Chemomab Therapeutics Ltd. 10-K

Item 9A. Controls and Procedures Management’s Annual Report on Internal Controls Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting at December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment under those criteria, management has determined that, as of December 31, 2020, our internal control over financial reporting was effective. Item 9B. Other Information None. 78 PART III Item 10. Directors, Executive Officers and Corporate Governance Our directors and executive officers, their ages and positions as of the date of this Annual Report are as follows: Name Age Position Neil Cohen 57 Chief Executive Officer and Director Andrew Fine 50 Chief Financial Officer Stan Polovets (1)(2)(3) 57 Chairman Ruth Alon (1)(2)(3) 69 Director Isaac Kohlberg (1)(2)(3) 69 Director (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating and Governance Committee A brief biography of each person who serves as an executive officer and/or director of our Company is set forth below: Neil Cohen has served as a member of Anchiano’s board of directors since April 2020 and as Anchiano’s interim Chief Executive Officer since October 2020. Mr. Cohen has served as the Chairman and Chief Executive Officer of Castel Partners Ltd. since January 2012. In 1994, he co-founded Israel Seed Partners, a leading venture capital firm, and managed the firm until 2019. Mr. Cohen has invested in and served on the boards of directors of many private technology companies, including a large number which were acquired or completed successful initial public offerings, including Compugen (Nasdaq: CGEN), Shopping.com (Nasdaq: SHOP, acquired by EBAY), Broadlight (acquired by Broadcom, Nasdaq: AVGO) and Cyota (acquired by RSA). He is a venture partner at SKY, an Israeli middle-market private equity firm, Hetz Ventures Management Ltd., an early-stage Israeli venture capital fund, and Shavit Capital. Mr. Cohen was previously the Business Editor of The Jerusalem Post and began his career in the private equity group at N M Rothschild & Sons Limited in London. Mr. Cohen received a B.A. and M.A. in Oriental Studies, with first class honors, from Oxford University. Stan Polovets has served as chairman of Anchiano’s board of directors since April 2020. Mr. Polovets is a graduate of Stanford Graduate School of Business, he also currently serves as a member of the Board of Overseers of New York University (NYU) Tandon School of Engineering, NYU President’s Global Council, and the Council on Foreign Relations. Mr. Polovets previously served as CEO of AAR, a private equity firm with a global energy portfolio valued in excess of $25 billion, and as Sr. Vice President at TNK-BP, one of the world’s largest oil companies. Mr. Polovets also held management, advisory, M&A and various financial positions at ExxonMobil, KPMG, TNK-BP and EY. Prior to joining Anchiano’s board, Mr. Polovets served as Lead Non-Executive Director of Clal Industries, Lead Independent Director of L1 Energy, Lead Independent Director at Taavura, member of the Board of Overseers at Stanford University’s Hoover Institution, Chairman for Eastern Europe at Edelman, and director at oil companies Slavneft and TNK-BP. He is a co-founder and chairman of The Genesis Prize Foundation, a prominent international philanthropic group. Andrew Fine has served as our Chief Financial Officer since October 2020 having previously served as our interim Chief Financial Officer since July 2020. Mr. Fine has over 20 years of experience in executive financial and operational roles and is currently Co-Managing Director at Line Consulting Ltd. Mr. Fine previously held roles as Chief Financial Officer at Seeking Alpha, ScaleMP and Freightos, leading finance and operations for the companies’ global activities. Mr. Fine holds a BA and an MBA from the Hebrew University of Jerusalem. 79 Ruth Alon has served as a director since September 2017. Ms. Alon is the founder and Chief Executive Officer of Medstrada Israel, a venture capital fund focusing on food and nutrition technologies. Between 1997 and 2016, Ms. Alon served as a general partner of Pitango Venture Capital. Prior to her tenure at Pitango, Ms. Alon held senior positions with Montgomery Securities from 1981 to 1987, Genesis Securities, LLC from 1993 to 1996, and Kidder Peabody & Co. from 1987 to 1993, as well as managing her own medical device independent consulting business in San Francisco from 1995 to 1996. Ms. Alon was the founder and chairperson of Israel Life Science Industry, a not-for-profit organization then representing the mutual goals of approximately 700 Israeli life science companies. She is also the co-founder of IATI, Israel Advanced Technology Industries, an umbrella organization for all high-tech and life sciences companies in Israel. She has a B.A. in economics from The Hebrew University of Jerusalem, Israel and an M.B.A. from Boston University. Isaac Kohlberg has served as a director since February 2017. He is the Senior Associate Provost and Chief Technology Development Officer at Harvard University. Previously, he was Chief Executive Officer of the Tel Aviv University Economic Corporation and Chief Executive Officer of RAMOT at Tel Aviv University, a technology transfer company. He served as Vice President at New York University Medical Center and Vice Provost of New York University. He also served as the Managing Director of Yeda R&D Company of the Weizmann Institute of Science. Mr. Kohlberg serves on the board of directors of CBI and Elicio Therapeutics, a privately-held biotechnology company of which CBI is a substantial shareholder. Mr. Kohlberg received a diploma in French cultural and historical studies from the University of Strasbourg, an M.B.A. from INSEAD and an LL.B. from Tel Aviv University. 80 Committees of the Board of Directors Our board of directors has established the following committees. Each committee operates in accordance with a written charter that sets forth the committee’s structure, operations, membership requirements, responsibilities and authority to engage advisors. Audit Committee Under the Companies Law, the Exchange Act and Nasdaq rules, we are required to establish an Audit Committee. The responsibilities of an Audit Committee under the Companies Law include identifying and addressing flaws in the business management of the company, reviewing and approving related party transactions, establishing whistleblower procedures, overseeing the company’s internal audit system and the performance of its internal auditor, and assessing the scope of the work and recommending the fees of the company’s independent accounting firm. In addition, the Audit Committee is required to determine whether certain related party actions and transactions are “material” or “extraordinary” for the purpose of the requisite approval procedures under the Companies Law and to establish procedures for considering proposed transactions with a controlling shareholder. In accordance with U.S. law and Nasdaq requirements, our Audit Committee is also responsible for the appointment, compensation and oversight of the work of our independent auditors and for assisting our board of directors in monitoring our financial statements, the effectiveness of our internal controls and our compliance with legal and regulatory requirements. Under the Companies Law and related regulations, the Audit Committee must consist of at least three directors who meet certain independence criteria. Under the Nasdaq rules, we are required to maintain an Audit Committee consisting of at least three independent directors, all of whom are financially literate and one of whom has accounting or related financial management expertise. Each of the members of the Audit Committee is required to be “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act. Our Audit Committee currently consists of Ms. Ruth Alon, Mr. Stan Polovets and Mr. Isaac Kohlberg. All of the members are independent as defined in the Companies Law, SEC rules and Nasdaq listing requirements. Our board of directors has determined that all members of our Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq rules. Our board of directors has determined that Ms. Ruth Alon is an Audit Committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq rules. Compensation Committee Under both the Companies Law and Nasdaq rules, we are required to establish a Compensation Committee. The responsibilities of a Compensation Committee under the Companies Law include recommending to the board of directors, for ultimate shareholder approval by a special majority, a policy governing the compensation of directors and officers based on specified criteria, reviewing modifications to and implementing such compensation policy from time to time, and approving the actual compensation terms of directors and officers prior to approval by the board of directors. In accordance with U.S. law and Nasdaq requirements, our Compensation Committee is also responsible for the appointment, compensation and oversight of the work of any compensation consultant, independent legal counsel and other advisors retained by the Compensation Committee. 81 The Companies Law and related regulations require the appointment of a Compensation Committee that complies with the requirements of Nasdaq. Under Nasdaq rules, we are required to maintain a Compensation Committee consisting of at least two independent directors; each of the members of the Compensation Committee is required to be independent under Nasdaq rules relating to Compensation Committee members, which are different from the general test for independence of board and committee members. Our Compensation Committee currently consists of Ms. Ruth Alon, Mr. Stan Polovets and Mr. Isaac Kohlberg. All of the members are independent as defined in the Companies Law and the Nasdaq listing requirements. Corporate Governance and Nominating Committee We have established a Corporate Governance and Nominating Committee, responsible for making recommendations to the board of directors regarding candidates for directorships and the size and composition of the board. In addition, the committee is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to the board concerning corporate governance matters. Under the Companies Law, nominations for director may also, under certain circumstances, be made by shareholders in accordance with the conditions prescribed by applicable law and our articles of association. Our Corporate Governance and Nominating Committee currently consists of Ms. Ruth Alon, Mr. Stan Polovets and Mr. Isaac Kohlberg. All of the members are independent as defined in the Nasdaq listing requirements. Internal Auditor Under the Companies Law, the board of directors is required to appoint an internal auditor recommended by the Audit Committee. The role of the internal auditor is to examine, among other things, whether the company’s actions comply with applicable law and proper business procedures. The internal auditor may not be an interested party, a director or an officer of the company, or a relative of any of the foregoing, nor may the internal auditor be our independent accountant or a representative thereof. Mr. Joseph Ginossar, CPA, who is the chief executive officer of Fahn Kanne Control Management Ltd. (the Business Risk Services division of Grant Thornton Israel), currently serves as our internal auditor. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of our ordinary shares to file with the SEC reports regarding their ownership and changes in ownership of our equity securities. We believe that all Section 16 filings requirements were met by our officers and directors during 2020. Code of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics that includes provisions ranging from restrictions on gifts to conflicts of interest. All of our employees and directors are bound by this Code of Business Conduct and Ethics. Violations of our Code of Business Conduct and Ethics may be reported to the Audit Committee. The Code of Business Conduct and Ethics includes provisions applicable to all of our employees, including senior financial officers and members of our Board of Directors and is posted on our website. We intend to post amendments to or waivers from any such Code of Business Conduct and Ethics. Item 11. Executive Compensation Aggregate Compensation of Directors and Officers The aggregate compensation we paid to our executive officers and directors for the year ended December 31, 2020 was approximately $2.7 million. This amount includes amounts paid, set aside or accrued to provide pension, severance, retirement or similar benefits or expenses, but does not include share-based compensation expenses, or business travel, professional and business association dues and expenses reimbursed to office holders, and other benefits commonly reimbursed or paid by companies in our industry. As of December 31, 2020, options to purchase 220,353 ordinary shares granted to our officers and directors were outstanding under our share option plan at a weighted average exercise price of $0.6 per share. 