INTRODUCTION	1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3.	KEY INFORMATION	4
ITEM 4.	INFORMATION ON THE COMPANY	48
ITEM 4A.	UNRESOLVED STAFF COMMENTS	75
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	75
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	86
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	105
ITEM 8.	FINANCIAL INFORMATION	107
ITEM 9.	THE OFFER AND LISTING	108
ITEM 10.	ADDITIONAL INFORMATION	108
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	126
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	126
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	127
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	127
ITEM 15.	CONTROLS AND PROCEDURES	127
ITEM 16.	[RESERVED]	128
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	128
ITEM 16B.	CODE OF ETHICS	128
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	128
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.	129
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.	129
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.	129
ITEM 16G.	CORPORATE GOVERNANCE	129
ITEM 16H.	MINE SAFETY DISCLOSURE	130
ITEM 16I.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	130
ITEM 16J.	INSIDER TRADING POLICIES	130
ITEM 16K.	CYBERSECURITY	130
ITEM 17.	FINANCIAL STATEMENTS	131
ITEM 18.	FINANCIAL STATEMENTS	131
ITEM 19.	EXHIBITS	131
	EXHIBIT INDEX	131

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“SGT-610” - SGT-610 (patidegib), an investigational topical treatment designed to prevent new Basel Cell Carcinomas (BCCs) formation in adults with Gorlin Syndrome;

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“SGT-210” - SGT-210 (erlotinib), an investigational topical ointment for the treatment of rare hyperkeratinization disorders; “erlotinib” refers to an epidermal growth factor receptor inhibitor;

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“Twyneo” - our novel, once-daily, non-antibiotic topical cream that has been approved by the Food and Drug Administration for the treatment of acne vulgaris, or acne;

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“Epsolay” - our novel, once-daily topical cream containing encapsulated benzoyl peroxide that has been approved by the Food and Drug Administration for the treatment of papulopustular (subtype II) rosacea;

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“investigational product candidates” - include SGT-610 and SGT-210;

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“approved products” - Twyneo and Epsolay;

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"generic product candidate" - a generic program developed in collaboration with Padagis Israel Pharmaceuticals Ltd ("Padagis");

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“product candidates” - both investigational product candidates and generic product candidates; and

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“our products” - both approved products and product candidates.

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the adequacy of our financial and other resources, particularly in light of our history of recurring losses and the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives;

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our ability to successfully integrate SGT-610 into our product candidate pipeline, and the benefits of and projections of our future financial performance as a result of our acquisition of SGT-610;

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our ability to enroll patients in our clinical trials and the possibility that patients would discontinue their participation in our clinical trials.

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our ability to complete the development of our product candidates;

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our ability to obtain the benefits associated with orphan drug designation, such as orphan drug exclusivity and, even if we do, that exclusivity may not prevent the U.S. Food and Drug Administration, or FDA, or other comparable foreign regulatory authorities from approving competing products;

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the timing and results of clinical trials that we may conduct or that our competitors and others may conduct relating to our or their product candidates;

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our dependence on the success of Galderma Holding SA (“Galderma”) and Searchlight Pharma Inc. (“Searchlight”) in commercializing our approved products in the U.S. and in Canada, respectively;

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the ability of Sol-Gel and Searchlight to obtain and maintain the regulatory approval of Twyneo and Epsolay in Canada;

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our ability to obtain and maintain regulatory approvals for our product candidates in our target markets and the possibility of adverse regulatory or legal actions relating to our product candidates even if regulatory approval is obtained;

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our ability to find suitable co-development, contract manufacturing and marketing partners to our products;

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our ability to commercialize and launch our investigational product candidates;

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our ability to obtain and maintain adequate protection of our intellectual property;

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our ability to manufacture our product candidates in commercial quantities, at an adequate quality or at an acceptable cost;

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acceptance of our products by healthcare professionals and patients;

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the possibility that we may face third-party claims of intellectual property infringement;

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intense competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do;

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potential product liability claims;

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potential adverse federal, state and local government regulation in the United States, Europe or Israel;

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the impact of the current global macroeconomic climate on our ability to source supplies for our operations or our ability or capacity to manufacture, sell and support the use of Twyneo, Epsolay and our product candidates; and

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loss or retirement of key executives and research scientists.

ITEM 1.           IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

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We are a dermatology company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

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We may need substantial additional funding to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to curtail our planned operations and the pursuit of our growth strategy. If we are successful in raising additional capital, this may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or products.

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We are largely dependent on the success of Twyneo, Epsolay and our product candidates for the treatment of topical dermatological conditions.

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Although we have entered into exclusive license agreements with Galderma and Searchlight for all U.S. and Canadian commercial activities for Twyneo and Epsolay, we have a limited operating history in the dermatological prescription drug space which may make it difficult to evaluate the success of our business to date and to assess our future viability.

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Twyneo, Epsolay and our product candidates, even if they receive regulatory approval, may fail to achieve the broad degree of physician adoption and market acceptance necessary for commercial success.

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Twyneo and Epsolay, and our product candidates, if approved, will face, significant competition and our failure to compete effectively may prevent us and our commercial partners from achieving significant market penetration and expansion.

