Scinai Immunotherapeutics Ltd. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 filings are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022 (the “Evaluation Date”). Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective 67 Report of Management on Internal Control over Financial Reporting We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: ● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets; ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Our management, including the CEO and CFO, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of the effectiveness, as of the end of the period covered by this Annual Report, of its internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on the results of this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the year ended December 31, 2022, we implemented certain internal control procedures to address the previously identified material weaknesses related to our control environment, risk assessment and monitoring. ITEM 9B. OTHER INFORMATION. None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 68 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Directors and Executive Officers The following table contains information with respect to our directors and executive officers. To the best of our knowledge, none of our directors or executive officers have an arrangement or understanding with any other person pursuant to which he or she was selected as a director or officer. Our executive officers are appointed by and serve at the pleasure of the Board of Directors. Name Age Position Amir Reichman 47 Chief Executive Officer and Director Tamar Ben-Yedidia 59 Chief Scientist Uri Ben-Or 52 Chief Financial Officer Elad Mark 41 Chief Operating Officer Mark Germain 73 Chairman of the Board of Directors Jay Green (3) 51 Director George H. Lowell 77 Director Morris Laster (1) (2) 58 Director Yael Margolin (1) (2) (3) 70 Director Samuel Moed 60 Director Adi Raviv (1) (2) 67 Director Avner Rotman 79 Director (1) Member of the Audit Committee. (2) Member of the Compensation Committee. (3) Member of the Nominating and Governance Committee The following noteworthy experience, qualifications, attributes and skills for each executive officer and Board member, led to our conclusion that the person should serve as a director in light of our business and structure: Mr. Amir Reichman became full-time CEO of the Company on March 2, 2021 after sharing CEO duties during a transition period beginning on January 21, 2021. Mr. Reichman served as Head of Global Vaccines Engineering Core Technologies and Asset Management at GSK Vaccines (“GSK”) in Belgium from December 2017 until March 2021. Prior to this, Mr. Reichman served as Senior Director of Vaccines Supply Chain for GSK from September 2015 to November 2017. Prior to GSK, Mr. Reichman held various leadership roles of increasing responsibility in the Global Vaccines Value Chain Management organization of Novartis Vaccines and Diagnostics Ltd. (“Novartis”) in Holly Springs, NC from 2011 to 2015 when until Novartis Vaccines was acquired by GSK. In 2003, Mr. Reichman’s academic research contributed to the founding of NeuroDerm Ltd. (“NeuroDerm”), an Israeli company that developed a drug device combination product aimed at transdermal drug delivery for the treatment of Parkinson’s NeuroDerm was acquired by Mitsubishi Tanabe Pharma Corporation in 2017 for $1.1 billion. Mr. Reichman served as NeuroDerm’s first employee and Senior Scientist until his departure for an MBA at the Wharton school in 2009. Mr. Reichman earned an M.Sc. in Biotechnology Engineering from the Ben-Gurion University of the Negev in Be’er Sheva, Israel and an MBA in Finance and Health Care Management from the Wharton School of the University of Pennsylvania in Philadelphia, PA. 69 Dr. Tamar Ben-Yedidia has served as our Chief Scientist since 2004 and is responsible for the pre-clinical and clinical development and trials of the Company. Dr. Ben-Yedidia began her career at Biotechnology General (Israel) Ltd., BTG (Rehovot), where she was employed as lab manager from 1991 to 1994. Dr. Ben-Yedidia joined the Department of Immunology at the Weizmann Institute of Science from 1994 - 2004. Dr. Ben-Yedidia was involved in two European Consortium projects related to the evaluation of different approaches for vaccination, has been invited to address conferences worldwide and is published in various scientific journals. Dr. Ben-Yedidia received her Ph.D. in immunology from the Weizmann Institute after completion of her doctoral thesis titled “A Peptide-Based Vaccine Against Influenza.” Mr. Uri Ben-Or , CPA, MBA, has served as our Chief Financial Officer since 2007. In January, 2007, Mr. Ben-Or founded CFO Direct, in which he has served as the chief executive officer and through which he provides his services to our company. Mr. Ben-Or has over 20 years of experience and significant expertise in corporate finance, accounting, M&A transactions and IPOs, and has served as CFO with life science companies traded on the TASE, on Nasdaq and over the counter. Mr. Ben-Or holds a B.Aegree in Business from the College of Administration, and a M.B.A degree from the Bar Ilan University and is a certified public accountant in Israel. Mr. Elad Mark joined the Company in 2018 as Site Head and has served as Chief Operating Officer since September 2019. As COO he oversees BiondVax’s manufacturing facility and scale up and technology transfer activities, including potential future CMO’s. Prior to joining BiondVax, Mr. Mark served for more than three years at Novartis as TPM (Technical Process Manager) and Area Lead Process for a large-scale biological facility establishment in Singapore, a $800 million investment in a biologics facility focused on drug substance manufacturing based on cell culture technology, which was designed to support both clinical and commercial production of potential new products that include monoclonal antibodies for use in helping patients with autoimmune, respiratory and oncology disorders. Before that Mr. Mark served as the Head of the Engineering Department in Biopharmax Group, a company which focuses on EPCM (Engineering, Procurement, Construction and Management) in the pharmaceutical field. Mr. Mark is a principal bioprocess engineer with over 15 consecutive years of biotechnology engineering experience with diverse project stages including feasibility study, conceptual and detail design, commissioning, qualification and process validation. Mr. Mark holds a B.Sc. in Engineering from the Afeka Academic College of Engineering in Tel Aviv and an MBA from the Open University of Israel. Mr. Mark Germain joined the board in 2018 and has served as the Chairman of our board of directors since 2019. Mr. Germain has been involved as a founder, director, chairman of the board of, and/or investor in, over twenty companies in the biotech field and assisted many of them in arranging corporate partnerships, acquiring technology, entering into mergers and acquisitions, and executing financings and going public transactions. He graduated from New York University School of Law in 1975, Order of the Coif, and was a partner in a New York law firm practicing corporate and securities law before leaving in 1986. Since then, and until he entered the biotech field in 1991, he served in senior executive capacities, including as president of a public company that was sold in 1991. In addition to being a director of BiondVax, Mr. Germain is a Managing Director at The Aentib Group, a boutique merchant bank, and served as a director on the board of Pluristem Therapeutics from 2007 through June, 2022, including time as Co-Chairman and lead independent director. He is also a co-founder and director of a number of private companies in and outside the biotech field. 70 Mr. Jay Green CPA, CA, MAcc, joined the board in 2022. He is currently the Chief Financial Officer of a privately held, Canadian-based healthcare services company, a role that he has held since January 2022. Prior to this, he completed a 19-year career with GSK across several progressive leadership positions in GSK’s three businesses of consumer healthcare, pharmaceuticals, and vaccines, as well as corporate development. He also led GSK’s global enterprise resource planning (ERP) program, one of the largest IT-enabled business transformation programs in the company’s history. Mr. Green recently served from 2014 to 2020 as Senior Vice President, Finance and CFO of GSK’s global vaccines business. Since 2020, Mr. Green has served in an advisory role to Gavi for COVAX, an international initiative to support equitable distribution of COVID-19 vaccines. He is a Chartered Professional Accountant who holds a Master of Accounting from the University of Waterloo, Ontario, Canada. Prof. George H. Lowell, M.D. has served as a member of our board of directors since 2008. He is also since 2019 a member of the Board of Directors and Chief Scientific Officer (CSO) of Healables Ltd., a private Israeli digital health start-up company. Prior to joining our company, Prof. Lowell served as CSO for BioDefense at GlaxoSmithkline Biologicals (2006-7) which acquired ID Biomedical Corp. (IDB) and CSO of IDB (2001-6) which acquired Intellivax Intl. Prof. Lowell served as founding CEO, President and CSO of the vaccine R&D companies he founded, Intellivax, Inc. in Baltimore and Intellivax Intl. Inc. in Montreal from 1995 until 2001. From 1974, Prof. Lowell served on active duty in the US Army Medical R&D Command (USAMRDC), retiring in 1994 with the rank of Colonel. During this period he served as consultant in pediatric infectious diseases at The Walter Reed Army Medical Center and director of his laboratories at The Walter Reed Army Institute of Research in Washington, D.C. From 1989-1991 COL Lowell served as Medical Liaison Officer attached to the US Embassy in Israel representing the USAMRDC to the IDF Medical Corps Research Unit. Prof. Lowell has held a number of academic posts, including Visiting Scientist at the Weizmann Institute of Science (Israel) and Visiting Professor, Hebrew University-Hadassah Medical Center (Israel). Prof. Lowell holds a B.A. from Yeshiva University, and an M.D. from the Albert Einstein College of Medicine of Yeshiva University. Prof. Lowell performed three years of post-doctoral training in pediatrics and pediatric infectious diseases and immunology at NYU-Bellevue Medical Center, and The Mount Sinai Medical Center, NY, NY. We believe that Prof. Lowell is qualified to serve on our board of directors based on his extensive experience and knowledge in the field of health care and years of executive leadership in the biomedical industry. Dr. Morris Laster has served as a member of our board of directors since November 2017. Dr. Laster is a healthcare executive and entrepreneur with 30 years of experience in the biopharmaceutical industry. His expertise lies in the identification, development, management and financing of advanced biomedical drugs and technologies. Dr. Laster is currently the CEO of Clil Medical Ltd., a biomedical consultancy company, a position he has held since 2010. Since 2013, he is a Medical Venture Partner at OurCrowd, where he has led over 40 investments and represents OurCrowd on the board of directors of Oncohost, HiL Applied Medical, MigVax, Sweetch and DreaMed Diabetes. Dr. Laster has founded seven companies that have gone public in the U.S., UK or Israel. Previously, he was the founding CEO of BioLineRx Ltd. (TASE:BLRX) from 2003 to 2009. In addition, he was the chairman and CEO of Keryx Biopharmaceuticals (NASDAQ:KERX) from 1997 to 2002. Dr. Laster began his career as a VP of medical venture capital at Paramount Capital in NYC. Dr. Laster received his MD from Downstate Medical Center, Brooklyn, NY in 1990 and a BS in Biology from SUNY Albany. Dr. Yael Margolin has more than 35 years of experience as senior manager, CEO and board member in venture capital and in the pharmaceutical and biotech industries, leading strategic and business planning, financing, team building, product development and corporate partnerships. From 2005 to 2019, Dr. Margolin served as President, Chief Executive Officer and director of Gamida Cell Ltd., a clinical stage biopharmaceutical company, leading the company from preclinical development through phase 3 international registration studies. Prior to that, Dr. Margolin was Vice President of Denali Ventures LLC, a venture capital firm focused on healthcare, and a program manager at Teva Pharmaceuticals. Dr. Margolin holds a bachelor of science in biology and a master of science Cum Laude from the department of microbiology, both from Tel Aviv University in Israel, a Ph.D. from the department of membrane research at the Weitzman Institute of Science in Rehovot, Israel and was a post-doctoral associate at the Yale University School of Medicine. 71 Mr. Samuel Moed is a healthcare executive with over 35 years of experience. Mr. Moed was for seven years Head of Corporate Strategy at Bristol Myers Squibb (“BMS”), a global biopharma company, until his retirement in 2020. Prior to that role, Mr. Moed was Head of Strategy Worldwide Pharma, President of US Pharma and President of the WW Consumer Healthcare Business at BMS. In addition to BiondVax, Mr. Moed serves on the board of Mediwound Ltd., a company that develops, manufactures and commercializes bio-therapeutic solutions for tissue repair and regeneration, is a Venture Partner at aMoon, a HealthTech and Life Sciences investment fund with BiondVax’s former controlling shareholder Mr. Marius Nacht as the anchor investor, and advises companies in the healthcare arena. Mr. Moed received his BA in history from Columbia University in New York City in 1985. Mr. Adi Raviv is a senior financial executive with a career spanning over 35 years. Mr. Raviv founded HTI Associates LLC in 1996 and since then has served as its managing member. In addition, since April 2016 he has been a Principal at Capacity Funding LLC, a company providing working capital solutions to small businesses. Prior to that, Mr. Raviv served in a chief financial officer position in two other companies that provide similar types of funding alternatives from 2009 to 2016. Mr. Raviv has extensive capital markets, cash management, corporate finance, investment banking, investor relations, restructuring, tax and treasury, and transactional experience along with knowledge of the private equity and venture capital arenas. Mr. Raviv co-founded THCG, Inc., a publicly traded technology merchant banking and consulting company (where he was also CFO), and has been involved with companies in challenging startup, growth, and turnaround environments. He was also an investment banker at Lehman Brothers, Oscar Gruss and Hambros for over a dozen years. Mr. Raviv has served on the boards of directors of many private and several public companies, as well as various non-profit entities. He received a bachelor’s degree in International Relations with honors from the Hebrew University of Jerusalem and an MBA, with honors, from Columbia University in New York City. Professor Avner Rotman has been a member of our board of directors since 2005 and served as the Chairman until 