Exhibit 99.1

ENLIVEX THERAPEUTICS LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019

AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

ENLIVEX THERAPEUTICS LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019

AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the condensed consolidated financial statements.

The accompanying notes are an integral part of the condensed consolidated financial statements.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

NOTE 1 - GENERAL

Enlivex R&D was incorporated in September 2005 under the laws of the State of Israel and has been engaged since inception in the development of an allogeneic drug pipeline for immune system rebalancing. Immune system rebalancing is critical for the treatment of life-threatening immune and inflammatory conditions, which involve the hyper-expression of cytokines (Cytokine Release Syndrome) and for which there are no U.S. Food and Drug Administration (“FDA”) approved treatments, as well as treating solid tumors via modulating immune-checkpoint rebalancing. The Company’s innovative immunotherapy candidate, Allocetra™, is a novel immunotherapy candidate based on a unique mechanism of action that targets clinical indications that are defined as “unmet medical needs,” such as preventing or treating complications associated with sepsis and acute multiple organ failure, bone marrow transplants and/or hematopoietic stem cell transplants. The Company also intends to develop its cell-based therapy to be combined with currently effective treatments of solid tumors via immune checkpoint rebalancing to increase the efficacy of various anti-cancer therapies, including Chimeric Antigen Receptor T-Cell Therapy and therapies targeting T-Cell Receptor Therapy. The Company’s development is based on the discoveries of Professor Dror Mevorach, an expert on clearance of dying (apoptotic) cells, in his laboratory in the Hadassah University Hospital located in the State of Israel.

In January 2015, Bioblast Pharma Inc. was established in the State of Delaware as a wholly owned subsidiary of the Parent.

The Company’s ordinary shares, NIS 0.40 per share (“Ordinary Shares” or “ordinary shares”), are traded under the symbol “ENLV” on both the Nasdaq Capital Market and on the on the Tel Aviv Stock Exchange.

The Company devotes substantially all of its efforts toward research and development activities and raising capital. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves sustainable revenues and profit from operations.

Research and development activities have required significant capital investment since the Company’s inception. The Company expects its operations to continue to require cash investment to pursue the Company’s research and development activities, including preclinical studies, formulation development, clinical trials and related drug manufacturing. The Company has not generated any revenues or product sales and has not achieved profitable operations or positive cash flow from operations. The Company’s has experienced net losses since its inception, and, as of March 31, 2020, had an accumulated deficit of $26,467.

The Company raised $24,750 in cash (before deducting placement agent fees and offering expenses) in conjunction with registered securities offerings of an aggregate of 3,093,750 Ordinary Shares and 2,093,750 warrants. However, the Company expects to continue to incur additional losses for at least the next several years, and, during that period, the Company will need to raise additional debt or equity financing or enter into partnerships to fund its development. If the Company is not able to achieve its funding requirements, it may be required to reduce discretionary spending, may not be able to continue the development of its product candidates or may be required to delay its development programs, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. There can be no assurances that additional financing will be secured or, if secured, will be on favorable terms. The ability of the Company to transition to profitability in the longer term is dependent on developing products and product revenues to support its expenses.

The Company’s management plans to finance its operations with issuances of the Company’s equity and equity-linked securities and, in the longer term, revenues. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed for its long-term development. The Company’s ability to continue to operate in the long term is dependent upon additional financial support. The Company’s management and board of directors believe that the Company’s current financial resources will be sufficient to continue its activities, including development of the Company’s products, for at least twelve months following the filing of these financial statements on Form 6-K. The Company may determine, however, to raise additional capital as the board of directors deems prudent.

Based on the Company’s current assessment, the Company does not expect any material impact on its development timeline and its liquidity due to the worldwide spread of the SARS-CoV-2 coronavirus, which causes COVID-19. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, will depend on future developments that are highly uncertain as of the date of issuance of these unaudited condensed consolidated financial statements. Actual results could differ from the Company’s estimates.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

These unaudited consolidated financial statements include the accounts of the Company and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements for annual periods prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited annual financial statements and notes thereto included in the Company’s 2019 Annual Report on Form 20-F, as filed with the SEC on April 30, 2020. The results of operations for these interim periods are not necessarily indicative of the operating results for any future period. The December 31, 2019 financial information has been derived from the Company’s audited financial statements.