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We rely on Galderma to commercialize Twyneo and Epsolay in the U.S., on Searchlight to commercialize Twyneo and Epsolay in Canada and on Padagis to develop and commercialize our generic product candidates and may depend on other parties for commercialization of Twyneo and Epsolay outside of the U.S. and Canada, and the development and commercialization of our investigational product candidates, if approved. We also rely on Galderma to provide us with accurate reports in order for us to accurately report our royalty revenues and sales based milestone payments. Any collaborative arrangements that we have (including our agreements with Galderma, Searchlight and Padagis) or may establish in the future may not be successful or we may otherwise not realize the anticipated benefits from these collaborations.

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We and our partners rely on third parties and consultants to assist us in conducting our clinical trials. If these third parties or consultants do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

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The manufacture of pharmaceutical products is complex, and manufacturers often encounter difficulties in production. If we, our partners, or any of our third-party manufacturers encounter any difficulties, our ability to provide product candidates for clinical trials or our approved products to patients, and the development or commercialization of our product candidates could be delayed or stopped.

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We depend on our intellectual property, and our future success is dependent on our ability to protect our intellectual property and not infringe on the rights of others.

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If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.

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If we are not able to retain our key management, or attract and retain qualified scientific, technical and business personnel, our ability to implement our business plan may be adversely affected.

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complete Phase III clinical study of SGT-610;

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conduct Phase I clinical studies of SGT-210 and continue the research and development of other future investigational product candidates;

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seek regulatory approvals for any product candidate that successfully completes clinical development;

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establish commercial manufacturing capabilities through one or more contract manufacturing organizations to commercialize our approved products;

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continue the development, bioequivalence and other studies required for abbreviated new drug application, or ANDA, submissions for our generic product candidates;

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seek new drug candidates and expand our disease portfolio;

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maintain, expand and protect our intellectual property portfolio;

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seek to enhance our technology platform;

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add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development; and

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experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

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the progress and results of our development activities for SGT-610 and SGT-210;

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the cost of manufacturing clinical supplies and exhibition batches of our investigational product candidates;

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the timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

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the amount of revenue received from commercial sales of Twyneo, Epsolay and, if any, from our product candidates for which we may receive marketing approval;

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the scope, progress, results and costs of development, laboratory testing and clinical trials for our generic product candidates;

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the costs, timing and outcome of regulatory reviews of any of our product candidates;

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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims by third parties that we are infringing upon their intellectual property rights; and

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the extent to which we acquire or invest in businesses, product candidates and technologies, including entering into licensing or collaboration arrangements for any of our investigational product candidates.

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we may not have adequate financial or other resources;

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we or our partners may not be able to manufacture our products in commercial quantities, in an adequate quality or at an acceptable cost;

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we or our partners may not be able to establish adequate sales, marketing and distribution channels for our products;

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we or our partners may not be able to find suitable co-development, contract manufacturing or marketing partners;

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healthcare professionals and patients may not accept our products;

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we may not be aware of possible complications from the continued use of our investigational product candidates since we have limited clinical experience with respect to the actual use of our investigational product candidates;

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changes in the market, new alliances between existing market participants and the entrance of new market participants may interfere with our or our partners market penetration efforts;

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third-party payors may not agree to reimburse patients for any or all of the purchase price of our products, which may adversely affect patients’ willingness to purchase our approved products or product candidates, once approved;

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uncertainty as to market demand may result in inefficient pricing of our approved products and product candidates, once approved;

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we may face third-party claims of intellectual property infringement;

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we or our partners may fail to obtain and maintain regulatory approvals for our product candidates in our target markets or may face adverse regulatory or legal actions relating to our product candidates even if regulatory approval is obtained;

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we are dependent upon the results of ongoing clinical trials relating to our product candidates and the products of our competitors;

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we may become involved in lawsuits pertaining to our clinical trials; and

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we may experience delays due to shortages in supply and human resources resulting from geopolitical instability (for more information, see “Item 3. Key Information – D. Risk Factors – Risks Related to Our Operations in Israel”).

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inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;

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reaching a consensus with regulatory authorities on study design or implementation of clinical trials;

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obtaining regulatory authorization to commence a trial;

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reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

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identifying, recruiting and training suitable clinical investigators;

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obtaining institutional review board, or IRB, or ethics committee approval at each site;

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recruiting suitable patients to participate in a trial;

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having patients complete a trial or return for post-treatment follow-up;

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clinical sites deviating from FDA regulations, or similar foreign requirements (where applicable), including GCPs, or the study protocol, or dropping out of a trial;

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adding new clinical trial sites;

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occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits, or occurrence of adverse events in trial of the same class of agents conducted by other companies;

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the cost of clinical trials of our product candidates being greater than we or our partners anticipate;

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transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization, or CMO, and delays or failure by our or our partners CMOs or us to make any necessary changes to such manufacturing process;

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third parties being unwilling or unable to satisfy their contractual obligations to us;

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manufacturing sufficient quantities of a product candidate for use in clinical trials; and damage to clinical supplies of a product candidate caused during storage and/or transportation.

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severity of the disease under investigation;

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size and nature of the patient population;

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eligibility criteria for the trial;

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design of the trial protocol;

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perceived risks and benefits of the product candidate under study;

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physicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any drugs that may be approved for the same indications we are investigating;

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proximity to and availability of clinical trial sites for prospective patients;

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availability of competing therapies and clinical trials; and

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ability to monitor patients adequately during and after treatment.

