<SEC-DOCUMENT>0001193125-16-707708.txt : 20160913
<SEC-HEADER>0001193125-16-707708.hdr.sgml : 20160913
<ACCEPTANCE-DATETIME>20160912203624
ACCESSION NUMBER:		0001193125-16-707708
CONFORMED SUBMISSION TYPE:	PREM14A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20160913
FILED AS OF DATE:		20160913
DATE AS OF CHANGE:		20160912

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			STEMCELLS INC
		CENTRAL INDEX KEY:			0000883975
		STANDARD INDUSTRIAL CLASSIFICATION:	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
		IRS NUMBER:				943078125
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		PREM14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-19871
		FILM NUMBER:		161881874

	BUSINESS ADDRESS:	
		STREET 1:		3155 PORTER DRIVE
		STREET 2:		.
		CITY:			PALO ALTO
		STATE:			CA
		ZIP:			94304
		BUSINESS PHONE:		6504753100

	MAIL ADDRESS:	
		STREET 1:		3155 PORTER DRIVE
		STREET 2:		.
		CITY:			PALO ALTO
		STATE:			CA
		ZIP:			94304

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CYTOTHERAPEUTICS INC/DE
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>PREM14A
<SEQUENCE>1
<FILENAME>d250555dprem14a.htm
<DESCRIPTION>PREM14A
<TEXT>
<HTML><HEAD>
<TITLE>PREM14A</TITLE>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>UNITED STATES </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>SECURITIES AND EXCHANGE COMMISSION </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>Washington, D.C. 20549 </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>SCHEDULE 14A </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>Proxy
Statement Pursuant to Section&nbsp;14(a) of the </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>Securities Exchange Act of 1934 </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


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<TD HEIGHT="16" COLSPAN="5"></TD></TR>
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<TD VALIGN="top" COLSPAN="5">Filed by the
Registrant&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Filed by
a Party other than the Registrant&nbsp;&nbsp;<FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="5"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="5">Check the appropriate box:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="3">Preliminary Proxy Statement</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="3"><B>Confidential, for Use of the Commission Only&nbsp;(as permitted by Rule 14a-6(e)(2))</B></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="3">Definitive Proxy Statement</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="3">Definitive Additional Materials</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="3">Soliciting Material under <FONT STYLE="white-space:nowrap">&#167;240.14a-12</FONT></TD></TR>
</TABLE> <P STYLE="font-size:24pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="bottom" COLSPAN="5" ALIGN="center"><FONT STYLE="font-size:24pt"><B><BR>STEMCELLS, INC.</B></FONT></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center"><B>(Name of Registrant as Specified In Its Charter)</B></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="5"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD COLSPAN="5" VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center"><FONT STYLE="font-size:8pt"><B>(Name of Person(s) Filing Proxy Statement, if other than the Registrant)</B></FONT></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="32" COLSPAN="5"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom" COLSPAN="5">Payment of Filing Fee (Check the appropriate box):</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" COLSPAN="3">No fee required.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#120;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" COLSPAN="3">Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(1)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Title of each class of securities to which transaction applies:</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">Common stock, par value $ .01&nbsp;per share (&#147;Common Stock&#148;)</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(2)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Aggregate number of securities to which transaction applies:</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">228,752,648 shares of Common Stock to be issued to shareholders of Microbot Medical Ltd. by StemCells, Inc. pursuant to that certain Agreement and Plan of
Merger and Reorganization, dated as of August&nbsp;15, 2016, by and among StemCells, Inc., Microbot Medical Ltd, and C&amp;RD Israel Ltd., assuming the exchange ratio determined based on information as to equity ownership as of August&nbsp;31,
2016.</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(3)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">The proposed maximum aggregate
value of the transaction was calculated based on the product of 228,752,648 shares of Common Stock multiplied by $1.36 per share (the average of the high and low trading prices of the Common Stock on The NASDAQ Capital Market on September&nbsp;12,
2016).</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(4)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Proposed maximum aggregate value of transaction:</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">$311,103,602</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(5)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Total fee paid: $31,329</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="24"></TD>
<TD HEIGHT="24" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" COLSPAN="3">Fee paid previously with preliminary materials.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="24"></TD>
<TD HEIGHT="24" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" COLSPAN="3">Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="24"></TD>
<TD HEIGHT="24" COLSPAN="2"></TD>
<TD HEIGHT="24" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(1)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Amount Previously Paid:</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:1pt">&nbsp;</P></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(2)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Form, Schedule or Registration Statement No.:</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:1pt">&nbsp;</P></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(3)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Filing Party:</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:1pt">&nbsp;</P></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">(4)</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Date Filed:</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:1pt">&nbsp;</P></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt;margin-bottom:0pt" ALIGN="center">


<IMG SRC="g250555g13m06.jpg" ALT="LOGO">
 </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">September [&#9679;], 2016 </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">To the Stockholders of StemCells, Inc.: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">You are
cordially invited to attend the special meeting of the stockholders of StemCells, Inc., which will be held at 2:00 p.m., local time, on October [&#9679;], 2016, at 39899 Balentine Drive, Suite 200, Newark, CA 94560, unless postponed or adjourned to
a later date. This will be an important meeting affecting your investment in StemCells because we will be asking for stockholder approval necessary to complete the previously-announced merger with Microbot Medical Ltd, a privately held biotechnology
company organized under the laws of the State of Israel. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;15, 2016, StemCells, Microbot, and C&amp;RD Israel Ltd., a
wholly-owned subsidiary of StemCells which we refer to as &#147;Merger Sub,&#148; entered into an Agreement and Plan of Merger and Reorganization, which we refer to as the &#147;Merger Agreement,&#148; pursuant to which Merger Sub will merge with
and into Microbot, with Microbot surviving as a wholly-owned subsidiary of StemCells (the &#147;Merger&#148;). The Merger has already been approved by the boards of directors of StemCells, Microbot and Merger Sub and the shareholders of Microbot.
The Merger remains subject to approval of the stockholders of StemCells, StemCells having a minimum net cash amount of not less than $0, as well as other closing conditions set forth in the Merger Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the effective time of the Merger, each share of Microbot capital stock outstanding will be converted into the right to receive 26.6 shares
of StemCells common stock, subject to adjustment to account for a proposed reverse stock split to be implemented prior to the closing of the Merger, which is described in the accompanying proxy statement. StemCells stockholders will continue to own
and hold their existing shares of StemCells common stock. Following the completion of the Merger, former shareholders of Microbot and certain advisors with respect to the Merger are expected to own 95% of the combined company comprised 75% of
existing Microbot shareholders and 20% by certain advisors (which includes an existing Microbot shareholder) and current stockholders of StemCells are expected to own 5% of the combined company, in each case based on the fully diluted shares of each
company prior to consummation of the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Shares of StemCells common stock are currently listed on The NASDAQ Capital Market under the
symbol &#147;STEM&#148; After completion of the Merger, StemCells will be renamed &#147;Microbot Medical Inc.&#148; and expects to trade on The NASDAQ Capital Market under the symbol
&#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At this special stockholder
meeting, our stockholders will be asked to vote upon various proposals, most of which are necessary for us to complete the Merger. Specifically, StemCells is soliciting proxies for use at the special meeting of its stockholders to consider and vote
upon (i)&nbsp;a proposal to approve and adopt the Merger Agreement; (ii)&nbsp;a proposal to approve the issuance of shares of StemCells common stock to advisors and to the Microbot shareholders in connection with the Merger, (iii)&nbsp;a proposal to
approve an amendment to StemCells&#146; certificate of incorporation to effect a reverse stock split of StemCells common stock within the range of one-for-[&#9679;] to one-for-[&#9679;], (iv)&nbsp;a proposal to approve an amendment to
StemCells&#146; certificate of incorporation to increase the number of authorized shares of StemCells common stock to [&#9679;] shares, (v)&nbsp;a proposal to approve an amendment to StemCells&#146; certificate of incorporation to change the name of
StemCells in connection with the Merger to &#147;Microbot Medical Inc.&#148; and (vi)&nbsp;an adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposals
referred to in clauses (i)&nbsp;through (v). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Approval of the foregoing proposals (i)&nbsp;through (v)&nbsp;will be necessary to
complete the Merger</B>. <B>Our Board of Directors recommends that StemCells&#146; stockholders vote &#147;FOR&#148; each of these proposals. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our Board of Directors has fixed the close of business on [&#9679;], 2016, as the record date for determining those stockholders who are
entitled to notice of, and to vote at, the special meeting of stockholders and any </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
postponements or adjournments thereof. The stock transfer books will not be closed between the record date and the date of the meeting. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B></B>More information about StemCells, Microbot and the proposed Merger transaction is contained in the accompanying proxy statement. We
urge you to read the proxy statement carefully and in its entirety. All stockholders are invited to attend the special meeting. <B>Your vote is very important, regardless of the number of shares you own</B>. Whether or not you expect to attend the
special meeting in person, please complete, date, sign and promptly return the accompanying proxy card in the enclosed postage paid envelope to ensure that your shares will be represented and voted at the special meeting.<B> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We appreciate your cooperation in considering and acting on the matters presented. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">By Order of the Board of Directors, </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">of StemCells Inc., </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P> <P STYLE="margin-top:0pt;margin-bottom:0pt; margin-left:2%; text-indent:-2%">


<IMG SRC="g250555g32t36.jpg" ALT="LOGO">
 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Kenneth B. Stratton, Esq. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">President&nbsp;&amp; General Counsel </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">StemCells, Inc. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this proxy statement. Any representation to the contrary is a criminal offense. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
accompanying proxy statement is dated September [&#9679;], 2016, and is first being mailed to StemCells stockholders on or about September [&#9679;], 2016. </P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>STEMCELLS, INC. </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>39899 Balentine Drive, Suite 200 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Newark, CA 94560 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(650) 670-2282 </B></FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>NOTICE OF SPECIAL MEETING OF STEMCELLS STOCKHOLDERS </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>TO BE HELD ON OCTOBER [</B>&#9679;<B></B><B>], 2016 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Time:</I></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I></I>2:00 p.m. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Date:</I></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I></I>October [&#9679;], 2016 </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Place:</I></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I></I>39899 Balentine Drive, Suite 200 <BR>Newark, CA 94560 </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Purposes: </FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To approve and adopt the Agreement and Plan of Merger and Reorganization, dated as of August&nbsp;15, 2016 (the &#147;Merger Agreement&#148;), by and among StemCells,
Microbot and C&amp;RD Israel Ltd., a wholly owned subsidiary of StemCells (&#147;Merger Sub&#148;), and approve the transactions contemplated thereby; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To approve the issuance of StemCells common stock, par value $0.01 per share, in connection with the Merger to advisors and to shareholders of Microbot, in each case as
contemplated by the Merger Agreement; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To amend StemCells&#146; restated certificate of incorporation to effect a reverse stock split of StemCells&#146; issued and outstanding common stock within the range
of one-for-[&#9679;] to one-for-[&#9679;] (with the exact amount to be determined by StemCells&#146; Board of Directors prior to the completion of the Merger); </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To amend StemCells&#146; restated certificate of incorporation to increase the number of authorized shares of StemCells common stock from 200,000,000 to [&#9679;]
shares; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To amend StemCells&#146; restated certificate of incorporation to change the name of StemCells from &#147;StemCells, Inc.&#148; to &#147;Microbot Medical Inc.&#148;;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To approve the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1,
2, 3, 4, or 5; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">To conduct any other business as may properly come before the StemCells special meeting or any adjournment or postponement thereof. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Even if you plan to attend the special meeting in person, StemCells requests that you sign and return the enclosed proxy to ensure
that your shares will be represented at the special meeting if you are unable to attend. You may change or revoke your proxy at any time before it is voted at the meeting. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Only stockholders of record of StemCells at the close of business on [&#9679;], 2016, the record date for the special meeting, are entitled to notice of and to vote at the special meeting and any
adjournments or postponements of the special meeting. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Your vote is very important.</B>&nbsp;The affirmative vote of the
holders of a majority of the shares of StemCells common stock entitled to vote on the matter, either in person or by proxy at the StemCells special meeting, is required for approval of Proposals Nos. 2 and 6. The affirmative vote of the holders of a
majority of the outstanding shares of StemCells common stock entitled to vote on the matter, either in person or by proxy, at the StemCells special meeting is required for approval of Proposals Nos. 1, 3, 4 and 5.<B> </B></FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you do not vote or do not instruct your broker, bank or nominee how to vote, it will not
affect the passage of Proposals Nos. 2, 6 and 7; however, broker non-votes will have the effect of a vote AGAINST Proposals Nos.&nbsp;1, 3, 4 and 5. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">It is important that your shares be represented and voted whether or not you plan to attend the special meeting in person. You may vote by completing and mailing the proxy card enclosed with the proxy
statement, or if your shares are held in &#147;street name,&#148; meaning your shares are held of record by a broker, bank or other nominee, you may vote by instructing your broker, bank or nominee how to vote your shares using the voting
instruction form furnished by your broker, bank or nominee. Submitting a proxy by mailing a proxy card or by instructing your broker, bank or nominee how to vote your shares will ensure your shares are represented at the special meeting. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Please vote promptly whether or not you expect to attend the StemCells special meeting. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>APPROVAL OF THE FOREGOING PROPOSALS 1 THROUGH 5 IS NECESSARY TO COMPLETE THE MERGER. THE BOARD OF DIRECTORS OF STEMCELLS HAS APPROVED
EACH PROPOSAL. THE BOARD OF DIRECTORS OF STEMCELLS UNANIMOUSLY RECOMMENDS THAT STEMCELLS STOCKHOLDERS VOTE &#147;FOR&#148; EACH PROPOSAL. </B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:51%; text-indent:-2%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">By Order of the Board of Directors of StemCells, Inc., </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:51%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kenneth
B. Stratton, Esq. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:51%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">President&nbsp;&amp; General Counsel </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:51%; text-indent:-2%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Newark, California </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:51%; text-indent:-2%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">September [&#9679;], 2016 </FONT></P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc"></A>TABLE OF CONTENTS </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="95%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_1">STEMCELLS, INC. PROXY STATEMENT FOR SPECIAL MEETING OF
STOCKHOLDERS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_2">ABOUT THIS DOCUMENT</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_3">QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE STEMCELLS SPECIAL
MEETING</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_4">SUMMARY</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_5">The Companies</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_6">The Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_7">Recommendations of the Board of Directors of StemCells and its Reasons for
 the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_8">Opinion of the Financial Advisor to the StemCells Board of
Directors</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_9">Overview of the Merger Agreement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_10">Microbot Private Placement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_11">Voting Agreements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_12">Management Following the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_13">Interests of Certain Directors, Officers and Affiliates of
StemCells</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_14">Material U.S. Federal Income Tax Consequences of the
Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_15">Risk Factors</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">13</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_16">Regulatory Approvals</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">13</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_17">NASDAQ Stock Market Listing</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">14</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_18">No Appraisal Rights or Dissenters&#146; Rights</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">14</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_19">SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL
DATA</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">15</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_20">Selected Historical Financial Data of StemCells</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">15</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_21">Selected Unaudited Pro Forma Combined Financial Data of StemCells and Microbot
</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_22">Comparative Historical and Unaudited Pro Forma Per Share
Data</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">17</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_23">MARKET PRICE AND DIVIDEND INFORMATION</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_24">RISK FACTORS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">20</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_25">Risks Relating to the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">20</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_26">Risks Relating to the Combined Company</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_27">Risks Relating to Microbot</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">29</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_28">CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_29">THE MERGER</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">50</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_30">Background of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">50</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_31">Reasons for the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">58</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_32">Interests of the StemCells Directors and Executive Officers in the Merger
</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">65</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_33">Golden Parachute Compensation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">66</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_34">Limitations of Liability and Indemnification of the StemCells and Microbot
 Officers and Directors</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">67</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_35">Merger Consideration</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">68</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_36">The Exchange Ratio</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">68</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_37">Fractional Shares</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">69</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_38">Effective Time of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">69</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_39">Regulatory Approvals</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">69</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_40">Tax Treatment of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">69</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_41">NASDAQ Stock Market Listing</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">69</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_42">THE MERGER AGREEMENT</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">71</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_43">Terms of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">71</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_44">Completion of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">71</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_45">Articles of Association; Directors and Officers</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">72</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_46">Merger Consideration</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">72</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">i </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="95%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_47">Assumption of Microbot Stock Options and Warrants</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">72</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_48">Exchange of Microbot Stock Certificates</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">73</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_49">Representations and Warranties</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">74</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_50">Material Adverse Effect</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">75</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_51">Certain Covenants of the Parties</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">77</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_52">No Solicitation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">81</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_53">Board Recommendations</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">83</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_54">Special Meetings of Stockholders</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">83</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_55">Indemnification of Directors and Officers</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">84</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_56">Governance Matters Upon Completion of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">84</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_57">Conditions to the Completion of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">84</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_58">Termination of the Merger Agreement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">86</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_59">Termination Fees and Expenses</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">87</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_60">Amendments</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">87</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_61">Governing Law</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">87</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_62">AGREEMENTS RELATED TO THE MERGER</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">88</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_63">Microbot Private Placement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">88</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_64">Voting Agreements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">88</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_65">MANAGEMENT FOLLOWING THE MERGER</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">89</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_66">Executive Officers and Directors</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">89</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_67">Board of Directors of the Combined Company Following the
Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">91</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_68">RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED
 COMPANY</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">93</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_69">STEMCELLS BUSINESS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">95</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_70">Nature of Business</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">95</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_71">Wind-down of operations</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">95</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_72">STEMCELLS MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">96</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_73">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK OF
STEMCELLS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">109</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_74">MICROBOT BUSINESS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">110</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_75">MICROBOT MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">126</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_76">THE SPECIAL MEETING OF STEMCELLS STOCKHOLDERS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">134</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_77">STEMCELLS PROPOSALS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">138</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_78">Proposal No.&nbsp;
1: To approve and adopt the Merger Agreement, and approve the transactions contemplated thereby</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">138</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_79">Proposal No.&nbsp;
2: To approve of the issuance of StemCells&#146; common stock in connection with the Merger to advisors and to shareholders of Microbot, in each case as contemplated by the Merger Agreement.</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">138</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_80">Proposal No.&nbsp;
3: To amend StemCells&#146; restated certificate of incorporation to effect a reverse stock split of StemCells&#146; issued and outstanding common stock within the range of one-for-[&#9679;] to one-for-[&#9679;] (with the exact amount to be determined by
 StemCells&#146; Board of Directors prior to the completion of the Merger)</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">139</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_81">Proposal No.&nbsp;
4: To amend StemCells&#146; restated certificate of incorporation to increase the number of authorized shares of StemCells common stock from 200,000,000 to [&#9679;] shares</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">145</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_82">Proposal No.&nbsp;
5: To amend StemCells&#146; restated certificate of incorporation to change the name of StemCells from &#147;StemCells, Inc.&#148; to &#147;Microbot Medical Inc.&#148;</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">146</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">ii </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="95%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_83">Proposal No.&nbsp;
6: To approve the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1, 2, 3, 4, or 5</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">146</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_84">UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">148</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_85">NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">153</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_86">DESCRIPTION OF STEMCELLS CAPITAL STOCK</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">157</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_87">Description of Common Stock</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">157</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_88">Transfer Agent and Registrar</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">157</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_89">Description of Preferred Stock</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">157</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_90">Anti-Takeover Provisions of StemCells&#146; Certificate of Incorporation and
 By-laws</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">158</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_91">Provisions of Delaware Law Governing Business Combinations</A></P></TD>

<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">159</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_92">PRINCIPAL STOCKHOLDERS OF STEMCELLS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">160</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_93">PRINCIPAL SHAREHOLDERS OF MICROBOT</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">161</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_94">PRINCIPAL STOCKHOLDERS OF COMBINED COMPANY</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">163</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_95">OTHER MATTERS</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">165</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_96">Section&nbsp;16(a) Beneficial Ownership Reporting
Compliance</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">165</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_97">Stockholder Proposals</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">165</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_98">WHERE YOU CAN FIND MORE INFORMATION</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">165</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_99">TRADEMARK NOTICE</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">165</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_100">ANNEX A &#151; Merger Agreement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_102">ANNEX B &#151; Opinion of Carabiner LLC </A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">B-1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#toc250555_103">ANNEX C &#151; Proposed Amendment to StemCells&#146; Certificate of Incorporation
 </A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">C-1</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">iii </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_1"></A>STEMCELLS, INC. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_2"></A>ABOUT THIS DOCUMENT </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells, Inc., which we refer to herein as the &#147;Company,&#148; &#147;StemCells,&#148; &#147;we,&#148; &#147;our,&#148; or
&#147;us,&#148; is providing these proxy materials in connection with the solicitation of proxies by our Board of Directors to be voted at our special meeting of stockholders to be held at 2:00 p.m., local time, on October [&#9679;], 2016, at 39899
Balentine Drive, Suite 200, Newark, CA 94560, or at any adjournment or postponement thereof. Commencing on or about September [&#9679;], 2016, this proxy statement and the enclosed proxy card will be mailed to each stockholder entitled to notice of,
and to vote at, the special meeting. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">You should rely only on the information contained in this proxy statement. No one has been
authorized to provide you with information that is different from that contained in or incorporated by reference into this proxy statement. This proxy statement is dated September [&#9679;], 2016. You should not assume that the information contained
in this proxy statement is accurate as of any other date. The mailing of this proxy statement to our stockholders will not create any implication to the contrary. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Unless otherwise expressly stated, the following information and all other information contained in this proxy statement does not give effect
to the proposed reverse stock split described in Proposal No.&nbsp;3, beginning on page&nbsp;139 in this proxy statement. When this proxy statement refers to the &#147;combined company,&#148; it means StemCells and its subsidiaries and Microbot,
collectively, assuming consummation of the Merger. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">1 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_3"></A>QUESTIONS AND ANSWERS ABOUT THE MERGER AND </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE STEMCELLS SPECIAL MEETING </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>The following are some questions that you may have regarding the Merger (as defined below) or the StemCells special meeting, together with
brief answers to those questions. StemCells urges you to read carefully the remainder of this proxy statement, including the annexes and other documents referred to in this proxy statement, because the information in this section may not provide all
of the information that might be important to you with respect to the Merger or the StemCells special meeting. </I></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What is the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>StemCells and Microbot Medical Ltd., or Microbot, have entered into an Agreement and Plan of Merger and Reorganization, dated August&nbsp;15, 2016, which we refer to as the Merger Agreement, that sets forth the
terms and conditions of the proposed business combination of StemCells and Microbot. Under the Merger Agreement, C&amp;RD Israel Ltd., a wholly owned subsidiary of StemCells (&#147;Merger Sub&#148;), will merge with and into Microbot, with Microbot
surviving as a wholly owned subsidiary of StemCells (the &#147;Merger&#148;). A complete copy of the Merger Agreement is attached to this proxy statement as Annex A. </TD></TR></TABLE>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Why are StemCells and Microbot proposing to effect the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">The Board of Directors of each of StemCells and Microbot has unanimously approved the Merger Agreement and the Merger. The combination of the two companies will create a publicly traded company with plans to pursue the
development of robotics-based medical devices for the treatment of cerebrospinal fluid and gastrointestinal disorders, as well as other conditions. The Board of Directors of StemCells believes that the Merger presents the best value opportunity
available to StemCells stockholders at this time. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Why am I receiving these materials?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>StemCells is sending these materials to its stockholders to help them decide how to vote their shares of StemCells common stock, with respect to the proposed Merger and the other matters to be considered at the
StemCells stockholder meeting. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">This document contains important information about the Merger and the special meeting, so you
should read it carefully. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What will stockholders receive in the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>Upon completion of the Merger, StemCells stockholders will not receive any consideration in the Merger. Microbot shareholders will receive, for each common share of Microbot they hold, a number of shares of
StemCells common stock equal to the exchange ratio, as such ratio is calculated pursuant to the formula set forth in the Merger Agreement (the &#147;Exchange Ratio&#148;) (see the section entitled &#147;The Merger Agreement &#151; Merger
Consideration&#148; beginning on page&nbsp;72). The Exchange Ratio is equal to three times the number of shares of StemCells common stock outstanding (after giving effect to the reverse stock split described in Proposal 3 and including all shares of
StemCells common stock issuable upon the conversion of any convertible security and shares of StemCells common stock to be issued to certain advisors with respect to the Merger representing, in the aggregate, 20% of StemCells&#146; post-closing
capitalization), divided by the number of Microbot ordinary shares outstanding, in each case calculated on a fully diluted basis immediately prior to the completion of the Merger, and will not be determined until that time. Following the closing of
the Merger, StemCells stockholders will own approximately 5% of the combined company, with the remaining 95% of the combined company ownership comprised 75% of existing Microbot shareholders and 20% by certain advisors (which includes an existing
Microbot shareholder) pursuant to Section&nbsp;5.29 of the Merger Agreement in each case calculated on a fully diluted basis. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">2 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">For illustrative purposes only, if the Merger had been completed on August&nbsp;15, 2016, the
date of the Merger Agreement, the Exchange Ratio (without giving effect to the proposed reverse stock split described elsewhere in this proxy statement) would have been approximately [&#9679;] shares of StemCells common stock for each Microbot
ordinary share. Therefore, if the Merger had been completed on such date and you owned 1,000 shares of StemCells common stock as of such date, you will continue to hold 1,000 shares of the combined company following the completion of the Merger. As
a percentage, if you hold 5% of the outstanding common shares of StemCells calculated on a fully diluted basis immediately prior to the completion of the Merger and do not also hold common shares of Microbot, then upon completion of the Merger you
will hold an aggregate of approximately 0.25% of the outstanding shares of common stock of the combined company calculated on a fully diluted basis. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">No fractional shares of StemCells common stock will be issued to Microbot shareholders in connection with the Merger. The number of whole
shares of StemCells common stock to be issued to any holder of Microbot common shares will be rounded down to the nearest whole number of shares (after aggregating all fractional shares of StemCells common stock issuable to such holder). </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>How will StemCells stockholders be affected by the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">The Merger will have no effect on the number of shares of StemCells common stock held by current StemCells stockholders as of immediately prior to the completion of the Merger (subject to any changes in outstanding
shares of StemCells common stock as a result of the reverse stock split described elsewhere in this proxy statement). However, it is expected that upon completion of the Merger such shares will represent only an aggregate of approximately 5% of the
outstanding shares of common stock of the combined company calculated on a fully diluted basis. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">For example, if you are a
StemCells stockholder and hold 5% of the outstanding shares of StemCells common stock calculated on a fully diluted basis immediately prior to the completion of the Merger and do not also hold common shares of Microbot, then upon completion of the
Merger you will hold an aggregate of approximately 0.25% of the outstanding shares of common stock of the combined company calculated on a fully diluted basis. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Is the Exchange Ratio subject to adjustment based on changes in the price of StemCells common stock or value of Microbot common shares?</B> </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">There will be no adjustments to the Exchange Ratio based on changes in the price of StemCells common stock or the value of Microbot common shares prior to the completion of the Merger. However, the Exchange Ratio will
be adjusted in connection with the reverse stock split described in Proposal 3. As a result of any changes in stock price or value, the aggregate market value of the shares of StemCells common stock that the Microbot shareholders are entitled to
receive at the time that the Merger is completed could vary significantly from the value of such shares on the date of this proxy statement, the date of the StemCells special meeting, the date of the Microbot special meeting, or the date on which
the Microbot shareholders actually receive their shares of StemCells common stock. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">For a more complete discussion of the
Exchange Ratio, see the section entitled &#147;The Merger &#151; The Exchange Ratio&#148; beginning on page 68. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>How will the Merger affect StemCells&#146; business?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">StemCells has recently undergone significant changes and will undergo additional significant changes in
connection with the Merger. Currently, StemCells is not engaged in any research, development or production activities or any commercial activities. Following the Merger, the combined company&#146;s headquarters will be moved to Microbot&#146;s
current principal executive offices located in Yokneam, Israel and the combined company will become an operating company dedicated to the development of robotics-based medical devices for the treatment of cerebrospinal fluid and gastrointestinal
disorders, as well as other conditions. In addition, as a result of the Merger, former Microbot shareholders will possess majority </P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">3 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">
control of the combined company, Microbot&#146;s current Board of Directors (or as otherwise designated by Microbot to enable the combined company to satisfy applicable NASDAQ and SEC
independence and corporate governance requirements) will be the Board of Directors of the combined company, and members of the management of Microbot immediately prior to the closing of the Merger, along with newly appointed members of management,
will be responsible for the management of the combined company. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">For a more complete discussion of the existing businesses of StemCells and
Microbot, see the sections entitled &#147;StemCells Business,&#148; &#147;StemCells Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,&#148; &#147;Microbot Business,&#148; and &#147;Microbot Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations&#148; beginning on pages 95, 96, 110, and 126, respectively. In addition, you should carefully review the section entitled &#147;Risk Factors&#148; beginning on page 20, which
presents risks and uncertainties related to the Merger, the combined company following the completion of the Merger, and the business and operations of StemCells and Microbot. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Will the shares of StemCells common stock received by Microbot shareholders in the Merger be subject to any transfer restrictions?</B> </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">Yes. The shares of StemCells common stock received by Microbot shareholders in the Merger will not be registered pursuant to the Securities Act of 1933, as amended (the &#147;Securities Act&#148;). The shares will carry
a restrictive legend and will be able to be resold only pursuant to Rule 144 under the Securities Act, another exemption from registration, or in the event there is subsequently an effective registration statement. </TD></TR></TABLE>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">These restrictions on shares issued to Microbot shareholders in the Merger will not affect the transferability of shares already held by our
existing stockholders. Our existing stockholders will be free to buy and sell shares of StemCells common stock on the open market as they currently do. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What StemCells stockholder approvals are being solicited?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">Each of the proposals contained in the notice is critical for StemCells to complete the Merger. Specifically, StemCells is seeking the following approvals in order to complete the Merger: (i)&nbsp;approval of the Merger
Agreement, which approval requires the affirmative vote of a majority of the shares of StemCells common stock entitled to vote on the matter, either in person or by proxy, at the StemCells special meeting (Proposal&nbsp;1, which is referred to as
the &#147;Merger Agreement Proposal&#148;); (ii)&nbsp;the issuance of StemCells common stock in connection with the Merger (Proposal 2, which is referred to as the &#147;Share Issuance Proposal&#148;), which approval requires the affirmative vote of
the holders of a majority of the shares of StemCells common stock cast, either in person or by proxy, at the StemCells special meeting; (iii)&nbsp;an amendment to StemCells&#146; restated certificate of incorporation, as amended to date (the
&#147;StemCells Certificate&#148;) to effect a reverse stock split of StemCells&#146; issued and outstanding common stock in the range presented in this Proxy Statement (Proposal 3, which is referred to as the &#147;Reverse Stock Split
Proposal&#148;), which approval requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter; (iv)&nbsp;an amendment to the StemCells Certificate to increase the
number of authorized shares of StemCells common stock from 200,000,000 to [&#9679;] shares (Proposal 4, which is referred to as the &#147;Authorized Shares Increase Proposal&#148;), which approval requires the affirmative vote of the holders of a
majority of the shares of StemCells common stock outstanding and entitled to vote on the matter; and (v)&nbsp;an amendment to the StemCells Certificate to change the name of StemCells from &#147;StemCells, Inc.&#148; to &#147;Microbot Medical
Inc.&#148; (Proposal 5, which is referred to as the &#147;Name Change Proposal&#148;), which approval requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter.
Proposals 1, 2, 3, 4 and 5 are collectively referred to herein as the &#147;StemCells Merger Proposals.&#148; </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">In connection
with the execution of the Merger Agreement, the holders of approximately 1% of the total outstanding voting power of StemCells, as of August&nbsp;15, 2016, entered into voting agreements with Microbot that provide, among other things, that they will
vote in favor of the StemCells Merger Proposals and that grant to Microbot an irrevocable proxy to vote all of their shares of StemCells common stock in favor of the StemCells Merger Proposals. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">4 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What stockholder approvals are required for the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the StemCells Merger
Proposals?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">The holders of a majority of the shares of StemCells common stock cast must vote in favor of any adjournment of the StemCells special meeting regardless of whether a quorum is present. </TD></TR></TABLE>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What other conditions must be satisfied or waived to complete the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">In addition to obtaining stockholder approvals, each of the other closing conditions contained in the Merger Agreement must be either satisfied or waived. Among the closing conditions is the requirement that
(i)&nbsp;the net cash of StemCells (which term is defined in the Merger Agreement) will not be less than zero, (ii)&nbsp;the StemCells common stock to be issued in the Merger has been approved for listing on the NASDAQ Capital Market,
(iii)&nbsp;Microbot shall have obtained the approval of the transactions contemplated by the Merger Agreement, including the Merger, of the Office of Chief Scientist at the Israeli Ministry of Economy, and (iv)&nbsp;no event has occurred that would
constitute a material adverse effect on the assets, liabilities, business, or results of operations of StemCells or Microbot. </TD></TR></TABLE>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">For a more complete discussion of the conditions to the completion of the Merger under the Merger Agreement, see the section entitled &#147;The
Merger Agreement &#151; Conditions to the Completion of the Merger&#148; beginning on page 84. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What is the reverse stock split and why is it necessary?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">It is expected that immediately prior to the effective time of the Merger, StemCells will effect a reverse stock split. The Merger constitutes a &#147;reverse merger&#148; under applicable marketplace rules established
by The NASDAQ Stock Market LLC, which requires the combined company to comply with the initial listing standards of the applicable NASDAQ market to continue to be listed on such market following the Merger. StemCells common stock is required to be
listed on the NASDAQ Capital Market as a condition to closing the Merger. The NASDAQ Capital Market&#146;s initial listing standards require a company to have, among other things, a $4.00 per share minimum bid price. Because the current per share
price of StemCells common stock is less than $4.00, the reverse stock split is necessary to meet the minimum bid listing requirement. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Why is StemCells seeking to amend the StemCells Certificate to increase the number of authorized shares of its common stock?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">In addition to the shares needed to complete to the Merger, the Board of Directors of StemCells desires to have additional shares available to provide flexibility to use its common stock for business and financial
purposes in the future. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Why is StemCells seeking to amend the StemCells Certificate to change the name of StemCells from &#147;StemCells, Inc.&#148; to &#147;Microbot Medical Inc.&#148;?</B> </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">Both StemCells and Microbot believe that the name change will allow for recognition of the combined company&#146;s business following the completion of the Merger. The current name will no longer accurately reflect the
business of the combined company and the mission of the combined company after the completion of the Merger. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>When do StemCells and Microbot expect to complete the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">StemCells and Microbot expect to complete the Merger as soon as possible following the approval of the StemCells Merger Proposals, assuming the satisfaction or waiver of all other closing conditions contained in the
Merger Agreement. It is possible, therefore, that factors outside of each company&#146;s control could require them to complete the Merger at a later time or not complete it at all. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">5 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What risks should I consider in deciding whether to vote in favor of the StemCells Merger Proposals?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">You should carefully review the section of this proxy statement entitled &#147;Risk Factors&#148; beginning on page&nbsp;20, which presents risks and uncertainties related to the proposed Merger, the combined company,
and the business and operations of each of StemCells and Microbot. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What are the material U.S. federal income tax consequences of the Merger to me?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">Because StemCells stockholders will continue to own and hold their existing shares of StemCells common stock following the Merger, the Merger generally will not result in U.S. federal income tax consequences to current
StemCells stockholders. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Do I have appraisal rights in connection with the Merger?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">StemCells. Under the Delaware General Corporation Law (the &#147;DGCL&#148;), holders of StemCells common stock are not entitled to appraisal rights in connection with the Merger or the proposals described in this proxy
statement. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">Microbot. Under Israeli law, pursuant to which the Merger is being consummated, holders of Microbot common shares
are not entitled to appraisal rights or their equivalent in connection with the Merger. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>When and where will the StemCells special meeting take place?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">The StemCells special meeting will be held on October [&#9679;], 2016 at 2:00 p.m., local time, at 39899 Balentine Drive, Suite 200, Newark, CA 94560. </TD></TR></TABLE>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Who can attend and vote at the stockholder meeting?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>All StemCells stockholders of record as of the close of business on [&#9679;], 2016, the record date for the StemCells special meeting, are entitled to receive notice of and to vote at the StemCells special
meeting. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What do I need to do now and how do I vote?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">StemCells urges you to read this proxy statement carefully, including its annexes, and to consider how the Merger may affect you. </TD></TR></TABLE>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>By mail</B>.<B></B> You may vote by mailing your signed StemCells proxy card in the enclosed return envelope. Please provide your proxy
instructions only once and as soon as possible so that your shares can be voted at the StemCells special meeting. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>By Internet or by
telephone</B>.<B></B> Follow the instructions on the StemCells proxy card to vote by Internet or telephone. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>In person at the
meeting</B>.<B></B> If you attend the StemCells special meeting, you may deliver your completed StemCells proxy card in person or you may vote by completing a ballot, which will be available at the meeting. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What happens if I do not return a proxy card or if I elect to abstain from voting?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">If you fail to submit a proxy card, your shares will not be counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the StemCells special meeting, and your
failure to take action will have no effect on the outcome of StemCells Proposal Nos. 2 (Share Issuance Proposal) and 6 (Adjournment to Solicit Additional Proxies, If Necessary). However, such failure to take action will have the same effect as
voting &#147;AGAINST&#148; StemCells Proposal Nos. 1 (Merger Agreement Proposal), 3 (Reverse Stock Split Proposal), 4 (Authorized Shares Increase Proposal) and 5 (Name Change Proposal). </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">6 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">If you are a StemCells stockholder and you sign, date, and mail your proxy card without
indicating how you wish to vote, your proxy will be counted as present for the purpose of determining the presence of a quorum for the StemCells special meeting and all of your shares will be voted &#147;FOR&#148; StemCells Proposal Nos. 1, 2, 3, 4,
5, and 6. However, if you submit a proxy card and affirmatively elect to abstain from voting, your proxy will be counted as present for the purpose of determining the presence of a quorum for the StemCells special meeting, but will not be voted at
the StemCells special meeting. As a result, your abstention will have the same effect as voting &#147;AGAINST&#148; StemCells Proposal Nos. 1, 2, 3, 4, 5, and 6. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>If my StemCells shares are held in &#147;street name&#148; by a broker or other nominee, will my broker or nominee vote my shares for me?</B> </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">If your StemCells shares are held in &#147;street name&#148; in a stock brokerage account or by another nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please
follow the voting instructions provided by your broker or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to StemCells or by voting in person at the StemCells special meeting unless you
provide a &#147;legal proxy,&#148; which you must obtain from your broker or other nominee. Obtaining a proxy from your broker or other nominee can take several days, so you are encouraged to plan accordingly. </TD></TR></TABLE>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>May I vote in person?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">If your shares of StemCells common stock are registered directly in your name with StemCells&#146; transfer agent, you are considered, with respect to those shares, the &#147;stockholder of record,&#148; and the proxy
materials and proxy card are being sent directly to you by StemCells. If you are a StemCells stockholder of record, you may attend the StemCells special meeting and vote your shares in person, rather than signing and returning your proxy card.
</TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">If your shares of StemCells common stock are held in a brokerage account or by another nominee, you are considered the
beneficial owner of shares held in &#147;street name,&#148; and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the StemCells special meeting. However,
because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the StemCells special meeting unless you obtain a &#147;legal proxy&#148; from the broker or other nominee that holds your shares giving you the
right to vote the shares in person at the applicable stockholder meeting. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>May I revoke or change my vote after I have provided proxy instructions?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">Yes. You may revoke or change your vote at any time before your proxy is voted at the StemCells special meeting. You can do this in one of four ways. First, you can send a written notice to StemCells stating that you
would like to revoke your proxy. Second, you can submit new proxy instructions on a new proxy card. Third, if you have voted by Internet or telephone, by casting a new vote over the Internet or by telephone. Fourth, you can attend the StemCells
special meeting and vote in person. Your attendance alone at the stockholder meeting will not revoke your proxy. If you have instructed a broker or other nominee to vote your shares, you must follow directions received from your broker or other
nominee in order to change those instructions. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What constitutes a quorum?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>As of September [&#9679;], 2016, there were 16,259,598 shares of StemCells outstanding. Stockholders who hold a majority of the shares of StemCells common stock outstanding as of the close of business on the
record date for the StemCells special meeting must be present, either in person or by proxy, in order to constitute a quorum to conduct business at the StemCells special meeting. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">7 </P>