The functional currency of the Company is the New Israeli Shekel (“NIS”), which is the local currency in which it operates. The financial statements of the Company were translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”.  Accordingly, assets and liabilities were translated from NIS to U.S. dollars using period -end exchange rates, equity items were translated at the exchange rates of the date of the equity transaction, and income and expense items were translated at average exchange rates during the period.

Gains or losses resulting from translation adjustments (which result from translating an entity’s financial statements into U.S. dollars if its functional currency is other than the U.S. dollar) are reported in other comprehensive income (loss) and are reflected in equity, under “accumulated other comprehensive income (loss)”.

Balances denominated in, or linked to foreign currencies are stated on the basis of the exchange rates prevailing at the balance sheet date.  For foreign currency transactions included in the statement of income, the exchange rates applicable on the relevant transaction dates are used.  Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financing income or expenses as applicable.

1 U.S. $ = 3.565 NIS and 3.456 NIS as of March 31, 2020 and December 31, 2019, respectively.

The U.S. $ increased (decreased) against the NIS 3.15% and (3.09%) in the three months ended March 31, 2020 and 2019, respectively.

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13, “Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this ASU on January 1, 2020. The adoption of this ASU did not have a material impact on its consolidated financial statements. 

In August 2018, the FASB issued new disclosure guidance on fair value measurement. This new guidance modifies the disclosure requirements on fair value measurements, including removal and modifications of various current disclosures as well as some additional disclosure requirements for Level 3 fair value measurements. Some of these disclosure changes must be applied prospectively while others retrospectively depending on requirement. This guidance is required to be adopted by the Company beginning in fiscal year 2020 with early adoption permitted. The Company adopted the guidance on January 1, 2020, which did not have a material impact on its consolidated financial statements. 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance to ease the potential burden in accounting due to reference rate reform. The guidance in this update provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures, but the adoption of this ASU is not expected to have a material impact on its consolidated financial statements.

For the three months ended March 31, 2020 and 2019, depreciation expenses were $54 and $44, respectively.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

NOTE 6 – LEASES

The Company is a party to operating leases for its corporate offices, laboratory space and vehicles. The Company’s operating leases have remaining lease terms of up to 3.41 years, some of which include options to extend the leases for up to five years.

NOTE 7 – COMMITMENTS AND CONTINGENT LIABILITIES

The Company is required to pay royalties to the State of Israel (represented by the Israel Innovation Authority), computed on the basis of proceeds from the sale or license of products, the development of which was supported by State grants. These royalties are generally 3% - 5% of sales until repayment of 100% of the grants (linked to the U.S. dollar) received by the Company plus annual interest at an applicable LIBOR-based rate. The Company’s aggregate contingent obligation to pay royalties as of March 31, 2020 was approximately $5,455, which represented the gross amount of grants actually received by the Company from the Israel Innovation Authority to such date, including accrued interest. As of March 31, 2020, the Company had not paid any royalties to the Israel Innovation Authority.

In January 2020, the Company submitted a grant application to the Israel Innovation Authority for funding of its clinical development program of prevention of cytokine storms and organ dysfunction associated with sepsis. The Company’s application for grants of NIS 3,467 ($973) representing participation of 30% of the plan to be executed in Israel was approved by the Israel Innovation Authority in April 2020, for a period commencing January 1, 2020 and ending December 31, 2020. In March 2020, the Company submitted a grant application to the Israel Innovation Authority for funding of its clinical development program of prevention of organ dysfunction and cytokine storms associated with COVID-19. The Company’s application for grants of NIS 1,857 ($521) representing participation of 30% of the plan to be executed in Israel was approved by the Israel Innovation Authority in April 2020 for a period commencing April 1, 2020 and ending March 31, 2021.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

NOTE 8 – EQUITY

In conjunction with the offering, the Company issued to the placement agent warrants to purchase up to 70,000 Ordinary Shares at an exercise price of $10 per share, exercisable until the five-year anniversary of their date of issuance. The placement agent warrants were valued upon issuance at $331 using a Black-Scholes model with the following assumptions: estimated weighted average volatility 72%; weighted average risk-free interest rate of 1.14%; no dividend; and a weighted average contractual expected life of five years. The placement agent warrants were accounted for as additional issuance costs and classified under additional paid-in capital.