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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

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the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

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we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;

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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; or

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regulatory authorities may withdraw approvals of such products;

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regulatory authorities may require additional warnings on the label;

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we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

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we may be required to implement a risk evaluation and mitigation strategy, or REMS, which may include a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug’s risks, or other elements to assure safe use;

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we could be sued and held liable for harm caused to patients; and

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our reputation may suffer.

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the FDA or comparable foreign regulatory authorities could suspend or impose restrictions on operations, including costly new manufacturing requirements;

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the FDA or comparable foreign regulatory authorities could refuse to approve pending applications or supplements to applications;

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the FDA or comparable foreign regulatory authorities could suspend any ongoing clinical trials;

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the FDA or comparable foreign regulatory authorities could suspend or withdraw marketing approval;

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the FDA or comparable foreign regulatory authorities could seek an injunction or impose civil or criminal penalties or monetary fines;

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the FDA or comparable foreign regulatory authorities could ban or restrict imports and exports;

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the FDA or comparable foreign regulatory authorities could issue warning letters or untitled letters or similar enforcement actions alleging noncompliance with regulatory requirements; or

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the FDA or other governmental authorities including comparable foreign regulatory authorities could take other actions, such as imposition of product seizures or detentions, clinical holds or terminations, refusals to allow the import or export of products, disgorgement, restitution, or exclusion from federal healthcare programs.

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the clinical indications for which the product is approved;

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the safety and efficacy of our product as compared to existing therapies for those indications;

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the prevalence and severity of adverse side effects;

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patient satisfaction with the results and administration of our product and overall treatment experience, including relative convenience, ease of use and avoidance of, or reduction in, adverse side effects;

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patient demand for the treatment of acne and rosacea or other indications;

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the cost of treatment in relation to alternative treatments, the extent to which these costs are covered and reimbursed by third-party payors, and patients’ willingness to pay for our products and product candidates, if approved; and

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the effectiveness of our sales and marketing efforts, including any head-to-head studies, if conducted, especially the success of any targeted marketing efforts directed toward dermatologists, pediatricians, other physicians, clinics and any direct-to-consumer marketing efforts we may initiate.

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revisions to the Medicaid rebate program by: (a) increasing the rebate percentage for branded drugs to 23.1% of the average manufacturer price, or AMP, with limited exceptions, (b) increasing the rebate for outpatient generic, multiple source drugs dispensed to 13% of AMP; (c) changing the definition of AMP; and (d) extending the Medicaid rebate program to Medicaid managed care plans, with limited exceptions;

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the imposition of annual fees upon manufacturers or importers of branded prescription drugs, which fees will be in amounts determined by the Secretary of Treasury based upon market share and other data;

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providing a discount on brand-name prescriptions filled in the Medicare Part D coverage gap as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

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imposing increased penalties for the violation of fraud and abuse laws and funding for anti-fraud activities; and

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expanding the definition of “covered entities” that purchase certain outpatient drugs in the 340B Drug Pricing Program of Section 340B of the Public Health Service Act.

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the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;

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the federal false claims laws, including the civil False Claims Act, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false or fraudulent statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to certain payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (nurse practitioners, certified nurse anesthetists, physician assistants, clinical nurse specialists, anesthesiology assistants and certified nurse midwives), and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners. Covered manufacturers are required to submit reports to the government by the 90th day of each calendar year;

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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

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analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require licensing or reporting of sales representatives; and state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or that require the reporting of pricing information and marketing expenditures;

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similar healthcare laws and regulations in foreign jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers.

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we may not be able to control the amount and timing of resources that our collaborators may devote to Twyneo, Epsolay and our product candidates;

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we may not be able to locate third party partners for the commercialization of Twyneo and Epsolay for territories other than the United States and Canada;

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our current or future collaborators’ partners may fail to secure adequate commercial supplies of Twyneo, Epsolay and our product candidates, if approved;

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should a collaborator fail to comply with applicable laws, rules, or regulations when performing services for us, we could be held liable for such violations;

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our current or future collaborators may fail to comply with local or any foreign health authorities’ laws and regulations, and as a result, the receipt of a site manufacturing, export or import license may be delayed or withheld for an undefined period;

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our current or future collaborators may experience financial difficulties or changes in business focus;

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our current or future collaborators’ partners may have a shortage of qualified personnel;

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we may be required to relinquish important rights, such as marketing and distribution rights;

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business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement;

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under certain circumstances, a collaborator could move forward with a competing product developed either independently or in collaboration with others, including our competitors;

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our current or future collaborators may utilize our proprietary information in a way that could expose us to competitive harm; and

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collaborative arrangements are often terminated or allowed to expire, which could delay the development and may increase the cost of developing our product candidates.

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any of our future processes or product candidates will be patentable;

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our processes or products and product candidates will not infringe upon the patents of third parties; or

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we will have the resources to defend against charges of patent infringement or other violation or misappropriation of intellectual property by third parties or to protect our own intellectual property rights against infringement, misappropriation or violation by third parties.

 

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these agreements may be breached;

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these agreements may not provide adequate remedies for the applicable type of breach;

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our trade secrets or proprietary know-how will otherwise become known; or

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our competitors will independently develop similar technology or proprietary information.