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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Who is paying for this proxy solicitation?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>StemCells will bear the cost and expense of preparing, assembling, printing, and mailing this proxy statement, any amendments thereto, the proxy card, and any additional information furnished to the StemCells
stockholders, including any fees paid to the SEC. StemCells may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of soliciting and obtaining proxies from beneficial owners, including the costs of
reimbursing brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding this proxy statement and other solicitation materials to beneficial owners. In addition, proxies may be solicited without extra compensation by
directors, officers and employees of StemCells by mail, telephone, fax, or other methods of communication. StemCells has retained Okapi Partners (&#147;Okapi&#148;) to assist StemCells in the solicitation of proxies from StemCells stockholders in
connection with the StemCells special meeting. Okapi will receive an initial start-up payment of $6,500 and a per unit fee for each call completed and each vote obtained as compensation for its services, plus reimbursement of out of pocket expenses.
StemCells has agreed to indemnify Okapi against certain liabilities arising out of or in connection with its engagement. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Whom should I contact if I have any questions about the Merger or the StemCells special meeting?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>If you have any questions about the Merger or the StemCells special meeting, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the
enclosed proxy card, you should contact StemCells or Okapi at the applicable address and telephone number listed below: </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Okapi Partners </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">1212 Avenue of the
Americas </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">24<SUP STYLE="font-size:85%; vertical-align:top">th</SUP> Floor </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">New York, New York 10036 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Attention
Charles W. Garske </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Stockholders Call Toll-Free: (877) 259-6290 </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What happens if I sell my shares after the record date but before the special meeting?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">If you transfer your StemCells common stock after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting (provided that such shares remain outstanding on
the date of the special meeting). </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>What do I do if I receive more than one proxy statement or set of voting instructions?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">If you hold shares directly as a record holder and also in &#147;street name&#148; or otherwise through a nominee, you may receive more than one proxy statement and/or set of voting instructions relating to the
StemCells special meeting. These should each be voted and/or returned separately in order to ensure that all of your shares are voted. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>Q:</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Should I send in my stock certificates?</B> </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A:</B></TD>
<TD ALIGN="left" VALIGN="top">No. StemCells stockholders are not required to tender or exchange their stock certificates as part of the Merger. However, you will receive written instructions from Computershare Limited, StemCells&#146; transfer
agent, for exchanging your StemCells stock certificates in connection with the reverse stock split. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">8 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>SU<A NAME="toc250555_4"></A>MMARY </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you.
To better understand the Merger and the proposals being considered at the Special Meeting, you should read this entire proxy statement carefully, including the Merger Agreement attached as Annex A, the opinion of Carabiner LLC attached as Annex B
and the other annexes to which you are referred herein. For more information, please see the section entitled &#147;Where You Can Find More Information&#148; beginning on page 165</I>.<I> </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The Compani<A NAME="toc250555_5"></A>es </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>StemCells,
Inc. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells was formed to engage in the research, development and commercialization of stem cell therapeutics. On May&nbsp;31,
2016, StemCells announced the decision to terminate its Phase II Pathway Study in spinal cord injury after determining that the magnitude of the effect on patients did not justify continuing the study or exploring the variability in the initial
patient observations. At the same time, StemCells announced an intention to initiate an orderly wind down of the company. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot Inc.
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot was incorporated on November&nbsp;10, 2010 under the Israel Business Corporations Act. Microbot is a pre-clinical medical
device company specializing in the research, design and development of next generation micro-robotics assisted medical technologies targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its micro-robotic
technologies with the goal of improving surgical outcomes for patients. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is currently developing its first two product
candidates: the Self Cleaning Shunt, or SCS, for the treatment of hydrocephalus and Normal Pressure Hydrocephalus, or NPH; and TipCAT, a self-propelling, semi-disposable endoscope that is being developed initially for use in colonoscopy procedures.
Microbot&#146;s product candidates are being designed to bring greater functionality to conventional medical devices and to reduce the known risks associated with such devices. Microbot is currently aiming to complete pre-clinical or clinical data
collection for both product candidates within the next 24 months and is targeting approval or clearance for SCS by late 2018. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot
currently holds an intellectual property portfolio that comprises nine patent families, which include eight patents granted in the United States, eleven patents granted outside the United States, and 17 patent applications pending worldwide, with
other patent applications under development, as well as an exclusive license to key components of its technology. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>C&amp;RD Israel Ltd. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">C&amp;RD Israel Ltd. is a wholly-owned subsidiary of StemCells, and was formed solely for the purposes of carrying out the Merger. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The M<A NAME="toc250555_6"></A>erger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells and Microbot have entered into the Merger Agreement, which provides that, subject to the terms and conditions contained therein, at
the effective time of the Merger, Merger Sub will merge with and into Microbot, with Microbot continuing as the surviving corporation and as a wholly owned subsidiary of StemCells. Each of the Board of Directors of StemCells and Microbot has
unanimously approved the Merger. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Recom<A NAME="toc250555_7"></A>mendations of the Board of Directors of StemCells and its Reasons for the
Merger </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells, after considering the factors described in the section entitled &#147;The Merger &#151;
Reasons for the Merger&#148; beginning on page 58, has approved the Merger Agreement and the transactions contemplated thereby, including the Merger. The Board of Directors of StemCells has determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, StemCells and its stockholders, and therefore recommends that the StemCells stockholders vote &#147;FOR&#148; the Merger Agreement Proposal,
&#147;FOR&#148; the Share Issuance Proposal, &#147;FOR&#148; the Reverse Stock Split Proposal, &#147;FOR&#148; the Authorized Shares Increase Proposal, and &#147;FOR&#148; the Name Change Proposal, as contemplated by the Merger Agreement and as
described in this proxy statement. For a more complete discussion of the recommendations of the Board of Directors of StemCells and its reasons for the Merger, see the section entitled &#147;The Merger &#151; Reasons for the Merger&#148; beginning
on page 58. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_8"></A>Opinion of the Financial Advisor to the StemCells Board of Directors </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B></B>Carabiner, LLC, or Carabiner, the Company&#146;s financial advisor with respect to the Merger transaction, delivered to the Board of
Directors of StemCells a written opinion dated August&nbsp;14, 2016, as of that date and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in the
written opinion, as to the fairness, from a financial point of view, to StemCells of the consideration to be paid in the Merger. The full text of this written opinion provided to the Board of Directors of StemCells, which describes, among other
things, the assumptions made, procedures followed, factors considered, qualifications and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated by reference in its entirety. Holders of StemCells
common stock are encouraged to read the opinion carefully in its entirety.<B> The Carabiner opinion was provided to the Board of Directors of StemCells in connection with its evaluation of the consideration provided for in the Merger. It does not
address any other aspect of the Merger or any alternative to the Merger and does not constitute a recommendation as to how any stockholders of StemCells should vote or act in connection with the Merger or otherwise. </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_9"></A>Overview of the Merger Agreement </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Merger Consideration (see page 68) </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the effective time of the Merger, each share of then-outstanding capital stock of Microbot (other than shares held by Microbot, StemCells or
any of StemCells&#146; subsidiaries, which will be cancelled at the completion of the Merger) will automatically be converted into the right to receive the number of shares of StemCells common stock equal to the Exchange Ratio (as defined in
&#147;The Merger Agreement &#151; Merger Consideration&#148; on page&nbsp;72). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a result, following the completion of the Merger,
former shareholders of Microbot are expected to receive shares of StemCells common stock representing approximately 75% of the outstanding shares of StemCells common stock calculated on a fully diluted basis and current stockholders of StemCells are
expected to own approximately 5% of the outstanding shares of StemCells common stock calculated on a fully diluted basis. Shares representing 20% of the outstanding shares of StemCells common stock following the completion of the Merger will be
issued to certain advisors with respect to the Merger. The foregoing percentages do not take into account shares of StemCells common stock held by Microbot shareholders prior to the completion of the Merger. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Conditions to Completion of the Merger (see page 86) </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To complete the merger, StemCells stockholders must approve and adopt the Merger Agreement, approve the issuance of shares of StemCells common
stock to advisors and to Microbot shareholders in connection with </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
the Merger and approve an amendment to the restated certificate of incorporation of StemCells effecting the proposed reverse stock split. In addition to obtaining such stockholder approvals, each
of the other closing conditions set forth in the Merger Agreement must be satisfied or waived. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>No Solicitation (see page 81) </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement contains provisions prohibiting StemCells and Microbot from seeking a competing transaction, as defined by the Merger
Agreement, and subject to specified exceptions described in the Merger Agreement. Under these &#147;no solicitation&#148; provisions, each of StemCells and Microbot has agreed, subject to specified exceptions, that neither it nor its subsidiaries,
if applicable, nor any of its officers, directors, employees, agents, or other representatives will directly or indirectly: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">solicit, initiate, or knowingly encourage, facilitate, induce, or take any other action that would reasonably be expected to lead to the making, submission, or announcement of any proposal or inquiry that constitutes,
or is reasonably likely to lead to, a competing proposal </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">enter into, continue, or participate in any discussions or any negotiations regarding any competing proposals or otherwise take any action to knowingly facilitate or induce any effort or attempt to make or implement an
competing proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">approve, endorse, enter into, or recommend a competing proposal or any letter of intent or contract contemplating a competing proposal or requiring the abandonment or termination of obligations under the Merger
Agreement; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">agree, resolve or commit to do any of the foregoing. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Termination of the Merger Agreement (see page 86)
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Either StemCells or Microbot can terminate the Merger Agreement under certain circumstances, which would prevent the Merger from
being completed. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Termination Fees and Expenses (see page 87) </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by
the Merger Agreement will be paid by the party incurring such expenses whether or not the Merger is consummated. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_10"></A>Microbot
Private Placement </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the Merger Agreement, Microbot is obligated to raise no less than $4.0 million in one or more private
placements prior to the closing of the Merger (the &#147;Microbot Private Placement&#148;), which amount would provide the combined company with at least 18 months of cash to fund operations post-closing, assuming a minimum net cash amount in
StemCells at closing (as defined in the Merger Agreement) of not less than $0. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;15, 2016, Microbot and Alpha Capital
Anstalt (the &#147;Investor&#148;), entered into an agreement pursuant to which, among other things, the Investor agreed to fund the Microbot Private Placement, which obligation shall be reduced dollar-for-dollar by any third party investors
investing in the Microbot Private Placement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Voting Agre<A NAME="toc250555_11"></A>ements </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with the execution of the Merger Agreement, directors and executive officers of StemCells, who in the aggregate, own
approximately 1% of StemCells&#146; outstanding shares, entered into a voting agreement </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
with Microbot under which such stockholders agreed to vote in favor of the proposals that relate to the Merger described elsewhere in this proxy statement and against any alternative acquisition
proposal, agreement or transaction. The voting agreement grants Microbot irrevocable proxies to vote any shares of StemCells common stock over which such stockholder has voting power in favor of each of the proposals described elsewhere in this
proxy statement and against any alternative acquisition proposal, agreement or transaction. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Certain shareholders of Microbot owning
approximately 68%of the voting power of Microbot on an as-converted basis also entered into voting agreements with StemCells under which such shareholders agreed to vote in favor of the Merger and against any alternative acquisition proposal,
agreement or transaction. The shareholders of Microbot will vote on whether to approve the Merger on September&nbsp;14, 2016. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each
director, executive officer and stockholder, as applicable, upon executing his, her, or its voting agreement has made representations and warranties to StemCells and Microbot, as applicable, regarding ownership and unencumbered title to the shares
thereto, such stockholder&#146;s power and authority to execute the voting agreement, and due execution and enforceability of the voting agreement. Unless otherwise waived, until the earlier of the closing of the Merger or the termination of the
Merger Agreement, all of these voting agreements prohibit the sale, assignment, transfer or other disposition by the stockholder of his, her, or its respective shares of StemCells or Microbot stock, as applicable, or the entrance into an agreement
or commitment to do any of the foregoing, except for transfers by will or by operation of law, in which case the voting agreement will bind the transferee. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The voting agreements will terminate at the earlier of the effective time of the Merger, termination of the Merger Agreement in accordance
with its terms or upon mutual written consent of such stockholder, StemCells and Microbot. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Mana<A NAME="toc250555_12"></A>gement Following the Merger
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s current Board of Directors (or as otherwise designated by Microbot to enable the combined company to satisfy
applicable NASDAQ and SEC independence and corporate governance requirements) will be the Board of Directors of the combined company, and members of the management of Microbot immediately prior to the closing of the Merger, along with any newly
appointed members of management, will be responsible for the management of the combined company. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Interests of Certain
<A NAME="toc250555_13"></A>Directors, Officers and Affiliates of StemCells </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In considering the recommendation of the Board of Directors
of StemCells with respect to issuing shares of StemCells common stock pursuant to the Merger Agreement and the other matters to be acted upon by StemCells stockholders at the special meeting, StemCells stockholders should be aware the named
executive officers of StemCells have interests in the Merger that may be different from, or in addition to, interests they have as StemCells stockholders. The Board of Directors of StemCells was aware of the following interests and considered them,
among other matters, in its decision to approve the Merger Agreement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Indemnification </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the completion of the Merger, the directors and executive officers of StemCells will have the right to continued indemnification to
the same extent that StemCells is currently permitted to indemnify such persons against certain losses pertaining to matters existing or occurring prior to the effective time. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Material U.<A NAME="toc250555_14"></A>S. Federal Income Tax Consequences of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each of StemCells and Microbot intends the Merger to qualify as a reorganization within the meaning of Section&nbsp;368(a) of the Internal
Revenue Code of 1986, as amended, which is referred to as the Code. Because </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
StemCells stockholders will continue to own and hold their existing shares of StemCells common stock following the Merger, the Merger generally will not result in U.S. federal income tax
consequences to current StemCells stockholders. StemCells stockholders who are also shareholders of Microbot should consult their tax advisor as to the tax consequences to them of participating in the Merger as a Microbot shareholder. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risk Fa<A NAME="toc250555_15"></A>ctors </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company&#146;s respective
stockholders, including the following: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the issuance of shares of StemCells common stock to advisors and to Microbot shareholders in connection with the Merger will substantially dilute the voting power of current StemCells stockholders; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the lack of a public market for Microbot shares makes it difficult to determine the fair market value of Microbot, and the merger consideration to be issued to Microbot shareholders may exceed the actual value of
Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells stockholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the Merger; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the announcement and pendency of the Merger could have an adverse effect on StemCells&#146; or Microbot&#146;s financial condition or business prospects; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">failure to complete the Merger may adversely affect StemCells&#146; and Microbot&#146;s financial results, future business and operations, as well as the market price of StemCells common stock; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">some of the directors and executive officers of StemCells and Microbot have interests in the Merger that may be different from, or in addition to, those of the other StemCells stockholders and Microbot shareholders;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells and Microbot will incur substantial transaction-related costs in connection with the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">if StemCells fails to continue to meet all applicable NASDAQ Capital Market requirements and the NASDAQ Stock Market determines to delist StemCells common stock, the delisting would impair StemCells&#146; ability to
complete the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">failure to complete the Merger may result in StemCells having insufficient funds to satisfy its existing trade payables and other liabilities, and may result in its petitioning for bankruptcy court protection; and
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">even if the Merger is consummated, StemCells and Microbot may fail to realize the anticipated benefits of the Merger. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, StemCells, Microbot, and the combined company are subject to various risks associated with their businesses. These risks are
discussed in greater detail in the section entitled &#147;Risk Factors&#148; beginning on page&nbsp;20. StemCells encourages you to read and consider all of these risks carefully. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_16"></A>Regulatory Approvals </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to Israeli Encouragement of Industrial Research and Development Law, 1984, including the regulations promulgated thereunder and the
approvals provided to Microbot pursuant thereto, Microbot is required to obtain the approval of the Israeli Office of Chief Scientist at the Israeli Ministry of Economy for the consummation of the Merger. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of this proxy statement, neither StemCells nor Microbot is required to make
filings or to obtain approvals or clearances from any antitrust regulatory authorities in the United States or other countries to complete the Merger. In the United States, StemCells must comply with applicable federal and state securities laws and
the rules and regulations of the NASDAQ Capital Market in connection with the issuance of shares of StemCells common stock and the resulting change in control of StemCells and the filing of this proxy statement with the SEC. In Israel, because
Microbot received certain grants from the Office of Chief Scientist at the Israeli Ministry of Economy, which is referred to as the OCS, Microbot must obtain OCS approval for any change in control transaction, such as the Merger. As a pre-condition
to such approval, StemCells would need to sign and deliver to the OCS an undertaking to comply, and cause the combined company to comply, following the Merger, with the OCS laws and regulations in respect of the grants Microbot received. In
addition, Microbot and Merger Sub must comply, in connection with the Merger, with the Israeli Companies Law and the regulations promulgated thereunder (the &#147;ICL&#148;) and, <I>inter alia</I>, submit the Israeli Companies Registrar all the
necessary documents in order that the Israeli Companies Registrar will declare the Merger effective and issue a certificate of merger. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_17">
</A>NASDAQ Stock Market Listing </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells common stock currently is listed on the NASDAQ Capital Market &#147;STEM.&#148; StemCells
has agreed to use its reasonable best efforts to cause the shares of StemCells common stock to be approved, at or prior to the completion of the Merger, for listing (subject only to notice of issuance) on the NASDAQ Capital Market at and following
the completion of the Merger. The listing of the shares of StemCells common stock issuable in the Merger on the stock exchange is a condition to Microbot&#146;s and StemCells&#146; obligation to complete the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells has filed an initial listing application for the NASDAQ Capital Market in connection with the Merger pursuant to NASDAQ
&#147;reverse merger&#148; rules. If such application is approved, StemCells anticipates that its common stock will continue to be listed on the NASDAQ Capital Market following the completion of the Merger. It is expected that at or following the
Merger, the trading symbol of the combined company will be changed. Microbot has requested the ticker symbol &#147;MBOT&#148; for this purpose. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_18">
</A>No Appraisal Rights or Dissenters&#146; Rights </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Holders of StemCells common stock are not entitled to appraisal rights in
connection with the Merger. Holders of Microbot stock are also not entitled to appraisal rights in connection with the Merger. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_19"></A>SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL
DATA </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following tables present summary historical financial data for StemCells and Microbot, summary unaudited pro forma condensed
financial data for StemCells and Microbot, and comparative historical and unaudited pro forma per share data for StemCells and Microbot. The following tables do not give effect to the proposed reverse stock split described in this proxy statement.
</P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_20"></A>Selected Historical Financial Data of StemCells </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table summarizes StemCells&#146; consolidated financial data as of the dates and for each of the periods indicated. The selected
financial data as of December&nbsp;31, 2015 and 2014 and for the years ended December&nbsp;31, 2015, 2014 and 2013 are derived from the StemCells audited consolidated financial statements and notes thereto appearing in StemCells&#146; Annual Report
on Form 10-K for the year ended December&nbsp;31, 2015, filed with the SEC on March&nbsp;15, 2016, or the StemCells 10-K. The selected financial data as of December&nbsp;31, 2013, 2012, and 2011 and for the years ended December&nbsp;31, 2012 and
2011 are derived from StemCells&#146; audited consolidated financial statements for the respective periods, which are not included or incorporated by reference in this proxy statement. The selected financial data as of June&nbsp;30, 2016 and for the
six months ended June&nbsp;30, 2016 and 2015 are derived from the StemCells unaudited financial statements and related notes appearing in StemCells&#146; Quarterly Report on Form 10-Q for the quarter ended June&nbsp;30, 2016, filed with the SEC on
August&nbsp;15, 2016, or the StemCells 10-Q. This financial data should be read in conjunction with &#147;StemCells Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and the financial statements and
notes thereto appearing in the StemCells 10-K and the StemCells 10-Q. StemCells&#146; historical results are not necessarily indicative of the results that may be expected in the future. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
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<TD></TD>
<TD></TD>
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<TD></TD>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six Months ended<BR>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Fiscal Year ended</B><br><B>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2012</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2011</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><B>(In thousands, except per share amounts)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman"><B>Consolidated Statements of Operations:</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Revenue from licensing agreements and grants</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">52</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">117</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,012</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">172</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">490</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">558</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Research and development expenses</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,903</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,531</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,111</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21,503</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">19,369</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,682</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,402</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">General and administrative expenses</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,044</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,753</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,334</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,420</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,834</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,360</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,143</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Wind-down expenses(1)</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">392</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">62</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">356</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">287</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Impairment of intangible asset</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">239</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,440</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">655</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Write-down of fixed assets(2)</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,333</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Gain (loss) on change in fair value of warrant liabilities(3)</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,847</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">914</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,422</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,253</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(5,945</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,612</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Conversion of CIRM loan into grant(4)</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,917</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Net loss from continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(7,046</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(17,812</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(36,415</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(32,261</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(25,987</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(27,971</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(20,183</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman"><B>Discontinued Operations:(5)</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Net loss from discontinued operations</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(369</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(452</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(520</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,146</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Net loss from disposal of assets</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(111</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman"><B>Basic and diluted loss per share:</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">From continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.66</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(2.60</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(4.56</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(6.28</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(7.18</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(11.64</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(17.07</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">From discontinued operations</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.09</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.12</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.22</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.97</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9.5pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9.5pt; font-family:Times New Roman">Shares used in computing basic and diluted loss per share amounts*</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,746</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,812</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,984</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,134</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,619</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,402</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,182</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:9.5pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><I>*</I></TD>
<TD ALIGN="left" VALIGN="top"><I>Adjusted for the 1-for-12 reverse stock split in May 2016. </I></TD></TR></TABLE>
 <P STYLE="margin-top:0pt;margin-bottom:0pt; font-size:8pt">&nbsp;</P></div><br clear="All"></div><br clear="All">

 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">15 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


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<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2012</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2011</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="18" ALIGN="center"><B>(In thousands)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Consolidated Balance Sheets</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,449</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">29,929</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,111</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">24,988</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">30,585</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,471</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">13,311</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Restricted cash(6)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,422</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Marketable securities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,901</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,281</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Assets held for sale(2)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,450</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,325</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,981</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21,219</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">32,427</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">41,557</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">30,170</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,205</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued wind-down expenses(1)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,943</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">392</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,103</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,135</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Fair value of warrant liabilities(3)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">591</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,044</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">771</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,685</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,542</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,265</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,042</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Long-term debt, including capital leases(7)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,428</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,370</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,343</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,274</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">138</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">331</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Stockholders&#146; equity (deficit)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(4,888</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,260</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(334</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,871</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,954</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,985</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,725</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">For 2016, relates to the wind down of our current operations, given the decision to terminate our current clinical studies, our available strategic alternatives and our current cash position. For 2015, relates to
restructuring costs under our strategic realignment plan. For 2013, 2012 and 2011, relates to wind-down and exit expenses in respect of our Rhode Island facility. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">Following the decision to wind down our current operations, on June 30, 2016 we wrote down our tangible assets to their realizable value. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(3)</TD>
<TD ALIGN="left" VALIGN="top">Relates to the fair value of warrants issued as part of our financing in 2011 and 2016. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(4)</TD>
<TD ALIGN="left" VALIGN="top">Relates to our loan agreement with CIRM, pursuant to which in May 2016, we gave notice to CIRM that we elected to convert our loan into a Grant pursuant to the CIRM&#146;s Loan Administration Policy, as amended
effective April&nbsp;25, 2016, and as if the forgiven loan balance had been total allowable project costs funded by CIRM. In the second quarter of 2016, we re-classified the principal amount of approximately $8,917,000 as &#147;Other income&#148;
and the accrued interest of approximately $243,000 as &#147;Gain on extinguishment of a loan&#148; in our Condensed Consolidated Statement of Operations. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(5)</TD>
<TD ALIGN="left" VALIGN="top">In December 2014, we sold and completed the wind down of our subsidiary SCS UK&#146;s operations in Cambridge, United Kingdom and therefore, have classified the historical results of this component as a discontinued
operation. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(6)</TD>
<TD ALIGN="left" VALIGN="top">Relates to our loan payable with Silicon Valley Bank. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(7)</TD>
<TD ALIGN="left" VALIGN="top">Data for 2015, 2014 and 2013 relates to the loan agreements with Silicon Valley Bank and the California Institute for Regenerative Medicine. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_21"></A>Selected Unaudited Pro Forma Combined Financial Data of StemCells and Microbot </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following selected unaudited pro forma combined financial data is intended to show how the merger might have affected the historical
financial results of StemCells and Microbot. The selected unaudited pro forma combined balance sheet data assumes that the merger took place on June&nbsp;30, 2016 and combines the historical balance sheets of StemCells and Microbot as of such date.
The unaudited pro forma statement of operations data assumes that the Merger took place on each of January&nbsp;1, 2016 and January&nbsp;1, 2016 and combines the historical statements of operations of StemCells and Microbot for the periods ended
June&nbsp;30, 2016 and December&nbsp;31, 2015. The following should be read in conjunction with the sections entitled &#147;Unaudited Pro Forma Combined Financial Statements&#148; beginning on page 148, &#147;StemCells Management&#146;s Discussion
and Analysis of Financial Condition and Results of Operations&#148; beginning on page 96, &#147;Microbot Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; beginning on page 126, Microbot&#146;s audited
and unaudited </P>
 <P STYLE="margin-top:0pt;margin-bottom:0pt; font-size:8pt">&nbsp;</P></div><br clear="All"></div><br clear="All">

 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">16 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1.00pt solid #000000;BORDER-LEFT:1.00pt solid #000000;BORDER-RIGHT:1.00pt solid #000000;BORDER-TOP:1.00pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
historical financial statements and the notes thereto contained elsewhere in this proxy statement and the other information in this proxy statement. The following information does not give effect
to the proposed reverse stock split of StemCells&#146; common stock described in Proposal 3. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The historical financial statements of
StemCells and Microbot have been adjusted to give pro forma effect to events that are (i)&nbsp;directly attributable to the Merger, (ii)&nbsp;factually supportable, and (iii)&nbsp;with respect to the statements of operations, expected to have a
continuing impact on the combined results. The unaudited pro forma combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that
may be associated with the integration of the two companies. The unaudited pro forma combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of
operations in future periods or the results that actually would have been realized had Microbot and StemCells been a combined company during the specified period. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="84%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP><B>Unaudited Pro Form Combined Balance Sheet Data:</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of June&nbsp;30,<BR>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,289,614</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42,428,096</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,427,170</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total stockholders&#146; equity</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">29,000,926</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP><B>Unaudited Pro Forma Combined Statements of Operations Data:</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months<BR>ended June&nbsp;30,<BR>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended<BR>December&nbsp;31,<BR>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">19,152,930</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37,752,090</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss from operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(19,100,455</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(37,635,203</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net loss</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(7,486,186</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(37,335,866</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic and diluted net loss per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.02</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.11</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_22"></A>Comparative Historical and Unaudited Pro Forma Per Share Data </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The information below reflects the historical net loss and book value per share of StemCells common stock and the historical net loss and book
value per ordinary share of Microbot in comparison with the unaudited pro forma net loss and book value per share after giving effect to the Merger. The unaudited pro forma net loss and book value per share does not give effect to the reverse stock
split of StemCells common stock described in Proposal 3. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">You should read the tables below in conjunction with the StemCells audited and
unaudited financial statement and notes thereto included in the StemCells 10-K and the StemCells 10-Q, the Microbot audited and unaudited financial statements and notes thereto included elsewhere in this proxy statement, and the unaudited pro forma
combined financial information and notes related to such financial statements included elsewhere in this proxy statement. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP><B>StemCells</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months<BR>ended<BR>June&nbsp;30,<BR>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year Ended<BR>December&nbsp;31,<BR>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Historical Per Common Share Data:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic and diluted net loss per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.66</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(4.56</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Book value per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.45</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.04</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
</TABLE>
 <P STYLE="margin-top:0pt;margin-bottom:0pt; font-size:8pt">&nbsp;</P></div><br clear="All"></div><br clear="All">

 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">17 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<div style ="BORDER-BOTTOM:1.00pt solid #000000;BORDER-LEFT:1.00pt solid #000000;BORDER-RIGHT:1.00pt solid #000000;BORDER-TOP:1.00pt solid #000000;MARGIN-LEFT:0px;MARGIN-RIGHT:0px;WIDTH:100%"><div style="width:97%; margin-top:1.5%; margin-left:1.5%; margin-right:-1.25%">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP><B>Microbot</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months<BR>ended<BR>June&nbsp;30,<BR>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year Ended<BR>December&nbsp;31,<BR>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Historical Per Common Share Data:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic and diluted net loss per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.10</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.20</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Book value per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.11</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.01</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP><B>StemCells and Microbot</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months<BR>ended<BR>June&nbsp;30,<BR>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year Ended<BR>December&nbsp;31,<BR>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Historical Per Common Share Data:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic and diluted net loss per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.02</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.11</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Book value per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.08</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE>
 <P STYLE="margin-top:0pt;margin-bottom:0pt; font-size:8pt">&nbsp;</P></div><br clear="All"></div><br clear="All">

 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">18 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_23"></A>MARKET PRICE AND DIVIDEND INFORMATION </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our common stock is listed on the NASDAQ Capital Market under the symbol &#147;STEM.&#148; As of [&#9679;], 2016, the record date, we had
[&#9679;] shares of common stock outstanding and approximately 241 registered stockholders. The last reported sales price of our common stock on September&nbsp;9, 2016, the last full trading day prior to the date of this proxy statement, was $1.33
per share. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Set forth below are the high and low sales prices for our common stock as reported on the NASDAQ Capital Market for the two
most recently completed fiscal years, and the first, second and third fiscal quarters of the current fiscal year: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Low(1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>High(1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>2014</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">First Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">15.48</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">19.08</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Second Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">14.16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25.68</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Third Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">15.12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28.08</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Fourth Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10.20</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15.48</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>2015</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">First Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">11.76</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16.56</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Second Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6.00</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12.12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Third Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4.56</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7.08</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Fourth Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4.68</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6.60</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>2016</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">First Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3.00</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5.16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Second Quarter</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4.44</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.33</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Third Quarter (through September 9, 2016)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2.99</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.34</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">Adjusted for the Company&#146;s one-for-twelve reverse stock split of outstanding shares on May&nbsp;9, 2016. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We have never paid any dividends on our common stock and have no intention to do so for the foreseeable future. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">19 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_24"></A>RISK FACTORS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>The combined company will face an unpredictable market environment that involves significant risks, many of which will be beyond its
control. In addition to the other information contained in this proxy statement, you should carefully consider the material risks described below before deciding how to vote your shares of StemCells common stock at the StemCells special meeting.
These factors should be considered in conjunction with the other information included by StemCells and Microbot in this proxy statement. If any of the risks described below or referred to in this proxy statement actually materialize, the business,
financial condition, results of operations, or prospects of StemCells, Microbot, and/or the combined company, or the stock price of the combined company, could be materially and adversely affected. </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_25"></A>Risks Relating to the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The issuance of shares of StemCells common stock to advisors and to Microbot shareholders in connection with the Merger will substantially dilute the
voting power of current StemCells stockholders, and as a result the StemCells stockholders will exercise less influence over the management of the combined company following the completion of the Merger. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the terms of the Merger Agreement, it is anticipated that StemCells will issue shares of StemCells common stock advisors. Following
the closing of the Merger, StemCells stockholders will own approximately 5% of the combined company, with the remaining 95% of the combined company ownership comprised 75% of existing Microbot shareholders and 20% by certain advisors (which includes
an existing Microbot shareholder) pursuant to Section&nbsp;5.29 of the Merger Agreement in each case calculated on a fully diluted basis. Accordingly, the issuance of shares of StemCells common stock to Microbot shareholders and advisors in
connection with the Merger will significantly reduce the relative voting power of each share of StemCells common stock held by current StemCells stockholders. In addition, the board of directors of the combined company will be designated by
Microbot. Consequently, StemCells&#146; stockholders will be able to exercise substantially less influence over the management and policies of the combined company than they currently exercise over the management and policies of StemCells. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>StemCells stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the
Merger. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If the combined company is unable to realize the full strategic and financial benefits anticipated from the Merger,
StemCells stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only
part of the strategic and financial benefits currently anticipated from the Merger. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot is not a publicly traded company, making it difficult
to determine the fair market value of Microbot. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The outstanding capital stock of Microbot is privately held and is not traded on
any public market, which makes it difficult to determine the fair market value of Microbot. There can be no assurances that the merger consideration to be issued to Microbot shareholders will not exceed the actual value of Microbot. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The conditions under the Merger Agreement to Microbot&#146;s consummation of the Merger may not be satisfied at all or in the anticipated timeframe.
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The obligation of Microbot to complete the Merger is subject to certain conditions, including the condition that StemCells have at
least $0 in Net Cash (as defined in the Merger Agreement) as of the closing, the approval by our stockholders of certain matters including, among other things, the approval of the Share Issuance Proposal, the Reverse Stock Split Proposal and the
Authorized Share Increase Proposal, the accuracy of the </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">20 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
representations and warranties contained in the Merger Agreement, subject to certain materiality qualifications, compliance by the parties with their respective covenants under the Merger
Agreement and no law or order preventing the Merger. These conditions are described in more detail under the section &#147;The Merger Agreement&#148; beginning on page 71 of this proxy statement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The announcement and pendency of the Merger or failure to consummate the Merger could have an adverse effect on StemCells&#146; or Microbot&#146;s
financial results, future business and operations, as well as the market price of StemCells common stock. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The announcement and
pendency of the Merger, or the companies&#146; failure to consummate the Merger, could disrupt StemCells&#146; or Microbot&#146;s businesses in the following ways, among others: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">third parties may seek to terminate and/or renegotiate their relationships with StemCells or Microbot as a result of the Merger, whether pursuant to the terms of their existing agreements or otherwise; and
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the attention of StemCells&#146; and Microbot&#146;s management may be directed toward the completion of the Merger and related matters and may be diverted from other opportunities that might otherwise be beneficial to
StemCells or Microbot. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Should they occur, any of these matters could adversely affect StemCells&#146; or Microbot&#146;s
financial condition, results of operations, or business prospects. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The completion of the Merger is subject to a number of conditions, and
there can be no assurance that the conditions to the completion of the Merger will be satisfied. If the Merger is not completed, StemCells and/or Microbot, as applicable, will be subject to several risks, including: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the fact that most of the fees and expenses in connection with to the Merger, such as legal, accounting and transaction agent fees, must be paid even if the Merger is not completed; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the fact that it may be very difficult to retain StemCells&#146; remaining directors and employees long enough to pursue other alternatives; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the StemCells&#146; Board of Directors would need to reevaluate StemCells&#146; strategic alternatives, many of which may be less favorable to stakeholders, such as liquidation of the company; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells may be delisted from the NASDAQ Capital Market for failure to comply with continued listing requirements; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">neither StemCells nor Microbot would realize any of the anticipated benefits of having completed the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the price of StemCells&#146; stock may decline and remain volatile; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the note entered into in connection with the Merger Agreement would become due and payable; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells or Microbot could be subject to litigation related to any failure to consummate the Merger or any related action that could be brought to enforce StemCells&#146; or Microbot&#146;s obligations under the Merger
Agreement. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, if the Merger Agreement is terminated and StemCells&#146; Board of Directors determines to seek
another business combination, there can be no assurance that it will be able to find a transaction that is superior or equal in value to the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells is subject to the additional risk that if the Merger Agreement is terminated, StemCells will no longer have access to the interim
financing provided in connection with the execution of the Merger Agreement, in which case StemCells would need to raise capital or obtain alternative financing to strengthen its cash position. If StemCells is unable to raise sufficient additional
capital or obtain alternative financing to strengthen its cash </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">21 </P>


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position, StemCells may not be able to service its existing indebtedness and may be required to initiate bankruptcy proceedings. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The Merger Agreement and the voting agreements contain provisions that could discourage or make it difficult for a third party to acquire StemCells or
Microbot prior to the completion of the Merger. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement contains provisions that make it difficult to entertain a
third-party proposal for an acquisition of StemCells. These provisions include the general prohibition on StemCells and Microbot soliciting or engaging in discussions or negotiations regarding any alternative acquisition proposal and the requirement
that StemCells submit the StemCells Merger Proposals to a vote of our stockholders even if our Board of Directors changes its recommendation with respect to the StemCells Merger Proposals. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">These provisions might discourage an otherwise interested third party from considering or proposing an acquisition of StemCells or Microbot,
even one that may be deemed of greater value to StemCells stockholders or Microbot shareholders, as applicable, than the Merger. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If the Microbot
Merger is not completed, StemCells may elect to liquidate its remaining assets, and there can be no assurances as to the amount of cash available to distribute to StemCells stockholders after paying StemCells&#146; debts and other obligations.
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If the Merger is not completed, the Board of Directors of StemCells may elect to take the steps necessary to liquidate all of its
remaining assets. The process of liquidation may be lengthy and StemCells cannot make any assurances regarding the timing of completing such a process. In addition, StemCells would be required to pay all of its debts and contractual obligations, and
to set aside certain reserves for potential future claims. There can be no assurance as to the amount of available cash, if any, that might be available to distribute to stockholders, if any, after paying the debts and other obligations and setting
aside funds for reserves, nor as to the timing of any such distribution. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>StemCells and Microbot have incurred and expect to continue to incur
substantial transaction-related costs in connection with the Merger. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells and Microbot have incurred, and expect to continue
to incur, a number of non-recurring transaction-related costs associated with completing the Merger and combining the two companies. These fees and costs have been, and will continue to be, substantial. Non-recurring transaction costs include, but
are not limited to, fees paid to legal, financial and accounting advisors, severance and benefit costs, filing fees and printing costs. Additional unanticipated costs may be incurred in the combined company&#146;s business, which may be higher than
expected and could have a material adverse effect on the combined company&#146;s financial condition and operating results. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If StemCells fails to
continue to meet all applicable NASDAQ Capital Market requirements and NASDAQ determines to delist StemCells common stock, the delisting would impair StemCells&#146; ability to complete the Merger. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a condition to completion the Merger, StemCells must maintain the listing of its common stock on NASDAQ and the combined company must be
approved for listing on the NASDAQ Capital Market. In order to maintain that listing and receive approval for listing of the combined company, StemCells and the combined company must satisfy minimum financial and other requirements. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On July&nbsp;14, 2016, StemCells received notices from NASDAQ, that (i)&nbsp;the closing bid price for StemCells common stock had been below
$1.00 per share for the previous 30 consecutive business days, and therefore StemCells was not in compliance with the requirements for continued including on the NASDAQ Capital Market and (ii)&nbsp;because StemCells&#146; Market Value of Listed
Securities, as defined by NASDAQ had been below </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">22 </P>


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$35&nbsp;million for the previous 30 consecutive business days, StemCells was not in compliance with the requirements for continued inclusion on the NASDAQ Capital Market. NASDAQ has notified
StemCells that it has 180 days to regain compliance. On August&nbsp;29 2016, StemCells regained compliance with the minimum bid price requirement for continued listing on the NASDAQ Capital Market, as the closing bid price of its common stock had
been at least $1.00 per share for ten consecutive trading days. The Company remains non-compliant with NASDAQ&#146;s Market Value of Listed Securities requirement, but continues to have until January&nbsp;10, 2017 to regain compliance with this
requirement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">While StemCells intends to engage in efforts to regain compliance and thus maintain its listing, there can be no assurance
that StemCells will be able to regain compliance during the applicable time period. If NASDAQ determines to delist StemCells&#146; common stock, an important condition to consummation of the Merger will be frustrated, the delisting would adversely
affect the market liquidity of StemCells common stock and adversely affect StemCells&#146; ability to obtain financing on acceptable terms, if at all. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The Exchange Ratio will not be adjusted in the event of any change in either StemCells&#146; stock price or Microbot&#146;s share price. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the Merger, each outstanding ordinary share of Microbot (with certain exceptions), by virtue of the Merger and without any action on the
part of the parties to the Merger Agreement or the holders of shares of StemCells&#146; common stock, will be converted into the right to receive validly issued, fully paid and nonassessable shares of StemCells common stock pursuant to an
established exchange ratio set forth in the Merger Agreement, which we refer to as the Exchange Ratio. This Exchange Ratio will not be adjusted for changes in the market price of either StemCells common stock or Microbot stock. However, the Exchange
Ratio may be adjusted to eliminate the effect of certain events, including a reclassification, recapitalization, or stock split in the outstanding shares of the capital stock of either StemCells or Microbot. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Share price changes may result from a variety of factors (many of which are beyond our or Microbot&#146;s control), including the following:
</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in StemCells&#146; and Microbot&#146;s respective businesses, operations and prospects, or the market assessments thereof; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">market assessments of the likelihood that the Merger will be completed; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">general market and economic conditions and other factors generally affecting the price of StemCells common stock or Microbot&#146;s capital stock. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The price of StemCells common stock at the closing of the Merger may vary from the price on the date the Merger Agreement was executed and the
date of the special meeting of StemCells stockholders. As a result, the market value of the merger consideration will also vary. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Provisions of
Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, Microbot, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special
approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed
from the date on which a merger proposal is filed by each of Microbot and Merger Sub with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the Merger.
In addition, a majority of each class of securities of the target company must approve a merger. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">23 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Because the Merger will result in an ownership change under Section&nbsp;382 of the Internal Revenue Code
(the &#147;Code&#148;) for StemCells, StemCells&#146; pre-Merger net operating loss carryforwards and certain other tax attributes will be subject to limitations. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If a corporation undergoes an &#147;ownership change&#148; within the meaning of Section&nbsp;382 of the Code, the corporation&#146;s net
operating loss carryforwards and certain other tax attributes arising prior to the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the
corporation&#146;s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The Merger will result in an ownership change of StemCells and,
accordingly, StemCells&#146; use of net operating loss carryforwards and certain other tax attributes will be subject to an annual limitation after the Merger. Consequently, StemCells will likely be unable to utilize a material portion of its net
operating loss carryforwards and other tax attributes to reduce its U.S. federal or state income tax liability. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Some of the directors and executive
officers of StemCells and Microbot have interests in the Merger that may be different from, or in addition to, those of the other StemCells and Microbot shareholders. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">When considering the recommendation by the Board of Directors of StemCells that the StemCells stockholders vote &#147;for&#148; each of the
StemCells Merger Proposals, the StemCells stockholders should be aware that certain of the directors and executive officers of StemCells and Microbot have certain rights to indemnification and to directors&#146; and officers&#146; liability
insurance that will be provided by the company in connection with the Merger. In addition, certain executive officers of StemCells have arrangements that provide them with interests in the Merger that are different from, or in addition to, those of
the stockholders of StemCells and shareholders of Microbot. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Certain of Microbot&#146;s current executive officers and directors are
expected to own shares of common stock of the combined company and/or options to purchase shares of common stock of the combined company following the completion of the Merger. See &#147;Principal Stockholders of Combined Company&#148; beginning on
page&nbsp;163. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells was aware of these potential interests and considered them in making their respective
recommendations to approve the StemCells Merger Proposals. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_26"></A>Risks Relating to the Combined Company </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Even if the Merger is consummated, StemCells and Microbot may fail to realize the anticipated benefits of the Merger. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The success of the Merger will depend on, among other things, the combined company&#146;s ability to achieve its business objectives, including
the successful development of its product candidates. If the combined company is not able to achieve these objectives, the anticipated benefits of the Merger may not be realized fully, may take longer to realize than expected, or may not be realized
at all. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells and Microbot have operated and, until the completion of the Merger, will continue to operate independently. Even if the
Merger is completed, it is possible that the integration process could result in the disruption of each company&#146;s ongoing business, an adverse impact on the value of StemCells&#146; assets, or inconsistencies in standards, controls, procedures
or policies that could adversely affect the combined company&#146;s ability to comply with reporting obligations as a public company, to satisfy StemCells&#146; obligations to third parties or to achieve the anticipated benefits of the Merger. Any
delays in the integration process or inability to realize the full extent of the anticipated benefits of the Merger could have an adverse effect on the business prospects and results of operations of the combined company. Such an adverse effect may
impact the value of the shares of the combined company&#146;s common stock after the completion of the Merger. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">24 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Potential difficulties that may be encountered in the integration process include the following:
</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">combining the internal controls and historical records of StemCells and Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">maintaining internal controls over financial reporting upon completion of the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">using the combined company&#146;s cash and other assets efficiently to develop the business of the combined company; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">appropriately managing the liabilities of the combined company; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">performance shortfalls as a result of the diversion of management&#146;s attention caused by completing the Merger. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, Microbot could be materially adversely affected prior to the closing of the Merger, which could have a material adverse effect on
the value of the combined company. StemCells is required under the Merger Agreement to complete the Merger despite: any changes in general economic or political conditions or the securities market in general, to the extent they do not
disproportionately affect Microbot; any changes in or affecting the industries in which Microbot operates, to the extent they do not disproportionately affect Microbot; and any changes, effects or circumstances resulting from the announcement or
pendency of the Merger Agreement or the completion of the contemplated transactions or compliance with the terms of the Merger Agreement. If any such adverse changes occur and the Merger is still completed, the combined company&#146;s stock price
may suffer. This in turn may reduce the value of the Merger to the stockholders of the combined company. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>A failure by the combined company upon
completion of the Merger to comply with the initial listing standards of the NASDAQ Capital Market may subject the stock to delisting from the NASDAQ Capital Market, which listing is a condition to the completion of the Merger. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a condition to the Merger, StemCells must maintain the listing of StemCells common stock on NASDAQ. In addition, oftentimes a reverse stock
split will not result in a trading price for the affected common stock that is proportional to the ratio of the split. Upon the completion of the Merger, the combined company will be required to meet the initial listing requirements to maintain the
listing and continued trading of StemCells&#146; shares on the NASDAQ Capital Market. These initial listing requirements are more difficult to achieve than the continued listing requirements under which StemCells is now trading, including that
StemCells (a)&nbsp;have a minimum bid price of at least $4 per share, (b)&nbsp;have a public float of at least $15 million and (c)&nbsp;have stockholders equity of at least $5 million. Based on information currently available, StemCells anticipates
that it will be unable to meet the $4.00 minimum bid price initial listing requirement at the closing of the Merger unless it effects a reverse stock split. If StemCells is unable to satisfy these requirements, NASDAQ may notify StemCells that its
stock will be subject to delisting from the NASDAQ Capital Market. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The combined company&#146;s management will be required to devote substantial
time to comply with public company regulations. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a public company, the combined company will incur significant legal, accounting
and other expenses. The rules implemented by the SEC and the NASDAQ Capital Market, impose various requirements on public companies, including those related to corporate governance practices. The combined company&#146;s management and other
personnel will need to devote a substantial amount of time to these requirements. Certain members of Microbot&#146;s management, which will substantially continue as the management of the combined company, do not have experience in addressing these
requirements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Sarbanes-Oxley requires, among other things, that the combined company maintain effective internal controls for financial
reporting and disclosure controls and procedures. In particular, the combined company must perform system and process evaluation and testing of its internal controls over financial reporting to allow management and the combined company&#146;s
independent registered public accounting firm to report on the </P>
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effectiveness of its internal controls over financial reporting, as required by Section&nbsp;404. The combined company&#146;s compliance with Section&nbsp;404 will require that it incur
substantial accounting and related expenses and expend significant management efforts. The combined company may need to hire additional accounting and financial staff to satisfy the ongoing requirements of Section&nbsp;404. Moreover, if the combined
company is not able to comply with the requirements of Section&nbsp;404, or if the combined company or its independent registered public accounting firm identifies deficiencies in its internal controls over financial reporting that are deemed to be
material weaknesses, the market price of the combined company&#146;s stock could decline and the combined company could be subject to sanctions or investigations by the NASDAQ Capital Market, the SEC, or other regulatory authorities. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Either StemCells, Microbot or both may become involved in securities class action litigation that could divert management&#146;s attention and harm the
combined company&#146;s business, and insurance coverage may not be sufficient to cover all costs and damages. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the past,
securities class action or shareholder derivative litigation often follows certain significant business transactions, such as the announcement of a merger. The combined company may become involved in this type of litigation in the future. Litigation
often is expensive and diverts management&#146;s attention and resources, which could adversely affect the combined company&#146;s business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The
market price of the combined company&#146;s common stock after the Merger may be affected by factors different from those currently affecting the shares of StemCells common stock. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Upon completion of the Merger, holders of StemCells common stock and Microbot capital stock will become holders of the combined company&#146;s
common stock. StemCells&#146; business differs significantly from the business of Microbot and, accordingly, the results of operations of the combined company and the market price of the combined company&#146;s common stock following the completion
of the Merger may be significantly affected by factors different from those currently affecting StemCells&#146; independent results of operations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The reverse stock split may not increase the combined company&#146;s stock price over the long-term. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The principal purpose of the reverse stock split is to increase the per-share market price of StemCells&#146; common stock. It cannot be
assured, however, that the reverse stock split will accomplish this objective for any meaningful period of time. In addition, it cannot be assured that the reverse stock split will increase the market price of its common stock by a multiple of the
proposed reverse stock split ratio, or result in any permanent or sustained increase in the market price of StemCells&#146; common stock, which is dependent upon many factors, including the combined company&#146;s business and financial performance,
general market conditions, and prospects for future success. Therefore, while the stock price of the combined company might meet the continued listing requirements for the NASDAQ Capital Market initially, it cannot be assured that it will continue
to do so. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The reverse stock split may decrease the liquidity of the combined company&#146;s common stock. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Although StemCells believes that the anticipated increase in the market price of the combined company&#146;s common stock could encourage
interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of
outstanding shares may lead to reduced trading and a smaller number of market makers for StemCells&#146; common stock. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The reverse stock split may
lead to a decrease in the combined company&#146;s overall market capitalization. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Should the market price of the combined
company&#146;s common stock decline after the reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split may be viewed
negatively by the market and, consequently, </P>
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can lead to a decrease in the combined company&#146;s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value
of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse stock split levels, and
accordingly, it cannot be assured that the total market value of StemCells&#146; common stock will remain the same after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on StemCells&#146; stock
price due to the reduced number of shares outstanding after the reverse stock split. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The existing shareholders of Microbot will control the
combined company for the foreseeable future, including the outcome of matters requiring shareholder approval and such control may prevent existing stockholders of StemCells from influencing significant corporate decisions and may result in conflicts
of interest that could cause the combined company&#146;s stock price to decline. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the closing of the Merger, StemCells
stockholders will own approximately 5% of the combined company, with the remaining 95% of the combined company ownership comprised 75% of existing Microbot shareholders and 20% by certain advisors (which includes an existing Microbot shareholder)
pursuant to Section&nbsp;5.29 of the Merger Agreement. As a result, after the consummation of the Merger, such entities and individuals will have the ability, acting together, to control the election of the combined company&#146;s directors and the
outcome of corporate actions requiring shareholder approval, such as: (i)&nbsp;a merger or a sale of the combined company; (ii)&nbsp;a sale of all or substantially all of the combined company&#146;s assets; and (iii)&nbsp;amendments to the combined
company&#146;s articles of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to the combined company&#146;s
other shareholders and be disadvantageous to Microbot shareholders with interests different from those entities and individuals. Certain of these individuals will also have significant control over the combined company&#146;s business, policies and
affairs as officers or directors of the combined company. These stockholders may also exert influence in delaying or preventing a change in control of the combined company, even if such change in control would benefit the other stockholders of the
combined company. In addition, the significant concentration of stock ownership may adversely affect the market value of the combined company&#146;s common stock due to investors&#146; perception that conflicts of interest may exist or arise. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Material weaknesses may exist when the combined company reports on the effectiveness of its internal control over financial reporting for purposes of
its reporting requirements. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A material weakness is a control deficiency, or a combination of control deficiencies, that results in
more than a remote likelihood that a material misstatement of annual or interim financial statements would not be prevented or detected. Microbot has concluded that there is a material weakness in its internal control over financial reporting
because it does not have a sufficient number of personnel with the appropriate level of experience and technical expertise to appropriately resolve non-routine and complex accounting matters or to evaluate the impact of new and existing accounting
pronouncements on its consolidated financial statements while completing the financial statement close process. Until this design deficiency is remediated, there is more than a remote likelihood that a material misstatement to Microbot&#146;s annual
or interim consolidated financial statements could occur and not be prevented or detected by Microbot&#146;s internal controls in a timely manner. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, following the completion of the Merger, the combined company will be required
to assess the effectiveness of its internal control over financial reporting as of the end of its fiscal year. This assessment must include disclosure of any material weaknesses in the combined company&#146;s internal control over financial
reporting that is identified by management. The report must also contain a statement that the combined company&#146;s independent registered public accounting firm has issued an attestation report on management&#146;s assessment of such internal
controls. If the combined company&#146;s management or its independent registered public accounting firm identifies one or more material weaknesses in the combined company&#146;s internal control over financial reporting, the combined company will
be unable to assert that such internal control is effective. If the combined company is unable to assert that its internal control over </P>
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financial reporting is effective because the material weakness identified above has not been remediated, or for any other reason, or if the combined company&#146;s independent registered public
accounting firm is unable to attest that the combined company&#146;s management&#146;s report is fairly stated or it is unable to express an opinion on the effectiveness of the combined company&#146;s internal controls, investors could lose
confidence in the accuracy and completeness of the combined company&#146;s financial reports, which could have an adverse effect on the combined company&#146;s stock price. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The combined company does not expect to pay cash dividends on its common stock. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">It is anticipated that the combined company will retain its earnings, if any, for future growth and therefore the combined company does not
anticipate paying cash dividends on its common stock in the future. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The combined company will incur costs and demands upon management as a result
of complying with the laws and regulations affecting public companies. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The combined company will incur significant legal,
accounting and other expenses that Microbot did not incur as a private company, including costs associated with public company reporting requirements. The combined company will also incur costs associated with corporate governance requirements,
including requirements under the Sarbanes-Oxley Act and rules and regulations promulgated by the SEC and The NASDAQ Stock Market. These rules and regulations are expected to increase the combined company&#146;s legal and financial compliance costs
and to make some activities more time-consuming and costly. For example, not all members of the combined company&#146;s management team have previously managed and operated a public company. The executive officers and other personnel of the combined
company will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations may also make it difficult and expensive for the combined
company to obtain directors&#146; and officers&#146; liability insurance. As a result, it may be more difficult for the combined company to attract and retain qualified individuals to serve on the combined company&#146;s board of directors or as
executive officers of the combined company, which may adversely affect investor confidence in the combined company and could cause the combined company&#146;s business or stock price to suffer. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Anti-takeover provisions in the combined company&#146;s charter and bylaws under Delaware law may prevent or frustrate attempts by stockholders to
change the board of directors or current management and could make a third-party acquisition of the combined company difficult. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Provisions in the combined company&#146;s certificate of incorporation and bylaws, which are identical to StemCells&#146; certificate of
incorporation and bylaws, may delay or prevent an acquisition or a change in management. These provisions include a classified board of directors. In addition, because the combined company will be incorporated in Delaware, it is governed by the
provisions of Section&nbsp;203 of the DGCL, which prohibits stockholders owning in excess of 15% of the outstanding combined company voting stock from merging or combining with the combined company. Although StemCells and Microbot believe these
provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with the combined company&#146;s board of directors, they would apply even if the offer may be considered beneficial by some
stockholders. In addition, these provisions may frustrate or prevent any attempts by the combined company&#146;s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board
of directors, which is responsible for appointing members of management. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>There can be no assurance of the combined company obtaining the
effectiveness of a resale registration statement or any other liquidity event. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">No assurance can be given that the combined company
will be able to obtain the effectiveness of a resale registration statement or other liquidity event will be consummated or that, if consummated, it would result in increased value of the shares of Common Stock. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">28 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Upon dissolution of the combined company, you may not recoup all or any portion of your investment.
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the event of a liquidation, dissolution or winding-up of the combined company, whether voluntary or involuntary, the proceeds
and/or assets of the combined company remaining after giving effect to such transaction, and the payment of all of our debts and liabilities, will be distributed to the stockholders of Common Stock on a pro rata basis, subject to any holders of our
securities that have preferential rights over our Common Stockholders. There can be no assurance that we will have available assets to pay to the holders of Common Stock, or any amounts, upon such a liquidation, dissolution or winding-up of our
Company. In this event, you could lose some or all of your investment. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The combined company may have unforeseen liabilities and any such
liabilities could harm its business, prospects, financial condition and results of operations. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As part of the negotiation of the
Merger Agreement, each party conducted due diligence on the other customary and appropriate for a transaction similar to the Merger. However, the due diligence process may not have revealed all material liabilities of the companies which may be
asserted in the future against the combined company relating to its activities before the consummation of the Merger. In addition, the Merger Agreement contains closing conditions with respect to the net cash of StemCells being no less than zero at
closing, subject to certain important exceptions. However, there can be no assurance that the combined company will not have additional liabilities upon the closing of the Merger that either party was unaware of. Any such liabilities that survive
the Merger could harm the combined company&#146;s business, prospects, financial condition and results of operations. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_27"></A>Risks
Relating to Microbot </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risks Relating to Microbot&#146;s Financial Position and Need for Additional Capital </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot has had no revenue and has incurred significant operating losses since inception and the combined company after the Merger is expected to
continue to incur significant operating losses for the foreseeable future. The combined company may never become profitable or, if achieved, be able to sustain profitability. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pro forma for the Merger, as if they had occurred as of June&nbsp;30, 2016, Microbot had cash and cash equivalents of approximately $5.3
million. Microbot has incurred significant operating losses since its inception and expects to incur significant losses for the foreseeable future as Microbot continues its preclinical and clinical development programs for its existing product
candidates, SCS and TipCAT; its research and development of any other future product candidates; and all other work necessary to obtain regulatory clearances or approvals for its product candidates in the United States and other markets. In the
future, Microbot intends to continue conducting micro-robotics research and development; performing necessary animal and clinical testing; working towards medical device regulatory compliance; and, if SCS, TipCAT or other future product candidates
are approved or cleared for commercial distribution, engaging in appropriate sales and marketing activities that, together with anticipated general and administrative expenses, will likely result in Microbot incurring further significant losses for
the foreseeable future. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is a development-stage medical device company and currently generates no revenue from product sales, and
may never be able to commercialize SCS, TipCAT or other future product candidates. Microbot does not currently have the required approvals or clearances to market or test in humans SCS, TipCAT or any other future product candidates and Microbot may
never receive them. Following the Merger, Microbot does not anticipate generating significant revenues until the combined company can successfully develop, commercialize and sell products derived from its product pipeline, of which Microbot can give
no assurance. Even if Microbot or any of its future development partners succeed in commercializing any of Microbot&#146;s product candidates, Microbot may never generate revenues significant enough to achieve profitability. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Because of the numerous risks and uncertainties associated with its product development pipeline and strategy, Microbot cannot accurately
predict when it will achieve profitability, if ever. Failure to become and </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">29 </P>