82 Individual Compensation of Officers The table and summary below outlines the compensation granted to our five most highly compensated officers with respect to the year ended December 31, 2020. For purposes of the table and the summary below, “compensation” includes base salary, bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and any undertaking to provide such compensation. Name and Principal Position Salary (1) (USD in thousands) Bonus (2) (USD in thousands) Equity-Based Compensation (3) (USD in thousands) Total (USD in thousands) Mr. Jonathan Burgin Ex.Chief Financial and Operating Officer $ 457 $ - $ 73 $ 530 Dr. Frank G. Haluska Ex.Chief Executive Officer $ 303 $ - $ 83 $ 385 Dr. David Kerstein Ex.Chief Medical Officer $ 426 $ - $ (107 ) $ 319 Dr. Ron Knickerbocker Ex.Senior Vice President of Clinical Development and Data Sciences $ 354 $ - $ (53 ) $ 301 Mr. Sean Daly Ex.Vice President of Clinical Operations $ 295 $ - $ (26 ) $ 269 (1) Salary includes gross salary plus payment by us of social benefits on behalf of the officer. Such benefits may include, to the extent applicable, payments, contributions and/or allocations for risk insurance (e.g., life, or work disability insurance), payments for social security, vacation, medical insurance and benefits, and other benefits and perquisites consistent with our policies. (2) Represents bonuses granted with respect to 2020. (3) Represents the equity-based compensation expenses recorded in our consolidated financial statements for the year ended December 31, 2020, based on the options’ fair value on the grant date, calculated in accordance with applicable accounting guidance for equity-based compensation. For a discussion of the assumptions used in reaching this valuation, see Note 2L to our annual consolidated financial statements included in this Annual Report on Form 10-K. Outstanding Equity Awards The table below outlines the unexercised options; stock that has not vested; and equity incentive plan awards for each executive officer outstanding as of December 31, 2020. 83 Option award Name Number of securities underlying unesercised options (#) exercisable Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Neil Cohen - 55,000 0.17 14-Jul-30 3,533 - 76.60 24-Sep-21 4,504 - 7.29 8-May-24 Burgin Jonathan 6,000 - 3.76 26-Apr-25 87,500 12,500 2.83 8-Sep-27 98,875 127,125 1.03 30-Jun-29 562,782 - 2.60 27-Dec-26 Haluska Frank 164,942 - 2.90 25-Sep-27 909,203 - 3.67 30-Jun-28 Director Compensation The table below outlines the unexercised options; stock that has not vested; and equity incentive plan awards for each executive officer outstanding as of December 31, 2020. Name Feed earned or paid in cash ($) Stock awards ($) Option awards ($) Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Outstanding options as of December 31, 2020 Veru Dennison 19,375 - 3,975 - - - 23,350 - Howard Lawrance 10,625 - 3,975 - - - 14,600 - Hardy Reginald 10,938 - 3,975 - - - 14,913 - Ofer Gonen 8,750 - 0 - - - 8,750 - Polovets Stan 71,250 - 1,933 - - - 73,183 55,000 Neil Cohen 32,408 - 1,933 - - - 34,341 55,000 Alon Ruth 53,050 - 10,289 - - - 63,340 55,353 Kohlberg Isaac 40,427 - 10,289 - - - 50,717 55,000 Employment Agreements The material employment terms for Dr. Haluska, our former Chief Executive Officer, are as follows: (1) an annual salary of $480,000 ($400,000 until April 30, 2019, when it was amended by a general meeting of our shareholders); (2) an annual bonus, subject to achievement of objectives set by the board of directors, in the target amount of $200,000; (3) payment of nine months’ of salary upon termination (or resignation for a good reason event), a partial annual bonus (pro rata) and partial vesting acceleration of option warrants (and in the case of termination or voluntary resignation with regard to changes in control of the company, a full annual bonus and full vesting acceleration of option warrants); and (4) all employee benefit plans, programs and arrangements, and all fringe benefits and perquisites that are made available to our senior executives, including health insurance coverage in accordance with the terms of our health insurance plan. In total, we have allocated Dr. Haluska options to purchase 2,059,016 ordinary shares in connection with his employment agreement. Of these, options to purchase 562,782, 164,942 and 909,203 ordinary shares vest in four annual tranches from the date of his employment (May 2016) with respective exercise prices of $2.60, $2.90 and $3.67, and options to purchase 422,090 ordinary shares vest in 16 quarterly tranches from the date of approval by our Board with an exercise price of $1.03. The material employment terms for Neil Cohen, our interim Chief Executive Officer, as of October 20, 2020 consist of a monthly salary of $12,000. Prior to Mr. Cohen’s employment, and in his capacity as a Director, we allocated Mr. Cohen options to purchase 55,000 ordinary shares. These options vest over a period of 3 years, with 33.33% vesting after 12 months from the date of approval by our Board and thereafter vest in 8 quarterly tranches. Our other employees are employed under the terms prescribed in their respective employment contracts. The employees are entitled to the social benefits prescribed by law and as otherwise provided in their agreements. These agreements each contain provisions standard for a company in our industry regarding non-competition, confidentiality of information and assignment of inventions. We also provide certain of our employees with a company car, which is leased from a leasing company. These contracts provide for notice periods of varying duration for termination of the agreement by us or by the relevant employee, during which time the employee will continue to receive base salary and benefits. 84 Equity Incentive Plans 2011 Share Option Plan On December 19, 2011, our board of directors adopted a share option plan (the “2011 Plan”), to allocate options to purchase our ordinary shares to our directors, officers, employees and consultants, and those of our affiliated companies (as such term is defined under the 2011 Plan), or the Grantees. The 2011 Plan is administered by our board of directors or a committee that was designated by our board of directors for such purpose, or the Administrator. Under the 2011 Plan, we may grant options to purchase ordinary shares (“Options”), under four tracks: (i) Approved 102 capital gains Options through a trustee, which was approved by the Israeli Tax Authority in accordance with Section 102(a) of the Israeli Income Tax Ordinance (“ITO”), and granted under the tax track set forth in Section 102(b)(2) of the ITO, or the Approved 102 Capital Gains Options. The holding period under this tax track is 24 months from the date of allocation of Options to the trustee or such period as may be determined in any amendment of Section 102 of the ITO, or any applicable tax ruling or guidelines; (ii) Approved 102 Earned Income Options through a trustee, granted under the tax track set forth is Section 102(b)(1) of the ITO, or the Approved 102 Earned Income Options. The holding period under this tax track is 12 months from the date of allocation of Options to the trustee or such period as may be determined in any amendment of Section 102 of the ITO; (iii) Unapproved 102 Options (the Options will not be allocated through a trustee and will not be subject to a holding period), or the Unapproved 102 Options; and (iv) 3(i) Options (the Options will not be subject to a holding period). These Options shall be subject to taxation pursuant to Section 3(i) of the ITO, or Section 3(i). Options pursuant to the first three tax tracks (under Section 102 of the ITO) can be granted to our employees and directors and the grant of Options under Section 3(i) can be granted to our consultants and controlling shareholders (a controlling shareholder is defined under the Section 102 of the ITO is a person who holds, directly or indirectly, alone or together with a “relative,” (i) the right to at least 10% of the company’s issued capital or 10% of the voting power; (ii) the right to hold at least 10% of the company’s issued capital or 10% of the voting power, or the right to purchase such rights; (iii) the right to receive at least 10% of the company’s profits; or (iv) the right to appoint a company’s director). Grantees who are not Israeli residents may be granted options that are subject to the applicable tax laws in their respective jurisdictions. We determine, in our sole discretion, under which of the first three tax tracks above the Options are granted and we notify the Grantee in a grant letter, as to the elected tax track. As mentioned above, consultants and controlling shareholders can only be granted Section 3(i) Options. The number of ordinary shares authorized to be issued under the 2011 Plan will be proportionately adjusted for any increase or decrease in the number of ordinary shares issued as a result of a distribution of bonus shares, change in our capitalization (split, combination, reclassification of the shares or other capital change), or issuance of rights to purchase ordinary shares or payment of a dividend. We will not allocate fractions of ordinary shares and the number of ordinary shares shall be rounded up to the closest number of ordinary shares. In the event of a (i) merger or consolidation in which we (in this context, specifically Anchiano Therapeutics Ltd.) is not the surviving entity or pursuant to which the other company becomes Anchiano Therapeutics Ltd.’s parent company or that pursuant to which Anchiano Therapeutics Ltd. is the surviving company but another entity holds 50% or more of Anchiano Therapeutics Ltd. voting rights, (ii) an acquisition of all or substantially all of our ordinary shares, (iii) the sale of all or substantially all Company assets, or (iv) any other event with a similar impact, the Company may exchange all of its outstanding Options granted under the 2011 Plan that remain unexercised prior to any such transaction for options to purchase shares of the successor corporation (or those of an affiliated company) following the consummation of such transaction. Unless otherwise determined by the Administrator, the exercise price of an Option granted under the 2011 Plan will be the average of the market price of the Company’s ordinary shares during the 22 business days prior to the date on which our board of directors authorized the grant of Options; provided, however, that such exercise price cannot be lower than the market price at the close of the trading day at which it was granted by our board of directors. The exercise price will be specified in the grant letter every Grantee received from us in which the Grantee notifies of the decision to grant him/her Options under the 2011 Plan. 85 Unless otherwise determined by the Administrator, the Options granted under the Plan will become vested and may be exercised in 16 equal portions of 6.25% of the total number of Options, at the end of each quarter following the day the Options were granted. Unless otherwise determined by our board of directors, the Options may be exercised for ten years following the date of grant, unless terminated earlier, and as long as the Grantee is employed by the Company (or by an affiliated company), or provides service to the Company (or an affiliated company). The Administrator may, in its absolute discretion, accelerate the time at which Options granted under the 2011 Plan or any portion of which will vest. Unless otherwise determined by the Administrator, in the event that the Grantee’s employment was terminated, not for Cause (as defined in the 2011 Plan), the Grantee may exercise that portion of the Options that had vested as of the date of such termination until the end of the specified term in the grant letter or the 2011 Plan. The portion of the Options that had not vested at such date, will be forfeited and can be re-granted according to the terms of the 2011 Plan. 2017 Equity-Based Incentive Plan On February 22, 2017, our board of directors adopted our 2017 Equity-Based Incentive Plan (the “2017 Plan”), to allocate a variety of share-based awards to our directors, officers, employees, consultants, advisors and service providers, and those of our affiliates (companies that control us, are controlled by us or are under common control with us), or the Participants. The 2017 Plan is currently administered by our board of directors, and may be administered by a committee designated by our board of directors for such purpose, or the Administrator. Under the 2017 Plan, we may grant options to purchase ordinary shares or ADSs, restricted shares or ADSs, restricted share units and other awards based on our ordinary shares, all of which are