2019. Prof. Rotman founded Rodar Technologies Ltd. in 2000 and served as its Chief Executive Officer and Chairman of the Board until 2019. Prof. Rotman also founded Bio-Dar Ltd. in 1984, and served as its President and CEO from 1985 until 2000. Prof. Rotman was also the chairman of the I-Tech incubator at Kyriat Weizmann. Prof. Rotman is the Founder and Chairman of the Foundation of Cardiovascular Research in Israel. Prof. Rotman holds a PhD in chemistry from the Weizmann Institute of Science, Israel, and an M.Sc and B.Sc in chemistry from the Hebrew University of Jerusalem, Israel. We believe that Prof. Rotman is qualified to serve on our board of directors based on his extensive experience and knowledge in the field of biotechnology and as an executive officer and director of multiple biotechnology companies. Our Scientific Advisory Board The following table sets forth certain biographical information with respect to our Scientific Advisory Board members: Professor Ruth Arnon , the head of our Scientific Advisory Board, is the inventor of the new synthetic influenza vaccine and head of BiondVax’s Scientific Advisory Board. Formerly Vice-President of the Weizmann Institute of Science (1988-1997), Professor Arnon is an internationally acclaimed immunologist. Along with Prof. Michael Sela, she conceptualized and developed Copaxone®, a drug for the treatment of multiple sclerosis which was approved by the FDA and is presently marketed worldwide. Prior to her appointment as Vice-President of the Weismann Institute, Prof. Arnon served as Head of the Department of Chemical Immunology and as Dean of the Faculty of Biology. From 1985 to 1994, Prof. Arnon was Director of the Weisman Institute’s McArthur Center for Molecular Biology of Tropical Diseases. Prof. Arnon has made significant contributions in the fields of vaccine development, cancer research and to the study of parasitic diseases. She has served as President of the European Federation of Immunological Societies, and as Secretary-General of the International Union of Immunological Societies. Dr. Arnon is the recipient of numerous international and Israeli awards including the prestigious Israel Prize. Prof. Arnon was also the Advisor for Science to the President of Israel. She is a member of the Israel Academy of Sciences, where she served as President from 2010-2015. Prof. Arnon is the incumbent of the Paul Ehrlich Chair in Immunochemistry at the Weizmann Institute. 72 Prof. Michel Revel , has M.D. and Ph.D. degrees. Born in 1938 in France, he joined the Weizmann Institute of Science, Rehovot, Israel in 1968, where he has been a full professor since 1973, heading for several periods the Departments of Virology and of Molecular Genetics. He has been an emeritus professor since 2010. Prof. Revel is best known for his work on the mechanism of action of interferon and the cloning of the genes for human interferon beta (IFN-β) and interleukin-6 (IL-6). He developed the first efficient genetic engineering production of a protein (IFN-b) in animal cells (CHO cells). He was Chief Scientist of InterPharm (Serono group), which produced the recombinant IFN-b (Rebif), a leading drug for treatment of multiple sclerosis, now 20 years in the market and sold in 90 countries by Merck Kga. Since 2010, Prof. Revel is co-founder and Chief Scientist of Kadimastem, an Israeli company producing human tissues by differentiation of pluripotent stem cells (ESC). The first product of Kadimastem, AstroRx, has recently been approved for clinical trial in Amyotrophic Lateral Sclerosis (ALS). Kadimastem also develops ESC-derived islet-like cells for the treatment of diabetes. Prof. Revel has received the Israel Prize for Medicine in 1999 and the Emet Prize in 2004. He was elected at the Israel National Academy of Science and Humanities in 2005. He served as chairman of the National Biotechnology Committee of Israel (1999-2002). Professor Dr. Matthias Dobbelstein has served as Director of the Institute of Molecular Oncology at the University Medical Center Göttingen (UMG), Germany since 2005 and is also an Associate Member of the Max Planck Institute for Multidisciplinary Sciences (MPI-NAT). He received his training as a physician at the University of Munich (LMU) and performed research as a virologist and cancer biologist at Princeton University (USA), the University of Marburg (Germany) and the University of Southern Denmark. Professor Dobbelstein’s research interests focus on principles of infections and cancer, including the application of anti-cancer drugs as antivirals, as well as alpaca-derived NanoAbs (nanosized antibodies also known as nanobodies and VHH antibodies) as therapeutics. His collaboration with Professor Dr. Dirk Görlich at MPI-NAT as highlighted in their 2021 EMBO Journal article titled “Neutralization of SARS-CoV-2 by highly potent, hyperthermostable, and mutation-tolerant nanobodies” forms the scientific basis of BiondVax’s exclusive license for development and commercialization of an innovative, self-administered, inhaled NanoAb for the treatment of COVID-19. As recently reported, a preclinical trial of the inhaled anti-COVID-19 NanoAbs demonstrated significantly milder illness and faster recovery in comparison to infected hamsters treated with inhaled placebo. In addition, Professor Dobbelstein, together with Professor Görlich, is collaborating with BiondVax under a five-year strategic research agreement for the discovery, characterization and cloning of additional NanoAbs for the treatment of autoimmune diseases such as psoriasis, psoriatic arthritis, asthma and macular degeneration. Prof. George H. Lowell, M.D. , a member of our board of directors, also serves on our Scientific Advisory Board. Biographical information regarding Prof. Lowell appears above. Family Relationships. There are no family relationships between any of our directors or executive officers. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports with the SEC relating to their share ownership and changes in such ownership. As a former foreign private issuer, our executive officers, directors and greater than 10% shareholders were not subject to the Section 16(a) filing requirements during the fiscal year ended December 31, 2022. Code of Ethics The Company currently maintains a Code of Ethics which applies to all directors, officers, and employees. A copy of our Code of Ethics can be found on our website at www.biondvax.com. 73 Board Composition and Director Independence Our board of directors consists of nine members. The directors will serve until our next annual meeting and until their successors are duly elected and qualified. The Company defines “independent” as that term is defined in Rule 5605(a)(2) of the NASDAQ listing standards. In making the determination of whether a member of the board is independent, our board considers, among other things, transactions and relationships between each director and his immediate family and the Company, including those reported under the caption “ Certain Relationships and Related Transactions ”. The purpose of this review is to determine whether any such relationships or transactions are material and, therefore, inconsistent with a determination that the directors are independent. On the basis of such review and its understanding of such relationships and transactions, our board affirmatively determined that Morris Laster, Yael Margolin, Adi Raviv, Jay Green, Avner Rotman and George H. Lowell are qualified as independent and that they have no material relationship with us that might interfere with his or her exercise of independent judgment. Board Committees Our board of directors has established an audit committee, a compensation committee, and a nominating and governance committee. Each of the board committees has the composition and responsibilities described below. Members will serve on these committees until their resignation or until otherwise determined by our Board of Directors. Audit Committee Our audit committee consists of Mr. Adi Raviv, Dr. Yael Margolin and Dr. Morris Laster. Mr. Adi Raviv serves as the chairman of the audit committee. Under the NASDAQ Capital Market corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Capital Market corporate governance rules. Our board of directors has affirmatively determined that Mr. Adi Raviv is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NASDAQ Capital Market corporate governance rules. Each of the members of the audit committee are deemed “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members. Our board of directors adopted an audit committee charter effective upon the listing of the ADSs and warrants on the NASDAQ Capital Market that set forth the responsibilities of the audit committee consistent with the rules of the SEC and the listing rules of the NASDAQ Capital Market, as well as the requirements for such committee under the Companies Law, including the following: ● oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law; ● recommending the engagement or termination of the person filling the office of our internal auditor; and ● recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors. Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management. 74 Compensation Committee Our compensation committee currently consists of Mr. Adi Raviv, Dr. Yael Margolin and Dr. Morris Laster. Dr. Yael Margolin serves as the Chairman of the Compensation committee. The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a special approval for Compensation. Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. Nominating and Governance Committee Our nominating and governance committee currently consists of Mr. Jay Green and Dr. Yael Margolin. Mr. Jay Green serves as the Chairman of the nominating and governance committee. The duties of the nominating and governance committee include identifying individuals qualified to become members of the Board and recommending to the Board the nominees for election to the Board at the next annual general meeting of shareholders, reviewing the Board committee structure and recommending to the Board for its approval directors to serve as members of each committee and reviewing and reassessing the adequacy of the Company’s corporate governance guidelines. Israeli Corporate Governance Requirements Companies incorporated under the laws of the State of Israel whose shares are publicly traded, including companies with shares listed on the Nasdaq Capital Market, are considered public companies under Israeli law and are required to comply with various corporate governance requirements under Israeli law relating to such matters as external directors, the audit committee, the compensation committee and an internal auditor. These requirements are in addition to the corporate governance requirements imposed by the listing rules of the Nasdaq Capital Market and other applicable provisions of U.S. securities laws. Pursuant to regulations enacted under the Israeli Companies Law, the board of directors of a public company whose shares are listed on certain non-Israeli stock exchanges, including Nasdaq, that do not have a controlling shareholder (as such term is defined in the Israeli Companies Law), may, subject to certain conditions, elect to “opt-out” of the requirements of the Israeli Companies Law regarding the election of external directors and to the composition of the audit committee and compensation committee, provided that the company complies with the requirements as to director independence and audit committee and compensation committee composition applicable to companies that are incorporated in the jurisdiction in which its stock exchange is located. In March 2023, our board of directors elected to opt-out of the Israeli Companies Law requirements to appoint external directors and related Israeli Companies Law rules concerning the composition of the audit committee and compensation committee. The foregoing exemptions will continue to be available to us so long as: (i) we do not have a “controlling shareholder” (as such term is defined under the Israeli Companies Law), (ii) our shares are traded on a U.S. stock exchange, including Nasdaq, and (iii) we comply with the Nasdaq rules applicable to domestic U.S. companies. If in the future we were to have a controlling shareholder, we would again be required to comply with the requirements relating to external directors and composition of the audit committee and compensation committee. Under the Israeli Companies Law, the term “controlling shareholder” means a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. For the purpose of approving transactions with controlling shareholders, the term “controlling shareholder” also includes any shareholder that holds 25% or more of the voting rights of the company if no other shareholder holds more than 50% of the voting rights in the company Compensation Policy The Compensation Policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth in the Companies Law. The Compensation Policy must be approved by the company’s board of directors after considering the recommendations of the compensation committee. In addition, the Compensation Policy needs to be approved by the company’s shareholders by a simple majority, provided that (i) such majority includes a majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting (abstentions are disregarded) or (ii) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter who were present and voted against the Compensation Policy, constitute two percent or less of the voting power of the company. Such majority determined in accordance with clause (i) or (ii) is hereinafter referred to as the Compensation Majority. 75 To the extent a Compensation Policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company may override the resolution of the shareholders following a re-discussion of the matter by the board of directors and the compensation committee and for specified reasons, and after determining that despite the rejection by the shareholders, the adoption of the Compensation Policy is for the benefit of the company. A Compensation Policy that is for a period of more than three years must be approved in accordance with the above procedure every three years. Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholders and their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is not material in relation to its existing terms. Pursuant to the Companies Law and following the recommendation of our compensation committee, our board of directors approved our compensation policy, and our shareholders, in turn, approved the Compensation Policy at our annual general meeting of shareholders that was held on December 27, 2021. The Compensation Policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The Compensation Policy must relate to certain factors, including advancement of the Company’s objectives, the Company’s business plan and its long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the Company’s risk management, size and the nature of its operations. The Compensation Policy must furthermore consider the following additional factors: ● the knowledge, skills, expertise and accomplishments of the relevant office holder; ● the office holder’s roles and responsibilities and prior compensation agreements with him or her; ● the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of the company, including those employed through manpower companies, in particular the ratio between such cost and the average and median compensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company; ● the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and ● as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. 