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remain profitable would depress the value of the combined company and could impair its ability to raise capital, which may force the combined company to curtail or discontinue its research and
development programs and/or day-to-day operations. Furthermore, there can be no assurance that profitability, if achieved, can be sustained on an ongoing basis. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s business depends on the success of the SCS and the TipCAT, both of which are still in pre-clinical development. If Microbot is unable to
obtain regulatory approval for or to successfully commercialize these products, its business will be materially harmed. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To date,
the primary focus of Microbot&#146;s product development has been on SCS, for the treatment of hydrocephalus and normal pressure hydrocephalus, or NPH, and TipCAT, a self-propelling, semi-disposable endoscope being developed initially for use in
colonoscopy procedures. Successful continued development and ultimate regulatory approval or clearance of both SCS and TipCAT are critical to the future success of Microbot&#146;s business. Microbot has invested, and will continue to invest, a
significant portion of its time and financial resources in the development, pre-clinical and clinical testing of and obtaining regulatory authorization for SCS and TipCAT. Microbot will need to raise sufficient funds to successfully complete its
development of these products. The future regulatory and commercial success of SCS and TipCAT is subject to a number of risks, including the following: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot may not have sufficient financial and other resources to complete the necessary clinical trials for SCS and TipCAT; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">If clinical trials are required for FDA clearance or approval of SCS or TipCAT, Microbot may not be able to obtain adequate evidence from such clinical trials of safety and effectiveness in order to receive the
applicable clearance or approval from the FDA; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot does not know the degree to which SCS or TipCAT will be accepted and adopted by physicians, patients and payors, even if approved or cleared by FDA for commercial marketing. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If Microbot is unable to successfully navigate these risks and achieve commercial success for its products, its business will be significantly
harmed and Microbot may never become profitable. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot has a limited operating history, which may make it difficult to evaluate the prospects
for the combined company&#146;s future viability. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has a limited operating history upon which an evaluation of its
business plan or performance and prospects can be made. The business and prospects of Microbot must be considered in the light of the potential problems, delays, uncertainties and complications that may be encountered in connection with a newly
established business. The risks include, but are not limited to, the possibility that Microbot will not be able to develop functional and scalable products, or that although functional and scalable, its products will not be economical to market;
that its competitors hold proprietary rights that may preclude Microbot from marketing such products; that its competitors market a superior or equivalent product; that Microbot is not able to upgrade and enhance its technologies and products to
accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances or approvals for its products. To successfully introduce and market its products at a profit, Microbot must establish brand name
recognition and competitive advantages for its products. There are no assurances that Microbot can successfully address these challenges. If it is unsuccessful, Microbot and its business, financial condition and operating results could be materially
and adversely affected. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s operations to date have been limited to organizing the company, entering into licensing
arrangements to initially obtain rights to its technologies, developing and securing its technologies, raising capital, developing regulatory and reimbursement strategies for its product candidates and preparing for pre-clinical and clinical trials
of the SCS and TipCAT. Microbot has not yet demonstrated its ability to successfully complete development of any product candidate, obtain marketing clearance or approval, manufacture a </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">30 </P>


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commercial-scale product or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any
predictions made about Microbot&#146;s future success or viability may not be as accurate as they could be if Microbot had a longer operating history. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s independent registered public accounting firm has noted that the continuation of Microbot as a business will be dependent on its ability
to receive additional financing. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Based on Microbot&#146;s limited operating history and the risks it faces, including
uncertainties regarding the development of its product, Microbot&#146;s independent registered public accounting firm has included an explanatory paragraph in its report on Microbot&#146;s financial statements as of and for the years ended
December&nbsp;31, 2015 and December&nbsp;31, 2014 elaborating on the business conditions Microbot faces. As Microbot expects to continue to incur significant operating costs and losses in connection with the development of its product and financing
its business development operations, as of the date of the financial statements, the continuation of Microbot&#146;s activities and its obligations are dependent upon the receipt of financing from its shareholders or new investors. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The combined company will need substantial additional funding. If the combined company is unable to raise capital when needed, it could be forced to
delay, reduce or eliminate its product development programs or commercialization efforts. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To date, Microbot has funded its
operations primarily through private placement offerings of debt and equity securities, grants and loans. From November&nbsp;10, 2010 through June&nbsp;30, 2016, Microbot received: (i)&nbsp;approximately $3.0 million from the issuance of
Microbot&#146;s series A preferred stock and the exercise of warrants to purchase Microbot&#146;s series A preferred stock, (ii)&nbsp;approximately $0.9 million for research and development activities as a grant from the Office of the Chief
Scientist in Israel, and (iii)&nbsp;approximately $1.2 million from existing shareholders of Microbot pursuant to convertible loan agreements. In addition, as a condition to the completion of the Merger, Microbot will conduct one or more private
capital raises prior to the consummation of the Merger, pursuant to which Microbot expects to raise proceeds of no less than $4.0 million, which is referred to herein as the Microbot Private Placement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot does not know when, or if, the combined company will generate any revenue, but does not expect the combined company to generate
significant revenue unless and until it obtains regulatory clearance or approval of and commercializes one of its current or future product candidates. It is anticipated that the combined company will continue to incur losses for the foreseeable
future, and that losses will increase as the combined company continues the development of, and seeks regulatory review of, its product candidates, and begins to commercialize any approved or cleared products following a successful regulatory
review. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot expects the research and development expenses of the combined company to increase substantially in future periods as it
conducts pre-clinical studies in large animals and potentially clinical trials for its product candidates, and especially if it initiates additional research programs for future product candidates. In addition, if the combined company obtains
marketing clearance or approval for any of its product candidates, it expects to incur significant commercialization expenses related to product manufacturing, marketing and sales. Furthermore, upon the completion of the Merger, Microbot expects to
incur additional costs associated with operating as a public company in the United States. Accordingly, the combined company will need to obtain substantial additional funding in connection with its continuing operations. If the combined company is
unable to raise capital when needed or on attractive terms, it could be forced to delay, reduce or eliminate its research and development programs or any future commercialization efforts. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot believes that the net cash of the combined company that will be available upon completion of the Merger will be sufficient to fund
the combined company for at least 18 months and fund operations necessary to commercialize SCS and TipCAT. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">31 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The combined company may need to raise additional funds through equity offerings or otherwise in
order to meet expected future liquidity needs, including the introduction of the SCS device into the hydrocephalus and NPH market, and introducing the TipCAT as a next-generation colonoscope. The combined company&#146;s future capital requirements,
generally, will depend on many factors, including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the date that the Merger is completed; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the timing and outcomes of the product candidates&#146; regulatory reviews, subsequent approvals or clearances, or other regulatory actions; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs, design, duration and any potential delays of the clinical trials that could be conducted at the FDA&#146;s request using Microbot&#146;s product candidates; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs of acquiring, licensing or investing in businesses, product candidates and technologies; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs to maintain, expand and defend the scope of Microbot&#146;s intellectual property portfolio; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs to secure or establish sales, marketing and commercial manufacturing capabilities or arrangements with third parties regarding same; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the combined company&#146;s need and ability to hire additional management and scientific and medical personnel; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the costs to operate as a public company in the United States, including the need to implement additional financial and reporting systems and other internal systems and infrastructure for the combined company&#146;s
business. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Raising additional capital may cause dilution to the combined company&#146;s investors, restrict its operations or require
it to relinquish rights to its technologies or product candidates. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Until such time, if ever, as the combined company can generate
substantial product revenues, it expects to finance its cash needs through a combination of equity offerings, licensing, collaboration or similar arrangements, grants and debt financings. The combined company does not have any committed external
source of funds. In addition to the Microbot Private Placement, the combined company may seek to raise additional capital at any time prior to, or financing soon after, completion of the Merger. To the extent that the combined company raises
additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights
of holder of the combined company&#146;s common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting the combined company&#146;s ability to take specific actions, such as incurring additional
debt, making capital expenditures, declaring dividends or other distributions, selling or licensing intellectual property rights, and other operating restrictions that could adversely affect the combined company&#146;s ability to conduct its
business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If the combined company raises additional funds through licensing, collaboration or similar arrangements, it may have to
relinquish valuable rights to its technologies, future revenue streams, research and development programs or product candidates or to grant licenses on terms that may not be favorable to the combined company. If the combined company is unable to
raise additional funds through equity or debt financings or other arrangements when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market
product candidates that it would otherwise prefer to develop and market itself. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Limitations on the ability of smaller reporting companies to sell
shares under a Form S-3 shelf registration statement may interfere with the combined company&#146;s ability to execute financing transactions quickly or at all. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The combined company&#146;s ability to raise capital using a shelf registration statement may be limited by, among other things, current SEC
rules and regulations. Under these rules and regulations, the combined company </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">32 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
must meet certain requirements to use a Form S-3 registration statement to raise capital without restriction as to the amount of the market value of securities sold under the Form S-3
registration statement. One such requirement is that the market value of the combined company&#146;s outstanding common stock held by non-affiliates, or public float, be at least $75 million as of a date within 60 days prior to the date on which the
securities are sold under the Form S-3 (and the date of any Form 10-K filing thereafter by the combined company, which is deemed a re-evaluation date). If the combined company does not meet that requirement, then the aggregate market value of
securities sold by the combined company in a primary offering under a Form S-3 in any 12-month period is limited to an aggregate of one-third of the combined company&#146;s public float. SEC rules and regulations require that the combined company
periodically re-evaluate the value of its public float, and if, at a re-evaluation date, its public float is less than $75 million, the combined company would become subject to the one-third of public float limitation described above. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the closing of the Merger, the combined company&#146;s public float is expected to be less than $75&nbsp;million, so the combined
company&#146;s ability to utilize a Form S-3 registration statement for a primary offering of its securities will be restricted under these rules, and any such offering under a Form S-3 will be limited to raising an aggregate of one-third of the
combined company&#146;s public float. Alternatively, the combined company could elect to raise capital pursuant to an exemption from registration under the Securities Act, or under a Form&nbsp;S-1 registration statement, but either of these
alternatives would likely increase the cost of raising additional capital when compared to the use of a Form S-3 registration statement. Furthermore, because of these limitations to using Form S-3 and the increased likelihood of greater costs and
potential delays associated with the alternatives to using a Form S-3, the terms of any financing transaction that the combined company is able to conduct may be less favorable or may cause it to be unable to obtain capital in a timely manner. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risks Relating to the Development and Commercialization of Microbot&#146;s Product Candidates </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s business depends heavily on the success of its lead product candidates, the SCS and the TipCAT. If Microbot is unable to commercialize
the SCS or the TipCAT or experiences significant delays in doing so, Microbot&#146;s business will be materially harmed. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot
expects the animal studies for SCS to start by the end of 2016. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by the FDA or if Microbot decides that the data from such trials would improve the
marketability of the product candidate. The TipCAT is expected to enter animal studies in 2017. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by the FDA or if Microbot decides that the data from
such trials would improve the marketability of the product candidate. After all necessary clinical and performance data supporting the safety and effectiveness of each product candidate are collected, Microbot must still obtain FDA clearance or
approval to market the device and those regulatory processes can take several months to several years to be completed. Therefore, Microbot&#146;s ability to generate product revenues will not occur for at least the next few years, if at all, and
will depend heavily on the successful commercialization of SCS and TipCAT in their respective intended markets. The success of each of these product candidates will depend on a number of factors, including the following: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the combined company&#146;s ability, following completion of the Merger, to obtain additional capital; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">successful completion of animal studies and, if necessary, human clinical trials and the collection of sufficient data to demonstrate that the device is safe and effective for its intended use; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">receipt of marketing approvals or clearances from FDA and other applicable regulatory authorities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">establishing commercial manufacturing arrangements with one or more third parties; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">obtaining and maintaining patent and trade secret protections; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">protecting Microbot&#146;s rights in its intellectual property portfolio; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">establishing sales, marketing and distribution capabilities; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">33 </P>


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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">generating commercial sales of SCS and TipCAT, as applicable, if and when approved, whether alone or in collaboration with other entities; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">acceptance of SCS and TipCAT, as applicable, if and when commercially launched, by the medical community, patients and third-party payors; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">effectively competing with existing shunt and endoscope products on the market and any new competing products that may enter the market; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">maintaining quality and an acceptable safety profile of SCS and TipCAT, as applicable, following clearance or approval. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If Microbot does not achieve one or more of these factors in a timely manner or at all, Microbot could experience significant delays or an
inability to successfully commercialize SCS and/or TipCAT, which would materially harm its business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s product candidates are subject
to an uncertain and potentially lengthy domestic regulatory review process. If Microbot does not obtain and maintain the necessary regulatory authorizations from the Food and Drug Administration, Microbot will not be able to sell its product
candidates in the United States. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s product candidates and operations are subject to extensive regulation in the
United States by the FDA under the agency&#146;s medical device authorities. The FDA regulates the development, bench and clinical testing, manufacturing, labeling, storage, record-keeping, promotion, marketing sales, distribution and post-market
support and reporting of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. Microbot expects its product candidates to be classified as Class II. In order to
market Class II products for use in the United States, Microbot must first obtain clearance from the FDA pursuant to Section&nbsp;510(k) of the Federal Food, Drug, and Cosmetic Act. Clearance under Section&nbsp;510(k) requires a demonstration that a
new device is substantially equivalent to another device with 510(k) clearance or grandfathered status or to a device that was reclassified from Class III to Class II or Class I. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If the FDA determines that the device or its intended use is not substantially equivalent to a predicate device, the device is automatically
placed into Class III, requiring the submission of a premarket approval application (PMA). There is no guarantee that the FDA will agree with Microbot&#146;s determination that a 510(k) notification is the appropriate regulatory pathway for its
products, or that FDA will grant Microbot 510(k) clearance for its pipeline medical device products even if that pathway is accepted. Failure to obtain the necessary clearances for its products would adversely affect Microbot&#146;s ability to grow
its business. Delays in receipt or failure to receive the necessary clearances, or the failure to comply with existing or future regulatory requirements, could reduce our business prospects. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Devices that cannot be cleared through the 510(k) process due to lack of a predicate device but would be considered low or moderate risk (in
other words, they do not rise to the level of requiring the approval of a PMA) may be eligible for the 510(k) de novo classification process. If FDA determines that either of Microbot&#146;s product candidates is not eligible for a traditional
510(k), the Microbot device may still be eligible for the 510(k) de novo process. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Even if one or both of Microbot&#146;s product
candidates receives 510(k) clearance from FDA, under either the traditional pathway or the de novo 510(k) pathway, any subsequent modification that could significantly affect the device&#146;s safety or effectiveness, or that would cause them to be
marketed for additional indications for use, may require a new 510(k) clearance or a PMA for the modified products before Microbot will be permitted to market them in the United States. The FDA can require a manufacturer to cease U.S. marketing
and/or recall the modified device until it is satisfied that the appropriate 510(k) clearance or PMA approval is obtained. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">34 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The FDA may not act favorably or quickly in its review of Microbot&#146;s 510(k), de novo 510(k),
or PMA submissions, as applicable, or Microbot may encounter significant difficulties and costs in its efforts to obtain FDA clearance or approval, any of which could delay or preclude its sale of its product candidates in the United States.
Furthermore, the FDA may request additional data or require Microbot to conduct further testing, or compile more data, including clinical data and clinical studies, in support of its 510(k) submission or potentially a de novo 510(k). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Moreover, the regulatory policies affecting Microbot&#146;s proposed product candidates can change at any time. The changes and their
potential impact on Microbot&#146;s business cannot be accurately predicted. For example, in 2011, the FDA announced a Plan of Action to modernize and improve the FDA&#146;s premarket review of medical devices, and has implemented, and continues to
implement, reforms intended to streamline the premarket review process. In addition, as part of the Food and Drug Administration Safety and Innovation Act of 2012, Congress enacted several reforms through the Medical Device Regulatory Improvements
and additional miscellaneous provisions which will further affect both pre- and post-approval medical device regulation. Changes in the FDA 510(k) process could make clearance more difficult to obtain, increase delay, add uncertainty and have other
significant adverse effects on Microbot&#146;s ability to obtain and maintain clearance for its product candidates. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The FDA may also,
instead of accepting any kind of 510(k) submission, classify a product as high-risk and require Microbot to submit a PMA for the initial clearance, which is typically a much more complex, lengthy and burdensome application than a 510(k) submission.
To support a PMA, the FDA would likely require that Microbot conduct one or more clinical studies to demonstrate that the device is safe and effective. In some cases such studies may be requested for a 510(k) or de novo 510(k) as well. Microbot may
not be able to meet the requirements to obtain 510(k) clearance or PMA approval, in which case the FDA may not grant any necessary clearances or approvals. In addition, the FDA may place significant limitations upon the intended use of its product
candidates as a condition to a 510(k) clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any
delays or failure to obtain FDA clearance or approval of new products Microbot develops, any limitations imposed by the FDA on new product use or the costs of obtaining FDA clearance or approvals could have a material adverse effect on
Microbot&#146;s business, financial condition and results of operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Failure to comply with the regulations or obtain the approvals
described above could have a material adverse effect on Microbot&#146;s business, financial condition and results of operations. There can be no assurance that clinical trials will meet desired endpoints, produce meaningful or useful data and be
free of unexpected adverse effects, and such uncertainty could preclude or delay market clearance or authorizations resulting in significant financial costs and reduced revenue. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>At this time, Microbot does not know whether the FDA will require it to submit clinical data in support of its future marketing applications for either
product candidate. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot anticipates that each of its existing product candidates, SCS and TipCAT, will be classified by the
FDA as Class II and thus be eligible for marketing pursuant to a cleared 510(k) notification. However, there is no guarantee that the FDA will agree with the Company&#146;s determination or that the FDA would accept the predicate devices that
Microbot intends to submit in its 510(k) notifications in order to establish that its new device product is substantially equivalent to one or more predicate devices. The FDA also may request additional data in response to a 510(k) notification, or
require Microbot to conduct further testing or compile more data in support of its 510(k) submission or de novo 510(k), as appropriate. Such additional data could include clinical data that must be derived from human clinical studies that are
designed appropriately to address the potential questions from the FDA regarding a proposed product&#146;s safety or effectiveness. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In
order to conduct a clinical investigation involving human subjects for the purpose of demonstrating the safety and effectiveness of a medical device, a company must, among other things, apply for and obtain
</P>
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Institutional Review Board, or IRB, approval of the proposed investigation. In addition, if the clinical study involves a &#147;significant risk&#148; (as defined by the FDA) to human health, the
sponsor of the investigation must also submit and obtain FDA approval of an Investigational Device Exemption, or IDE, application. Microbot may not be able to obtain FDA and/or IRB approval to undertake clinical trials in the United States for any
new devices Microbot intends to market in the United States in the future. Any type of clinical study in humans requires the investment of substantial expense, professional resources and time. Moreover, the timing of the commencement, continuation
and completion of any future clinical trial may be subject to significant delays attributable to various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling
patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delay in or failure to obtain IRB approval to conduct a clinical trial at a prospective site, and shortages of supply in the investigational device.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The addition of one or more mandatory clinical trials to the development timeline for one or both Microbot product candidates would
significantly increase the costs associated with developing and commercializing the product and delay the timing of U.S. regulatory authorization. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Unsuccessful animal studies, clinical trials or procedures relating to product candidates under development could have a material adverse effect on
Microbot&#146;s prospects. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The regulatory approval process for new products and new indications for existing products requires
extensive data and procedures, including the development of regulatory and quality standards and, potentially, certain clinical studies. Unfavorable or inconsistent data from current or future clinical trials or other studies conducted by Microbot
or third parties, or perceptions regarding such data, could adversely affect Microbot&#146;s ability to obtain necessary device clearance or approval and the market&#146;s view of Microbot&#146;s future prospects. Failure to successfully complete
these studies in a timely and cost-effective manner could have a material adverse effect on Microbot&#146;s prospects. Because animal trials, clinical trials and other types of scientific studies are inherently uncertain, there can be no assurance
that these trials or studies will be completed in a timely or cost-effective manner or result in a commercially viable product. Clinical trials or studies may experience significant setbacks even if earlier preclinical or animal studies have shown
promising results. Furthermore, preliminary results from clinical trials may be contradicted by subsequent clinical analysis. Results from clinical trials may also not be supported by actual long-term studies or clinical experience. If preliminary
clinical results are later contradicted, or if initial results cannot be supported by actual long-term studies or clinical experience, Microbot&#146;s business could be adversely affected. Clinical trials also may be suspended or terminated by us,
the FDA or other regulatory authorities at any time if it is believed that the trial participants face unacceptable health risks. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot has no
prior experience in conducting clinical trials and will depend upon the ability of third parties, including contract research organizations, collaborative academic groups, future clinical trial sites and investigators, to conduct or to assist the
Company in conducting clinical trials for its product candidates, if such trials become necessary. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a development-stage,
pre-clinical company, Microbot has no prior experience in designing, initiating, conducting and monitoring human clinical trials, if data from such trials become necessary in order to obtain regulatory clearance or approval of our product
candidates. Should the FDA or another regulatory agency in a foreign market request clinical data to support the safety and effectiveness of Microbot&#146;s product candidates, Microbot will depend upon its ability and/or the ability of future
collaborators, contract research organizations, clinical trial sites and investigators to successfully design, initiate, conduct and monitor such clinical trials. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Failure by Microbot or by any of these future collaborating parties to timely and effectively initiate, conduct and monitor a future clinical
trial could significantly delay or materially impair Microbot&#146;s ability to complete those clinical trials and/or obtain regulatory clearance or approval of its product candidates and, consequently, could delay or materially impair its ability
to generate revenues from the commercialization of those products. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If the commercial opportunity for SCS and TipCAT is smaller than Microbot anticipates, Microbot&#146;s
future revenue from SCS and TipCAT will be adversely affected and Microbot&#146;s business will suffer. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If the size of the
commercial opportunities in any of Microbot&#146;s target markets is smaller than Microbot anticipates, Microbot may not be able to achieve profitability and growth. Microbot is developing SCS as a device for the treatment of hydrocephalus and NPH
and is developing TipCAT as an endoscopic tool, with colonoscopy as the most immediate application of the TipCAT technology. Microbot expects its future revenues to be primarily derived from the sales of the SCS and TipCAT, neither of which has
undergone an FDA pre-market review process necessary to commercialize the product candidate in the United States. It is difficult to predict the penetration, future growth rate or size of the market for Microbot&#146;s product candidates. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The commercial success of the SCS and TipCAT will require broad acceptance of the devices by the doctors and other medical professionals who
specialize in the procedures targeted by each device, a limited number of whom may be able to influence device selection and purchasing decisions. If Microbot&#146;s technologies are not broadly accepted and perceived as having significant
advantages over existing medical devices, then Microbot will not meet its business objectives. Such perceptions are likely to be based on a determination by medical facilities and physicians that Microbot&#146;s product candidates are safe and
effective, are cost-effective in comparison to existing devices, and represent acceptable methods of treatment. Microbot cannot assure that it will be able to establish the relationships and arrangements with medical facilities and physicians
necessary to support the market uptake of its product candidates. In addition, its competitors may develop new technologies for the same markets Microbot is targeting that are more attractive to medical facilities and physicians. If doctors and
other medical professionals do not consider Microbot product candidates to be suitable for application in the procedures we are targeting and an improvement over the use of existing or competing products, Microbot&#146;s business goals will not be
realized. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Customers will be unlikely to buy the SCS or the TipCAT unless Microbot can demonstrate that they can be produced for sale to consumers
at attractive prices. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To date, Microbot has focused primarily on research and development of the first generation versions of the
SCS and the TipCAT. Consequently, Microbot has no experience in manufacturing its product candidates, and intends to manufacture its product candidates through third-party manufacturers. Microbot can offer no assurance that either it or its
manufacturing partners will develop efficient, automated, low-cost manufacturing capabilities and processes to meet the quality, price, engineering, design and production standards or production volumes required to successfully mass produce its
commercial products. Even if its manufacturing partners are successful in developing such manufacturing capability and quality processes, including the assurance of GMP-compliant device manufacturing, there can be no assurance that Microbot can
timely meet its product commercialization schedule or the production and delivery requirements of potential customers. A failure to develop such manufacturing processes and capabilities could have a material adverse effect on Microbot&#146;s
business and financial results. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The proposed price of Microbot&#146;s product candidates, once approved for sale, will be dependent on
material and other manufacturing costs. Microbot cannot offer any assurances that its manufacturing partner will be able manufacture its product candidates at a competitive price or that achieving cost reductions will not cause a reduction in the
performance, reliability and longevity of its product candidates. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot has relied on, and intends to continue to rely on, third-party
manufacturers to produce its product candidates. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot currently relies, and expects to rely for the foreseeable future, on
third-party manufacturers to produce and supply its product candidates, and it expects to rely on third parties to manufacture the commercialized products as well, should they receive the necessary regulatory clearance or approval. Reliance on
</P>
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third-party manufacturers entails risks to which Microbot would not be subject if Microbot manufactured its product candidates or future commercial products itself, including: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">limitations on supply availability resulting from capacity, internal operational problems or scheduling constraints of third parties; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">potential regulatory non-compliance or other violations by the third-party manufacturer that could result in quality assurance issues or government enforcement action that has a negative effect on Microbot&#146;s
product candidates and distribution strategy; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the possible breach of manufacturing agreements by third parties because of various factors beyond Microbot&#146;s control; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the possible termination or non-renewal of manufacturing agreements by third parties for various reasons beyond Microbot&#146;s control, at a time that is costly or inconvenient to Microbot. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If Microbot is not able to maintain its key manufacturing relationships, Microbot may fail to find replacement manufacturers or develop its
own manufacturing capabilities, which could delay or impair Microbot&#146;s ability to obtain regulatory clearance or approval for its product candidates and could substantially increase its costs or deplete profit margins, if any. If Microbot does
find replacement manufacturers, Microbot may not be able to enter into agreements with them on terms and conditions favorable to it and there could be a substantial delay before new facilities could be qualified and registered with the FDA and other
foreign regulatory authorities. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If Microbot&#146;s product candidates are not considered to be a safe and effective alternative to existing
technologies, Microbot will not be commercially successful. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The SCS and TipCAT rely on new technologies, and Microbot&#146;s
success will depend on acceptance of these technologies by the medical community as safe, clinically effective, cost effective and a preferred device as compared to products of its competitors. Microbot does not have long-term data regarding
efficacy, safety and clinical outcomes associated with the use of SCS or TipCAT. Any data that is generated in the future may not be positive or may not support the product candidates&#146; regulatory dossiers, which would negatively affect market
acceptance and the rate at which its product candidates are adopted. Equally important will be physicians&#146; perceptions of the safety of Microbot&#146;s product candidates because Microbot&#146;s technologies are relatively new. If, over the
long term, Microbot&#146;s product candidates do not meet surgeons&#146; expectations as to safety, efficacy and ease of use, they may not become widely adopted. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Market acceptance of Microbot&#146;s product candidates will also be affected by other factors, including Microbot&#146;s ability to convince
key opinion leaders to provide recommendations regarding its product candidates; convince distributors that its technologies are attractive alternatives to existing and competing technologies; supply and service sufficient quantities of products
directly or through marketing alliances; and price products competitively in light of the current macroeconomic environment, which is becoming increasingly price sensitive. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot may be subject to penalties and may be precluded from marketing its product candidates if Microbot fails to comply with extensive governmental
regulations. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot believes that its medical device product candidates will be categorized as Class II devices, which typically
require a 510(k) or 510(k) de-novo premarket submission to the FDA. However, the FDA has not made any determination about whether Microbot&#146;s medical product candidates are Class II medical devices and may disagree with that classification. If
the FDA determines that Microbot&#146;s product candidates should be reclassified as Class III medical devices, Microbot could be precluded from marketing the devices for clinical use within the United States for months, years or longer, depending
on the specifics of the change in classification. Reclassification of any of Microbot&#146;s product candidates as Class III medical devices could significantly increase Microbot&#146;s regulatory costs, including the timing and expense associated
with required clinical trials and other costs. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">38 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The FDA and non-U.S. regulatory authorities require that Microbot product candidates be
manufactured according to rigorous standards. These regulatory requirements significantly increase Microbot&#146;s production costs, which may prevent Microbot from offering products within the price range and in quantities necessary to meet market
demands. If Microbot or one of its third-party manufacturers changes an approved manufacturing process, the FDA may need to review the process before it may be used. Failure to comply with applicable pre-market and post-market regulatory
requirements could subject Microbot to enforcement actions, including warning letters, fines, injunctions and civil penalties, recall or seizure of its products, operating restrictions, partial suspension or total shutdown of its production, and
criminal prosecution. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If Microbot is not able to both obtain and maintain adequate levels of third-party reimbursement for procedures involving its
product candidates after they are approved for marketing and launched commercially, it would have a material adverse effect on Microbot&#146;s business. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Healthcare providers and related facilities are generally reimbursed for their services through payment systems managed by various governmental
agencies worldwide, private insurance companies, and managed care organizations. The manner and level of reimbursement in any given case may depend on the site of care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized,
available budget, or a combination of these factors, and coverage and payment levels are determined at each payor&#146;s discretion. The coverage policies and reimbursement levels of these third-party payors may impact the decisions of healthcare
providers and facilities regarding which medical products they purchase and the prices they are willing to pay for those products. Microbot cannot assure you that its sales will not be impeded and its business harmed if third-party payors fail to
provide reimbursement for Microbot products that healthcare providers view as adequate. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the United States, Microbot expects that its
product candidates, once approved, will be purchased primarily by medical institutions, which then bill various third-party payors, such as the Centers for Medicare&nbsp;&amp; Medicaid Services, or CMS, which administers the Medicare program through
Medicare Administrative Contractors, and other government health care programs and private insurance plans, for the healthcare products and services provided to their patients. The process involved in applying for coverage and incremental
reimbursement from CMS is lengthy and expensive. Moreover, many private payors look to CMS in setting their reimbursement policies and amounts. If CMS or other agencies limit coverage for procedures utilizing Microbot&#146;s products or decrease or
limit reimbursement payments for doctors and hospitals utilizing Microbot&#146;s products, this may affect coverage and reimbursement determinations by many private payors. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If a procedure involving a medical device is not reimbursed separately by a government or private insurer, then a medical institution would
have to absorb the cost of Microbot&#146;s products as part of the cost of the procedure in which the products are used. At this time, Microbot does not know the extent to which medical institutions would consider insurers&#146; payment levels
adequate to cover the cost of its products. Failure by hospitals and surgeons to receive an amount that they consider to be adequate reimbursement for procedures in which Microbot products are used could deter them from purchasing Microbot products
and limit sales growth for those products. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has no control over payor decision-making with respect to coverage and payment levels
for its medical device product candidates, once they are approved. Additionally, Microbot expects many payors to continue to explore cost-containment strategies (e.g., comparative and cost-effectiveness analyses, so-called
&#147;pay-for-performance&#148; programs implemented by various public government health care programs and private third-party payors, and expansion of payment bundling initiatives, and other such methods that shift medical cost risk to providers)
that may potentially impact coverage and/or payment levels for Microbot&#146;s current product candidates or products Microbot develops in the future. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As Microbot&#146;s product offerings are used across diverse healthcare settings, they will be affected to varying degrees by the different
payment systems. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Clinical outcome studies for the SCS may not provide sufficient data to make Microbot&#146;s product
candidates the standard of care. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s business plan relies on the broad adoption by surgeons of the SCS for primary
shunt placement procedures to prevent shunt occlusions. Although Microbot believes the occurrence of shunt occlusion complications is well known among physicians practicing in the relevant medical fields, SCS may be adopted for replacement shunt
surgeries only. Neurosurgeons may adopt SCS for primary shunt placement procedures only upon additional clinical studies with longer follow up periods, if at all. It may also be necessary to provide outcome studies on the preventative capabilities
of the SCS in order to convince the medical community of its safety and efficacy. Clinical studies may not show an advantage in SCS based procedures in a timely manner, or at all, and outcome studies have not been designed at this time, and may be
too large and too costly for Microbot to conduct. Both situations could prevent broad adoption of the SCS and materially impact Microbot&#146;s business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot products may in the future be subject to mandatory product recalls that could harm its reputation, business and financial results. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of
material deficiencies or defects in design or manufacture that could pose a risk of injury to patients. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device
would cause serious injury or death, although in most cases this mandatory recall authority is not used because manufacturers typically initiate a voluntary recall when a device violation is discovered. In addition, foreign governmental bodies have
the authority to require the recall of Microbot products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A
government-mandated or voluntary recall by Microbot or one of its distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any Microbot products would
divert managerial and financial resources and have an adverse effect on Microbot&#146;s financial condition and results of operations, and any future recall announcements could harm Microbot&#146;s reputation with customers and negatively affect its
sales. In addition, the FDA could take enforcement action, including any of the following sanctions for failing to timely report a recall to the FDA: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">detention or seizure of Microbot products; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">operating restrictions or partial suspension or total shutdown of production; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">refusing or delaying requests for 510(k) clearance or premarket approval of new products or modified products; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">withdrawing 510(k) clearances or other types of regulatory authorizations -that have already been granted; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">refusing to grant export approval for Microbot products; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">criminal prosecution. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If Microbot&#146;s future commercialized products cause or contribute to a death
or a serious injury, Microbot will be subject to Medical Device Reporting regulations, which can result in voluntary corrective actions or agency enforcement actions. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under FDA regulations, Microbot will be required to report to the FDA any incident in which a marketed medical device product may have caused
or contributed to a death or serious injury or in which a medical device malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in
European Union markets are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the relevant authority in whose jurisdiction the incident occurred. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">40 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot anticipates that in the future it is likely that we may experience events that would
require reporting to the FDA pursuant to the Medical Device Reporting (MDR) regulations. Any adverse event involving a Microbot product could result in future voluntary corrective actions, such as product actions or customer notifications, or agency
actions, such as inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending Microbot in a lawsuit, will require the dedication of our time and capital, distract management
from operating our business, and may harm our reputation and financial results. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot could be exposed to significant liability claims if
Microbot is unable to obtain insurance at acceptable costs and adequate levels or otherwise protect itself against potential product liability claims. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The testing, manufacture, marketing and sale of medical devices entail the inherent risk of liability claims or product recalls. Product
liability insurance is expensive and may not be available on acceptable terms, if at all. A successful product liability claim or product recall could inhibit or prevent the successful commercialization of Microbot&#146;s products, cause a
significant financial burden on Microbot, or both, which in any case could have a material adverse effect on Microbot&#146;s business and financial condition. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The results of Microbot&#146;s research and development efforts are uncertain and there can be no assurance of the commercial success of Microbot&#146;s
product candidates. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot believe that its success will depend in part on its ability to expand its product offerings and
continue to improve its existing product candidates in response to changing technologies, customer demands and competitive pressures. As such, Microbot expects to continue dedicating significant resources in research and development. The product
candidates and services being developed by Microbot may not be technologically successful. In addition, the length of Microbot&#146;s product candidates and service development cycle may be greater than Microbot originally expected. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If Microbot fail to retain certain of its key personnel and attract and retain additional qualified personnel, Microbot might not be able to pursue its
growth strategy effectively. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is dependent on its senior management, in particular Harel Gadot, Microbot&#146;s Chief
Executive Officer. Although Microbot believes that its relationship with members of its senior management is positive, there can be no assurance that the services of any of these individuals will continue to be available to Microbot in the future.
Microbot&#146;s future success will depend in part on its ability to retain its management and scientific teams, to identify, hire and retain additional qualified personnel with expertise in research and development and sales and marketing, and to
effectively provide for the succession of senior management, when necessary. Competition for qualified personnel in the medical device industry is intense and finding and retaining qualified personnel with experience in the industry is very
difficult. Microbot believes that there are only a limited number of individuals with the requisite skills to serve in key positions at Microbot, particularly in Israel, and it competes for key personnel with other medical equipment and technology
companies, as well as research institutions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot does not carry, and does not intend to carry, any key man life insurance policies
on any of its existing executive officers. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risks Relating to International Business </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If Microbot fails to obtain regulatory clearances in other countries for its product candidates under development, Microbot will not be able to
commercialize these product candidates in those countries. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In order for Microbot to market its product candidates in countries
other than the United States, Microbot must comply with the safety and quality regulations in such countries. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In Europe, these
regulations, including the requirements for approvals, clearance or grant of Conformit&eacute; Europ&eacute;enne, or CE, Certificates of Conformity and the time required for regulatory review, vary from country to
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">41 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
country. Failure to obtain regulatory approval, clearance or CE Certificates of Conformity (or equivalent) in any foreign country in which Microbot plans to market its product candidates may harm
its ability to generate revenue and harm its business. Approval and CE marking procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval or CE
Certificate of Conformity in other countries might differ from that required to obtain FDA clearance. The regulatory approval or CE marking process in other countries may include all of the risks detailed above regarding FDA clearance in the United
States. Regulatory approval or the CE marking of a product candidate in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval or a CE Certificate of Conformity in one country may
negatively impact the regulatory process in others. Failure to obtain regulatory approval or a CE Certificate of Conformity in other countries or any delay or setback in obtaining such approval could have the same adverse effects described above
regarding FDA clearance in the United States. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot cannot be certain that it will be successful in complying with the requirements of
the CE Certificate of Conformity and receiving a CE Mark for its product candidates or in continuing to meet the requirements of the Medical Devices Directive in the European Economic Area (EEA). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Israel&#146;s Medical Devices Law generally requires the registration of all medical products with the Ministry of Health, or MOH, Registrar
through the submission of an application to the Ministry of Health Medical Institutions and Devices Licensing Department, or AMAR. If the application includes a certificate issued by a competent authority of a &#147;recognized&#148; country, which
includes Australia, Canada, the European Community Member States, Japan or the United States, the registration process is expedited, but is generally still expected to take 6 to 9 months for approval. If certification from a recognized country is
not available, the registration process takes significantly longer and a license is rarely issued under such circumstances, as the MOH may require the presentation of significant additional clinical data. Once granted, a license (marketing
authorization) for a medical device is valid for five years from the date of registration of the device, except for implants with a life-supporting function, for which the validity is for only two years from the date of registration. Furthermore,
the holder of the license must meet several additional requirements to maintain the license. Microbot cannot be certain that it will be successful in applying for a license from the MOH for its product candidates. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot operations in international markets involve inherent risks that Microbot may not be able to control. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s business plan includes the marketing and sale of its proposed product candidates internationally, and specifically in Europe
and Israel. Accordingly, Microbot&#146;s results could be materially and adversely affected by a variety of factors relating to international business operations that it may or may not be able to control, including: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">adverse macroeconomic conditions affecting geographies where Microbot intends to do business; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">foreign currency exchange rates; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">political or social unrest or economic instability in a specific country or region; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">higher costs of doing business in certain foreign countries; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">infringement claims on foreign patents, copyrights or trademark rights; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">difficulties in staffing and managing operations across disparate geographic areas; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">difficulties associated with enforcing agreements and intellectual property rights through foreign legal systems; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">trade protection measures and other regulatory requirements, which affect Microbot&#146;s ability to import or export its product candidates from or to various countries; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">adverse tax consequences; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">42 </P>


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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">unexpected changes in legal and regulatory requirements; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">military conflict, terrorist activities, natural disasters and medical epidemics; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot&#146;s ability to recruit and retain channel partners in foreign jurisdictions. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s financial results may be affected by fluctuations in exchange rates and Microbot&#146;s current currency hedging strategy may not be
sufficient to counter such fluctuations. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s financial statements are denominated in U.S. dollars and the financial
results of the combined company are expected to be denominated in U.S. dollars, while a significant portion of Microbot&#146;s business is conducted, and a substantial portion of its operating expenses are payable, in currencies other than the U.S.
dollar. Exchange rate fluctuations may have an adverse impact on Microbot&#146;s future revenues or expenses as presented in the financial statements. Microbot may in the future use financial instruments, such as forward foreign currency contracts,
in its management of foreign currency exposure. These contracts would primarily require Microbot to purchase and sell certain foreign currencies with or for U.S. dollars at contracted rates. Microbot may be exposed to a credit loss in the event of
non-performance by the counterparties of these contracts. In addition, these financial instruments may not adequately manage Microbot&#146;s foreign currency exposure. Microbot&#146;s results of operations could be adversely affected if Microbot is
unable to successfully manage currency fluctuations in the future. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risks Relating to Microbot&#146;s Intellectual Property </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s right to develop and commercialize its existing product candidates are subject to the terms and condition of a license granted to
Microbot by Technion Research and Development Foundation Ltd and termination of the license with respect to one or both of the technology platforms underlying the product candidates would result in Microbot ceasing its development efforts for the
applicable product candidate(s). </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot entered into a license agreement with Technion Research and Development Foundation Ltd.,
or TRDF, in 2012 pursuant to which Microbot obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCAT technology platforms. Pursuant to the terms of the license
agreement, in order to maintain the license with respect to each platform, Microbot must use commercially reasonable efforts to develop products covered by the license, including meeting certain agreed upon development milestones. TRDF has the
option to terminate a license granted with respect a particular technology in the event Microbot fails to meet a development milestone associated with such technology. Therefore, the failure to meet development milestones may lead to a complete
termination of the applicable license agreement and result in Microbot ceasing its development efforts for the applicable product candidate. The milestones for SCS include commencing initial studies in humans by December 2018 and commencing a
clinical trial, if necessary, by December 2019. The milestones for TipCAT include commencing initial studies in humans by December 2018 and commencing a full clinical trial, if necessary, by December 2020. Failure to meet any development milestone
will give TRDF the right to terminate the license with respect to the technology underlying the missed milestone. Although Microbot expects to meet the milestone requirements, TRDF has demonstrated flexibility with respect to amending the terms of
the license to extend the milestone dates. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the license agreement, Microbot is also subject to various other obligations, including
obligations with respect to payment upon the achievement of certain milestones and royalties on product sales. TRDF may terminate the license agreement under certain circumstances, including material breaches by Microbot or under certain bankruptcy
or insolvency events. In the case of termination of the license by Microbot without cause or by TRDF for cause, TRDF has the right to receive a non-exclusive license from Microbot with respect to improvements to the licensed technologies made by
Microbot. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If TRDF were to terminate the license agreement or if Microbot was to otherwise lose the ability to exploit the licensed
patents, Microbot&#146;s competitive advantage could be reduced or terminated, and Microbot will likely not be able to find a source to replace the licensed technology. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">43 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">However, if there is any future dispute between Microbot and TRDF regarding the respective
parties&#146; rights under the license agreement, Microbot&#146;s ability to develop and commercialize the SCS and TipCAT may be materially harmed. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot may not meet its product candidates&#146; development and commercialization objectives in a timely manner or at all. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has established internal goals, based upon expectations with respect to its technologies, which Microbot has used to assess its
progress toward developing its product candidates. These goals relate to technology and design improvements as well as to dates for achieving specific development results. If the product candidates exhibit technical defects or are unable to meet
cost or performance goals, Microbot&#146;s commercialization schedule could be delayed and potential purchasers of its initial commercialized products may decline to purchase such products or may opt to pursue alternative products, which would
materially harm its business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Intellectual property litigation and infringement claims could cause Microbot to incur significant expenses or
prevent Microbot from selling certain of its product candidates. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The medical device industry is characterized by extensive
intellectual property litigation. From time to time, Microbot might be the subject of claims by third parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive to defend and divert the time and effort of
Microbot&#146;s management and operating personnel from other business issues. A successful claim or claims of patent or other intellectual property infringement against Microbot could result in its payment of significant monetary damages and/or
royalty payments or negatively impact its ability to sell current or future products in the affected category and could have a material adverse effect on its business, cash flows, financial condition or results of operations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>If Microbot or TRDF are unable to protect the patents or other proprietary rights relating to Microbot&#146;s product candidates, or if Microbot
infringes on the patents or other proprietary rights of others, Microbot&#146;s competitiveness and business prospects may be materially damaged. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s success depends on its ability to protect its intellectual property (including its licensed intellectual property) and its
proprietary technologies. Microbot&#146;s commercial success depends in part on its ability to obtain and maintain patent protection and trade secret protection for its product candidates, proprietary technologies, and their uses, as well as its
ability to operate without infringing upon the proprietary rights of others. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot currently hold, through licenses or otherwise, an
intellectual property portfolio that includes U.S. and international patents and pending patents, and other patents under development. Microbot intend to continue to seek legal protection, primarily through patents, including the TRDF licensed
patents, for its proprietary technology. Seeking patent protection is a lengthy and costly process, and there can be no assurance that patents will be issued from any pending applications, or that any claims allowed from existing or pending patents
will be sufficiently broad or strong to protect its proprietary technology. There is also no guarantee that any patents Microbot holds, through licenses or otherwise, will not be challenged, invalidated or circumvented, or that the patent rights
granted will provide competitive advantages to Microbot. Microbot&#146;s competitors have developed and may continue to develop and obtain patents for technologies that are similar or superior to Microbot&#146;s technologies. In addition, the laws
of foreign jurisdictions in which Microbot develops, manufactures or sells its product candidates may not protect Microbot&#146;s intellectual property rights to the same extent as do the laws of the United States. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Adverse outcomes in current or future legal disputes regarding patent and other intellectual property rights could result in the loss of
Microbot&#146;s intellectual property rights, subject Microbot to significant liabilities to third parties, require Microbot to seek licenses from third parties on terms that may not be reasonable or
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">44 </P>


