loss basedon currency fluctuations between the trade date and the settlement date. Any foreign currency gain or loss a U.S. Holder realizes will be U.S. source ordinaryincome or loss. Passive Foreign Investment Company Considerations If we are classified as a PFIC in any taxable year, a U.S. Holder would be subject to special rules generally intended to reduce or eliminate any benefits fromthe deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on acurrent basis. A non-U.S. corporation is classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules withrespect to the income and assets of subsidiaries, either (i) at least 75% of its gross income is “passive income” or (ii) at least 50% of the average quarterlyvalue of its total gross assets (which, assuming we are not a CFC for the year being tested, would be measured by fair market value of the assets, and for whichpurpose the total value of our assets may be determined in part by the market value of our ordinary shares, which is subject to change) is attributable to assetsthat produce “passive income” or are held for the production of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the excess of gainsover losses from the disposition of assets which produce passive income, and includes amounts derived by reason of the temporary investment of funds raisedin offerings of our ordinary shares. If a non-U.S. corporation owns directly or indirectly at least 25% by value of the stock of another corporation, the non-U.S.corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly itsproportionate share of the other corporation’s income. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our ordinary shares,we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns our ordinary shares,regardless of whether we continue to meet the tests described above. We must determine our PFIC status annually based on tests which are factual in nature, and our status will depend on our income, assets and activities eachyear. However, we believe that we were not a PFIC for our 2018 taxable year, but we expect that unless and until we generate sufficient revenue from activelicensing and other non-passive sources and otherwise satisfy the asset test above, we will be treated as a PFIC in future taxable years. If we are a PFIC, and you are a U.S. Holder, then unless you make one of the elections described below, a special tax regime will apply to both (a) any “excessdistribution” by us to you (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distributionreceived by you in the shorter of the three preceding years or your holding period for our ordinary shares) and (b) any gain realized on the sale or otherdisposition of the ordinary shares. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax asif (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each year had been subject to taxin each year of that holding period at the highest marginal rate for such year (other than income allocated to the current period or any taxable period beforewe became a PFIC, which would be subject to tax at the U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interestcharge discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have beenpayable in those years. In addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term capital gainsdiscussed above under “Distributions.” 96Table of Contents Certain elections may potentially be used to reduce the adverse impact of the PFIC rules on U.S. Holders (“qualifying electing fund” (“QEF”) and “mark-to-market” elections), but these elections may accelerate the recognition of taxable income and may result in the recognition of ordinary income. The rules described above for excess distributions would not apply to a U.S. Holder if the U.S. Holder makes a timely QEF election for the first taxable year ofthe U.S. Holder’s holding period for ordinary shares and we comply with specified reporting requirements. A timely QEF election for a taxable year generallymust be made on or before the due date (as may be extended) for filing the taxpayer’s U.S. federal income tax return for the year. A U.S. Holder who makes aQEF election generally must report on a current basis a pro rata share of our ordinary earnings and net capital gain for any taxable year in which we are aPFIC, whether or not those earnings or gains are distributed. A U.S. Holder who makes a QEF election must file a Form 8621 with its annual income tax return.We have not historically provided the information necessary for U.S. Holders to make qualified electing fund elections. However, beginning with our 2016taxable year, for U.S. Holders who seek to make a QEF election with respect to our ordinary shares, we intend to make available an information statement thatwill contain the necessary information required for making a QEF election and permit such U.S. Holders access to certain information in the event of an auditby the U.S. tax authorities. If a U.S. Holder does not make a QEF election for the first taxable year of the U.S. Holder’s holding period for ordinary shares during which we are a PFIC, theQEF election will not be treated as timely and the adverse tax regime described above would apply to dispositions of or excess distributions on the ordinaryshares. In such case, a U.S. Holder may make a deemed sale election whereby the U.S. Holder would be treated as if the U.S. Holder had sold the ordinaryshares in a fully taxable sale at fair market value on the first day of such taxable year in which the QEF election takes effect. Such U.S. Holder would berequired to recognize any gain on the deemed sale as an excess distribution and pay any tax and interest due on the excess distribution when making thedeemed sale election. The effect of such further election would be to restart the U.S. Holder’s holding period in the ordinary shares, subject to the QEF regime,and to purge the PFIC status of such ordinary shares going forward. If a U.S. Holder makes the mark-to-market election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of theordinary shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted taxbasis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously includedas a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder’s tax basis in the ordinary shares will be adjusted to reflectthese income or loss amounts. Any gain recognized on the sale or other disposition of ordinary shares in a year when we are a PFIC will be treated as ordinaryincome and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). The mark-to-market election is available only if we are a PFIC and our ordinary shares are “regularly traded” on a “qualified exchange.” Ourordinary shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the ordinary shares are traded on aqualified exchange on at least 15 days during each calendar quarter (subject to the rule that trades that have as one of their principle purposes the meeting ofthe trading requirement as disregarded). The NASDAQ Global Market is a qualified exchange for this purpose and, consequently, if the ordinary shares areregularly traded, the mark-to-market election will be available to a U.S. Holder. U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences of thealternative treatments would be in their particular circumstances. If we are a PFIC, the general tax treatment for U.S. Holders described in this section would apply to indirect distributions and gains deemed to be realized byU.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs. 97Table of Contents If a U.S. Holder owns ordinary shares during any year in which we are a PFIC and the U.S. Holder recognizes gain on a disposition of our ordinary shares orreceives distributions with respect to our ordinary shares, the U.S. Holder generally will be required to file an IRS Form 8621 (Information Return by aShareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with respect to the company, generally with the U.S. Holder’s federalincome tax return for that year. If our company were a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filingrequirements. The U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. investors are urged to consult their own tax advisers with respect tothe ownership and disposition of our ordinary shares, the consequences to them of an investment in a PFIC, any elections available with respect to ourordinary shares and the IRS information reporting obligations with respect to the ownership and disposition of our ordinary shares. Medicare Tax Certain U.S. Holders that are individuals, estates or trusts may be required to pay an additional 3.8% Medicare tax on all or a portion of their “net investmentincome,” which may include all or a portion of their dividend income and net gains from the disposition of ordinary shares. U.S. Holders will likely not beable to credit foreign taxes against the 3.8% Medicare tax. Each U.S. Holder that is an individual, estate or trust is urged to consult its tax advisors regardingthe applicability of the Medicare tax to its income and gains in respect of its investment in our ordinary shares. Backup Withholding Tax and Information Reporting Requirements U.S. backup withholding tax and information reporting requirements may apply to certain payments to certain shareholders. Information reporting generallywill apply to payments of dividends on, and to proceeds from the sale or redemption of, our ordinary shares made within the United States, or by a U.S. payoror U.S. middleman, to a holder of our ordinary shares, other than an exempt recipient (including a payee that is not a U.S. person that provides an appropriatecertification and certain other persons). A payor may be required to withhold backup withholding tax from any payments of dividends on, or the proceedsfrom the sale or redemption of, ordinary shares within the United States, or by a U.S. payor or U.S. middleman, to a holder, other than an exempt recipient, ifsuch holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backupwithholding tax requirements. Any amounts withheld under the backup withholding rules should generally be allowed as a credit against the beneficialowner’s U.S. federal income tax liability, if any, and any excess amounts withheld under the backup withholding rules may be refunded, provided that therequired information is timely furnished to the IRS. Foreign Asset Reporting Certain U.S. Holders who are individuals may be required to report information relating to an interest in our ordinary shares, subject to certain exceptions(including an exception for shares held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of Specified ForeignFinancial Assets) with their federal income tax return. U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations, ifany, with respect to their ownership and disposition of our ordinary shares. Foreign Account Tax Compliance Act The Foreign Account Tax Compliance Act (“FATCA”) encourages foreign financial institutions to report information about their U.S. account holders(including holders of certain equity interests) to the IRS. Foreign financial institutions that fail to comply with the withholding and reporting requirements ofFATCA and certain account holders that do not provide sufficient information under the requirements of FATCA are subject to a 30% U.S. withholding taxon certain payments they receive, including foreign passthru payments (which may include payments made by us with respect to our ordinary shares). Theterm “foreign passthru payment” is not currently defined in U.S. Treasury Regulations, and therefore, the future application of FATCA withholding tax onforeign pass-thru payments to holders of ordinary shares is uncertain. If a holder of ordinary shares is subject to withholding, there will be no additionalamounts payable by way of compensation to the holder of such securities for the deducted amount. Holders of ordinary shares should consult their own taxadvisors regarding this legislation in light of such holder’s particular situation. THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO APROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAXCONSEQUENCES TO IT OF AN INVESTMENT IN ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES. F. Dividends and Paying Agents Not applicable. 98Table of Contents G. Statement by Experts Not applicable. H. Documents on Display You may inspect our securities filings, including this Annual Report and the exhibits and schedules thereto, without charge at the offices of the SEC at 100 FStreet, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of the Annual Report from the Public Reference Section of the SEC, 100 FStreet, NE, Washington, D.C. 20549 upon the payment of the prescribed fees. You may obtain information on the operation of the Public Reference Room bycalling the SEC at 1-800-SEC-0330. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and otherinformation regarding registrants like us that file electronically with the SEC. You can also inspect the Annual Report on this website. A copy of each document (or a translation thereof to the extent not in English) concerning our company that is referred to in this Annual Report is availablefor public view (subject to confidential treatment of certain agreements pursuant to applicable law) at our principal executive offices. I. Subsidiary Information Not applicable. Item 11. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due toadverse changes in financial market prices and rates. Our market risk exposure is primarily a result of foreign currency exchange rates. Approximately 39% ofour expenses in 2018 were denominated in New Israeli Shekels. Changes of 5% in the US$/NIS exchange rate will increase or decrease the operating expensesby up to 1%. Foreign Currency Risk Fluctuations in exchange rates, especially the NIS against the U.S. dollar, may affect our results, as some of our assets are linked to NIS, as are some of ourliabilities. In addition, the fluctuation in the NIS exchange rate against the U.S. dollar may impact our results, as a portion of our operating costs are NISdenominated. The following table presents information about the changes in the exchange rates of the NIS against the U.S. dollar at year end: Period % Year ended December 31, 2018 8.1%Year ended December 31, 2017 (9.83)%Year ended December 31, 2016 (1.5)% Inflation Risk We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last three fiscal years. If our costs wereto become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through hedging transactions. Our inability orfailure to do so could harm our business, financial condition and results of operations. Item 12. Description of Securities Other Than Equity Securities Not applicable. 