The sale of Ordinary Shares and issuance of warrants qualified for equity treatment under U.S. GAAP. The respective values of the warrants and Ordinary Shares issued to investors were calculated using their relative fair values and classified under Ordinary Shares and additional paid-in capital.

The warrants were valued using a Black-Scholes model with the following assumptions: estimated weighted average volatility 68.24%; weighted average risk-free interest rate of 0.67%; no dividend; and a weighted average contractual expected life of two years. The value ascribed to the investors’ warrants was $3,723 and to the Ordinary Shares $13,027.

In conjunction with this offering, the Company also issued to the placement agent warrants to purchase up to 146,563 Ordinary Shares, which warrants have substantially the same terms as the investor warrants, except that the placement agent warrants are exercisable at a price of $10 per Ordinary Share. The placement agent warrants were valued at $232 using a Black-Scholes model with the same assumptions used to estimate the investors’ warrants. The placement agent warrants were accounted for as additional issuance costs and classified under additional paid-in capital.

Holders of the Company’s warrants have no rights as an ordinary shareholder until such holders exercise their warrants and acquire Ordinary Shares. All of the foregoing warrants were outstanding at March 31, 2020.

As of March 31, 2020, the total unrecognized estimated compensation cost related to outstanding non-vested employees’ stock options was $1,040 which is expected to be recognized over a weighted average period of 2.27 years.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

As of March 31, 2019, the unrecognized estimated compensation cost related to outstanding non-vested consultants’ stock options was $249, which is expected to be recognized over a weighted average period of 1.7 years.

ENLIVEX THERAPEUTICS LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2020 (UNAUDITED)

U.S. dollars in thousands (except shares and per share data)

NOTE 11 – EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

The Company evaluated all events and transactions that occurred subsequent to the balance sheet date and prior to the date on which these financial statements were issued, and determined that the following event necessitated disclosure: In April 2020 the Company received an approval from the Israel Innovation Authority for funding of its clinical development programs of prevention of organ dysfunction and cytokine storms associated with sepsis and with COVID-19 ( See NOTE-7).

F-10

Exhibit 99.2

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This Operating and Financial Review and Prospects contains forward-looking statements, which may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “would”, “could”, “intends,” “estimates,” “suggests,” “has the potential to” and other words and phrases of similar meaning, including, without limitation, statements regarding expected cash balances, market opportunities for the results of current clinical studies and preclinical experiments, the effectiveness of, and market opportunities for, ALLOCETRA^TM programs, and potential future payments to holders of CVRs, all of which statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are cautioned that forward-looking statements involve risks and uncertainties that may affect Enlivex’s business and prospects, including the risks that Enlivex may not succeed in generating any revenues or developing any commercial products; that the products in development may fail, may not achieve the expected results or effectiveness and/or may not generate data that would support the approval or marketing of these products for the indications being studied or for other indications; that ongoing studies may not continue to show substantial or any activity; that the Trehalose program may not generate any revenues for the Company or for holders of the CVRs, and other risks and uncertainties that may cause results to differ materially from those set forth in the forward-looking statements. The results of clinical trials in humans may produce results that differ significantly from the results of clinical and other trials in animals. The results of early-stage trials may differ significantly from the results of more developed, later-stage trials. The development of any products using the ALLOCETRA^TM product line or the Trehalose program could also be affected by a number of other factors, including unexpected safety, efficacy or manufacturing issues, additional time requirements for data analyses and decision making, the impact of pharmaceutical industry regulation, the impact of competitive products and pricing and the impact of patents and other proprietary rights held by competitors and other third parties.  In addition to the risk factors described above, investors should consider the economic, competitive, governmental, technological and other factors discussed in Enlivex’s filings with the Securities and Exchange Commission, including in its Annual Report on Form 20-F for the year ended December 31, 2019.  The forward-looking statements contained in this Operating and Financial Review and Prospects speak only as of the date the statements were made, and we do not undertake any obligation to update forward-looking statements, except as required under applicable law.