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favorable to Microbot, prevent Microbot from manufacturing, importing or selling its product candidates, or compel Microbot to redesign its product candidates to avoid infringing third
parties&#146; intellectual property. As a result, Microbot may be required to incur substantial costs to prosecute, enforce or defend its intellectual property rights if they are challenged. Any of these circumstances could have a material adverse
effect on Microbot&#146;s business, financial condition and resources or results of operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has the first right, but not the
obligation, to control the prosecution, maintenance or enforcement of the licensed patents from TRDF. However, there may be situations in which Microbot will not have control over the prosecution, maintenance or enforcement of the patents that
Microbot licenses, or may not have sufficient ability to consult and input into the patent prosecution and maintenance process with respect to such patents. If Microbot does not control the patent prosecution and maintenance process with respect to
the TRDF licensed patents, TRDF may elect to do so but may fail to take the steps that are necessary or desirable in order to obtain, maintain and enforce the licensed patents. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s ability to develop intellectual property depends in large part on hiring, retaining and motivating highly qualified design and
engineering staff and consultants with the knowledge and technical competence to advance its technology and productivity goals. To protect Microbot&#146;s trade secrets and proprietary information, Microbot has entered into confidentiality
agreements with its employees, as well as with consultants and other parties. If these agreements prove inadequate or are breached, Microbot&#146;s remedies may not be sufficient to cover its losses. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Dependence on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may result
in Microbot&#146;s payment of significant monetary damages or impact offerings in its product portfolios. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s
long-term success largely depends on its ability to market technologically competitive product candidates. If Microbot fails to obtain or maintain adequate intellectual property protection, it may not be able to prevent third parties from using its
proprietary technologies or may lose access to technologies critical to our product candidates. Also, Microbot currently pending or future patent applications may not result in issued patents, and issued patents are subject to claims concerning
priority, scope and other issues. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Furthermore, Microbot has not filed applications for all of our patents internationally and it may not
be able to prevent third parties from using its proprietary technologies or may lose access to technologies critical to its product candidates in other countries. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risks Relating to Operations in Israel </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot&#146;s headquarters are located in Israel, and therefore, political conditions in Israel may affect Microbot&#146;s operations and results.
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s executive offices are located in Israel and the executive offices of the combined company are expected to be
located in Israel. In addition, the majority of its directors, who may also be the directors of the combined company, are residents of Israel. Accordingly, political, economic and military conditions in Israel will directly or indirectly affect
Microbot&#146;s operations and results. Since the establishment of the State of Israel, a number of armed conflicts have taken place between Israel and its Arab neighbors. An ongoing state of hostility, varying in degree and intensity has led to
security and economic problems for Israel. For a number of years there have been continuing hostilities between Israel and the Palestinians. This includes hostilities with the Islamic movement Hamas in the Gaza Strip, which have adversely affected
the peace process and at times resulted in armed conflicts. Such hostilities have negatively influenced Israel&#146;s economy as well as impaired Israel&#146;s relationships with several other countries. Israel also faces threats from Hezbollah
militants in Lebanon, from ISIS and rebel forces in Syria, from the government of Iran and other potential threats from additional countries in the region. Moreover, some of Israel&#146;s neighboring countries have recently undergone or are
undergoing significant political changes. These political, economic and military conditions in Israel could have a material adverse effect on Microbot&#146;s business, financial condition, results of operations and future growth. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">45 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Political relations could limit Microbot&#146;s ability to sell or buy internationally. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot could be adversely affected by the interruption or reduction of trade between Israel and its trading partners. Some countries,
companies and organizations continue to participate in a boycott of Israeli firms and others doing business with Israel, with Israeli companies or with Israeli-owned companies operating in other countries. Foreign government defense export policies
towards Israel could also make it more difficult for us to obtain the export authorizations necessary for Microbot&#146;s activities. Also, over the past several years there have been calls in Europe and elsewhere to reduce trade with Israel. There
can be no assurance that restrictive laws, policies or practices directed towards Israel or Israeli businesses will not have an adverse impact on Microbot&#146;s business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Israel&#146;s economy may become unstable. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">From time to time, Israel&#146;s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity
prices, military conflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing fiscal and monetary policies, import duties, foreign currency restrictions, controls of wages, prices and
foreign currency exchange rates and regulations regarding the lending limits of Israeli banks to companies considered to be in an affiliated group. The Israeli government has periodically changed its policies in these areas. Reoccurrence of previous
destabilizing factors could make it more difficult for Microbot to operate its business and could adversely affect its business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Exchange rate
fluctuations between the U.S. dollar and the NIS currencies may negatively affect Microbot&#146;s operating costs. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A significant
portion of Microbot&#146;s expenses is paid in New Israeli Shekels, or NIS, but its financial statements are denominated in U.S. dollars. As a result, Microbot is exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or the
NIS instead devalues relative to the U.S. dollar, and the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the U.S. dollar cost of
Microbot&#146;s operations in Israel would increase and Microbot&#146;s U.S. dollar-denominated results of operations would be adversely affected. Microbot cannot predict any future trends in the rate of inflation in Israel or the rate of
devaluation (if any) of the NIS against the U.S. dollar. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s primary expenses paid in NIS that are not linked to the U.S.
dollar are employee expenses in Israel and lease payments on its Israeli facility. If Microbot is unsuccessful in hedging against its position in NIS, a change in the value of the NIS compared to the U.S. dollar could increase Microbot&#146;s
research and development expenses, labor costs and general and administrative expenses, and as a result, have a negative impact on Microbot&#146;s profits. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Funding and other benefits provided by Israeli government programs may be terminated or reduced in the future and the terms of such funding may have a
significant impact on future corporate decisions. </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot participates in programs under the auspices of the Israeli Office of
the Chief Scientist, or OCS, for which it receives funding for the development of its technologies and product candidates. If Microbot fails to comply with the conditions applicable to this program, it may be required to pay additional penalties or
make refunds and may be denied future benefits. From time to time, the government of Israel has discussed reducing or eliminating the benefits available under this program, and therefore these benefits may not be available in the future at their
current levels or at all. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s research and development efforts from inception until now have been financed in part through
such OCS royalty bearing grants in an aggregate amount of US$893,673 through June&nbsp;30, 2016. With respect to such grants Microbot is committed to pay royalties at a rate of between 3% to 3.5% on sales proceeds up to the
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">46 </P>


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total amount of grants received, linked to the dollar, plus interest at an annual rate of USD LIBOR. In addition, as a recipient of OCS grants, Microbot must comply with the requirements of the
Israeli Encouragement of Industrial Research and Development Law, 1984, or the R&amp;D Law, and related regulations. Under the terms of the grants and the R&amp;D Law, Microbot is restricted from transferring any technologies, know-how,
manufacturing or manufacturing rights developed using OCS grants outside of Israel without the prior approval of OCS. Therefore, if aspects of its technologies are deemed to have been developed with OCS funding, the discretionary approval of an OCS
committee would be required for any transfer to third parties outside of Israel of the technologies, know-how, manufacturing or manufacturing rights related to such aspects. Furthermore, the OCS may impose certain conditions on any arrangement under
which it permits Microbot to transfer technology or development outside of Israel or may not grant such approvals at all. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If approved,
the transfer of OCS-supported technology or know-how outside of Israel may involve the payment of significant fees, which will depend on the value of the transferred technology or know-how, the total amount OCS funding received by Microbot, the
number of years since the funding and other factors. These restrictions and requirements for payment may impair Microbot&#146;s ability to sell its technology assets outside of Israel or to outsource or transfer development or manufacturing
activities with respect to any product or technology outside of Israel. Furthermore, the amount of consideration available to Microbot&#146;s shareholders in a transaction involving the transfer of technology or know-how developed with OCS funding
outside of Israel (such as through a merger or other similar transaction) may be reduced by any amounts that Microbot is required to pay to the OCS. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Some of Microbot&#146;s employees and officers are obligated to perform military reserve duty in Israel. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Generally, Israeli adult male citizens and permanent residents are obligated to perform annual military reserve duty up to a specified age.
They also may be called to active duty at any time under emergency circumstances, which could have a disruptive impact on Microbot&#146;s workforce. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>It may be difficult to enforce a non-Israeli judgment against Microbot or its officers and directors. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Upon the consummation of the Merger, the operating subsidiary of the combined company will be incorporated in Israel. Some of Microbot&#146;s
executive officers and directors who will be executive officers and directors of the combined company are not residents of the United States, and a substantial portion of Microbot&#146;s assets and the assets of its executive officers and directors
are located outside the United States. Therefore, a judgment obtained against Microbot, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United
States and may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel.
Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws
reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found
to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case
law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against Microbot in Israel, it may be impossible to collect any damages awarded by either a U.S. or foreign court. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">47 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Risks Relating to Microbot&#146;s Securities and Governance Matters </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The existing shareholders of Microbot will control the combined company for the foreseeable future, including the outcome of matters requiring
shareholder approval and such control may prevent existing stockholders of StemCells from influencing significant corporate decisions and may result in conflicts of interest that could cause the combined company&#146;s stock price to decline.
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Upon completion of the Merger, the existing shareholders of Microbot, including certain shareholders holding 5% or more of the
total ownership interest in Microbot, and its executive officers and directors, and advisors with respect to the Merger will collectively own approximately 95% of the combined company&#146;s outstanding shares of Common Stock. As a result, after the
consummation of the Merger, such entities and individuals will have the ability, acting together, to control the election of the combined company&#146;s directors and the outcome of corporate actions requiring shareholder approval, such as:
(i)&nbsp;a Merger or a sale of the combined company, (ii)&nbsp;a sale of all or substantially all of the combined company&#146;s assets, and (iii)&nbsp;amendments to the combined company&#146;s articles of incorporation and bylaws. This
concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to the combined company&#146;s other shareholders and be disadvantageous to Microbot
shareholders with interests different from those entities and individuals. Certain of these individuals will also have significant control over the combined company&#146;s business, policies and affairs as officers or directors of the combined
company. These stockholders may also exert influence in delaying or preventing a change in control of the combined company, even if such change in control would benefit the other stockholders of the combined company. In addition, the significant
concentration of stock ownership may adversely affect the market value of the combined company&#146;s common stock due to investors&#146; perception that conflicts of interest may exist or arise. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Anti-takeover provisions in the combined company&#146;s charter and bylaws under Delaware law may prevent or frustrate attempts by stockholders to
change the board of directors or current management and could make a third-party acquisition of the combined company difficult. </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Provisions in the combined company&#146;s certificate of incorporation and bylaws, which are identical to StemCells&#146; certificate of
incorporation and bylaws, may delay or prevent an acquisition or a change in management. These provisions include a classified board of directors. In addition, because the combined company will be incorporated in Delaware, it is governed by the
provisions of Section&nbsp;203 of the DGCL, which prohibits stockholders owning in excess of 15% of the outstanding combined company voting stock from merging or combining with the combined company. Although StemCells and Microbot believe these
provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with the combined company&#146;s board of directors, they would apply even if the offer may be considered beneficial by some
stockholders. In addition, these provisions may frustrate or prevent any attempts by the combined company&#146;s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board
of directors, which is responsible for appointing members of management. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">48 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_28"></A>CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This proxy statement and the other documents referred to or incorporated by reference into this proxy statement contain or may contain
&#147;forward-looking statements&#148; of StemCells within the meaning of Section&nbsp;21E of the Exchange Act, which is applicable to StemCells, but not Microbot, because StemCells, unlike Microbot, is a public company subject to the reporting
requirements of the Exchange Act. For this purpose, certain statements contained herein, other than statements of historical fact, may be forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995. Such
statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements that include words such as &#147;may&#148;, &#147;will&#148;, &#147;project&#148;, &#147;might&#148;, &#147;expect&#148;,
&#147;believe&#148;, &#147;anticipate&#148;, &#147;intend&#148;, &#147;could&#148;, &#147;would&#148;, &#147;estimate&#148;, &#147;continue&#148; or &#147;pursue&#148; or the negative of these words or other words or expressions of similar meaning
may identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement and the other documents referred to or incorporated by reference and relate to a variety of matters, including but
not limited to (i)&nbsp;the timing and anticipated completion of the Merger, (ii)&nbsp;the benefits expected to result from the Merger, (iii)&nbsp;the anticipated business of the combined company following the completion of the Merger, and
(iv)&nbsp;other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations, and assumptions of management are not guarantees of performance and are
subject to significant risks and uncertainty. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this proxy statement and those that are referred to or incorporated
by reference into this proxy statement. In addition to the risk factors identified elsewhere, important factors that could cause actual results to differ materially from those described in forward-looking statements contained herein include, but are
not limited to: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any operational or cultural difficulties associated with the integration of the businesses of StemCells and Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">unexpected costs, charges or expenses resulting from the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">risks relating to the completion of the Merger, including the risk that the required stockholder approvals might not be obtained in a timely manner or at all or that other conditions to the completion of the Merger will
not be satisfied; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any difficulties associated with requests or directions from governmental authorities resulting from their reviews of the Merger; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any changes in general economic and/or industry-specific conditions. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">You are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement or, in the case of documents referred to in this proxy statement, as of the date of those documents. StemCells disclaims any obligation
to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this proxy statement or to reflect the occurrence of unanticipated events, except
as required by law. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">49 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_29"></A>THE MERGER </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_30"></A>Background of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>This section and the section entitled &#147;The Merger Agreement&#148; beginning on page 71 describe the material aspects of the Merger,
including the Merger Agreement. While StemCells believes that this description covers the material terms of the Merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this
entire proxy statement for a more complete understanding of the Merger and the Merger Agreement, including the Merger Agreement itself, which is attached as Annex A and the opinion of Carabiner LLC, which is attached as Annex B. </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Background of the Merger </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><I>The
Company&#146;s Decision to Discontinue its Program in Age Related Macular Degeneration </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the fall of 2015, the Company&#146;s
leadership team was asked to develop and evaluate strategic alternatives with the aim of reaching a value inflection point for StemCells stockholders by late 2017. At the time, the Company had two ongoing Phase II clinical studies to evaluate its
proprietary HuCNS-SC platform technology (highly purified human neural stem cells). The first clinical study, called the Radiant Study, was a controlled Phase II study testing HuCNS-SC cells in patients with the dry form of age related macular
degeneration (&#147;dry AMD&#148;). The second clinical study, called the Pathway Study, was a controlled Phase II study testing HuCNS-SC cells in patients with chronic cervical spinal cord injury. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Both programs (dry AMD and spinal cord injury) were based on compelling pre-clinical and early clinical data. However, at September&nbsp;30,
2015, the Company had reported cash and cash equivalents of approximately $21 million, and estimated that it would cost an additional $100 million to complete both Phase II studies. Towards the end of 2015, the capital market for small publicly
traded life science companies was depressed, especially for those companies focused on regenerative medicine. Some were trading at or near all-time lows, as was the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Accordingly, on December&nbsp;7 and 8, 2015, the Company&#146;s management team presented to the Board five possible operating plans, each
with different anticipated impact on operations, headcount, cash requirements, financing opportunities, and likelihood of success. The Board considered and discussed, among other things, patient enrollment rates in both Phase&nbsp;II studies and the
Company&#146;s likely prospects for reaching a successful outcome in one or both clinical studies. Management presented alternative budgets ranging from approximately $40 million to approximately $100 million over a two- to three-year period,
together with their related operating plans, timelines, and rationales. Management also presented different alternative approaches for the Company&#146;s product development efforts, including the scale-up of cell manufacturing believed necessary to
conduct pivotal clinical programs and commercial launch of a therapeutic based upon HuCNS-SC cells. Following discussion, the Board requested additional information largely relating to the Company&#146;s product development efforts, which had become
a significant percentage of the Company&#146;s annual operating budget. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On December&nbsp;16, 2015, the Board again met to discuss the
different proposals from management for maximizing enterprise value by conserving corporate resources and focusing on only one of the Company&#146;s two Phase II clinical studies. Management presented various recommendations including a possible
reduction in force. Following discussion, the Board decided to discontinue the Company&#146;s Radiant Study in dry AMD, focusing on the spinal cord injury program to substantially increase the Company&#146;s likelihood for success. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following this meeting, on December&nbsp;23, 2015, the Company announced its strategic realignment to fully focus the Company&#146;s resources
on its proprietary HuCNS-SC cell platform technology for the treatment of chronic spinal cord injury. The decision to suspend the Company&#146;s dry AMD program, including its Phase II Radiant Study and a reduction in force of approximately 25%, was
expected to reduce operating costs by approximately $20 million. As part of this strategic realignment, the Company also began a process of actively </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">50 </P>


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seeking to divest non-core assets and pursue non-dilutive financing alternatives. These efforts were intended to reduce cash needs and reliance on capital markets for further funding, expedite
enrollment in the ongoing Phase II Pathway study in spinal cord injury, and allow the Company to continue a more limited, but still viable, process development scale up for initiation of a pivotal study in spinal cord injury. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>The Company&#146;s Decision to Discontinue its Program in Spinal Cord Injury </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the end of 2015, the Company had approximately $14.5 million in cash and cash equivalents, and a cash burn rate of approximately $2
million to $3 million per month. With the reduction in force and discontinuation of the Radiant Study, the Company anticipated needing more than $50 million to complete its Phase&nbsp;II Pathway Study in spinal cord injury and continue its planned
product development activities, and the Company had a market valuation of just under $45 million. Market conditions, especially for small regenerative medicine companies, remained challenging. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In January and February 2016, the Company reviewed and considered various financing proposals received from potential investors and various
investment banks and other intermediaries. On February&nbsp;25, 2016, the Board approved resolutions to raise funds through either a preferred stock or common stock financing, with the target to raise gross proceeds of not less than $5 million and
up to approximately $16 million. On March&nbsp;8, 2016, the Company initiated a confidentially marketed public offering of common stock and common stock warrants (the &#147;2016 CMPO&#148;). The Company raised just over $8 million in the 2016 CMPO.
As part of the financing, the Company&#146;s underwriters required a lockup prohibiting the Company from conducting future equity financings for up to 120 days. During this time, recruitment in the Pathway Study continued on track and the 6-month
and <FONT STYLE="white-space:nowrap">9-month</FONT> data from the first cohort of the Pathway Study remained encouraging. The trial was also beginning to attract media attention, although the Company&#146;s stock price continued to remain below
$0.40 per share. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">With an anticipated need to raise at least $20 million in 2016 to advance the Pathway Study, on April&nbsp;20, 2016, the
StemCells Board of Directors approved both a proposal to further narrow the Company&#146;s product development activities to reduce expenditures and a proposal to initiate a common stock rights offering. On May&nbsp;23, 2016, after completing its
12:1 reverse stock split, the Company filed with the SEC a preliminary registration statement on Form S-1 for the planned rights offering. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">However, by the end of May, the Company had received preliminary indications that some of the 12-month clinical data from the open cohort in
the Pathway Study was less robust than the 6-month and 9-month data. While the 12-month data generally still showed an improvement over baseline for all patients in Cohort 1, the magnitude of the improvements appeared small and the possibility of a
loss of improvement from 9-month time point to the 12-month time point called into question the durability of any clinical effect in this patient population. It was also unknown and unknowable whether less than robust 12-month data would be
sufficiently compelling to successfully complete the Company&#146;s planned rights offering. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells Board of Directors held seven
meetings from May&nbsp;9 until May&nbsp;30, 2016. In each of these meetings, the main topic of discussion concerned the data from the Pathway Study and its potential significance to patients with chronic spinal cord injury and to the Company&#146;s
financing options. Some of the open questions included whether even small improvements in muscle strength and dexterity would translate into a meaningful improvement in quality of life for patients with complete paralysis and whether the data from
such a small cohort of patients (just six patients) might be predictive of outcomes in the larger second cohort of patients, which at the time remained blinded to the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Therefore, at the Board&#146;s direction, the Company engaged several key opinion leaders, including clinicians familiar with spinal cord
injury and those who helped develop the GRASSP measurements used to test the patients in the Pathway Study, to help answer these questions on an expedited basis. In addition, at its May&nbsp;19, 2016 meeting, the Board approved management&#146;s
recommendation to unblind some of the data from the second cohort from the study in the hope of determining, one way or another, whether the Pathway Study was worth pursuing to completion. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">51 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company empaneled an Interim Analysis Data Monitoring Committee (the &#147;IA-DMC&#148;),
consisting of three expert clinicians. With expert consultation and advice, the Company prepared a series of &#147;go/no go&#148; questions for the IA-DMC with the aim of using both data from Cohort 1 and unblinded data from Cohort 2 to assess the
likelihood of success from the Pathway Study. The IA-DMC met on May&nbsp;25, 2016 and determined that the data failed to clear most of the pre-established hurdles. In addition, after completing their assessments, the IA-DMC delivered to the Company
the committee&#146;s written recommendation to discontinue the study. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">With this information in hand, the Board met again on May&nbsp;27,
2016, to discuss, among other things, the data from the Pathway Study, its prospects for success, the Company&#146;s cash needs, the methodologies and conclusions of the IA-DMC, and management&#146;s assessments. Following an assessment of different
options available to the Company, the Board concluded that in light of the available clinical data and the IA-DMC&#146;s recommendation to discontinue the study, the Company&#146;s prospects to raise sufficient funds to complete enrollment in the
Pathway Study and collect final data were very poor. The Board therefore instructed management to discontinue the Pathway Study and cease all clinical trial related activities as promptly as possible. The Board also instructed management to prepare
a wind down plan, with the aim of maximizing the Company&#146;s residual enterprise value for all stakeholders, including stockholders and trade creditors. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>The Decision to Enter into the Microbot Merger Agreement </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the Board meeting held on May&nbsp;27, 2016, the Company&#146;s management considered various wind-down scenarios, including the
possibility of pursuing alternative disease indications as well as the possibility of repurposing the Company to pursue pre-clinical testing of its recently announced genetically modified human neural stem cell. This preclinical research, which was
being conducted in collaboration with researchers at Stanford University and which provided the basis for a newly filed patent application, was considered promising, but the Company&#146;s overhead costs did not support a re-start of the business as
a &#147;new cell&#148; discovery company. At this time, the Company had less than three months of cash on hand, and the likelihood of rapidly acquiring new technology in order to repurpose the business was also considered very low. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board met on May&nbsp;30, 2016 to consider its strategic alternatives. As part of these deliberations, the Company&#146;s legal counsel
advised the Board on its fiduciary responsibilities and management reviewed alternative plans. These alternative plans included (i)&nbsp;the potential for monetizing or further developing any of StemCells&#146; prior clinical development programs,
including its earlier programs in rare genetic disorders, (ii)&nbsp;possible business combinations with other healthcare companies with other technologies under development; and (iii)&nbsp;the possibility of liquidating StemCells and distributing
any remaining cash to stockholders. The Board also considered the possibility of divesting Company assets, both hard assets and intellectual property, together with a potential combination with a company interested in combining with StemCells. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following day, on May&nbsp;31, 2016, the Company announced the termination of the Pathway Study and the Company&#146;s plan to wind down
operations. StemCells also began to evaluate measures to preserve its cash while maximizing stockholder value. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">From the announced
discontinuation of clinical activities on May&nbsp;31 until execution of the Microbot Merger Agreement on August&nbsp;15, 2016, the Company&#146;s Board of Directors held twelve special meetings. The initial meetings, the ones held on June&nbsp;2,
16 and 28 and July&nbsp;8, 12 and 15, 2016, preceded the execution of the letter of intent with Microbot and focused on evaluating the strategic alternatives for the Company, the potential wind down scenarios and the monetization alternatives for
the Company&#146;s assets. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Early in the process, the Company solicited and received proposals for the possible engagement of an
investment bank to help conduct one or more auctions of available assets. Most of the banks indicated that all the proposed transactions were likely too small to warrant an engagement, and none of the banks proposed engagement terms that were
consistent with the Company&#146;s limited cash resources and timeline. Moreover, following the announcement of the wind down, the Company received numerous unsolicited expressions of </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">52 </P>


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interest to acquire one or more of the identified bundles of assets. The Company also sent out invitations to many businesses that had, from time to time in the past, expressed an interest in
either partnering with or acquiring StemCells or its technologies, whether for specific disease indications or otherwise. For these reasons, the Company elected not to engage an investment bank. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">By mid-June, the Company had entered into approximately 60 confidentiality agreements with bidders interested in potentially acquiring
different Company assets. Active negotiations followed with approximately 40&nbsp;of these bidders. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Four bidders expressed an interest in
the Company&#146;s GMP manufacturing facility. It was decided from these negotiations that the deal structure would likely be an assignment of the Company&#146;s real property lease in Sunnyvale, California, coupled with a sale of the equipment
located at the facility and the retention of technical employees who had been separated by StemCells as part of its reduction in force. Four bidders expressed an interest in the Company&#146;s proprietary animal models. Five bidders expressed an
interest in the Company&#146;s research and laboratory equipment. Approximately 30 bidders, many of which were from outside the United States, expressed an interest in the Company&#146;s clinical research programs and/or intellectual property.
Approximately 20 bidders, including Microbot, expressed an interest in combining with StemCells. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>All these corporate opportunities
were discussed and reviewed with the Company&#146;s Board of Directors at its meetings in June and early July. In particular, at the board meeting held of June&nbsp;16, management presented to the Board over 30 potential acquirers of Company assets.
The StemCells Board of directors asked about, and discussed with management, the different technologies being developed by the companies that had expressed an interest in combining with StemCells, likely deal structures, the advantages of different
deals for the Company&#146;s stockholders and creditors, and likely preconditions to closing, among other things. With respect to bidders interested in combining with StemCells, management presented detailed information about each of the companies
and their indications of interest, including (i)&nbsp;company-specific value drivers, such as descriptions of each company&#146;s clinical programs and potential fund-raising ability to support its programs, and (ii)&nbsp;transaction-specific value
drivers, such as the valuation of the company, the proposed post-closing stock ownership split (<I>i.e.</I>,&nbsp;what percentage ownership would StemCells&#146; stockholders continue to own in the company) and the ability to close a transaction.
<I> </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">By the end of June 2016, more than 30 bidders had conducted due diligence on different aspects of the Company and, after having
advanced dozens of negotiations over the span of six weeks, the Company had made significant progress narrowing the field of viable transactions. First, the Company had selected an auction house, Heritage Partners, to auction off the Company&#146;s
laboratory and research equipment. Second, the Company determined that its plans to divest the GMP manufacturing facility had a reasonable chance of success in July, thereby potentially providing funds needed to extend the Company&#146;s timeline
for completing any other transaction, especially a business combination. Third, the Board determined that any business combination would require $1-2&nbsp;million in transaction costs, not including those needed to file the Company&#146;s Form 10-Q
for the second quarter of fiscal year 2016. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At its meeting held on June&nbsp;28, 2016, the Board of Directors of StemCells met again with
management to review the entire landscape of ongoing negotiations, with the intent of selecting a subset to advance to the next round of consideration. Management presented approximately 40 potential bidders, ranging from those interested in
acquiring certain Company patents to those interested in combining with the Company. Of these, approximately twenty had submitted term sheets or other non-binding expressions of interest; twelve of these, including Microbot&#146;s, involved some
form of business combination. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">53 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Of these twelve, management considered five as significantly less reliable, as they were made by
bidders that appeared to lack funds sufficient to complete the proposed transaction without unspecified third party funding. The remaining seven bidders had presented preliminary non-binding indications of interest with the following terms: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="33%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="33%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="30%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:23.55pt; font-size:8pt; font-family:Times New Roman"><B>Bidder</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Proposed Transaction Structure</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Key Proposed Terms</B></P></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Microbot</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Business combination</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Current&nbsp;StemCells&nbsp;stockholders&nbsp;to retain approximately 5%; approximately $1.2MM bridge funding to offset transaction costs, plus additional funds to pay down liabilities</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bidder A</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Business combination</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$5MM bridge loan upon execution of merger agreement; current StemCells stockholders to retain approximately 1%; stated interest in pursuing HuCNS-SC cells in AMD</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bidder B</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Convertible debt and preferred stock issuance</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Secured convertible debt of $4MM; purchase of preferred stock equal to 51% of the vote; stated interest in retaining some cell-based research activities</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bidder C</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Business combination coupled with common stock financing</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Current stockholders to retain approximately 8-10%; preconditioned on concurrent fundraising</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bidder D</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Common stock issuance</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Purchase of 51% for $5.5 million</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bidder E</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Common stock issuance</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Purchase of 77% for $15 million; stated interest in retaining some cell-based research activities</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bidder F</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Common stock issuance</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Purchase of approximately 60% for $5-6 million</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a consequence of the Company&#146;s severe cash constraints and the high cash requirements for any business
combination, the Board, at this meeting, concluded that one of the key preconditions for any merger transaction would be the willingness of an acquirer to provide a bridge loan to the Company to cover transaction costs, including those related to
the preparation and filing of the Company&#146;s Form&nbsp;10-Q for the second quarter of 2016, which was due to be filed on or before August&nbsp;9, 2016. The Board also expressed an interest in selecting a finalist with whom to focus
StemCells&#146; limited time and resources to negotiate a definitive merger agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following this, Company management engaged in
accelerated negotiations with Microbot and the remaining Bidders A-F. Each of these bidders was invited to submit final terms for an acquisition, which had to include a mechanism for immediate bridge funding to the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>On or about June&nbsp;30, 2016, BMR-Pacific Research Center LP (&#147;BMR&#148;), the Company&#146;s landlord at its Newark, CA
facility, filed suit against StemCells claiming breach of the lease and damages in excess of $16&nbsp;million (<I>BMR v. StemCells, Inc.</I>, Alameda County Superior Court case no. RG16821619; hereinafter the
&#147;<I>Lease&nbsp;Litigation</I>&#148;). <I> </I></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">54 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Bidder D passed on the Company&#146;s technology and withdrew its offer. Bidders C, E and F each
indicated that it was unprepared to provide bridge funding prior to the execution of definitive agreements and failed to offer a business case that the Board believed would offer value to StemCells stockholders. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Bidders A and B and Microbot (collectively, the &#147;Three Finalists&#148;), in contrast, all presented revised offers that included attempts
to address the Company&#146;s need for an immediate cash infusion. On July&nbsp;5, Microbot submitted a revised letter of intent that included a commitment to provide a bridge loan of $530,000 upon execution of the term sheet and an additional
bridge loan of $650,000 upon execution of the definitive merger agreement. On July&nbsp;7, Bidder A submitted a revised term sheet that included a proposal to acquire the Company&#146;s intellectual property for $2 million as a source of bridge
funding for a subsequent business combination transaction. Furthermore, also on July&nbsp;7, Bidder B submitted a revised term sheet which included provisions for a secured note for $1.2 million, payable in two tranches &#151; the first for $530,000
in July and the second for $670,000 in August. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At its meeting held on July&nbsp;8, 2016, the Board considered the revised terms proposed
by the Three Finalists. The Board considered management&#146;s final recommendations, including the assessment that only the Microbot proposal showed a workable path forward to provide funding to cover transaction costs, funding to pay down Company
trade payables, and a proposal that would provide the Company&#146;s stockholders with potential upside from a percentage ownership in the continuing company. The proposal from Bidder A remained preliminary and required significant additional due
diligence from Bidder A, as the initial transaction (specifically, the sale of the Company&#146;s IP for $2 million) was contingent on significant additional due diligence and would require transaction costs, transfer of IP to the Company&#146;s
foreign subsidiary, and the negotiation of an asset acquisition agreement. Bidder&nbsp;B&#146;s revised proposal was unclear, proposing that all bridge loan money was contingent upon final due diligence to Bidder B&#146;s satisfaction and execution
of the definitive merger agreement documents, therefore failing to address the Board&#146;s principal need for speedy funding. In addition, Bidder B had no clear solution for addressing the Company&#146;s trade payables and other liabilities. It was
also noted that, of the Three Finalists, Microbot had been the fastest and most focused in its negotiations and due diligence activities to date, which gave management higher confidence in Microbot&#146;s ability to successfully negotiate definitive
merger agreements before the Company&#146;s 10-Q filing date. Accordingly, following this discussion and based on StemCells&#146; diligence and discussions with potential strategic partners, the Board agreed to narrow the focus of the process
principally on Microbot. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Negotiation of the Microbot term sheet accelerated following the Board&#146;s July&nbsp;8 meeting. The
negotiations primarily revolved around three items: (1)&nbsp;how to divide the value of StemCells&#146; intellectual property if monetized, (2)&nbsp;what cash commitment existed from the Investor to pay down StemCells&#146; trade payables and other
liabilities, and (3)&nbsp;the Investor&#146;s bridge funding commitment of approximately $1.2 million, so that the Company would have resources sufficient to complete the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">During this time, the Company and the Investor began negotiating lending documents to provide for an immediate bridge loan to the Company of
$530,000 to help fund transaction costs, including costs associated with the Company&#146;s Form 10-Q filing for the second quarter of 2016. Concurrently, the Company and Microbot, together with their legal advisors, continued to negotiate terms
within the letter of intent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>At its July&nbsp;12, 2016 meeting, the Board was provided an update from management on progress in
the negotiation of the letter of intent and the lending documents as well as an update on the Company&#146;s efforts at settling the <I>Lease Litigation</I>. Additional negotiations followed.<I> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the July&nbsp;15, 2016 Board meeting, management presented for possible approval a final letter of intent and secured lending documents for
the Microbot transaction. The StemCells Board of Directors discussed and considered the options available to the company, including liquidation. Question were asked of, and answered by, management about the process of securing the proposed letter of
intent, as well as final recommendations. At this time, the Board authorized management to enter into a period of exclusive negotiation with Microbot for a </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">55 </P>


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possible reverse triangular merger in which StemCells&#146; stockholders would continue to hold approximately 5% of the continuing company and with the aim of securing a bridge loan upon entering
into a non-binding letter of intent by no later than July&nbsp;22, 2016, so as to preserve the opportunity to complete an orderly wind-down and satisfaction of creditors if StemCells and Microbot were unable to successfully enter into a definitive
merger agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>Discussions continued over the weekend, and it became clear that StemCells would not be able to enter into the
Microbot letter of intent and receive the initial bridge loan of $530,000 unless the Company could successfully settle the <I>Lease Litigation </I>with BMR, its former landlord. In addition, BMR had, on July&nbsp;12, filed an <I>ex parte</I> motion
in the <I>Lease Litigation</I> seeking an attachment on all the Company&#146;s assets.<I> </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At about this time, on July&nbsp;13,
StemCells successfully entered into an agreement with Miltenyi Biotec, Inc., the U.S. wholly-owned subsidiary of Miltenyi Biotech GmbH, an international research tools supplier, for the divestiture of the Company&#146;s GMP manufacturing facility.
This transaction brought $690,000 and reduced the Company&#146;s overall severance costs. Shortly thereafter, on July&nbsp;20, StemCells successfully completed the auction of its remaining research and laboratory equipment for gross proceeds of
approximately $880,000. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>While negotiations of the Microbot merger slowed as the Company defended itself in the <I>Lease
Litigation</I> and successfully opposed the landlord&#146;s <I>ex parte</I> motion, settlement discussions with BMR continued. At the end of July, the Company reached a tentative agreement for the settlement of the <I>Lease Litigation</I>, and the
Microbot Investor agreed to increase its bridge loan offer by $800,000 to cover part of the litigation settlement costs. Thereafter, Microbot and StemCells, having just received the proceeds from the divestiture of its GMP manufacturing facility,
modified the proposed term sheet to reflect a bridge loan of $2 million, payable upon execution of the definitive merger documents.<I> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>StemCells and Microbot executed the agreed-upon letter of intent on July&nbsp;27, 2016 and the Company and BMR executed their
settlement of the <I>Lease Litigation</I> on July&nbsp;29, 2016. <I> </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Negotiation of definitive merger documents and more active due
diligence of both companies began upon entering into the letter of intent. The drafting of the Merger Agreement began with a kick-off call on July&nbsp;27 and culminated in the execution of the definitive deal documents, two and a half weeks later,
on August&nbsp;15, 2016. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Between July&nbsp;27, when the parties executed the letter of intent, until August&nbsp;15, when the parties
entered into the definitive Merger Agreement, the Company&#146;s Board met to discuss the proposed transaction six times. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At its
July&nbsp;29, 2016 meeting, the Board received and discussed an update on negotiations, the proposed mechanism for paying down StemCells&#146; payables, and mechanics for negotiating the definitive merger agreements. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On July&nbsp;30, 2016, Ropes&nbsp;&amp; Gray LLP (&#147;Ropes&#148;), outside corporate counsel to StemCells, Inc., distributed the initial
draft of the merger agreement to representatives from Microbot and its advisors and legal counsel, Ruskin Moscou Faltischek PC (&#147;Ruskin&#148;), Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC (&#147;Mintz Levin&#148;) and Abraham
Moran&nbsp;&amp; Co., Microbot&#146;s Israeli counsel (&#147;Abraham&#148;), as well as Investor&#146;s representative and its advisors and legal counsel, GreenBlock Capital (&#147;GreenBlock&#148;) and Ellenoff Grossman&nbsp;&amp; Schole LLP
(&#147;Ellenoff&#148;). StemCells, Microbot and the Investor, together with their respective advisors (namely, Ropes, Ruskin, Mintz Levin, Abraham, GreenBlock, and Ellenoff), became the working group responsible for negotiating and drafting the
definitive merger documents, the &#147;Working Group.&#148; StemCells also engaged local Israeli counsel, S. Horowitz&nbsp;&amp; Co., for specific consultation and advice; and, on July&nbsp;31, 2016, the Company engaged Carabiner LLC to advise the
Board with respect to the potential transaction, and to potentially provide a fairness opinion with respect to the consideration to be paid in connection with the potential transaction. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">From August&nbsp;1 through August&nbsp;9, 2016, the Working Group held daily calls during which the Working Group reviewed all aspects of the
proposed transaction. During this period of time, StemCells&#146; management team </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">56 </P>


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and outside advisors, including Carabiner, conducted targeted due diligence with respect to each company&#146;s financial position and funding opportunities as well as Microbot&#146;s product
development programs, especially focusing on the timing of reaching stated milestones and probability of success. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;2, 2016,
Ruskin provided the Working Group with a mark-up of the proposed merger agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Working Group held an all hands drafting call on
August&nbsp;3, 2016 in an attempt to address some of these open items. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At a meeting on August&nbsp;3, 2016, the Board discussed and
considered the proposal to renegotiate StemCells&#146; outstanding warrants, the commitments being made by the Investor to fund the transaction, plans to monetize the Company&#146;s intellectual property assets, and the desirability of paying down
the Company&#146;s payables, among other things. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;4, 2016, Ropes provided the Working Group with a revised draft of the
proposed merger agreement, including a high-level issues list based on Ruskin&#146;s mark-up of the merger agreement. The principal changes revolved around financing commitments from the Investor and interim operating covenants. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At a meeting on August&nbsp;5, 2016, the Board further discussed and considered Microbot&#146;s financial position and fundraising
opportunities, the planned exchange of some of StemCells&#146; outstanding warrants, and the mechanism for funding of StemCells&#146; payables. For the second half of this meeting, a representative from the Investor attended the meeting to answer
questions about Microbot, the Investor and its interest in Microbot&#146;s product development programs. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At a meeting on August&nbsp;9,
2016, the Board further discussed and considered the relative advantage of the merger against other alternatives available to the Company, including liquidation. The Company&#146;s outside legal counsel presented an update on the negotiations and
the deal terms reflected in the draft merger agreement, noting open issues and certain Israeli law considerations. Discussion focused on the commitments from the Investor to bridge the Company&#146;s transaction costs, fund the pay down of
StemCells&#146; payables and commit to making a substantial cash investment into Microbot prior to the closing of the merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On
August&nbsp;10, 2016, Ruskin provided the Working Group with a mark-up of the proposed merger agreement, following an all hands call. Additional changes were made to reconfirm the Investor&#146;s side letter commitment to fund Microbot prior to the
closing of the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;11, 2016, Ropes provided the Working Group with a revised draft of the proposed merger agreement,
following an all hands call to cover open items, consisting principally of the dispute mechanism relating to the closing net cash calculation and certain aspects of Israeli law. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;12, 2016, Ruskin provided the Working Group with a mark-up of the proposed merger agreement, following a working group call
covering last remaining open items, including assurance for Microbot (i)&nbsp;that the Company could satisfy all its liabilities with cash available, plus Investor&#146;s committed funding, so that the Company could satisfy a net cash zero
precondition to closing, and (ii)&nbsp;that the combined company could satisfy the NASDAQ listing requirements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At its meeting on
August&nbsp;12, 2016, the Board further discussed and considered alternatives for monetizing the Company&#146;s intellectual property assets, the nature of the proposed bridge loan and the collateral. The Company&#146;s outside legal counsel
presented the terms and conditions of the proposed lending agreements, including the initial secured note. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;14, 2016, Ropes
provided the Working Group with a revised draft of the proposed merger agreement and on August&nbsp;15, 2016, Ropes provided the Working Group with the final draft of the merger agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">57 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;14, 2016, a telephonic meeting of the StemCells Board of Directors was held for
the purpose of (i)&nbsp;determining whether to approve the transaction with Microbot and direct management to enter into the definitive merger agreement, and (ii)&nbsp;discussing any other viable potential courses of action for the Company,
including liquidation. Attendees included all members of the StemCells Board of Directors (except Dr.&nbsp;Trounson who was absent for health reasons), members of StemCells&#146; management team, a representative from Carabiner, and a representative
from Ropes&nbsp;&amp; Gray, the Company&#146;s outside corporate counsel in the transaction. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the beginning of the meeting, the
representative from Carabiner provided a detailed fairness presentation, during which directors&#146; questions were asked and answered. Following this, the representative from Carabiner orally presented its fairness opinion, which was confirmed by
delivery of a written opinion dated August&nbsp;14, 2016, that, as of that date, and based upon the assumptions, qualifications and limitations set forth in its opinion, the consideration to be paid in the merger was fair, from a financial point of
view, to StemCells. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following this, the representative from Ropes reviewed for the Board the directors&#146; fiduciary duties, including
duty of care, duty of loyalty and duties in a change of control transaction, and the applicable judicial review standards. In addition, StemCells&#146; management had prepared and delivered to the Board in advance of this meeting new cash flow
projections factoring in anticipated transaction costs and the quantification of expected severance and other costs. During this presentation, questions were asked by directors and addressed by management, including a detailed discussion about the
minimum cash closing requirement and StemCells&#146; comfort level of satisfying that condition under various scenarios. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells
Board of Directors expressed consensus and satisfaction that a full and complete process had been run and that the appropriate corporate governance steps had been taken. The Board reiterated its view that the proposed transaction was the best
opportunity for maximizing stockholder value, noting the objective merits of both (i)&nbsp;the process run, (ii)&nbsp;the ultimate selection of Microbot based on probability-of-success grounds, and (iii)&nbsp;the deal terms. After discussion, the
StemCells Board of Directors then unanimously (i)&nbsp;determined that the Merger was advisable and in the best interests of StemCells and its stockholders, (ii)&nbsp;approved the Merger Agreement, the Merger and the other transactions contemplated
by the Merger Agreement and deemed the Merger Agreement advisable, and (iii)&nbsp;approved and determined to recommend the approval of the issuance of the shares of StemCells common stock in connection with the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Management was directed to sign the Merger Agreement. In the morning of August&nbsp;15, 2016, the Merger Agreement was signed by
Dr.&nbsp;Massey on behalf of the Company. On August&nbsp;15, 2016, StemCells and Microbot issued a joint press release publicly announcing the signing of the definitive Merger Agreement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_31"></A>Reasons for the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the Merger, the combined company will focus on the development of robotics based medical devices for the treatment of cerebrospinal
fluid and gastrointestinal disorders, as well as other conditions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells Board of Directors considered the following factors in
reaching its conclusion to approve the Merger and to recommend that the StemCells stockholders approve the issuance of shares of StemCells common stock in the Merger, all of which the Board viewed as supporting its decision to approve the business
combination with Microbot: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The Board of Directors and management team of StemCells had undertaken a comprehensive and thorough process of reviewing and analyzing potential merger candidates to identify the opportunity that would, in the
Board&#146;s opinion, create the most value for StemCells stockholders, and with the greatest certainty for success. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">The StemCells Board of Directors concluded, based in part on the judgment, advice and analysis of its management
with respect to the potential strategic, financial and operational benefits of the Merger (which judgment, advice and analysis was informed in part by the business, technical, financial,
</P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">58 </P>


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accounting and legal due diligence investigation performed with respect to Microbot), that Microbot&#146;s product candidates, the Self Cleaning Shunt and TipCAT, may provide new medical benefits
for a large underserved patient population and thereby generate potential returns for StemCells stockholders and attract new investors to the combined company. </P></TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The commitment from the Investor to provide pre-closing financing to Microbot was considered by the StemCells Board of Directors to likely be sufficient for the immediate term for advancing Microbot&#146;s products
under development, given its business plans. The Board also considered the possibility that the combined company would be able to take advantage of the potential benefits resulting from the combination of the StemCells public company structure with
Microbot&#146;s business to raise additional funds in the future, if necessary. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The Board concluded that the Microbot transaction provided the only reasonably viable path forward for satisfying a significant percentage of the Company&#146;s outstanding trade payables, while concurrently providing
its stockholders with a continuing interest. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The StemCells Board of Directors concluded that the Merger would provide the existing StemCells stockholders a meaningful opportunity to participate in the potential growth of the combined company following the Merger.
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The StemCells Board of Directors considered Carabiner&#146;s opinion to the Board as to the fairness to StemCells (attached hereto as Annex&nbsp;B), from a financial point of view and as of the date of the opinion, of
the aggregate number of shares of StemCells common stock to be paid in the Merger. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board also reviewed the recent
financial condition, results of operations and financial condition of StemCells, including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the lack of success in developing StemCells&#146; lead product candidate, HuCNS-SC cells, and the unlikeliness that such circumstances would change for the benefit of its stockholders in the foreseeable future;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the loss of virtually all operational capabilities of StemCells, and the risks associated with continuing to operate StemCells on a stand-alone basis; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">current financial market conditions and historical market prices, volatility and trading information with respect to StemCells common stock; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the low likelihood for obtaining a superior offer from an alternative purchaser in light of the other potential strategic buyers previously identified and contacted by, or on behalf of, StemCells and the risk of losing
the proposed transaction with Microbot; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the projected liquidation value of StemCells and the risks, costs and timing associated with liquidating compared to the value StemCells stockholders will receive in the Merger, including the fact that the Company had
trade payables and other liabilities far in excess of any likely realizable value for the remaining assets in the Company. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells Board of Directors also reviewed the terms of the Merger and associated transactions, including: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">that the number of shares of StemCells common stock to be issued in the Merger is fixed based on the relative valuations of the companies, and thus the relative percentage ownership of StemCells stockholders and
Microbot shareholders immediately following the completion of the Merger is similarly fixed; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">59 </P>