99Table of Contents PART II Item 13. Defaults, Dividend Arrearages and Delinquencies Not applicable. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Use of Proceeds from Initial Public Offering On October 6, 2014, we completed an initial public offering in the United States on the NASDAQ Global Market of our ordinary shares, par value NIS 0.01per share. Pursuant to the initial public offering, we sold a total of 6,760,418 ordinary shares (including the shares sold pursuant to the over-allotment option)at a price of $6.00 per share. The aggregate offering price of the shares sold (including the over-allotment option) was approximately $40.5 million. The netproceeds we received from the offering (including the over-allotment option) were approximately $34.9 million. As of December 31, 2018, we had used all of the net proceeds of our initial public offering. None of the proceeds from our initial public offering were used fordirect or indirect payments to our directors, officers or their associates, or to persons owning 10% or more of our equity securities, or to our affiliates. Item 15. Controls and Procedures Disclosure Controls and Procedures We have performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that the material financial andnon-financial information required to be disclosed to the SEC is recorded, processed, summarized and reported timely. Based on our evaluation, ourmanagement, including the Chief Executive Officer, or CEO and the Chief Financial Officer, or CFO, has concluded that our disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by thisreport are effective. Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures ofpersons within the Company to disclose material information otherwise required to be set forth in our reports. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f)promulgated under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and board of directorsregarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordancewith generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even thosesystems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may notprevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our management, including our CEO and CFO, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of theeffectiveness, as of the end of the period covered by this Annual Report, of the Compay’s internal control over financial reporting based on the framework inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on the results ofthis evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2018. 100Table of Contents Report of the Independent Accounting Firm This annual report does not include an attestation report of the Company’s registered public accounting firm because management’s report was not subject toattestation by our independent registered public accounting firm as emerging growth companies are exempt from this requirement. Changes in Internal Control over Financial Reporting Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or ourinternal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations includethe realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls canbe circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of anysystem of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, orthe degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatementsdue to error or fraud may occur and not be detected. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurredduring the year ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financialreporting. Item 16. [Reserved] Item 16A. Audit committee financial expert All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the Securities and ExchangeCommission and the NASDAQ corporate governance rules. Our board of directors has determined that Mr. David Hastings and Dr. Shmuel (Muli) Ben Zvi arethe audit committee financial experts as defined by the Securities and Exchange Commission rules, has the requisite financial experience and is independentas defined by the NASDAQ corporate governance rules. Item 16B. Code of Ethics We have adopted a Code of Business Conduct and Ethics applicable to all of our directors and employees, including our Chief Executive Officer, ChiefFinancial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a “code of ethics” as defined in this Item16B of Form 20-F promulgated by the SEC. The full text of the Code of Business Conduct and Ethics is posted on our website at www.vblrx.com Informationcontained on, or that can be accessed through, our website does not constitute a part of this Form 20-F and is not incorporated by reference herein. If we makeany amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the code of ethics, wewill disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC. 101Table of Contents Item 16C. Principal Accountant Fees and Services The following table sets forth, for each of the years indicated, the fees billed by Kesselman & Kesselman, a member firm of PricewaterhouseCoopersInternational Ltd., our independent registered public accounting firm: Year Ended December 31, 2018 2017 (in thousands) Service rendered Audit Fees (1) $135.0 $145.0 Audit-Related Fees (2) - - Tax Fees (3) 33.0 31.0 All Other Fees - - Total $168.0 $176.0 (1)Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services thatgenerally only the independent accountant can reasonably provide, including work regarding the public listing or offering during 2017 and 2018.(2)Audit related services relate to reports to the IIA.(3)Tax fees relate to tax compliance, planning and advice. Our board of directors reviews and pre-approves all audit services and permitted non-audit services (including the fees and other terms) to be provided by ourindependent auditors. Item 16D. Exemptions from the Listing Standards for Audit Committees Not applicable. Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers In the year ended December 31, 2018, neither we nor any affiliated purchaser (as defined in the Exchange Act) purchased any of our ordinary shares. Item 16F. Change in Registrant’s Certifying Accountant None. Item 16G. Corporate Governance As a foreign private issuer whose shares are listed on the NASDAQ Global Market, we have the option to follow certain Israeli corporate governance practicesrather than those of NASDAQ, except to the extent that such laws would be contrary to U.S. securities laws and provided that we disclose the practices we arenot following and describe the home country practices we follow instead. We rely on this “foreign private issuer exemption” with respect to the followingNASDAQ requirements: ●Quorum requirement. Under our articles of association and as permitted under the Companies Law, a quorum for any meeting of shareholders shallbe the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting power of ourshares instead of 33 1 3% of the issued share capital required under Nasdaq requirements. 102Table of Contents Except as stated above, we comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ, subject to certain exemptions theJOBS Act provides to emerging growth companies. We may in the future elect to follow home country practices in Israel with regard to other matters,including the formation of compensation, nominating and corporate governance committees, separate executive sessions of independent directors and non-management directors and the requirement to obtain shareholder approval for certain dilutive events (such as for the establishment or amendment of certainequity-based compensation plans, issuances that will result in a change of control of the company, certain transactions other than a public offering involvingissuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company). Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on NASDAQ, may provideless protection than is accorded to investors under NASDAQ listing requirements applicable to domestic issuers. For more information, see “Item 3. RiskFactors-We are an ‘emerging growth company’ and a ‘foreign private issuer,’ and we cannot be certain if the reduced reporting requirements applicable toemerging growth companies and foreign private issuers will make our ordinary shares less attractive to investors” and “Risk Factors-We are a ‘foreign privateissuer’ and intend to follow certain home country corporate governance practices, and our shareholders may not have the same protections afforded toshareholders of companies that are subject to all NASDAQ corporate governance requirements.” We will also be required to comply with Israeli corporategovernance requirements under the Companies Law applicable to Israeli public companies such as us whose shares are also listed for trade on an exchangeoutside Israel. Item 16H. Mine Safety Disclosure Not applicable. 103Table of Contents PART III Item 17. Financial Statements Financial Statements are set forth under Item 18. Item 18. Financial Statements Our Financial Statements beginning on pages F-1 through F-8, as set forth in the following index, are incorporated herein by reference. These FinancialStatements are filed as part of this Annual Report. PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2STATEMENTS OF FINANCIAL POSITION F-3STATEMENTS OF COMPREHENSIVE LOSS F-4STATEMENTS OF CHANGES IN EQUITY F-5STATEMENTS OF CASH FLOWS F-7NOTES TO THE FINANCIAL STATEMENTS F-8 F-1Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the board of directors and shareholders of VASCULAR BIOGENICS LTD. Opinion on the Financial Statements We have audited the accompanying statements of financial position of Vascular Biogenics Ltd. (the “Company”) as of December 31, 2018 and 2017, and therelated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2018, including therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, thefinancial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in theperiod ended December 31, 2018 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe Securities and Exchange Commission and the PCAOB. We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company isnot required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtainan understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internalcontrol over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Tel-Aviv, Israel/s/ Kesselman & KesselmanMarch 27, 2019Certified Public Accountants (lsr.) A member firm of PricewaterhouseCoopers International Limited We have served as the Company’s auditor since 2001. Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel,P.O. Box 50005 Tel-Aviv 6150001 Telephone: +972 -3-7954555, Fax: +972 -3- 7954556, www.pwc.com/il F-2Table of Contents VASCULAR BIOGENICS LTD. STATEMENTS OF FINANCIAL POSITION December 31 Note 2018 2017 U.S. dollars in thousands Assets CURRENT ASSETS: Cash and cash equivalents $29,347 $6,694 Short-term bank deposits 5 21,135 48,035 Trade receivables 8 - 2,000 Other current assets 12a 1,227 1,729 TOTAL CURRENT ASSETS 51,709 58,458 NON-CURRENT ASSETS: Property and equipment, net 6 8,921 7,128 Long-term prepaid expenses 48 103 TOTAL NON-CURRENT ASSETS 8,969 7,231 TOTAL ASSETS $60,678 $65,689 Liabilities and equity CURRENT LIABILITIES- Accounts payable: Trade $1,193 $3,058 Other 12b 2,944 3,465 Deferred revenue 8 290 1,046 Lease liability 347 - TOTAL CURRENT LIABILITIES 4,774 7,569 NON-CURRENT LIABILITIES- Severance pay obligations, net 7 99 128 Deferred revenue 8 2,263 2,092 Lease liability 449 - TOTAL NON-CURRENT LIABILITIES 2,811 2,220 TOTAL LIABILITIES 7,585 9,789 COMMITMENTS 9 EQUITY: 10 Ordinary shares, NIS 0.01 par value; Authorized as of December 31, 2018 and 2017,70,000,000 shares; issued and outstanding as of December 31, 2018 and 2017,35,881,128 and 29,879,323 shares, respectively 73 57 Accumulated other comprehensive income 41 16 Additional paid in capital 233,721 221,055 Warrants 7,904 2,960 Accumulated deficit (188,646) (168,188) TOTAL EQUITY 53,093 55,900 TOTAL LIABILITIES AND EQUITY $60,678 $65,689 The accompanying notes are an integral part of the financial statements. F-3Table of Contents VASCULAR BIOGENICS LTD. STATEMENTS OF COMPREHENSIVE LOSS Year ended December 31 Note 2018 2017 2016 U.S. dollars in thousands REVENUES 8 585 13,864 - COST OF REVENUES 9c (235) (340) - GROSS PROFIT 350 13,524 - RESEARCH AND DEVELOPMENT EXPENSES, net 12c $15,940 $17,770 $12,447 MARKETING EXPENSES 12e 397 562 - GENERAL AND ADMINISTRATIVE EXPENSES 12d 5,220 5,847 3,828 OPERATING LOSS 21,207 10,655 16,275 FINANCIAL INCOME 14 (908) (544) (285)FINANCIAL EXPENSES 14 159 27 12 FINANCIAL (INCOME), net (749) (517) (273) LOSS FOR THE YEAR 20,458 10,138 16,002 OTHER COMPREHENSIVE LOSS (INCOME)- Items that will not be reclassified to profit or loss- Re-measurements of post-employment benefit obligation (25) 24 5 COMPREHENSIVE LOSS $20,433 $10,162 $16,007 U.S. dollarsLOSS PER ORDINARY SHARE 13 Basic and diluted $0.62 $0.37 $0.64 Number of sharesWEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING- Basic and diluted 32,969,094 27,398,169 24,970,585 The accompanying notes are an integral part of the financial statements. F-4Table of Contents (Continued)-1 VASCULAR BIOGENICS LTD. STATEMENTS OF CHANGES IN EQUITY Number ofordinaryshares Ordinaryshares Accumulatedothercomprehensiveincome Additionalpaid incapital Warrants Accumulateddeficit Totalequity U.S. dollars in thousands BALANCE AT JANUARY 1, 2016 22,470,321 $38 $45 $174,012 2,960 $(142,048) $35,007 CHANGES DURING THE YEARENDED DECEMBER 31, 2016: Comprehensive loss - - (5) - - (16,002) (16,007)Employee stock options exercised 72,873 * - 121 - - 121 Issuance of ordinary Shares, net ofissuance costs of $2,117 thousand 4,359,091 12 - 21,847 - - 21,859 Share based payments to employeesand non-employees services - - - 1,420 - - 1,420 BALANCE AT DECEMBER 31, 2016 26,902,285 $50 $40 $197,400 $2,960 $(158,050) $42,400 CHANGES DURING THE YEARENDED DECEMBER 31, 2017 Comprehensive Loss - - (24) - - (10,138) (10,162)Employee stock options exercised 252,343 * - 479 - - 479 Issuance of ordinary shares, net ofissuance costs in amount of $288thousand 2,724,695 7 - 19,024 - - 19,031 Share based payments to employeesand non-employees services - - - 4,152 - - 4,152 BALANCE AT DECEMBER 31, 2017 29,879,323 $57 $16 $221,055 2,960 $(168,188) $55,900 * Amount less than $1 thousand F-5Table of Contents (Concluded)-2 VASCULAR BIOGENICS LTD. STATEMENTS OF CHANGES IN EQUITY Number ofordinaryshares Ordinaryshares Accumulatedothercomprehensiveincome Additionalpaid incapital Warrants Accumulateddeficit Totalequity U.S. dollars in thousands BALANCE AT DECEMBER 31, 2017 29,879,323 $57 $16 $221,055 2,960 $(168,188) $55,900 CHANGES DURING THE YEARENDED DECEMBER 31, 2018: Comprehensive income (loss) - - 25 - - (20,458) (20,433)Employee stock options exercised 97,043 - - 34 - - 34 Issuance of ordinary shares andwarrants, net of issuance costs in anamount of $1,775 thousand 5,904,762 16 - 8,765 4,944 - 13,725 Share based payments to employeesand non-employees services - - - 3,867 - - 3,867 BALANCE AT DECEMBER 31, 2018 35,881,128 $73 $41 $233,721 7,904 $(188,646) $53,093 * Amount less than $1 thousand The accompanying notes are an integral part of the financial statements. F-6Table of Contents VASCULAR BIOGENICS LTD. STATEMENTS OF CASH FLOWS Year ended December 31 2018 2017 2016 U.S. dollars in thousands CASH FLOWS FROM OPERATING ACTIVITIES: Loss for the year $(20,458) $(10,138) $(16,002)Adjustments required to reflect net cash used in operating activities (see Appendix A) 3,951 5,993 2,340 Interest received 849 324 250 Interest paid (22) - - Net cash used in operating activities (15,680) (3,821) (13,412) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,229) (6,482) (491)Proceeds from sale of property and equipment 4 - - Investment in short-term bank deposits (21,000) (81,332) (3,600)Maturity of short-term bank deposits 47,958 66,974 - Net cash generated from (used in) from investing activities 24,733 (20,840) (4,091) CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of employees stock options 34 479 121 Issuance of ordinary shares and warrants, net 13,725 19,031 21,859 Principal elements of finance lease payments (88) - - Net cash generated from financing activities 13,671 19,510 21,980 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 22,724 (5,151) 4,477 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 6,694 11,585 7,090 EXCHANGE GAINS (LOSSES) ON CASH AND CASH EQUIVALENTS (71) 260 18 CASH AND CASH EQUIVALENTS AT END OF THE YEAR $29,347 $6,694 $11,585 APPENDIX A: Adjustments required to reflect net cash used in operating activities: Depreciation $1,156 $156 $130 Interest income (908) (331) (263)Interest paid 22 - - Loss from sale of property and equipment 47 - - Exchange gains on lease liability (60) - - Exchange losses (gains) on cash and cash equivalents 71 (260) (18) Net changes in severance pay obligations (4) 17 8 Share based payments 3,867 4,152 1,420 4,191 3,734 1,277 Changes in working capital: Decrease (increase) in other current assets 502 (409) 126 Decrease (increase) in trade receivables 2,000 (2,000) - Decrease (increase) in long term prepaid expenses 55 (90) 307 Increase (decrease) in accounts payable: Trade (1,691) 421 472 Other (521) 1,199 158 Increase (decrease) in deferred revenue (585) 3,138 - (240) 2,259 1,063 $3,951 $5,993 $2,340 APPENDIX B: Non cash activity- Purchase of property and equipment in payables $796 115 The accompanying notes are an integral part of the financial statements. F-7Table of Contents VASCULAR BIOGENICS LTD. NOTES TO THE FINANCIAL STATEMENTS NOTE 1-GENERAL INFORMATION: a.General Vascular Biogenics Ltd. (the “Company” or VBL) was incorporated on January 27, 2000. The Company is a late-stage clinical biopharmaceutical companyfocused on the discovery, development and commercialization of first-in-class treatments for cancer. VBL has also developed a proprietary platform ofsmall molecules, Lecinoxoids, for the treatment of chronic immune-related indications, and is also conducting a research program exploring the potential oftargeting of MOSPD2 for immuno-oncology and anti-inflammatory applications. VB-111 (ofranergene obadenovec), a Phase 3 drug candidate, is the Company’s lead product candidate in the Company’s cancer program. VB-201, a Phase2-ready drug candidate, is the Company’s lead Lecinoxoid-based product candidate. The Company’s “VB-600 series” for targeting of MOSPD2 is at pre-clinical stage. In November 2017, the Company entered into an exclusive license agreement with NanoCarrier Co., Ltd. for the development, commercialization, andsupply of ofranergene obadenovec (“VB-111”) in Japan for all indications, see notes 2(m) and 8. Since inception, the Company has incurred significant losses, and it expects to continue to incur significant expenses and losses for at least the next severalyears. As of December 31, 2018, the Company had an accumulated deficit of $188.6 million. The Company’s losses may fluctuate significantly fromquarter to quarter and year to year, depending on the timing of its clinical trials, the receipt of payments under any future collaboration agreements it mayenter into, and its expenditures on other research and development activities. As of December 31, 2018, the Company had cash, cash equivalents and short-term bank deposits of $50.5 million. The Company may seek to raise morecapital to pursue additional activities. The Company may seek these funds through a combination of private and public equity offerings, governmentgrants, strategic collaborations and licensing arrangements. Additional financing may not be available when the Company needs it or may not be availableon terms that are favorable to the Company. b.Approval of financial statements These financial statements were approved by the Board of Directors on March 27, 2019. NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a.Basis of preparation of the financial statements The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by theInternational Accounting Standards Board (“IASB”). The significant accounting policies described below have been applied consistently in relation to all the periods presented, unless otherwise stated. The financial statements have been prepared under the historical cost convention except of severance pay obligation, net. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management toexercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, orareas where assumptions and estimates are significant to the financial statements are disclosed in note 3. F-8Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): Actual results could differ from those estimates and assumptions. b.Functional and presentation currency: 1)Functional and presentation currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entityoperates (the “functional currency”). The financial statements are presented in U.S. dollar ($), which is the Company’s functional and presentation currency. 2)Transactions and balances Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognized in the income statement. All foreign exchange gains and losses are presented in the statements of comprehensive loss within financial income or expenses. c.Cash and cash equivalents Cash and cash equivalents include cash on hand and short-term bank deposits (with original maturities of three months or less) that are not restricted as towithdrawal or use, and are therefore considered to be cash equivalents. d.Property and equipment: 1)All property and equipment (including leasehold improvements) are stated at historical cost less accumulated depreciation and impairment. Historical costincludes expenditures that are directly attributable to the acquisition of the items. Repairs and maintenance are charged to the income statement during the period in which they are incurred. 2)The assets are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Annual rates of depreciation are as follows: % Laboratory equipment 9-15 Computers 25-33 Office furniture and equipment 7 Leasehold improvements in buildings under operating leases are depreciated using the straight-line method over the shorter of the term of the lease or theestimated useful life of the improvements. 3)Gains and losses on disposals are determined by comparing proceeds with the associated carrying amount. These are included in the statements ofcomprehensive loss. F-9Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): e.Impairment of non-financial assets Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may notbe recoverable. An impairment loss is recognized for the amount by which the asset carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset fair value less costs to dispose and its value in use. For the purposes of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows (cash-generating units). Through December 31, 2018, no impairment has been recognized. f.Financial assets: As of January 1, 2018, the Company adopted IFRS 9 “Financial Instruments”. 1)Classification From 1 January 2018, the Company classifies its financial assets as measured at amortized cost. The classification depends on the entity’s business modelfor managing the financial assets and the contractual terms of the cash flows. Financial assets at amortized cost of the Company are included in trade receivables, other current assets and short term bank deposits in the Statements ofFinancial Position. 2)Recognition and measurement Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset.Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Companyhas transferred substantially all the risks and rewards of ownership. At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss(FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured atamortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arisingon derecognition is recognised directly in profit or loss and presented in the Statement of Comprehensive Loss under “Financial Expenses (Income), net”together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. 3)Impairment From 1 January 2018, the company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortisedcost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised frominitial recognition of the receivables. Prior to the effective date and adoption of IFRS 9, the financial assets of the Company were classified as loans and receivables. The classificationdepended on the purpose for which the financial assets were acquired, also, prior to the adoption of IFRS 9, the Company assessed at December 31, 2017whether there is any objective evidence that a financial asset or group of financial assets was impaired. F-10Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): g.Financial liabilities: Accounts payable Accounts payable are initially measured at fair value. In subsequent periods, the other financial liabilities are presented at amortized cost. Any differencebetween the consideration and the redemption value is accreted to profit or loss over the term of the liability, using the effective interest method. Financial liabilities are classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least 12months after the end of the reporting period, in which case they are classified as noncurrent liabilities. h.Share capital Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are included in equity as a deductionfrom the proceeds. i.Deferred income tax Deferred taxes are recognized using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carryingamounts in the financial statements. Deferred income tax assets are recognized only to the extent that it is probable that future taxable income will be available against which the temporarydifferences can be utilized. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheetdate and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Due to absence of expectation of taxable income in the future, no deferred tax assets have been recorded in the Company’s financial statements. j.Employee benefits: 1)Post employment benefit obligation Israeli labor laws and the Company’s agreements require the Company to pay retirement benefits to employees terminated or leaving their employment incertain other circumstances. Most of the Company’s employees are covered by a defined contribution plan under Section 14 of the Israel Severance PayLaw from the beginning of their employment with the Company. With respect to the remaining employees, which are not covered by a defined contribution plan under Section 14 of the Israel Severance Pay Law only fromJanuary 1, 2010, the Company records a liability in its statement of financial position for defined benefit plans that represents the present value of thedefined benefit obligation as of the statement of financial position date, net of the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the definedbenefit obligation is determined by discounting the estimated future cash outflows using interest rates of highly rated corporate bonds that are denominatedin the currency in which the benefits will be paid (NIS) and that have terms to maturity approximating the terms of the related liability. Remeasurement gains and losses arising from adjustments to reflect actual experience and changes in actuarial assumptions are charged or credited toequity in other comprehensive loss (income) in the period in which they arise. F-11Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): 2)Vacation and recreation pay Under Israeli law, each employee is entitled to vacation days and recreation pay, both computed on an annual basis. The entitlement is based on the lengthof the employment period. The Company recognizes a liability and an expense for vacation and recreation pay based on the entitlement of each employee. k.Share-based payments The Company operates a number of equity-settled, share-based compensation plans to employees (as defined in IFRS 2 “Share-Based Payments”), directorsand service providers. As part of the plans, the Company grants employees, directors and service providers, from time to time and at its discretion, optionsand RSU’s to purchase Company shares. The fair value of the employee and service provider services received in exchange for the grant of the options andRSU’s are recognized as an expense in profit or loss and is recorded to Additional paid in capital within equity. The total amount recognized as an expenseover the vesting period of the options (the period during which all vesting conditions are expected to be met) was determined as follows: 1)Share based payments to employees and directors by reference to the fair value of the options and RSU’s granted at date of grant. 