76 The Compensation Policy must also include: ● a link between variable compensation and long-term performance and measurable criteria; ● the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation; ● the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements; ● the minimum holding or vesting period for variable, equity-based compensation; and ● maximum limits for severance compensation. The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (and subsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well as functions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of office holders, including: ● recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); ● recommending to the board of directors periodic updates to the compensation policy; ● assessing implementation of the compensation policy; and ● determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders. Our compensation committee’s responsibilities include: ● reviewing and recommending overall compensation policies with respect to our Chief Executive Officers and other executive officers; ● reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officers and other executive officers including evaluating their performance in light of such goals and objectives; ● reviewing and approving the granting of options and other incentive awards; and ● reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors. Internal Auditor Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation of the audit committee. An internal auditor may not be: ● a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; ● a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; ● an office holder (including a director) of the company (or a relative thereof); or ● a member of the company’s independent accounting firm, or anyone on his or her behalf. 77 ● The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. On October 22, 2014, we appointed Mr. Gewirtz Yisrael as our internal auditor. Mr. Gewirtz Yisrael is a certified internal auditor and a partner at Fahn Kanne & Co. Grant Thornton Israel, a certified public accounting firm in Israel. ● The board of directors shall determine the direct supervisor of the internal auditor. The internal auditor is required to submit his findings to the audit committee, unless specified otherwise by the board of directors. Exculpation, Insurance and Indemnification of Directors and Officers Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders. Under the Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification: ● financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be reasonably foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria; ● reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (i) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (A) no indictment was filed against such office holder as a result of such investigation or proceeding; and (B) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (ii) in connection with a monetary sanction; and ● reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent. 78 Under the Companies Law and the Israeli Securities Law 5728-1968 (the “Israeli Securities Law”), a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association: ● a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; ● a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and ● a financial liability imposed on the office holder in favor of a third party. Under our articles of association, we may insure an office holder against the aforementioned liabilities as well as the following liabilities: ● a breach of duty of care to the company or to a third party. ● any other action against which we are permitted by law to insure an office holder; ● expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law including the Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 5771-2011 and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigation expenses and attorney fees; and ● a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law. Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following: ● a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; ● a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder; ● an act or omission committed with intent to derive illegal personal benefit; or ● a fine, civil fine, administrative fine or ransom or levied against the office holder. Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies Law and the Israeli Securities Law, including expenses incurred and/or paid by the office holder in connection with an Administrative Enforcement Procedure. We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articles of association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances. The maximum indemnification amount set forth in such agreements is limited to an amount which shall not exceed 25% of our net assets based on our most recently audited or reviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement 79 In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act of 1933, however, is against public policy and therefore unenforceable. We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, we entered into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by the Companies Law, including with respect to liabilities resulting from the initial public offering in the U.S., to the extent that these liabilities are not covered by insurance. Involvement in Certain Legal Proceedings. To the best of our knowledge, none of our directors or executive officers has, during the past ten years: ● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); ● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; ● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; ● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; ● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or ● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission. 80 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE OFFICER COMPENSATION TABLE The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2022 and 2021. Stock All Other Total Name and Position(s) Year Salary ($ ) Bonus ($) Awards ($) (1) Compensation ($) (2) Compensation ($) Amir Reichman 2022 $ 368,257 $ 182,012 $ 545,538 $ 12,228 $ 1,108,035 Chief Executive Officer and Director 2021 $ 426,904 $ 250,267 $ 572,347 $ 8,682 $ 1,258,200 Tamar Ben-Yedidia 2022 $ 257,225 $ 41,773 $ 48,814 $ 15,926 $ 636,738 Chief Scientist 2021 $ 233,457 $ 39,855 $ 85,852 $ 19,293 $ 378,457 - Elad Mark 2022 $ 233,736 $ 39,216 $ 13,098 $ 4,064 $ 290,114 Chief Operating Officer 2021 $ 202,361 $ 37,511 $ 24,437 $ 21,543 $ 285,852 (1) Represents the grant date fair value of the RSU awards calculated for book purposes in accordance with GAAP. These are non-cash amounts and do not represent actual amounts paid or to be realized. This is a calculation performed for accounting purposes even though recipients may never realize any value from their awards. These RSUs are subject to vesting and limitations on resales. For further information see Note 2 to the financial statements. (2) All other compensation consists of a car allowance. Employment Agreements and Change-in-Control Provisions Mr. Germain Service Agreement We are party to a services agreement with Mr. Germain, pursuant to which he receives a monthly payment of $12,500. Pursuant to this agreement, in May 2019, Mr. Germain was granted an option to purchase 13,071 ADSs at an exercise price of $79.80 per ADS. 25% of the options vested upon approval by shareholders, and the remainder vested in equal increments on each anniversary of the grant date and became fully vested on April 30, 2022. In May 2021, Mr. Germain was granted an option to purchase 16,000 ADSs at an exercise price of $69.50 per ADS, The options vest in equal monthly installments during a period of four (4) years commencing one (1) month following April 6, 2021 and become fully vested on April 6, 2025. The agreement, as amended to date, expires in May 2025 and provides that either party may terminate the agreement upon 90 days’ written notice. In addition, in May 2022 we granted Mr. Germain a cash payment of $90,000, and in March 2023, our compensation committee and board of directors approved a cash payment of $37,500, subject to shareholder approval. 81 Mr. Reichman Employment Agreement Pursuant to his employment agreement entered into with us on January 20, 2021, Mr. Reichman is entitled to an annual gross salary of USD 350,000. During the transition period between January 20, 2021, the date the agreement was signed, and March 2, 2021, Mr. Reichman was entitled to a pro-rated portion of this amount equal to 20% of his monthly salary. The agreement also provides that Mr. Reichman was entitled to a one-time signing bonus at the gross lump sum amount of USD 50,000 and is eligible to receive an annual cash bonus of a gross amount equal to three to six monthly salaries to the extent Mr. Reichman meets annual objectives that shall be approved by the board of directors and by shareholders. It is currently contemplated that the annual bonus would be (i) four monthly salaries for meeting a set of baseline annual objectives, and (ii) three monthly salaries in the case of underperforming compared to such annual objectives, provided the Employee meets the baseline objectives set by the board of directors. Under extraordinary circumstances reflecting performance by Mr. Reichman significantly above all such annual objectives, the board of directors may, in its sole discretion, consider an additional cash bonus of not more than an additional three monthly salaries (up to nine monthly salaries in total). The bonus amounts and annual objectives shall be subject to the terms of the Company’s Compensation Policy from time to time. Furthermore, under the agreement Mr. Reichman is entitled to receive 60,000 restricted share units (the “RSUs”) under the Company’s 2018 Israeli Share Option Plan, which will vest over a period of five years, 20% to vest each year starting on January 20, 2021 (the “Commencement Date”), and would become fully vested, in accordance with the terms of the grant, on January 20, 2026. The ADSs underlying the RSUs may not be sold by Mr. Reichman during the term of his employment except that, commencing on the third anniversary of the Commencement Date, sales may be made pursuant to a Rule 10b5-1 plan, with the number of RSUs sold during any one year period not exceeding five percent of the vested RSUs held by Mr. Reichman at the time of such sales (the “Resale Limits”). If Mr. Reichman’s employment agreement is terminated by the Company for no cause prior to the fifth anniversary of the Commencement Date, the Resale Limits shall terminate. If Mr. Reichman’s employment agreement is terminated by Mr. Reichman or terminated by the Company for cause prior to the fifth anniversary of the Commencement Date, the Resale Limits shall continue until the earlier of (i) one year after such termination, or (ii) the fifth anniversary of the Commencement Date. The RSUs would be subject to accelerated vesting in the event of a change of control. For these purposes, a “change of control” means the first to occur of (i) a sale of all or substantially all of the assets of the Company; (ii) a merger, consolidation, or like transaction of the Company with or into another company; provided, that in the case of either clauses (i) or (ii) the Company’s stockholders of record immediately prior to such transaction will, immediately after such transaction, hold less than fifty percent (50%) of the voting power of the surviving or acquiring entity, and provided further that a change of control shall not include (x) any consolidation, merger or reorganization effected to change the domicile of the Company or (y) any transaction or series of transactions effected principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof; (iii) the acquisition by any person, entity or group not directly or indirectly affiliated with Angels Investments in Hi Tech Ltd. (“Angels”) of more than 50% of the voting power of the Company, in a single or series of related transactions; and (iv) when a person, entity or group not directly or indirectly affiliated with Angels becomes a shareholder that has “control,” as defined in the Israeli Companies Law, 1999. The Company will provide Mr. Reichman other benefits, such as a company car, vacation, sick days, contribution towards work disability insurance, monthly contributions equal to 7.5% of monthly salary to an Education Fund (“Keren Hishtalmut”, a short-term savings plan available in Israel which is tax free to the employee up to a cap determined by law) and a manager’s insurance policy or a pension fund and other benefits and perquisites similar to those of other officers of the Company. Each of Mr. Reichman and the Company may terminate Mr. Reichman’s employment by prior written notice of 60 days. In the event of termination by the Company without cause, the Company will pay Mr. Reichman nine monthly salaries, which includes amounts accrued in a pension insurance policy and amounts required by Israeli law. 82 In May 2022, we granted Mr. Reichman an annual bonus for the year 2021 of $250,266. In March 2023, we granted Mr. Reichman an annual cash bonus for the year 2022 of $182,000, equal to 50% of his annual base compensation) and, subject to shareholder approval, and a grant of 78,125 RSUs that vest in three years. Dr. Ben-Yedidia Employment Agreement Pursuant to her employment agreement entered into with us on March 15, 2005, as amended to date, Dr. Ben-Yedidia is employed on a full-time basis and is currently entitled to a monthly salary of NIS 49,000 plus Company car (approximately $13,500) which also includes monthly contributions equal to 7.5% of her monthly salary to an Education Fund and a manager’s insurance policy and other benefits and perquisites similar to those of other officers of the Company. In addition, we provide Dr. Ben-Yedidia with a leased company car and a mobile phone. Dr. Ben-Yedidia is entitled to 22 annual paid vacation days. Dr. Ben-Yedidia’s employment agreement may be terminated by either us or Dr. Ben-Yedidia upon 120 days’ prior written notice or by us immediately for cause (i.e., termination due to embezzlement of our funds, or the material breach of the terms and conditions of the employment agreement, or if Dr. Ben-Yedidia is involved in an act which constitutes a breach of trust between her and us or constitutes a severe breach of discipline, or conduct causing grave injury to us any, monetarily or otherwise, or Dr. Ben-Yedidia’s inability to carry out her duties for a period exceeding 120 consecutive days, provided that her resumption of duties for a period of less than 15 consecutive days shall not be deemed to have broken the