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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the limited number and nature of the conditions to Microbot&#146;s obligation to consummate the Merger and the limited risk of non-satisfaction of such conditions as well as the likelihood that the Merger will be
consummated on a timely basis; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the respective rights of, and limitations on, StemCells and Microbot under the Merger Agreement to consider certain unsolicited acquisition proposals under certain circumstances should StemCells or Microbot receive a
superior proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the voting agreements, pursuant to which officers, directors and certain shareholders of Microbot agreed, solely in their capacity as shareholders, to vote shares of their Microbot capital stock covering more than 50%
of the outstanding shares of Microbot (on an as-converted to common stock basis) in favor of adoption of the Merger Agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the fact that Microbot would as promptly as practicable solicit the approval of its shareholders to adopt the Merger Agreement and approve the Merger and other transactions contemplated by the Merger Agreement;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the commitment by the Investor to fund an initial bridge loan of $2 million to cover transaction costs and the costs associated with the Company&#146;s settlement of the <I>Lease Litigation</I>; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the commitment by the investor to fund up to an additional $2 million to allow the Company to pay down payables and other liabilities; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the belief that the terms of the Merger Agreement, including the parties&#146; representations, warranties and covenants, and the conditions to their respective obligations, are reasonable under the circumstances.
</TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the course of its deliberations, the StemCells Board of Directors also considered a variety of risks and other
countervailing factors related to entering into the Merger, including: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the substantial expenses to be incurred in connection with the Merger, including the costs associated with any related litigation; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the risk that the combined company would fail to satisfy the initial listing standards of the NASDAQ Capital Market, or one of the other conditions to closing; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the possible volatility, at least in the short term, of the trading price of StemCells common stock resulting from the Merger announcement; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the risk that the Merger might not be consummated in a timely manner or at all, the potential adverse effect of the public announcement of the Merger and the potential adverse effect of the delay or failure to complete
the Merger on the reputation of StemCells; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the risk to the business of StemCells, operations and financial results in the event that the Merger is not consummated, including the diminution of StemCells&#146; cash and its likely inability to raise additional
capital through the public or private sale of equity securities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the strategic direction of the combined company following the completion of the Merger, which will be determined by the Board of Directors as designated by Microbot; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">various other risks associated with the combined organization and the Merger, including those described in the section entitled &#147;Risk Factors&#148; in this proxy statement. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The foregoing information and factors considered by the StemCells Board of directors are not intended to be exhaustive but are believed to
include all of the material factors considered by the Board. In view of the wide variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the Board did not find it useful, and did not
attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Board may have given </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">60 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
different weight to different factors. The StemCells Board of Directors conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, the
StemCells management team and the legal and financial advisors of StemCells, and considered the factors overall to be favorable to, and to support, its determination. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Opinion of the Financial Advisor to the StemCells Board of Directors </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;14, 2016, Carabiner rendered its oral opinion to the StemCells Board of Directors, which opinion was subsequently confirmed in
writing on August&nbsp;14, 2016, that, as of the date of the written opinion and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations set forth therein, the consideration to be paid by
StemCells in the Merger was fair, from a financial point of view, to the StemCells stockholders. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>The full text of the Carabiner
Opinion, which sets forth assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by Carabiner in connection with such opinion, is attached as Annex B to this proxy statement and is
incorporated by reference into this proxy statement. StemCells urges you to carefully read the Carabiner Opinion, together with the following description thereof, in its entirety. The following is a summary of the material terms of the Carabiner
Opinion and is qualified in its entirety by reference to the full text of such opinion. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Carabiner provided the Carabiner Opinion
for the information and assistance of the StemCells Board of Directors in connection with its consideration of the Merger. The Carabiner Opinion addressed only the fairness, from a financial point of view, to the StemCells stockholders of the
consideration to be paid in the Merger. The Carabiner Opinion was intended for the use and benefit of the StemCells Board of Directors. The Carabiner Opinion is not a recommendation to any StemCells stockholder or Microbot shareholder or any other
person as to how such person should vote with respect to the Merger or take any other action in connection with the Merger or otherwise. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with rendering the opinion described above and performing its related financial analyses, Carabiner: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed a draft of the Merger Agreement dated August&nbsp;4, 2016; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed draft term sheets and commitment papers for the Financing Commitments; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed certain financial information about StemCells that was publicly available; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed a draft of StemCells&#146; Quarterly Report on Form 10-Q, which was filed on August&nbsp;15, 2016; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed certain financial information provided by StemCells&#146; and Microbot&#146;s respective management, including certain financial analyses, budgets, reports and other information; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Held discussions with various members of senior management of StemCells and Microbot concerning historical and current operations, financial conditions and prospects, including recent financial performance;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed the recent share trading price history of StemCells; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed the value of Microbot implied by the consideration and in its concurrent financing; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed the valuations of certain publicly traded companies that Carabiner viewed as comparable in certain respects to the business of Microbot; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reviewed the financial terms of selected acquisition transactions involving companies in lines of business that Carabiner viewed as comparable in certain respects to the business of Microbot. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">61 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, Carabiner conducted such other quantitative reviews, analysis and inquiries relating
to Microbot as it considered appropriate in rendering its opinion. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In arriving at its opinion, Carabiner assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting, and other information provided to, discussed with, or reviewed by Carabiner and upon the respective assurances of the management of
StemCells and Microbot that each of them was not aware of any material relevant developments or matters related to StemCells or Microbot, as applicable, or that may affect the Merger, that has been omitted or that remains undisclosed to Carabiner.
The Carabiner Opinion does not address any legal, regulatory, tax, or accounting matters, as to which Carabiner understood that StemCells had obtained such advice as it deemed necessary from other qualified professionals. Carabiner did not conduct
any independent verification of any financial projections of StemCells, Microbot, or the combined company following the Merger and expressed no opinion as to any such financial projections or the assumptions on which they were based. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In arriving at its opinion, Carabiner made no analysis of, and expressed no opinion as to, the adequacy of the reserves of StemCells or
Microbot and relied upon information supplied to Carabiner by StemCells and Microbot as to such adequacy. Carabiner did not make any independent evaluations or appraisals of the assets or liabilities (including any contingent derivatives or
off-balance sheet assets or liabilities) of StemCells or any of its subsidiaries or Microbot, and Carabiner was not furnished with any such evaluations or appraisals. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Merger
Agreement and any other agreement contemplated thereby are and will be true and correct as of the date or the dates made or deemed made, that each party will perform all of the covenants and agreements required to be performed by it under the Merger
Agreement and any other agreement contemplated thereby, and that all conditions to the completion of the Merger will be satisfied and the Merger, and the other transactions contemplated by the Merger Agreement, will be completed in accordance with
the terms of the Merger Agreement without waiver, modification, or amendment of any material term, condition, or agreement set forth therein. Carabiner also assumed that the final form of the Merger Agreement would be substantially similar to the
last draft of the Merger Agreement reviewed by Carabiner prior to the delivery of the Carabiner Opinion. Carabiner further assumed that any governmental, regulatory, and other consents and approvals contemplated by the Merger Agreement would be
obtained and that, in the course of obtaining any of those consents, no restrictions will be imposed or waivers made that would have an adverse effect on StemCells, Microbot, or any of the potential benefits of the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In arriving at its opinion, Carabiner did not consider any effects of any share of Microbot capital stock held by Microbot or owned by
StemCells or any of its subsidiaries, which shall be canceled in the Merger. In addition, Carabiner did not give any consideration to any terms or conditions of any other agreement to be entered into in connection with the Merger Agreement,
including the terms or conditions of the voting agreements described elsewhere in this proxy statement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Carabiner Opinion was based
on economic, market, financial, and other conditions existing, and on the information made available to Carabiner, as of the date of such opinion, and Carabiner assumed no obligation to update, revise or reaffirm such opinion, unless otherwise
mutually agreed to by the StemCells Board of Directors and Carabiner. Carabiner noted that subsequent developments may affect the conclusion reached in the Carabiner Opinion. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Carabiner Opinion addressed solely the fairness, from a financial point of view, to the StemCells stockholders of the Exchange Ratio. The
Carabiner Opinion does not in any way address other terms or conditions of the Merger or the Merger Agreement, including the financial or other terms of any other agreement contemplated by, or to be entered into in connection with, the Merger
Agreement, nor does the Carabiner Opinion address, and Carabiner expressed no opinion with respect to, the solvency of StemCells or Microbot or the impact thereon of the Merger. The Carabiner Opinion does not address the StemCells Board of
Directors&#146; </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">62 </P>


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underlying business decision to proceed with the Merger, the relative merits of the Merger compared to other alternatives available to StemCells, or whether such alternatives exist. Carabiner did
not express any opinion as to what the value of the shares of StemCells common stock will be when issued to holders of Microbot capital stock pursuant to the Merger or the prices or ranges of prices at which shares of StemCells common stock will
trade at any time, including following the announcement or completion of the Merger. The Carabiner Opinion does not in any manner address (and Carabiner was not required to opine as to) the fairness of the amount or nature of, or any other aspects
related to, compensation to be received by any officers, directors, or employees of any party to the Merger, or any class of such persons, relative to the Exchange Ratio or otherwise. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following is a summary of the material financial analyses delivered by Carabiner to the StemCells Board of Directors in connection with
rendering the Carabiner Opinion. The following summary, however, does not purport to be a complete description of the financial analyses performed by Carabiner. The order of the analyses described below does not represent the relative importance or
weight given to those analyses by Carabiner. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of the corresponding summaries and are alone not a
complete description of the financial analyses performed by Carabiner. Considering the data in the tables below without considering the corresponding full narrative descriptions of the financial analyses, including the methodologies and assumptions
underlying such analyses, could create a misleading or incomplete view of the financial analyses performed by Carabiner. Other than the guidance provided by the StemCells Board of Directors and senior management to Carabiner set forth in this proxy
statement, no instructions were given to or limitations imposed upon Carabiner by the StemCells Board of Directors or senior management with respect to the investigations made or procedures followed by it in rendering its opinion. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In furnishing its opinion, Carabiner did not attempt to combine the analyses described herein into one composite valuation range, nor did
Carabiner assign any quantitative weight to any of the analyses or the other factors considered. Furthermore, in arriving at its opinion, Carabiner did not attribute any particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and factor in light of one another. Accordingly, Carabiner has stated that it believes that its analyses must be considered as a whole and that considering any portion of
its analyses, without considering all of the analyses, could create a misleading or incomplete view of the process underlying its opinion or the conclusions to be drawn therefrom. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The results of the application by Carabiner of each of the valuation methodologies utilized in connection with its fairness opinion is
summarized below. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Selected Comparable Company Analysis </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In order to assess how the public market values shares of similar publicly traded companies and to provide a range of relative implied equity
values per share of Microbot common shares by reference to these companies, which could then be used to calculate implied exchange ratio ranges, Carabiner reviewed and compared specific financial data relating to Microbot with selected companies
that Carabiner deemed comparable to Microbot. These companies each operate in segments of the medical device industry, have annual revenues up to $50 million, and a market capitalization of between $1 million and $80 million. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The selected comparable companies with respect to Microbot were: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Athleon, Inc. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Cognetix, Inc. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">InspireMD, Inc. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Lombard Medical, Inc. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Medigus Ltd. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">63 </P>


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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Sunshine Heart, Inc. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Viveve Medical, Inc. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Xtent, Inc. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner selected the comparable companies listed above because it considered
their businesses and operating profiles to be reasonably similar to that of Microbot, as applicable. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Comparable Transaction Analysis </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner reviewed the financial terms, to the extent publicly available, of acquisitions or reverse mergers in the United States during the
past 24 months involving medical device companies that Carabiner deemed relevant, based on its professional experience. For each of the selected precedent transactions, Carabiner analyzed the revenues reported by the target company and compared
these to the purchase price. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The table below summarizes the data points that Carabiner presented to the board of directors: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="26%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="23%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="23%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="22%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Target</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Acquirer</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Purchase&nbsp;Price</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Reported&nbsp;Revenues</B></P></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Unilens&nbsp;Vision&nbsp;Inc.</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Valeant&nbsp;Pharmaceuticals International, Inc.</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$28.5&nbsp;million</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$10 million</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">ViewRay, Inc.</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">N/A</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$26.7 million</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$8 million</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Infraredx, Inc.</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">NIPRO Corporation</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$80.0 million</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$4 million</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Creagh Gerard</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Surmodics, Inc.</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$32.0 million</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$3.5&nbsp;million</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Interactive&nbsp;Motion Technologies,&nbsp;Inc.</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Bionik&nbsp;Laboratories&nbsp;Corp.</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$23.7 million</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$2.0 million</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner noted that the valuation data indicates that early stage revenue companies can achieve multiples of
3x to 10x of revenues in a merger or sale transaction but that publicly available market data for pre-revenue, development stage medical device companies is generally unavailable. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General Overview of Analyses; Other Considerations </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The preparation of a financial opinion is a complex process and is not susceptible to partial analysis or summary description. In arriving at
its opinion, Carabiner considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered. Each analytical technique has inherent strengths and weaknesses, and the nature of the
available information may further affect the value of particular techniques. The overall conclusions Carabiner reached are based on all the analyses and factors presented, taken as a whole, and also on application of Carabiner&#146;s own experience
and judgment. Such conclusions may involve significant elements of subjective judgment and qualitative analysis. Carabiner therefore gave no opinion as to the value or merit, standing alone, of any one or more parts of the analyses. Furthermore,
Carabiner believes that the summary provided and the analyses described above must be considered as a whole and that selecting any portion of the analyses, without considering all of them, would create an incomplete view of the process underlying
Carabiner&#146;s analysis and opinion. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In performing its analyses, Carabiner made numerous assumptions with respect to industry
performance, general business, regulatory, and economic conditions, and other matters, all of which are beyond Carabiner&#146;s and many of which are beyond the control of StemCells or Microbot. Any estimates used by Carabiner in its analysis are
not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">No single company or transaction used in the above analyses as a comparison is identical to StemCells, Microbot or the Merger, and an
evaluation of the results of those analyses is not entirely mathematical. Rather, </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">64 </P>


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the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading, or other values
of the companies, businesses, or transactions analyzed. The analyses were prepared solely for purposes of Carabiner providing its opinion and do not purport to be appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold, which are inherently subject to uncertainty. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Carabiner Opinion was one of the many factors taken into
consideration by the StemCells Board of Directors in making its determination to approve the Merger. See the section entitled &#147;The Merger&#151;Reasons for the Merger.&#148; Consequently, the analyses as described above should not be viewed as
determinative of the opinion of the StemCells Board of Directors with respect to the Exchange Ratio or of whether the StemCells board of directors would have been willing to agree to a different exchange ratio. The Exchange Ratio was determined
through arm&#146;s-length negotiations between StemCells and Microbot and was approved by the StemCells Board of Directors. Carabiner did not recommend any specific amount of consideration or specific exchange ratio to StemCells or the StemCells
Board of Directors or suggest that any specific amount of consideration or exchange ratio constituted the only appropriate consideration or exchange ratio for the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner has consented to the use of the Carabiner Opinion in this proxy statement; however, Carabiner has not assumed any responsibility for
the form or content of this proxy statement, other than the Carabiner Opinion itself. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells Board of Directors selected Carabiner
because of Carabiner&#146;s reputation in the health care industry and experience in health care merger and acquisition transactions, including transactions similar to the Merger. Pursuant to an engagement letter agreement, dated as of July&nbsp;19,
2016, Carabiner agreed to provide, an opinion as to the fairness, from a financial point of view, of the consideration to be paid or received in any such transaction. As compensation for Carabiner&#146;s financial advisory services, StemCells paid a
monthly retainer of $15,000 and, upon delivery of the fairness opinion, a fee of $150,000. In addition, StemCells also agreed to reimburse Carabiner for its reasonable out of pocket expenses, not to exceed $10,000, including attorney&#146;s fees and
expenses, and to indemnify Carabiner and its related parties against various liabilities in connection with Carabiner&#146;s engagement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner is regularly engaged in performing financial analyses with respect to businesses and securities in connection with mergers and
acquisitions, and for other purposes. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_32"></A>Interests of the StemCells Directors and Executive Officers in the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In considering the
recommendation of the Board of Directors of StemCells with respect to the approval of the Merger Agreement, the Merger, the transactions contemplated by the Merger Agreement, and the other matters to be acted upon by the StemCells stockholders at
the special meeting, the StemCells stockholders should be aware that certain members of the Board of Directors and executive officers of StemCells have interests in the Merger that may be different from, or in addition to, the interests of the
StemCells stockholders. These interests relate to or arise from, among other things: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Upon completion of the Merger, certain current and former StemCells employees, including certain of its current and former named executive officers, may receive cash success fees, as described below under &#147;The
Merger &#151; Golden Parachute Compensation;&#148; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Certain indemnification obligations of Microbot following the Merger, as described under &#147;The Merger Agreement &#151; Indemnification of Directors and Officers&#148;; </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells was aware of these potential conflicts of interest and considered them, among other matters, in reaching
their respective decisions to approve the Merger Agreement and to recommend, </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">65 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
as applicable, that the StemCells stockholders approve the proposals to be presented to the StemCells stockholders for consideration at the special meeting as contemplated by this proxy
statement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_33"></A>Golden Parachute Compensation </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Overview </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This section sets forth
the information required by Item&nbsp;402(t) of Regulation S-K regarding the compensation for each of StemCells&#146; named executive officers that is based on or otherwise relates to the Merger. This compensation is referred to as &#147;golden
parachute&#148; compensation by the applicable SEC disclosure rules, and in this section StemCells uses such term to describe the Merger-related compensation payable to StemCells&#146; named executive officers. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Severance and Change of Control Arrangements with StemCells&#146; Named Executive Officers </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the announcement that StemCells would begin an orderly wind down of operations, StemCells entered into a trust agreement on
June&nbsp;16, 2016 with David A. Bradlow, as trustee, in order to establish a third party trust for the benefit of StemCells employees and, in particular, to help ensure the availability of funds necessary to satisfy its future commitments to
exiting employees and tax authorities. At the time, and following a renegotiation of all its existing severance obligations owed to employees, StemCells transferred $2.3 million to fund the trust.&nbsp;This amount represented StemCells&#146; best
estimate of (i)&nbsp;severances expected to become payable to employees upon the termination of their employment, (ii)&nbsp;anticipated accrued paid time off expected to be due at the time of their termination of employment, (iii)&nbsp;certain
anticipated future employee wages, (iv)&nbsp;certain anticipated tax obligations, (v)&nbsp;potential retention bonuses payable in October, and (vi)&nbsp;anticipated costs associated with the administration of the trust. In all cases, the severance
amounts contributed into the beneficial trust were net of the agreed-upon negotiated discounts of more than 50% from each employee&#146;s&nbsp;original severance agreement with StemCells. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As part of this renegotiation of severances in June 2016, StemCells&#146; then current executive officers &#151; Dr.&nbsp;Ian Massey (its
then-President and Chief Executive Officer), Mr.&nbsp;Greg Schiffman (its then-Chief Financial Officer), and Mr.&nbsp;Ken Stratton (its General Counsel and current interim President) &#151; each entered into a Severance Buy-Out, Compromise and
Release agreement with the Company, each dated June&nbsp;6, 2016, in which they amended their existing employment agreements to forfeit in excess of 50% of their severances otherwise payable in the event of their involuntary termination of
employment other than for cause, whether following a change of control transaction or otherwise. In return, these severance amounts were deposited into the beneficial trust. In the case of Dr.&nbsp;Massey, StemCells contributed $219,808 into the
trust to cover his severance payable and both employer and employee taxes owed of this payment. In the case of Mr.&nbsp;Schiffman, StemCells contributed $190,219 into the trust to cover his severance payable and both employer and employee taxes owed
of this payment. In the case of Mr.&nbsp;Stratton, StemCells contributed $143,656 into the trust to cover his severance payable and both employer and employee taxes owed of this payment. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Also, in connection with the renegotiation of severances in June 2016, sixteen current and former employees of StemCells, including its three
named executive officers, which we refer to collectively as the Close-out Team, entered into Cooperation and Consulting Agreements, also dated June&nbsp;6, 2016, under which StemCells has agreed to pay the Close-out Team success payments generally
equal to 15% of (i)&nbsp;the valuation ascribed to StemCells in a merger transaction such as the Merger and (ii)&nbsp;any proceeds received by the Company upon the successful disposition of certain Company assets in connection with the wind down of
operations in return for their continued support of the business and its wind down activities even after the termination of their employment. The Company will divide any success fees in good faith either ratably based upon efforts made or in equal
shares across all eligible members of the Close-out Team. Accordingly, upon completion of the Merger, certain of StemCells&#146; current and former named executive officers may receive the cash success fees included in the table below. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">66 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On or about August&nbsp;1, 2016, the trustee released both to the approximately 50 impacted
employees, including StemCells&#146; current and former executive officers all of whom had been given provisionally an August&nbsp;1, 2016 termination date, and to tax authorities approximately $2.1 million from the trust, in all cases pursuant to
the terms of the trust agreement. The amount was part of the approximately $3,800,000 recorded as wind-down expense in our Condensed Consolidated Statement of Operations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Aggregate Amounts of Potential Compensation </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The table below summarizes potential golden parachute compensation that each named executive officer could be entitled to receive from
StemCells if the Merger is completed, as discussed above. It is currently expected that none of the named executive officers will continue to be employed by the combined company following the closing of the Merger and, accordingly, will be entitled
to receive the severance and benefits described above and below. Please note that the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described herein. Accordingly, the
actual amounts, if any, to be received by such named executive officer may differ in material respects from the amounts set forth below. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For purposes of calculating such potential golden parachute compensation, StemCells has assumed that the Merger had occurred on
September&nbsp;1, 2016 and has further assumed that the named executive officers will incur a termination of employment on such date that would entitle them to the benefits set forth in the table below. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="55%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="14" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Golden Parachute Compensation</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Cash(1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Equity</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>COBRA<BR>Benefits(2)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Total</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Ian Massey</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">216,667</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">216,667</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gregory Schiffman</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">187,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">187,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Ken Stratton</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">141,667</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">17,400</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">159,067</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">Cash compensation represents negotiated lump sum severance benefits for each of Messrs. Massey, Schiffman and Stratton plus the officer&#146;s expected portion of the payment estimated to be made to the Close-out Team.
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">In connection with their separation from the Company effective August&nbsp;15, 2016, each of Messrs. Massey and Schiffman are receiving COBRA benefits for one year following their separation. Mr.&nbsp;Stratton is the
only named executive officer who is continuing as an employee of the Company. Accordingly, upon his separation as of the closing date of the Merger (the &#147;Closing Date&#148;), Mr.&nbsp;Stratton is expected to begin receiving COBRA benefits
within one year of such date. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Indemnification and Insurance.</I>&nbsp;&nbsp;&nbsp;&nbsp;For a description of the
indemnification rights afforded to StemCells&#146; directors and officers under the Merger Agreement, see &#147;The Merger Agreement &#151; Indemnification of Directors and Officers.&#148; </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_34"></A>Limitations of Liability and Indemnification of the StemCells and Microbot Officers and Directors </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the Merger Agreement, upon the completion of the Merger, the parties agreed that all rights to indemnification or advancement of
expenses now existing in favor of, and all limitations on the personal liability of each present and former director, officer, employee, fiduciary or agent of StemCells or any of its subsidiaries, as provided for in their respective organizational
documents in effect as of the date of the Merger Agreement, will continue to be honored and in full force and effect after the closing of the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement also provides that StemCells will purchase a six-year &#147;tail&#148; policy under its existing directors&#146; and
officers&#146; liability insurance policy, with an effective date as of the closing of the Merger. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">67 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_35"></A>Merger Consideration </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the effective time of the Merger, by virtue of the Merger and without any action on the part of the holders of Microbot capital stock, each
then-outstanding share of Microbot capital stock will be automatically converted into the right to receive a number of shares of StemCells common stock equal to the Exchange Ratio. The Exchange Ratio will be determined immediately prior to the
completion of the Merger by dividing (i)&nbsp;the product of (a)&nbsp;three times (b)&nbsp;the total number of outstanding shares of StemCells common stock calculated on a fully diluted basis (in other words, inclusive of all shares of StemCells
common stock issuable upon conversion of any securities convertible into or exercisable or exchangeable for shares of StemCells common stock) as of immediately prior to the completion of the Merger (but after giving effect to the reverse stock split
described elsewhere in this proxy statement and the issuance of the shares to certain Microbot advisors with respect to the Merger representing, in the aggregate, 20% of StemCells&#146; post-closing capitalization, as provided for in the Merger
Agreement), by (ii)&nbsp;the total number of outstanding common shares of Microbot calculated on a fully diluted basis (in other words, inclusive of all shares of Microbot capital stock issuable upon conversion of any securities convertible into or
exercisable or exchangeable for shares of Microbot common stock) as of immediately prior to the completion of the Merger. As a result, former shareholders of Microbot are expected to receive shares of StemCells common stock representing an aggregate
of approximately 75% of the outstanding shares of common stock of the combined company calculated on a fully diluted basis. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_36"></A>The Exchange Ratio </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Exchange Ratio is based on three times the number of shares of StemCells common stock divided by the number of common shares of Microbot
outstanding, in each case calculated on a fully diluted basis immediately prior to the effective time of the Merger, and will not be determined until that time. Accordingly, any changes in the number of shares of outstanding capital stock of either
StemCells or Microbot, as a result of option grants, option expirations, or issuance of new share capital, prior to the effective time of the Merger would result in a corresponding change to the Exchange Ratio. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For illustrative purposes only, based on the number of shares of StemCells common stock and Microbot common shares outstanding, in each case
calculated on a fully diluted basis, as of August&nbsp;15, 2016, the date of the Merger Agreement, the Exchange Ratio (without giving effect to the proposed reverse stock split described elsewhere in this proxy statement) would have been
approximately 26.6 shares of StemCells common stock for each share of Microbot capital stock. Based on the number of shares of StemCells common stock and Microbot capital stock outstanding, in each case calculated on a fully diluted basis, as of
September [&#9679;], 2016, the last practicable date before the printing of this proxy statement, the Exchange Ratio (without giving effect to the proposed reverse stock split described elsewhere in this proxy statement) would have been [&#9679;]
shares of StemCells common stock for each share of Microbot capital stock. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">No adjustments to the Exchange Ratio will be made based upon
changes in the price of the StemCells common stock or the value of Microbot equity prior to the completion of the Merger. Changes in stock price or value may result from a variety of factors, including, among others, general market and economic
conditions, changes in StemCells&#146; or Microbot&#146;s respective businesses, operations, and prospects, the market assessment of the likelihood that the Merger will be completed as anticipated or at all, and regulatory considerations. Many of
these factors are beyond StemCells&#146; or Microbot&#146;s control. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a result of any such changes in the price of the StemCells common
stock, the aggregate market value of the shares of StemCells common stock that the Microbot shareholders will be entitled to receive at the effective time of the Merger could vary significantly from the value of such shares on the date of this proxy
statement, the date of the StemCells special meeting, the date of the Microbot extraordinary general meeting, or the date on which the Microbot shareholders actually receive their shares of StemCells common stock. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">68 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_37"></A>Fractional Shares </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">No fractional shares of StemCells common stock will be issued to Microbot shareholders in connection with the Merger. Instead, the number of
whole shares to be issued to any holder of Company Stock shall be rounded down to the nearest whole number of shares of StemCells common stock (after aggregating all fractional share will receive in connection with the Merger, see the section
entitled &#147;The Merger Agreement &#151; Merger Consideration&#148; beginning on page&nbsp;72). </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_38"></A>Effective Time of the
Merger </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I></I>The Merger Agreement requires the parties to complete the Merger after all of the conditions to the completion of the
Merger contained in the Merger Agreement are satisfied or waived, including, among others, the adoption of the Merger Agreement by the shareholders of Microbot and stockholders of StemCells and the approval by the StemCells stockholders of the
issuance of StemCells common stock and the amendment to StemCells&#146; amended and restated certificate of incorporation effecting the proposed reverse stock split, among other things. The Merger will become effective upon the issuance by the
Israeli Companies Registrar, after the closing of the Merger, of the certificate of merger. The Israeli Companies Registrar will issue such certificate after Microbot and the Merger Sub file with the Israeli Companies Registrar all the necessary
documents required by the ICL, including, <I>inter alia</I>, a merger proposal and a notice stating that all the preconditions to the merger were completed. Neither StemCells nor Microbot can predict the exact timing of the completion of the Merger,
but according to the ICL the Israeli Companies Registrar will not issue the certificate of merger unless at least fifty (50)&nbsp;days have elapsed since the filing of the merger proposal with the Companies Registrar and at least thirty
(30)&nbsp;days have elapsed since the approval of the merger by the shareholders of each of Microbot and Merger Sub. <I> </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_39"></A>Regulatory Approvals </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of this proxy statement, neither StemCells nor Microbot is required to make filings or to obtain approvals or clearances from
any antitrust regulatory authorities in the United States or other countries to complete the Merger. In Israel, because Microbot received certain grants from the OCS, Microbot must obtain the approval of the transactions contemplated by the Merger
Agreement, including the Merger, of the OCS. As a pre-condition for the OCS approval, StemCells would need to sign an undertaking (following a standard form prescribed by the OCS) to comply, and cause Microbot to comply, following the Merger, with
the OCS laws and regulations in respect of the grants Microbot received. In the United States, StemCells must comply with applicable federal and state securities laws and the rules and regulations of the NASDAQ Capital Market in connection with the
issuance of shares of StemCells common stock in the Merger and the resulting change in control of StemCells and the filing of this proxy statement with the SEC. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_40"></A>Tax Treatment of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells, Merger Sub and Microbot intend the Merger, together with the issuance of shares of StemCells common stock to Microbot shareholders,
to qualify as a reorganization within the meaning of Section&nbsp;368(a) of the Internal Revenue Code of 1986, as amended, or the Code. Each of StemCells, Merger Sub and Microbot will use its reasonable best efforts to cause the Merger, together
with the issuance of shares of StemCells common stock to Microbot shareholders, to qualify as a reorganization within the meaning of Section&nbsp;368(a) of the Code, and not take any action or cause any action to be taken which would or could
reasonably be expected to prevent or impede the Merger from qualifying as a reorganization under Section&nbsp;
368(a) of the Code. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_41"></A>NASDAQ Stock Market Listing </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells common stock currently is listed on the NASDAQ Capital Market under the symbol &#147;STEM.&#148; StemCells has agreed to use its
reasonable best efforts to cause the shares of StemCells common stock to be </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">69 </P>


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approved, at or prior to the completion of the Merger, for listing (subject only to notice of issuance) on the NASDAQ Capital Market at and following the completion of the Merger, and the listing
of the shares of StemCells common stock issuable pursuant to the Merger Agreement is a condition to Microbot&#146;s and StemCells&#146; obligation to complete the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of the mailing of this proxy statement, StemCells has filed an initial listing application for the NASDAQ Capital Market in
connection with the Merger pursuant to NASDAQ &#147;reverse merger&#148; rules. If such application is approved, StemCells anticipates that its common stock will continue to be listed on the NASDAQ Capital Market following the completion of the
Merger under the trading symbol &#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .&#148; It is expected that following the Merger, the trading symbol of the combined company will be changed. Microbot has requested the
ticker symbol &#147;MBOT&#148; for this purpose. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_42"></A>THE MERGER AGREEMENT </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>The following is a summary of the material provisions of the Merger Agreement but does not purport to describe all of the terms of the
Merger Agreement. The following summary is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference into this proxy
statement. This summary may not contain all of the information about the Merger Agreement that is important to you. You should refer to the full text of the Merger Agreement for details of the transaction and the terms and conditions of the Merger
Agreement. </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Additionally, the representations, warranties and covenants described in this section and contained in the Merger
Agreement have been made only for the purpose of the Merger Agreement and, as such, are intended solely for the benefit of StemCells, Merger Sub and Microbot. In many cases, these representations, warranties and covenants are subject to limitations
agreed upon by the parties and are qualified by certain disclosures exchanged by the parties in connection with the execution of the Merger Agreement. Furthermore, many of the representations and warranties in the Merger Agreement are the result of
a negotiated allocation of contractual risk among the parties and, taken in isolation, do not necessarily reflect facts about StemCells or Microbot, their respective subsidiaries and affiliates or any other party. Likewise, any references to
materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or stockholders. Finally, information concerning the subject matter of the representations and warranties may have
changed since the date of the Merger Agreement or may change in the future and these changes may not be fully reflected in the public disclosures made by StemCells and/or Microbot. </I><B></B><I></I><B><I>As a result of the foregoing, you are
strongly encouraged not to rely on the representations, warranties and covenants contained in the Merger Agreement, or any descriptions thereof, as accurate characterizations of the state of facts or condition of StemCells, Microbot, or any other
party. You are likewise cautioned that you are not a third-party beneficiary under the Merger Agreement and do not have any direct rights or remedies pursuant to the Merger Agreement.</I></B><I></I><B></B><I> </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_43"></A>Terms of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement and in accordance with Delaware law with
respect to the Merger Agreement and with the laws of the State of Israel with respect to the Merger, at the completion of the Merger, Merger Sub, a wholly owned subsidiary of StemCells, will merge with and into Microbot. Upon completion of the
Merger, Microbot will continue as a wholly owned subsidiary of StemCells (the &#147;Surviving Corporation&#148;). </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_44"></A>Completion of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The closing of the Merger will take place no later than the second business day after the satisfaction or waiver of the conditions to the
completion of the Merger contained in the Merger Agreement, other than the conditions which by their terms can be satisfied only as of the closing of the Merger or on such other day as StemCells, Microbot and Merger Sub may mutually agree. For a
more complete discussion of the conditions to the completion of the Merger, see the section entitled &#147;&#151; Conditions to the Completion of the Merger&#148; beginning on page 84. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the closing, the parties will file with the Israeli Companies Registrar (the &#147;Companies Registrar&#148;) a notice informing the
Companies Registrar of the Merger and requires that, promptly after notice that the closing has occurred, the Companies Registrar issue a certificate evidencing the completion of the Merger (the &#147;Certificate of Merger&#148;) in accordance with
the Israeli Companies Law and the regulations promulgated thereunder (the &#147;ICL&#148;). The Merger shall become effective upon issuance by the Companies Registrar, after the closing of the Merger, of the Certificate of Merger. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_45"></A>Articles of Association; Directors and Officers </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Upon completion of the Merger, the articles of association of the Surviving Corporation will be amended and restated in such form and substance
as shall have been reasonably agreed to by StemCells and Microbot, until thereafter amended in accordance with the terms thereof and applicable law. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The directors of Microbot will be the directors of the Surviving Corporation immediately following the completion of the Merger and each of
them will hold office until his or her successor is duly elected or appointed and qualified or until his or her earlier death, resignation or removal. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The officers of Microbot will be the officers of the Surviving Corporation immediately following the completion of the Merger, and each of
them will hold office until his or her successor is duly appointed and qualified or until his or her earlier death, resignation or removal. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_46">
</A>Merger Consideration </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Upon completion of the Merger, each share of then-outstanding capital stock of Microbot (other than shares
held by Microbot, StemCells or any of StemCells&#146; subsidiaries, which will be cancelled at the completion of the Merger) will be automatically converted into the right to receive the number of shares of StemCells common stock equal to the
Exchange Ratio (as defined below) (the &#147;Merger Consideration&#148;). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">No fractional shares of StemCells common stock will be issued
in connection with the Merger. The number of whole shares to be issued to any holder of Microbot capital stock shall be rounded down to the nearest whole number of shares of StemCells common stock (after aggregating all fractional shares of
StemCells common stock issuable to such holder). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement defines the &#147;Exchange Ratio&#148; as the number of shares of
StemCells common stock equal to the quotient obtained by dividing (i)&nbsp;the product obtained by multiplying (a)&nbsp;three times (b)&nbsp;the total number of outstanding shares of StemCells common stock on a fully diluted, as converted basis (in
other words, inclusive of all shares of common stock issuable upon conversion of any securities convertible into or exercisable or exchangeable for StemCells common stock), as of immediately prior to the completion of the Merger (but after giving
effect to the Reverse Stock Split Proposal and including the shares of StemCells common stock issued to certain consultants with respect to the Merger representing, in the aggregate, 20% of StemCells&#146; post-closing capitalization) by
(ii)&nbsp;the total number of outstanding shares of Microbot common stock on a fully diluted, as converted basis (in other words, inclusive of all shares of common stock issuable upon conversion of any securities convertible into or exercisable or
exchangeable for Microbot capital stock) as of immediately prior to the completion of the Merger. The Merger Agreement provides that the Exchange Ratio will be appropriately adjusted if, prior to the completion of the Merger, the outstanding shares
of common stock of Microbot or StemCells are changed as a result of any reclassification, recapitalization, stock split, merger, combination, exchange, readjustment or similar transaction, or any stock dividend thereon, to eliminate the effect of
such event on the Exchange Ratio. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_47"></A>Assumption of Microbot Stock Options and Warrants </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Stock Options </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement
provides that, upon completion of the Merger, each Microbot stock option that is outstanding and unexercised immediately prior to the completion of the Merger, whether or not vested, will be converted into an option to purchase StemCells common
stock, and StemCells will assume such stock option in accordance with the terms of the Microbot 2015 Stock Option Plan, which is referred to as the &#147;Microbot Equity Plan,&#148; and the terms of the contract evidencing such Microbot stock
option. Following the completion of the Merger, each Microbot option may be exercised solely for shares of StemCells common stock. The number of shares of StemCells common stock subject to each assumed Microbot stock option will be determined by
</P>
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multiplying the number of shares of Microbot capital stock subject to the stock option immediately prior to the completion of the Merger by the Exchange Ratio and rounding down to the nearest
whole number of shares of StemCells common stock. The per share exercise price for shares of StemCells common stock issuable upon exercise of each assumed Microbot stock option will be determined by dividing the per share exercise price for Microbot
common stock subject to the stock option immediately prior to the completion of the Merger by the Exchange Ratio and rounding up to the nearest whole cent. After adjusting the assumed stock options to reflect the application of the Exchange Ratio,
all other terms of the assumed stock options, including the term, exercisability and vesting schedule, will remain unchanged, except that the board of directors of the combined company or a committee thereof will succeed to the authority and
responsibility of the Microbot board of directors or any applicable committee thereof with respect to such stock options. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, at
the completion of the Merger, StemCells may assume the Company Equity Plan. If StemCells assumes the Company Equity Plan, then under such Company Equity Plan, StemCells shall be entitled to grant stock awards, to the extent permissible under
applicable law, using the share reserves of the Company Equity Plan, subject to certain customary adjustments. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Warrants </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that, upon completion of the Merger, each Microbot warrant that is outstanding and unexercised immediately prior
to the completion of the Merger will be converted into a warrant to purchase StemCells common stock and StemCells will assume such warrant in accordance with the terms of the applicable Microbot warrant and the terms of the contract evidencing such
Microbot warrant. Following the completion of the Merger, each Microbot warrant may be exercised solely for shares of StemCells common stock. The number of shares of StemCells common stock subject to each assumed Microbot warrant will be determined
by multiplying the number of shares of Microbot capital stock subject to the warrant immediately prior to the completion of the Merger by the Exchange Ratio and rounding down to the nearest whole number of shares of StemCells common stock. The per
share exercise price for shares of StemCells common stock issuable upon exercise of each assumed Microbot warrant will be determined by dividing the per share exercise price of such warrant immediately prior to the completion of the Merger by the
Exchange Ratio and rounding up to the nearest whole cent. After adjusting the assumed Microbot warrants to reflect the application of the Exchange Ratio, all other terms of the assumed warrants, including the term, exercisability and vesting
schedule, will remain unchanged. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_48"></A>Exchange of Microbot Stock Certificates </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At or prior to the completion of the Merger, StemCells will enter into an agreement with a bank or trust company selected by StemCells
reasonably acceptable to Microbot who will act as the exchange agent for payment of the Merger Consideration to the holders of Microbot&#146;s ordinary shares in exchange for certificates representing the existing ordinary shares of Microbot. At or
before the completion of the Merger, StemCells will supply the exchange agent with the Merger Consideration. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement
provides that, promptly following the completion of the Merger, StemCells or the exchange agent will mail to each Microbot shareholder of record a letter of transmittal and instructions for use in surrendering all certificates of Microbot stock for
the applicable portion of the Merger Consideration. The Merger Agreement provides that upon surrender to the exchange agent of Microbot stock certificates, a properly completed letter of transmittal and other documents reasonably requested by the
exchange agent, a holder of shares of Microbot stock will be entitled to receive the applicable portion of the Merger Consideration. StemCells, the Surviving Corporation, and the exchange agent will be entitled to deduct and withhold from the Merger
Consideration such amounts as may be required to be deducted or withheld under the Code or any other applicable law. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If any shares of
Microbot stock are unvested or subject to a repurchase option, risk of forfeiture or other similar condition immediately prior to the completion of the Merger, then the Merger Consideration Shares </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">73 </P>


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issued with respect thereto will also be unvested or subject to a repurchase option, risk or forfeiture or other similar condition, as applicable. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If any shareholder has lost a certificate representing Microbot capital stock, or if any such certificate has been stolen or destroyed, such
shareholder will, as a condition to receiving the applicable portion of Merger Consideration for the shares represented by such certificate, be required to make an affidavit of the loss, theft or destruction and, if reasonably required by StemCells,
post a bond in a reasonable amount as indemnity against any claim that may be made against StemCells with respect to such certificate. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">From and after the completion of the Merger, unless it is properly surrendered or transferred, each Microbot stock certificate will represent
only the right to receive an applicable portion of the Merger Consideration. In addition, the transfer books of Microbot will close at the completion of the Merger and no shares of Microbot stock will thereafter be registered or transferred on the
transfer books of Microbot. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Stock certificates should not be surrendered for exchange by Microbot shareholders prior to the completion
of the Merger and should be sent only pursuant to instructions set forth in the letters of transmittal which the Merger Agreement provides will be mailed to Microbot shareholders promptly following the completion of the Merger. In all cases, the
certificates representing shares of StemCells common stock will be delivered only in accordance with the procedures set forth in the letter of transmittal. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">After the first anniversary of the date upon which the Merger is completed, any Merger Consideration (or dividends or distributions thereon)
remaining in the exchange fund established by StemCells with the exchange agent shall be delivered to StemCells or StemCells&#146; designee, and any former shareholders of Microbot who have not complied with the applicable provisions for payment
summarized above will be entitled to receive payment of the applicable portion of Merger Consideration only from StemCells. None of the Surviving Corporation, StemCells, the exchange agent or any other party to the Merger Agreement will be liable to
any former shareholders of Microbot for any amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar laws. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_49"></A>Representations and Warranties </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement contains customary representations and warranties made by Microbot to StemCells and Merger Sub made as of the date of the
Merger Agreement and as of the Closing Date, and generally reciprocal representations and warranties made by StemCells and Merger Sub to Microbot. Specifically, the representations and warranties of each of StemCells and Microbot in the Merger
Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by confidential disclosure schedules exchanged by StemCells and Microbot as may or may not be specifically
indicated in the text of the Merger Agreement) relate to the following subject matters, among other things: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">organization, good standing and qualification to do business as currently conducted; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">no violation of the constitutive documents of the applicable company; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">corporate power and authority to enter into the Merger Agreement and to complete the transactions contemplated by the Merger Agreement; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">valid authorization to enter into and execution of the Merger Agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the required consents and approvals of governmental entities and third parties in connection with the transactions contemplated by the Merger Agreement; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the declaration of advisability of the Merger Agreement and the Merger by each party&#146;s board of directors, the approval of the Merger Agreement and the Merger by each party&#146;s board of directors and, subject to
certain provisions relating to the fiduciary duties of each party&#146;s board of directors, the recommendation made by each party&#146;s board of directors to its respective stockholders; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">74 </P>


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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">capitalization, including valid authorization and issuance of outstanding capital stock; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">compliance with certain laws; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">financial statements; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">title to property; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the absence of undisclosed liabilities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the conduct of each party&#146;s business, and the absence of certain changes or events since June&nbsp;30, 2016; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the capitalization of StemCells&#146; subsidiaries; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">litigation, investigations, proceedings and the absence of orders or judgments from governmental entities; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">insurance policies and claims against such policies; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">matters relating to material contracts, including the absence of certain defaults under or breaches or violations of material contracts and that the contracts identified as material contracts are valid, binding and
enforceable obligations; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">employment and labor matters; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">intellectual property matters; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">tax matters; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, matters relating to its employee benefit plans; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">regulatory matters; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">environmental matters; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the absence of misstatements or omissions of material facts in this proxy statement with respect to StemCells, and information provided for inclusion therein, with respect to Microbot; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the absence of undisclosed brokers&#146; fees; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the inapplicability of anti-takeover statutes to the Merger and the other transactions contemplated by the Merger Agreement. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement contains additional representations and warranties of StemCells regarding, among other things, the approval by the
StemCells board of directors of the amendment to StemCells&#146; certificate of incorporation, StemCells&#146; SEC filings, disclosure controls and procedures and internal controls over financial reporting, StemCells&#146; compliance with the
listing requirements of the NASDAQ Capital Market, and the due authorization, valid issuance, and lack of resale restrictions with respect to the shares of StemCells common stock to be issued as Merger Consideration (other than as may be imposed
pursuant to rules 144 or 145 under the Securities Act). </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_50"></A>Material Adverse Effect </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Several of the representations, warranties, covenants and closing conditions contained in the Merger Agreement refer to the concept of
&#147;Company Material Adverse Effect&#148; or &#147;Parent Material Adverse Effect&#148;. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Company Material Adverse Effect </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For purposes of the Merger Agreement, a &#147;Company Material Adverse Effect&#148; means any change, circumstance, condition, development,
effect, event, occurrence, result or state of facts that, individually or when taken together with any other such change, circumstance, condition, development, effect, event, occurrence, </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">75 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
result or state of facts, has or would reasonably be expected to have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of Microbot or
prevent the ability of Microbot to consummate the transactions contemplated by the Merger Agreement, when viewed on a long-term or short-term basis; except none of the following shall be taken into account in determining whether there has been a
Company Material Adverse Effect: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in general economic or political conditions or the securities market in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) to the extent they do not
disproportionately affect Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in or affecting the industries in which Microbot operates to the extent they do not disproportionately affect Microbot in any material respect; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes, effects or circumstances resulting from the announcement or pendency of the Merger Agreement or the consummation of the transactions contemplated by or compliance with the terms of the Merger Agreement;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any specific action taken at the written request of StemCells or Merger Sub or expressly required by the Merger Agreement; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">continued losses from operations or decreases in cash balances of Microbot. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Parent Material Adverse
Effect </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For purposes of the Merger Agreement, a &#147;Parent Material Adverse Effect&#148; means any change, circumstance,
condition, development, effect, event, occurrence, result or state of facts that, individually or when taken together with any other such change, circumstance, condition, development, effect, event, occurrence, result or state of facts, has or would
reasonably be expected to have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of StemCells and Merger Sub or prevent or materially delay the ability of StemCells and Merger Sub to
consummate the transactions contemplated by the Merger Agreement, when viewed on a long-term or short-term basis; except none of the following shall be taken into account in determining whether there has been a Parent Material Adverse Effect:
changes in general economic or political conditions or the securities market in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) to the extent they do not disproportionately affect
StemCells and its subsidiaries, taken as a whole; </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in general economic or political conditions or the securities market in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) to the extent they do not
disproportionately affect StemCells and its subsidiaries, taken as a whole; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes in or affecting the industries in which StemCells operates to the extent they do not disproportionately affect StemCells and its subsidiaries, taken as a whole, in any material respect; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">changes, effects or circumstances resulting from the announcement or pendency of the Merger Agreement or the consummation of the transactions contemplated by or compliance with the terms of the Merger Agreement;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any specific action taken at the written request of Microbot or expressly required by the Merger Agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">continued losses from operations or decreases in cash balances of StemCells or its subsidiaries or on a consolidated basis among StemCells and its subsidiaries; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any further reductions, either voluntary or involuntary, in StemCells&#146; personnel. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Furthermore, no change, circumstance, condition, development, effect, event, occurrence, result or state of facts relating to StemCells
intellectual property, equipment or leasehold improvements shall be taken into account in determining whether there has been a Parent Material Adverse Effect. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">76 </P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_51"></A>Certain Covenants of the Parties </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Affirmative Covenants </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each of
StemCells and Microbot has undertaken certain covenants in the Merger Agreement relating to the conduct of its business between the date of the Merger Agreement and the earlier of the completion of the Merger or the earlier termination of the Merger
Agreement. In general, except as contemplated or required by the Merger Agreement (or disclosed to the other party pursuant to the terms of the merger agreement), without the prior written consent of the other party, each of StemCells and Microbot
has agreed to, and StemCells has agreed to cause its subsidiaries to: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of Microbot, conduct its business in the ordinary course; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of Microbot, use reasonable best efforts to preserve intact its business, keep available the services of officers and employees and maintain existing business relations with licensors, licensees, suppliers,
distributors, consultants, customers and other parties, except, with respect to Microbot and its subsidiaries, to the extent that such termination is in the ordinary course of business; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">not take any action that would reasonably be expected to adversely affect its ability to complete the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, timely file all documents required to be filed with the SEC under applicable law in a timely manner and in compliance with applicable law; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, maintain compliance with the applicable listing requirements of the NASDAQ Capital Market; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">provide the other party and its representatives with reasonable access during normal business hours to its offices, properties, personnel, books and records and furnish the other party and its representatives with
financial and operating data and other information, as reasonably requested, , including reports to Microbot and its designated representatives regarding the use of StemCells cash funds prior to the Closing Date; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, prepare and file this proxy statement with the SEC. In connection with the foregoing, each party shall promptly notify the other party of receipt of all comments from the SEC with respect to
this proxy statement and any request by the SEC for any amendment or supplement hereto or for additional information and shall promptly provide the other party with copies of all correspondence between such party and/or any of its representatives
and the SEC with respect to this proxy statement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">as promptly as practicable following the date of the Merger Agreement, use its reasonable best efforts to obtain and maintain in connection with the transactions contemplated by the Merger Agreement, including the
Merger, all approvals, consents, registrations, permits, authorizations and other confirmations of all government authorities which, if not obtained, would result in a Parent Material Adverse Effect or Company Material adverse Effect, as applicable,
or would result in the failure to satisfy the closing conditions described in the Merger Agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">cooperate and coordinate with the other party in the making of any filings or submissions that are required to be made under any applicable law or requested to be made by any governmental authority, and supply the other
party or its representatives with any material information that may be required or requested by a government authority in such filings or submissions; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">use reasonable best efforts to offer to take, or cause to be taken, all actions and do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the transactions contemplated by the Merger Agreement, including the Merger, including by taking all such actions and doing all such things necessary to resolve any such
objections, if any, as any government authority or person may assert under any applicable laws to avoid or eliminate each and every impediment under any applicable law that may be asserted by any government authority so as to enable the transaction
</P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">77 </P>