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we established a quorum requirement such that the quorum for any meeting of shareholders is two or more shareholders holding at least 33 1∕3% of our voting rights, which complies with Nasdaq requirements; however, if the meeting is adjourned for lack of quorum, the quorum for such adjourned meeting will be any number of shareholders, instead of 33 1∕3% of our voting rights;

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we also intend to adopt and approve material changes to equity incentive plans in accordance with Israeli Companies Law, 5759-1999, or with the Companies Law, which does not impose a requirement of shareholder approval for such actions. In addition, we intend to follow Israeli corporate governance practice in lieu of Nasdaq Marketplace Rule 5635(c), which requires shareholder approval prior to an issuance of securities in connection with equity-based compensation of officers, directors, employees or consultants;

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as opposed to making periodic reports to shareholders in the manner specified by the Nasdaq corporate governance rules, the Companies Law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports available through a public website. We will only mail such reports to shareholders upon request; and

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we will follow Israeli corporate governance practice instead of Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as issuances that will result in a change of control, certain transactions other than a public offering involving issuances of a 20% or greater interest in us and certain acquisitions of the stock or assets of another company). Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq corporate governance rules.

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positive or negative results of testing and clinical trials by us, strategic partners and competitors;

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delays in entering into strategic relationships with respect to the commercialization of Twyneo and Epsolay outside the U.S. and Canada or with respect to the development and/or commercialization of our product candidates or entry into strategic relationships on terms that are not deemed to be favorable to us;

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technological innovations or commercial product introductions by us or competitors;

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changes in government regulations;

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developments concerning proprietary rights, including patents and litigation matters;

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public concern relating to the commercial value or safety of any of our products;

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financing or other corporate transactions;

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publication of research reports or comments by securities or industry analysts;

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general market conditions in the pharmaceutical industry or in the economy as a whole; or

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other events and factors, many of which are beyond our control.

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up to $6 million in total development and NDA acceptance milestone payments;

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up to $64 million in commercial milestone payments, which amount increases to $89 million when sales exceed $500 million; and

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single digit royalties, which increase to double digit royalties when sales exceed $500 million.

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blockage of hair follicles through abnormal keratinization in the follicle, which narrows pores;

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increase in oils, or sebum production, secreted by the sebaceous gland;

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overgrowth of naturally occurring bacteria caused by the colonization by the anaerobic lipohilic bacterium Propionibacterium acnes, or P. acnes;

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inflammatory response due to relapse of pro-inflammatory mediators into the skin.

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Mild acne: characterized by few papules or pustules (both comedonal and inflammatory); treated with an over-the-counter product or topical prescription therapies.

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Moderate acne: characterized by multiple papules and pustules with moderate inflammation and seborrhea (scaly red skin); treated with a combination of oral antibiotics and topical therapies.

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Topical over-the-counter monotherapies such as adapalene 0.1%, benzoyl peroxide and salicylic acid, in different concentrations, are the most commonly used therapies. These are generally tolerable first-line treatments for mild acne, but less efficacious than prescription therapies.

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Topical prescription antibiotic monotherapies such as clindamycin and erythromycin that are most commonly used as topical therapies in cases of mild-to-moderate acne.

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Topical prescription retinoid monotherapies such as tretinoin, adapalene 0.3% and tazarotene. Physicians view retinoids as moderately efficacious, but they have high rates of skin irritation.

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Topical prescription combination products such as combinations of BPO/adapalene, BPO/clindamycin, BPO/adapalene/clinidamycin, BPO/erythromycin and clindamycin/tretinoin. These target multiple components that contribute to the development of acne, though topical side effects are common.

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Oral prescription antibiotics such as doxycycline and minocycline. These are typically used as step-up treatments for more severe cases of acne, with risk of systemic side effects.

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Oral prescription isotretinoin, which is primarily used for severe cystic acne and acne that has not responded to other treatments. The use of oral prescription isotretinoin is tightly controlled due to tolerability issues.

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Epsolay creates a silica-based barrier between benzoyl peroxide crystals and the skin and, as a result, can reduce irritation typically associated with topical application of benzoyl peroxide, increasing the potential for more tolerable application to rosacea-affected skin.

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Epsolay’s release of the drug can reduce irritation while maintaining efficacy.

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completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practices, or GLP, requirements or other applicable regulations;

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submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials in the United States may begin;

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approval by an independent institutional review board, or IRB, or ethics committee at each clinical site before each trial may be initiated;

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performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for its intended use;

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preparation and submission to the FDA of an NDA;

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satisfactory completion of an FDA advisory committee review, if applicable;

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satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or components thereof are produced, to assess compliance with current good manufacturing practices, or cGMPs, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

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satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; and

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payment of user fees and FDA review and approval of the NDA.

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Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

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Phase 2: The drug is administered to a limited patient population to identify possible short-term adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

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Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

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fines, warning letters or holds on post-approval clinical trials;

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refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;

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product seizure or detention, or refusal to permit the import or export of products; or

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injunctions or the imposition of civil or criminal penalties.

•

“Centralized MAs” are issued by the EC through the centralized procedure based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and are valid throughout the EU. The centralized procedure is compulsory for certain types of medicinal products such as (i) medicinal products derived from biotechnological processes, (ii) designated orphan medicinal products, (iii) advanced therapy medicinal products, or ATMPs (such as gene therapy, somatic cell therapy and tissue engineered products) and (iv) medicinal products containing a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases or autoimmune diseases and other immune dysfunctions, and viral diseases. The centralized procedure is optional for products containing a new active substance not yet authorized in the EU, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

•

“National MAs” are issued by the competent authorities of the EU member states, only cover their respective territory, and are available for product candidates not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for marketing in an EU member state, this national MA can be recognized in another member state through the mutual recognition procedure. If the product has not received a national MA in any member state at the time of application, it can be approved simultaneously in various member states through the decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the competent authorities of each of the member states in which the MA is sought, one of which is selected by the applicant as the reference member state.