referred to as Awards. We may grant Awards under the same four tracks as described above with respect to the 2011 Plan, subject to the same conditions as apply for the 2011 Plan. In addition, we may grant incentive stock options and nonqualified stock options to Participants who are residents of the United States, and we may grant awards to Participants who are residents of other countries that comply with the laws of those jurisdictions. The number of ordinary shares authorized to be issued under the 2017 Plan will be proportionately adjusted for any increase or decrease in the number of ordinary shares issued as a result of a distribution of bonus shares, change in our capitalization (split, combination, reclassification of the shares or other capital change), issuance of rights to purchase ordinary shares or payment of a dividend. We will not allocate fractions of ordinary shares and the number of ordinary shares shall be rounded down to the closest number of ordinary shares. In the event of a (i) merger, consolidation, amalgamation or the like with or into another corporation, (ii) an acquisition (including an exchange) of all or substantially all of our ordinary shares, (iii) the sale of all or substantially all of our assets, or (iv) any other event determined by the Administrator to have a similar impact, then – unless otherwise determined by our board of directors in its sole and absolute discretion – any Award then outstanding will be assumed or an equivalent Award shall be substituted by the successor corporation, under substantially the same terms as the Award. The exercise price of an option granted under the 2017 Plan will, in general, be no less than the fair market value of the Company’s ordinary shares on the date of grant, subject to any minimum exercise price prescribed by law. The Administrator determines the vesting provisions for each Award and may, in its sole discretion, accelerate the time at which options granted under the 2017 Plan will vest. Unless otherwise determined by the Administrator, options may be exercised for ten years (five years in the case of an incentive stock option granted to a 10% shareholder), and as long as the Participant is employed by the Company (or by an affiliated company) or provides services to the Company (or an affiliated company). If a Participant’s employment is terminated, other than for cause, the Participant may generally exercise vested options for a limited period following termination. 86 In accordance with the terms of the 2017 Plan, on January 1 of each calendar year during the term of the 2017 Plan, the number of shares available for issuance under the 2017 Plan shall be increased by 4% of the total number of company shares outstanding on December 31 of the immediately preceding calendar year, or such lesser number as shall be determined by the administrator of the plan, subject to adjustments required for recapitalization events. As of February 18, 2020, our board of directors has approved the issuance, under our incentive plans, of options to purchase 3,737,849 ordinary shares currently outstanding at an average exercise price of $2.51 per share. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information, as of February 18, 2020, regarding beneficial ownership of our ordinary shares (including ordinary shares represented by ADSs): · each person who is known by us to own beneficially more than 5% of our ordinary shares; · each director; · each executive officer; and · all of our directors and executive officers collectively. Beneficial ownership is determined in accordance with the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. For purposes of the table below, we deem ordinary shares issuable pursuant to options or warrants that are currently exercisable or exercisable within 60 days of the date of this Annual Report on Form 10-K, if any, to be outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise noted, the address of each director and current and former executive officer of Anchiano is One Kendall Square, Building 1400E, Suite 14-105, Cambridge, Massachusetts 02139. 87 NAME OF BENEFICIAL OWNER Total Beneficial Ownership Percentage of Ordinary Shares Beneficially Owned* 5% and Greater Shareholders Clal Biotechnology Industries Ltd. (1) 9,307,662 25.09 % Shavit Capital Funds (2) 8,868,546 21.67 % Access Industries Holdings LLC (3) 15,829,397 42.67 % Edgewater Partner Holdings Ltd. (4) 1,923,075 5.18 % Directors and Executive Officers Neil Cohen 62,110 * Andrew Fine — * Ruth Alon (5) 32,399 * Isaac Kohlberg (6) 32,090 * Stanislav Polovets — * All current executive officers and directors as a group (5 persons) 126,599 * * Percentage ownership based on 37,099,352 ordinary shares outstanding as of the date of this Annual Report on Form 10-K. (1) The beneficial ownership is based in part on the latest available filing made with the SEC on Schedule 13D on December 14, 2020 and consists of 6,911,166 ordinary shares and warrants to purchase 2,396,496 ordinary shares. To the best of our knowledge, Clal Industries Ltd. owns 47% of the outstanding shares of, and controls CBI (TASE: CBI). The remaining 53% of CBI’s outstanding shares are publicly-held and listed on the TASE. Clal Industries Ltd. is wholly owned by Access AI Ltd., which is owned by AI Diversified Holdings S.à r.l., which is owned by AI Diversified Parent S.à r.l., which is owned by AI Diversified Holdings Limited, or AIDH Limited. AI SMS owns a majority of the equity of AIDH Limited. AIH owns a majority of the equity of AI SMS, and LLC holds a majority of the outstanding voting interests in AIH. AIM controls LLC and AIH, and Len Blavatnik controls AIM. The address of each of Clal Industries Ltd. and CBI is Triangle Tower, 3 Azrieli Center, Tel Aviv 67023, Israel and the address of each of foregoing other than Clal Industries Ltd. and CBI is 40 West 57th Street, 28th Floor, New York, NY 10019. (2) The beneficial ownership is based on the latest available filing made with the SEC on Schedule 13G January 2, 2020 and consists of 5,034,150 ordinary shares and warrants to purchase 3,834,395 ordinary shares. Gabriel Capital Management Ltd. (“GCM”) is the management company to Shavit Capital Fund III (US), L.P. (“Shavit III”), which holds 3,056,305 of the aforementioned ordinary shares and warrants to purchase 2,314,286 ordinary shares, and certain other affiliated funds (collectively with Shavit III, the “Shavit Funds”). Gabriel Leibler is the sole shareholder of the sole shareholder of GCM. Decisions regarding the voting and disposition of securities held by the Shavit Funds are subject to approval by certain internal investment committees comprising three or more individuals, of which Mr. Leibler is a member. As of December 31, 2019, other Shavit Funds held in the aggregate 1,977,845 ordinary shares and warrants to purchase 1,520,110 ordinary shares. GCM may be deemed to beneficially own such securities held by the Shavit Funds. To the best of our knowledge, the general partner of Shavit III and Shavit Capital Fund 3 (Israel), L.P. is Shavit Capital Fund 3 GP, L.P., which is managed by Shavit Capital Management 3 (GP) Ltd. in its capacity as the general partner. The general partner of Shavit Capital Fund IV (US), L.P. and Shavit Capital Fund 4 (Israel), L.P. is Shavit Capital Fund 4 GP, L.P., which is managed by Shavit Capital Management 4 (GP) Ltd. in its capacity as the general partner. The controlling shareholder of Shavit Capital Management 3 (GP) Ltd. and Shavit Capital Management 4 (GP) Ltd. is a company, the controlling shareholder of which is Mr. Leibler. Neil Cohen holds a 3.45% interest in Shavit Capital Fund 3 (Israel), L.P. and a 1.67% interest in Shavit Capital Fund 4 (Israel), L.P. The address of each of the foregoing other than Mr. Leibler and Mr. Cohen is Jerusalem Technology Park, Building 1B, Box 70, Malha, Jerusalem, 96951 Israel. The address of Mr. Leibler is 4a Gidon Street, Jerusalem 9350604 Israel. (3) The beneficial ownership is based on the latest available filing made with the SEC on Schedule 13D on December 14, 2020 and consists of (i) the ordinary shares, ADSs and warrants owned directly by CBI and (ii) 6,521,735 ordinary shares represented by 1,304,347 ADSs owned directly by AIH. For more information on AIH and CBI, see footnote (1) above. (4) Consists entirely of ordinary shares. Edgewater Partner Holdings Ltd. is beneficially owned by Mr. Youqiang Yu, and as such, Mr. Yu may be deemed to beneficially own the ordinary shares beneficially owned by Edgewater Partner Holdings Ltd. The shareholder’s business address is c/o Edgewater Partner Holdings Ltd., Novasage Chambers, Level 2, CCCS Building, Beach Road, Apia, Samoa. (5) Represents 32,399 shares of Anchiano’s issuable upon the exercise of options. (6) Represents 32,090 shares of Anchiano’s issuable upon the exercise of options. 88 Item 13. Certain Relationships and Related Transactions, and Director Independence Certain Relationships and Related Transactions We have entered into employment agreements with each of our executive officers. Compensation arrangements for our executive officers and directors are described in the sections entitled “Item 11. Executive Compensation” and “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Our Articles of Association permit us to insure each of our directors and officers to the fullest extent permitted by the Companies Law. We have obtained Directors and Officers insurance for our executive officers and directors. All related party transactions are reviewed and approved by the Audit Committee, as required by the Audit Committee Charter. Family Relationships There are no family relationships among directors or executive officers of our Company. Corporate Governance and Independent Directors In compliance with the listing requirements of Nasdaq, we have a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. We currently regularly monitor developments in the area of corporate governance to ensure we are in compliance with the standards and regulations required by Nasdaq. Our board of directors consists of four directors, of whom three (Ms. Ruth Alon, Mr. Isaac Kohlberg and Mr. Stan Polovets) qualify as independent directors under the corporate governance standards of the Nasdaq rules and the independence requirements of Rule 10A-3 of the Exchange Act. Under our articles of association, our board of directors must consist of not less than three and no more than 11 directors. Pursuant to our articles of association, the vote required to appoint a director is a simple majority vote of holders of our voting shares participating and voting at the relevant meeting. In addition, our articles of association allow our board of directors to appoint new directors to fill vacancies which occurred for any reason or as additional directors, provided that the number of board members shall not exceed the maximum numbers of directors mentioned above. The appointment of a director by the board shall be in effect until the following annual general meeting of the shareholders or until the end of his tenure in accordance with our articles of association. Our board of directors may continue to operate for as long as the number of directors is not less than the minimum number of directors mentioned above. In addition, under the Companies Law, our board of directors must determine the minimum number of directors who are required to have financial and accounting expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason of his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and financial statements. He or she must be able to thoroughly comprehend the financial statements of the company and initiate discussion regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise, the board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that we require at least one director with the requisite financial and accounting expertise and that Ms. Ruth Alon, Mr. Isaac Kohlberg, Mr. Neil Cohen and Mr. Stan Polovets have such expertise. 