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<TD WIDTH="8%">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">
contemplated by the Merger Agreement, including the Merger, to be consummated as soon as possible. In furtherance of the foregoing, in the case of Microbot, as promptly as practicable following
the date of the Merger Agreement taking all actions and provide all requisite documents and notifications relating to the Merger Agreement and the transactions contemplated thereby, including the Merger, as required to obtain approval for the
consummation of the transactions contemplated by the Merger Agreement, including the Merger, from the Office of the Chief Scientist at the Israeli Ministry of Economy; </P></TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">before issuing any press release or otherwise making any public statement with respect to any of the transactions contemplated by the Merger Agreement, including the Merger, consult with the other party as to its form
and substance, and agree not to issue any such press release or general communication o employees or make any public statement without obtaining the other party&#146;s written consent, except advices by outside counsel that it is required under
applicable law; in the case of StemCells, use reasonable best efforts to initiate and process the liquidation or transfer the assets of, pay or satisfy all obligations and other liabilities or, and dissolve, Stem Cells Sciences Holdings Limited and
Stem Cell Sciences (UK) Limited; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">provide the other party with prompt notice of certain events, including the occurrence or nonoccurrence of any event that would likely cause such party to be unable to fulfill certain conditions required to be fulfilled
by such party prior to the completion of Merger, the receipt of a notice from a third party alleging that the consent of such third party is required in connection with the transactions contemplated by the Merger Agreement, including the Merger, or
the existence of any facts or circumstances that would reasonably be expected to result in a Company Material Adverse Effect or Parent Material Adverse Effect, as applicable; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, use reasonable best efforts to cause StemCells common stock to be approved, at or prior to the completion of the Merger, for listing on the NASDAQ Capital Market at and after the completion of
the Merger, including paying any required fees and submitting any listing application and listing agreement, if any, required by the NASDAQ Capital Market at least 60 days prior to the completion of the Merger, and to change the trading symbol of
StemCells to the symbol chose by Microbot, effective at, or as soon as practicable following the completion of the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, use best efforts to do all things necessary or advisable to continue the listing of StemCells common stock on the NASDAQ Capital Market, and shall promptly provide Microbot with true, correct
and complete copies of any and all correspondences with and to the NASDAQ Capital Market, and provide a response to the NASDAQ Capital Market only after providing Microbot with reasonable opportunity to provide advice and input in respect of such
response; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, give Microbot the opportunity to participate, and if Microbot so elects, shall cooperate with respect to, the defense or settlement of any stockholder litigation against StemCells and/or its
directors or executive officers relate to the Merger, the Merger Agreement or the transactions contemplated by the Merger Agreement and StemCells shall not settle or offer to settle any such litigation without Microbot&#146;s written consent, which
consent will not be unreasonably withheld, conditioned or delayed; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, immediately prior to the completion of the Merger, and subject to obtaining the requisite stockholder approval of the StemCells Merger Proposals, file its charter amendment with the Delaware
Secretary of State to effect the Reverse Stock Split Proposal and the Authorized Shares Increase Proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, use reasonably best efforts to enter into agreements or other contracts by no later than August&nbsp;18, 2016 with certain institutional holders of StemCells&#146; outstanding and unexercised
warrants providing for the surrender or amendment of such warrants; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">in the case of Microbot, deliver to each holder of Microbot capital stock or securities convertible into,
exchangeable for, or representing the right to subscribe for, purchase or otherwise receive any shares of </P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">78 </P>


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<TD WIDTH="8%">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">
Microbot capital stock or any other Microbot equity securities, a form of accredited investor questionnaire, in reliance of which, StemCells and Microbot shall take such action as reasonably
necessary to ensure that the issuance of shares of StemCells common stock in the Merger shall validly qualify for an exemption from the registration and prospectus delivery requirements of the Securities Act and the equivalent state
&#147;blue-sky&#148; laws; </P></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of Microbot, conduct one or more private capital raises of not less than $4.0 million prior to Closing (collectively, the &#147;Company Private Placement&#148;); </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, use its reasonable best efforts to obtain duly executed and delivered waiver and release agreements, in form and substance reasonably acceptable to Microbot, with the employees of StemCells and
its subsidiaries; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of Microbot, revise and update its unaudited financial statements so that they are prepared in accordance with GAAP; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">in the case of StemCells, issue to certain consultants with respect to the Merger, a number of shares of StemCells common stock (or other securities as agreed to in writing by such consultants and the parties to the
Merger Agreement) which in the aggregate shall equal 20% of StemCells&#146; post-closing capitalization as of the Closing Date (on a fully diluted basis). </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, in the case of StemCells, StemCells has agreed to prepare and deliver a schedule setting forth, in reasonable detail, the Net
Cash of StemCells as of 10 days prior to the anticipated Closing and a good faith estimate of the Net Cash to be held by Stem Cells as of the Closing, which shall be reviewed by Microbot with access to be provided by StemCells to its books and
records, books of account, accountant&#146;s work paper and personnel and accountants. Within 5 business days after the delivery of the Net Cash schedule, Microbot will have the right to dispute any part of the Net Cash schedule by delivering a
written request to StemCells setting forth, in reasonable detail, any item in the Net Cash schedule Microbot believes is not correct. A notification by StemCells of no objection or failure to deliver a notification will be a deemed acceptance that
the Net Cash schedule has been finally determined for the purposes of the Merger Agreement and StemCells will not be required to determine Net Cash again prior to Closing except under certain circumstances. If Microbot disputes the Net Cash
schedule, representatives of StemCells and Microbot shall promptly meet and attempt to resolve the disputed item(s) in good faith, which agreed upon amount will be deemed to have been finally determined for the purposes of the Merger Agreement. If
the representatives of StemCells and Microbot are unable to negotiate an agreed-upon determination within 3 business days, then Microbot may pursue any available remedy under the Merger Agreement, including asserting that the closing conditions have
not been satisfied or asserting that it may terminate the Merger Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For the purposes of the Merger Agreement, &#147;Net
Cash&#148; of StemCells means, as of any particular time, on a consolidated basis (x)&nbsp;StemCells and its subsidiaries&#146; cash and cash equivalents, short term investments, and restricted cash, plus (y)&nbsp;accounts receivable as specifically
contemplated by the line item &#147;other receivables&#148; in StemCells&#146; unaudited balance sheet for the fiscal period ended June&nbsp;30, 2016 and filed with the SEC, but only to the extent of cash collections thereon through the completion
of the Merger, minus (z)&nbsp;the aggregate of the following obligations and liabilities of Parent and Parent Subsidiaries, to the extent such obligations and liabilities are probable and can be reasonably estimated (including those cash settled
liabilities and obligations that would be reflected on a balance sheet prepared in accordance with GAAP), calculated without duplication: (i)&nbsp;All current liabilities (other than non-cash current liabilities) and long term liabilities (other
than non-cash long term liabilities), including but not limited to any litigation costs, accounts payable and severance payments; (ii)&nbsp;All indebtedness for borrowed money or in respect of capitalized leases or the purchase of assets (including
all principal, accrued interest thereon (and if such indebtedness is not prepayable, all remaining interest to be paid or accrued through maturity thereof), and any other amounts payable to the holders of such indebtedness as a result of or in
connection with, the consummation of the transactions); (iii)&nbsp;Any and all contractual cash obligations, including but not limited to operating lease payments, capital lease equipment and loan payables. Notwithstanding the foregoing, the
calculation of the obligations and liabilities in calculating Net Cash herein </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">79 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
shall exclude any obligations or liabilities of StemCells to the Investor or any of its affiliates or assignees; provided that such amount shall not exceed $4.4 million; and (iv)&nbsp;any
litigation costs, expenses, settlements and judgments (whether actual or projected). </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Negative Covenants </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Prior to the completion of the Merger or other earlier termination of the Merger Agreement, each of Microbot and StemCells have agreed, with
respect to itself and its subsidiaries, not to (unless consented to in writing by the other party), among other things (subject to, in some cases, exceptions or qualifications specified in the Merger Agreement or set forth in the confidential
disclosure schedules exchanged by Microbot and StemCells): </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">enter into any material contract, agreement or commitment or terminate or amend in any material respect, or waive any material right under, any material contract other than in the ordinary course of business or, with
respect to Microbot, with prior written notice to StemCells; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">grant any severance or termination pay to any officer or director except payments in amounts consistent with policies and past practice or pursuant to written agreements or policies existing on the date of the Merger
Agreement and previously disclosed to the other party, or adopt any new severance plan except, with respect to Microbot, with the prior written notice to StemCells or as required by applicable Israeli law; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">declare or pay any dividends or make any other distributions in respect of their capital stock or split, combine or reclassify any capital stock, or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any capital stock other than, with respect to Microbot, in the ordinary course of business, with prior written notice to StemCells or with respect to the Company Private Placement; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">repurchase or otherwise acquire any shares of its capital stock except pursuant to rights of repurchase under its stock plans; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">materially amend any certificate of incorporation, bylaws, certificate of formation or limited liability company agreement other than with respect to the Company Private Placement; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">sell, lease, license, encumber or otherwise dispose of any material properties or assets other than in the ordinary course of business; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">incur any indebtedness for borrowed money or guarantee any such indebtedness, or issue or sell any debt securities or rights to acquire debt securities, other than, with respect to Microbot, in the ordinary course of
business or with respect to the Company Private Placement, or, with respect to StemCells, pursuant to a secured note and corresponding security agreement entered into by StemCells in connection with the Merger Agreement; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">enter into any &#147;keep well&#148; or other contract to maintain any financial statement condition of any other person other than a wholly owned subsidiary; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">with respect to StemCells, adopt or amend any employee benefit, employee equity purchase or employee option plan; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">with respect to StemCells, enter into any employment contract or hire any employee; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">with respect to StemCells, pay any special bonus to any director or employee; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">with respect to StemCells, increase the salaries or wage rates of officers or employees, except increases to non-officer employees in the ordinary course of business or pursuant to existing contracts; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">pay or settle any pending or threatened litigation, claims or liability other than with respect to amounts owed to vendors and suppliers or settlements in the ordinary course of business, settlements not involving more
than $100,000 individually or $250,000 in the aggregate and with respect to taxes; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">80 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">authorize or propose any plan of liquidation or dissolution, any acquisition of a material amount of assets, a disposition of a material amount of assets, any partnership, association or joint venture, or other than
with respect to the Company Private Placement, any material change in capitalization; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">with respect to StemCells, purchase any insurance policy other than the &#147;tail&#148; policy in favor of StemCells&#146; current directors and officers, fail to renew any insurance policy or permit any insurance
policy to be cancelled, terminated or materially altered; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">maintain books and records in a manner other than in the ordinary course of business consistent with past practices; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">enter into any hedging, option, derivative or other similar transaction or any foreign exchange position except in the ordinary course of business and, with respect to StemCells, consistent with past practices;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">institute any change in accounting methods, principles or practices other than as required by GAAP or for purposes of compliance and the SEC and, with respect to Microbot, with the NASDAQ Capital Market;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">make any material election or change in tax accounting method, enter into any tax closing agreement, settle any material tax claim or assessment, consent to any material extension or waiver of the limitation period
applicable to any material tax claim or assessment or amend any tax return or enter into any tax sharing agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">issue or sell any securities other than: the Company Private Placement; with respect to Microbot, the grant of stock options to employees; the issuance of any shares of Microbot capital stock upon the exercise of stock
options or existing warrants; the issuance of any shares of StemCells common stock upon the exercise of stock options or existing StemCells securities; with respect to Microbot, upon the conversion of existing convertible promissory notes; or as
expressly contemplated by the Merger Agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">amend the terms of any securities, or with respect to Microbot, file a registration statement with respect to an initial public offering of Microbot securities; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">enter into any agreement that would limit either company, StemCells&#146; subsidiaries or the Surviving Corporation from engaging in any line of business, competing with any person or selling any product or service;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">with respect to StemCells, make any capital expenditures in excess of $50,000 in the aggregate or any expenditures not contemplated in the StemCells budget; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">take any action that would prevent the Merger from qualifying as a reorganization under Section&nbsp;368(a) of the Code; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">agree or commit to do any of the foregoing. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_52"></A>No Solicitation </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Subject to certain exceptions described below, prior to the completion of the Merger or the earlier termination of the Merger Agreement, each
of StemCells and Microbot has agreed that it will not, and it will not authorize or permit its subsidiaries, if applicable, and their respective directors, officers, employees, agents and other representatives to, directly or indirectly: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">solicit, initiate, or knowingly encourage, facilitate, induce, or take any other action that would reasonably be expected to lead to the making, submission, or announcement of any proposal or inquiry that constitutes,
or is reasonably likely to lead to, an Acquisition Proposal (as defined below); </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">enter into, continue, or participate in any discussions or any negotiations regarding any Acquisition Proposal or otherwise take any action to knowingly facilitate or induce any effort or attempt to make or implement an
Acquisition Proposal; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">81 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">approve, endorse, enter into, or recommend an Acquisition Proposal or any letter of intent or contract contemplating an Acquisition Proposal or requiring the abandonment or termination of obligations under the Merger
Agreement; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">agree, resolve or commit to do any of the foregoing. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, each of StemCells and
Microbot has agreed to and will cause its subsidiaries, if applicable, and their respective directors, officers, employees, agents and other representatives to cease and terminate all discussions or negotiations with any person previously conducted
with respect to any Acquisition Proposal. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Prior to obtaining the requisite stockholder approval of the StemCells Merger Proposals or the
Microbot Merger Proposal, as applicable, the restrictions set forth above do not prohibit either StemCells or Microbot, as applicable, from furnishing information regarding itself or participating in discussions with a person making an unsolicited
written Acquisition Proposal if (i)&nbsp;it received an Acquisition Proposal that the board of directors of the company determines in good faith, after consultation with legal advisors, and in the case of StemCells, financial advisors, constitutes
or would reasonably be expected to constitute a Superior Proposal (as defined below), (ii)&nbsp;such Acquisition Proposal did not result from a violation of the restrictions set forth above, (iii)&nbsp;its board of directors determines in good
faith, after consultation with outside legal counsel, that failure to take action would be inconsistent with its fiduciary duties under applicable law, (iv)&nbsp;with respect to furnishing information regarding itself, it enters into a
confidentiality agreement with such person, and (v)&nbsp;with respect to furnishing information regarding itself, all information provided to such person has been previously or concurrently provided to the other company. In addition, StemCells or
Microbot, as applicable, must provide the other company with written notice within 48 hours of receipt of any proposal, offer, or inquiry or discussions or negotiations sought to be initiated or continued with such person regarding an Acquisition
Proposal, which notice indicates the terms of such proposal and includes a copy of any written materials received relating thereto and thereafter promptly keeps the other company informed of all material developments regarding such proposal, offer
or inquiry. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">An &#147;Acquisition Proposal&#148; means, with respect to StemCells or Microbot, as the case may be, any offer, proposal or
indication of interest (other than the transactions contemplated by the Merger Agreement) related to any transaction or series of transactions involving: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any merger, consolidation, issuance or acquisition of securities or other similar transaction (i)&nbsp;that would result in a third party directly or indirectly owning 15% or more of any class of voting securities of
the subject company or (ii)&nbsp;in which the subject company issues securities representing 15% or more of any class of voting securities of the subject company; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any sale, lease, exchange, transfer, acquisition or disposition of any assets that constitute or account for (i)&nbsp;15% or more of the consolidated net revenues, consolidated net income or consolidated book value of
the subject company or (ii)&nbsp;15% of more of the fair market value of the assets of the subject company; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any liquidation or dissolution of the subject company. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A &#147;Superior Proposal&#148; means,
with respect to StemCells or Microbot, as the case may be, a bona fide written Acquisition Proposal (provided that, for purposes of this definition, references to 15% in the definition of &#147;Acquisition Proposal&#148; shall be deemed to be
references to 50%) which the board of directors of the subject company determines in good faith (after consultation with its financial advisor) (i)&nbsp;to be reasonably likely to be consummated if accepted and (ii)&nbsp;to be more favorable to the
subject company&#146;s stockholders from a financial point of view than the Merger, in each case, taking into account at the time of determination all relevant circumstances, including the various legal, financial and regulatory aspects of the
proposal, all the terms and conditions of such proposal and the Merger Agreement, any changes to the terms of the Merger Agreement offered by the other company in response to such Acquisition Proposal and the ability of the person making such
Acquisition Proposal to consummate the transactions contemplated by such Acquisition Proposal (based upon, among other things, expectation of obtaining required approvals). </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">82 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_53"></A>Board Recommendations </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the Merger Agreement, subject to the exceptions set forth below, (i)&nbsp;the Microbot board of directors has agreed to recommend that
Microbot shareholders vote in favor of the Microbot Merger Proposal (the &#147;Microbot Board Recommendation&#148;) and (ii)&nbsp;the StemCells board of directors has agreed to recommend that StemCells stockholders vote in favor of the StemCells
Merger Proposals (the &#147;StemCells Board Recommendation&#148;). Subject to the exceptions described below, the Merger Agreement provides that: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">neither the Microbot board of directors nor the StemCells board of directors will (i)&nbsp;fail to make the Microbot Board Recommendation or the StemCells Board Recommendation, as applicable, (ii)&nbsp;withdraw, amend
or modify in a manner adverse to the other company, the Microbot Board Recommendation or the StemCells Board Recommendation, as applicable, or (iii)&nbsp;recommend, adopt, endorse or approve an Acquisition Proposal; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">neither the Microbot board of directors nor the StemCells board of directors will resolve, agree or publicly propose to take any of the actions described above. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each of the foregoing actions is referred to as a &#147;Recommendation Change&#148;. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The restrictions set forth above will not prohibit the StemCells board of directors or the Microbot board of directors, as the case may be,
from effecting a Recommendation Change if Microbot or StemCells, as applicable, has (i)&nbsp;received an Acquisition Proposal, and the board of directors of such company has determined in good faith after consulting with legal counsel (x)&nbsp;that
a failure to take action would be inconsistent with its duties under applicable law and (y)&nbsp;the Acquisition Proposal constitutes a Superior Proposal (with respect to StemCells, after consulting with its financial advisor) or (ii)&nbsp;in
response to an Intervening Event (as defined below), if the board of directors of such company has determined in good faith, after consulting with legal counsel, that a failure to take action would be inconsistent with its duties under applicable
law, and all of the following conditions are met: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot or StemCells, as applicable, has provided written notice to the other company that it intends to make a Recommendation Change, which written notice shall contain a description of the events, facts and
circumstances giving rise to the proposed action or material terms and conditions of the Superior Proposal, including a copy of the definitive acquisition agreement, as applicable; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the other company does not make, within three business days after receipt of the notice described above, a proposal which in the good faith judgment of the board of directors of the subject company, after consulting
with its legal counsel and, with respect to StemCells, its financial advisor, cause such events, facts and circumstances to no longer be a basis for a Recommendation Change or such Acquisition Proposal to no longer constitute a Superior Proposal;
and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot or StemCells, as applicable, provides a new notice and the other company receives a new three day business period, in each case, as described above, with respect to any material change in the events, facts and
circumstances or material term of the Superior Proposal or any material change in the principal rationale stated by the subject company board of directors for the Recommendation Change. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">An &#147;Intervening Event&#148; means, with respect to StemCells or Microbot, as the case may be, a material event or circumstance that
occurs after the date of the Merger Agreement and was not previously known or reasonably foreseeable by the board of directors of StemCells or Microbot, as the case may be, provided that the receipt, existence or terms of an Acquisition Proposal or
any matter relating thereto or consequence thereof does not constitute an Intervening Event. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_54"></A>Special Meetings of
Stockholders </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each of StemCells and Microbot has agreed to take all action necessary to hold a meeting of its stockholders for the
purpose of obtaining the required stockholder approval of the StemCells Merger Proposals and the Microbot Merger Proposal, respectively, as promptly as practicable, including mailing this proxy statement to
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">83 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
StemCells&#146; stockholders as promptly as reasonably practicable following clearance of the proxy statement by the SEC. Each party&#146;s respective obligation to hold its stockholder meeting
will not be affected by any Recommendation Change by its board of directors (unless such Recommendation Change leads to a termination of the Merger Agreement). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To the extent reasonably necessary to comply with applicable listing criteria of the NASDAQ Capital Market or otherwise to permit the issuance
of the Merger Consideration, StemCells further agrees to submit to its stockholders at the special meeting a proposal to approve a reverse stock split of StemCells common stock. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_55"></A>Indemnification of Directors and Officers </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that StemCells will continue to indemnify and hold harmless each present and former director or officer of
StemCells or any of its subsidiaries, with respect to acts or omissions occurring or alleged to have occurred before or at the completion of the Merger, to the fullest extent permitted under applicable law and in StemCells&#146; certificate of
incorporation and bylaws. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that StemCells will not enter into any contract relating to the indemnification
of any present and former director or officer of StemCells or any of its subsidiaries, or any other person, without the prior written consent of Microbot, which may be withheld in its reasonable discretion. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that, prior to the completion of the Merger, StemCells will purchase and maintain for a period of six years
following the completion of the Merger, a directors&#146; and officers&#146; liability &#147;tail&#148; insurance policy covering the present and former directors and officers of StemCells for events occurring at or prior to the completion of the
Merger. Such policy must contain terms no less favorable than the policies maintained by StemCells or Microbot, as applicable, as of the date of the Merger Agreement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_56"></A>Governance Matters Upon Completion of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells has agreed to take all actions necessary to ensure that, immediately following the completion of the Merger, the StemCells board of
directors shall resign and the replacement board of directors shall consist of members designated by Microbot, to hold office from and after the completion of the Merger until the earliest of the appointment of his or her respective successor, his
or her resignation, or his or her proper removal. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells has agreed to take all actions necessary to ensure that, immediately
following the completion of the Merger, StemCells&#146; remaining employees and officers resign and the replacement executive officers shall consist of members designated by Microbot, to hold office from and after the completion of the Merger until
the earliest of the appointment of his or her respective successor, his or her resignation, or his or her proper removal. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_57"></A>Conditions to the Completion of the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The obligations of each of Microbot and StemCells to complete the Merger and the other transactions contemplated by the Merger Agreement are
subject to the satisfaction or waiver in writing of the following conditions: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells&#146; stockholders shall have approved the Name Change Proposal, the Share Authorization Proposal, the Reverse Stock Split Proposal and the Share Issuance Proposal at the StemCells Special meeting (or at any
adjournment or postponement thereof); </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot&#146;s shareholders shall have approved the execution and delivery by Microbot of the Merger Agreement, the performance by Microbot of its covenants and obligations thereunder and the consummation by Microbot
of the transactions contemplated thereby; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">No law or order shall have been enacted, entered, promulgated or enforced by any governmental authority, which remains in effect and which prohibits the consummation of the Merger or otherwise makes the Merger illegal;
</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">84 </P>


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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells&#146; common stock shall be listed on NASDAQ and shall have been approved for listing (subject only to notice of issuance) under NASDAQ under a symbol chosen by Microbot prior to the completion of the Merger;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells shall be registered under Section&nbsp;12(b) of the Exchange Act of 1934, as amended; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot shall have obtained the approval of transactions contemplated by the Merger Agreement, including the Merger, of the Office of Chief Scientist at the Israeli Ministry of Economy. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The obligations of Microbot to complete the Merger and the other transactions contemplated by the Merger Agreement are subject to the
satisfaction or waiver in writing of the following conditions: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The representations and warranties of StemCells and Merger Sub (other than those representations and warranties specifically set forth in clause&nbsp;&#147;(ii)&#148; below) must be true and correct at and as of the
date of the Merger Agreement and as of the completion of the Merger as if made at and as of the completion of the Merger (or, in the case of those representations and warranties that are made as of a particular date or period, as of such date or
period), except where the failure of such representations and warranties to be true and correct (disregarding all qualifications or limitations as to &#147;materially&#148;, &#147;Parent Material Adverse Effect&#148; and words of similar import set
forth therein) has not had, individually or in the aggregate, a Parent Material Adverse Effect; and (ii)&nbsp;the representations and warranties of StemCells and Merger Sub relating to capitalization must be true and correct in all respects, except
for de minimis inaccuracies, as of the date of the Merger Agreement and as of the completion of the Merger as if made at and as of the completion of the Merger; and (iii)&nbsp;the representations and warranties of StemCells and Merger Sub relating
to its organization, authority, no Parent Material Adverse Effect, finders and brokers and takeover statutes shall be true and correct in all respects as of the date of the Merger Agreement and as of the completion of the Merger as if made at and as
of the completion of the Merger. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells and Merger Sub shall have performed and complied in all material respects with all agreements and obligations required by the Merger Agreement to be performed or complied with by them on or prior to the
Closing Date, other than agreements made with respect to StemCells&#146; warrants; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">There shall not have occurred and be continuing any Parent Material Adverse Effect between the date of the Merger Agreement and the Closing Date. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The Net Cash of StemCells at the closing of the Merger shall not be less than zero. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">StemCells shall have furnished to Microbot a certificate executed by its principal executive officer to evidence compliance with the foregoing conditions. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The obligations of StemCells and Merger Sub to complete the Merger and the other transactions contemplated by the Merger Agreement are subject
to the satisfaction or waiver in writing of the following conditions: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">The representations and warranties of Microbot (other than those representations and warranties specifically set
forth in clause&nbsp;&#147;(ii)&#148; below) must be true and correct at and as of the date of the Merger Agreement and as of the completion of the Merger as if made at and as of the completion of the Merger (or, in the case of those representations
and warranties that are made as of a particular date or period, as of such date or period), except where the failure of such representations and warranties to be true and correct (disregarding all qualifications or limitations as to
&#147;materially&#148;, &#147;Company Material Adverse Effect&#148; and words of similar import set forth therein) has not had, individually or in the aggregate, a Company Material Adverse Effect; and (ii)&nbsp;the representations and warranties of
Microbot relating to capitalization must be true and correct in all respects, except for de minimis inaccuracies, as of the date of the Merger Agreement and as of the completion of the Merger as if made at and as of the completion of the Merger; and
(iii)&nbsp;the representations and warranties of Microbot relating to its organization, authority, no Company Material Adverse Effect, finders and brokers and takeover statutes shall be true
</P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">85 </P>


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<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">
and correct in all respects as of the date of the Merger Agreement and as of the completion of the Merger as if made at and as of the completion of the Merger. </P></TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot shall have performed and complied in all material respects with all agreements and obligations required by the Merger Agreement to be performed or complied with by them on or prior to the Closing Date;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">There shall not have occurred and be continuing any Company Material Adverse Effect between the date of the Merger Agreement and the Closing Date. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The Microbot Private Placement shall have been consummated; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Microbot shall have furnished to StemCells and Merger Sub a certificate executed by its principal executive officer to evidence compliance with the foregoing conditions. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_58"></A>Termination of the Merger Agreement </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that, at any time prior to the completion of the Merger, either before or after the requisite stockholder
approvals of the StemCells Merger Proposals and the Microbot Merger Proposal have been obtained (except as set forth below), the Merger Agreement may be terminated: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by mutual written consent of StemCells and Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by either StemCells or Microbot if the Merger has not been completed by November&nbsp;15, 2016. A party may not terminate the Merger Agreement for this reason if the failure to complete the Merger is caused by that
party&#146;s action or failure to act and such action or failure to act constitutes a material breach of the Merger Agreement; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by either StemCells or Microbot if any applicable law irrevocably prohibits or makes the Merger illegal or if a final and nonappealable order has been entered by a governmental authority permanently prohibiting the
completion of the Merger, provided that the party seeking to terminate the Merger Agreement has performed its obligations under the Merger Agreement to resist, resolve or remove such applicable law or order; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by either StemCells or Microbot if the Microbot special meeting (including any adjournments or postponements thereof) has been held and the Microbot shareholders have voted not to approve the Microbot Merger Proposal,
provided that a party may not terminate the Merger Agreement for this reason if the failure to obtain approval of the Microbot Merger Proposal is caused by that party&#146;s breach of a material obligation to be performed prior to the completion of
the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by either StemCells or Microbot if the StemCells special meeting (including any adjournments or postponements thereof) has been held and the StemCells stockholders have voted not to approve the StemCells Merger
Proposals, not to effect the reverse stock split, if applicable, or not to issue share of StemCells common stock pursuant to the Merger Agreement, provided that a party may not terminate the Merger Agreement for this reason if the failure to so
obtain approval is caused by that party&#146;s breach of a material obligation to be performed prior to the completion of the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">subject to certain cure provisions, by either StemCells or Microbot if the other company&#146;s representations and warranties are inaccurate such that the conditions to the completion of the Merger relating to the
accuracy of the other company&#146;s representations and warranties would not be satisfied (see the section entitled &#147;&#151; Conditions to the Completion of the Merger&#148; beginning on page 84), provided that a party may not terminate the
Merger Agreement for this reason if it has materially breached the Merger Agreement and remains in breach as of the date of such proposed termination; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">subject to certain cure provisions, by either StemCells or Microbot if the other company has not performed in all
material respects such other company&#146;s obligations and agreements set forth in the Merger Agreement such that the conditions to the completion of the Merger relating to the performance
</P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">86 </P>


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<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">
of the other Company&#146;s obligations and agreements would not be satisfied (see the section entitled &#147;&#151;&nbsp;Conditions to the Completion of the Merger&#148; beginning on page 84),
provided that a party may not terminate the Merger Agreement for this reason if it has materially breached the Merger Agreement and remains in breach as of the date of such proposed termination; </P></TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
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<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by Microbot, if at any time prior to the approval of the StemCells Merger Proposals, the board of directors of StemCells has (i)&nbsp;effected any Recommendation Change, (ii)&nbsp;failed to publicly reaffirm the
StemCells Board Recommendation within two business days of Microbot&#146;s request or (iii)&nbsp;failed to recommend against or taken a neutral position with respect to a tender or exchange offer related to an Acquisition Proposal;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by Microbot if StemCells, after receiving an Acquisition Proposal, materially violated or breached its no solicitation obligations (see the section entitled &#147;&#151; No Solicitation&#148; beginning on page 81);
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by Microbot prior to August&nbsp;19, 2016 if holders of at least 80 percent of certain outstanding warrants of StemCells have not agreed to amend or surrender such warrants, provided that Microbot may not terminate the
Merger Agreement for this reason if it has materially breached the Merger Agreement and remains in breach as of the date of such proposed termination; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by StemCells, if at any time prior to the approval of the Microbot Merger Proposals, the board of directors of Microbot has (i)&nbsp;effected any Recommendation Change, (ii)&nbsp;failed to publicly reaffirm the Microbot
Board Recommendation within two business days of StemCells&#146; request or (iii)&nbsp;failed to recommend against or taken a neutral position with respect to a tender or exchange offer related to an Acquisition Proposal; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">by StemCells if Microbot, after receiving an Acquisition Proposal, materially violated or breached its no solicitation obligations (see the section entitled &#147;&#151; No Solicitation&#148; beginning on page 81); or
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">automatically without action of either of parties if the Investor has not funded the initial $2.0 million pursuant to a debt commitment within one day of the date of the Merger Agreement. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_59"></A>Termination Fees and Expenses </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement provides that all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by
the Merger Agreement will be paid by the party incurring such expenses whether or not the Merger is consummated. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_60"></A>Amendments
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement may be amended only by the written agreement of StemCells, Merger Sub and Microbot at any time prior to the
completion of the Merger. However, following the approval of the StemCells Merger Proposals or the Microbot Merger Proposal, any amendment that pursuant to applicable law requires further stockholder approval may not be made without such stockholder
approval. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_61"></A>Governing Law </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement is governed by the laws of the State of Delaware and, with respect to the Merger, the laws of the State of Israel. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">87 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_62"></A>AGREEMENTS RELATED TO THE MERGER </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_63"></A>Microbot Private Placement </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the Merger Agreement, Microbot is obligated to raise no less than $4.0 million in one or more private placements prior to the
closing of the Merger (the &#147;Microbot Private Placement&#148;), which amount would provide the combined company with at least 18 months of cash to fund operations post-closing, assuming a minimum StemCells net cash amount of not less than $0 at
closing. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;15, 2016, Microbot and Alpha Capital Anstalt (the &#147;Investor&#148;), entered into an agreement pursuant to
which, among other things, the Investor agreed to fund the Microbot Private Placement, which obligation shall be reduced dollar-for-dollar by any third party investors investing in the Microbot Private Placement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of this proxy statement, Microbot has not sold any securities in the Microbot Private Placement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_64"></A>Voting Agreements </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with the execution of the Merger Agreement, certain stockholders of StemCells also entered into a voting agreement with Microbot
under which each such stockholder has agreed to vote in favor of the proposals that relate to the Merger and against any alternative acquisition proposal, agreement or transaction. The voting agreement grants Microbot irrevocable proxies to vote any
shares of StemCells common stock over which such stockholder has voting power in favor of each of the proposals described elsewhere in this proxy statement and against any alternative acquisition proposal, agreement or transaction. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Certain shareholders of Microbot owning approximately 68% of the voting power of Microbot on an as-converted basis also entered into voting
agreements with StemCells under which such shareholders agreed to vote in favor of the Merger and against any alternative acquisition proposal, agreement or transaction. The shareholders of Microbot will vote on whether to approve the Merger on
September&nbsp;14, 2016. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each director, executive officer and stockholder, as applicable, upon executing his, her, or its voting
agreement has made representations and warranties to StemCells and Microbot, as applicable, regarding ownership and unencumbered title to the shares thereto, such stockholder&#146;s power and authority to execute the voting agreement, and due
execution and enforceability of the voting agreement. Unless otherwise waived, all of these voting agreements prohibit the sale, assignment, transfer or other disposition by the stockholder of his, her, or its respective shares of StemCells or
Microbot stock, as applicable, or the entrance into an agreement or commitment to do any of the foregoing, except for transfers by will or by operation of law, in which case the voting agreement shall bind the transferee. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The voting agreements will terminate at the earlier of the effective time of the Merger, termination of the Merger Agreement in accordance
with its terms or upon mutual written consent of such stockholder, StemCells and Microbot </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">88 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_65"></A>MANAGEMENT FOLLOWING THE MERGER </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_66"></A>Executive Officers and Directors </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Termination of Current Executive Officers and Directors of StemCells </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Effective as of immediately following the effective time of the Merger, StemCells&#146; remaining employees and officers, including its
remaining executive officers and directors, are required by the Merger Agreement to resign and the officers and directors of Microbot immediately prior to the completion of the Merger shall be the officers of the combined company immediately after
the effective time of the Merger. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Executive Officers and Directors of the Combined Company Following the Merger </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The combined company&#146;s board of directors is expected to initially consist of at least six (6)&nbsp;members, consisting of Harel Gadot,
Yoav Waizer, Moshe Shoham, Yoseph Bornstein, Solomon Mayer, and at least one additional member who shall be designated by Microbot prior to closing and who meets the SEC and NASDAQ Stock Market independence requirements. The staggered structure of
the current StemCells board of directors will remain in place for the combined company following the completion of the merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
following table lists the names and ages as of September&nbsp;1, 2016 and positions of the individuals who are expected to serve as executive officers and directors of the combined company upon completion of the merger: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
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<TD></TD>
<TD></TD>
<TD></TD>
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<TD WIDTH="62%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:20.00pt; font-size:8pt; font-family:Times New Roman"><B>Name</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Age</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:35.90pt; font-size:8pt; font-family:Times New Roman"><B>Position(s)</B></P></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><I>Executive Officers</I></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Harel Gadot</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">44</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Chief Executive Officer and Chairman of the Board of Directors</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><I>Non-Employee Directors</I></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yoav Waizer</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Director</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Moshe Shoham</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">63</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Director</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yoseph Bornstein</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Director</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Solomon Mayer</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">63</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Director</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Executive Officers </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Harel Gadot</I>, is a co-founder of Microbot and has served as Chief Executive Officer since Microbot was founded in November 2010. He has
been the Chairman of Microbot&#146;s board of directors since July 2014. He also serves as the Chairman of XACT Robotics Ltd. since August 2013 and MEDX Xelerator LP since July 2016. From December 2007 to April 2010 Mr.&nbsp;Gadot was a Worldwide
Group Marketing Director at Ethicon Inc., a Johnson and Johnson Company, where he was responsible for the global strategic marketing of the company. Mr.&nbsp;Gadot also held management positions, as well as leading regional strategic position for
Europe, Middle-East and Africa, as well as In Israel, while at Johnson and Johnson. Mr.&nbsp;Gadot served as director for ConTIPI Ltd. from August 2010 until November 2013 when ConTIPI Ltd. was acquired by Kimberly-Clark Corporation. Mr.&nbsp;Gadot
holds a B.Sc.in Business from Siena College, Loudonville NY, and an M.B.A. from the University of Manchester, UK. We believe that Mr.&nbsp;Gadot is qualified to serve as Chairman of the board and as Chief Executive Officer of the combined company
due to his extensive experience in strategic marketing in the medical device industry. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot expects to hire a Chief Financial Officer
prior to closing pending the consummation of the merger. Microbot also expects to hire a Chief Technology Officer either shortly before or after the consummation of the merger, and a Chief Operating Officer shortly after the consummation of the
merger. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Non-Employee Directors </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Yoav Waizer, </I>has served as a member of the Board of Directors of Microbot since May 2015. Mr.&nbsp;Waizer is a Partner and Chief
Executive Officer of Medica Venture Partners, a healthcare dedicated venture investing out </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">89 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
of Israel in innovative capital-starved early stage and special situation companies, since November 2005. Prior to his Tenure at Medica, Mr.&nbsp;Waizer served as CFO&nbsp;&amp; COO at Cedar
Fund, a venture capital fund focuses on investing in Israel-related high-tech companies in the telecom, networking, Internet-infrastructure and enterprise software areas and prior to that Mr.&nbsp;Waizer was the CFO of Star Ventures Israel, the
Israeli fund of Star Ventures, a $1 billion venture capital fund investing in all stages of development within the Telecom, Enterprise S/W, Wireless and Life Sciences sectors. Mr.&nbsp;Waizer is currently a director of InterCure Ltd., a company
focused on investing in medical technology companies that is traded on the Tel Aviv Stock exchange. Mr.&nbsp;Waizer holds Master of Business Administration in Information Systems and B.Sc. in Accounting and Statistics, both from the Tel-Aviv
University. We believe that Mr.&nbsp;Waizer is qualified to serve as a member of the combined company&#146;s board due to his extensive investment experience and extensive knowledge of the life sciences industry. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Moshe Shoham, D.Sc., </I>is a co-founder of Microbot and has served as Chairman of Microbot&#146;s Scientific Advisor Board and as a
Director since Microbot was founded in November 2010. Prof. Shoham has been the head of the robotics laboratory at the Technion-Israel Institute of Technology, Department of Mechanical Engineering since October 1990 and has been a professor in the
Department of Mechanical Engineering at the Technion-Israel Institute of Technology since October 1989. Prior to that, Dr.&nbsp;Shoham was the director of the robotic laboratory in the Department of Mechanical Engineering at Columbia University from
September 1986 to September 1989. Dr.&nbsp;Shoham has served as a foreign member of the National Academy of Engineering in the United States since October 2014. In addition, Dr.&nbsp;Shoham founded Mazor Surgical Technologies Ltd., a publically
traded medical device company in the field of surgical robotics, and has been its Chief Technology Officer since January 2003. Dr.&nbsp;Shoham earned B.Sc. in 1978, a M.Sc. in 1982 and a D.Sc. in 1986 from the Technion-Israel Institute of
Technology. We believe that Dr.&nbsp;Shoham is qualified to serve as Chairman of Microbot&#146;s Scientific Advisory Board and as a member of the combined company&#146;s board due to his extensive knowledge of our technologies and the surgical
robotics industry, and his extensive business and academic experience in the field of surgical robotics. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Yoseph Bornstein,</I> is a
co-founder of Microbot and has been a member of the Board of Directors since Microbot was founded in November 2010. Mr.&nbsp;Bornstein founded Shizim Ltd., a life science holding group in October 2000 and has served as its president since then.
Mr.&nbsp;Bornstein is the Chairman of GCP Clinical Studies Ltd., a provider of clinical research services and educational programs in Israel since January 2002. He is the Chairman of Biotis Ltd., a service company for the bio-pharmaceutical
industry, since June 2000. In addition, he is the Chairman of Dolphin Medical Ltd., a service company for the medical device industry, since April 2012 and the Chairman of ASIS Enterprises B.B.G. Ltd., a business August 2007. In October 1992,
Mr.&nbsp;Bornstein founded Pharmateam Ltd., an Israeli company that specialized in representing international pharmaceutical companies which was sold in 2000. Mr.&nbsp;Bornstein is also a founder of a number of other privately held life-science
companies. Mr.&nbsp;Bornstein served as the Biotechnology Committee Chairman of the Unites States-Israel Science&nbsp;&amp; Technology Commission (the &#147;USISTF&#148;) from September 2002 to February 2005 as well as a consultant for USISTF from
September 2002 to February 2005. He is also the founder of ILSI-Israel Life Science Industry Organization and ITTN-Israel Tech Transfer Organization. We believe that Mr.&nbsp;Bornstein is qualified to serve as a member of the combined company&#146;s
board due to his extensive experience in, and knowledge of, the life sciences industry and international business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Solomon Mayer,</I>
has served as a member of the Board of Directors of Microbot since June 2014, as the designated director of Alpha Capital. Mr.&nbsp;Mayer has served as the President and Chief Executive Officer of Mooney Aviation Company since June 1999. He also
serves as President of Chailife Line, an organization devoted to help restore normalcy to family life and better enable them to withstand the crises and challenges of serious pediatric illness. In addition, Mr.&nbsp;Mayer serves as a Director of the
Laniado Hospital, International Medical Search Co. of New York, Blastgard International, Inc. and Ironwood Gold Corp. We believe that Mr.&nbsp;Mayer is qualified to serve as a member of the board of the combined company due to his investment
experience and extensive management experience as an executive and director of a variety of companies. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">90 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_67"></A>Board of Directors of the Combined Company Following the Merger </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot expects that the combined company&#146;s board of directors will initially consist of at least five members, consisting of Harel
Gadot, Yoav Waizer, Moshe Shoham, Yoseph Bornstein and Solomon Mayer. Furthermore, Microbot may designate at least one additional member prior to closing if Microbot determines that it needs to further meet the SEC and NASDAQ Stock Market
independence requirements. The staggered structure of the current StemCells board of directors will remain in place for the combined company following the completion of the merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">It is anticipated that the directors will be appointed to the three staggered director classes of the combined company board of directors
prior to the completion of the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has notified us that there are no family relationships among any of the current Microbot
directors and executive officers, and there are no family relationships among any of the proposed combined company directors and officers. There are no arrangements or understandings with another person under which the directors and executive
officers of the combined company was or is to be selected as a director or executive officer. Additionally, no director or executive officer of the combined company is involved in legal proceedings which require disclosure under Item&nbsp;401 of
Regulation&nbsp;S-K. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells board of directors currently has, and following the completion of the Merger will continue to have,
the following committees: an Audit Committee, a compensation and stock option committee (the &#147;Compensation Committee&#148;) and a corporate governance and nominating committee (the &#147;Corporate Governance Committee&#148;). Following the
completion of the Merger, the combined company does not expect to have a Strategic Transaction Committee. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Audit Committee </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Audit Committee acts pursuant to a written charter. The primary function of the Audit Committee is to assist the board of directors in
fulfilling its oversight responsibilities. The committee does this primarily by reviewing the company&#146;s financial reports and other financial information as well as the company&#146;s systems of internal controls regarding finance, accounting,
legal compliance, and ethics that management and the board of directors have established. The committee also assesses the company&#146;s auditing, accounting and financial processes more generally. The Audit Committee recommends to the board of
directors the appointment of a firm of independent auditors to audit the financial statements of the company and meets with such personnel of the company to review the scope and the results of the annual audit, the amount of audit fees, the
company&#146;s internal accounting controls, the company&#146;s financial statements contained in this proxy statement, and other related matters. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with the closing of the Merger, the combined company&#146;s board of directors is expected to select members of the Audit
Committee, including the Audit Committee financial expert. To qualify as independent to serve on the combined company&#146;s audit committee, the NASDAQ Stock Market listing standards and the applicable rules of the SEC require that a director does
not accept any consulting, advisory, or other compensatory fee from the combined company, other than for services as a director, or be an affiliated person of the combined company. StemCells and Microbot believe that, following the completion of the
Merger, the functioning of the combined company&#146;s Audit Committee will comply with the applicable requirements of the rules and regulations of the NASDAQ Stock Market. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Compensation Committee </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
Compensation Committee acts pursuant to a written charter. The Compensation Committee makes recommendations to the board of directors and management concerning salaries in general, determines executive compensation and approves incentive
compensation for employees and consultants. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">91 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with the closing of the Merger, the combined company&#146;s board of directors is
expected to select members of the Compensation Committee. To qualify as independent to serve on the combined company&#146;s Compensation Committee, the NASDAQ Stock Market listing standards and the applicable rules of the SEC require that a director
does not accept any consulting, advisory, or other compensatory fee from the combined company, other than for services as a director, or be an affiliated person of the combined company and, if so, whether such affiliation would impair the
director&#146;s judgment as a member of the Compensation Committee. StemCells and Microbot believe that, following the completion of the Merger, the functioning of the combined company&#146;s Compensation Committee will comply with the applicable
requirements of the rules and regulations of the NASDAQ Stock Market and of the SEC. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Corporate Governance Committee </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Corporate Governance Committee acts pursuant to a written charter. The Corporate Governance Committee oversees nominations to the board of
directors and considers the experience, ability and character of potential nominees to serve as directors, as well as particular skills or knowledge that may be desirable in light of the company&#146;s position at any time. The Corporate Governance
Committee also develops and recommends to the board of directors a set of corporate governance principles applicable to the company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In
connection with the closing of the Merger, the combined company&#146;s board of directors is expected to select members of the Corporate Governance Committee. StemCells and Microbot believe that, following the completion of the Merger, the
composition of the Corporate Governance Committee will comply with the applicable requirements of the rules and regulations of the NASDAQ Stock Market. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Director Independence </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">NASDAQ&#146;s listing standards and StemCells&#146; Corporate Governance Guidelines require that StemCells&#146; board of directors consist of
a majority of independent directors, as determined under the applicable NASDAQ listing standards. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">92 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_68"></A>RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMBINED COMPANY </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Described below are the transactions and series of similar transactions of Microbot since January&nbsp;1, 2015
in which: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the amounts involved exceeded or will exceed $120,000; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">any of the directors, executive officers, holders of more than 5% of capital stock (sometimes refer to as 5% stockholders below) or any member of their immediate family had or will have a direct or indirect material
interest. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Microbot Transactions </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Consulting Arrangements with Mr.&nbsp;Gadot </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In March 2011, Microbot entered into a consulting agreement with MEDX Ventures Group LLC, of which Mr.&nbsp;Gadot is the Chief Executive
Officer, Company Group Chairman and majority equity owner (the &#147;Gadot Consulting Agreement&#148;), pursuant to which Mr.&nbsp;Gadot serves as Microbot&#146;s Chief Executive Officer.&nbsp;Under the terms of the Gadot Consulting Agreement, MEDX
Ventures Group receives a monthly fee of $17,000, which amount increases to $25,000 per month upon the consummation of a merger or other similar transaction. Under the Gadot Consulting Agreement, MEDX Ventures Group and Mr.&nbsp;Gadot are subject to
customary non-competition, non-solicitation, confidentiality and intellectual property ownership provisions. In addition, MEDX Ventures Group is entitled to receive reimbursement for all direct expenses in connection with the performance of services
under the Gadot Consulting Agreement. Either Microbot or MEDX Ventures Group may terminate the Gadot Consulting Agreement upon 60 days&#146; written notice. MEDX Ventures Group LLC is a stockholder of Microbot.&nbsp;Microbot expects to enter into an
employment agreement or to amend the Gadot Consulting Agreement with Mr.&nbsp;Gadot prior to, and contingent upon, the completion of the Merger.</P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>2015 Bridge Notes </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In 2015,
Microbot issued convertible promissory notes, at an interest rate of 10%, in the aggregate principal amount of $411,500 (the &#147;2015 Notes&#148;) to certain investors and Microbot shareholders. The 2015 Notes matured on July&nbsp;8, 2016. The
principal and accrued but unpaid interest on the 2015 Notes converted into 452,650 shares of Series A Preferred Stock and warrants to purchase 409,750 shares of Series A Preferred Stock. The table below sets forth the 2015 Notes with aggregate
principal in excess of $120,000 that were purchased by Microbot&#146;s directors, executive officers and holders of more than 5% of its capital stock. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:115.70pt; font-size:8pt; font-family:Times New Roman"><B>Name of 2015 Bridge Note Holder</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Outstanding<BR>Principal<BR>Purchased&nbsp;in&nbsp;2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Saber Holding GmbH</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">140,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leon Lewkowicz</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">140,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>2016 Bridge Notes </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In 2016, Microbot issued convertible promissory notes, at an annual interest rate of 10%, in the aggregate principal amount of $750,000 (the
&#147;2016 Notes&#148;) to certain investors and Microbot shareholders. The principal and accrued but unpaid interest on the 2016 Notes will convert, at a 20% discount, into common stock upon the consummation of the Merger. The table below sets
forth the 2016 Notes with aggregate principal in excess of $120,000 that were purchased by Microbot&#146;s directors, executive officers and holders of more than 5% of its capital stock. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">93 </P>