2)Share based payments to service providers by reference to the fair value of the service provided. Service conditions and performance vesting conditions are included in assumptions about the number of options and RSU’s that are expected to vest. Thetotal expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Company revises its estimates of the number of options and RSU’s that are expected to vest based on the vestingconditions. The Company recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to Additionalpaid in capital. When options are exercised, the Company issues new shares, with proceeds less directly attributable transaction costs recognized as share capital (parvalue) and additional paid in capital. l.Provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow ofresources will be required to settle the obligation. Provisions are measured by discounting the future cash outflow at a pretax interest rate that reflectscurrent market assessments of the time value of money and the risks specific to the obligation. The carrying amount of the provision is adjusted in eachreporting period in order to reflect the passage of time and the changes in the carrying amounts are carried to the statement of comprehensive loss. As of December 31, 2018, no provisions have been recognized. m.Revenue from contracts with customers General In November 2017, the Company signed an exclusive license agreement with NanoCarrier Co. Ltd (hereinafter - “The License Agreement”), for thedevelopment, commercialization, and supply of VB-111 in Japan (see note 8 for further details). As of January 1, 2017, the Company early adopted IFRS 15, with full retrospective application. Since the Company has not generated revenues until 2017,the adoption of IFRS 15 did not have an effect on accumulated deficits as of January 1, 2015 nor on 2015’s and 2016’s comparatives. IFRS 15 introduces a five-step model for recognizing revenue from contracts with customers, as follows: 1.identify the contract with a customer; 2.identify the performance obligations in the contract; 3.determine the transaction price; 4.allocate the transaction price to the performance obligations in the contract; 5.recognize revenue when (or as) the entity satisfies a performance obligation. Revenues from licensing agreement According to IFRS 15, performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods and servicesthat are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or servicepromised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readilyavailable to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company has identified two performance obligations in The License Agreement: (1) Grant of the license and use of its IP; and (2) Company’sparticipation and consulting assistance services. In addition, there is a potential performance obligation regarding future manufacturing. IFRS 15 defines the ‘Transaction Price’ as the amount of consideration to which the entity expects to be entitled in exchange for transferring the promisedgoods or services to a customer. The Company allocates the transaction price to each performance obligation identified based on the standalone sellingprices of the goods or services being provided to the customer. The Grant of the license and use of its IP performance obligation considered to be a right to use IP in accordance with IFRS 15. Therefore, revenue isrecognized at a point in time, upon transfer of control over the license to the licensee. The Company’s participation and consulting assistance services performance obligation is recognized as revenue over the service period, based on inputmethod, which is costs incurred and labor hours expended. Revenue from achieving additional milestones is recognized only when it is highly probable that a significant reversal of cumulative revenues will not occur,usually upon achievement of the specific milestone. The transaction price contains variable considerations contingent upon the licensee achieving certain milestones, as well as sales-based royalties, inaccordance with the relevant agreement. Variable payments, contingent on achieving additional milestones, are included in the transaction price based on most likely amount method. Amountsincluded in the transaction price are recognized only when it is highly probable that a significant reversal of cumulative revenues will not occur, usuallyupon achievement of the specific milestone, in accordance with the relevant agreement. Sales-based royalties are not included in the transaction price. Rather, they are recognized as the related sale occurs, due to the specific exception of IFRS 15for sales-based royalties in licensing of intellectual properties. F-12Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): n.Research and development expenses Research expenses are charged to profit or loss as incurred. An intangible asset arising from development of the Company’s products is recognized if all ofthe following conditions are met: ●It is technically feasible to complete the intangible asset so that it will be available for use; ●Management intends to complete the intangible asset and use it or sell it; ●There is an ability to use or sell the intangible asset; ●It can be demonstrated how the intangible asset will generate probable future economic benefits; ●Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; ●Costs associated with the intangible asset during development can be measured reliably. Other development costs that do not meet the above criteria are recognized as expenses as incurred. Development costs previously recognized as anexpense are not recognized as an asset in a subsequent period. As of December 31, 2018, the Company has not yet capitalized any development costs. o.Government grants Government grants, which are received from the Israeli Innovation Authority or IIA (formerly known as the Israeli Office of Chief Scientist, or the “OCS”)by way of participation in research and development that is conducted by the Company, fall within the scope of “forgivable loans,” as set forth inInternational Accounting Standard 20 “Accounting for Government Grants and Disclosure of Government Assistance” (“IAS 20”). As approved by the IIA, the grants are received in installments as the program progresses. The Company recognizes each forgivable loan on a systematicbasis at the same time the Company records, as an expense, the related research and development costs for which the grant is received, provided that there isreasonable assurance that (a) the Company complies with the conditions attached to the grant, and (b) it is probable that the grant will be received (usuallyupon receipt of approval notice). The amount of the forgivable loan is recognized based on the participation rate approved by the IIA; thus, a forgivableloan is recognized as a receivable when approved research and development costs have been incurred before grant funds are received. Since at the time of grant approval there is reasonable assurance that the Company will comply with the forgivable loan conditions attached to the grant,and it is reasonably assured that the Company will not pay royalties to IIA, grant income is recorded against the related research and development expensesin the statements of comprehensive loss. If forgivable loans are initially carried to income, as described above, and in subsequent periods it is no longer reasonably assured that royalties will not bepaid to the IIA, the Company recognizes a liability that is measured based on the Company’s best estimate of the amount required to settle the Company’sobligation at the end of each reporting period. p.Lease Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made underoperating leases are charged to the statements of comprehensive loss on a straight-line basis over the period of the lease. Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as financeleases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum leasepayments. The corresponding rental obligations, net of finance charges, are included in short-term lease liability and long-term lease liability. Each leasepayment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constantperiodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases isdepreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Companywill obtain ownership at the end of the lease term. F-13Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): q.Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is responsible forallocating resources and assessing performance of the operating segments. The Company operates in one operating segment. r.Loss per Ordinary Share Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary Sharesissued and outstanding during the year. The diluted loss per share is calculated by adjusting the weighted average number of outstanding Ordinary Shares, assuming conversion of all dilutivepotential shares. The Company’s dilutive potential shares consist of options and RSU’s granted to employees and service providers and warrants. The dilutive potential shares were not taken into account in computing loss per share in 2018, 2017, and 2016 as their effect would not have been dilutive. s. Trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection of the amounts isexpected in one year or less, they are classified as current assets. The Company’s impairment for trade and other receivables are outlined in note 2(f)(3). t.Standards that are not yet in effect and have not been early adopted by the Company: 1.International Financial Reporting Standard No. 16 “Leases” (hereafter - IFRS 16) IFRS 16 was issued in January 2016. It will result in almost all leases being recognized on the balance sheet by lessees, as the distinction betweenoperating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals arerecognized.The only exceptions are short-term and low-value leases. The Company has reviewed all of the Company’s arrangements over the last year in light of the new lease accounting rules in IFRS 16. The standard willaffect primarily the accounting for the Company’s operating leases. The Company expects to recognize lease liabilities and a right of use assets of approximately $2.7 million on January 1, 2019. The Company will apply the standard from its mandatory adoption date of January 1, 2019. The Company intends to apply the simplified transitionapproach and will not restate comparative amounts for the year prior to first adoption. The Company expects that net loss will increase by an immaterial amount for 2019 as a result of adopting the new rules. Operating cash flows for 2019 willincrease, and financing cash flows will decrease by approximately $0.4 million as repayment of the principal portion of the lease liabilities will beclassified as cash flows from financing activities. F-14Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 3-SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the relatedactual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilitieswithin the next financial year are discussed below: Revenue In 2017, the Company signed a license and supply agreement as more fully described in note 8. In determining the amounts to be recognized as revenue,the Company used its judgement in the following main issues: Identifying the performance obligations in the agreement and determining whether the license provided is distinct - based on the Company’s analysis, thelicense is distinct as the licensee is able to benefit from the license on its own at its current stage (inter alia, due to sublicensing rights, rights andresponsibility for development in the territory, etc.). Allocation of the transaction price - the Company estimated the standalone selling prices of the services to be provided based on expected cost plus amargin and used the residual approach to estimate the standalone selling price of the license as the Company has not yet established a price for the license,and it has not previously been sold on a standalone basis. Variable consideration consists of potential future milestone payments. The Company determined that all such variable consideration shall be allocated tothe license (the satisfied performance obligation). Share-based payments With respect to grants to employees, the value of the labor services received from them in return is measured on the date of grant based on the fair value ofthe equity instruments granted to the employees. For options granted prior to the Company’s IPO in order to measure the fair value of the labor servicereceived, the Company first measured the share value by using the income approach method, which is an analysis that involves forecasting the appropriatecash flow stream over an appropriate period and then discounting it back to a present value at an appropriate discount rate. This discount rate shouldconsider the time value of money, inflation, and the risk inherent in ownership of the asset or security interest being valued. Once the share value wasestimated, the Company used the Black-Scholes model to value the equity instrument. Since the Company was not publicly traded, it looked forcomparable companies in the healthcare sector to set the volatility assumption and estimated the equity instrument’s life. For options granted since 2015,the expected volatility was calculated using weighted average and was based on the stock price volatility of the Company since October 1st, 2014 (IPOdate) and the remaining years on the stock price volatility of similar companies. The Company’s management estimates the fair value of the options granted to consultants based on the value of services receivable over the vesting periodof the applicable options. The value of the transactions, measured as aforesaid, is expensed over the period during which the right of the employees and non-employees to exercise orreceive the underlying equity instruments vests; commensurate with every periodic recognition of the expense, a corresponding increase is recorded toadditional paid in capital, included under the Company’s equity (see also note 10). Clinical