Overview

Enlivex Therapeutics, Ltd., a company organized under the laws of the State of Israel (including its consolidated subsidiaries, “we”, “us”, “our” or the “Company”), is a clinical stage immunotherapy company, developing an allogeneic drug pipeline for immune system rebalancing. Immune system rebalancing is critical for the treatment of life-threatening immune and inflammatory conditions, which involve the hyper-expression of cytokines (Cytokine Release Syndrome) and for which there are no FDA-approved treatments, as well as treating solid tumors via modulating immune-checkpoint rebalancing. Our innovative immunotherapy candidate, Allocetra™, is a novel immunotherapy candidate based on a unique mechanism of action that targets clinical indications that are defined as “unmet medical needs” such as preventing or treating complications associated with sepsis and acute multiple organ failure, bone marrow transplants and/or hematopoietic stem cell transplants. We also intend to develop our cell-based therapy to be combined with effective treatments of solid tumors via immune checkpoint rebalancing to increase the efficacy of various anti-cancer therapies, including Chimeric Antigen Receptor T-Cell therapies and T-Cell Receptor therapies.

The Merger

On March 26, 2019, we consummated a merger transaction, pursuant to which our wholly owned subsidiary, Treblast Ltd., merged with and into Enlivex Therapeutics R&D Ltd., (“Enlivex R&D”, formerly known as Enlivex Therapeutics Ltd.), with Enlivex R&D remaining as the surviving entity in the merger (the “Merger”). Upon consummation of the Merger, we changed our name from Bioblast Pharma Inc. to Enlivex Therapeutics Ltd.

At the closing of the Merger, we, Enlivex R&D, a representative of the Company’s pre-Merger shareholders, and a rights agent, entered into a Contingent Value Rights Agreement (the “CVR Agreement”). Pursuant to the CVR Agreement, the Company’s shareholders immediately prior to the Merger received one contingent value right (each, a “CVR”) for each ordinary share of the Company held of record immediately prior to the closing of the Merger. Each CVR represents the right to receive payments based on the Company’s pre-Merger clinical development programs. CVR holders are entitled to receive 100% of any payments up to $20.0 million received by the Company and 50% of any subsequent consideration received by the Company in excess of such amount, in each case with respect to such pre-Merger clinical development programs and net of all related transaction expenses.

On February 19, 2019 the Company sold its pre-Merger clinical development programs to Seelos Therapeutics, Inc. (“Seelos”), a clinical-stage biopharmaceutical company. Under the terms of the agreement between the Company and Seelos, Seelos paid $1.5 million at closing and an additional $2.0 million on the first anniversary of the closing. Seelos has agreed to pay additional milestone payments of up to $17.0 million upon completion of the related clinical study and approval of a New Drug Application by the FDA, as well as royalties.

The Merger has been treated as a reverse recapitalization of the pre-Merger Company for financial accounting and reporting purposes. As such, Enlivex R&D is treated as the acquirer, and the pre-Merger Company is treated as the acquired entity for accounting and financial reporting purposes.

The Company’s ordinary shares are traded on the Nasdaq Capital Market and the Tel Aviv Stock Exchange under the symbol “ENLV”.

Financing During First Quarter 2020

On February 26, 2020, we consummated a registered direct offering to certain institutional investors of an aggregate of 1,000,000 ordinary shares, at a purchase price of $8.00 per share, for aggregate gross proceeds of $8.0 million (the “February 2020 offering”). Additionally, we issued to the placement agent in the February 2020 offering warrants to purchase up to 70,000 ordinary shares, which are exercisable at a price of $10.00 per ordinary share at any time during a period of five years from the issuance date.