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<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:115.70pt; font-size:8pt; font-family:Times New Roman"><B>Name of 2016 Bridge Note Holder</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Outstanding<BR>Principal<BR>Purchased&nbsp;in&nbsp;2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Alpha Capital Anstalt</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">400,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Saber Holding GmbH</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">175,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leon Lewkowicz</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">175,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>License Agreement with Technion </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot entered into a license agreement with Technion Research and Development Foundation Ltd., or TRDF, in 2012 pursuant to which Microbot
obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCAT technology platforms. TRDF is a founding member of Microbot and current beneficially owns approximately 14.5%
of Microbot&#146;s ordinary shares on an as converted basis. See &#147;Microbot Business &#150; Intellectual Property&#148; for a description of this agreement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Microbot Private Placement in Connection with Merger </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the Merger Agreement, Microbot is obligated to raise no less than $4.0 million in one or more private placements prior to the
closing of the Merger, which amount would provide the combined company with at least 18 months of cash to fund operations post-closing, assuming a minimum net cash amount of not less than $0 at closing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;15, 2016, Microbot and Alpha Capital Anstalt, entered into an agreement pursuant to which, among other things, Alpha Capital
Anstalt agreed to fund the Microbot Private Placement, which obligation shall be reduced dollar-for-dollar by any third party investors investing in the Microbot Private Placement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of this proxy statement, Microbot has not sold any securities in the Microbot Private Placement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">94 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_69"></A>STEMCELLS BUSINESS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_70"></A>Nature of Business </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells, Inc., a Delaware corporation, is a biopharmaceutical company that operates in one segment, the research, development, and
commercialization of stem cell therapeutics and related technologies. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_71"></A>Wind-down of operations </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In May 2016, StemCells decided to terminate its Phase II Pathway Study in spinal cord injury following an in-depth review of data from the
study and after obtaining the concurrence of the study&#146;s Interim Analysis Data Monitoring Committee. While the results showed overall improvement in patients treated with StemCells&#146; proprietary cells, the magnitude of the effect and the
perceived trend of the effect over time did not justify continuing the study or exploring the variability in the initial patient observations, given the financial resources available to StemCells. Following this, in May 2016, StemCells&#146; Board
of Directors approved a plan to wind down StemCells&#146; current operations, having considered the decision to terminate the Pathway Study, StemCells&#146; available strategic alternatives and the current cash position. StemCells is evaluating
opportunities to monetize its intellectual property, including data collected in its studies and trade secrets, as well as the transfer of StemCells&#146; proprietary HuCNS-SC cells and other assets through a potential sale. As part of the wind down
of StemCells&#146; operations, StemCells conducted a reduction of its work force impacting all of its remaining full-time employees, consisting of approximately 50 employees. It also effected the sales of its GMP manufacturing facilities and of its
remaining research and laboratory equipment. On August&nbsp;14, 2016, StemCells&#146; Chief Executive Officer and Chief Financial Officer notified the board of directors of their intention to resign. Their resignations were effective as of
August&nbsp;15, 2016. In addition, on August&nbsp;15, 2016, in connection with the announcement of the signing of the Merger Agreement, three of StemCells&#146; board members resigned from their positions as members of the Board of Directors. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells had recorded approximately $3,803,000 in wind-down expenses for the quarter ended June&nbsp;30, 2016. StemCells has incurred
significant operating losses since inception and has an accumulated deficit of $463,732,581 through June&nbsp;30, 2016. As of June&nbsp;30, 2016, StemCells had cash and cash equivalents of approximately $2,449,000. StemCells expects to incur
additional operating losses over the foreseeable future. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">95 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_72"></A>STEMCELLS MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following discussion should be read in conjunction with StemCells&#146; unaudited financial
statements and related notes included in Item&nbsp;1, &#147;Financial Statements,&#148; of the Quarterly Report on Form 10-Q for the fiscal quarter ended June&nbsp;30, 2016, as well as our Annual Report on Form 10-K for the fiscal year ended
December&nbsp;31, 2015. This discussion may contain forward looking statements that involve substantial risks and uncertainties. Such statements include, without limitation, all statements as to expectation or belief and statements as to our future
results of operations. Forward looking statements can be identified by the use of words such as &#147;believe,&#148; &#147;expect,&#148; &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;intend,&#148; &#147;anticipate&#148; or the
negative thereof or comparable terminology, and include discussions of matters such as anticipated financial performance, liquidity and capital resources, business prospects, technological developments, new and existing products, regulatory
approvals and research and development activities. StemCells&#146; actual results may vary materially from those contained in such forward-looking statements because of risks to which StemCells is subject. All forward-looking statements attributable
to StemCells or to persons acting on StemCells&#146; behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth in the section entitled &#147;Risk Factors&#148; on page 20 and &#147;Risk Factors&#148; in
Part I, Item&nbsp;1A of our Form 10-K for the year ended December&nbsp;31, 2015 and in Part I, Item IA of our Form 10-Q for the fiscal quarter ended June&nbsp;30, 2016. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Overview </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>The Company </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells was engaged in the research, development, and commercialization of cell-based therapeutics. StemCells&#146; research and development
(R&amp;D) programs were primarily focused on identifying and developing potential cell-based therapeutics which could either restore or support organ function. In particular, since StemCells relocated its operations to California in 1999,
StemCells&#146; R&amp;D efforts had been directed at refining StemCells&#146; methods for identifying, isolating, culturing, and purifying the human neural stem cell and developing this cell as potential cell-based therapeutics for the central
nervous system (CNS). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In October 2014, StemCells had initiated a Phase II proof of concept clinical trial to further investigate its
HuCNS-SC cells as a treatment for spinal cord injury. The Phase II Pathway&#153; Study, was the first clinical trial designed to evaluate both the safety and efficacy of transplanting human neural stem cells into patients with cervical spinal cord
injury. Traumatic injuries to the cervical (neck) region of the spinal cord, also known as tetraplegia or quadriplegia, impair sensation and motor function of the hands, arms, legs, and trunk. The trial was conducted as a randomized, controlled,
single-blind study and efficacy was to be primarily measured by assessing motor function according to the International Standards for Neurological Classification of Spinal Cord Injury (ISNCSCI). The primary efficacy outcome would focus on change in
upper extremity strength as measured in the hands, arms, and shoulders. The trial was to follow the participants for one year and enroll up to fifty-two subjects. The trial was planned for three cohorts; the first cohort was an open-label dose
escalation arm involving six patients to determine the cell dose to be used for the second and third cohort of the study; the second cohort would have enrolled forty patients to form the single blinded controlled arm of the Phase II study with the
primary efficacy outcome to be tested was the change in motor strength of the various muscle groups in the upper extremities innervated by the cervical spinal cord; the third cohort was planned as an optional open label cohort targeted to enroll six
patients to assess safety and preliminary efficacy in patients with less severe injuries (AIS C). StemCells transplanted its first subject in this Phase II trial in December 2014 and completed transplanting the six patients comprising the first
cohort of this trial in April 2015. The six-month results for the first cohort showed that muscle strength had improved in five of the six patients with four of these five patients also demonstrating improved performance on functional tasks
assessing dexterity and fine motor skills. In addition, four of the six patients showed improvement in the level of spinal cord injury as defined and measured by the ISNCSCI assessment of at least one level. StemCells commenced enrollment of the
second cohort in the Pathway Study in June 2015 and had thirteen sites in the United States and Canada that were actively recruiting </P>
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patients. StemCells expected to complete enrollment of Cohort II by the end of the third quarter of 2016, and StemCells expected to have final results of this trial before year-end 2017. However,
before this could happen, StemCells observed in the first cohort of the Pathway Study a declining trend in the magnitude of the effect in both strength and function at the twelve-month time point. While the results at twelve months were still
improved from baseline, this late variability led StemCells to conduct an earlier-than-planned interim analysis of the Cohort&nbsp;II data. The results of this interim analysis were reviewed by us as well as by an IA-DMC. In performing the interim
analysis of Cohort II, an IA-DMC consisting of three leading clinicians in the spinal cord injury field, reviewed the accrued data to date against specific clinically relevant criteria linked to achieving the statistically significant result for
improving motor strength and function in treated patients. Following this analysis, the <FONT STYLE="white-space:nowrap">IA-DMC</FONT> concluded that the data failed the futility criteria established for the interim analysis and, based on this,
recommended cessation of the study. StemCells took the IA-DMC&#146;s recommendation under advisement in making our decision to terminate the Pathway Study. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Previous clinical trials conducted by StemCells included: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
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<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a Phase I/II clinical trial of StemCells&#146; HuCNS-SC cells for the treatment of thoracic spinal cord injury which represents the first time that neural stem cells have been transplanted as a potential therapeutic
agent for spinal cord injury. The Phase I/II trial evaluated both safety and preliminary efficacy of StemCells&#146; proprietary HuCNS-SC human neural stem cells as a treatment for chronic thoracic spinal cord injury. The trial was completed in May
2014. StemCells reported the results from twelve-month data that revealed sustained improvements in sensory function that emerged consistently around three months after transplantation and persisted until the end of the study. The patterns of
sensory gains were confirmed to involve multiple sensory pathways and were observed more frequently in the patients with less severe injury; three of the seven AIS A patients and four of the five AIS B patients showed signs of positive sensory gains
confirming the previously reported interim results. In addition, two patients progressed during the study from the most severe classification, AIS A, to the lesser degree of injury grade, AIS B. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a Phase I/II clinical trial in dry AMD at five trial sites in the United States to evaluate the safety and preliminary efficacy of sub-retinal HuCNS-SC cell transplantation in geographic atrophy (GA), the most advanced
form of dry AMD. The trial was completed in June 2014. Multiple safety and efficacy assessments were incorporated into the study, including various assessments of visual function and measurements of disease status by direct retinal examination. The
tests in the study included best-corrected visual acuity (BCVA), contrast sensitivity (CS), microperimetry for analysis of visual function, optical coherence tomography (OCT), and fundus autofluorescence (FAF) to measure the extent of the underlying
geographic atrophy. Initial assessment of data from the Phase I/II trial indicate that the BCVA and CS measurements for the majority of the patients in the study either improved or remained stable in the treated eye. OCT analysis showed increases in
central subfield thickness and in macular volume in the treated eye relative to the untreated eye. For those patients enrolled in the study with lesions sizes consistent with the eligibility criteria for enrollment in StemCells&#146; Phase II
efficacy study, the study showed GA growth rates in the study eye that were lower than those seen in the control eye. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">a Phase II randomized, controlled proof-of-concept study was designed to evaluate both the safety and efficacy of
StemCells&#146; proprietary HuCNS-SC cells for the treatment of GA. The study was designed to enroll sixty-three patients between 50-90 years of age with bi-lateral GA-AMD (geographic atrophy associated with age related macular degeneration in both
eyes). Designed as a &#147;fellow eye&#148; controlled study, all subjects were to receive subretinal transplantation of HuCNS-SC cells via a single injection into the eye with the inferior best-corrected visual acuity; the untreated eye would serve
as a control. The objective of the trial was to demonstrate a reduction in the rate of GA disease progression in the treated eye versus the control eye. In December 2015, however, StemCells initiated a strategic realignment plan to fully focus our
resources on StemCells&#146; proprietary HuCNS-SC cells for the treatment of chronic spinal cord injury. A key elements of the plan included the immediate suspension </P></TD></TR></TABLE>
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of further patient enrollment into our Phase II Radiant Study in GA-AMD as well as the modification of certain service agreements related to the AMD program. </P></TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a Phase I clinical trial in infantile and late infantile neuronal ceroid lipofuscinosis (NCL), which showed that StemCells&#146; HuCNS-SC cells were well tolerated and non-tumorigenic, and that there was evidence of
engraftment and long-term survival of the transplanted HuCNS-SC cells. In October 2013, the results of a four-year, long-term follow up study of the patients from the initial Phase I study showed there were no long-term safety or tolerability issues
associated with the cells up to five years post-transplantation. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a four-patient Phase I clinical trial in PMD, which is a myelination disorder in the brain. The data showed preliminary evidence of durable and progressive donor-derived three of the four patients, with the fourth
patient clinically stable. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In April 2013, StemCells entered into an agreement with the California Institute for
Regenerative Medicine (CIRM) under which CIRM would have provided up to approximately $19.3 million as a forgivable loan, in accordance with mutually agreed upon terms and conditions and CIRM regulations. The CIRM loan helped fund preclinical
development of StemCells&#146; HuCNS-SC cells for Alzheimer&#146;s disease. Between July 2013 and August 2014, StemCells received in aggregate, approximately $9.6 million as disbursements of the loan provided under the CIRM Loan Agreement. However,
in December 2014, as findings under this preclinical study in Alzheimer&#146;s disease did not meet certain pre-determined criteria for continued funding of this program by CIRM, the parties terminated the loan agreement and StemCells wound down
this preclinical study which had been funded in part by the CIRM loan agreement. In February 2015, StemCells repaid CIRM approximately $679,000 of the aggregate loan proceeds received. Under the terms of the CIRM loan agreement, principal amount of
approximately $8,917,000 and accrued interest of approximately $243,000 were forgiven. However, authoritative accounting guidance requires certain conditions (which includes a legal release from the creditor) to be met before a liability can be
extinguished and derecognized. In May 2016, StemCells issued a letter to CIRM that constitutes notice that we elected to convert the loan into a Grant pursuant to the CIRM&#146;s Loan Administration Policy, as amended effective April&nbsp;25, 2016,
and as if the forgiven loan balance had been total allowable project costs funded by CIRM. In the second quarter of 2016, StemCells re-classified the principal amount of approximately $8,917,000 as &#147;Other income&#148; and the accrued interest
of approximately $243,000 as &#147;Gain on extinguishment of a loan&#148; in our Condensed Consolidated Statement of Operations. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Reverse Stock
Split </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells effected a one-for-twelve reverse stock split on May&nbsp;6, 2016. As a result of the reverse stock split, each
twelve shares of StemCells common stock automatically combined into and became one share of StemCells common stock. Any fractional shares which would otherwise be due as a result of the reverse stock split were rounded up to the nearest whole share.
Concurrent with the reverse stock split, StemCells reduced the authorized number of common shares from 225&nbsp;million to 200 million. The reverse stock split automatically and proportionately adjusted, based on the one-for-twelve split ratio, all
issued and outstanding shares of our common stock, as well as common stock underlying stock options, warrants and other derivative securities outstanding at the time of the effectiveness of the reverse stock split. The exercise price on outstanding
equity based-grants was proportionately increased, while the number of shares available under StemCells equity-based plans was also proportionately reduced. Share and per share data (except par value) for the periods presented reflect the effects of
this reverse stock split. References to numbers of shares of common stock and per share data in the accompanying financial statements and notes thereto have been adjusted to reflect the reverse stock split on a retroactive basis. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Wind-down of operations </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In May
2016, StemCells decided to terminate its Phase II Pathway Study in spinal cord injury following an in-depth review of data from the study and after obtaining the concurrence of the study&#146;s Interim Analysis Data
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">98 </P>


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Monitoring Committee. While the results showed overall improvement in patients treated with StemCells proprietary cells, the magnitude of the effect and the perceived trend of the effect over
time did not justify continuing the study or exploring the variability in the initial patient observations, given the financial resources available to StemCells. Following this, in May 2016, StemCells&#146; Board of Directors approved a plan to wind
down its current operations, having considered the decision to terminate the Pathway Study, available strategic alternatives and the current cash position. StemCells is evaluating opportunities to monetize its intellectual property, including data
collected in its studies and trade secrets, as well as the transfer of StemCells proprietary HuCNS-SC cells and other assets through a potential sale. StemCells will not proceed with earlier plans to conduct a rights offering, for which StemCells
had filed a registration statement with the SEC. As part of the wind down of our operations, StemCells conducted a reduction of work force impacting all of the remaining full-time employees, consisting of approximately 50 employees and exited our
facilities, as of August&nbsp;1, 2016. StemCells recorded approximately $3,803,000 in wind-down expenses for the quarter ended June&nbsp;30, 2016. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of August&nbsp;1, 2016, StemCells had cash and cash equivalents of approximately $900,000. If StemCells plans to liquidate the Company,
StemCells cannot determine with certainty the amount of any liquidating distribution to its stockholders and it is possible that there will be no liquidating distribution to stockholders. The amount of any cash distributed to StemCells stockholders
will depend upon, among other things, StemCells&#146; current liquid assets offset by StemCells&#146; known and unknown liabilities as well as operating expenses associated with the wind down. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Critical Accounting Policies and the Use of Estimates </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The accompanying discussion and analysis of StemCells&#146; financial condition and results of operations are based on StemCells&#146;
condensed consolidated financial statements and the related disclosures, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates, assumptions,
and judgments that affect the reported amounts in StemCells&#146; condensed consolidated financial statements and accompanying notes. These estimates form the basis for making judgments about the carrying values of assets and liabilities. StemCells
bases its estimates and judgments on historical experience and on various other assumptions that StemCells believes to be reasonable under the circumstances, and StemCells has established internal controls related to the preparation of these
estimates. Actual results and the timing of the results could differ materially from these estimates. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Stock-Based Compensation </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">U.S. GAAP requires StemCells to recognize expense related to the fair value of our stock-based payment awards, including employee stock options
and restricted stock units. Under the provisions of U.S. GAAP, the fair value of StemCells&#146; employee stock-based payment awards is estimated at the date of grant using the Black-Scholes-Merton (Black-Scholes) option-pricing model and is
recognized as expense ratably over the requisite service period. The Black-Scholes option-pricing model requires the use of certain assumptions, the most significant of which are StemCells&#146; estimates of the expected volatility of the market
price of StemCells stock and the expected term of the award. StemCells&#146; estimate of the expected volatility is based on historical volatility. The expected term represents StemCells&#146; estimated period during which StemCells stock-based
awards remain outstanding. StemCells estimates the expected term based on historical experience of similar awards, giving consideration to the contractual terms of the awards, vesting requirements, and expectation of future employee behavior,
including post-vesting terminations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In May 2016, StemCells&#146; Board of Directors approved a plan to wind down our current operations,
having considered the decision to terminate the Pathway Study, the available strategic alternatives and StemCells&#146; current cash position. As part of the wind down of StemCells&#146; operations, StemCells conducted a reduction of its work force
impacting all of its remaining full-time employees, consisting of approximately 50 employees, as of August&nbsp;1, 2016. Unvested options and RSUs of the employees impacted were forfeited. As of June&nbsp;30, 2016, total unrecognized compensation
expense related to unvested awards of stock option and restricted stock units is not significant. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">99 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Warrant Liability </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells accounts for its warrants in accordance with U.S. GAAP which defines how freestanding contracts that are indexed to and potentially
settled in a company&#146;s own stock should be measured and classified. Authoritative accounting guidance prescribes that only warrants issued by StemCells under contracts that cannot be net-cash settled, and are both indexed to and settled in
StemCells common stock, can be classified as equity. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As part of StemCells&#146; December 2011 financing, StemCells issued Series A
Warrants with a five year term to purchase 666,667 shares at $16.80 per share and Series B Warrants with a ninety trading day term to purchase 666,667 units at $15.00 per unit. Each unit underlying the Series B Warrants consisted of one share of
StemCells common stock and one Series A Warrant. In the first and second quarter of 2012, an aggregate of 225,000 Series B Warrants were exercised. For the exercise of these warrants, StemCells issued 225,000 shares of StemCells&#146; common stock
and 225,000 Series A Warrants. The remaining 441,667 Series B Warrants expired unexercised by their terms on May&nbsp;2, 2012. The Series A Warrants contain full ratchet anti-dilution price protection so that, in most situations, upon the issuance
of any common stock or securities convertible into common stock at a price below the then-existing exercise price of the Series A Warrants, the Series A exercise price will be reset to the lower common stock sales price. As a result of
StemCells&#146; April 2015 financing, the exercise price of the outstanding Series A warrants were reduced from $16.80 per share to $8.40 per share. Subsequently, as a result of StemCells&#146; sale of shares of StemCells&#146; common stock under a
sales agreement entered into in 2009 and amended in 2012, the exercise price of the outstanding Series A warrants was reduced from $8.40 per share to $6.24 per share and as a result of StemCells&#146; March 2016 financing, the exercise price of
these warrants was reduced to approximately $3.60 per share. As terms of the Series A Warrants do not meet the specific conditions for equity classification, StemCells is required to classify the fair value of these warrants as a liability, with
subsequent changes in fair value to be recorded as income (loss) due to change in fair value of warrant liability. The fair value of the Series A Warrants is determined using a Black-Scholes model See Note 11 &#147;Warrant Liability&#148; in the
notes to condensed consolidated financial statements of Part I, Item&nbsp;1 of StemCells&#146; Form 10-Q for further information. The fair value is affected by changes in inputs to these models including StemCells&#146; stock price, expected stock
price volatility, the contractual term, and the risk-free interest rate. StemCells will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire or are amended in a way that would no longer require
these warrants to be classified as a liability. The estimated fair value of StemCells&#146; 2011 Series A warrant liability at June&nbsp;30, 2016, was approximately $57,000. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In March 2016, StemCells raised gross proceeds of approximately $8,000,000 through an underwritten public offering of 2,222,250 units, at a
price of $3.60 per unit, before deducting underwriting discounts and other offering expenses. Each unit consists of a fixed combination of one share of StemCells common stock, a Series A Warrant to purchase 0.50 of a share of StemCells&#146; common
stock, and a Series B Warrant to purchase 0.75 of a share of StemCells&#146; common stock. Each Series A Warrant has an exercise price of $3.60 per share, is immediately exercisable, and will expire two years from the date of issuance. Each Series B
Warrant has an exercise price of $5.04 per share, will become exercisable upon stockholder approval of an increase in StemCells&#146; authorized capital and the one-year anniversary of the issuance date, whichever is later, and will expire on the
fifth anniversary of the date they become exercisable. In connection with the offering, StemCells granted the underwriters a 45-day option to purchase up to an additional 333,338 shares of StemCells&#146; common stock and/or warrants to purchase up
to an additional 416,672 shares of StemCells&#146; common stock to cover over-allotments, if any. The option was exercised in part and StemCells issued an additional 166,473 of Series A warrants and 249,709 of Series B Warrants. The Series A and
Series B Warrants contain full ratchet anti-dilution price protection for two years so that, in most situations, upon the issuance of any common stock or securities convertible into common stock at a price below the then-existing exercise price of
the respective warrants, the exercise price of these warrants will be reset to the lower common stock sales price. The initial shares and warrants were offered under StemCells&#146; effective shelf registration statement previously filed with the
SEC. StemCells intends to file a subsequent registration statement to register the common shares issuable when the Series B Warrants become exercisable. As terms of the Series A and Series B Warrants do not meet the specific conditions for equity
classification, StemCells is required to classify the fair value of these warrants as a liability, </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">100 </P>


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with subsequent changes in fair value to be recorded as income (loss) due to change in fair value of warrant liability. The fair value of the Series A and Series B Warrants is determined using a
Black-Scholes model. See Note 11 &#147;Warrant Liability&#148; in the notes to condensed consolidated financial statements of Part I, Item&nbsp;1 of StemCells&#146; Form 10-Q for further information. The fair value is affected by changes in inputs
to these models including StemCells&#146; stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. StemCells will continue to classify the fair value of the warrants as a liability until the warrants are
exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability. The estimated fair value of StemCells warrant liability for the 2016 Series A and 2016 Series B warrants at June&nbsp;30, 2016,
was approximately $160,000 and $374,000 respectively. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Revenue Recognition </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells currently recognizes revenue resulting from the licensing and use of StemCells&#146; technology and intellectual property. Licensing
agreements may contain multiple elements, such as upfront fees, payments related to the achievement of particular milestones and royalties. Revenue from upfront fees for licensing agreements that contain multiple elements are generally deferred and
recognized on a straight-line basis over the term of the agreement. Fees associated with substantive at risk performance-based milestones are recognized as revenue upon completion of the scientific or regulatory event specified in the agreement, and
royalties received are recognized as earned. Revenue from licensing agreements is recognized net of a fixed percentage due to licensors as royalties. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Results of Operations </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146;
results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future due to the occurrence of material recurring and nonrecurring events, including without limitation the receipt and
payment of recurring and nonrecurring licensing payments, the initiation or termination of clinical studies, research collaborations and development programs for both cell-based therapeutic products and research tools, unpredictable or unanticipated
manufacturing and supply costs, unanticipated capital expenditures necessary to support StemCells&#146; business, developments in on-going patent prosecution and litigation, the on-going expenses to maintain StemCells&#146; facilities. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Revenue </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Revenue for the three and
six-month periods ended June&nbsp;30, 2016, as compared with the same period in 2015, is summarized in the table below: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="49%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three&nbsp;months&nbsp;ended</B><br><B>June&nbsp;30, </B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in<BR>2016&nbsp;vs&nbsp;2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months&nbsp;ended</B><br><B>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in<BR>2016 vs&nbsp;2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Revenue:</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue from licensing agreements</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">29,311</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">30,131</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(820</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3)%</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">52,475</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">51,128</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,347</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3%</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Second quarter ended June&nbsp;30, 2016 versus second quarter ended June&nbsp;30,
2015.</I>&nbsp;&nbsp;&nbsp;&nbsp;Total revenue in the second quarter of 2016 was approximately $29,000 compared to approximately $30,000 for the second quarter of 2015. <I> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Six-month period ended June&nbsp;30, 2016 versus six-month period ended June&nbsp;30, 2015.&nbsp;&nbsp;&nbsp;&nbsp;</I>Total revenue in the
six-month period ended June&nbsp;30, 2016 was approximately $52,000 and approximately $51,000 for the same period of 2015. <I> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Licensing revenue for the first quarters and six-month periods for 2016 and 2015 were not significant. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">101 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Operating Expenses </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Operating expenses for the three and six-month periods ended June&nbsp;30, 2016, as compared with the same period in 2015, is summarized in the
table below: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:9pt" ALIGN="center">


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<TD WIDTH="36%"></TD>
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<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three months ended</B><br><B>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in 2016<BR>vs&nbsp;2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months ended</B><br><B>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in 2016<BR>vs&nbsp;2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman"><B>Operating expenses:</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,694,097</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7,238,985</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(3,544,888</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(49</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,902,802</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">13,531,176</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(4,628,374</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(34</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">General and administrative</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,415,719</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,063,729</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(648,010</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(31</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,044,053</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,752,925</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,291,128</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Wind-down expense</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803,448</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803,448</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803,448</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803,448</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Total operating expenses</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,913,264</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,302,714</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(389,450</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(4</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">18,750,303</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">18,284,101</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">466,202</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:9pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top">Calculation not meaningful </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Research and Development Expenses </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146; R&amp;D expenses historically consisted primarily of salaries and related personnel expenses, costs associated with clinical
trials and regulatory submissions, costs associated with preclinical activities such as toxicology studies, costs associated with cell processing and process development, certain patent-related costs such as licensing, facilities related costs such
as allocated rent and operating expenses, depreciation, lab equipment and supplies. Clinical trial expenses include payments to vendors such as clinical research organizations, contract manufacturers, clinical trial sites, laboratories for testing
clinical samples and consultants. Cumulative R&amp;D costs incurred since StemCells refocused its activities on developing cell-based therapeutics (fiscal years 2000 through the six months ended June&nbsp;30, 2016) were approximately $246 million.
Over this period, the majority of these cumulative costs were related to: (i)&nbsp;characterization of StemCells&#146; proprietary HuCNS-SC cells, (ii)&nbsp;expenditures for toxicology and other preclinical studies, preparation and submission of
applications to regulatory agencies to conduct clinical trials and obtaining regulatory clearance to initiate such trials, all with respect to its proprietary HuCNS-SC cells, (iii)&nbsp;preclinical studies and development of its human liver
engrafting cells, (iv)&nbsp;costs associated with cell processing and process development, and (v)&nbsp;costs associated with StemCells&#146; clinical studies. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells managed its R&amp;D resources, including StemCells employees and facilities, across various projects rather than on a
project-by-project basis for the following reasons. The allocations of time and resources change as the needs and priorities of individual projects and programs change, and many of StemCells researchers were assigned to more than one project at any
given time. Furthermore, StemCells was exploring multiple possible uses for its proprietary HuCNS-SC cells, so much of StemCells R&amp;D effort is complementary to and supportive of each of these projects. Lastly, much of StemCells&#146; R&amp;D
effort was focused on manufacturing processes, which can result in process improvements useful across cell types. StemCells also used external service providers to assist in the conduct of StemCells&#146; clinical trials and to provide various other
R&amp;D related products and services. Many of these costs and expenses were complementary to and supportive of each of StemCells&#146; programs. Because we StemCells does not have a development collaborator for any of StemCells&#146; product
programs, StemCells was responsible for all costs incurred with respect to its product candidates. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In May 2016, StemCells decided to
terminate its Phase II Pathway Study in spinal cord injury following an in-depth review of data from the study and after obtaining the concurrence of the study&#146;s Interim Analysis Data Monitoring Committee. While the results showed overall
improvement in patients treated with StemCells proprietary cells, the magnitude of the effect and the perceived trend of the effect over time did not justify continuing the study or exploring the variability in the initial patient observations,
given the financial resources available to StemCells. Following this, in May 2016, StemCells&#146; Board of Directors approved a plan to wind down StemCells&#146; current operations, having considered the decision to terminate the Pathway Study,
StemCells&#146; available strategic alternatives and StemCells&#146; current cash position. StemCells is evaluating opportunities to </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">102 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
monetize StemCells&#146; intellectual property, including data collected in studies and trade secrets, as well as the transfer of StemCells&#146; proprietary HuCNS-SC cells and other assets
through a potential sale. StemCells&#146; will not proceed with earlier plans to conduct a rights offering, for which StemCells had filed a registration statement with the SEC. As part of the wind down of StemCells&#146; operations, StemCells
conducted a reduction of its work force impacting all of its remaining full-time employees, consisting of approximately 50 employees and exited its facilities, as of August&nbsp;1, 2016. Effective May&nbsp;31, 2016, in accordance with U.S. GAAP,
StemCells&#146; recorded expenses associated with the wind-down of its operations in the period in which the liability was incurred. These expenses were recorded as wind-down expense in StemCells&#146; Condensed Consolidated Statement of Operations.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Second quarter ended June&nbsp;30, 2016 versus second quarter ended June&nbsp;30, 2015.</I>&nbsp;&nbsp;&nbsp;&nbsp;R&amp;D expenses
totaled approximately $3,694,000 in the second quarter of 2016 compared with $7,239,000 in the second quarter of 2015. The decrease of approximately $3,500,000, or 49%, in 2016 compared to 2015, was primarily attributable to the wind-down of
StemCells&#146; research and development programs and other operations in May 2016. <I> </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Six-month period ended June&nbsp;30, 2016
versus six-month period ended June&nbsp;30, 2015.&nbsp;&nbsp;&nbsp;&nbsp;</I>R&amp;D expenses totaled approximately $8,903,000 in the six-month period ended June&nbsp;30, 2016 compared with $13,531,000 for the same period in 2015. The decrease of
approximately $4,600,000, or 34%, in 2016 compared to 2015, was primarily attributable to the wind-down of StemCells&#146; research and development programs in May 2016. <I> </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>General and Administrative Expenses </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">General and administrative (G&amp;A) expenses are primarily comprised of salaries, benefits and other staff related costs associated with sales
and marketing, finance, legal, human resources, information technology, and other administrative personnel, allocated facilities and overhead costs, external legal and other external general and administrative services. Effective May&nbsp;31, 2016,
in accordance with U.S. GAAP, StemCells recorded expenses associated with the wind-down of StemCells&#146; operations in the period in which the liability was incurred. These expenses were recorded as wind-down expense in StemCells&#146; Condensed
Consolidated Statement of Operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Second quarter ended June&nbsp;30, 2016 versus second quarter ended June&nbsp;30,
2015.</I>&nbsp;&nbsp;&nbsp;&nbsp;G&amp;A expenses totaled approximately $1,416,000 in the second quarter of 2016 compared with approximately $2,064,000 in the same period of 2015. The decrease of approximately $648,000, or 31%, in 2016 compared to
2015, was primarily attributable to the wind-down of StemCells&#146; operations in May 2016. Effective May&nbsp;31, 2016, in accordance with U.S. GAAP, StemCells recorded expenses associated with the wind-down of StemCells operations in the period
in which the liability was incurred. These expenses were recorded as wind-down expense in its Condensed Consolidated Statement of Operations. <I> </I></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Six-month period ended June&nbsp;30, 2016 versus six-month period ended June&nbsp;30, 2015</I>.&nbsp;&nbsp;&nbsp;&nbsp;G&amp;A expenses
totaled approximately $6,044,000 in the six-month period ended June&nbsp;30, 2016 compared with approximately<I> </I>$4,753,000 in the same period of 2015. The increase of approximately $1,291,000, or 27%, in 2016 compared to 2015, was primarily
attributable to a separation and consulting agreement with StemCells&#146; previous Chief Executive Officer who resigned in January 2016. The separation agreement included expenses of approximately $1,257,000 in salary and benefits, and
approximately $920,000 in stock based compensation expense for accelerated vesting of his outstanding equity awards (net of cancellations). The increase was also attributable to higher costs for external services; primarily legal fees of
approximately $753,000. The increase was partially offset by the wind-down of StemCells&#146; operations in May 2016. Effective May&nbsp;31, 2016, in accordance with U.S. GAAP, StemCells recorded expenses associated with the wind-down of
StemCells&#146; operations in the period in which the liability was incurred. These expenses were recorded as wind-down expense in StemCells&#146; Condensed Consolidated Statement of Operations. <I> </I></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">103 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Other Income (Expense) </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Other income totaled approximately $11,399,000 in the second quarter of 2016 compared with other income of approximately $811,000 in the same
period of 2015, and other income of approximately $11,652,000 for the six-month period ended June&nbsp;30, 2016 compared with other income of approximately $421,000 for the six-month period ended June&nbsp;30, 2015. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:9pt" ALIGN="center">


<TR>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
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<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
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<TD></TD>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Three months ended<BR>June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in 2016</B><br><B>vs 2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months ended</B><br><B>June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in 2016</B><br><B>vs 2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman"><B>Other income (expense):</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Change in fair value of warrant liability</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,568,634</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">988,367</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,580,267</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">463</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,846,862</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">641,037</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,205,825</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">812</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Conversion of CIRM loan into a grant</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,916,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,916,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,916,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,916,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Gain on extinguishment of loan payable</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">242,931</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">242,931</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">242,931</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">242,931</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Write-down of fixed assets</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,332,736</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,332,736</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,332,736</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,332,736</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Interest income</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,069</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,139</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,930</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">90</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,312</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,779</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">135</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Interest expense</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(128</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(146,267</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">146,139</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(100</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(28,029</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(331,623</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">303,594</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(92</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Other income (expense), net</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(33,370</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,370</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(100</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(2,100</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">107,611</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(109,711</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(102</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:9pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:9pt; font-family:Times New Roman">Total other expense, net</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">11,399,411</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">810,869</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">10,588,542</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">11,651,881</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">420,558</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">11,231,323</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:9pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top">Calculation not meaningful </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Change in Fair Value of Warrant Liability </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells record changes in fair value of warrant liability as income or loss in StemCells&#146; Condensed Consolidated Statements of
Operations. StemCells has warrants outstanding which were issued as part of several transactions and have classified the fair value of certain warrants that did not meet the specific conditions for equity classification as a liability. The fair
value of the outstanding warrants is determined using the Black-Scholes-Merton (Black-Scholes) option pricing model, and is affected by changes in inputs to the various models, including StemCells&#146; stock price, expected stock price volatility,
the contractual term, and the risk-free interest rate. The fair value of the warrant liability is revalued at the end of each reporting period. See Note 11 &#147;Warrant Liability&#148; in the notes to condensed consolidated financial statements of
Part I, Item&nbsp;1 of StemCells&#146; Form 10-Q for further information. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Conversion of CIRM loan into a grant </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In April 2013, StemCells entered into an agreement with the California Institute for Regenerative Medicine (CIRM) under which CIRM would have
provided up to approximately $19.3 million as a forgivable loan, in accordance with mutually agreed upon terms and conditions and CIRM regulations. The CIRM loan helped fund preclinical development of StemCells&#146; HuCNS-SC cells for
Alzheimer&#146;s disease. Between July 2013 and August 2014, StemCells received in aggregate, approximately $9.6 million as disbursements of the loan provided under the CIRM Loan Agreement. However, in December 2014, as findings under this
preclinical study in Alzheimer&#146;s disease did not meet certain pre-determined criteria for continued funding of this program by CIRM, the parties terminated the loan agreement and StemCells wound down this preclinical study which had been funded
in part by the CIRM loan agreement. In February 2015, StemCells repaid CIRM approximately $679,000 of the aggregate loan proceeds received. Under the terms of the CIRM loan agreement, principal amount of approximately $8,917,000 and accrued interest
of approximately $243,000 were forgiven. However, authoritative accounting guidance requires certain conditions (which includes a legal release from the creditor) to be met before a liability can be extinguished and derecognized. In May 2016,
StemCells issued a letter to CIRM that </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">104 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
constitutes notice that StemCells elected to convert its loan into a grant pursuant to the CIRM&#146;s Loan Administration Policy, as amended effective April&nbsp;25, 2016, and as if the forgiven
loan balance had been total allowable project costs funded by CIRM. In the second quarter of 2016, StemCells re-classified the principal amount of approximately $8,917,000 as &#147;Other income&#148;. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Gain on Extinguishment of Debt </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In April
2013, StemCells entered into an agreement with the California Institute for Regenerative Medicine (CIRM) under which CIRM would have provided up to approximately $19.3 million as a forgivable loan, in accordance with mutually agreed upon terms and
conditions and CIRM regulations. The CIRM loan helped fund preclinical development of our HuCNS-SC cells for Alzheimer&#146;s disease. Between July 2013 and August 2014, StemCells received in aggregate, approximately $9.6 million as disbursements of
the loan provided under the CIRM Loan Agreement. However, in December 2014, as findings under this preclinical study in Alzheimer&#146;s disease did not meet certain pre-determined criteria for continued funding of this program by CIRM, the parties
terminated the loan agreement and StemCells wound down this preclinical study which had been funded in part by the CIRM loan agreement. In February 2015, StemCells repaid CIRM approximately $679,000 of the aggregate loan proceeds received. Under the
terms of the CIRM loan agreement, principal amount of approximately $8,917,000 and accrued interest of approximately $243,000 were forgiven. However, authoritative accounting guidance requires certain conditions (which includes a legal release from
the creditor) to be met before a liability can be extinguished and derecognized. In May 2016, StemCells issued a letter to CIRM that constitutes notice that StemCells elected to convert the loan into a Grant pursuant to the CIRM&#146;s Loan
Administration Policy, as amended effective April&nbsp;25, 2016, and as if the forgiven loan balance had been total allowable project costs funded by CIRM. In the second quarter of 2016, StemCells re-classified the principal amount of approximately
$8,917,000 as &#147;Other income&#148; and the accrued interest of approximately $243,000 as &#147;Gain on extinguishment of a loan&#148; in StemCells&#146; Condensed Consolidated Statement of Operations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Write-down of Fixed Assets </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">May&nbsp;30,
2016, StemCells&#146; Board of Directors approved a plan to wind down StemCells&#146; current operations, having considered the decision to terminate the Pathway Study, StemCells&#146; available strategic alternatives and StemCells&#146; current
cash position. As part of the wind down of StemCells&#146; operations, StemCells conducted a reduction of its work force impacting all of its remaining full-time employees, consisting of approximately 50 employees, termed StemCells&#146; commercial
lease agreements and exited StemCells&#146; two facilities located in Newark and Sunnyvale, California, as of August&nbsp;1, 2016. By way of an auction, StemCells sold all of its tangible assets at its Newark facility in July 2016 and received
approximately $800,000 in respect of such sale on August&nbsp;1. In July 2016, the lease for StemCells&#146; Sunnyvale facility was taken over by an unrelated Company. As part of the lease transfer, the unrelated Company acquired all of
StemCells&#146; tangible assets at this facility for $650,000. At June&nbsp;30, 2016, StemCells wrote down these assets to its realizable value by a write-off of approximately $3,333,000 and classified the realizable value of these assets as
&#147;Assets held for sale&#148; in StemCells&#146; Condensed Consolidated Balance Sheets. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Interest Income </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Interest income in three-and six-month period ended June&nbsp;30, 2016 and 2015 were not significant and is from the investment of
StemCells&#146; cash balances in money market accounts and short-term money market instruments that are highly liquid and that preserves capital. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Interest Expense </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Interest expense was
approximately $128 in the second quarter of 2016 compared with approximately $146,000 for the second quarter of 2015. Interest expense was approximately $28,000 for the six-month period ended June&nbsp;30, 2016 compared with approximately $332,000
for the six-month period ended June&nbsp;30, 2015. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">105 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Interest expense in the three-and six month period of 2015 is primarily attributable to interest due under a Loan Agreement with SVB. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Other income (expense), net </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Other
expense of approximately $2,000 for the six-month period ended June&nbsp;30, 2016 was primarily related to state franchise taxes. Other expense of approximately $33,000 in the second quarter of 2015 was primarily attributable to state franchise
taxes paid. Other income of approximately $108,000 for the six-month period ended June&nbsp;30, 2015 was primarily attributable to the gain on sale of StemCells&#146; Rhode Island property offset by state franchise taxes paid. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Liquidity and Capital Resources </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Since
StemCells&#146; inception, StemCells has financed its operations through the sale of common and preferred stock, the issuance of long-term debt and capitalized lease obligations, credit facilities, revenue from collaborative agreements, research
grants, license fees, and interest income. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>June&nbsp;30,<BR>2016</B></TD>
<TD VALIGN="bottom" ROWSPAN="2">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>December&nbsp;31,<BR>2015</B></TD>
<TD VALIGN="bottom" ROWSPAN="2">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,448,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">12,110,565</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(9,661,804</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(80</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In summary, our cash flows were: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="45%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change in 2016<BR>versus&nbsp;2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>$</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash used in operating activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(17,634,514</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(16,484,500</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(1,150,014</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash used in investing activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(15,434</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(407,600</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">392,166</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(96</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash provided by financing activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7,988,453</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">21,847,407</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(13,858,954</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(63</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Net Cash Used in Operating Activities </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net cash used in operating activities in the six-month period ended June&nbsp;30, 2016 increased by approximately $1,150,000, or 15%, when
compared to the same period of 2015. Cash used in operating activities is primarily driven by StemCells&#146; net loss as adjusted for non-cash charges and differences in the timing of operating cash flows. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Net Cash Used in Investing Activities </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net cash used in investing activities of approximately $15,000 in the six-month period ended June&nbsp;30, 2016 was primarily for the purchase
of lab equipment. Net cash used for investing activities of approximately $408,000 in the six-month period ended June&nbsp;30, 2015 was primarily related to the purchase of lab equipment for approximately $557,000, offset by receipts of
approximately $149,000 from the sale of StemCells&#146; property in Rhode Island. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Net Cash Provided by Financing Activities </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Net cash of approximately $7,988,000 provided by financing activities in the six-month period ended June&nbsp;30, 2016 was primarily
attributable to net proceeds (net of offering expenses underwriting discounts and commissions) received from a financing transaction in March 2016, offset by repayment of loan, lease and other obligations. Net cash of approximately $21,847,000
provided by financing activities in the six-month period </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">106 </P>


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ended June&nbsp;30, 2016 was primarily attributable to net proceeds of approximately $24,943,000 from a financing transaction in April 2015, partially offset by the repayment of loan, lease and
other obligations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells has incurred significant operating losses and negative cash flows since inception. StemCells had not
achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. StemCells does not expect to be profitable in the next several years, but rather expects to incur additional operating
losses. StemCells has limited liquidity and capital resources and must obtain significant additional capital resources in order to continue operations. StemCells had relied on cash balances and proceeds from equity and debt offerings, proceeds from
the transfer or sale of StemCells&#146; intellectual property rights, equipment, facilities or investments, and government grants and funding from collaborative arrangements, to fund StemCells&#146; operations. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of August&nbsp;1, 2016, StemCells had cash and cash equivalents of approximately $900,000 and approximately $3 million under this universal
shelf registration statement available for issuing debt or equity securities. If StemCells plans to liquidate the Company, StemCells cannot determine with certainty the amount of any liquidating distribution to its stockholders and it is possible
that there will be no liquidating distribution to stockholders. The amount of any cash distributed to StemCells&#146; stockholders will depend upon, among other things, StemCells&#146; current liquid assets offset by StemCells&#146; known and
unknown liabilities as well as operating expenses associated with the wind down. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Commitments </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">See Note 9, &#147;Commitments and Contingencies&#148; in the notes to condensed consolidated financial statements of Part I, Item&nbsp;1 of
StemCells&#146; Form 10-Q for further information. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Off-Balance Sheet Arrangements </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146; has certain contractual arrangements that create potential risk for it and are not recognized in StemCells&#146; Condensed
Consolidated Balance Sheets. Discussed below are those off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on StemCells&#146; financial condition, changes in financial condition, revenue or
expenses, results of operations, liquidity, capital expenditures or capital resources. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Operating leases </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells leased various real properties under operating leases that generally require StemCells to pay taxes, insurance, maintenance, and
minimum lease payments. Some of StemCells&#146; leases have options to renew. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Operating Leases &#151; California </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In December 2010, StemCells entered into a commercial lease agreement with BMR-Gateway Boulevard LLC (BMR), as landlord, for office and
research space at BMR&#146;s Pacific Research Center in Newark, California. The initial term of the lease was approximately eleven and one-half years and includes escalating rent payments which StemCells&#146; recognized as lease operating expense
on a straight-line basis. StemCells was expected to pay approximately $17,869,000 in aggregate as rent over the term of the lease to BMR. In May&nbsp;30, 2016, StemCells&#146; Board of Directors approved a plan to wind down StemCells&#146; current
operations, having considered the decision to terminate the Pathway Study, StemCells&#146; available strategic alternatives and StemCells&#146; current cash position. As part of the wind down of StemCells&#146; operations, StemCells terminated its
commercial lease agreement with BMR as of August&nbsp;1, 2016, by agreeing to pay a lease termination fee of approximately $800,000 and forfeit StemCells&#146; security deposit of approximately $333,000 with BMR. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In March 2013, StemCells entered into a commercial lease agreement with Prologis, L.P. (Prologis), as landlord, for office and research space
in Sunnyvale, California. The facility was for operations that supported </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">107 </P>