continuity of the aforementioned 120 days). Under her employment agreement, Dr. Ben-Yedidia received options to purchase 25,000 ordinary shares, which were later exchanged for 7,850 RSUs. In addition, in February 2012 our board of directors approved the grant of the following conditioned bonus to Tamar Ben-Yedidia: in the event that we duly enter into one or more material agreement(s) (i.e. an agreement or a series of agreements, pertaining to a transaction with us (or any other entity designated by us for the transaction by us) in connection with the sale of all or substantially all of our assets or a commercialization of one of our products in the field of business, with aggregate proceeds received resultant of such agreement are no less than a sum of $10 million) with any third party during the term of Dr. Ben-Yedidia’s engagement with us or during a period of three years commencing on the date of the termination of the employment agreement by us, Dr. Ben-Yedidia shall be entitled to receive a one-time bonus per material agreement equal to 1.25% of the proceeds received by us as a result of the material agreement. In May 2022, Dr. Ben-Yedidia was granted a 2021 bonus of NIS 140,250 (approximately $43,800), an amount equal to three months’ salary. For the year 2022, Dr. Ben-Yedidia was granted a performance-based incentive package of NIS 147,000 (approximately $42,000), an amount equal to 25% of her annual compensation, and a grant of 20,082 RSUs vesting in three years. Mr. Mark Employment Agreement Pursuant to his employment agreement entered into with us on September 5, 2018. He is currently entitled to a monthly salary of NIS 46,000 (approximately $13,000), which also includes monthly contributions equal to 7.5% of his monthly salary to an Education Fund and a manager’s insurance policy and other benefits and perquisites similar to those of other officers of the Company. In addition, we provide Mr. Mark with a leased company car and a mobile phone. Mr. Mark is entitled to 16 annual paid vacation days. Mr. Mark’s employment agreement may be terminated by either us or Mr. Mark upon 60 days’ prior written notice or by us immediately for cause (i.e., termination due to embezzlement of our funds, or the material breach of the terms and conditions of the employment agreement, or if Mr. Mark is involved in an act which constitutes a breach of trust between his and us or constitutes a severe breach of discipline, or conduct causing grave injury to us any, monetarily or otherwise, or Mr. Mark’s inability to carry out his duties for a period exceeding 120 consecutive days, provided that his resumption of duties for a period of less than 15 consecutive days shall not be deemed to have broken the continuity of the aforementioned 120 days). For the year 2022, Mr. Mark was granted a performance-based incentive package of 138,000 NIS (approximately $39,000), an amount equal to 25% of his annual compensation, and 18,852 RSUs vesting in three years. 83 Outstanding Equity Awards at Fiscal Year End The following table sets forth information regarding equity awards that were made in the option plan to employees and directors: December 31, 2022: Option Awards(1) Stock Awards Name Number of Securities Underlying Unexercised Options, Exercisable Number of Securities Underlying Unexercised Options, Not Exercisable Option Exercise Price Option Expiration Date Number of ADS Units of Stock That Have Not Vested (1) Market Value of ADS Units of Stock That Have Not Vested (2) Amir Reichman - - - - 48,000 142,080 Tamar Ben-Yedidia - - - - 7,850 23,236 Elad Mark - - - - 4,430 13,113 (1) Vests in accordance with the following schedule: Mr. Reichman – 12,000 RSUs vest per year over the next four years; Dr. Ben Yedidia – 750 RSUs will vest in September 2024, 3,350 RSUs will vest in October 2024, and 3,750 RSUs will vest in March 2025; and Mr. Mark – 900 RSUs will vest in October 2024 and 3,530 RSUs will vest in March 2025. (2) Based on the $2.96 closing price of our ADSs on December 30, 2022, as reported by Nasdaq. Director Compensation The following Director Compensation Table sets forth the compensation of our directors for the fiscal year ending on December 31, 2022. Each of our non-management directors receives a cash retainer, meeting participation fees, and equity awards, as detailed below. Fees Earned or Paid in Stock Option Cash Awards Awards Total Name ($) ($)(1) ($)(1) ($) Mark Germain 123,858 - 212,811 336,669 Jay Green 41,981 3,883 26,493 72,358 George H. Lowell 40,604 5,000 22,757 68,361 Morris Laster 51,030 5,000 22,757 78,787 Yael Margolin 51,030 5,000 30,986 87,016 Samuel Moed 43,528 - 449,621 493,149 Adi Raviv 53,954 6,226 32,012 92,192 Avner Rotman 40,604 5,000 30,986 76,590 (1) Represents the grant date fair value of the RSU and option awards calculated for book purposes in accordance with GAAP. These are non-cash amounts and do not represent actual amounts paid or to be realized. This is a calculation performed for accounting purposes even though recipients may never realize any value from their awards. RSUs are subject to vesting and limitations on resale. Options were granted at an exercise price at least equal to market value during the 30 trading days or 30 calendar days prior to approval of the grant by the Board or shareholders, as the case may be. Options are subject to vesting and other limitations on sales. For further information see Note 2 to the financial statements. The following table sets forth the range of exercise prices of the options held by directors and the market value of the vested RSU awards held by directors as of December 31, 2022: Market Value of Vested Name Option Exercise Price ($) RSUs At December 31, 2022 ($) (a) Mark Germain 69.5 - 85.8 - Jay Green 29.36 (b) George H. Lowell 69.50 - 7.76 (b) Morris Laster 69.50 - 79.76 (b) Yael Margolin 69.50 - 72.8 (b) Samuel Moed 69.50 - 72.8 0 Adi Raviv 69.50 - 80.76 (b) Avner Rotman 69.50 - 72.8 (b) Amir Reichman - 35,520 (a) Based on the closing price of the ADSs on December 31, 2022, $2.96. (b) Less than $1,000. 84 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth certain information as of March 15, 2023 concerning the beneficial ownership of ADSs: (i) each director and director nominee, (ii) each Named Executive Officer in the Summary Compensation Table under “Executive Compensation” above, (iii) all executive officers and directors as a group, and (iv) each person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner of 5% or more of our ADSs. The address for each of the persons below who are beneficial owners of 5% or more of our ADSs is our corporate address at BiondVax Pharmaceuticals Ltd., Jerusalem BioPark, 2nd floor, Hadassah Ein Kerem Campus, Jerusalem, Israel. The information with respect to beneficial ownership of ADSs by our major shareholders is given based on information reported in such shareholder’s Schedule 13G or Schedule 13D, except where more updated information was provided to us by the shareholders. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ADSs. ADSs issuable under share options or other conversion rights that were exercisable within 60 days after March 31, 2023, are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options or other conversion rights but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The percentage of ADSs beneficially owned is based on 3,284,058 ADSs outstanding as of March 31, 2023. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all ADSs that they beneficially own. None of our shareholders has different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled, directly or indirectly, by another corporation or by any foreign government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. Except as otherwise indicated in the footnotes to this table, we believe the persons named in this table have sole voting and investment power with respect to all the ordinary shares indicated. 85 Percent of ADSs Class % Directors and Executive Officers Avner Rotman (1) 4,314 * George H. Lowell (2) 4,854 * Uri Ben-Or - * Tamar Ben-Yedidia - * Elad Mark - * Mark Germain (3) 21,738 * Morris Laster (4) 3,966 * Adi Raviv (5) 3,966 * Yael Margolin (6) 3,966 * Sam Moed (7) 7,267 * Amir Reichman (8) 12,000 * Jay Green (9) 1,417 * All executive officers and directors as a group (12 people) 63,488 * 5% Shareholders Angels Investments in Hi Tech Ltd. 427,404 12.77 % Daniel Stone 298,150 8.91 % Sabby Volatility Warrant Master Fund, Ltd (10) 228,329 6.83 % * Less than 1%. (1) Consists of 514 ADSs, options to purchase 3,606 ADSs and 194 ADSs issuable upon settlement of vested RSUs. The ADS options are comprised of options to purchase (i) 1800 ADSs at an exercise price per ADS of $72.8 that expire in March 2030 and (ii) 1,806 ADSs at an exercise price per ADS of $69.5 that expire in April 2031. (2) Consists of 1,054 ADSs, options to purchase 3,606 ADSs and 194 ADSs issuable upon settlement of vested RSUs. The options are comprised of options to purchase (i) 1,800 ADSs at an exercise price per ADS of $79.60 that expire in March 2030 and (ii) 3,806 ADSs at an exercise price per ADS of $69.50 that expire in April 2031. (3) Consists of options to purchase 21,738 ADSs. The options are comprised of ADS options to purchase (i)13,071 ADSs at an exercise price per ADS of $85.80 that expire in May 2029 and (ii) 8,667 ADSs at an exercise price per ADS of $69.50 that expire in April 2031. (4) Consists of 167 ADSs, options to purchase 3,606 ADSs and 194 ADSs issuable upon settlement of vested RSUs. The options are comprised of options to purchase (i) 1,800ADS at an exercise price per ADS of $79.76 that expire in March 2030 and (ii) 1,806 shares at an exercise price per ADS of $69.5 that expire in April 2031. (5) Consists of 167 ADSs, options to purchase 3,606 ADSs and 194 ADSs issuable upon settlement of vested RSUs. The options are comprised of options to purchase (i) 1,800 ADSs at an exercise price per ADS of $80.76 that expire in March 2030 and (ii) 1,806 ADSs at an exercise price per ADS of $69.50 that expire in April 2031. (6) Consists of 167 ADSs, options to purchase 3,606 ADSs and 194 ADSs issuable upon settlement of vested RSUs. The options are comprised of options to purchase (i) 1,800 ADSs at an exercise price per ADS of $80.76 that expire in March 2030 and (ii) 1,806 ADSs at an exercise price per ADS of $69.50 that expire in April 2031. (7) Consists of options to purchase 7,267 ADSs. The options are comprised of options to purchase (i) 1,800 ADSs at an exercise price per ADS of $72.80 that expire in March 2030 and (ii) 5,467 ADSs at an exercise price per ADS of $69.50 that expire in August 2030. 86 (8) Consists of 12,000 ADSs issuable upon settlement of vested RSUs. (9) Consists of options to purchase 1,181 ADS at an exercise price per ADS of $29.36 per ADS that expire in December 2031 and 236 ADSs issuable upon settlement of vested RSUs. (10) Sabby Management, LLC is the investment manager of Sabby Volatility Warrant Master Fund, Ltd. and shares voting and investment power with respect to these shares in this capacity. As manager of Sabby Management, LLC, Hal Mintz also shares voting and investment power on behalf of Sabby Volatility Warrant Master Fund, Ltd. The address of the Sabby Volatility Warrant Master Fund, Ltd. is c/o c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman KY1-9007, Cayman Islands. Each of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over the securities listed except to the extent of their pecuniary interest therein. Includes ADSs exercisable upon exercise of warrants to acquire ADSs. The terms of the warrants preclude a holder thereof from exercising such holder’s warrant, if after giving effect to the issuance of ordinary shares upon such exercise, the holder (together with the holder’s affiliates and any other persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 9.99% of the number of ordinary shares outstanding immediately after giving effect to the issuance of ordinary shares issuable upon such exercise subject to certain exceptions. Changes in Control We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K. Equity Compensation Plan Information 2005 Israeli Share Option Plan The 2005 Israeli Share Option Plan (the “2005 Plan”) permits grants of options to employees, directors, consultants, service providers and other entities which the board shall decide their services are considered valuable to the Company. Options granted under the 2005 Plan are subject to applicable vesting schedules and generally expire 10 years from the grant date. Upon the termination of a recipient’s engagement with us for any reason other than death, disability or for cause, all unvested options allocated shall automatically expire and all vested options allocated will automatically expire 90 days after the termination unless expired earlier due to their term. If the recipient’s engagement was terminated for cause (as defined in the 2005 Plan), the recipient’s right to exercise any unexercised options, awarded and allocated in favor of such recipient, whether vested or not, will immediately cease and expire as of the date of such termination. If the recipient dies or is disabled, any vested but unexercised options will automatically expire 12 months from the termination of the engagement, unless expired earlier due to their term. In the event that options allocated under the 2005 Plan expire or otherwise terminate in accordance with the provisions of the 2005 Plan, such expired or terminated options will become available for future grant awards and allocations under the 2005 Plan. In the event of (i) the sale of all or substantially all of our assets; (ii) a sale (including an exchange) of all or substantially all of our share capital; or (iii) a merger, acquisition or reorganization of the Company with or into another corporation, then, subject to obtaining the applicable approvals of the Israeli tax authorities, unexercised options then outstanding shall be assumed or substituted for an appropriate number of shares of the successor company subject to certain adjustments as determined by the board of directors in its sole discretion. Subject to certain conditions, the board shall also have the power to provide for immediate acceleration in a recipient’s option agreement in the event of such a transaction. As of March 31, 2023, the Company had outstanding grants under the 2005 Option Plan to acquire 7,933,400 ordinary shares. 