•

Royalty Payment Obligation. In general, the Recipient Company may be obligated to pay the IIA royalties from any income deriving from the products (and related know-how and services), whether received by the grant recipient or any affiliated entity, developed (in all or in part), directly or indirectly, as a result of, an Approved Program, or deriving therefrom, at rates which are determined under the IIA’s rules and guidelines (currently a yearly rate of between 3% to 5% on sales of products or services developed under the Approved Programs, depending on the type of the Recipient Company — i.e., whether it is a “Small Company,” or a “Large Company” as such terms are defined in the IIA’s rules and guidelines), up to the aggregate amount of the total grants received by the IIA, plus Annual Interest for a File (as such term is defined in the IIA’s rules and guidelines).

•

Local Manufacturing Obligation. Products developed using the IIA grants must, as a general matter, be manufactured in Israel. The transfer of manufacturing capacity outside of Israel in a manner that exceeds the manufacturing capacity that was declared in the Recipient Company's original IIA grant application is subject to prior written approval from the IIA (except for the transfer of less than 10% of the manufacturing capacity in the aggregate, which event requires only a notice to the IIA, which shall be provided in writing prior to the transfer of such manufacturing rights abroad, while the IIA has a right to deny such transfer within 30 days following the receipt of such notice). In general, the transfer of manufacturing capacity outside of Israel may be subject an increase in the royalties' cap (inter alia, depending on the manufacturing volume that is performed outside of Israel) and such transfer will be subject to payment of royalties in accelerated rate; and

•

IIA Funded Know-How transfer limitation. Under the IIA’s rules and guidelines, a Recipient Company is prohibited from transferring the IIA Funded Know-How outside of Israel except with the approval of the Research Committee and in certain circumstances, subject to certain payments to the IIA calculated according to formulas provided under the IIA’s rules and guidelines (which are capped to amounts specified under such rules and guidelines, generally up to 6 time the grants received plus  Annual Interest as such term is defined under the rules, or A Redemption Fee). For calculating the Redemption Fee which shall be paid to the IIA in the event of a transfer of IIA Funded Know-How outside of Israel, inter alia, the following factors will be taken into account: the scope of the IIA support received, the royalties that have already paid to the IIA, the amount of time that has lapsed since the Recipient Company has finalized the IIA Approved Program, the sale price and the form of transaction. A transfer for the purpose of the Innovation Law and the IIA’s rules means an actual sale of the IIA-Funded Know-How, or any other transaction which in essence constitutes a transfer of such know-how (such as providing an exclusive license to a foreign entity for R&D purposes, which precludes the Recipient Company from further using such IIA Funded Know-How). A mere license solely to market products resulting from the IIA Funded Know-How would not be deemed a transfer for the purpose of the Innovation Law and the IIA’s rules. Upon payment of the Redemption Fee, the IIA Funded Know-How and the manufacturing rights of the products developed using such IIA funding cease to be subject to the Innovation Law and the IIA’s rules.

•

Subject to the IIA’s prior approval, a Recipient Company may transfer IIA Funded Know-How to another Israeli company, provided that the acquiring company assumes all of the Recipient Company’s responsibilities towards the IIA. Such transfer will not be subject to the payment of the Redemption Fee; however, the income from such transaction will generally be subject to the obligation to pay royalties to the IIA (other than in specific circumstances that will be examined by the IIA, mainly when the transfer is between related entities).

•

IIA Funded Know-How license limitation. The grant to a foreign entity of a right to use the IIA Funded Know-How for R&D purposes (which does not entirely prevent the Recipient Company from using the Funded Know-How) is subject to receipt of the IIA’s prior approval. This approval is subject to payment to the IIA in accordance with the formulas stipulated in the IIA's rules (which distinguish between the manner of the payment for such license grant, i.e., one-time payment or payment in installments) and such payment shall be no less than the amount of the IIA grants received (plus Annual Interest), and no more than the cap stated in the IIA’s rules and will generally be due only upon the receipt of the license fee from the licensee).

•

up to $6 million in total development and NDA acceptance milestone payments;

•

up to $64 million in commercial milestone payments, which amount increases to $89 million when sales exceed $500 million; and

•

single digit royalties, which increase to double digit royalties when sales exceed $500 million.

•

salaries for research and development staff and related expenses, including employee benefits and share-based compensation expenses;

•

expenses paid to suppliers of disposables and raw materials, including drug substances, and related expenses, such as, external laboratory testing and development of analytical methods;

•

expenses for production of Twyneo, Epsolay and our product candidates both in-house and by contract manufacturers;

•

expenses paid to contract research organizations and other third parties in connection with the performance of pre-clinical studies, clinical trials and related expenses;

•

expenses incurred under agreements with other third parties, including subcontractors, suppliers and consultants that conduct formulation development, regulatory activities and pre-clinical studies;

•

expenses incurred to acquire, develop and manufacture materials for use in pre-clinical and other studies;

•

expenses incurred from the purchase and transfer of product candidates; and

•

facilities, depreciation of fixed assets used to develop our product candidates, maintenance of equipment used to develop our product candidates and other expenses, including direct and allocated expenses for rent, maintenance of facilities, insurance and other operating expenses.