89 Private Financings In February 2018, CBI, which at the time was our controlling shareholder, extended bridge financing to us in the principal amount of $1.0 million, which was pending completion of the private placement of equity securities described below, and subsequently provided an additional $2.0 million principal amount of bridge financing. The unpaid principal amount of the bridge financing bore annual interest at the rate payable on three-month U.S. Treasury bills. The repayment of the bridge financing was made by deducting the repayment amount from the $5.0 million purchase price of the securities acquired by CBI pursuant to the Securities Purchase Agreement described below. Pursuant to a Securities Purchase Agreement (“SPA”), dated March 29, 2018, between us and the investors identified therein, in June 2018 we issued 5,960,787 ordinary shares, and warrants to purchase an additional 4,768,629 ordinary shares, as well as price protection and certain other rights. The gross proceeds from the sale of the ordinary shares amounted to $22.9 million. As a result of our February 2019 initial public offering, price protection rights included in the SPA were triggered, resulting in the issuance of 8,262,800 ordinary shares and adjustments to the warrants, whereby they can be exercised for 6,207,330 additional ordinary shares, each at a price of $1.932 per share. For information regarding the current shareholdings of Shavit Capital Funds and CBI, see “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Information Rights Agreement We entered into an information rights agreement, effective as of December 19 2018, with one of our principal shareholders, CBI. The information rights agreement provides CBI with rights to receive our annual and quarterly financial statements, auditor consent letters and valuation reports, and other information reasonably required by CBI to enable it to prepare its financial statements. The information rights agreement also requires that we provide CBI with information material to the Company and mandated to be disclosed by the requirements applicable to CBI, as well as certain other material information of the Company. The information rights agreement contains customary confidentiality provisions and terminates when CBI, and any company that controls CBI, is no longer required to issue public reports relating to us pursuant to the Exchange Act. Item 14. Principal Accountant Fees and Services The following table sets forth fees billed to us by our independent registered public accounting firm during the fiscal years ended December 31, 2020 and 2019 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered. Year Ended December 31, 2020 2019 Audit Fees 160 255 Audit-Related Fees - - Tax Fees 3 3 All Other Fees - - Total 163 258 Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors Our Audit Committee has the sole authority to approve the scope of the audit and any audit-related services, as well as all audit fees and terms. The Audit Committee must pre-approve any audit and non-audit services provided by our independent registered public accounting firm. The Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable laws, rules and regulations, including those of self-regulating organizations. The Audit Committee will approve permitted non-audit services by our independent registered public accounting firm only if it determines that using a different firm to perform such services will be less efficient or cost-effective. The Audit Committee reviews and pre-approves the statutory audit fees that can be provided by the independent registered public accounting firm on an annual basis. 90 PART IV Item 15. Exhibits and Financial Statement Schedules Exhibit No. Description 1.1 Anchiano Therapeutics Ltd. Amended and Restated Articles of Association (previously filed as Exhibit 3.2 of Amendment No. 4 to our Registration Statement on Form F-1 (File No. 333-229155) as filed with the SEC on February 11, 2019 and incorporated by reference herein). 2.1 Agreement and Plan of Merger between Anchiano Therapeutics Ltd. and CMB Acquisition Ltd. and Chemomab Ltd., dated December 14, 2020 (previously filed as Exhibit 2.1 to our Current Report on Form 8-K (File No. 001-38807) as filed with the SEC on December 15,2020 and incorporated by reference herein). 3.1 Deposit Agreement between Anchiano Therapeutics Ltd., the Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder (previously filed as Exhibit 4.1 to our Current Report on Form 6-K (File No. 001-38807) as filed with the SEC on February 14, 2019 and incorporated by reference herein). 4.1 Collaboration and License Agreement, dated as of September 13, 2019, by and between Anchiano Therapeutics Inc. and ADT Pharmaceuticals, LLC (previously filed as Exhibit 10.1 to our Current Report on Form 6-K (File No. 001-38807) as filed with the SEC on September 23, 2019 and incorporated by reference herein). 4.4 2011 Incentive Plan for Employees, Officers and Consultants (previously filed as Exhibit 10.6 of our Registration Statement on Form F-1 (File No. 333-229155) as filed with the SEC on January 7, 2019 and incorporated by reference herein). 4.5 Compensation Policy for Officers, dated February 2017 (previously filed as Exhibit 10.7 of our Registration Statement on Form F-1 (File No. 333-229155) as filed with the SEC on January 7, 2019 and incorporated by reference herein). 4.6 2017 Equity-Based Incentive Plan (previously filed as Exhibit 10.8 of our Registration Statement on Form F-1 (File No. 333-229155) as filed with the SEC on January 7, 2019 and incorporated by reference herein). 4.7 Information Rights Agreement between Anchiano Therapeutics Ltd. and Clal Biotechnology Industries Ltd., dated December 19, 2018 (previously filed as Exhibit 10.10 of our Registration Statement on Form F-1 (File No. 333-229155) as filed with the SEC on January 7, 2019 and incorporated by reference herein). 4.9 Proxy Statement / Prospectus (previously filed in our Registration Statement on form S-4 (File No. 335-252070) as filed with the SES on February 12, 2021 . 21.1 List of Subsidiaries (filed herewith). 23.1 Consent of Independent Registered Public Accounting Firm8 3 (filed herewith). 24.1 Power of Attorney (filed herewith). 31.1 Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith). 31.2 Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (filed herewith). 32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 91 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ANCHIANO THERAPEUTICS LTD. Date: March 7, 2021 By: /s/ Neil Cohen Neil Cohen Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Neil Cohen and Andrew Fine, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Neil Cohen Chief Executive Officer March 7, 2021 Neil Cohen (Principal Executive Officer) and Director /s/ Andrew Fine Chief Financial Officer March 7, 2021 Andrew Fine (Principal Financial and Accounting Officer) /s/ Stan Polovets Chairman March 7, 2021 Stan Polovets /s/ Ruth Alon Director March 7, 2021 Ruth Alon /s/ Isaac Kohlberg Director March 7, 2021 Isaac Kohlberg 92 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020 F- 1 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020 INDEX Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-3 CONSOLIDATED FINANCIAL STATMENTS F-4 Consolidated Balance Sheets F-4 Consolidated Statements of Operations and Comprehensive Loss F-5 Statements of Changes in Shareholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F- 2 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Anchiano Therapeutics Ltd. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Anchiano Therapeutics Ltd. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the two year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses and cash flow deficits from operations that together with other matters described in the aforesaid note, raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Somekh Chaikin Member Firm of KPMG International We have served as the Company’s auditor since 2004. Tel Aviv, Israel March 7 , 2021 F- 3 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share and per share data) December 31, December 31, Note 2020 2019 ASSETS Current assets: Cash and cash equivalents 3 $ 5,392 $ 17,575 Prepaid expenses and other 724 636 Total current assets 6,116 18,211 Property and equipment, net 12 158 Operating lease right-of-use 4 - 1,199 Long-term pledged deposits - 130 Other non-current assets 51 57 Total assets $ 6,179 $ 19,755 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade payables $ 678 $ 875 Accrued expenses and other 8a 1,729 2,855 Operating lease liability 4 179 391 Total current liabilities 2,586 4,121 Non-current operating lease liability 4 16 725 Total liabilities 2,602 4,846 Commitments and contingencies Shareholders' equity: Ordinary shares, no par value - authorized 500,000,000 shares as of December 31, 2020 and 100,000,000 shares as of December 31,2019; issued and outstanding 37,099,352 shares at December 31, 2020 and December 31,2019 - - Additional Paid-in capital 6 119,745 119,468 Currency translation differences reserve 872 872 Accumulated deficit (117,040 ) (105,431 ) Total shareholders' equity 3,577 14,909 Total liabilities and shareholders' equity $ 6,179 $ 19,755 The accompanying notes are an integral part of these consolidated financial statements F- 4 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (U.S. dollars in thousands, except share and per share data) Note Year ended December 31, 2020 2019 Operating Expenses: Research and development $ 3,783 $ 13,303 General and administrative 7,180 6,245 Restructuring expense 5b 749 3,350 Total operating expenses 11,712 22,898 Finance (income) expense, net 8b (103 ) 4,226 Net loss and comprehensive loss $ 11,609 $ 27,124 Loss per share basic and diluted $ 0.31 $ 0.79 Weighted average number of shares outstanding used in computation of basic and diluted loss per share in thousands 37,099 34,446 The accompanying notes are an integral part of these consolidated financial statements. F- 5 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. dollars in thousands, except share and per share data) Currency Ordinary shares Additional translation Number of Amounts Paid-in differences Accumulated shares (*) capital reserve deficit Total Balance at January 1, 2019 15,575,682 $ - $ 87,240 $ 872 $ (78,307 ) $ 9,805 Changes during 2019: Issuance of shares, net 21,523,670 - 26,500 - - 26,500 Reclassification of warrants due to reassessment (see note 6b) - - (3,628 ) - - (3,628 ) Reclassification of warrants due to modification (see note 6b) 8,198 8,198 Share-based compensation - - 1,158 - - 1,158 Net loss for the year - - - - (27,124 ) (27,124 ) Balance at December 31, 2019 37,099,352 - 119,468 872 (105,431 ) 14,909 Changes during 2020: Share-based compensation - - (20 ) - - (20 ) Refund on share issuance expenses 297 297 Net loss - - - - (11,609 ) (11,609 ) Balance at December 31, 2020 37,099,352 $ - $ 119,745 $ 872 $ (117,040 ) $ 3,577 (*) No par value The accompanying notes are an integral part of these consolidated financial statements F- 6 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. dollars in thousands, except share and per share amounts) Year ended December 31, 2020 2019 Operating activities: Net loss $ (11,609 ) $ (27,124 ) Adjustments required to reconcile net loss to net cash used in operating activities: Financing costs, net - 4,570 Depreciation 80 281 Gain on sale of property and equipment (36 ) - Share-based payments (20 ) 1,158 Write-off of right-of-use 278 - Changes in operating asset and liabilities: Prepaid and other current (88 ) 2,305 Other non-current assets 6 975 Trade payables (197 ) 1,076 Accrued expenses and other (1,126 ) 301 Net cash used in operating activities (12,712 ) (16,458 ) Investing activities: Purchase of property and equipment (34 ) (95 ) Proceeds from sale of property and equipment 136 - Net cash provided by (used in) investing activities 102 (95 ) Financing activities: Proceeds from issuance of ordinary shares and warrants - 30,500 Share issuance costs 297 (3,879 ) Net cash provided by financing activities 297 26,621 Increase (decrease) in cash, cash equivalents and restricted cash (12,313 ) 10,068 Cash, cash equivalents and restricted cash at, beginning of period 17,705 7,637 Cash, cash equivalents and restricted cash at, end of period $ 5,392 $ 17,705 Reconciliation in amounts on consolidated balance sheets: Cash and cash equivalents $ 5,392 $ 17,575 Restricted cash - 130 Total cash, cash equivalents and restricted cash $ 5,392 $ 17,705 F- 7 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 1 - NATURE OF OPERATIONS Anchiano Therapeutics Ltd. (the "Company") is a biopharmaceutical company dedicated to the discovery, development, and commercialization of novel, targeted therapies to treat cancer in areas of significant clinical need. Anchiano is developing small-molecule pan-RAS inhibitors and inhibitors of PDE10 and the β-catenin pathway, having discontinued active clinical development of inodiftagene vixteplasmid in November 2019. After a thorough evaluation of the data, the Company determined there was a low probability of surpassing the pre-defined futility threshold at the planned interim analysis of its Phase 2 Codex study, evaluating the gene therapy inodiftagene vixteplasmid in patients with BCG-unresponsive non-muscle-invasive bladder cancer (NMIBC), and announced the discontinuation of the study. In January 2020, our Board of Directors approved management’s recommendation to close the Company’s office and laboratories located in Israel. Following the closure of the Israeli facilities at the end of May 2020, and as of December 31, 2020, the Company’s sole remaining office was located at One Kendall Square, Building 1400E, Suite 14-105, Cambridge, Massachusetts. In February 2021, in light