NOTE 4: - WARRANTS TO PURCHASE ORDINARY SHARES

In August 2016 and April 2017, as part of its financing rounds, the Company issued 6,554,016 and 2,515,775 warrants to purchase Ordinary Shares of the Company, nominal value NIS 0.01 per share with an exercise price of $3.5995 and $6.785 per warrant, respectively. The warrants are exercisable immediately upon issuance and may be exercised at any time prior to August 2021 and April 2022, respectively. Subsequent to March 31, 2018, all the warrant agreements were amended conditioned on the closing of United Therapeutics’ acquisition of the Company. (See also Note 10).

On May 25, 2017, 1,351,766 warrants that were issued in August 2016 were exercised into ordinary shares.

The Company accounted for the warrants according to the provisions of ASC 480 “Distinguishing Liabilities from Equity” and ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity” and due to certain terms and conditions, the warrants classified as a liability. As of March 31, 2018, the Company is using both market approach and Monte Carlo option pricing model in estimating the fair value of the warrants. The assumptions used under the market approach reflect the consideration to the warrants holders upon consummation of the merger agreement under which United Therapeutics will acquire the Company (See also Note 10). The following assumptions were used in the Monte Carlo option pricing model and the fair value of the warrants.

Warrants issued on August 2016:

	March 31,			December 31,
	2018			2017
	Unaudited

Risk-free interest rate (1)	2.48		%	2.12		%
Expected volatility (2)	76.4		%	76.3		%
Expected life (in years) (3)	3.34			3.59
Expected dividend yield (4)	0		%	0		%
Fair value per warrant:	$	2.13		$	1.60

Warrants issued on April 2017:

	March 31,			December 31,
	2018			2017
	Unaudited

Risk-free interest rate (1)	2.48		%	2.12		%
Expected volatility (2)	76.4		%	76.3		%
Expected life (in years) (3)	4.07			4.32
Expected dividend yield (4)	0		%	0		%
Fair value per warrant:	$	1.77		$	1.20

(1)

Risk free interest rate based on yield rates of non-index linked U.S. Federal Reserve treasury bonds.

(2)

Expected volatility was calculated based on actual historical share price movements of companies in the same industry over a term that is equivalent to the expected term of the warrants.

(3)

Expected life was based on the contractual term of the warrants.

(4)

Expected dividend yield was based on the fact that the Company has not paid dividends to its shareholders in the past and does not expect to pay dividends to its shareholders in the future.

The Company re-measured these warrants at fair value as of March 31, 2018 and consequently during the three months periods ended March 31, 2018, the Company recorded $4,201 as a financial exspenses as a result of increase in the warrants’ fair value predominantly due to the terms of the amended warrant agreements (See also Note 10). Total fair value of the warrants as of March 31, 2018, is $15,544.