87 2018 Israeli Share Option Plan The 2018 Israeli Share Option Plan (the “2018 Plan”) permits the granting of options, restricted share units or allotment of shares or other equity-based awards to employees, directors, consultants, service providers and other entities which the board shall decide their services are considered valuable to the Company, under similar terms and conditions to the 2005 Plan. Options granted under the 2018 Plan are subject to applicable vesting schedules and generally expire 10 years from the grant date. Upon the termination of a recipient’s engagement with us for any reason other than death, disability or for cause, all unvested options allocated shall automatically expire and all vested options allocated will automatically expire 90 days after the termination, unless expired earlier due to their term, or unless expiration is extended beyond termination under certain circumstance for a period not to exceed the term of the options, such as was recently approved by shareholders in connection with option grants to directors. If the recipient’s engagement was terminated for cause (as defined in the 2018 Plan), the recipient’s right to exercise any unexercised options, awarded and allocated in favor of such recipient, whether vested or not, will immediately cease and expire as of the date of such termination. If the recipient dies or is disabled, any vested but unexercised options will automatically expire 12 months from the termination of the engagement, unless expired earlier due to their term. In the event that options allocated under the 2018 Plan expire or otherwise terminate in accordance with the provisions of the 2018 Plan, such expired or terminated options will become available for future grant awards and allocations under the 2018 Plan. Restricted share units granted under the 2018 Plan are subject to applicable vesting schedules, and the Board may condition the grant or vesting of restricted share units upon the attainment of specified performance targets or such other factors as the Board may determine, in its sole discretion. In the event of (i) the sale of all or substantially all of our assets; (ii) a sale (including an exchange) of all or substantially all of our share capital; or (iii) a merger, acquisition or reorganization of the Company with or into another corporation, then, subject to obtaining the applicable approvals of the Israeli tax authorities, unexercised awards then outstanding shall be assumed or substituted for an appropriate number of shares of the successor company subject to certain adjustments as determined by the board of directors in its sole discretion. Subject to certain conditions, the board shall also have the power to provide for immediate acceleration in a recipient’s award agreement in the event of such a transaction. The Company has reserved an unlimited amount of the issued and outstanding capital of the Company available for issuance under the 2018 Plan. As of March 31, 2023, the Company had awarded grants under the Option Plan to acquire 63,398,080 ordinary shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR INDEPENDENCE. a. Related parties consist of nine directors (including the CEO) serving on the Company’s board of directors and three key officers. b. Transactions with related parties: For information regarding transactions with our officers: please see Item 11 Executive Compensation - Employment Agreements and Change-in-Control Provisions. 88 c. Balances with related parties: Payables Key management personnel: December 31, 2021 721 December 31, 2022 531 d. Transactions with related parties: Research and development Marketing, general and administrative Key management personnel: 2021 463 4,197 2022 521 2,500 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, served as our independent registered public accountants for the years ended December 31, 2022 and 2021. Audit Fees For the Company’s fiscal years ended December 31, 2022 and 2021, we were billed approximately $126,000 and $65,000, respectively, for professional services rendered by our independent auditors for the audit and review of our financial statements. Audit-Related Fees For the Company’s fiscal years ended December 31, 2022 and 2021, there were $49,000 and $9,000 for professional services rendered by our independent auditors for tax compliance, tax advice, and tax planning. All Other Fees For the Company’s fiscal years ended December 31, 2022 and 2021, we were billed approximately $50,000 and $67,500, respectively, for professional services rendered by our independent auditors related to the Registration Statement on Form F-1 and amendments thereto filed with the SEC in those years. Pre-Approval Policies All of the above services and fees were reviewed and approved by the entire Board. No services were performed before or without approval. 89 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. Exhibit No. Exhibit Description 3.1# Articles of Association of BiondVax Pharmaceuticals Ltd., 4.1# Description of Securities 4.2 Form of Pre-Funded Warrant, (incorporated by reference to Exhibit 4.16 to the Registration Statement on Form F-1/A filed with the SEC on December 14, 2022). 4.3 Form of Exchangeable Warrant, (incorporated by reference to the Registration Statement on Form F-1/A filed with the SEC on December 14, 2022). 4.4 Form of Non-Exchangeable Warrant, (incorporated by reference to the Registration Statement on Form F-1/A filed with the SEC on December 14, 2022). 10.1 Form of Deposit Agreement between BiondVax Pharmaceuticals Ltd., The Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015). 10.2** 2005 Share Incentive Plan, (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 20-F filed with the SEC on June 12, 2020). 10.3** 2018 Share Incentive Plan, (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 20-F filed with the. SEC on June 12, 2020). 10.4** Compensation Policy, (incorporated by reference to Appendix B to the Exhibit 99.1 to the Form 6-K filed with the SEC on November 22, 2021). 10.5** Employment Agreement, dated January 20, 2021, between BiondVax Pharmaceuticals Ltd. And Mr. Amir Reichman, (incorporated by reference to Exhibit 4.4 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022). 10.6** Employment Agreement dated March 15, 2005, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar Ben-Yedidia, (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014). 10.7** Addendum to Employment Agreement dated April 1, 2012, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar-Ben Yedidia, (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014). 10.8**# Addendum to Employment Agreement dated May 28, 2015, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar-Ben Yedidia. 10.9**# Addendum to Employment Agreement dated April 1, 2012, between BiondVax Pharmaceuticals Ltd. and Dr. Tamar-Ben Yedidia 10.10**# Employment Agreement dated September 5, 2018, between BiondVax Pharmaceuticals Ltd. and Elad Mark. 10.11 Form of Indemnification Letter (unofficial English translation from Hebrew original), (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014). 10.12 Form of Indemnification and Exculpation Agreement, (incorporated by reference to Exhibit 10.18 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015). 10.13 Finance Contract between BiondVax Pharmaceuticals Ltd. and the European Investment Bank, (incorporated by reference to Exhibit 99.2 to Form 6-K filed with the SEC on June 19, 2017). 10.14 Amendment No. 1, dated January 11, 2021, to Finance Contract dated June 19, 2017, by and between BiondVax Pharmaceuticals Ltd. and the European Investment Bank, (incorporated by reference to Exhibit 4.16 to the Annual Report on Form 20-F filed with the SEC on May 13, 2021). 10.15 Lease Agreement dated July 10, 2017 between BiondVax Pharmaceuticals Ltd. and Unihad BioPark Ltd., (incorporated by reference to Exhibit 4.19 to the Form 20-F filed with the SEC on April 30, 2018). 10.16 Services Agreement between BiondVax Pharmaceuticals Ltd. and Mark Germain, (incorporated by reference to Appendix C to the Form 6-K filed with the SEC on April 23, 2019). 10.17+ License Agreement, dated December 11, 2021, between BiondVax Pharmaceuticals Ltd. and Max-Planck-Innovation GmbH, (incorporated by reference to Exhibit 4.16 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022). 10.18+ Accompanying Research Collaboration Agreement, dated December 11, 2021, between BiondVax Pharmaceuticals Ltd., Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen, (incorporated by reference to Exhibit 4.17 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022). 90 10.19+ Research Collaboration Agreement, dated March 23, 2022, between BiondVax Pharmaceuticals Ltd., Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen, (incorporated by reference to Exhibit 4.18 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022). 10.20+ Form of License Agreement between BiondVax Pharmaceuticals Ltd., Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen (incorporated by reference to Exhibit 4.19 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022). 10.21# Amendment Agreement dated August 9, 2022, to Finance Contract dated June 19, 2017 and as amended from time to time, by and between BiondVax Pharmaceuticals Ltd. and the European Investment Bank, 14.1# Code of Conduct 23.1# Consent of Kost Forer Gabbay & Kasierer, Certified Public Accountant (Isr.), a member of Ernst & Young Global, independent registered public accounting firm for the Registrant 31.1# Certification of Principal Executive Officer of BiondVax Pharamaceuticals Ltd. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2# Certification of Principal Financial and Accounting Officer of BiondVax Pharamaceuticals Ltd. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1## Certification of Principal Executive Officer of BiondVax Pharamaceuticals Ltd. pursuant to Section 906 of the Sarbanes-Oxley act of 2002 32.2## Certification of Principal Financial and Accounting Officer of BiondVax Pharamaceuticals Ltd. pursuant to Section 906 of the Sarbanes-Oxley act of 2002 101.INS# Inline XBRL Instance Document. 101.SCH# Inline XBRL Taxonomy Extension Schema Linkbase Document. 101.CAL# Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF# Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB# Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE# Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104# Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). # Filed herewith. ## In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not deemed filed for purposes of Section 18 of the Exchange Act. ** Indicates a management contract or compensatory plan or arrangement. + Certain confidential portions of this exhibit have been redacted from the publicly filed document because such portions are (i) not material and (ii) would be competitively harmful if publicly disclosed. 91 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 17, 2023 BiondVax Pharmaceuticals Ltd. By: /s/ Amir Reichman Amir Reichman Chief Executive Officer 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 capacity and on the dates indicated. Name Capacity Date /s/ Amir Reichman Chief Executive Officer and Director April 17, 2023 Amir Reichman (Principal Executive Officer) /s/ Uri Ben-Or Chief Financial Officer April 17, 2023 Uri Ben-Or (Principal Financial Officer and Principal Accounting Officer) /s/ Mark Germain Chairman of the Board of Directors April 17, 2023 Mark Germain /s/ Jay Green Director April 17, 2023 Jay Green /s/ George H. Lowell Director April 17, 2023 George H. Lowell /s/ Morris Laster Director April 17, 2023 Morris Laster /s/ Yael Margolin Director April 17, 2023 Yael Margolin /s/ Samuel Moed Director April 17, 2023 Samuel Moed /s/ Adi Raviv Director April 17, 2023 Adi Raviv /s/ Avner Rotman Director April 17, 2023 Avner Rotman 92 BIONDVAX PHARMACEUTICALS LTD. AUDITED FINANCIAL STATEMENTS December 31, 2022 and 2021 BIONDVAX PHARMACEUTICALS LTD. Index to the Financial Statements (Audited) Page Report of Independent Registered Public Accounting Firm PCAOB ID: 1281 F-2 Balance Sheets F-3 – F-4 Statements of Operations F-5 Statements of Comprehensive Loss F-6 Statements of Changes in Shareholders’ Equity F-7 Statements of Cash Flows F-8 – F-9 Notes to Financial Statements F-10 – F-29 - - - - - - - - - - - - - - F- 1 Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A Tel-Aviv 6492102, Israel Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of BIONDVAX PHARMACEUTICALS LTD. Opinion on the Financial Statements We have audited the accompanying balance sheets of Biondvax Pharmaceuticals Ltd. (the Company) as of December 31, 2022 and 2021, the related statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2022 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. Liquidity and Capital Resources Description of the Matter As discussed in Note 1 to the financial statements, the Company has incurred losses, and has not yet started recognizing revenues from sales. As of December 31, 2022, the Company's cash position (cash and cash equivalents) totaled $14,075. In the year ended December 31, 2022, the Company had an operating loss of $5,796 and negative cash flows from operating activities of $7,265 million. The Company's operations are dependent on its existing working capital resources and additional sources of capital and financing. This dependency will continue until the Company will be able to completely finance its operations by generating revenue from its products and to raise funds (through public or private securities offerings, debt financings, government funding or grants, or other sources) to support the ongoing advancement of its clinical trials and corporate activities. Also, the Company’s board of directors approved a cost saving plan, to be implemented if and as required, to allow the Company to continue its operations and meet its cash obligations. The Company and the board of directors believe that its existing financial resources and its operating plans, including the effects of the costs saving plan, will be adequate to satisfy its expected liquidity requirements for a period of at least twelve months from the end of the filing date. Liquidity and Capital Resources are a critical audit matter due to the subjective judgments and various assumptions required by management concerning the level and timing of cash receipts and cash outlays for operating expenses and capital expenditures, including a cost saving plan and to conclude the Company would have sufficient liquidity to sustain itself for at least a year beyond the date of the issuance of the financial statements. This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions. Additionally, the relevance of management’s liquidity conclusions to the users of the financial statements also impacted our assessment of these circumstances as a critical audit matter. How We Addressed the Matter in Our Audit Addressing the matter involved performing procedures and evaluating audit evidence in connection with our overall opinion on the financial statements. Our audit procedures to evaluate the significant judgments and assumptions made by management included, among others, inquiries with management, testing the reasonableness of the forecasted operating expenses compared to historic amounts and the underlying management assumptions, including the assumptions used for the saving plan, reconsidering certain prior management forecasted amounts to evaluate whether those forecasted amounts approximated the ultimate actual results. This was performed in consideration of management’s ability to put forth reasonable estimates and evaluating the adequacy of the Company’s disclosure of these circumstances in the financial statements. Additionally, these procedures included evaluating the sufficiency of the company's liquidity disclosure included in the notes to the financial statements. /s/ KOST FORER GABBAY & KASIERER A Member of Ernst & Young Global We