of the effects the situation in which offices were no longer required under the circumstances, the Company signed a lease termination agreement related to this office, effective as of February 28, 2021. (for details, see Note 10 below). On July 2, 2020, the Company’s Chief Executive Officer Dr. Frank Haluska sent a letter to the Chairman of the Company’s board of directors outlining Dr. Haluska’s belief that events had occurred that were sufficient to trigger his ability to resign for “Good Reason” under his employment agreement. The company’s board of directors informed Dr. Haluska that it disagreed with the letter’s assertions regarding “Good Reason” and treated the letter as a constructive resignation effective as of July 2, 2020. On July 12, 2020, Dr. Frank Haluska tendered his written resignation from the Company’s board of directors, effective immediately. See Note 9 for further detail. In light of business circumstances, and in order to conserve cash and preserve optionality while alternatives are being identified and assessed, the Company made a decision during July 2020 to undertake reductions in headcount and other cost saving measures. These included plans to temporarily reduce the Company’s internal and external research and development work on the Company’s pan-RAS-inhibitor program until there is greater clarity regarding Anchiano’s ability to fund the program. We continue to undertake actions for the promotion of the program and its assets and towards strengthening the protection of all related intellectual property. On October 20, 2020, the Company appointed Mr. Neil Cohen as its Chief Executive Officer. Mr. Cohen was a member of the Company’s board of directors prior to his appointment as CEO and continues to serve in this capacity. The Company also appointed Mr. Andrew Fine to serve as its Chief Financial Officer. Mr. Fine previously served as the Company’s Interim Chief Financial Officer pursuant to a subcontracting agreement as of July 2020. On December 14, 2020 the Company entered into an Agreement and Plan of Merger with Chemomab, an Israeli limited company and a clinical-stage biotech company focusing on the discovery and development of innovative therapeutics for fibrosis-related diseases with high unmet need, which included the proposed Merger of CMB Acquisition Ltd., a wholly owned subsidiary of ours, with Chemomab as the surviving company. The merger is, subject to shareholder approval as well as, amongst other things, the completion of a financing of no less than $30 million concurrently with the closing of the merger, and the listing of the Anchiano ADSs on Nasdaq, At the effective time of the merger, the Company anticipates that each share of Chemomab common stock outstanding immediately prior to the effective time of the Merger will be converted into the right to receive approximately 1,028.99 shares of Anchiano common stock, subject to adjustment to account for a reverse split of Anchiano common stock at a reverse split ratio to be determined by Anchiano’s board of directors, subject to shareholder approval, and to be implemented prior to the consummation of the merger. Immediately following the merger, and prior to any private investment as part of the merger, the former Chemomab security holders will own approximately 90% of the aggregate number of shares of Anchiano common stock and the security holders of Anchiano as of immediately prior to the merger will own approximately 10% of the aggregate number of shares of Anchiano common stock on a fully diluted basis. The Company is incorporated and registered in Israel. The Company's American Depositary Shares ("ADSs"), each representing five ordinary shares of the Company with no par value (the "ordinary shares"), began trading on the Nasdaq Capital Market (“Nasdaq”) in February 2019 under the symbol "ANCN". Its ordinary shares were traded on the Tel Aviv Stock Exchange (“TASE”) between August 2006 and June 2019, at which time the Company voluntarily delisted from the TASE. The Company wholly owns a subsidiary, Anchiano Therapeutics Israel Ltd. (formerly BioCanCell Therapeutics Israel Ltd.), which itself wholly owns a Delaware-incorporated subsidiary, Anchiano Therapeutics, Inc. (formerly BioCanCell USA, Inc.) for the purposes of operating in the United States. This subsidiary is subject to the tax laws of the State of Delaware. The Company is subject to a number of risks including with regard to the successful development of therapeutics, the ability to obtain adequate financing, the ability to obtain FDA approval and reimbursement for any products the Company may develop, protection of intellectual property, fluctuations in operating results, dependence on key personnel and collaborative partners, rapid technological changes inherent in the target markets of any products the Company may develop, product liability , the introduction of substitute products and competition from larger companies. F- 8 In March 2020 the World Health Organization declared the global novel coronavirus (COVID-19) outbreak a pandemic. As of December 31, 2020, the Company’s operations have not been significantly impacted by the COVID-19 outbreak. However, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations, including ongoing and planned pre-clinical development activities. Liquidity The consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has incurred losses and cash flow deficits from operations since inception, resulting in an accumulated deficit at December 31, 2020 of $117 million. The Company has financed operations to date primarily through public and private placements of equity securities. The Company anticipates that it will continue to incur net losses for the foreseeable future. The Company believes that its existing cash and cash equivalents will only be sufficient to fund its projected cash needs until the completion of the contemplated merger with Chemomab during the first half of 2021. Accordingly, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. To meet future capital needs, and should the contemplated merger with Chemomab not be completed, the Company would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be on favorable terms or even available to the Company. The failure of the Company to obtain sufficient funds on commercially-acceptable terms when needed, would have a material adverse effect on the Company’s business, results of operations and financial condition. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of the Company’s expenses could vary materially and adversely as a result of a number of factors. The Company has based its estimates on assumptions that may prove to be wrong, and the Company’s expenses could prove to be significantly higher than it currently anticipates. F- 9 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: a. Basis of presentation The Company’s financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). b. Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates its assumptions on an ongoing basis, including those related to share-based compensation, leases and derivatives. The Company's management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. F- 10 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): c. Functional currency Items included in the financial statements of the Company's entities are measured using the currency of the primary economic environment in which the Company operates. The Company's functional currency from inception through December 31, 2018 was the New Israeli Shekel (“NIS”), as this was the functional currency of its significant operations. Effective January 1, 2019, due to significant business developments and changes to its economic circumstances, the Company, as well as its Israeli subsidiary, reassessed its functional currency and determined to change its functional currency to the U.S. dollar (“dollar”, “USD” or “$”) from the NIS. The change in functional currency was accounted for prospectively from January 1, 2019, and the financial statements prior to and including the period ended December 31, 2018 were not restated for the change in functional currency. F- 11 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): d. Principles of consolidation The consolidated financial statements include the financial statements of Anchiano Therapeutics Ltd. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. e. Cash and cash equivalents Cash equivalents are short-term, highly-liquid deposits that are not restricted as to withdrawal and are readily convertible to cash with original maturities of three months or less, at the date acquired. f. Restricted cash Restricted cash deposited in an interest-bearing saving accounts which is used as a security for the Company's office rent and car leasing. Cash expected to be restricted for more than one year from the balance sheet date is classified as long-term restricted cash in the consolidated balance sheets. g. Property and equipment: 1) Property and equipment are stated at cost, net of accumulated depreciation and amortization. 2) The Company’s property and equipment are depreciated by the straight-line method on the basis of their estimated useful life. h. Impairment of long-lived assets The Company tests long-lived assets for impairment whenever events or circumstances present an indication of impairment. If the sum of expected future cash flows (undiscounted and without interest charges) of the assets is less than the carrying amount of such assets, an impairment loss would be recognized. The assets would be written down to their estimated fair values, calculated based on the present value of expected future cash flows (discounted cash flows), or some other fair-value measure. i. Derivatives Measurement of derivative financial instruments Derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for by recognizing them in profit or loss, as financing income or expense. Reassessment of derivatives The classification of a contract shall be reassessed at each balance sheet date. If the classification required changes as a result of events during the period, the contract shall be reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified. If a contract is reclassified from permanent or temporary equity to an asset or a liability, the change in fair value of the contract during the period the contract was classified as equity shall be accounted for as an adjustment to shareholders' equity. The contract subsequently shall be marked to fair value through earnings. F- 12 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): i. Derivatives (continued) Issuance of parcel of securities The consideration received from the issuance of a parcel of equity securities is allocated according to the relative fair value of the instruments. Direct issuance costs are attributed to the specific securities in respect of which they were incurred, whereas joint issuance costs are attributed to the securities on a proportionate basis according to the allocation of the consideration from the issuance of the parcel, as described above. j. Severance pay The Israeli Severance Pay Law, 1963 (“Severance Pay Law”), specifies that employees are entitled to severance payment following the termination of their employment. Under the Severance Pay Law, the severance payment is calculated as one-month salary for each year of employment (and pro rata for a portion thereof). Under Section 14 of the Severance Pay Law, employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, made on behalf of the employee with investment firms or insurance companies. Payments in accordance with Section 14 release the Group from any future severance payments in respect of those employees. As a result, the Group does not recognize any liability for severance pay from the time Section 14 has been adopted with respect to an employee, and the deposits under Section 14 are not recorded as an asset in the Company's balance sheet. For the period during which the Group’s employees in Israel were not subject to Section 14 are accounted for under the Shut Down method of accounting. Accordingly, the Company calculated the liability for severance pay pursuant to the Severance Pay Law based on the most recent salary of these employees, multiplied by the number of years of employment as of the balance sheet date. The Company's liability for these employees is fully provided for via monthly deposits with severance pay funds, insurance policies and accruals. The value of these deposits is recorded as an asset on the Company's balance sheet under Funds in respect of employee rights upon retirement and other short-term assets. k. Contingencies Certain conditions may exist, as of the date of the financial statements, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. Management applies the guidance in ASC 450-20-25 when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, are disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantees are disclosed. F- 13 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): l. Share-based compensation Share-based compensation expense related to share awards is recognized based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton option pricing model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of the Company’s ordinary shares and the expected dividend yield of ordinary shares. The assumptions used to determine the fair value of the option awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. The Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule using the accelerated method based on the multiple-option award approach. Forfeitures are accounted for by estimating the number of awards expected to be forfeited instead of as they occur. m. Research and development Research and development expenses include costs directly attributable to the conduct of research and development programs, including clinical trial and materials, management development of production processes, salaries, wages and incidentals, laboratory rent and maintenance. All costs associated with research and developments are expensed as incurred. Intangible assets that are purchased from others for use in R&D activities in a transaction other than a business combination are capitalized only if they have alternative future use. Otherwise, such assets are expensed. For the two years ended December 31, 2020, the Company did not capitalize any intangible asset purchased at an asset acquisition. n. Patent Costs Costs related to filing and pursuing patent applications are recorded as general and administrative expenses as incurred, since the recoverability of such expenditures is uncertain. F- 14 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued): o. Income taxes: 1) Deferred taxes Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently-enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future. Given the Company’s losses, the Company has provided a full valuation allowance with respect to its deferred tax assets. 2) Uncertainty in income tax The Company follows a two-step approach in recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates that it is more likely than not that the position will be sustained based on technical merits. If this threshold is met, the second step is to measure the tax position as the largest amount that has more than a 50% likelihood of being realized upon ultimate settlement. p. Loss per share Basic loss per share is computed on the basis of the net loss for the period divided by the weighted-average number of ordinary shares outstanding during the period. Diluted loss per share is based upon the weighted-average number of ordinary shares and of ordinary shares equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options which are included under the treasury stock method when dilutive. The following ordinary shares underlying stock options and warrants were excluded from the calculation of diluted net loss per ordinary share, because their effect would have been anti-dilutive for the years presented: Year ended December 31 2020 2019 Outstanding stock options 2,565,301 3,822,374 Warrants 10,975,950 10,975,950 F- 15 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2−SIGNIFICANT ACCOUNTING POLICIES (continued): q. Fair value measurement Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described as follows: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data or active market data of similar or identical assets or liabilities. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. See Note 6c. r. Concentration of credit risks Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, and pledged deposits. The Company deposits cash and cash equivalents with highly-rated financial institutions and, as a matter of policy, limits the amounts of credit exposure to any single financial institution. The Company has not experienced any material credit losses in these accounts and does not believe it is exposed to significant credit risk on these instruments. F- 16 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued): s. Newly issued and recently adopted accounting pronouncements: Accounting pronouncements recently adopted 1) In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use (ROU) asset and a lease liability. Leases are classified as either operating or finance based on criteria similar to existing lease accounting, with the classification affecting the pattern and classification of expense recognition in the statement of operations. This standard became effective on January 1, 2019. A modified retrospective transition approach is allowed, applying the new standard to all leases existing at the date of initial application. Operating-lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, while the ROU assets are also adjusted for any prepaid or accrued lease payments. The Company uses its incremental borrowing rate, based on the information available at the commencement date, to determine the present value of the lease payments. For lease modifications that decrease the scope of the lease, the Company recognizes a decrease in the carrying amount of the right-of-use asset in order to reflect the partial or full cancellation of the lease, and recognizes in profit or loss a profit (or loss) that equals the difference between the decrease in the right-of-use asset and re-measurement of the lease liability. The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option, if it reasonably certain that the Company will exercise the option. After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event). The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if relevant and any unamortized initial direct costs. Lease expenses for lease payments are recognized on a straight-line basis over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will exercise or not exercise the option to renew or terminate the lease. t. Reclassifications Certain prior year amounts shown in the accompanying condensed consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total shareholders’ equity, net loss, or loss per share. NOTE 3 – CASH AND CASH EQUIVALENTS: December 31, December 31, 2020 2019 In US dollars Cash $ 1,110 $ 9,349 Cash equivalents 4,001 7,451 In New Israeli Shekels Cash 281 775 $ 5,392 $ 17,575 Cash equivalents are comprised of short-term bank deposits with original maturities of three months or less, at the date acquired. F- 17 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 4 - LEASES: The Group leases facilities, labs offices and cars for use in its operations, which are classified as operating leases. In addition to rent, the leases may require the Group to pay directly for fees, insurance, maintenance and other operating expenses. In May 2018, Anchiano Therapeutics, Inc. signed an agreement to rent space for offices in Cambridge, Massachusetts, until December 2021. This agreement was amended in October 2019 with the agreement ending in January 2022 with annual rent of approximately $185 thousand. In February 2021, in light of the situation in which offices were no longer required under the circumstances, the Company signed a lease termination agreement (See note 10 below for further details). Given that the Company is no longer using the asset as of December 31, 2020 there is a need for an impairment of the asset. As of December 31, 2020, the Company recognized a decrease of approximately $195 thousand in the carrying amount of the right-of-use asset to reflect the impairment of the right of use asset. In addition to this the Company recognized a decrease of approximately $83.0 thousand in Q1 2020 on account of impairment of its right of use asset for its facilities in Israel that the Company vacated. The cash flow information related to operating leases and the lease term and the discount rate related to Company’s operating lease right-of-use assets and related lease liabilities are as follows: Year ended December 31, 2020 Operating cash flow from operating leases $ 247 Weighted Average Remaining Lease Term (years) 1.33 Weighted Average Discount rate 10.20 % Year ended December 31, 2020 Operating lease expense $ 242 Supplemental balance sheet information related to operating leases was as follows December 31, 2020 Assets Operating lease right of use $ - Liabilities Operating lease liabilities, current portion $ 179 Operating lease liabilities, non-current portion 16 Total $ 195 F- 18 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 4 – LEASES (continued) : As of December 31, 2020, the maturity of lease liabilities under our non-cancelable operating leases were as follows: Operating Lease 2021 189 2022 16 Total future minimum lease payments, undiscounted 205 Less: Imputed interest -10 Present value of future minimum lease payments $ 195 NOTE 5 - COMMITMENTS : A. Royalty Commitments: 1. Liability for royalty payments to the Israel Innovation Authority The Company is obligated to pay royalties to the Israel Innovation Authority (the “IIA”) on proceeds from the sale of products developed from research and development activities that were partially funded by grants from the IIA, relating to inodiftagene, development of which the Company discontinued in 2019. See Note 1 above for details. Under the specific terms of the funding arrangements with the IIA, royalties of 3.5% to 25% are payable on the sale of products developed with funding received from the IIA, which payments shall not exceed, in the aggregate, 300% of the amount of the grant received (dollar linked), plus interest at annual rate based on LIBOR. As of December 31, 2020, the Company had recognized and received grants (cumulatively) from the IIA in the amount of $4 million. At the time the Company received the grants, successful development of the program was not probable and, accordingly, no related liability has been recognized in the financial statements. The Company did not receive any grants from the IIA for the years ended December 31, 2020 and 2019. The Company did not successfully commercialize the products developed from research and development activities related to inodiftagene that were partially funded by grants from the IIA. In January 2021 the Company submitted a request to the IIA to close its files with the IIA and to receive approval from the IIA that the Company has no obligations to pay royalties as no commercialization resulted from the research and development activities. As of the date of these financial statements no response has been received from the IIA. F- 19 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 5 – COMMITMENTS (continued) : A. Royalty Commitments (continued): 2. Liability for royalty payments to Yissum The research and development activities of the Group relating to inodiftagene, development of which the Company discontinued in 2019, were based on an exclusive license granted to the Group to use patent-protected technology and/or applications for the registration of patents developed by the Group. The rights to these patents originally belonged to Yissum Technology Transfer, the research development Company of The Hebrew University of Jerusalem (hereinafter, “Yissum”). Under the 2005 license agreement between Yissum and the Group, as amended (the “License Agreement”), Yissum granted an exclusive license to the Group for the global development, use, manufacture and commercialization of products that are based on the patents. In return, the Group undertook to pay royalties to Yissum. The Group does not recognize a liability for royalties until the event underlying the liability actually probable and reasonably and therefore the financial statements do not include a liability for these royalties. In April 2020, the Company notified Yissum that as a result of the Company’s decision to discontinue clinical development of inodiftagene, the Company will cease payments to maintain the intellectual property that was licensed from Yissum that supported the development and as related to a licensing and development agreement between the parties (“License Agreement”). In August 2020 the Company agreed with Yissum on termination of the License Agreement and the return of all intellectual property. B. Restructuring Restructuring provisions are recognized for the direct expenditures arising from restructuring initiatives, where the plans are sufficiently detailed and where appropriate communication has been made to those affected. The Company has recorded restructuring expenses related principally to contract termination costs due to the discontinuation of the clinical trials to clinical research organizations (CRO’s) and manufacturers and contractual involuntary termination benefits to employees which have been accounted for as ongoing benefit arrangements and associated termination costs related to the reduction of its workforce. One-time termination benefits are expensed at the date the