trial accruals Clinical trial expenses are charged to research and development expense as incurred. The Company accrues for expenses resulting from obligations undercontracts with clinical research organizations (CROs). The financial terms of these contracts are subject to negotiations, which vary from contract tocontract and may result in payment flows that do not match the periods over which materials or services are provided. The Company’s objective is to reflectthe appropriate trial expense in the financial statements by matching the appropriate expenses with the period in which services and efforts are expended.As of December 31, 2018, the company had clinical accruals in the amount of approximately $1.2 million. NOTE 4-FINANCIAL RISK MANAGEMENT: a.Financial risk management: 1)Financial risk factors The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and price risk), credit and interest risks andliquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potentialadverse effects on the Company’s financial performance. Risk management is performed by the Chief Financial Officer of the Company, who identifies and evaluates financial risks in close cooperation with theCompany’s Chief Executive Officer. The Company’s finance department is responsible for carrying out risk management activities in accordance with policies approved by its Board ofDirectors. The Board of Directors provides guidelines for overall risk management, as well as policies dealing with specific areas such as exchange rate risk,interest rate risk, credit risk, use of financial instruments, and investment of excess cash. In order to minimize exposure to market risk and credit risk, theCompany invested the majority of its cash balances in highly-rated banks. F-15Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 4-FINANCIAL RISK MANAGEMENT (continued): 2)Credit and interest risk Credit and interest risk arises from cash and cash equivalents and deposits with banks. A substantial portion of the liquid instruments of the Company areinvested in short-term deposits in a leading Israeli bank. The Company estimates that since the liquid instruments are mainly invested for the short-term andwith a highly-rated institution, the credit and interest risk associated with these balances is immaterial. 3)Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed creditfacilities. Management monitors rolling forecasts of the Company’s liquidity reserve (comprising cash and cash equivalents and deposits). This is generally carriedout based on the expected cash flows in accordance with practice and limits set by the management of the Company. The Company is in a research stage. It is therefore exposed to liquidity risk, taking into consideration the forecasts of cash flows required to finance itsinvestments and other activities. 4)Market risk-Foreign exchange risk The Company might be exposed to foreign exchange risk as a result of making payments to employees or service providers and investment of someliquidity in currencies other than the U.S. dollar (the functional currency of the Company). The Company manages the foreign exchange risk by aligningthe currencies for holding liquidity with the currencies of expected expenses, based on the expected cash flows of the Company. Had the dollar beenstronger by 5% against the New Israeli Shekel (“NIS”), assuming all other variables remained constant, the Company would have recognized an additionalexpense of $62 thousand, $51 thousand and $13 thousand in profit or loss for the years ended December 31, 2018, 2017 and 2016, respectively. b.Capital risk management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns forshareholders and to maintain an optimal capital structure to reduce the cost of capital. It should be noted that the Company is in the research anddevelopment stage and does not yet generate regular revenue streams. (See also note 1a). c.Fair value of financial instruments The different levels of valuation of financial instruments are defined as follows: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Inputs, other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly(derived from prices). Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair value of financial instruments traded in active markets is based on quoted market prices at the dates of the statements of financial position. F-16Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 4-FINANCIAL RISK MANAGEMENT (continued): A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, orregulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. These instruments are included inlevel 1. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniquesmaximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required tofair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. As of December 31, 2018 and 2017, the fair value of financial instruments (cash and cash equivalents, short term bank deposits, other current assets, tradereceivables and accounts payable) are approximate to their carrying value. F-17Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 4-FINANCIAL RISK MANAGEMENT (continued): d.Composition of monetary balances The composition of financial instruments by currency: As of December 31, 2018: Dollars NIS Poundsterling Euro &SEK Total U.S. dollars in thousands Assets: Cash and cash equivalents $26,340 $2,827 $95 $85 $29,347 Short term bank deposits 21,135 - - - 21,135 Trade receivables - - - - - Other current assets (except for prepaid expenses) - 521 - - 521 47,475 3,348 95 85 51,003 Liabilities- Accounts payable and accrued expenses $1,966 $2,109 $- $62 $4,137 Net assets $45,509 $1,239 $95 $23 $46,866 As of December 31, 2017: Dollars NIS Poundsterling Euro &SEK Total U.S. dollars in thousands Assets: Cash and cash equivalents $4,781 $1,546 $187 $180 $6,694 Short term bank deposits 48,035 - - - 48,035 Trade receivables 2,000 - - - 2,000 Other current assets (except for prepaid expenses) - 1,447 - - 1,447 54,816 2,993 187 180 58,176 Liabilities- Accounts payable and accrued expenses $4,492 $1,973 $45 $13 $6,523 Net assets $50,324 $1,020 $142 $167 $51,653 NOTE 5-SHORT-TERM BANK DEPOSITS: The bank deposits in 2018 of $21,135 thousand are for terms of three months to one year and carry interest at annual rates of 2.44%-2.64%. The bankdeposits in 2017 of $48,035 thousand are for terms of three months to one year and carry interest at annual rates of 1.56%-1.81%. F-18Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 6-PROPERTY AND EQUIPMENT Composition of assets, grouped by major classifications, and changes therein is as follows: Cost Accumulated depreciation Balance atbeginningof year Additionsduringthe year Disposalsduring theyear Balanceat endof year Balance atbeginningof year Additionsduringthe year Disposalsduring theyear Balanceat endof year Net bookvalue U.S. dollars in thousands Year ended December 31, 2018: Laboratory equipment $3,016 $1,627 $(4) $4,639 $1,501 $432 $(4) $1,929 $2,710 Computers 238 37 - 275 154 50 - 204 71 Office furniture and equipment 111 85 - 196 20 15 - 35 161 Leasehold improvements 5,675 1,251 (300) 6,626 237 659 (249) 647 5,979 $9,040 $3,000 (304) $11,736 $1,912 $1,156 $(253) $2,815 $8,921 Year ended December 31, 2017: Laboratory equipment $2,024 $1,186 $(194) $3,016 $1,605 $90 $(194) $1,501 $1,515 Computers 400 95 (257) 238 368 43 (257) 154 84 Office furniture and equipment 67 83 (39) 111 57 2 (39) 20 91 Leasehold improvements 752 5,233 (310) 5,675 526 21 (310) 237 5,438 $3,243 $6,597 (800) $9,040 $2,556 $156 $(800) $1,912 $7,128 Cost Accumulated depreciation Balance atbeginningof year Additionsduringthe year Disposalsduring theyear Balanceat endof year Balanceatbeginningof year Additionsduringthe year Balanceat endof year Net bookvalue U.S. dollars in thousands Year ended December 31, 2016: Laboratory equipment $1,683 $341 - $2,024 $1,528 $77 $1,605 $419 Computers 374 26 - 400 336 32 368 32 Office furniture and equipment 66 1 - 67 54 3 57 10 Leasehold improvements 629 123 - 752 508 18 526 226 $2,752 $491 - $3,243 $2,426 $130 $2,556 $687 NOTE 7-SEVERANCE PAY OBLIGATIONS, net: a.The Company has both defined benefit and defined contribution plans. The Company has no obligation relating to the defined contribution plans. The obligation under the defined benefit plans is covered partly by regulardeposits with severance pay funds and by the purchase of insurance policies. b.The Company’s obligation to make pension payments is covered by regular deposits with defined contribution plans. The amounts deposited are notreflected in the statements of financial position. c.The amounts recognized in the statements of financial position were as follows: Year endedDecember 31 2018 2017 U.S. dollarsin thousands Severance pay obligations $391 $469 Fair value of plan assets 292 341 Liability in the statements of financial position $99 $128 F-19Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 7-SEVERANCE PAY OBLIGATIONS, net (continued): Amounts charged to other comprehensive loss (income) for the years ended December 31, 2018, 2017 and 2016 were $(25) thousand, $24 thousand and $5thousand, respectively. The principal actuarial assumptions used for December 31, 2018 and 2017 were as follows: 2018 2017 Discount rate 3.41% 2.8%Future salary increases 4.0% 4.5% d.The amounts recorded as an employee benefit expense in respect of defined contribution plans for the years ended December 31, 2018, 2017 and 2016were $347 thousand, $318 thousand and $266 thousand, respectively. NOTE 8-LICENSE AND SUPPLY AGREEMENT In November 2017, the Company signed an exclusive license agreement with NanoCarrier Co., Ltd. for the development, commercialization, and supply ofVB-111 in Japan. VBL retains rights to VB-111 in the rest of the world (“The License Agreement”). Under terms of the agreement, VBL has grantedNanoCarrier an exclusive license to develop and commercialize VB-111 in Japan for all indications. VBL will supply NanoCarrier with VB-111, andNanoCarrier will be responsible for all regulatory and other clinical activities necessary for commercialization in Japan. In exchange, the Company receivedan up-front nonrefundable payment of $15.0 million, and is entitled to receive greater than $100.0 million additional payments only if certain developmentor commercial milestones are achieved. VBL will also receive tiered royalties on net sales. In addition, in case NanoCarrier will enter into a sublicenseagreement, the Company will be entitled to receive royalties from sublicense income received by NanoCarrier. In December 2017, the Company met the first milestone relating to the commencement of the Ovarian Phase 3 trial; and therefore, it recognized $2.0 millionin trade receivables, which was received in January 2018. As of December 2017, and in accordance with IFRS 15, the Company concluded that it has satisfied the performance obligation for the grant of the licenseand use of its IP and recognized revenue in the amount of $11.9 million. In addition, upon the commencement of the Ovarian Phase 3 trial milestone, theCompany recognized additional variable revenue in the amount of $2.0 million. The performance obligation relating to the Company’s participation and consulting assistance services during the development period is recognized over theservice period. During 2018 the Company recognized revenue in an amount of $0.6 million related to the Company’s participation and consulting assistanceservices. Out of the consideration received, as of December 31, 2018 the Company has deferred revenue in the amount of $2.6 million ($0.3 million isclassified within current liabilities, and $2.3 million within non-current liabilities, which will be recognized until 2021). All revenue recognized in 2017 was related to the license and use of the Company’s IP. All revenues recognized in 2018 were related to the Company’sparticipation and consulting assistance services. All revenues recognized in 2018 were included in the opening balance of the deferred revenue in thestatements of financial position. NOTE 9-COMMITMENTS: a.In April 2011, the Company executed a Commercial License Agreement with Janssen Vaccines & Prevention B.V. (“ Janssen”), for incorporating theadenovirus 5 in VB-111 and other drug candidates for cancer for consideration including the following potential future payments: ●an annual license fee of €100 thousand that is linked to Consumer Price Index (in 2018 the Company paid $144 thousand), continuing until thetermination of the agreement, which will occur upon (i) the later of the expiration date of the last related patent or 10 years from the first commercialsale of VB-111 or (ii) the termination of the agreement by the Company, which is permitted, upon three months’ written advance notice to Janssen; ●a milestone payment of €400 thousand ($460 thousand) upon receipt of the first regulatory approval for the marketing of the first indication foreach product covered under the agreement; and ●royalties of 0.5%-2.0% on net sales. There are no limits or caps on the amount of potential royalties. Pursuant to the agreement, the Company has the right to terminate the agreement bygiving Janssen three months’ written notice. b.In October 2016, the Company entered into a long-term lease contract for approximately $2.2 million over 7 years for a new facility in Modiin, Israel withthe option to extend for an additional two periods of three years each. The site houses the Company’s local biological drugs manufacturing facility,headquarters, discovery research and clinical development. The Company relocated to its new site in October 2017. The expected future minimum leasepayment $320 thousand on an annual basis for the years ending December 31, 2019 through December 31, 2023, and $133 thousand for the year endingDecember 31, 2024. F-20Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 9-COMMITMENTS (continued): The Company entered into operating lease agreements for vehicles it uses. The leases will expire in 2021. The expected lease payments for the years endingDecember 31, 2019, 2020 and 2021 are approximately $196 thousand, $144 thousand and $27 thousand, respectively. c.In February 2013, the Company entered into an agreement with Tel Hashomer-Medical Research, Infrastructure and Services Ltd. (“Tel Hashomer”). Theagreement with Tel Hashomer provides that the