have served as the Company’s auditor since 2005. Tel-Aviv, Israel April 17, 2023 F- 2 BIONDVAX PHARMACEUTICALS LTD. BALANCE SHEETS U.S. dollars in thousands (except share and per share data) December 31, 2022 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 14,075 $ 17,374 Restricted cash 140 143 Prepaid expenses and other receivables 155 326 Total current assets 14,370 17,843 NON-CURRENT ASSETS: Property, plant and equipment, net 11,245 12,386 Operating lease right-of-use assets 1,452 1,807 Total non-current assets 12,697 14,193 Total assets $ 27,067 $ 32,036 The accompanying notes are an integral part of the financial statements. F- 3 BIONDVAX PHARMACEUTICALS LTD. BALANCE SHEETS U.S. dollars in thousands (except share and per share data) December 31, 2022 2021 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Trade payables $ 716 $ 999 Operating lease liabilities 382 375 Other payables 1,240 1,070 Total current liabilities 2,338 2,444 NON-CURRENT LIABILITIES: Warrants liability 5,329 - Loan from others 20,082 27,164 Non-current operating lease liabilities 1,078 1,446 Total non-current liabilities 26,489 28,610 CONTINGENT LIABILITIES AND COMMITMENTS SHAREHOLDERS’ EQUITY (DEFICIT): Ordinary shares of no par value: Authorized: 20,000,000,000 shares at December 31, 2022 and 1,800,000,000 at December 31, 2021; Issued and outstanding 989,290,784 shares at December 31, 2022 and 739,048,544 shares at December 31, 2021 - - Additional paid-in capital 116,082 113,076 Accumulated deficit ( 115,835 ) ( 110,039 ) Accumulated other comprehensive loss ( 2,007 ) ( 2,055 ) Total shareholders’ equity (deficit) ( 1,760 ) 982 Total liabilities and shareholders’ equity $ 27,067 $ 32,036 The accompanying notes are an integral part of the financial statements. F- 4 BIONDVAX PHARMACEUTICALS LTD. STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share and per share data) Year ended December 31, 2022 2021 Research and development. $ 5,765 $ 3,249 Marketing, general and administrative 5,296 7,625 Other income - ( 12 ) Total operating loss 11,061 10,862 Financial income, net ( 5,265 ) ( 2,656 ) Net loss $ 5,796 $ 8,206 Net loss per share attributable to ordinary shareholders, basic and diluted ( 0.01 ) ( 0.02 ) Weighted average number of shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted 754,076,407 564,575,967 The accompanying notes are an integral part of the financial statements. F- 5 BIONDVAX PHARMACEUTICALS LTD. STATEMENTS OF COMPREHENSIVE LOSS U.S. dollars in thousands (except share and per share data) Year ended December 31, 2022 2021 Net loss $ 5,796 $ 8,206 Other comprehensive income: Foreign currency translation adjustments ( 48 ) ( 39 ) Total comprehensive loss $ 5,748 $ 8,167 The accompanying notes are an integral part of the financial statements. F- 6 BIONDVAX PHARMACEUTICALS LTD. STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY U.S. dollars in thousands (except share and per share data) Ordinary shares Additional Accumulated Total Number Amount paid-in capital comprehensive loss Accumulated deficit shareholders’ equity Balance as of December 31, 2020 461,285,824 $ - $ 88,889 $ ( 2,094 ) $ ( 101,833 ) $ ( 15,038 ) Issuance of shares, net of issuance costs of $ 424 277,762,720 - 21,430 - - 21,430 Share-based compensation - - 2,757 - - 2,757 Other comprehensive income - - - 39 - 39 Net loss - - - - ( 8,206 ) ( 8,206 ) Balance as of December 31, 2021 739,048,544 - 113,076 ( 2,055 ) ( 110,039 ) 982 Issuance of shares, net of issuance costs of $ 129 168,104,520 - 1,154 - - 1,154 Exercise of warrants 75,060,000 - 250 - - 250 Share-based compensation 7,077,720 1,602 - - 1,602 Other comprehensive income - - - 48 - 48 Net loss - - - - ( 5,796 ) ( 5,796 ) Balance as of December 31, 2022 989,290,784 $ - $ 116,082 $ ( 2,007 ) $ ( 115,835 ) $ ( 1,760 ) The accompanying notes are an integral part of the financial statements. F- 7 BIONDVAX PHARMACEUTICALS LTD. STATEMENTS OF CASH FLOWS U.S. dollars in thousands (except share and per share data) Year ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 5,796 ) $ ( 8,206 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property, plant and equipment 562 471 Expense of in-process research and development 209 - Financial income related to loan from others ( 4,113 ) ( 3,152 ) Share-based compensation 1,602 2,757 Decrease in other receivables 140 59 Changes in operating lease right-of-use assets 153 148 Increase (decrease) in trade payables ( 175 ) 3 Changes in operating lease liabilities ( 156 ) ( 150 ) Increase in other payables 309 644 Net cash used in operating activities ( 7,265 ) ( 7,426 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 836 ) ( 139 ) Net cash used in investing activities $ ( 836 ) $ ( 139 ) The accompanying notes are an integral part of the financial statements. F- 8 BIONDVAX PHARMACEUTICALS LTD. STATEMENTS OF CASH FLOWS U.S. dollars in thousands (except share and per share data) Year ended December 31 2022 2021 Cash flows from financing activities: Proceed from issuance of warrants $ 5,844 $ - Proceeds from issuance of shares, net 932 21,430 Net cash provided by financing activities 6,776 21,430 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1,977 ) 575 Increase (decrease) in cash, cash equivalents and restricted cash ( 3,302 ) 14,440 Cash, cash equivalents and restricted cash at beginning of year 17,517 3,077 Cash, cash equivalents and restricted cash at end of year $ 14,215 $ 17,517 Supplementary disclosure of cash flows activities: (1) Cash paid during the year for: Interest $ 916 $ - (2) Non-cash transactions: Exercise of warrants liability to equity $ 250 $ - Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 14,075 $ 17,374 Restricted cash 140 143 Cash, cash equivalents and restricted cash $ 14,215 $ 17,517 The accompanying notes are an integral part of the financial statements. F- 9 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 1:- GENERAL a. BIONDVAX PHARMACEUTICALS LTD.(the “Company”), is focused on developing and ultimately commercializing products for prevention and treatment of infectious diseases and related illnesses. The Company was incorporated on July 21, 2003 in Israel, and started its activity on March 31, 2005. The Company’s principal executive offices and main laboratory are located at Jerusalem, Israel. b. On December 22, 2021, the Company signed an exclusive, worldwide, license agreement with the Max Planck Society (“MPG”), the parent organization of the Max Planck Institute for Multidisciplinary Sciences, and the University Medical Center Göttingen (“UMG”), both in Germany, for the development and commercialization of an innovative Covid-19 NanoAb therapy and an accompanying research collaboration agreement with MPG and UPG in support of the abovementioned development of a COVID-19 NanoAb. The agreements became effective January 1, 2022 and provide for an upfront payment, development and sales milestones and royalties based on sales and sharing of sublicense revenues. c. On March 23, 2022, the Company executed an additional research collaboration agreement (RCA) with MPG and UMG covering discovery, selection and characterization of NanoAbs for several other disease indications with large and growing markets that leverage their unique and strong binding affinity, stability at high temperatures, and potential for more effective and convenient routes of administration. These targets are the basis for validated and currently marketed monoclonal antibodies, including for conditions such as psoriasis, asthma, macular degeneration, and psoriatic arthritis. According to the contract, BiondVax will have an exclusive option for exclusive license agreement for the development and commercialization of each of the NanoAbs covered by the agreement with MPG and UMG. d. As of December 31, 2022, the Company's cash position (cash and cash equivalents) totaled $ 14,075 . In the year ended December 31, 2022, the Company had an operating loss of $ 5,796 and negative cash flows from operating activities of $ 7,265 million. The Company’s current operating budget includes various assumptions concerning the level and timing of cash receipts and cash outlays for operating expenses and capital expenditures, including a cost saving plan. The Company is planning to finance its operations from its existing working capital resources and additional sources of capital and financing. However, there is no assurance that additional capital and/or financing will be available to the Company, and even if available, whether it will be on terms acceptable to the Company or in amounts required. Accordingly, the Company’s board of directors approved a cost saving plan, to be implemented if and as required, in whole or in part, at its discretion, to allow the Company to continue its operations and meet its cash obligations. The cost saving plan consists of cutting expenditures by means of further efficiencies and synergies, which include mainly the following steps: reduction in headcount and postponing or cancelling capital expenditures that would not be required for the implementation of the revised business plan. Nevertheless, the Company and the board of directors believe that its existing financial resources and its operating plans, including the effects of the costs saving plan, will be adequate to satisfy its expected liquidity requirements for a period of at least twelve months from the end of the filing date. F- 10 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. Basis of presentation of the financial statements: The Company’s financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP) as set forth in the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC). Prior to 2022, the Company prepared its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), as permitted in the United States based on the Company’s qualification as a “foreign private issuer” under the rules and regulations of the U.S Securities and Exchange Commission (the SEC). In connection with the loss of the Company's status as a foreign private issuer effective on January 1, 2023, the Company, as a domestic filer, prepared its financial statements in accordance with U.S. GAAP. b. Use of estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates. c. Functional and reporting currency: The functional currency is the currency that best reflects the economic environment in which the Company operates and conducts their transactions. Most of the Company’s costs are incurred in NIS. The Company’s management believes that the functional currency of the Company is the NIS. Accordingly, monetary accounts maintained in currencies other than the NIS are remeasured into NIS in accordance with ASC No. 830 “Foreign Currency Matters”. All transaction gains and losses of the remeasured monetary balance sheet items are reflected in the statements of operations as financing income or expenses as appropriate. Due to the loss of the Company's status as a foreign private issuer effective on January 1, 2023, the Company, as a domestic filer, changed its reporting currency from NIS to U.S. dollar. The change in reporting currency was applied retrospectively. Financial statements for all periods presented have been recast into U.S. dollars. In applying the change in reporting currency, all assets and liabilities of the Company’s operations were translated from their NIS functional currency into U.S. dollars using the exchange rates in effect on the balance sheet date, and shareholders’ equity were translated at the historical rates. Opening shareholders’ equity at August 1, 2018 has been translated at the historic rate on that date and any other movements in shareholders’ equity during the period from August 1, 2018 to December 31, 2022 were translated using the appropriate historical rates at the date of the respective transaction. All other revenues, expenses and cash flows were translated at the average rates during the reporting periods presented. The resulting translation adjustments are reported under comprehensive income as a separate component of shareholders’ equity. F- 11 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) d. Comprehensive income: The Company accounts for comprehensive income in accordance with ASC 220, "Comprehensive Income". Comprehensive income generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. e. Cash equivalents: Cash equivalents are short-term highly liquid deposits that are readily convertible to cash with original maturities of three months or less, at the date acquired. f. Restricted cash: Restricted cash are deposits with original maturities of three months or less and are used as security for the Company’s credit cards. Restricted cash amounted to $ 140 and $ 143 as of December 31, 2022 and 2021, respectively. g. Property, plant and equipment: Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and any related investment grants, excluding day-to-day servicing expenses. Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows: % Laboratory equipment 10 - 15 Office, furniture and equipment 6 - 33 Computers and Cars 33 Leasehold improvements (* ) Manufacturing plant in process (** ) (*) Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term or the expected life of the improvement. (**) As of December 31, 2022, the manufacturing plant is under validation process and therefore is not yet ready for production. Depreciation of the manufacturing plant will commence upon completion of the validation process. F- 12 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.) h. Impairment of long-lived assets: The Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360 “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets through an impairment charge, to their estimated fair values. During the years ended December 31, 2022 and 2021, no impairment indicators have been identified. i. Government grants: The Company received royalty-bearing grants from the Israel Innovation Authority ("IIA") for approved research and development projects and, in return, undertook to pay royalties amounting to 3 %- 5 % on the revenues derived from sales of products or services developed in whole or in part using these grants. These grants are recognized at the time the Company is entitled to such grants on the basis of the costs incurred as provided by the relevant agreement and included as a deduction from research and development expenses. The Company recognized the amounts of grants received in research and development as a reduction from research and development expenses. For the years ended December 31, 2022 and 2021, no funds were received from the IIA j. Research and development expenses: Research and development expenses net of grants , are recognized in the statements of operations when incurred. Research and development expenses consist of personnel costs (including salaries, benefits and share-based compensation), materials, consulting fees and payments to subcontractors, costs associated with obtaining regulatory approvals, and executing pre-clinical and clinical studies. In addition, research and development expenses include overhead allocations consisting of various administrative and facilities related costs. The Company charges research and