On March 1, 2020, we consummated a second registered direct offering to certain institutional investors of an aggregate of 2,093,750 ordinary shares, together with warrants to purchase up to 2,093,750 ordinary shares, at a combined purchase price of $8.00 per share and associated warrant to purchase one ordinary share, for aggregate gross proceeds of $16.75 million (the “March 2020 offering”). The investor warrants are exercisable at a price of $9.00 per ordinary share at any time during a period of two years from the issuance date. Additionally, we issued to the placement agent in the March 2020 offering warrants to purchase up to 146,563 ordinary shares, which are exercisable at a price of $10.00 per ordinary share at any time during a period of two years from the issuance date.

Impact of COVID-19

Based on the Company’s current assessment, the Company does not expect any material impact on its product candidate development timeline and its liquidity due to the worldwide spread of the SARS-CoV-2 coronavirus, which causes COVID-19. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, will depend on future developments that are highly uncertain as of the date of issuance of this Operating and Financial Review and Prospects. Actual results could differ from the Company’s estimates.

Financial Overview

Since inception, we have incurred significant losses in connection with our research and development and have not generated any revenue. We have funded our operations primarily through grants from the Israel Innovation Authority and pursuant to the sale of equity and equity-linked securities in both private and registered equity offerings to our affiliates, shareholders and third-party investors. As of March 31, 2020, we had $32.7 million in cash and cash equivalents and short-term bank deposits. As of March 31, 2020, we had an accumulated deficit of approximately $26.4 million. Although we provide no assurance, we believe that our existing funds will be sufficient to continue our business and operations as currently conducted through the fourth quarter of 2022. We expect that we will continue to incur operating losses, which may be substantial, over at least the next several years, and we will likely need to obtain additional funds to further develop our research and development programs. Our ability to generate revenue and become profitable depends upon the clinical success of our product candidates, regulatory approvals and our ability to successfully commercialize products.

Costs and Operating Expenses

Our current costs and operating expenses consist of two components: (i) research and development expenses; and (ii) general and administrative expenses.

Research and Development Expenses

Our research and development expenses consist primarily of research and development activities at our laboratory in Israel, including drug and laboratory supplies and costs for facilities and equipment, outsourced development expenses, including the costs of regulatory consultants and certain other service providers, salaries and related personnel expenses (including stock-based compensation) and fees paid to external service providers, patent-related legal fees and the costs of preclinical studies and clinical trials. We charge all research and development expenses to operations as they are incurred. We expect our research and development expenses to remain our primary expenses in the near future as we continue to develop our product candidates. Increases or decreases in research and development expenditures are attributable to the number and duration of our preclinical and clinical studies.

We expect that a large percentage of our research and development expenses in the future will be incurred in support of our current and future preclinical and clinical development projects. Due to the inherently unpredictable nature of preclinical and clinical development processes, we are unable to estimate with any certainty the costs we will incur in the continued development of our product candidates for potential commercialization. Furthermore, although we expect to obtain additional grants from the Israel Innovation Authority, we cannot be certain that we will do so. Clinical development timelines, the probability of success and development costs can differ materially from our current expectations. We expect to continue to test our product candidates in preclinical studies for toxicology, safety and efficacy and to conduct additional clinical trials for our product candidates.

While we are currently focused on advancing our product development, our future research and development expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of each candidate’s commercial potential. As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for our product candidates in certain indications in order to focus our resources on more promising indications for any such product candidate. Completion of clinical trials may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

We expect our research and development expenses to increase in the future as we continue the advancement of our clinical product development for our current indications and as we potentially pursue additional indications. The lengthy process of completing clinical trials and seeking regulatory approval for our product candidates requires the expenditure of substantial resources. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our liquidity, financial position and results of operation.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation (including stock-based compensation) for employees in executive and operational roles, including accounting, finance, investor relations, information technology and human resources. Our other significant general and administrative expenses include facilities costs, professional fees for outside accounting and legal services, travel costs and insurance premiums. Additionally, we incur expenses associated with the requirements applicable to a foreign private issuer in the United States.

Financial Income and Expenses

Our financial income and expenses consist of bank fees, exchange rate differences and expenses associated with financial derivative liabilities, such as warrants.