Company will pay 1% of any net sales of any product covered by the intellectual property covered underthe agreement and 2% of any consideration received by the Company for granting a license or similar rights to such intellectual property. Such amountswill be recorded as part of the Company’s cost of revenues. In addition, upon the occurrence of an exit event such as a merger, sale of all shares or assets orthe closing of an initial public offering such as the IPO, the Company is required to pay to Tel Hashomer 1% of the proceeds received by the Company orits shareholders as the case may be. Royalty and all other payment obligations under this agreement will expire once the Company has paid an aggregatesum of NIS 100 million (approximately $29 million) to Tel Hashomer by way of pay out, exit proceeds and licensing consideration. Amounts previouslypaid as royalties on any net sales will not be taken into account when calculating this aggregate sum. Amounts payable upon occurrence of an exit event isnot considered to be probable until actual occurrence. Upon occurrence of such event, as such event does not represent a substantive milestone with regardto the Company’s intellectual property, the amount to be paid is recorded in the Statement of Comprehensive Loss under research and development costs. In November 2014, following the completion of an IPO, the Company paid to Tel Hashomer amount of $0.4 million. In November 2017, following theexecution of The License Agreement, the Company paid Tel Hashomer an additional $340 thousand for a 2% consideration that was received for grantinga license or similar rights to this intellectual property. d.In January 2015, the Company entered into an agreement with a Contract Research Organization (“CRO”) according to which it will receive projectmanagement, clinical development and other related services from the CRO for the execution of the Phase 3 rGBM clinical trial study in consideration forup to $18.7 million. Additional expenses related to changes in the study and in the estimated services involved were agreed upon and are being negotiatedwith the CRO during the execution of the study. Through December 31, 2018, expenses in the total amount of $21.7 million were incurred. e.The Company is committed to pay royalties to the Government of Israel on proceeds from sales of products in the research and development of which theGovernment participates by way of grants. At time the grants were received, successful development of the related project was not assumed. In the case offailure of the project that was partly financed by the Government of Israel, the Company is not obligated to pay any such royalties. Under the terms of theCompany’s funding from the Israeli Government, royalties of 3%-3.5% are payable on sales of products developed from projects so funded up to 100% ofthe amount of the grant received by the Company (dollar linked) with the addition of an annual interest based on Libor. As of December 31, 2018, the totaladditional royalty amount that may be payable by the Company, before the additional Libor interest, is approximately $22.6 million ($27.8 millionincluding interest). F-21Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 9-COMMITMENTS (continued): In addition, under the Research Law, we are prohibited from transferring, including by way of license, the IIA-financed technologies and relatedintellectual property rights and know-how outside of the State of Israel, except under limited circumstances and only with the approval of the IIA ResearchCommittee. We may not receive the required approvals for any proposed transfer and, even if received, we may be required to pay the IIA a portion of theconsideration that we receive upon any sale of such technology to a non-Israeli entity up to 600% of the grant amounts plus interest. f.In December 2017, the Company entered into an agreement with a Contract Research Organization (“CRO”) according to which it will receive projectmanagement, clinical development and other related services from the CRO for the execution of the Phase 3 study in platinum-resistant ovarian cancer inconsideration for approximately $19.0 million. Through December 31, 2018, expenses in the total amount of $800 thousand were incurred. NOTE 10-SHARE CAPITAL: a.Composed of shares of NIS 0.01 par value, as follows: Number of shares December 31 2018 2017 Authorized: Ordinary Shares 70,000,000 70,000,000 Issued: Ordinary Shares (1) 35,881,128 29,879,323 (1)The Ordinary Shares confer upon their holders the following rights: (i) the right to vote in any general meeting of the Company; (ii) the right to receivedividends; and (iii) the right to receive upon liquidation of the Company a sum equal to the nominal value of the share, and if a surplus remains, toreceive such surplus. F-22Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 10-SHARE CAPITAL (continued): b. c.On June 7, 2016, the Company entered into a securities purchase agreement related to a registered direct offering for an aggregate of 4,359,091 ordinaryshares, NIS 0.01 par value, at a purchase price of $5.50 per share. The net proceeds from this offering, which closed on June 10, 2016 were approximately$21.9 million after subtracting placement agent fees and offering costs. d.On December 1, 2016, the Company entered into a separate Equity Distribution Agreements with JMP Securities LLC and Chardan Capital Markets, LLC(collectively as the “Agents”) to implement an “at the market offering” program under which the Company, from time to time, may offer and sell itsordinary shares, NIS 0.01 par value, having an aggregate offering price of up to $20,000,000 (the “Shares”) through the Agents. The Company hasprovided the Agents with customary indemnification rights, and the Agents will be entitled to a fixed commission of 3.0% of the aggregate gross proceedsfrom the Shares sold. The “at the market offering” is effective through October 2018. Until October 2018, the Company sold an aggregate of 224,695ordinary shares under its at-the-market equity facility. The total consideration amounted to $1,322 thousand, net of issuance costs. The “at the marketoffering” was ended in October 2018. e.On November 16, 2017, the Company entered into an underwriting agreement with Piper Jaffray & Co. related to the underwritten offering of an aggregateof 2,500,000 ordinary shares, NIS 0.01 par value (the “Ordinary Shares”). The public offering price for each Ordinary Share was $7.50. The purchase priceto be paid by the underwriters to the Company for each Ordinary Share was $7.20. The net proceeds from the sale of the Ordinary Shares, which closed onNovember 21, 2017, was approximately $17.9 million after deducting underwriting discounts and commissions and estimated offering expenses. f.On June 25, 2018, the Company entered into securities purchase agreements related to the registered direct offering of an aggregate of 5,904,762 ordinaryshares, NIS 0.01 nominal value, at a purchase price of $2.50 per share and accompanying short-term warrants to purchase up to 2,952,381 ordinary sharesand long-term warrants to purchase up to 2,952,381 ordinary shares at an additional purchase price per warrant combination of $0.125. The combinedoffering price of each ordinary share and accompanying warrants is $2.625 per unit for aggregate gross proceeds of approximately $15.5 million. Theordinary shares and the warrants are immediately separable and were issued separately. The net proceeds from this offering, which closed on June 27, 2018were $13.7 million after deducting the underwriting discounts and commissions and offering costs payable by the Company. The short-term and long-termwarrants are exercisable immediately after issuance and will expire on January 6, 2020 and June 26, 2022, respectively at an exercise price of $2.51 and$3.00 per one ordinary share, respectively. The fair value of the separable warrants on the date of purchase was computed using the Black-Scholes model.The underlying data used for computing the fair value of the short-term and long-term warrants are mainly as follows: ordinary share price based on theshare’s price at the stock market on June 25, 2018: $2.40; expected volatility based on Company historical trade: 88.0% and 109%; risk-free interest rate:2.279% and 2.715% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity thatequals the average life of the warrants); expected dividend: zero; and expected life to exercise of 1.5 years and 4.0 years, respectively. The considerationwas allocated between ordinary shares and warrants based on the ratio of the warrants’ fair value and the ordinary share price. g.Share based compensation plans In February 2000, the Company’s board of directors approved an option plan (the “Plan”) as amended through 2008. Under the Plan, the Company reservedup to 1,423,606 Ordinary Shares of NIS 0.01 par value of the Company for allocation to employees and non-employees. Each option is exercisable to acquireone Ordinary Share. In April 2011, the Company’s board of directors approved a new option plan (the “New Plan”). Under the New Plan, the Company reserved up to 766,958Ordinary Shares (of which 159,458 Ordinary Shares shall be taken from the unallocated pool reserved under the Plan) for allocation to employees and non-employees. F-23Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 10-SHARE CAPITAL (continued): In September 2014, the Company’s shareholders approved the adoption of the Employee Share Ownership and Option Plan (2014) (“2014 Plan”) effectiveas of the closing of the public offering. Under the 2014 Plan, the Company reserved up to 928,000 Ordinary Shares (of which 28,000 Ordinary Shares shallbe taken from the unallocated pool reserved under the New Plan). The Ordinary Shares to be issued upon exercise of the options confer the same rights asthe other Ordinary Shares of the Company, immediately upon allotment. Any option granted under the Plan that is not exercised within ten years from thedate upon which it becomes exercisable, will expire. Any option which was granted under the New Plan, and was not exercised within twenty years from thedate when it becomes exercisable, will expire. Option exercise prices and vesting periods shall be as determined by the board of directors of the Company on the date of the grant.The options granted to employees through December 31, 2002 are subject to the terms stipulated by section 102 of the Israeli Income Tax Ordinance (the“Ordinance”). Among other things, the Ordinance provides that the Company will be allowed to claim as an expense for tax purposes the amounts creditedto the employees as a benefit upon sale of the shares allotted under the plans at a price exceeding the exercise price, when the related tax is payable by theemployee. The options granted to employees after December 31, 2002, are subject to the terms stipulated by section 102(b)(2) of the Ordinance. According to theseprovisions, the Company will not be allowed to claim as an expense for tax purposes the amounts credited to the employees as a capital gain benefit inrespect of the options granted. Options granted to related parties or non-employees of the Company are governed by Section 3(i) of the Ordinance. The Company will be allowed to claimas an expense for tax purposes the amounts equal to the expenses it recorded in the financial statements in the year in which the related parties or non-employees exercised the options into shares. In April 2016, the board of directors approved the increase of 620,824 Ordinary Shares to the number of shares available for issuance under the 2014 Plan,effective January 1, 2016. In March 2017, the Board of Directors approved the increase of 1,027,911 Ordinary Shares to the number of shares available for issuance under the 2014Plan. In January 2018, the Board of Directors approved the increase of 1,402,385 Ordinary Shares to the number of shares available for issuance under the 2014Plan F-24Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 10-SHARE CAPITAL (continued): Options and Restricted Stock Units (“RSUs”) granted in 2016: Number of options and RSUs grantedaccording to option planof the Company Exerciseprice perOrdinary The fairvalue ofoptions and RSUson date Date of grant Other thandirectors Todirectors Total Share($) of grant (inthousands) 1) February 2016 - 20,000 20,000 $3.48 $51 2) May and June 2016 70,000 - 70,000 $3.30 - $3.40 $230 3) March 2016 114,129 - 114,129 $ $412 4) November 2016 725,000 - 725,000 $5.08 $3,232 5) November 2016 100,000 - 100,000 $ $492 F-25Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 10-SHARE CAPITAL (continued): 1)20,000 options were allocated to two external directors of the Company: a.The options will vest over 3 years from the date of grant; 1/12 of the options at the end of each quarter in the course of the 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $3.48, fair value of these options was estimated at $51 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 86.0%; risk-free interest rate: 1.64% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 2)70,000 options were allocated to two Consultants: a.The options will vest between 3 to 5 years. b.Company management estimates the fair value of the options granted to consultants based on the value of services received over the vesting period of theapplicable options. The value of such services is estimated based on the additional cash compensation the Company would need to pay if such optionswere not granted. The fair value of these options on the date of grant was approximately $230 thousand. 3)114,129 restricted stock units (“RSUs”) were allocated to officers of the Company: a.The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. b.The fair value of these RSUs on the date of grant was approximately $412 thousand, using the quoted closing market share price of $3.61on the NasdaqGlobal Market. 