development expenses as incurred. k. Acquired In-Process Research and Development: In an asset acquisition, the initial costs of rights to in-process research and development projects acquired are expensed as R&D in the statements of operations, unless the in-process research and development has an alternative future use. In a business combination, the fair value of in-process research and development is capitalized as an indefinite-lived intangible asset, regardless of whether the in-process research and development asset has an alternative future use. F- 13 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.) In accordance with the agreement with MPG disclosed in note 1b, the Company issued 150,000 ADSs at no cost to MPG as an upfront payment for the license. The ADSs are restricted for a period of three years. The Company evaluated the fair value of the license at $ 209 . The fair value was calculated by an independent valuation, at a discount rate of 31 % based on the following assumptions: Stock price 1.48 variance 150 % Risk free interest 1 % The fair value of the license in the amount of $ 209 was recorded as expense in the statement of operating income for the year ended 2022. l. Share-based compensation: The Company accounts for share-based compensation in accordance with ASC No. 718, “Compensation - Stock Compensation”, which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the award is recognized as an expense over the requisite service periods, which is the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service. The Company has selected the binominal option-pricing model as the most appropriate fair value method for its option awards. The Binomial model takes into account variables such as volatility, dividend yield rate, and risk-free interest rate and also allows for the use of dynamic assumptions and considers the contractual term of the option, and the probability that the option will be exercised prior to the end of its contractual life. The fair value of restricted shares is based on the closing market value of the underlying shares at the date of grant. The Company estimates the forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures. Stock-based compensation cost is measured at the grant date, based on the fair value of the award. The Company recognizes compensation expense for the value of its awards, which have graded vesting, on a straight-line basis when the only condition to vesting is continued service. F- 14 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.) m. Severance pay and retirement plans: The majority of the Company’s employees who are Israeli citizens have subscribed to Section 14 of Israel’s Severance Pay Law, 5723-1963 (the “Severance Pay Law”). Pursuant to Section 14 of the Severance Pay Law, employees covered by this section are entitled to monthly deposits at a rate of 8.33 % of their monthly salary, made on their behalf by the Company. Payments made to employees in accordance with this section release the Company from any future severance liabilities with respect to such employees. Neither severance pay liability nor severance pay fund under Section 14 of the Severance Pay Law is recorded on the Company’s balance sheets. Severance expense for the years ended December 31, 2022 and 2021, amounted to $ 288 and $ 177 , respectively. n. Fair value of financial instruments: The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data are available. The carrying amounts of cash and cash equivalents, restricted cash, prepaid expenses and other receivables, trade payables and other current payables approximate their fair value due to the short-term maturity of such instruments. F- 15 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.) o. Leases: The Company accounts for leases according to ASC 842, “Leases”. The Company determines if an arrangement is a lease and the classification of that lease at inception. The Company elected the practical expedient for lease agreements with a term of twelve months or less and does not recognize right-of-use (“ROU”) assets and lease liabilities in respect of those agreements. The Company also elected the practical expedient to not separate lease and non-lease components for its leases. An ROU asset represents the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease agreement. An ROU asset is measured based on the discounted present value of the remaining lease payments, plus any initial direct costs incurred and prepaid lease payments, excluding lease incentives. The lease liability is measured at lease commencement date based on the discounted present value of the remaining lease payments. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. Certain leases include options to extend the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option. Payments under the Company’s lease arrangements are primarily fixed however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease right-of-use assets and liabilities. p. Contingencies: The Company is currently involved in various commitment and contingent liabilities. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss (see Note 8). F- 16 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) q. Income taxes: The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”, which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, to reduce deferred tax assets to their estimated realizable value, if needed. ASC 740 offers a two-step approach for recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50 % likely to be realized upon ultimate settlement. As of December 31, 2022, and 2021 no liability for unrecognized tax benefits was recorded as a result of ASC 740. r. Basic and diluted net loss per share: The Company’s basic net loss per share is calculated by dividing net loss attributable to ordinary shareholders by the weighted-average number of shares of ordinary shares outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive ordinary shares are anti-dilutive. s. Warrants: The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own common stock. Warrants that determined to be classified as equity, are recorded as a component of additional paid-in capital. Warrants that determined to be classified as liabilities are recorded at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized in Financial expenses, net in the statements of operations. F- 17 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) t. Recently adopted accounting pronouncements: In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance.” The new standard improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The adoption of this ASU did not have a significant impact on the Company’s financial statements and disclosures. u. Recently issued accounting pronouncements, not yet adopted: In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company has evaluated that the adoption of this ASU will not have a significant impact on the Company’s financial statements and disclosures. NOTE 3:- PREPAID EXPENSES AND OTHER RECEIVABLES December 31, 2022 2021 Government authorities $ 110 $ 98 Prepaid expenses and other 45 228 $ 155 $ 326 F- 18 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 4:- FAIR VALUE MEASUREMENTS In accordance with ASC No. 820, the Company measures warrants liability at fair value classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments The following table presents assets measured at fair value on a recurring basis as of December 31, 2022 and 2021: December 31, 2022 2021 Fair value measurement using input Level 2 Non-current liabilities: Warrants liability $ 5,329 $ - Total liabilities $ 5,329 $ - NOTE 5:- PROPERTY, PLANT AND EQUIPMENT, NET The composition of property, plant and equipment is as follows: December 31, 2022 2021 Cost: Laboratory equipment $ 1,588 $ 887 Computers and Cars 289 294 Office, furniture and equipment 43 45 Leasehold improvements 3,915 4,430 Manufacturing plant in process 7,831 8,861 13,666 14,517 Less - accumulated depreciation ( 2,421 ) ( 2,131 ) Property and equipment, net $ 11,245 $ 12,386 Depreciation expenses amounted to $ 562 and $ 471 for the years ended December 31, 2022 and 2021, respectively. F- 19 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 6:- LEASES The Company has several operating lease agreements that include leases of offices and cars that are used to maintain the Company’s ongoing operation. The leases of the offices and cars are for a period of 10 and 3 years, respectively. Some of these lease agreements include extension options. The Company does not include in the lease term the exercise of extension options unless it is reasonably certain at lease commencement that the extension options will be exercised. Supplemental balance sheet information related to operating leases is as follows: Year ended December 31, 2022 2021 Office Weighted average remaining lease term (in years) 5 6 Weighted average discount rate 8 % 8 % Cars Weighted average remaining lease term (in years) 1.7 2 Weighted average discount rate 18 %- 23 % 18 % Minimum lease payments for the Company’s right of use assets over the remaining lease periods as of December 31, 2022, are as follows: Office Cars 2023 $ 322 $ 74 2024 322 44 2025 322 12 2026 322 - Thereafter 322 - Total undiscounted lease payments 1,610 130 Less - adjustment to discounted lease payments ( 260 ) ( 20 ) Present value of lease liabilities $ 1,350 $ 110 NOTE 7:- OTHER PAYABLES December 31, 2022 2021 Employees and payroll accruals $ 484 $ 709 Accrued expenses 756 361 $ 1,240 $ 1,070 F- 20 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 8:- CONTINGENT LIABILITIES AND COMMITMENTS Since 2006, the Company received approximately $ 5,830 in grants from the Israeli Innovation Authority (IIA), formerly known as the Office of the Chief Scientist. The grants were for research and development of M-001. In return to those grants, the Company undertook to pay royalties amounting to 3 %- 5 % on the revenues derived from sales of products or services developed in whole or in part using these grants. The maximum aggregate royalties paid generally cannot exceed 100 % of the grants received by the Company, plus annual interest generally equal to the 12-month LIBOR applicable to dollar deposits, as published on the first business day of each calendar year. The maximum royalty amounts payable by the Company as of December 31, 2022 is approximately $ 5,830 which represents the total gross amount of grants actually received by the Company from the IIA including accrued interest. As of December 31, 2022, the Company had not paid any royalties to the IIA. In light of the Phase 3 clinical trial results (see also Note 9.c below), the Company does not currently expect any future revenues from M-001 and therefore do not currently expect to make any royalty payments to the IIA and the Company does not record a liability for amounts received from IIA until the related revenues are recognized. In the event of failure of a project that was partly financed by the IIA, the Company will not be obligated to pay any royalties or repay the amounts received. The Company also subject to various other restrictions pursuant to the grant, including limitations on transferring IP developed with grant funds. In light of the Company’s new strategy, it does not expect these restrictions to be material to its ongoing operations. NOTE 9:- LOAN FROM OTHERS. a. On June 19, 2017, the Company entered into a Finance Contract with the European Investment bank (EIB) for a total amount of approximately $22,422 (€ 20,000 ) and up to 50% of the Company's expected cost of developing and marketing the Company’s product candidate, M-001. In addition, as a repayment features, EIB was entitled to receive the higher between 3% of any M-001 sales revenues for a period of ten years, or realizing a cash-on-cash multiple of 2.8 times During 2018, the Company received approximately $ 23,599 (€ 20,000 ) in two tranches of approximately $ 7,080 (€ 6,000 ) and the third tranche of approximately $ 9,439 (€ 8,000 ). On October 7, 2019, the Company received the remaining approximately $ 4,390 (€ 4,000 ). In the event the Company elects to prepay the EIB financing, or in the event the EIB shall demand prepayment following certain events, including a change of control, senior management changes or merger events, the Company shall be required to pay EIB the principal amount of the tranches already paid, or the Prepayment Amount, plus the greater of: (i) the amount, as determined by EIB required in order for the EIB to realize an internal rate of return on the relevant amount prepaid of 20 %; and (ii) the Prepayment Amount. The Finance Contract also stipulates that in the event the EIB demands prepayment of the loan due to any prepayment event to non-EIB lenders, the Company shall be obligated to pay the Prepayment Amount plus an additional reduced amount. In addition, and as consideration for the EIB financing, the EIB shall be entitled to 3 % of any annual M-001 sales revenues. F- 21 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 9:- LOAN FROM OTHERS (Cont.) b. On April 22, 2019, the Committee of EIB Bank agreed to expand the 2017 financing agreement to the Company by an additional approximately $4,502 (€ 4,000) to a total of approximately $27,013 (€ 4,000). An amendment to that effect was signed in June 2019 (the "Amendment"). Those funds were received in October 2019 and will be used in support of the ongoing pivotal, clinical efficacy, Phase 3 trial of BiondVax’s M-001 Universal Flu Vaccine candidate in Europe. According to the Amendment, as repayment features, EIB is entitled to receive the higher between 3% of any M-001 sales revenues for a period of twelve years or realizing a cash-on-cash multiple of 2.8 times c. On October 23, 2020, the Company announced Phase 3 clinical trial results of the M-001 universal vaccine product. The results did not demonstrate a statistically significant difference between the vaccinated group and the placebo group in reduction of flu illness and severity. Therefore, the study failed to meet both the primary and secondary efficacy endpoints. However, the study’s primary safety endpoint was met. As a result of the Phase 3 clinical trial failure, Company's management estimates that there will be no future revenues from the M-001 product. Therefore, most likely, there will be no future royalty payments to EIB. Under the Finance Contract, the EIB may accelerate all loans extended thereunder if an event of default has occurred, which includes, amongst other things, an event of default arising from the occurrence of a material adverse change, defined as any event or change of condition, which in the opinion of the EIB, has a material adverse effect on: our ability to perform our obligations under the Finance Documents; our business, operations, property, condition (financial or otherwise) or prospects; or the rights or remedies of the EIB under the Finance Contract, amongst other things. If the EIB determines that an event of default has occurred, it could accelerate the amounts outstanding under the Finance Contract, making those amounts immediately due and payable. In accordance with the EIB loan agreement, and due to the above, the Company was required to pay EIB the principal amount of the tranches already loaned by the EIB to the Company, within five years of the date of each tranche of the loan. On December 31, 2020, the Company re-evaluated the loan in the sum of $ 29,443 . As a result, the Company recorded an amount of $ 6,162 as revaluation income of the EIB loan. F- 22 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 9:- LOAN FROM OTHERS (Cont.) On January 26, 2021, the EIB notified the Company that they welcome the Company’s efforts to secure future equity financing in an amount not less than $ 2,000 in order to enable the Company to pursue new business opportunities, strengthen the Company balance sheet and invest in growth. Thus, within that context, the EIB wrote in their letter that they will not consider the failure of the Company’s pivotal phase 3 trial for M-001 to meet the primary and secondary efficacy endpoints as a trigger for prepayment of a loan extended under the Finance Contract. However, EIB cautioned the Company that their letter is not a consent, agreement, amendment or waiver in respect of the terms of the Finance Contract, reserving any other right or remedy the EIB may have now or subsequently. d. On August 9, 2022, the Company signed a loan restructuring agreement with the European Investment Bank (EIB) for the new terms of its outstanding approximately $ 24,554 (€ 24,000 ) loan to the Company. The new terms include: 1. An extension of the maturity dates from 2023 (approximately $20,462) and 2024 (approximately $4,092) until December 31, 2027. 