employees are notified, unless the employees must provide future services beyond a minimum retention period, in which case the benefits are expensed ratably over the future service periods. A provision for contract termination costs, in which a contract is terminated or the entity will continue to incur costs pursuant to contract for its remaining term without economic benefit, is recognized only when the contract is terminated or when the entity permanently ceases using the rights granted under the contract. In November 2019 the Company decided to discontinue its Phase 2 Codex study in patients with BCG-unresponsive NMIBC. In connection with this decision, the Company is required to make certain payments under contracts with clinical research organizations (CROs) and with manufactures of the drug in order to terminate the contracts and close the trials. This restructuring plan included a reduction in the workforce of seven employees. In January 2020 the Board of Directors approved management’s recommendation to close the Company’s office and laboratories located in Israel. In connection with this restructuring, the employment of the remaining five Israeli employees was terminated in the second quarter of 2020. In July 2020, the Company made the strategic decision to temporarily reduce development of the Company’s RAS program and to institute various cost savings measures to preserve liquid resources. At the same time the Company continued to actively pursue the maintenance of its Licensing Agreement with ADT and protection of its intellectual property assets. The cost saving activities included severing 3 employees and contract termination with outsourced contractors working on clinical activities. The following table represents a roll forward of the restructuring and other activities noted above: CRO, Manufacturing and other related Severance- related Facility and Leases Total Balance, January 1, 2020 $ 2,572 $ 336 $ - $ 2,908 Expenses 502 - 247 749 Paid or consumed (2,836 ) (336 ) (247 ) (3,419 ) Balance, December 31, 2020 $ 238 $ - $ - $ 238 F- 20 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 5 — COMMITMENTS (continued) : C. Acquisition In September 2019, the Company announced that its fully-owned subsidiary, Anchiano Therapeutics, Inc. entered into an option to license agreement with ADT Pharmaceuticals, LLC (“ADT”). Pursuant to the terms and conditions set forth in the agreement, the parties agreed to conduct research and development activities of novel small-molecule inhibitors (RAS and PDE10/β-catenin). As part of the arrangement, the Group is primarily responsible for the research, development, manufacturing and regulatory activities and ADT assists with the research activities as necessary in exchange for a quarterly fee from Anchiano. In connection with the agreement, ADT also granted Anchiano exclusive rights to research, develop, manufacture and commercialize the aforementioned compounds relating to patents owned by ADT and any products containing such compounds worldwide. In consideration for the rights granted under the agreement, Anchiano committed to pay ADT (i) a $3 million upfront fee; (ii) a fee upon transfer of the know-how and intellectual property rights to the Company; and then (iii) additional payments, including milestone and royalty payments. Anchiano may terminate the agreement at any time in its entirety or on a compound-by-compound basis after providing 90 days written notice to ADT. The Company accounted for the upfront fee as a research and development expense. NOTE 6 - SHARE CAPITAL: a. Rights of the Company’s ordinary shares Each ordinary share is entitled to one vote. The holders of ordinary shares are also entitled to receive dividends if declared by the Board of Directors, whenever funds are legally available. Since its inception, the Company has not declared any dividends. b. 2018 Private Placement In June 2018, the Company completed a $22.9 million fundraising round from investors in the United States and Israel, led by Shavit Capital Funds. In consideration for the investment, the Company issued 5,960,787 ordinary shares (constituting approximately 38% of the Company’s issued and outstanding share capital after completion of the transaction) at a price per share of approximately $3.842, as well as warrants to acquire additional shares equal to 80% of the shares issued, at an exercise price per share of NIS 16.20 (approximately $4.32). The warrants are exercisable for five years from the closing date of the transaction, as of December 31, 2018, and may be exercised on a cashless basis. In addition, the investors were granted price protection rights (to shares and warrants) in the event of a future share issuance by the Company wherein the price does not increase by at least approximately 42.86% over the price per share in the fundraising (or is less than the adjusted price per share, if the price has already been adjusted). For details of an allocation that took place in 2019 pursuant to these rights, see Note 6c below. The warrants and shares were recorded within equity on the issuance date (see note 2s on the adoption of ASU2017). As detailed in Note 2c, the Company changed its functional currency from NIS to USD as of January 1, 2019. Due to this change from this date, the exercise price of the warrants was no longer denominated in the Company’s functional currency and therefore not considered indexed to the Company’s own stock according to ASC 815-40 F- 21 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 6 - SHARE CAPITAL (continued): b. 2018 Private Placement (continued) Additionally, upon the Company’s Nasdaq IPO of February 14, 2019, the warrants’ term modified such that the exercise price currency was changed to USD. As a result, the warrants were reclassified within equity on that date. Consequently, the warrants were measured at fair value from January 1, 2019 until February 14, 2019, with resulting finance expenses of $4.6 million, until they were reclassified within equity. The following table summarizes the activity for the warrants whose fair value measurements are estimated utilizing Level 3 inputs: 2019 Fair value on January 1, 2019 3,628 Adjustments- finance expenses 4,570 Fair value on February 14, 2019 8,198 The Company has determined the fair value of the warrants (a Level 3 valuation) as of January 1, 2019 and February 14, 2019. The fair value of these warrants was estimated by implementing the Probability-Weighted Expected Return Method or the Black-Scholes Method. The following parameters were used: Derivative Financial Instrument February 14, 2019 January 1, 2019 Stock price (USD) $1.84 $2.50 Expected term End of 2022 End of 2022 Risk free rate 2.49% 1.37% Volatility 52% 48% F- 22 In December 2020, in connection with, and conditional on completion of the contemplated merger, investors in the June 2018 fundraising round executed an agreement in which they agree to exercise all of their warrants upon the completion of the merger; reduce the number of shares in the Company to which they are entitled as a result of the merger pursuant to the price protection provisions and waive their rights to the balance of the price protection. Under this agreement the investors will (i) receive additional shares equal to only 80% of the number shares currently held by each investor for no additional consideration; and (ii) in respect of the price protection rights applicable to warrants held by such investors, the number of shares into which the warrants shall be exercisable shall be increased, for no additional consideration, only by the number shares necessary to ensure that, upon a cashless exercise of the warrants upon the merger, the aggregate number of shares held by each investor shall equal 80% more than the shares currently purchasable under the warrants; See also note 9D below. c. 2019 Public offering On February 14, 2019, the Company raised $30.5 million in its Nasdaq initial public offering (“IPO”), allocating 2,652,174 ADSs, each representing five ordinary shares of the Company. The ADSs are listed under the symbol “ANCN”. In accordance with price protection rights granted in 2018 and activated in the offering (see Note 6b above for details and accounting treatment), the Company allocated an additional 8,262,800 ordinary shares (equivalent to 1,652,560 ADSs) to rights holders and adjusted their warrants to be exercisable for an additional 6,207,330 ordinary shares (equivalent to 1,241,466 ADSs). d. 2018 Reverse Split and Capitalization In June 2018, the Company completed a 10:1 reverse share split, canceled the par value of its ordinary shares and increased its authorized capital to 30 million ordinary shares. In December 2018, the Company increased its authorized capital to 100 million ordinary shares. All amounts of shares, underlying shares, share prices and exercise prices in these financial statements reflect such adjustments. F- 23 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 6 - SHARE CAPITAL (continued): e. Share-based compensation Until 2016, the Company issued options to purchase shares to its employees, directors and other service providers/consultants pursuant to its 2011 Share Option Plan. From 2017, the Company has issued options pursuant to its 2017 Equity-Based Incentive Plan (the “2017 Plan”). As of December 31, 2020 and 2019, 6,218,798 shares and 3,501,486 shares respectively remain available for grant under the 2017 Plan. In accordance with the terms of the 2017 Plan, on January 1 of each calendar year during the term of the 2017 Plan, the number of shares available for issuance under the 2017 Plan shall be increased by 4% of the total number of company shares outstanding on December 31 of the immediately preceding calendar year, or such lesser number as shall be determined by the administrator of the 2017 Plan, subject to adjustments required for recapitalization events. The Plan is designed to enable the Company to grant options to purchase ordinary shares under various and different tax regimes including, without limitation, as ISOs or non-qualified stock options for U.S. residents, and pursuant and subject to Sections 102 or 3(i) of the Israeli Tax Ordinance. The fair value of each option granted is estimated using the Black-Scholes option pricing method. The volatility is based on the Company’s historical volatility. The risk-free interest rate assumption is based on observed Treasury yields over the expected term of the options granted with USD-denominated exercise prices (options granted in the past with NIS-denominated exercise prices used the equivalent Israeli government bond yields). The Company’s management uses the mid-point between the vesting date and the contractual term for each vesting tranche or its expectations, as applicable, of each option as its expected term. The expected term of the options granted represents the period of time that granted options are expected to remain outstanding. F- 24 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 6 - SHARE CAPITAL (continued): e. Share-based compensation (Continued): Options granted to employees and directors: In the years ended December 31, 2020 and December 31, 2019, the Company granted options to purchase ordinary shares as follows: Year ended December 31, 2020 Award amount Exercise price range Vesting period Expiration Employees 775,000 $0.23-$0.24 4 years 2030 Directors 110,000 $0.165 3 years 2030 Year ended December 31, 2019 Award amount Exercise price range Vesting period Expiration Employees 1,098,590 $0.60-$1.55 4 years 2029 Directors 495,000 $0.47-$1.03 3 years 2029 The fair value of options granted during 2020 and 2019 was $0.1 million and $0.8 million, respectively. The fair value of options granted to employees and directors is based on the share price on grant date and was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are as follows: Year ended December 31, 2019 Value of ordinary share $0.47 - $1.54 Dividend yield 0% Expected volatility 51.5% - 68.8% Risk-free interest rate 1.7% - 2.5% Expected term (years) 4.95 - 7 Year ended December 31, 2020 Value of ordinary share $0.15 - $0.24 Dividend yield 0% Expected volatility 64.9% - 67.4% Risk-free interest rate 0.30% to 0.45% Expected term (years) 5.5 - 7 The total unrecognized share-based compensation cost at December 31, 2020 is $0.14 million, which is expected to be recognized over a weighted-average period of 1.3 years. F- 25 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 6 - SHARE CAPITAL (continued): e. Share-based compensation (Continued): Summary of outstanding and exercisable options: The following table summarizes the number of options outstanding for the years ended December 31, 2020 and December 31, 2019, and related information. As a result of the Company restructuring that resulted in the termination of the employment of senior employees and as a result of the resignation of the Company’s CEO a significant