•

the scope, rate of progress and expense of our research and development activities;

•

clinical trials and early-stage results;

•

the terms and timing of regulatory requirements and approvals;

•

the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

•

the ability to market, commercialize and achieve market acceptance of any product candidate that we are developing or may develop in the future.

•

the progress and expenses of our pre-clinical studies, clinical trials and other research and development activities;

•

the scope, prioritization and number of our clinical trials and other research and development programs;

•

the expenses and timing of obtaining regulatory approval, if any, for our product candidates;

•

the expenses of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; and

•

the expenses of, and timing for, expanding our manufacturing agreements for production of sufficient clinical and commercial quantities of our product candidates.

Name		Age		Position
Moshe Arkin		71		Executive Chairman of the Board of Directors
Alon Seri-Levy		62		Chief Executive Officer and Director
Gilad Mamlok		55		Chief Financial Officer
Ofer Toledano		59		Vice President Research and Development
Ofra Levy-Hacham		57		Vice President Clinical, Regulatory Affairs and Quality
Michael Glezin		42		Vice President Business Development
Karine Neimann		52		Vice President Projects and Planning, Chief Chemist
Itzik Yosef		47		Chief Operating Officer
Tamar Fishman Jutkowitz		48		Vice President and General Counsel
Itai Arkin		35		Director
Hani Lerman		51		Director
Sharon Kochan		55		Director
Jonathan B. Siegel		50		Independent Director
Ran Gottfried		79		Lead Independent Director
Jerrold S. Gattegno		71		Independent Director
Yuval Yanai		71		Independent Director

Name and Position of director or officer		Base Salary or Other Payment (1)				Value of Social Benefits (2)				Value of Equity Based Compensation Granted (3)				All Other Compensation (4)				Total
(Amounts in U.S. dollars are based on 2023 monthly average representative U.S. dollar – NIS rate of exchange)
Alon Seri-Levy / Chief Executive Officer			325				63				787				23				1,198
Gilad Mamlok / Chief Financial Officer			263				54				276				50				643
Ofer Toledano / VP R&D			205				57				196				24				482
Ofra Levy-Hacham / VP Clinical, RA & QAA			172				49				157				24				403
Itzik Yosef / Chief Operating Officer			163				47				52				26				288

(1)	“Base Salary or Other Payment” means the aggregate yearly gross monthly salaries or other payments with respect to the Company's Executive Officers and members of the board of directors for the year 2023.

(2)	“Social Benefits” include payments to the National Insurance Institute, advanced education funds, managers’ insurance and pension funds; vacation pay; and recuperation pay as mandated by Israeli law.

(3)

Consists of the fair value of the equity-based compensation granted during 2023 in exchange for the directors and officers services recognized as an expense in profit or loss and is carried to the accumulated deficit under equity. The total amount recognized as an expense over the vesting period of the options.

(4)	“All Other Compensation” includes, among other things, car-related expenses, communication expenses, basic health insurance, holiday presents, and 2021, 2022 and 2023 special bonuses that officers received.

•

The term affiliation includes:

•

an employment relationship;

•

a business or professional relationship maintained on a regular basis;

 

•

control; and

•

service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.

•

the majority of the shares that are voted at the meeting in favor of the election of the external director, excluding abstentions, include at least a majority of the votes of shareholders who are not controlling shareholders and do not have a personal interest in the appointment (excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder); or

•

the total number of shares held by non-controlling shareholders or any one on their behalf that are voted against the election of the external director does not exceed two percent of the aggregate voting rights in the company.

•

his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company and subject to additional restrictions set forth in the Companies Law with respect to the affiliation of the external director nominee;

•

the external director proposed his or her own nomination, and such nomination was approved in accordance with the requirements described in the paragraph above; or

•

his or her service for each such additional term is recommended by the board of directors and is approved at a meeting of shareholders by the same majority required for the initial election of an external director (as described above).

 

•

the chairman of the board of directors;

•

a controlling shareholder or a relative of a controlling shareholder;

•

any director employed by us or by one of our controlling shareholders or by an entity controlled by our controlling shareholders (other than as a member of the board of directors); or

•

any director who regularly provides services to us, to one of our controlling shareholders or to an entity controlled by our controlling shareholders.

•

retaining and terminating our independent auditors, subject to board of directors and shareholder ratification;

•

overseeing the independence, compensation and performance of the Company’s independent auditors;

•

the appointment, compensation, retention and oversight of any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit services;

•

pre-approval of audit and non-audit services to be provided by the independent auditors;

•

reviewing with management and our independent directors our financial statements prior to their submission to the SEC; and

•

approval of certain transactions with office holders and controlling shareholders, as described below, and other related party transactions.

(1)

to recommend to the board of directors the compensation policy for directors and officers, and to recommend to the board of directors once every three years whether the compensation policy that had been approved should be extended for a period of more than three years;

(2)

to recommend to the board of directors updates to the compensation policy, from time to time, and examine its implementation;

(3)

to decide whether to approve the terms of office and employment of directors and officers that require approval of the compensation committee; and

(4)

to decide whether the compensation terms of the chief executive officer, which were determined pursuant to the compensation policy, will be exempted from approval by the shareholders because such approval would harm the ability to engage the chief executive officer.