2. Interest on the Loan will begin to accrue starting January 1, 2022, at an annual rate of 7%. The interest payments will be deferred until the new maturity date and will be added to the principal balance at the end of each year during the loan period. 3. An amount of $ 900 (approximately € 880) were paid by BiondVax on August 15, 2022, shortly after the execution of the relevant amendment letter with the EIB and was applied to reduce the outstanding loan. Going forward 10% of any capital raises until maturity will be used to further repay the Loan principal including any outstanding accrued interest. 4. If the Company sales exceed approximately $5,332 (€ 5,000), 3% of the revenues will be paid to the EIB as royalties until the EIB receives (from the Loan repayment, inter alia the interest and the royalties) the higher of (i) a total of 2.8 times the original approximately $25,596 (€ 24,000) principal (as provided in the original Loan agreement) and (ii) 20% IRR on the principal. 5. In case the Company decides to discharge all liabilities under the finance contract, inter alia payments of the variable remuneration, the Company would need to repay to the EIB an indemnity amount in addition to the Loan principal and the accrued interest. The indemnity amount will be calculated such that the EIB receives an additional payment equal to the greater of (i) the prepayment amount (i.e. twice the prepayment amount in the aggregate) and (ii) the amount required to realize 20% IRR on the prepayment amount at the time of prepayment. F- 23 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 9:- LOAN FROM OTHERS (Cont.) The Company recorded the cash received in each tranche and a corresponding liability to repay the cash. The Company evaluates the estimated cash flows from the EIB loan at each reporting period. When the estimated cash flows change from the estimates used as of the date on which the EIB loan was issued, the EIB loan's carrying amount is adjusted to an amount equal to the present value of the estimated remaining future payments, discounted by using the original effective interest rate. The adjustment to the carrying amount is recognized in earnings as an adjustment to interest expenses, in the period in which the change in estimate occurred. As a result of the loan restructure, the Company recorded an amount of $ 7,168 under finance income. Interest expense related to the EIB loan were to $ 87 As of December 31, 2022, the outstanding principal amount related to the EIB loan in nominal terms is $ 25,596 . NOTE 10:- SHAREHOLDERS’ EQUITY a. Rights attached to shares: An Ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends, and a right to participate in the distribution of surplus assets upon liquidation of the Company. b. On February 2, 2021, the Company closed an underwritten offering in which it sold 2,434,783 ADSs at a public offering price of $ 4.95 per ADS. On February 10, 2021, Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, fully exercised its over-allotment option to purchase an additional 365,217 ADSs, bringing total gross proceeds to the Company from the offering including exercise of the over-allotment option of approximately $ 13,800 . The Company received a net amount of $ 12,480 after deduction of issuance expenses of $ 360 . c. An amendment to the Company’s Articles of Association increasing the registered share capital of the Company by an additional 1,100,000,000 Ordinary Shares (the equivalent of 27,500,000 ADSs) such that the total registered share capital of the Company would consist of 1,800,000,000 Ordinary Shares, no par value (the equivalent of 45,000,000 ADSs). d. On December 27, 2021, the Company closed an underwritten offering in which it sold 3,813,560 ADSs at a public offering price of $ 2.36 per ADS. On December 27, 2021, Aegis Capital Corp., the sole bookrunning manager for the underwritten offering, fully exercised its over-allotment option to purchase an additional 330, 508 ADSs, bringing total gross proceeds to the Company from the offering including exercise of the over-allotment option of approximately $ 9,780 . The Company received a net sum of $ 8,956 (after deduction of issuance expenses of $ 63 . e. On November 10, 2022, the Company announced that it plans to affect a ratio change of the Company’s American Depositary Shares (ADSs) to its non-traded ordinary shares from the current ratio of one (1) ADS representing forty (40) ordinary shares to a new ratio of one (1) ADS representing four hundred (400) ordinary shares. The ratio change will have the same effect as a reverse split of the existing ADSs of one (1) new ADS for every ten (10) old ADSs. The effective date for the ratio change was November 25, 2022. F- 24 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 10:- SHAREHOLDERS’ EQUITY (Cont.) f. On December 13 2022, an amendment to the Company’s Articles of Association increasing the registered share capital of the Company by an additional 18,200,000,000 Ordinary Shares (the equivalent of 45,500,000 ADSs) such that the total registered share capital of the Company would consist of 20,000,000,000 Ordinary Shares, no par value (the equivalent of 50,000,000 ADSs). g. On December 20, 2022, the Company closed an underwritten public offering with gross proceeds to the Company of $ 8,000,000 , before deducting underwriting discounts and other expenses payable by the Company. The offering consisted of 1,600,000 units and pre-funded units. Each unit consisted of one American Depositary Share (“ADS”) and two warrants, each to purchase one ADS, and each pre-funded unit consists of one pre-funded warrant to purchase one ADS and two warrants each to purchase one ADS. One of the warrants will expire three years from the date of issuance, and the other warrant will expire one year from the date of issuance and may be exercised for half an ADS on or prior to six (6) months following the original issuance for no additional consideration. Each ADS (or pre-funded warrant) was sold together with two warrants at a combined purchase price of $ 5.00 per unit (or $ 4.99 per pre-funded unit after reducing $ 0.01 attributable to the exercise price of the pre-funded warrants). Each ADS represents 400 of our ordinary shares, no par value per share. The Company received a net sum of $ 7,231 after deduction of underwriter discount and issuance expenses of $ 769 . The warrants were classified as liabilities, initially and subsequently measured at fair value through earnings pursuant to ASC 480 as the warrants are not considered indexed to the Company's own shares. NOTE 11:- SHARE-BASED COMPENSATION a. Option plans: Options granted under the Company’s 2005 Israeli Share Option Plan (“Plan”) were exercisable in accordance with the terms of the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over a period of three or four years. In March 2018, the Company’s Board of Directors approved the adoption of the Company’s 2018 Israeli Share Option Plan (“2018 Plan”) for the grant of options and restricted shares (“RSU”) to employees, directors and service providers. The options are exercisable within 10 years from the date of grant, against payment of the exercise price, in accordance with the terms of the 2018 Plan. The options generally vest over a period of three or four years. Option grants: Expected volatility was calculated based upon the Company’s historical share price and historical volatilities of similar entities in the related sector index. The expected term of the options granted is derived from output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. F- 25 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 11:- SHARE-BASED COMPENSATION (Cont.) The following table lists the inputs to the binomial option-pricing model used for the fair value measurement of equity-settled share options for the above Options Plans for the years 2022 and 2021: December 31, 2022 2021 Dividend yield 0 % 0 % Expected volatility of the share prices 84 % 110 % Risk-free interest rate 2.1 % 1.7 % Expected term (in years) 10 10 Based on the above inputs, the fair value of the ADS options was determined to be $ 0.157 , $ 0.281 and $ 0.384 per 3ADS option at the grant date. b. The following table summarizes the number of options granted to employees under the Option Plans for the year ended December 31, 2022 and related information: Number of options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value Balance as of December 31, 2021 28,889,600 $ 1.57 16.3 $ 85 Granted 1,000,000 0.29 9 ( * Expired ( 970,000 ) 0.01 5.69 ( * Balance as of December 31, 2022 28,919,600 0.8 7.07 12 Exercisable as of December 31, 2022 21,084,680 $ 0.8 6.9 $ 5 As of December 31, 2022, there are $ 890 of total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to four years . *) Less than 1 thousand USD F- 26 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 11:- SHARE-BASED COMPENSATION (Cont.) c. The following table summarizes information about the Company’s outstanding and exercisable options granted to employees as of December 31, 2022: Exercise price Options outstanding as of December 31, 2022 Weighted average remaining contractual term ( years) Options exercisable as of December 31, 2022 Weighted average remaining contractual term (years) $ 0.007 – 0.452 28,919,600 7.07 21,084,680 6.9 28,919,600 21,084,680 d. A summary of restricted shares activity for the year ended December 31, 2022 is as follows: Number of restricted shares Weighted average grant date fair value Balance as of December 31, 2021 $ 60,490 3.92 Granted 49,357 9.92 Vested ( 278 ) 9.76 Forfeited ( 1,801 ) 13.7 Balance as of December 31, 2022 107,768 6.49 e. The total share-based compensation expense related to all of the Company’s equity-based awards, recognized for the years ended December 31, 2022 and 2021 is comprised as follows: Year ended December 31, 2022 2021 Research and development expenses $ 100 $ 323 Marketing, general and administrative expenses 1,502 2,434 Total share-based compensation $ 1,602 $ 2,757 F- 27 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 12:- TAXES ON INCOME a. Corporate tax rates Taxable income of the Israeli parent is subject to the Israeli corporate tax at the rate of 23 % in 2022 and 2021. b. Net operating losses carryforward: The Company has net operating losses for tax purposes as of December 31, 2022 totaling approximately $ 95,734 , respectively, which may be carried forward and offset against taxable income in the future for an indefinite period. c. Final tax assessments: The Company’s tax assessments through the 2016 tax year are considered final. d. Deferred taxes: Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows: Year ended December 31, 2022 2021 Deferred tax assets: Net operating loss carry forward $ 21,683 $ 19,571 Temporary differences mainly relating to Research and Development 336 840 Lease liabilities 336 419 Deferred tax asset before valuation allowance 22,355 20,830 Deferred tax liabilities: Right-of-use assets ( 334 ) ( 416 ) Deferred tax liabilities before valuation allowance ( 334 ) ( 416 ) Valuation allowance ( 22,021 ) ( 20,414 ) Deferred tax asset, net $ - $ - e. Reconciliation of the theoretical tax expense to the actual tax expense: F- 28 BIONDVAX PHARMACEUTICALS LTD. NOTES TO FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data and unless otherwise indicated) NOTE 12:- TAXES ON INCOME (Cont.) The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization of such deferred taxes. NOTE 13:- BASIC AND DILUTED NET LOSS PER SHARE a. Basic net loss per ordinary share is computed by dividing net loss for each reporting period by the weighted-average number of ordinary shares outstanding during each year. Diluted net loss per ordinary share is computed by dividing net loss for each reporting period by the weighted average number of ordinary shares outstanding during the period, plus dilutive potential ordinary shares considered outstanding during the period, in accordance with ASC No. 260-10 “Earnings Per Share”. The Company experienced a loss in the year ended December 31, 2022; hence all potentially dilutive ordinary shares were excluded due to their anti-dilutive effect. Details of the number of shares and loss used in the computation of net loss per share: Year ended December 31, 2022 2021 Weighted number of shares Net loss attributable to equity holders of the Company Weighted number of shares Net loss attributable to equity holders of the Company For the computation of basic and diluted loss 754,076,407 5,796 564,575,967 8,206 b. The following items have been excluded from the diluted weighted average number of shares outstanding because they are anti – diluted: Year ended December 31, 2022 2021 Share Options 28,919,600 28,889,600 Restricted share units 43,107,200 24,196,000 warrants 292,940,000 - NOTE 14:- FINANCIAL INCOME, NET Year ended December 31, 2022 2021 Income: Exchange differences, net $ 1,524 $ - Remeasurement of warrants liabilities 711 - Finance income in respect of loans from others 8,130 3,152 10,365 3,152 Expenses: Exchange differences, net - 487 Finance expenses in respect of loans from others 4,886 - Bank commissions and other financial expenses 21 9 5,100 496 Total financial income, net $ 5,265 $ 2,656 NOTE 15 - SUBSEQUENT EVENTS a. On February, 2023, $ 725 thousand was paid to the EIB as part of the loan restructure agreement. b. On March 8, 2023, the board of directors approved the grant of an aggregate of 203,732 RSUs, each vesting in three years, to officers and employees of the company. The grant of 78,125 RSUs to our chief executive officer is subject to shareholder approval. F-29