number of granted options were forfeited during the period : Number of Options Weighted Average Exercise Price (1) Weighted Average Remaining Contractual Life in Years Options outstanding - December 31, 2018 2,453,767 $ 3.32 9.0 Granted 1,593,590 $ 1.03 9.6 Forfeited (221,611 ) $ 1.30 9.4 Expired (3,372 ) $ 13.32 5.8 Exercised - $ - - Options outstanding - December 31, 2019 3,822,374 $ 2.50 8.5 Granted 885,000 $ 0.22 9.3 Forfeited (1,677,286 ) $ 1.01 8.6 Expired (505,398 ) $ 2.58 7.7 Exercised - - - Options outstanding - December 31, 2020 2,524,691 $ 2.62 7.45 Options exercisable - December 31, 2020 1,998,264 $ 3.16 7.02 (1) Weighted-average exercise price per ordinary share. NIS-denominated exercise prices were converted to USD using the year-end Bank of Israel representative rate. The following tables summarizes information concerning outstanding and exercisable options as of December 31, 2020, in terms of ordinary shares: December 31, 2020 Options outstanding Options exercisable Exercise prices per share (USD) Number of options outstanding at end of year Weighted Average Remaining Contractual Life Number of options exercisable at end of year Weighted average remaining contractual life $25-77 5,535 1.21 5,535 1.21 $6-8 6,757 3.35 6,757 3.35 $3-5 938,203 7.47 938,203 7.47 $2-3 865,577 6.25 852,470 6.24 $1-2 349,750 8.50 175,410 8.50 $0-1 358,870 9.39 19,890 8.50 2,524,691 1,998,264 The aggregate intrinsic value of the total of both the outstanding and exercisable options as of December 31, 2020, is $0. F- 26 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 6 - SHARE CAPITAL (continued): e. Share-based compensation expenses (Continued): The following table illustrates the effect of share-based compensation on the statements of operations: Year ended December 31 2020 2019 Research and development $ (162 ) $ 470 General and administrative $ 142 $ 688 $ (20 ) $ 1,158 NOTE 7 - INCOME TAX: a. Corporate tax rates 1) Ordinary taxable income in Israel is subject to a corporate tax rate of 23%. 2) The Company’s US-based subsidiary, Anchiano Therapeutics, Inc., is taxed separately under the U.S. tax laws. The US-based subsidiary is subject to a federal flat tax rate of 21% and state taxes as applicable. b. As of December 31, 2020, the Company had estimated net operating loss carryforwards in Israel of approximately $13 million that can be carried forward indefinitely, and estimated carryforward capital losses of approximately $14.1 million. As of December 31, 2020, the Company’s Israeli subsidiary had estimated net operating loss carryforwards of approximately $87.5 million in Israel that can be carried forward indefinitely and estimated carryforward capital losses of approximately $1.6 million. The Company’s US-based subsidiary had no net operating loss carryforwards as of December 31, 2019. As of December 31, 2020 the U.S. subsidiary had estimated federal and state net operating loss carryforwards available to offset future taxable income of approximately $5.5 million . Net operating loss carryforwards may be carried forward indefinitely until the loss is fully recovered, but they are limited to 80% of the taxable income in any one tax period. c. As of December 31, 2020, the Company’s and the Company’s subsidiary’s tax years until December 31, 2014 are closed to audit inspections by the taxing authority due to statute of limitation rules effective in Israel. The U.S. subsidiary’s tax years until December 31, 2016 are closed to audit inspections by the taxing authority due to statute of limitation rules effective in the U.S. d. The components of the net loss (following which there is no provision for income taxes) were as follows: Year ended December 31, 2020 2019 Israel 5,725 22,678 U.S. 5,884 4,446 11,609 27,124 e. There was no provision made for income taxes in 2020 or 2019. Prior to 2019 our U.S. subsidiary provided us with general and clinical trial management services. For these services, our US subsidiary was compensated on a cost-plus basis, and recorded income taxes accordingly on the profits. In 2019, following our acquisition of the programs from ADT, our U.S. subsidiary ceased to provide us with general clinical trial management services and expenses related to the ADT programs are not part of the cost-plus compensation and accordingly our US subsidiary does not have taxable income for the current year F- 27 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 7 - INCOME TAX (continued): f. A reconciliation of the Company’s theoretical income tax expense to actual income tax expense is as follows: Year ended December 31, 2020 2019 Loss before income tax (11,609 ) (27,124 ) Tax rate 23 % 23 % Computed "expected" tax benefit (2,670 ) (6,238 ) Decrease (increase) in tax refund resulting from: - change in temporary differences for which deferred taxes were not recognized (1,965 ) 2,133 - Different tax rate in subsidiaries operating outside of Israel (240 ) (1 ) - Non-deductible items (25 ) 1,195 - Tax credits - - Losses and benefits for tax purposes for the year, for which deferred taxes were not recorded 4,900 2,911 Actual tax expense - - g. The following table presents the significant components of the Company’s deferred tax asset: December 31, 2020 2019 Deferred tax assets: Net operating loss carry forward 24,650 17,811 Capital loss carry forward 3,638 3,421 Research and development 2,392 4,297 Share based compensation 900 890 Other 1 67 Less - valuation allowance (31,581 ) (26,486 ) Net deferred tax assets - - A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The Company has established a valuation allowance to offset deferred tax assets at December 31, 2020 and 2019 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets. The net change in the total valuation allowance for the year ended at December 31, 2020 was an increase of $5.1 million. F- 28 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 8 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION: a. Balance sheets: Certain prior year amounts shown below for December 31, 2019 have been reclassified to conform to the 2020 presentation. These reclassifications did not have any effect on the total liabilities. Other payables: December 31, December 31, 2020 2019 Accrued expenses $ 1,459 $ 372 Restructuring accrual 238 2,161 Payroll and related 32 60 Liability for employee rights upon retirement - 262 $ 1,729 $ 2,855 Certain prior year amounts shown in the accompanying condensed consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total shareholders’ equity, net loss, or loss per share See also note 2t above. b. Statements of operations: Finance expenses, net: Year ended December 31, 2020 2019 Finance expenses: Foreign exchange rates, net - 40 Interest expenses, bank fees and other 6 9 Changes in fair value of warrants (see note 6b) - 4,570 Total finance expenses 6 4,619 Finance income: Foreign exchange rates, net 89 - Interest on bank deposit 20 393 Total finance income 109 393 Total finance expenses (income), net (103 ) 4,226 F- 29 ANCHIANO THERAPEUTICS LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (U.S. dollars in thousands, except share and per share data) NOTE 9 - RELATED PARTY TRANSACTIONS: A. On July 2, 2020, the Company’s Chief Executive Officer Dr. Frank Haluska sent a letter to the Chairman of the Company’s board of directors outlining Dr. Haluska’s belief that events had occurred that were sufficient to trigger his ability to resign for “Good Reason” under his employment agreement. The Company’s board of directors informed Dr. Haluska that it disagreed with the letter’s assertions regarding “Good Reason” and treated the letter as a constructive resignation effective as of July 2, 2020. On July 12, 2020, Dr. Frank Haluska tendered his written resignation from the Company’s board of directors, effective immediately. Dr. Haluska referenced the matters articulated in his letter of July 2, 2020, and the Company’s response and actions following receipt of the letter as the basis for his resignation from the Board. The Company has a potential maximum exposure of up to $0.4 million relating to claims of “Good Reason” resignation. It is the Company’s position, based on its legal counsel, that the CEO resigned without Good Reason, is not entitled to severance, and the Company will contest any and all claims for severance. The Company has not accrued any provision in its financial statements in this regard. B. In July 2020, the Company’s compensation committee approved allocations of options to each of Mr. Stan Polovets, a director in the Company, and to Mr. Neil Cohen, a shareholder and a director in the Company, to purchase 55,000 ordinary shares (currently equivalent to 11,000 ADSs).. The options vest over a period of 36 months (33% after 12 months 8.33% at the end of each 3 month period thereafter) with an exercise price of $0.165 per ordinary share or $0.823 per ADS. See note 6e for further details on and description of the value of the grants . ).. C. On October 20, 2020, the Company appointed Mr. Neil Cohen as Chief Executive Officer of the Company, effective immediately. Pursuant to his employment agreement, in his capacity as Chief Executive Officer of the Company Mr. Cohen will receive a gross salary of $12,000 per month. Mr. Cohen will continue to serve as a member of the Company’s board of directors. D. In December 2020 in connection with , and contingent on the completion of, the contemplated merger, and pursuant to price protection rights granted to private investors in 2018 under a securities purchase agreement, shareholders and warrant holders that are related parties of the Company executed an agreement in which related parties (and other investors) agree to exercise all of their warrants in the Company upon the closing of the merger; reduce the number of shares in the Company to which they are entitled as a result of the merger pursuant to the price protection provisions granted to such holders, and waive their rights to the balance of the price protection; and upon the completion of the merger, release the Company from any further obligations under the securities purchase agreement, and terminate the price protection rights and an Investors Rights Agreement related to Company shares and warrants held by such investors. See note 6b for further detail. NOTE 10 - SUBSEQUENT EVENTS: A. In February 2021, in light of the situation in which offices were no longer required under the circumstances, the Company signed a lease termination agreement related to its office located in Cambridge, Massachusetts, effective immediately. The Company paid $0.1 million as a buy-out on future lease commitments and forgave a deposit of approximately $0.05 million held by the landlord on account of future lease payments. The Company moved its corporate activities to offices in Jerusalem, Israel, that are owned by the firm that provides bookkeeping services to the Company and made available for the Company’s CFO and CEO as required. B. Between February 3 and February 18, 2021, five separate complaints were filed by putative stockholders of the Company challenging the proposed merger. Two complaints were filed in the United States District Court for the Southern District of New York ( Bispo v. Anchiano Therapeutics Ltd., et al. , No. 1:21-cv-00964-JSR (“ Bispo Action”) and Jace v. Anchiano Therapeutics Ltd., et al. , No. 1:21-cv-01114-JSR (“ Jace Action”)). One complaint was filed in the United States District Court for the Eastern District of New York ( Daly v. Anchiano Therapeutics Ltd., et al. , No. 1:21-cv-00621 (“ Daly Action”)). The remaining two complaints were filed in United States District Court for the District of Delaware ( Ciccotelli v. Anchiano Therapeutics Ltd., et al. , No. 1:21-cv-00153-RGA (“ Ciccotelli Action”) and Wilhelm v. Anchiano Therapeutics Ltd., et al. , No. 1:21-cv-00226 (“ Wilhelm Action”)). All five actions assert violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against Anchiano and each member of the Anchiano board, and violations of Section 20(a) of the Exchange Act against the individual defendants. The Ciccotelli also asserts violations of Section 20(a) of the Exchange Act against Chemomab. Additionally, the Bispo Action asserts a breach of fiduciary duty claim against the individual defendants. In general, the complaints each allege that the Registration Statement on Form S-4 filed with the SEC by Anchiano on January 13, 2021, omitted or misrepresented material information regarding the merger. The complaints seek, among other things, injunctive relief, damages, and an award of plaintiff's costs, including attorneys’ fees and expenses. The Company has submitted an amendment to the registration statement that included additional information not previously provided and that addresses the claims of omission and misrepresentation. It is still too early to assess and determine the possible / probable outcome of these complaints F- 30