Other Comprehensive income (Loss)

Our functional currency is the New Israeli Shekel (“NIS”), while our presentation currency is the U.S. dollar. Gains or losses resulting from the translation from our functional currency to our presentation currency are recognized in other comprehensive income (loss).

Critical Accounting Policies and Estimate

The preparation of financial statements in accordance with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Management bases its estimates on historical experience, market and other conditions, and various other assumptions it believes to be reasonable. Although these estimates are based on management’s knowledge of current events and actions that may impact us in the future, the estimation process is, by its nature, uncertain given that estimates depend on, among other things, events over which we may not have control. If market and other conditions change from those that we anticipate, our financial condition and results of operation may be materially affected. In addition, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material effect on our financial condition and results of operation. We review our estimates, judgments, and assumptions used in our accounting practices periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable; however, our actual results may differ materially from these estimates.

Our significant accounting policies are described in detail in the notes to our audited consolidated financial statements appearing in our Annual Report on Form 20-F for the year ended December 31, 2019, as filed with the SEC on April 30, 2020; however, we believe the following accounting policies to be the most critical to the judgments and estimates used in the preparation of our financial statements.

Share-Based Compensation and Fair Value of Ordinary Shares

ASC 718 - “Compensation-stock Compensation”- (“ASC 718”) 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 portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods.

We estimate the fair value of our share-based awards to employees and non-employees using Black-Scholes, which requires the input of assumptions, some of which are highly subjective, including:

Until the closing of the Merger, there was no active external or internal market for our ordinary shares. Thus, it was not possible to estimate the expected volatility of our share price in estimating fair value of options granted with respect to periods preceding the Merger. Accordingly, as a substitute for such volatility, we used the historical volatility of comparable companies in the industry. The expected term of options granted represents the period of time that options granted are expected to be outstanding, we use management’s estimates for the expected term of options due to insufficient readily available historical exercise data.

Compensation expense for options granted to non-employees is determined based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted to non-employees is re-measured in each quarterly period. Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment, stock price volatility and value of our ordinary shares upon measurement date.

Research and Development Expenses

For the three months ended March 31, 2020 and 2019, we incurred research and development expenses in the aggregate of $1,372,000 and $1,578,000, respectively. The decrease of $206,000, or 13%, in research and development expenses for 2020 as compared to 2019 was primarily due to a $317,000 decrease in stock-based compensation to employees and consultants and a $247,000 grant from the Israel Innovation Authority at 30% participation of an approved clinical development program of prevention of cytokine storm and organ dysfunction associated with sepsis, which were offset by a $131,000 increase in salaries, a $136,000 increase clinical studies and consumption of materials, and a $108,000 increase in patents and related expenses.

General and Administrative Expenses

For the three months ended March 31, 2020 and 2019, we incurred general and administrative expenses in the aggregate of $524,000 and $784,000, respectively. The decrease of $260,000, or 33%, in general and administrative expenses for 2020 as compared to 2019 was primarily due to a $374,000 decrease in withholding tax provision on preferred shares dividends (all of which preferred shares were converted to ordinary shares in connection with the Merger), which was offset by an $83,000 increase in professional fees and a $16,000 increase in salaries.

Operating Loss

As a result of the foregoing research and development and general and administrative expenses for the three months ended March 31, 2020, our operating loss was $1,896,000, representing an decrease of $466,000, or 19%, as compared to our operating loss of $2,362,000 for the three months ended March 31, 2019. This decrease primarily resulted from a decrease in withholding tax provision and stock based compensation and from the Israel Innovation Authority grants, all as described above, which was offset by an increase in research and development salaries, the costs of clinical studies and material consumption an increase in accounting and legal expenses.

Financial Income (Expenses), Net

Financial expenses, net and income, net consist of the following:

For the three months ended March 31, 2020 and 2019, we recorded net financial income (expenses) of $1,102,000 and $(303,000), respectively. The decrease in financial expense for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 was primarily due to a decrease  in loss resulting from currency fluctuations on cash and cash equivalents and deposits denominated in currencies other than the NIS, changes in the fair value of our warrants and from interest earned on our cash and cash equivalents.