 

•

the education, skills, experience, expertise and accomplishments of the relevant office holder;

•

the office holder’s position, 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 employment of other employees of the company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost, the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in the company;

•

if the terms of employment include variable components — the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and

•

if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms of his or her compensation during such period, the company’s performance during such period, his or her individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the company.

•

with regards to variable components:

-

with the exception of office holders who report directly to the chief executive officer, determining the variable components on long-term performance basis and on measurable criteria; however, the company may determine that an immaterial part of the variable components of the compensation package of an office holder’s shall be awarded based on non-measurable criteria, if such amount is not higher than three monthly salaries per annum, while taking into account such office holder contribution to the company;

-

the ratio between variable and fixed components, as well as the limit of the values of variable components at the time of their grant.

•

a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s financial statements;

•

the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and

•

a limit to retirement grants.

•

information on the business advisability of a given action brought for his or her approval or performed by virtue of his or her position; and

•

all other important information pertaining to such action.

 

•

refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her other duties or personal affairs;

•

refrain from any activity that is competitive with the business of the company;

•

refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself or herself or others; and

•

disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

•

a transaction other than in the ordinary course of business;

•

a transaction that is not on market terms; or

•

a transaction that may have a material impact on the company’s profitability, assets or liabilities.

•

majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or

•

the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than two percent (2%) of the voting rights in the company.

•

at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or

•

the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed two percent (2%) of the aggregate voting rights in the company.

•

an amendment to the articles of association;

•

an increase in the company’s authorized share capital;

•

a merger; and

•

the approval of related party transactions and acts of office holders that require shareholder approval.

•

a monetary liability incurred by or imposed on the office holder in favor of another person pursuant to a court judgment, including pursuant to a settlement confirmed as judgment or arbitrator’s decision approved by a competent 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 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 reasonable attorneys’ fees, which were incurred by the office holder as a result of an investigation or proceeding filed against the office holder by an authority authorized to conduct such investigation or proceeding, provided that such investigation or proceeding was either (i) concluded without the filing of an indictment against such office holder and without the imposition on him of any monetary obligation in lieu of a criminal proceeding; (ii) concluded without the filing of an indictment against the office holder but with the imposition of a monetary obligation on the office holder in lieu of criminal proceedings for an offense that does not require proof of criminal intent; or (iii) in connection with a monetary sanction;

•

a monetary liability imposed on the office holder in favor of a payment for a breach offended at an Administrative Procedure (as defined below) as set forth in Section 52(54)(a)(1)(a) to the Securities Law;

•

expenses expended by the office holder with respect to an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees;

•

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or which were imposed on the office holder by a court (i) in a proceeding instituted against him or her by the company, on its behalf, or by a third party, (ii) in connection with criminal indictment of which the office holder was acquitted, or (iii) in a criminal indictment which the office holder was convicted of an offense that does not require proof of criminal intent; and

•

any other obligation or expense in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.

•

a breach of the fiduciary duty 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;

•

a monetary liability imposed on the office holder in favor of a third party;

•

a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and

•

expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.

•

a breach of the fiduciary duty, except for indemnification and insurance for a breach of the fiduciary duty 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 prejudice the company;

•

a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

•

an act or omission committed with intent to derive illegal personal benefit; or

•

a fine or forfeit levied against the office holder.

		As of December 31,
		2021								2022								2023
		Company								Company								Company
		Employees				Consultants				Employees				Consultants				Employees				Consultants
Management			9								9								8
Research and development and other			44								46								28

•

each person or entity known by us to own beneficially 5% or more of our outstanding ordinary shares;

•

each of our directors, executive officers and director nominees; and

•

all of our executive officers, directors and director nominees as a group.

 

		Shares Beneficially Owned
Name of Beneficial Owner		Number				Percentage
5% or greater shareholders
M. Arkin Dermatology Ltd. (1)			18,068,564				60.52	%
Migdal Insurance & Financial Holdings Ltd. (2)			1,227,548				4.40	%
Phoenix Holdings Ltd. (3)			2,574,922				9.24	%
Directors and executive officers
Moshe Arkin (1)			18,154,564				61.35	%
Alon Seri-Levy (4)			322,722				1.15	%
Gilad Mamlok			*				*
Ofer Toledano			*				*
Ofra Levy-Hacham			*				*
Karine Neimann			*				*
Itzik Yosef			*				*
Itai Arkin			*				*
Ran Gottfried			*				*
Jerrold S. Gattegno			*				*
Hani Lerman			*				*
Jonathan Siegel
Sharon Kochan			*				*
Yuval Yanai			*				*
All directors and executive officers as a group (14 persons)			18,186,836				62.50	%

* Less than 1%.

(1)

Arkin Dermatology directly owns 16,068,564 ordinary shares and 2,000,000 warrants to purchase up to 2,000,000 ordinary shares. Mr. Moshe Arkin, the chairman of our board of directors, is the sole shareholder and sole director of Arkin Dermatology and may therefore be deemed to be the indirect beneficial owner of the ordinary shares owned directly by Arkin Dermatology. In addition, Mr. Moshe Arkin directly owns 86,000 ordinary shares.

(2)

Based on the Schedule 13G/A filed with the SEC on January 31, 2024, the ordinary shares are beneficially owned by, among others, (i) provident funds, mutual funds, pension funds and insurance policies, which are managed by direct and indirect subsidiaries of Migdal Insurance & Financial Holdings Ltd, each of which operates under independent management and makes independent voting and investment decisions, (ii) companies for the management of funds for joint investments in trusteeship, each of which operates under independent management and makes independent voting and investment decisions, and (iii) their own account (Nostro account).