4)725,000 options were allocated to employees and officers of the Company: a.The options will vest by 4 years with 50% on the second year anniversary; the remaining 50% at 1/8 of the options at the end of each quarter over thecourse of the last 2 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $5.08, fair value of these options was estimated at $3,232 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 1.78% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 5)100,000 RSUs were allocated to officers of the Company: a.The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. b.The fair value of these RSUs on the date of grant was approximately $492 thousand, using the quoted closing market share price of $4.92 on the NasdaqGlobal Market. Options and Restricted Stock Units (“RSUs”) granted in 2017: Number of options grantedaccording to option planof the Company Exerciseprice perOrdinary The fairvalue ofoptions on date Date of grant Other thandirectors To directors Total Share($) of grant (inthousands) 1) February 2017 - 20,000 20,000 $5.22 $100 2) March 2017 10,000 - 10,000 $5.43 $30 3) March 2017 - 65,000 65,000 $5.71 $337 4) June 2017 100,000 - 100,000 $5.39 $437 5) June 2017 36,000 - 36,000 $ $175 6) October 2017 700,000 - 700,000 $5.99 $4,113 7) October 2017 140,000 - 140,000 $ $903 1)20,000 options were allocated to two independent directors of the Company: a.The options will vest over 3 years from the date of grant; 1/12 of the options at the end of each quarter in the course of the 3 years.  b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $5.22, fair value of these options was estimated at $100 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.41% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. F-26Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) 2)10,000 options was allocated to a Consultant: a.The options will vest over 3 years. b.Company management estimates the fair value of the options granted to consultants based on the value of services received over the vesting period of theapplicable options. The value of such services is estimated based on the additional cash compensation the Company would need to pay if such optionswere not granted. The fair value of these options on the date of grant was approximately $30 thousand. 3)65,000 options were allocated to four independent directors of the Company: a.The options will vest by 4 years with 50% on the second year anniversary; the remaining 50% at 1/8 of the options at the end of each quarter over thecourse of the last 2 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $5.71, fair value of these options was estimated at $337 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.44% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 4)100,000 options was allocated to an officer of the Company: a.The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the courseof the last 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $5.39, fair value of these options was estimated at $437 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.15% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 5)36,000 restricted stock units (“RSUs”) were allocated to an officer of the Company: a.The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. b.The fair value of these RSUs on the date of grant was approximately $175 thousand, using the quoted closing market share price of $4.85 on the NasdaqGlobal Market. 6)700,000 options were allocated to employees and officers of the Company: a.The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the courseof the last 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $5.99, fair value of these options was estimated at $4,113 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.41% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 7)140,000 RSUs were allocated to officers of the Company: a.The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. b.The fair value of these RSUs on the date of grant was approximately $903 thousand, using the quoted closing market share price of $6.45 on the NasdaqGlobal Market. Options granted in 2018: Number of options grantedaccording to option planof the Company Exerciseprice perOrdinary The fairvalue ofoptions on date Date of grant Other thandirectors To directors Total Share($) of grant (inthousands) 1) January 2018 - 128,000 128,000 $6.9 $838,470 2) June 2018 50,000 - 50,000 $2.22 $119,264 3) September 2018 - 30,000 30,000 $1.78 $45,574 4) December 2018 935,000 370,000 1,305,000 $1.22 $1,299,867 F-27Table of Contents 1)128,000 options were allocated to independent directors of the Company: a.The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the courseof the last 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $6.90, fair value of these options was estimated at $838 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.46% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 2)50,000 options were allocated to officer of the Company: a.The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the courseof the last 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $2.22, fair value of these options was estimated at $119 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.93% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 3)30,000 options were allocated to independent directors of the Company: a.The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the courseof the last 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $1.78, fair value of these options was estimated at $46 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 97.0%; risk-free interest rate: 2.85% (the risk-free interest rate is determined based on rates ofreturn on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expectedterm; 11 years. 4)1,305,000 options were allocated to employees, officers and independent directors of the Company: a.The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the courseof the last 3 years. b.The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value ofthe options are mainly as follows: an exercise price equal to $1.22, fair value of these options was estimated at $1,300 thousand with expected combinedvolatility based on weighted average of the stock price volatility of the Company since October 1st, 2014 (IPO date) and the remaining years on the stockprice volatility of similar companies in the healthcare sector: 100.0%; risk-free interest rate: 2.86% (the risk-free interest rate is determined based on ratesof return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and theexpected term; 11 years. F-28Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 10-SHARE CAPITAL (continued): h.Changes in the number of options and RSUs and weighted average exercise prices are as follows: Year ended December 31 2018 2017 2016 Number ofoptions Weightedaverageexerciseprice Number ofoptions Weightedaverageexerciseprice Number ofoptions Weightedaverageexerciseprice Outstanding at beginning of year 4,036,095 $3.88 3,241,535 $3.41 2,304,179 $3.17 Granted 1,513,000 1.74 1,071,000 4.91 1,029,129 3.87 Exercised (97,042) 0.33 (252,343) 1.91 (72,873) 1.66 Forfeited (395,140) 3.31 (24,097) 4.18 (18,900) 6.92 Outstanding at end of year 5,056,914 $3.36 4,036,095 $3.88 3,241,535 $3.41 Exercisable at end of year 2,478,796 $3.70 1,844,283 $2.97 1,718,713 $2.16 i.The following is information about exercise price and remaining contractual life of outstanding options and RSUs at year-end: December 31, 2018 December 31, 2017 December 31, 2016 Number of optionsoutstanding at end ofyear Exerciseprice Weightedaverage ofremainingcontractual life Number ofoptionsoutstandingat end ofyear ExercisePrice Weightedaverage ofremainingcontractual life Number ofoptionsoutstanding atend of year Exercise price Weightedaverage ofremainingcontractual life 521,509 $0.002 11.34 758,928 $0.002 8.29 620,970 $0.002 10.73 72,990 $1.21 5.72 98,657 $1.21 6.78 117,990 $1.21 7.65 1,898,969 $ 1.22-$2.47 15.54 513,969 $2.47 10.45 713,282 $2.47 1.12 559,871 $3.30 -$3.48 13.96 584,871 $3.30 - $3.48 14.96 588,023 $3.30 - $ 3.48 15.96 60,000 $6.03 16.13 60,000 $ 6.03 17.13 60,000 $6.03 18.13 116,000 6.9 19.2 372,470 $7.52 16.88 409,670 $7.52 17.88 416,270 $ 7.52 18.88 1,455,105 $5.08 - $5.99 18.38 1,610,000 $5.08 - $ 5.99 19.38 725,000 $5.08 19.87 5,056,914 4,036,095 3,241,535 j.Expenses for share based compensation recognized in statements of comprehensive loss were as follows: Year endedDecember 31 2018 2017 2016 U.S. dollarsin thousands Research and development expenses $2,255 $2,027 $900 Administrative and general expenses 1,541 1,977 520 Marketing expenses 71 148 - $3,867 $4,152 $1,420 The remaining unrecognized compensation expenses as of December 31, 2018 are $3,481 thousand; The unrecognized compensation cost is expected to berecognized over a weighted average period of 1 year. F-29Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 11-TAXES ON INCOME The Company is taxed according to Israeli tax laws: a.Measurement of results for tax purposes The Company as a “foreign-investment company” measures its results for tax purposes in dollar based on Income Tax Regulations (Bookkeeping Principlesof Foreign Invested Companies and of Certain Partnerships and the Determination of Their Taxable Income), 1986. b.Tax rates The income of the Company, other than income from Benefitted Enterprises (see c below), is subject to the regular corporate tax rate. In January 2016, theLaw for the Amendment of the Income Tax Ordinance (No. 216) was published, enacting a reduction of corporate tax rate beginning in 2016 and thereafter,from 26.5% to 25%. In December 2016, the Economic Efficiency Law (Legislative Amendments for Implementing the Economic Policy for the 2017 and 2018 Budget Year) waspublished, introducing a gradual reduction in corporate tax rate from 25% to 23%. As a result, the corporate tax rate in 2017 is 24% and in 2018 andthereafter reduced to 23%. The corporate tax rate for 2018, 2017 and 2016 were 23%, 24% and 25%, respectively. c.Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”) Under the Investment Law, including Amendment No. 60 to the Investment Law that was published in April 2005, by virtue of the Benefited Enterpriseprogram for certain of its production facilities, the Company may be entitled to various tax benefits. The main benefit arising from such status is the reduction in tax rates on income derived from a Benefited Enterprise. The extent of such benefits depends onthe location of the enterprise. Since the Company’s facilities are not located in “national development zone A,” income derived from Benefited Enterpriseswill be tax exempt for a period of two years and then have a reduced tax rate for a period of up to an additional eight years. The period of tax benefits, as described above, is limited to 12 years from the beginning of the Benefited Enterprise election year (2012). As of December 31,2018, the period of benefits has not yet commenced. In the event of distribution or deemed distribution of dividends from income which was tax exempt as above, the amount distributed will be subject to the taxrate it was exempted from. The Company is entitled to claim accelerated depreciation in respect of equipment used by the approved enterprises during five tax years. Entitlement to the above benefits is conditioned upon the Company fulfilling the conditions stipulated by the Investment Law and regulations publishedthereunder. In the event of failure to comply with these conditions, the benefits may be canceled and the Company may be required to apply the regular tax depreciationrates and pay tax on the income in question at the regular corporate tax rates with the addition of linkage differences to the Israeli consumer price index andinterest. F-30Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 11-TAXES ON INCOME (continued): The Investment Law was amended as part of the Economic Policy Law for the years 2011-2012 (the “Amendment”), which became effective on January 1,2011. The Amendment sets alternative benefit tracks to the ones currently in place under the provisions of the Investment Law, including a reduced corporate taxrate. Tax rate for “Preferred Enterprise” income of companies not located in national development zone A is 16% for fiscal year 2014 and thereafter. The benefits are granted to companies that qualify under criteria set forth in the Investment Law; for the most part, those criteria are similar to the criteriathat have existed in the Investment Law prior to its amendment and the benefit period is unlimited in time. However, in accordance with the Amendment,the classification of licensing income as Preferred income may be subject to the issuance of a pre-ruling by the Israel Tax Authority. Under the transitional provisions of the Investment Law, a company is allowed to continue to enjoy the tax benefits available under the Investment Lawprior to its amendment until the end of the period of benefits, as defined in the Investment Law. In each year during the period of benefits of its Benefited Enterprise, the Company will be able to opt for application of the Amendment, thereby makingavailable to itself the tax rate described above. The Company’s election to apply the Amendment is irrevocable. As of December 31, 2018, the Company’s management decided not to adopt the application of the Amendment. There is no assurance that future taxable income of the Company will qualify as Benefited or Preferred income or that the benefits described above will beavailable to the Company in the future. d.Losses for tax purposes carried forward to future years The balance of carry forward losses as of December 31, 2018 and 2017 are $164.9 million and $144.9 million, respectively. Under Israeli tax laws, carryforward tax losses have no expiration date. Deferred tax assets on losses for tax purposes carried forward to subsequent years are recognized if utilization of the related tax benefit against a futuretaxable income is expected. The Company has not created deferred taxes on its carry forward losses since their utilization is not expected in the foreseeable future. e.Tax assessments The Company has tax assessments that are considered to be final through tax year 2013. F-31Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 12-SUPPLEMENTARY FINANCIAL INFORMATION: December 31 2018 2017 U.S. dollarsin thousands a. Other current assets: Institutions - VAT $287 $865 Prepaid expenses 706 282 Government grants receivable 234 482 Other - 100 $1,227 $1,729 b. Accounts payable-other: Accrued expenses $2,434 $2,956 Employee-related accrued expenses 281 317 Provision for vacation 229 192 $2,944 $3,465 Year ended December 31 2018 2017 2016 U.S. dollarsin thousands c. Research and development expenses, net: Payroll and related expenses $5,182 $4,636 $2,921 Subcontractors and consultation 7,158 12,450 8,894 Materials 1,681 768 556 Patent expenses 780 797 752 Depreciation 1,086 106 88 Office rent and maintenance 1,364 721 397 Other 704 481 539 17,955 19,959 14,147 Government grants (see note 9e) (2,015) (2,189) (1,700) $15,940 $17,770 $12,447 d. Administrative and general expenses: Payroll and related expenses $1,838 $2,681 $1,499 Management and professional fees 2,131 2,212 1,614 Foreign travel 340 279 259 Depreciation 70 50 42 Other 841 625 414 $5,220 $5,847 $3,828 e. Marketing expenses Payroll and related expenses $355 346 - Consultation 42 216 - $397 562 - F-32Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 13-LOSS PER SHARE Basic and diluted loss per share: Basic Basic loss per share is calculated by dividing the result attributable to equity holders of the Company by the weighted average number of Ordinary Shares inissue during the year. Diluted All Ordinary Shares underlying outstanding options, RSU’s and warrants have been excluded from the calculation of the diluted loss per share for the yearsended December 31, 2018, 2017 and 2016 since their effect was anti-dilutive. The total number of options, RSU’s and warrants excluded from thecalculations of diluted loss per share were – 12,211,676, 5,286,095, and 4,491,535 for the years ended December 31, 2018, 2017 and 2016, respectively. Year ended December 31 2018 2017 2016 U.S. dollars in thousands, except per share data Basic and diluted: Loss attributable to equity holders of the Company $20,458 $10,138 $16,002 Weighted average number of ordinary shares in issue 32,969,094 27,398,169 24,970,585 Loss per ordinary share $0.62 $0.37 $0.64 NOTE 14-FINANCIAL (INCOME) EXPENSES, net: Year ended December 31 2018 2017 2016 U.S. dollarsin thousands Financial income: Interest from deposits $908 $335 $263 Exchange differences - 209 22 908 544 285 Financial expenses: Bank fees 37 27 12 Exchange differences 122 - - 159 27 12 TOTAL FINANCIAL (INCOME) EXPENSES, net $(749) $(517) $(273) F-33Table of Contents VASCULAR BIOGENICS LTD.NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE 15-RELATED PARTIES-TRANSACTIONS AND BALANCES: a.Transactions with related parties Key management personnel include members of the Board of Directors, the Chief Executive Officer and all Vice Presidents of the Company and companiescontrolled by them. Year ended December 31 2018 2017 2016 U.S. dollars in thousands Key management compensation: Labor cost and related expenses $2,267 $2,202 $1,737 Share-based payments 1,866 2,075 817 Other 427 406 420 $4,560 $4,683 $2,974 b.Balances with related parties: December 31 2018 2017 U.S. dollars inthousands Key management- Payables and accrued expenses - for salary and related expenses $484 $409 Severance pay obligations $76 $88 Provision for vacation $116 $97 NOTE 16-SUBSEQUENT EVENT: In March 2019, the Company executed an exclusive option license agreement with an animal health company, for the development of the Company’sproprietary anti-inflammatory molecule, VB-201, for veterinary use. The Company retains VB-201 rights for treatment of humans, worldwide. Under the termsof the agreement, the Company has granted an exclusive option license to explore the potential of VB-201 for animal health indications. In consideration,the Company receiving an undisclosed up-front payment, and is entitled to receive additional development milestone payments. Upon exercising the optionto license, the Company will receive additional milestones and royalties on net sales. F-34Table of Contents Item 19. Exhibits Exhibit No. Description 1.1 Articles of Association of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.2 of the Registration Statement onForm F-1 filed with the Securities and Exchange Commission on September 30, 2014). 1.2 Memorandum of Association of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.4 of the RegistrationStatement on Form F-1 filed with the Securities and Exchange Commission on September 30, 2014). 2.1 Amended and Restated Investors’ Rights Agreement, dated as of March 13, 2008, by and among the Registrant and the other partiesthereto, as amended. (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form F-1 filed with the Securities andExchange Commission on June 6, 2014). 2.2 Form of Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 of Registration Statement on Form F-1 filed with theSecurities and Exchange Commission on July 29, 2014). 2.3 Warrant to purchase ordinary shares, dated April 1, 2001, issued to Dror Harats, as amended (incorporated by reference to Exhibit 4.4 of theRegistration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6, 2014). 2.4 Warrant to purchase ordinary shares, dated May 14, 2001, issued to Dror Harats, as amended (incorporated by reference to Exhibit 4.5 ofthe Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6, 2014). 2.5 Warrant to purchase ordinary shares, dated December 28, 2001, issued to Dror Harats, as amended (incorporated by reference to Exhibit 4.6of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6, 2014). 2.6 Form of Warrant to purchase ordinary shares, (incorporated by reference to Exhibit 4.2 of the Current Report on Form 6-K filed with theSecurities and Exchange Commission on November 5, 2015). 2.7 Form of Series A/Series B Warrant to purchase ordinary shares (incorporated by reference to Exhibit 4.1 of the Current Report on Form 6-Kfiled with the Securities and Exchange Commission on June 27, 2018). 4.1 Employee Ownership and Share Option Plan (2011) of the Registrant, and form of agreement thereunder (incorporated by reference toExhibit 10.1 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6, 2014). 4.2 Form of Release and Indemnification Agreement to be entered into between the Registrant and its officers and directors (incorporated byreference to Exhibit 10.3 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 25,2014). 4.3† Commercial Gene Therapy License Agreement, dated April 15, 2011, between the Registrant and Crucell Holland B.V. (incorporated byreference to Exhibit 10.3 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on July 18, 2014). 4.4† Agreement, dated February 3, 2013, between the Registrant and Tel Hashomer-Medical Research, Infrastructure and Services Ltd.(incorporated by reference to Exhibit 10.4 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commissionon July 18, 2014). 4.5† Manufacturing Services Agreement, dated January 5, 2012, between the Registrant and Lonza Houston, Inc. (incorporated by reference toExhibit 10.5 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on July 18, 2014). 4.6 Master Services Agreement, dated May 14, 2008, between the Registrant and Genzyme Pharmaceuticals (incorporated by reference toExhibit 10.3 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6, 2014). 104 Table of Contents ExhibitNo. Description 4.7† Technical Agreement on the Manufacture of Capsules, dated April 29, 2008, between the Registrant and Encap Drug Delivery andstandard terms and conditions of purchase order (incorporated by reference to Exhibit 10.7 of the Registration Statement on Form F-1 filedwith the Securities and Exchange Commission on July 18, 2014). 4.8† Technical Agreement on the Manufacture of Capsules, dated August 3, 2012, between the Registrant and Encap Drug Delivery andstandard terms and conditions of purchase order (incorporated by reference to Exhibit 10.8 of the Registration Statement on Form F-1 filedwith the Securities and Exchange Commission on July 18, 2014). 4.9† Material Transfer and Confidentiality Agreement, effective as of September 19, 2005, among the Registrant, Crucell Holland B.V. andBioReliance Ltd. (incorporated by reference to Exhibit 10.9 of the Registration Statement on Form F-1 filed with the Securities andExchange Commission on July 18, 2014). 4.10† General Services Agreement, dated September 24, 2012, between the Registrant and BioClinica, Inc., and Addendum dated November 19,2012 and August 29, 2013 (incorporated by reference to Exhibit 10.10 of the Registration Statement on Form F-1 filed with the Securitiesand Exchange Commission on July 18, 2014). 4.11† Clinical Trial Agreement, dated September 9, 2012, between the Registrant and SCIderm GmbH (incorporated by reference to Exhibit10.11 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on July 18, 2014). 4.12† Service Agreement, dated November 8, 2012, between the Registrant and KCR S.A. (incorporated by reference to Exhibit 10.12 of theRegistration Statement on Form F-1 filed with the Securities and Exchange Commission on July 18, 2014). 4.13† Service Agreement, dated December 16, 2013, between the Registrant and KCR S.A. (incorporated by reference to Exhibit 10.13 of theRegistration Statement on Form F-1 filed with the Securities and Exchange Commission on July 18, 2014). 4.14# Lease Agreement, dated January 2013, between the Registrant and Matzlawi Building Company Ltd. (incorporated by reference to Exhibit10.14 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6, 2014). 4.15† Material Transfer and Confidentiality Agreement, effective February 6, 2012 between the Registrant, Crucell Holland B.V. and LonzaHouston, Inc. (incorporated by reference to Exhibit 10.15 of the Registration Statement on Form F-1 filed with the Securities andExchange Commission on July 18, 2014). 4.16 Agreement between the Registrant and Prof. Jacob George, dated January 24, 2010, as amended on August 1, 2012 (incorporated byreference to Exhibit 10.16 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on June 6,2014). 4.17 Employee Share Ownership and Option Plan (2014) of the Registrant, and form of Capital Gains Option Agreement thereunder(incorporated by reference to Exhibit 10.17 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commissionon June 25, 2014). 4.18† Master Services Agreement, effective as of January 30, 2015, by and between PPD Development, L.P. and the Registrant (incorporated byreference to Exhibit 4.18 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 25, 2015). 4.19# Lease Agreement, dated as of June 10, 2016, by and between the Registrant and Darwish Shalom (incorporated by reference to Exhibit4.19 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 15, 2018). 4.20† Development, Commercialization and Supply Agreement, dated as of November 3, 2017, by and between the Registrant and NanoCarrierCo., Ltd. (incorporated by reference to Exhibit 4.20 of the Annual Report on Form 20-F filed with the Securities and ExchangeCommission on March 15, 2018). 4.21† Clinical Trial Services Agreement by and between the Registrant and the GOG Foundation, Inc. dated December 23, 2017 (incorporatedby reference to Exhibit 4.21 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 15, 2018). 4.22† Agreement by and between the Registrant and Biopharmax Group Ltd. dated June 1, 2016 (incorporated by reference to Exhibit 4.22 ofthe Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 15, 2018). 12.1* Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a). 12.2* Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a). 13.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002. 15.1* Consent of Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited, Independent Registered PublicAccounting Firm. †Portions of this exhibit have been omitted pursuant to a grant of confidential treatment by the Securities and Exchange Commission and the non-public information has been filed separately with the Securities and Exchange Commission. #English summary of original Hebrew document. *Filed herewith **The certifications furnished in Exhibit 13.1 hereto are deemed to accompany this Annual Report on Form 20-F and will not be deemed “filed” forpurposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference intoany filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrantspecifically incorporates it by reference. 105 Table of Contents SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to signthis annual report on its behalf. VASCULAR BIOGENICS LTD. By:/s/ Dror Harats Dror HaratsChief Executive Officer Date: March 28, 2019 106   Schedule 4.3.2 Exhibit 12.1 I, Dror Harats, certify that: 1.I have reviewed this annual report on Form 20-F of Vascular Biogenics Ltd.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for thecompany and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annualreport that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the company’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control overfinancial reporting. Date: March 28, 2019 /s/ Dror Harats Dror HaratsChief Executive Officer   Exhibit 12.2 I, Amos Ron, certify that: 1.I have reviewed this annual report on Form 20-F of Vascular Biogenics Ltd.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for thecompany and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annualreport that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the company’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control overfinancial reporting. Date: March 28, 2019 /s/ Amos Ron Amos RonChief Financial Officer   Exhibit 13.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES- OXLEY ACT OF 2002 In connection with the Annual Report of Vascular Biogenics Ltd. (the “Company”) on Form 20-F for the period ended December 31, 2018 as filed with theSecurities and Exchange Commission (the “Report”), I, Dror Harats, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 28, 2019 /s/ Dror Harats Dror HaratsChief Executive Officer In connection with the Annual Report of Vascular Biogenics Ltd. (the “Company”) on Form 20-F for the period ended December 31, 2018 as filed with theSecurities and Exchange Commission (the “Report”), I, Amos Ron, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 28, 2019 /s/ Amos Ron Amos RonChief Financial Officer   Exhibit 15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-202463, 333-210583, 333-219969 and 333-223232) and on Form F-3 (Nos. 333-207250 and 333-222138) of Vascular Biogenics Ltd. of our report dated March 27, 2019 relating to the financialstatements, which appears in this Form 20-F. /s/ Kesselman & KesselmanTel-Aviv, IsraelKesselman & KesselmanMarch 28, 2019Certified Public Accountants (Isr.) A member firm of PricewaterhouseCoopers International Limited  

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