Net Loss

As a result of the foregoing research and development and general and administrative expenses, for the three months ended March 31, 2020, our net loss was $794,000, representing a decrease of $1,871,000 as compared to our net loss of $2,665,000 for the comparable prior year period. This decrease primarily resulted from a decrease in financial expenses, withholding tax provision, stock-based compensation and from the Israel Innovation Authority grants described above, which was offset by an increase in research and development expenses, including salaries, the costs of clinical studies and material consumption and an increase in accounting and legal expenses.

Other Comprehensive Income (Loss)

As a result of an increase of 3.15% in the U.S. dollar against the NIS in three months ended March 31, 2020, as compared to a decrease of 3.09% in the comparable prior year period, we recorded losses of $1,016,000 from exchange rate differences arising from translating our unaudited condensed consolidated financial statements from functional to presentation currency, as compared to income of $300,000 for the comparable prior year period.

Cash Flows

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

For the three months ended March 31, 2020 and 2019, net cash provided by (used in) operations was $779,000 and $(1,069,000), respectively. The increase in net cash provided by operations for 2020 as compared to the comparable prior year period was primarily due to a decrease  in loss resulting from currency fluctuations on cash and cash equivalents as described above, which was offset by an increase in research and development expenses, as a result of increases in salaries, clinical study expenses and consultants’ fees.

For the three months ended March 31, 2020 and 2019, net cash (used in) provided by investing activities was $$2,039,000) and $1,466,000, respectively. The increase in net cash used in investing activities for 2020 as compared to 2019 resulted primarily from our deposit of cash into short-term interest-bearing bank deposits.

For the three months ended March 31, 2020 and 2019, net cash provided by financing activities was $22,456,000 and $4,711,000 respectively. This increase in cash provided by financing activities for 2020 as compared to 2019 resulted primarily from net proceeds of $22,456,000 from our issuance of ordinary shares and warrants in the February 2020 offering and the March 2020 offering.

Liquidity and Capital Resources

We have incurred substantial losses since our inception. As of March 31, 2020, we had an accumulated deficit of approximately $26.4 million and working capital (current assets minus current liabilities) of approximately $31 million. We expect to incur losses from operations for the foreseeable future, and we expect to incur increasing research and development expenses, including expenses related to the hiring of personnel, conducting preclinical studies and clinical trials and outsourcing of certain development activities. We expect that general and administrative expenses will also increase as we expand our finance and administrative staff and add infrastructure.

Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. We believe that our existing cash resources will be sufficient to fund our projected cash requirements approximately through the fourth quarter of 2022. Nevertheless, we will require significant additional financing in the future to fund our operations, including if and when we progress into additional clinical trials, obtain regulatory approval for any of our product candidates and commercialize the same. We believe that we will need to raise significant additional funds before we have any revenue, if at all. Our future capital requirements will depend on many factors, including:

We currently do not have any commitments for future external funding. In the future, we will need to raise additional funds, and we may decide to raise additional funds even before we need such funds if the conditions for raising capital are favorable. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings, credit facilities or by out-licensing applications of our product candidates. The sale of equity or convertible debt securities may result in dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also subject us to covenants that restrict our operations. We cannot be certain that additional funding, whether through grants from the Israel Innovation Authority, financings, credit facilities or out-licensing arrangements, will be available to us on acceptable terms, if at all. If sufficient funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more applications of our product candidates, or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain potential products that we might otherwise seek to develop or commercialize independently.

 Foreign Currency Exchange Risk

Our foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS mainly against the U.S. dollar, and vice versa, because most of our expenses are denominated in NIS and the U.S. dollar. Our NIS and U.S. dollar expenses consist principally of payments made to employees, sub-contractors and consultants for preclinical studies, clinical trials and other research and development activities. We anticipate that a sizable portion of our expenses will continue to be denominated in the NIS and U.S. dollar. Our financial position, results of operations and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. Our results of operations and cash flow are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates.

To date, we have not engaged in hedging our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.

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