(3)

Based on the Schedule 13G/A filed with the SEC on February 12, 2024, the ordinary shares are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of the Phoenix Holding Ltd., or the Subsidiaries.  The Subsidiaries manage their own funds and/or the funds of others, including for holders of exchange-traded notes or various insurance policies, members of pension or provident funds, unit holders of mutual funds, and portfolio management clients. Each of the Subsidiaries operates under independent management and makes its own independent voting and investment decisions.

(4)

Consists of options to purchase 322,722 ordinary shares exercisable within 60 days of March 1, 2024. The exercise price of these options ranges between $1.59 and $11.21 per share and the options expire between March 2025 and July 2033.

B.           Memorandum and Articles of Association 

•

amendments to our amended and restated articles of association;

•

appointment or termination of our auditors;

•

appointment of external directors;

•

approval of certain related party transactions;

•

increases or reductions of our authorized share capital;

•

mergers; and

•

the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management.

•

amortization over an eight-year period of the cost of purchased know-how and patents and rights to use a patent and know-how which were purchased in good faith and are used for the development or advancement of the Industrial Enterprise, commencing on the year in which they were first used;

•

under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and

•

expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering.

•

The research and expenditures are approved by the relevant Israeli government ministry, determined by the field of research;

•

The research and development must be for the promotion of the company; and

•

The research and development are carried out by or on behalf of the company seeking such tax deduction.

Tax Year		Development Region “A”				Other Areas within Israel
2011 – 2012			10	%			15	%
2013			7	%			12.5	%
2014 – 2016			9	%			16	%
2017 and thereafter			7.5	%			16	%

•

banks

•

certain financial institutions;

•

insurance companies;

•

regulated investment companies;

•

real estate investment trusts;

•

broker-dealers;

•

traders that elect to mark to market;

•

U.S. expatriates;

•

tax-exempt entities;

•

persons holding our ordinary shares or warrants as part of a straddle, hedging, constructive sale, conversion or integrated transaction;

•

persons that actually or constructively (including through the ownership of our warrants) own 10% or more of our share capital (by vote or value);

•

persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States;

•

persons who acquired our ordinary shares or warrants pursuant to the exercise of any employee share option or otherwise as compensation;

•

persons subject to special tax accounting rules as a result of any item of gross income with respect to our ordinary shares or warrants being taken into account in an applicable financial statement; or

•

pass-through entities, or persons holding our ordinary shares or warrants through pass-through entities.

•

an individual who is a citizen or resident of the United States;

•

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;

•

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

•

a trust that (i) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

•

at least 75% of its gross income for such year is passive income (such as interest income); or

•

at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to cash or other assets that produce passive income or are held for the production of passive income.

•

the excess distribution or gain will be allocated ratably over your holding period;

•

the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and

•

the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to underpayments  of tax will be imposed on the resulting tax attributable to each such year.

ITEM 14.          MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 

•

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;

•

provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance with generally accepted accounting principles;

•

provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board of directors (as appropriate); and

•

provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

		Year Ended December 31,
Services Rendered		2023				2022
		(U.S. dollars in thousands)
Audit Fees (1)			220				189
Tax (2)			7				19
Other (3)			2				1
Total			229				204

(1)	Audit Fees consist of professional services rendered in connection with the audit of our consolidated financial statements, review of our consolidated quarterly financial statements, issuance of comfort letters, consents and assistance with review of documents filed with the SEC.
(2)	Tax fees relate to tax compliance, planning and advice.
(3)	Other fees relate to license fees for use of accounting research tools.

•

the quorum for any meeting of shareholders is two or more shareholders holding at least 33-1∕3% of our voting rights, which complies with Nasdaq requirements; however, if the meeting is adjourned for lack of quorum, the quorum for such adjourned meeting will be any number of shareholders, instead of 33-1∕3% of our voting rights;

•

we adopt and approve material changes to equity incentive plans in accordance with the Companies Law, which does not impose a requirement of shareholder approval for such actions. In addition, we intend to follow Israeli corporate governance practice in lieu of Nasdaq Marketplace Rule 5635(c), which requires shareholder approval prior to an issuance of securities in connection with equity based compensation of officers, directors, employees or consultants;

•

as opposed to making periodic reports to shareholders and proxy solicitation materials available to shareholders in the manner specified by the Nasdaq corporate governance rules, the Companies Law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports available through a public website. We only mail such reports to shareholders upon request; and

•

we follow Israeli corporate governance practice instead of Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as issuances that will result in a change of control, certain transactions other than a public offering involving issuances of a 20% or greater interest in us and certain acquisitions of the stock or assets of another company).

•

risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment;

•

a team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents;

•

the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;

•

cybersecurity awareness training of our employees, incident response personnel, and senior management;

•

a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

•

a third-party risk management process for service providers, suppliers, and vendors who have access to our critical systems and information.

ITEM 19.          EXHIBITS 

	SOL-GEL TECHNOLOGIES LTD.
	By:	/s/ Alon Seri-Levy
		Name:	Alon Seri-Levy
		Title:	Chief Executive Officer and Director
	By:	/s/ Gilad Mamlok
		Name:	Gilad Mamlok
		Title:	Chief Financial Officer