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StemCells&#146; clinical development activities. The initial term of the lease was ten years and included escalating rent payments which StemCells recognized as lease operating expense on a
straight-line basis. StemCells was expected to pay approximately $3,497,000 in aggregate rent over the term of the lease. As part of the lease, Prologis had agreed to provide StemCells financial allowances to build initial tenant improvements,
subject to customary terms and conditions relating to landlord-funded tenant improvements. The tenant improvements were recorded as leasehold improvement assets and amortized over the term of the lease. In May&nbsp;30, 2016, StemCells&#146; Board of
Directors approved a plan to wind down current operations, having considered the decision to terminate the Pathway Study, its available strategic alternatives and StemCells&#146; current cash position. As part of the wind down of StemCells&#146;
operations, StemCells terminated its commercial lease agreement with Prologis by having the existing lease assumed by an unrelated third party, effective as of August&nbsp;1, 2016. StemCells is not expected to pay a lease termination fee and expects
to receive a refund of the security deposit of $40,000 from Prologis. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">With the exception of the operating leases discussed above,
StemCells has not entered into any significant off balance sheet financial arrangements and has not established any special purpose entities. StemCells has not guaranteed any debts or commitments of other entities or entered into any options on
non-financial assets. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Contractual Obligations </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells has periodically entered into licensing agreements with third parties to obtain exclusive or non-exclusive licenses for certain
technologies. The terms of certain of these agreements require StemCells to pay future milestone payments based upon achievement of certain developmental, regulatory or commercial milestones. StemCells does not anticipate making any milestone
payments under any of its licensing agreements for 2016. Milestone payments beyond fiscal year 2016 cannot be predicted or estimated, due to the uncertainty of achieving the required developmental, regulatory or commercial milestones. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells does not have any material unconditional purchase obligations or commercial commitments related to capital expenditures, clinical
development, clinical manufacturing, or other external services contracts at June&nbsp;30, 2016. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">108 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_73"></A>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK OF
STEMCELLS </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Interest Rate and Credit Risks </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146; interest-bearing assets, or interest-bearing portfolio, consist of cash and cash equivalents. Our interest income is sensitive
to changes in the general level of interest rates, primarily U.S. interest rates. At June&nbsp;30, 2016, StemCells&#146; cash equivalents were primarily composed of money market accounts comprised of U.S. Treasury debt securities. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Equity Security and Foreign Exchange Risks </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At June&nbsp;30, 2016, the remaining assets and liabilities of StemCells&#146; UK subsidiaries included in StemCells&#146; Consolidated Balance
Sheets were not significant because StemCells is currently not subject to material foreign currency exchange risk with respect to revenue transactions and cash balances, and StemCells has not to date entered into any hedging contracts. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">109 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_74"></A>MICROBOT BUSINESS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Overview </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot Medical Ltd., or
Microbot, was incorporated on November&nbsp;10, 2010 under the Israel Business Corporations Act. Microbot is a pre-clinical medical device company specializing in the research, design and development of next generation micro-robotics assisted
medical technologies targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its micro-robotic technologies with the goal of improving surgical outcomes for patients. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is currently developing its first two product candidates: the Self Cleaning Shunt, or SCS, for the treatment of hydrocephalus and
Normal Pressure Hydrocephalus, or NPH; and TipCAT, a self-propelling, semi-disposable endoscope that is being developed initially for use in colonoscopy procedures. Microbot&#146;s product candidates are being designed to bring greater functionality
to conventional medical devices and to reduce the known risks associated with such devices. Microbot is currently aiming to complete pre-clinical or clinical data collection for both product candidates within the next 24 months and is targeting
approval or clearance for SCS by late 2018. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot currently holds an intellectual property portfolio that comprises nine patent
families, which include eight patents granted in the United States, eleven patents granted outside the United States, and 17 patent applications pending worldwide, with other patent applications under development, as well as an exclusive license to
key components of its technology. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Industry Overview </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Shunt Systems </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Hydrocephalus is a medical
condition in which there is an abnormal accumulation of cerebrospinal fluid, or CSF, in the brain that can cause increased intracranial pressure. It is estimated that one in every 500 babies are born with hydrocephalus, and over 1,000,000 people in
the United States currently live with hydrocephalus. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Symptoms of hydrocephalus vary with age, disease progression and individual
tolerance to the condition, but they can include convulsion, tunnel vision, mental disability or dementia-like symptoms and even death. Normal Pressure Hypocephalus (&#147;NPH&#148;) is a type of hydrocephalus that usually occurs in older adults.
NPH is generally treated as distinct from other types of hydrocephalus because it develops slowly over time. In NPH, the drainage of CSF is blocked gradually and the excess fluid builds up slowly. This slow accumulation means that the fluid pressure
may not be as high as in other types of hydrocephalus. It is estimated that more than 700,000 Americans have NPH, but less than 20% receive an appropriate diagnosis. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Hydrocephalus is most often treated by the surgical insertion of a shunt system. The shunt system diverts the flow of CSF from the
brain&#146;s ventricles (or the lumbar subarachnoid space) to another part of the body where the fluid can be more readily absorbed. Hydrocephalus shunt designs have changed little since their introduction in the 1950s. A shunt system typically
consists of three parts: the distal tubing or shunt (a flexible and sturdy plastic tube), the ventricular catheter (the proximal catheter), and a valve. The end of the shunt system with the proximal catheter is placed in the ventricles (within the
CSF) and the distal catheter is placed in the site of the body where the CSF can be drained. A valve is located along the shunt to maintain and regulate the rate of CSF flow. Current systems can be created from separate components or bought as
complete units. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The treatment of hydrocephalus with existing shunt systems often includes complications as well. For example,
approximately 50% of shunts used in the pediatric population fail within two years of placement and repeated neurosurgical operations are often required. Ventricular catheter blockage, or occlusions, is by far the most frequent event that results in
shunt failure. Shunt occlusion occurs when there is a partial or complete blockage of the shunt that causes it to function intermittently or not at all. Such a shunt blockage can be caused </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">110 </P>


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by the accumulation of blood cells, tissue, or bacteria in any part of the shunt system. In the event of shunt occlusion, CSF begins to accumulate in the brain or lumbar region again and the
symptoms of untreated hydrocephalus can reappear until a shunt replacement surgery is performed. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Although several companies are active in
the field of hydrocephalus treatment and the manufacturing of shunt systems and shunt components, Microbot believes that the majority of those companies are focusing on the development of valves. The development of a &#147;smart shunt&#148; &#150; a
shunt that could provide for weaning form shunt dependency or increase personalized control through advanced control algorithms, that could provide data to the physician on patient conditions and shunt function with sensor based controls, or correct
the high failure rate of existing shunt systems &#150; is for the most part at an academic and conceptual level only. Reports of smart shunt technologies are typically focused on a subset of components with remaining factors left unspecified, such
as hardware, control algorithms or power management. Microbot does not believe that a smart shunt has been developed to date. Because of the limited innovation in this area, Microbot believes an opportunity exists to provide patients suffering from
hydrocephalus or NPH with a more effective instrument for treating their condition. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Endoscopic Equipment </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Endoscopes are medical devices used to look inside a body cavity or organ with minimally invasive surgery. The North American flexible
endoscopes market was valued at $1.27 billion in 2013, and is expected to reach $1.91 billion by 2018, at a CAGR of 8.5% during the period 2013 to 2018. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Colonoscopy is a procedure that allows a physician to examine the colon using an endoscope. It is a commonly performed procedure for the
diagnosis and treatment of a range of conditions, including for the screening and surveillance of colorectal neoplasia, or colorectal cancer. Annually, between 15 and 20&nbsp;million endoscopy procedures are conducted in the United States with
reusable endoscope devices to screen various sections of a patient&#146;s gastrointestinal, or GI, tract. However, according to data from the American Cancer Society, it is estimated that over 49,000 Americans will die from colorectal cancer and
95,000 new cases of colon cancer will be diagnosed in 2016. It is the third leading cause of cancer deaths in spite of being highly preventable with early identification and removal of colorectal adenomas, or polyps. Colonoscopy with removal of
colorectal polyps has been shown to be the most effective way of preventing colorectal cancer. And colonoscopy is generally considered the gold standard for the detection and treatment of adenomas. However, using current colonoscopic technology,
approximately 30% of polyps are missed. In addition, the technique remains underutilized &#150; less than 50% of eligible Americans, based on guidelines established by organizations including the American Cancer Society, United States Preventive
Services Task Force, and U.S. Multi-Society Task Force on Colorectal Cancer, have undergone screening, with more than 45% of colon cancers being diagnosed at a time when the cancer has become incurable. This reluctance can be linked to
patients&#146; general discomfort associated with the colonoscopy screening procedure, due to the use of mechanical force to insert the endoscope into the colon. The procedure is widely perceived to be uncomfortable, and it also can sometimes damage
or perforate the bowel wall. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Colonoscopy techniques that improve the Adenoma Detection Rate, or ADR, and reduce patient discomfort could
optimize the potential of colonoscopy for the prevention of colorectal cancer. Microbot believes that it has the potential to develop a robotic endoscope product that addresses this issue of patient discomfort, which it believes will improve
patients&#146; willingness to get this important screening test &#150; with the additional benefit of providing a new tool to health care practitioners for use in the identification and treatment of colorectal polyps. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Microbot&#146;s Product Pipeline </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Self-Cleaning Shunt
(SCS) </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Self-Cleaning Shunt, or SCS, device is designed to act as the ventricular catheter portion of a CSF shunt system that is
used to relieve hydrocephalus and NPH. It is designed to work as an alternative to any ventricular catheter options currently on the market and to connect to all existing shunt system valves currently on the
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">111 </P>


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market, therefore, the successful commercialization of the SCS is not dependent on any single shunt system. Initially, Microbot expects the SCS device to be an aftermarket purchase that would be
deployed to modify existing products by the end user. Microbot believes that the use of its SCS device will reduce, and potentially eliminate, shunt occlusions, and by doing so Microbot believes its SCS has the potential to become the gold-standard
ventricular shunt in the treatment of Hydrocephalus and NPH. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The SCS device embeds an internal robotic cleaning mechanism in the lumen,
or inside space, of the ventricular catheter which prevents cell accumulation and tissue ingrowth into the catheter. The SCS device consists of a silicone tube with a perforated titanium tip, which connects to a standard shunt valve at its distal
end. The internal cleaning mechanism is embedded in the lumen of the titanium tip. Once activated, the cleaning mechanism keeps tissue from entering the catheter perforations while maintaining the CSF flow in the ventricular catheter. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The internal cleaning mechanism of the SCS device is activated by means of an induced magnetic field, which is currently designed to be
externally generated by the patient through a user-friendly headset that transmits the magnetic field at a pre-determined frequency and operating sequence protocol. The magnetic field that is created by the headset is then captured by a flexible
coil and circuit board that is placed just under the patient&#146;s scalp in the location where the valve is located. The circuit board assembly converts the magnetic field into the power necessary to activate the cleaning mechanism within the
proximal part of the ventricular catheter. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has completed the development of an SCS prototype and is currently completing the
safety testing, general proof of concept testing and performance testing for the device, which Microbot began in mid-2013. Microbot had a pre-submission meeting with the FDA in early 2014, and has been working closely with Washington University in
St. Louis to develop the protocol for and to execute the necessary animal study. Microbot expects the animal study to start by the end of 2016. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by the
FDA or if Microbot decides that the data from such trials would improve the marketability of the product candidate. Microbot believes that the first generation of its SCS device should receive regulatory approval or clearance from FDA by late 2018.
The proposed indication for use of the SCS device would be for the treatment of hydrocephalus as a component of a shunt system when draining or shunting of CSF is indicated. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot may also conduct clinical trials for the SCS in other countries where such trials are necessary for Microbot to sell its SCS device
in such country&#146;s market, although it has no current plans to do so. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>TipCAT </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The TipCAT is a semi-disposable, flexible, self-propelled endoscope. A mechanism comprising a series of interconnected balloons at the
device&#146;s tip provides the TipCAT with its forward locomotion capability. The device has the capability to self-propel within natural tubular lumens such as the colon, blood vessels, and the urinary tract. The TipCAT is designed to be
fully-equipped with a contemporary endoscope, including a high-quality camera, steering capability and a standard working channel for treatments. The TipCAT thus offers functionality and visualization features equivalent to modern endoscopes, along
with unique advantages associated with its physiologically adapted self-propelling mechanism, flexibility, and design. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The TipCAT
consists of two parts: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">A disposable self-propulsion module, which is a series of interconnected, sequentially inflatable balloons constructed on an inner tube (i.e., the working channel); and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">A re-usable module isolated from contact with the tissue/body fluids, containing a camera, LED lighting and a steering system. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the self-propulsion module, the air to inflate the balloons is supplied from a single channel. The sequential inflating and deflating of
the balloons creates an inchworm-like forward motion. Therefore, unlike standard endoscopes, the TipCAT does not need to be mechanically forced into the patient&#146;s lumen using </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">112 </P>


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external pressure; rather, it will gently advance itself through the organ&#146;s anatomy. As a result, the TipCAT is designed to be able to reach every part of the lumen under examination
regardless of the topography, be less operator dependent, and greatly reduce the likelihood of damage to lumen structure. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Furthermore,
Microbot believes that use of the TipCAT will improve ADR by straightening the intestinal topography, smoothing colon topography and improving tissue visualization. In addition, by incorporating the TipCAT in therapeutic procedures, Microbot
believes that the inflated balloons will provide the additional benefits of assisting the physician in centralizing endoscope optics and allowing for the colonoscope to be secured in each treatment position throughout the procedure, resulting in
more efficient and effective procedures. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The TipCAT is also designed such that only disposable parts are in direct contact with the lumen
tissue, which should eliminate the risk of cross contamination between patients and the need for post-use reprocessing. Reducing dependence on reprocessing procedures is important from a regulatory perspective because safety issues related to the
reprocessing of reusable medical devices are a growing concern for regulatory authorities. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A TipCAT prototype was shown to self-propel
and self-navigate in curved plastic pipes and curved ex-vivo colon. In addition, in its first feasibility study, the prototype device was tested in a live animal experiment and successfully self-propelled through segments of the animal&#146;s colon,
with no post-procedural damage. All tests were conducted at AMIT (Alfred Mann Institute of Technology at the Technion), prior to the licensing of TipCAT by Microbot. Microbot is currently reviewing the design and general proof of concept of the
TipCAT and working closely with experts in the field to define the optimal design. Microbot expects animal studies for this device to begin in 2017. Upon the completion of animal studies, Microbot may conduct clinical trials if they are requested by
the FDA or if Microbot decides that the data from such trials would improve the marketability of the product candidate. Regulatory approval or clearance for marketing the TipCAT colonoscope in the United States is targeted to occur soon after the
applicable animal or clinical trials are completed, depending on when the applicable premarket submission is finalized and filed with FDA, and Microbot&#146;s ability to raise money and conduct the necessary trials for approval. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot also plans to further develop the TipCAT for application other diagnostic and therapeutic endoscopic procedures outside of
colonoscopy, such as Chronic Total Occlusion, or CTO, urethroscopy and catheterization. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot may conduct clinical trials for the
TipCAT in other countries where such trials are necessary for Microbot to sell its TipCAT device in such country&#146;s market, although it has no current plans to do so. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Strategy </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s goal is to
generate sales of its products, once they have received regulatory approval, by establishing SCS and TipCAT devices as the standard-of-care in the eyes of doctors, surgeons, patients and medical facilities, as well as getting the support of payors
and insurance companies. Microbot believes that it can achieve this objective by working with hospitals to demonstrate the key benefits of its products. Microbot&#146;s strategy includes the following key elements: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"><B>Continue to refine existing product candidates and develop additional micro-robotic solutions</B>. As Microbot prepares to bring its initial product candidates through pre-clinical and clinical trials, if necessary,
and eventually to market, it continues to focus on improving its product candidates to respond to clinical data and patient and physician feedback. Microbot also expects to continue to innovate in the micro-robotics field by continuing to find ways
of using its technology to solve unmet needs, with the overarching goal of providing a safer, more effective and more efficient surgical environment for patients and physicians. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt"><B>Establish and leverage relationships with key institutions and leading clinicians</B>. Microbot intends to
develop relationships with a relatively small number of hospitals and clinics through its clinical </P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">113 </P>


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stage. Microbot&#146;s objective will be to maintain clinical focus with such hospitals and clinics so as to establish the SCS and TipCAT as the standard of care in such institutions for their
respective procedures. Microbot also expects to identify key clinicians in the hydrocephalus and colonoscopy specialties with the expectation that such clinical focus will accelerate the adoption of its candidate products. </P></TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"><B>Invest in research and development</B>. Microbot&#146;s most significant expense has historically been research and development, and Microbot expects that this will continue in the future, including expenses it
expects to incur to improve on its prototype products in order to respond to clinical data, to develop additional applications using its technologies and to develop future product candidates. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"><B>Explore partnerships for the introduction of Microbot&#146;s products</B>. Microbot intends to focus its marketing and sales efforts initially on pursuing collaborations with global medical device companies that have
established sales and distribution networks. Microbot seeks to enter collaborations and partnerships with strategic players that offer synergies with Microbot&#146;s product candidates and expertise. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"><B>Seek additional IP and technologies to complement and strengthen Microbot&#146;s current IP portfolio</B>. Microbot intends to continue exploring new technologies, IP and know-how to add to its current portfolio and
to allow Microbot to enter new spaces and strengthen its overall product portfolio. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>SCS Opportunities </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The SCS is designed to prevent shunt occlusions in hydrocephalus and NPH patients who have undergone or are undergoing the surgical insertion
of a shunt system. For purposes of its marketing strategy, Microbot has split the market for shunt systems into two sub-markets: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">Primary shunt placement; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">Shunt replacement. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s SCS device is universal (meaning that it is designed to be
attachable to any valve on the market); therefore, Microbot&#146;s initial go-to-market strategy is the development of strategic partnerships with leading global medical device companies with ready sales and distribution channels. Outside of a
strategic partnership, it is most likely that Microbot&#146;s SCS product will be initially used in shunt replacement surgeries to replace occluded ventricular catheters. Accordingly, Microbot intends to establish key hospital and clinic
relationships that will allow it to diffuse the technology among experts and other stakeholders. Microbot is also planning to apply for the SCS device to be covered under the current reimbursement codes in the United States for use in hydrocephalus
and NPH shunt procedures. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>TipCAT Opportunities </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot expects that its initial go-to-market strategy for the TipCAT will be to establish key hospital and clinic relationships in the field
of colonoscopy that will allow Microbot to introduce and then diffuse the technology among colonoscopy experts and other stakeholders. Generally, Microbot expects the hospitals and clinics selected for the TipCAT clinical trials to also start using
the product commercially, which will help to promote and support market uptake of the TipCAT product. Because Microbot expects the use of the TipCAT to increase the number of colonoscopy procedures that can be performed at any such facility,
Microbot will seek to promote the technology among the doctors and experts involved in the distribution and buying groups within such selected partner hospitals. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Competition </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>SCS Competitive Landscape </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Several academic research groups, such as at the New Jersey Institute of Technology, are currently researching sensing and
obstruction-resistant catheter designs, and the Smart Sensors and Integrated Microsystems (SSIM) </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">114 </P>


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Program at Wayne State University has publicized that it is engaging in smart shunt development activity.&nbsp;However, based on its knowledge of the patented technologies, Microbot believes that
these technologies are still early in the research and development cycle. The SCS also faces non-direct competition from Aqueduct Neurosciences, Inc., which is developing&nbsp;a non-shunt, electro-mechanical technology platform to control the
draining of cerebrospinal fluid. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot does not expect its SCS device to directly compete against shunt systems currently available in
the market. The SCS device is designed to replace a component of existing shunt systems and is expected to be an aftermarket purchase that would be used to modify existing products by the end user. However, there can be no assurance that
Microbot&#146;s product candidate will be accepted by the shunt market as an alternative component. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>TipCAT Competitive Landscape </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The market for endoscopy products is highly competitive with several players operating both at a global and regional level. The leading players
in the colonoscopy space are Pentax, Fuji and Olympus, which dominate the U.S. market for reusable colonoscopes.&nbsp;However, Microbot believes that the most relevant competitors to TipCAT are smaller companies such as GI View and SMART Medical
Systems, which produce disposable, self-propelled colonoscopes. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">GI View produces a colonoscope with 360&deg; omni-directional
visualization and offers self-propelled intubation created using balloons and low pressure CO<SUB STYLE="font-size:85%; vertical-align:bottom">2</SUB> gas. In addition, the GI View product is single use and disposable. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">SMART Medical Systems&#146; product, which, according to publicly available information is being commercialized by Pentax, is introduced by a
physician through a standard colonoscope&#146;s tool channel and uses its balloon technology to anchor the bowel, which enables the colonoscope to be maneuvered beyond challenging lumen sections.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot believes the TipCAT can successfully compete against its relevant competitors in that it offers all of the following attributes: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the ability to have varied dimensions during insertion and any subsequent point of a procedure, so as to accommodate the particular diameters of the organ at any moment, allows for the straightening of an organ&#146;s
topography and improved visualization; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">disposability, which protects against cross-contamination; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">a working channel for therapeutic interventions (and additional visualization capabilities); </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">lower cost; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">a self-propelling mechanism, allowing for passage through challenging anatomical structures while eliminating tissue trauma. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Some of Microbot&#146;s competitors currently have significantly greater resources than Microbot does; have established relationships with
healthcare professionals, customers and third-party payors; and have long-term contracts with group purchasing organizations in the United States. In addition, many of Microbot&#146;s competitors have established distributor networks, greater
resources for product development, sales and marketing, additional lines of products and the ability to offer financial incentives such as rebates, bundled products or discounts on other product lines that Microbot cannot provide. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s products could also be rendered obsolete or uneconomical by technological advances developed in the future by existing or new
competitors. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">115 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Intellectual Property </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is currently
developing its first two product candidates, the SCS and TipCAT based on technological platforms licensed from TRDF, as further discussed below, and Microbot plans to develop other micro-robotic solutions through internal research and development to
strengthen its intellectual property position, and continue exploring strategic collaborations and accretive acquisition opportunities. Microbot currently holds an intellectual property portfolio that includes 9 patent families, which include 8
patents granted in the US, 11 patents granted outside the US, and 17 patent applications pending worldwide, with other patent applications under development. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot relies on intellectual property licensed or developed, including patents, trade secrets, technical innovations, laws of unfair
competition and various licensing agreements to provide its future growth and to build its competitive position. As Microbot continues to expand its intellectual property portfolio, it is critical for Microbot to continue to invest in filing patent
applications to protect its technology, inventions, and improvements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot relies on a combination of patents, trade secret,
copyright and other intellectual property rights and measures to aggressively protect its intellectual property. It also relies on other forms of intellectual property, including trade secrets and know-how, to maintain its competitive position.
Microbot requires its employees and consultants to execute confidentiality agreements in connection with their employment or consulting relationships with Microbot. Microbot also requires its employees and consultants who work on its product
candidates to agree to disclose and assign to Microbot all inventions conceived during the term of their service, while using Microbot property, or which relates to Microbot&#146;s business. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Patent applications in the United States and in foreign countries are maintained in secrecy for a period of time after filing, which results
in a delay between the actual discoveries and the filing of related patent applications and the time when discoveries are published in scientific and patent literature. Patents issued and patent applications filed relating to medical devices are
numerous, and there can be no assurance that current and potential competitors and other third parties have not filed or in the future will not file applications for, or have not received or in the future will not receive, patents or obtain
additional proprietary rights relating to product candidates, products, devices or processes used or proposed to be used by Microbot. Microbot believes that the technologies it employs in its products and systems do not infringe the valid claims of
any third party patents. There can be no assurance, however, that third parties will not seek to assert that Microbot devices and systems infringe their patents or seek to expand their patent claims to cover aspects of Microbot&#146;s products and
systems. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The medical device industry in general has been characterized by substantial litigation regarding patents and other intellectual
property rights. Any such claims, regardless of their merit, could be time-consuming and expensive to respond to and could divert Microbot&#146;s technical and management personnel. Microbot may be involved in litigation to defend against claims of
infringement by other patent holders, to enforce patents issued to Microbot, or to protect Microbot&#146;s trade secrets. If any relevant claims of third-party patents are upheld as valid and enforceable in any litigation or administrative
proceeding, Microbot could be prevented from practicing the subject matter claimed in such patents, or would be required to obtain licenses from the patent owners of each such patent, or to redesign Microbot&#146;s products, devices or processes to
avoid infringement. There can be no assurance that such licenses would be available or, if available, would be available on terms acceptable to Microbot or Microbot would be successful in any attempt to redesign products or processes to avoid
infringement. Accordingly, an adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent Microbot from manufacturing and selling its products. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Issued U.S. patents which cover Microbot&#146;s product candidates will expire between 2026 and 2031, excluding any patent term extensions
that might be available following the grant of marketing authorization. Issued patents outside of the United States directed to Microbot&#146;s product candidates will expire between 2026 and 2032. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">116 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>License Agreement with the Technion </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In June 2012, Microbot entered into a license agreement with Technion Research and Development Foundation Ltd., or TRDF, the technology
transfer subsidiary of the Technion Institute of Technology, pursuant to which it obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCAT technology platforms and
invented by Professor Shoham and in certain circumstances other TRDF-related persons. Pursuant to the terms of the license agreement, in order to maintain the license with respect to each platform, Microbot must use commercially reasonable efforts
to develop products covered by the license, including meeting certain agreed upon development milestones. The milestones for SCS include commencing initial studies in humans by December 2018 and commencing a full clinical trial, if necessary, by
December 2019. The milestones for TipCAT include commencing initial studies in humans by December 2018 and commencing a full clinical trial, if necessary, by December 2020. Failure to meet any development milestone will give TRDF the right to
terminate the license with respect to the technology underlying the missed milestone. Although Microbot expects to meet the milestone requirements, TRDF has demonstrated flexibility with respect to amending the terms of the license to extend the
milestone dates. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As partial consideration for the grant of the licenses under the agreement, Microbot issued a number of shares to TRDF
equal to 3% of its issued and outstanding shares at such time on a fully diluted basis. Such shares were initially subject to antidilution protections but are no longer subject to adjustment. In addition, as partial consideration for the licenses
granted, Microbot agreed to pay TRDF royalties of between 1.5% and 3.0% of net sales of products covered by the licenses, subject to certain reductions, and certain percentages of amounts received by Microbot in the event of sublicensing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the case of termination of the license by Microbot without cause or by TRDF for cause, TRDF has the right to receive a non-exclusive
license from Microbot with respect to improvements to the licensed technologies made by Microbot. In such cases, TRDF would pay a royalty of 10% of the income received by TRDF in connection its sublicensing of such patent right and related
intellectual property. If the license from TRDF were to be terminated with respect with either of the technology platforms underlying the SCS or the TipCAT, Microbot would no longer be able to continue its development of the related product
candidate. However, Microbot believes that its current intellectual property portfolio, and its ongoing efforts to expand into other micro-robotic surgical technologies, will give it the flexibility to shift its resources towards developing and
commercializing related products. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Research and Development </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s research and development programs are generally pursued by engineers and scientists employed by Microbot in its offices in
Israel on a full-time basis or as consultants, or through partnerships with industry leaders in manufacturing and design and researchers in academia. Microbot is also working with subcontractors in developing specific components of its technologies.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The primary objectives of Microbot&#146;s research and development efforts are to continue to introduce incremental enhancements to the
capabilities of its candidate products and to advance the development of proposed products. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has received funds from the Office
of the Chief Scientist in Israel, or OCS, for research and development activities. Microbot received a grant from the OCS in 2012, which grant reimbursed Microbot for 50% of its research and development expenses, up to $764,466. This first grant
from the OCS ended in 2014. After the expiration of the first grant, Microbot received approval for an additional grant from the OCS which reimbursed Microbot for 50% of its research and development expenses for the period from May&nbsp;1, 2014
through September&nbsp;30, 2015, up to $924,166. After the expiration of the second grant, Microbot received an approval for a third grant from the Chief Scientist of Israel which reimbursed Microbot for 50% of its research and development expenses
for the period from May&nbsp;1, 2016 through April&nbsp;30, 2017, up to $1,026,050. Microbot expects to continue to access government funding in the future. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">117 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">For the fiscal year ended December&nbsp;31, 2015, Microbot incurred research and development
expenses of $822,759 compared to research and development expenses of $836,698 for the fiscal year ended December&nbsp;31, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot
has already made plans to develop a second version of its SCS device that will have an embedded controller and battery. This alternative design will allow the cleaning mechanism to be automatically activated, without the need for the patient&#146;s
involvement in the activation process. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Manufacturing </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot does not have any manufacturing facilities or manufacturing personnel. Microbot currently relies, and expects to continue to rely, on
third parties for the manufacturing of its product candidates for preclinical and clinical testing, as well as for commercial manufacturing if its product candidates receive marketing approval. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Commercialization </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has not yet
established a sales, marketing or product distribution infrastructure for its product candidates, which are still in development stages. Microbot plans to access the U.S. markets for hydrocephalus, NPH, and colonoscopy with its initial device
offerings through strategic partnerships but may develop its own focused, specialized sales force or distribution channels once it has several commercialized products in its portfolio. Microbot has not yet developed a commercial strategy outside of
the United States. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Government Regulation </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>General
</I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s medical technology products and operations are subject to extensive regulation in the United States and other
countries. Most notably, if Microbot seeks to sell its products in the United States, its products will be subject to the Federal Food, Drug, and Cosmetic Act (FDCA) as implemented and enforced by the U.S. Food and Drug Administration (FDA). The FDA
regulates the development, bench and clinical testing, manufacturing, labeling, storage, record-keeping, promotion, marketing, sales, distribution and post-market support and reporting of medical devices in the United States to ensure that medical
products distributed domestically are safe and effective for their intended uses. Regulatory policy affecting its products can change at any time. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Advertising and promotion of medical devices in the United States, in addition to being regulated by the FDA, are also regulated by the
Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and
consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Foreign countries where Microbot wishes to sell its products may require similar or more onerous approvals to manufacture or market its
products. Government agencies in those countries also enforce laws and regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of medical device products. These
regulatory requirements can change rapidly with relatively short notice. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Other regulations Microbot encounters in the United States and
in other jurisdictions are the regulations that are common to all businesses, such as employment legislation, implied warranty laws, and environmental, health and safety standards, to the extent applicable. In the future, Microbot will also
encounter industry-specific government regulations that would govern its products, if and when they are developed for commercial use. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">118 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>U.S. Regulation </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The FDA governs the following activities that Microbot performs, will perform, upon the clearance or approval of its product candidates, or
that are performed on its behalf, to ensure that medical products distributed domestically or exported internationally are safe and effective for their intended uses: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">product design, and development; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">product safety, testing, labeling and storage; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">record keeping procedures; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">product marketing. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There are numerous FDA regulatory requirements governing the approval or
clearance and subsequent commercial marketing of Microbot&#146;s products. These include: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the timely submission of product listing and establishment registration information, along with associated establishment user fees; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">continued compliance with the Quality System Regulation, or QSR, which require specification developers and manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation
and other quality assurance procedures during all aspects of the manufacturing process; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">clearance or approval of product modifications that could significantly affect the safety or effectiveness of the device or that would constitute a major change in intended use; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Medical Device Reporting regulations (MDR), which require that manufacturers keep detailed records of investigations or complaints against their devices and to report to the FDA if their device may have caused or
contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">adequate use of the Corrective and Preventive Actions process to identify and correct or prevent significant systemic failures of products or processes or in trends which suggest same; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">post-approval restrictions or conditions, including post-approval study commitments; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">notices of correction or removal and recall regulations. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Unless an exemption applies, before
Microbot can commercially distribute medical devices in the United&nbsp;States, Microbot must obtain, depending on the classification of the device, either prior 510(k) clearance, 510(k) de-novo clearance or premarket approval (PMA), from the FDA.
The FDA classifies medical devices into one of three classes based on the degree of risk associated with each medical device and the extent of regulatory controls needed to ensure the device&#146;s safety and effectiveness: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Class I devices, which are low risk and subject to only general controls (e.g., registration and listing, medical device labeling compliance, MDRs, Quality System Regulations, and prohibitions against adulteration and
misbranding) and, in some cases, to the 510(k) premarket clearance requirements; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Class II devices, which are moderate risk and generally require 510(k) or 510(k) de-novo premarket clearance before they may be commercially marketed in the United States as well as general controls and potentially
special controls like performance standards or specific labeling requirements; and </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">119 </P>


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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Class III devices, which are devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a predicate device.
Class III devices generally require the submission and approval of a PMA supported by clinical trial data. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot expect
the medical products in its pipeline currently to be classified as Class II. Class II devices are those for which general controls alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information
to establish special controls. Special controls can include performance standards, post-market surveillance, patient histories and FDA guidance documents. Premarket review and clearance by the FDA for these devices is generally accomplished through
the 510(k) or 510(k) <FONT STYLE="white-space:nowrap">de-novo</FONT> premarket notification process. As part of the 510(k) or 510(k) de-novo notification process, FDA may require the following: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Development of comprehensive product description and indications for use. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Completion of extensive preclinical tests and preclinical animal studies, performed in accordance with the FDA&#146;s Good Laboratory Practice (GLP) regulations. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Comprehensive review of predicate devices and development of data supporting the new product&#146;s substantial equivalence to one or more predicate devices. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">If appropriate and required, certain types of clinical trials (IDE submission and approval may be required for conducting a clinical trial in the US). </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Clinical trials involve use of the medical device on human subjects under the supervision of qualified investigators in accordance with
current Good Clinical Practices (GCPs), including the requirement that all research subjects provide informed consent for their participation in the clinical study. A written protocol with predefined end points, an appropriate sample size and
pre-determined patient inclusion and exclusion criteria, is required before initiating and conducting a clinical trial. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA&#146;s
Investigational device Exemption, or IDE, regulations that among other things, govern investigational device labeling, prohibit promotion of the investigational device, and specify recordkeeping, reporting and monitoring responsibilities of study
sponsors and study investigators. If the device presents a &#147;significant risk,&#148; as defined by the FDA, the agency requires the device sponsor to submit an IDE application, which must become effective prior to commencing human clinical
trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application or notifies the company that the investigation is on hold and may not begin. If the FDA determines that there are
deficiencies or other concerns with an IDE that requires modification, the FDA may permit a clinical trial to proceed under a conditional approval. In addition, the study must be approved by, and conducted under the oversight of, an Institutional
Review Board (IRB) for each clinical site. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but it
must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Assuming successful completion of all required testing, a detailed 510(k) premarket notification or 510(k) de-novo is submitted to the FDA requesting clearance to market the product. The notification includes all
relevant data from pertinent preclinical and clinical trials, together with detailed information relating to the product&#146;s manufacturing controls and proposed labeling, and other relevant documentation. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">A 510(k) clearance letter from the FDA will authorize commercial marketing of the device for one or more specific indications for use. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left" STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">After 510(k) clearance, Microbot will be required to comply with a number of post-clearance requirements,
including, but not limited to, Medical Device Reporting and complaint handling, and, if </P></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">120 </P>


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<TD WIDTH="8%">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-family:Times New Roman; font-size:10pt">
applicable, reporting of corrective actions. Also, quality control and manufacturing procedures must continue to conform to QSRs. The FDA periodically inspects manufacturing facilities to assess
compliance with QSRs, which impose extensive procedural, substantive, and record keeping requirements on medical device manufacturers. In addition, changes to the manufacturing process are strictly regulated, and, depending on the change, validation
activities may need to be performed. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with QSRs and other types of regulatory controls.
</P></TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">After a device receives 510(k) clearance from FDA, any modification that could significantly affect its safety or
effectiveness, or that would constitute a major change in its intended use or technological characteristics, requires a new 510(k) clearance or could require a PMA. The FDA requires each manufacturer to make the determination of whether a
modification requires a new 510(k) notification or PMA in the first instance, but the FDA can review any such decision. If the FDA disagrees with a manufacturer&#146;s decision not to seek a new 510(k) clearance or PMA for a particular change, the
FDA may retroactively require the manufacturer to seek 510(k) clearance or PMA. The FDA can also require the manufacturer to cease U.S. marketing and/or recall the modified device until additional 510(k) clearance or PMA approval is obtained. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The FDA and the Federal Trade Commission, or FTC, will also regulate the advertising claims of Microbot&#146;s products to ensure that the
claims Microbot makes are consistent with its regulatory clearances, that there is scientific data to substantiate the claims and that product advertising is neither false nor misleading. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To obtain 510(k) clearance, Microbot must submit a notification to the FDA demonstrating that its proposed device is substantially equivalent
to a predicate device (i.e., a device that was in commercial distribution before May&nbsp;28, 1976, a device that has been reclassified from Class III to Class I or Class II, or a 510(k)-cleared device). The FDA&#146;s 510(k) clearance process
generally takes from three to 12 months from the date the application is submitted but also can take significantly longer. If the FDA determines that the device or its intended use is not substantially equivalent to a predicate device, the device is
automatically placed into Class III, requiring the submission of a PMA. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">There is no guarantee that the FDA will grant Microbot 510(k)
clearance for its pipeline medical device products, and failure to obtain the necessary clearances for its products would adversely affect Microbot&#146;s ability to grow its business. Delays in receipt or failure to receive the necessary
clearances, or the failure to comply with existing or future regulatory requirements, could reduce its business prospects. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Devices that
cannot be cleared through the 510(k) process due to lack of a predicate device but would be considered low or moderate risk may be eligible for the 510(k) de-novo process. In 1997, the Food and Drug Administration Modernization Act, or FDAMA added
the de novo classification pathway now codified in section 513(f)(2) of the FD&amp;C Act. This law established an alternate pathway to classify new devices into Class I or II that had automatically been placed in Class III after receiving a Not
Substantially Equivalent, or NSE, determination in response to a 510(k) submission. Through this regulatory process, a sponsor who receives an NSE determination may, within 30 days of receipt, request FDA to make a risk-based classification of the
device through what is called a &#147;de novo request.&#148; In 2012, section 513(f)(2) of the FD&amp;C Act was amended by section 607 of the Food and Drug Administration Safety and Innovation Act (FDASIA), in order to provide a second option for de
novo classification. Under this second pathway, a sponsor who determines that there is no legally marketed device upon which to base a determination of substantial equivalence can submit a de novo request to FDA without first submitting a 510(k).
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In the event that Microbot receives a Not Substantially Equivalent determination for either of its device candidates in response to a
510(k) submission, the Microbot device may still be eligible for the 510(k) de-novo classification process. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Devices that cannot be
cleared through the 510(k) or 510(k) de-novo classification process require the submission of a PMA. The PMA process is much more time consuming and demanding than the 510(k) </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">121 </P>


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notification process. A PMA must be supported by extensive data, including but not limited to data obtained from preclinical and/or clinical studies and data relating to manufacturing and
labeling, to demonstrate to the FDA&#146;s satisfaction the safety and effectiveness of the device. After a PMA application is submitted, the FDA&#146;s in-depth review of the information generally takes between one and three years and may take
significantly longer. If the FDA does not grant 510(k) clearance to its products, there is no guarantee that Microbot will submit a PMA or that if Microbot does, that the FDA would grant a PMA approval of Microbot&#146;s products, either of which
would adversely affect Microbot&#146;s business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Foreign Regulation </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition to regulations in the United States, Microbot will be subject to a variety of foreign regulations governing clinical trials,
marketing authorization and commercial sales and distribution of its products in foreign countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval or clearance. The
requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">International sales of medical devices are subject to foreign governmental regulations which vary substantially from country to country.
Whether or not Microbot obtains FDA approval or clearance for its products, Microbot will be required to make new regulatory submissions to the comparable regulatory authorities of foreign countries before Microbot can commence clinical trials or
marketing of the product in such countries. The time required to obtain certification or approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ. Below are summaries of
the regulatory systems for medical devices in Europe and Israel, where Microbot currently anticipates marketing its products. However, its products may also be marketed in other countries that have different systems or minimal requirements for
medical devices. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Europe</B>. The primary regulatory body in Europe is the European Union, or E.U., which consists of 28&nbsp;member
states and has a coordinated system for the authorization of medical devices. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The E.U. has adopted legislation, in the form of directives
to be implemented in each member state, concerning the regulation of medical devices within the European Union. The directives include, among others, the Medical Device Directive, or MDD, that establishes certain requirements with which medical
devices must comply before they can be commercialized in the European Economic Area, or EEA (which comprises the member states of the E.U. plus Norway, Liechtenstein and Iceland). Under the MDD, medical devices are classified into four Classes, I,
IIa, IIb, and III, with Class I being the lowest risk and Class III being the highest risk. However, the E.U. authorities, including the European Commission, do not have direct regulatory over medical device manufacturers under the MDD. Rather, the
MDD directs E.U. Member States to implement laws and regulations consistent with the provisions set forth in the directive. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the
MDD, to demonstrate compliance of a medical device with the essential requirements, manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. An accredited body known
as a &#147;Notified Body&#148;, which is an entity designated by an E.U. Member State (or competent authority) to perform conformity assessments, will typically audit and examine the manufacturer&#146;s quality system for the production, quality,
design and final inspection of the medical devices and review a Technical File containing technical documents regarding the device, including but limited to, detailed device description, manufacturing information, preclinical and clinical tests,
risk analysis, compliance with essential requirements, etc., before issuing a certification demonstrating compliance with the essential requirements. Medical devices that comply with the essential requirements are entitled to bear the
Conformit&eacute; Europ&eacute;ene, or CE Mark. Medical devices properly bearing the CE Mark may be commercially distributed throughout the EEA. Under the MDD, notified bodies are also charged with performing periodic inspections to verify that a
manufacturer&#146;s quality system, particularly the production and quality controls, is adequately executed and maintained. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">122 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, the MDD requires all medical device manufacturers to inform the competent
authorities of their respective Member States of the address(es) of any business facilities and descriptions of any certified medical device products. The MDD also requires manufacturers to file vigilance reports in the event a device malfunction,
deterioration in performance, or inadequate instructions or labeling results in, or could lead to, death or serious harm to a patient. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In
September 2012, the European Commission published proposals for the revision of the EU regulatory framework for medical devices. The proposal would replace the MDD with a new regulation, the Medical Devices Regulation, or MDR. Unlike the MDD that
must be implemented into national laws, the Medical Devices Regulation would be directly applicable in all EEA member states and so is intended to eliminate current national differences in regulation of medical devices. E.U. lawmakers published a
revised draft of the proposed MDR in June 2016, which continues to be discussed within the Council of the European Union. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If finally
adopted, the MDR is expected to enter into force in late 2016 and become applicable three years thereafter. The adoption of the MDR may, however, be materially delayed due to disagreements about specific portions of the regulation, as well as the
implementation process. In its current form it would, among other things, impose additional reporting requirements on manufacturers of high risk medical devices, impose an obligation on manufacturers to appoint a &#147;qualified person&#148;
responsible for regulatory compliance, and provide for more strict clinical evidence requirements. These new rules and procedures will likely result in increased regulatory oversight of all medical devices marketed in the E.U., and this may, in
turn, increase the costs, time and requirements that need to be met in order to place a medical devices on the EEA market. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot
intends to apply for the CE Mark for each of its medical device products. There is no guarantee that Microbot will be granted a CE Mark for all or any of its pipeline products and failure to obtain the CE Mark would adversely affect its ability to
grow its business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Israel</B>. Israel&#146;s Medical Devices Law generally requires the registration of all medical products with the
Ministry of Health, or MOH, Registrar as a precondition for production and distribution in Israel. Special exemptions may apply under limited circumstances and for purposes such as the provision of essential medical treatment, research and
development of the medical device, and personal use, among others. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Registration of medical devices requires the submission of an
application to the Ministry of Health Medical Institutions and Devices Licensing Department, or AMAR. An application for the registration of a medical device includes the following: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Name and address of the manufacturer, and of the importer as applicable; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Description of the intended use of the medical device and of its medical indications; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Technical details of the medical device and of its components, and in the event that the device or the components are not new, information should be provided on the date or renovation; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Certificate attesting to the safety of the device, issued by a competent authority of one of the following countries: Australia, Canada, European Community (EC), Member States (MSs), Israel, Japan, or the United States;
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Information on any risk which may be associated with the use of the device (including precautionary measures to be taken); </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Instructions for use of the device in Hebrew; the MOH may allow the instructions to be in English for certain devices; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Details of the standards to which the device complies; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Description of the technical and maintenance services, including periodic checks and inspections; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Declaration, as appropriate: of the local manufacturer/importer, and of the foreign manufacturer. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">123 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If the application includes a certificate issued by a competent authority of one of the following
&#147;recognized&#148; countries: Australia, Canada, European Community (CE) Member States (MSs), Japan, or the United States, the registration process is generally expedited, but could still take 6-9 months for approval. If such certificate is not
available, the registration process will take significantly longer and a license is rarely issued. Furthermore, the MOH will determine what type of testing is needed. In general, in the case of Israeli manufactured devices that are not registered or
authorized in any &#147;recognized&#148; country, the application requires presentation of a risk analysis, a clinical evaluation, a summary of the clinical trials, and expert opinions regarding the device&#146;s safety and effectiveness. Additional
requirements may apply during the registration period, including follow-up reviews, to improve the quality and safety of the devices. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">According to regulations issued by Israel&#146;s Minister of Health in June 2013, a decision on a request to register a medical device must be
delivered by AMAR within 120 days from the date of the request, although this rarely occurs. The current rules for the registration of medical devices do not provide for an expedited approval process. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Once granted by the MOH, a license (marketing authorization) for a medical device is valid for five years from the date of registration of the
device, except for implants with a life-supporting function, for which the validity is for only two years from the date of registration. Furthermore, the holder of the license, the Israeli Registration Holder, or IRH, must do the following to
maintain its license: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Reside and maintain a place of business in Israel and serve as the regulatory representative. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Respond to questions from AMAR concerning the registered products. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Report adverse events to AMAR. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Renew the registration on time to keep the market approval active. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Comply with post-marketing requirements, including reporting of adverse and unexpected events occurring in Israel or in other countries where the device is in use. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Getting a device listed on Israel&#146;s four major Sick Funds (health insurance entities) is also necessary in order for Israeli hospitals
and health care providers to order such products. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot intends to apply for a license from the MOH for each of its medical devices.
There is no guarantee that Microbot will be granted licenses for its pipeline products and failure to obtain such licenses would adversely affect its ability to grow its business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Employees </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot currently has two
full-time employees and one part time employee, each of whom is based in its principal executive office located in Yokneam, Israel. These employees oversee day-to-day operations of the Company supporting management and leading engineering,
manufacturing, intellectual property and administration functions of the Company. As required, Microbot also engages consultants to provide services to the Company, including regulatory, legal and corporate services. Microbot has no unionized
employees. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot currently plans to hire an additional 6-8 full-time employees within the next 12 months, whose principal
responsibilities will be the support of its operational, research and development, and clinical development activities. In addition, Microbot intends to hire a chief financial officer after consummation of the Merger. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Facilities </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s principal
executive office is located in premises of approximately 1,840 square feet at 5 Hamada Street, 2<SUP STYLE="font-size:85%; vertical-align:top">nd</SUP> Floor, Yokneam, Israel. Microbot believes that this facility is adequate for its current needs.
Microbot </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">124 </P>


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plans to relocate to a larger facility 12-18 months after the consummation of the Merger, which will provide the space and infrastructure necessary to accommodate its development work based on
its current operating plan. Microbot does not own any real property. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Legal Matters </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is not currently a party in any legal or governmental regulatory proceedings nor is Microbot currently aware of any pending or
potential legal or governmental regulatory proceedings proposed to be initiated against us that would have a material adverse effect on its business, financial condition or operating results. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Corporate Information </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s
principal executive office is located at 5 Hamada St. 2<SUP STYLE="font-size:85%; vertical-align:top">nd</SUP> Floor, Yokneam Israel. Microbot&#146;s telephone number is +972 (0)&nbsp;4 820 0710. Microbot maintains a website at
<U>www.microbotmedical.com</U>. Microbot&#146;s website, and the information contained therein, is not part of this proxy statement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">125 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_75"></A>MICROBOT MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>The following discussion and analysis of financial condition and results of operations should
be read together with Microbot&#146;s financial statements and the related notes appearing elsewhere in this proxy statement. In addition to historical information, the following discussion contains forward-looking statements that involve risks and
uncertainties. Please see &#147;Cautionary Note Regarding Forward-Looking Statements&#148; on page 49 for additional factors relating to such statements, and see &#147;Risk Factors&#150;Risks Relating to Microbot,&#148; beginning on page 29 for a
discussion of certain risk factors applicable to Microbot&#146;s business, financial condition and results of operation. Operating results are not necessarily indicative of results that may occur in future periods. </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Overview </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is a pre-clinical
medical device company specializing in the research, design and development of next generation micro-robotics assisted medical technologies targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its micro-robotic
technologies with the goal of improving surgical outcomes for patients. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot is currently developing its first two product
candidates: the Self Cleaning Shunt, or SCS, for the treatment of hydrocephalus and Normal Pressure Hydrocephalus, or NPH; and TipCAT, a self-propelling, semi-disposable endoscope that is being developed initially for use in colonoscopy procedures.
Microbot&#146;s product candidates are being designed to bring greater functionality to conventional medical devices and to reduce the known risks associated with such devices. Microbot is currently aiming to complete pre-clinical or clinical data
collection for both product candidates within the next 24 months and is targeting approval or clearance for SCS by late 2018. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot
has no products approved for commercial sale and has not generated any revenues from product sales since its inception in 2010. From inception to June&nbsp;30, 2016, Microbot has raised net cash proceeds of approximately $5,178,000 to fund
operations, primarily from government grants, loans, and private placement offerings of debt and equity securities. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has never
been profitable and has incurred significant operating losses in each year since inception. Net losses for the six months ended June&nbsp;30, 2016 and 2015 were approximately $440,000 and $484,000, respectively, and net losses for the years ended
December&nbsp;31, 2015 and 2014 were approximately $921,000 and $1,021,000, respectively. Substantially all of Microbot&#146;s operating losses resulted from expenses incurred in connection with its research and development programs and from general
and administrative costs associated with its operations. As of June&nbsp;30, 2016, Microbot had a net working capital of approximately $670,000, consisting primarily of cash and cash equivalents. Microbot expects to continue to incur significant
expenses and increasing operating losses for at least the next several years as it continues the clinical development of, and seeks regulatory approval for its product candidates. Accordingly, Microbot will continue to require substantial additional
capital to continue its clinical development and potential commercialization activities. The amount and timing of Microbot&#146;s future funding requirements will depend on many factors, including the timing and results of its clinical development
efforts. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Estimated completion dates and costs for Microbot&#146;s clinical development and research programs can vary significantly for
each current and future product candidate and are difficult to predict. As a result, Microbot cannot estimate with any degree of certainty the costs it will incur in connection with development of its product candidates at this point in time.
Microbot anticipates it will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of early research
programs, results of ongoing and future clinical trials, its ability to enter into collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product
candidate&#146;s commercial potential. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">126 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Recent Developments </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On August&nbsp;15, 2016, Microbot entered into the Merger Agreement pursuant to which it will merge with Merger Sub, a wholly-owned subsidiary
of StemCells in an all-stock transaction. Subject to the terms and conditions of the Merger Agreement, at the closing of the transaction, Microbot will be a wholly owned subsidiary of StemCells, which is expected to be renamed &#147;Microbot Medical
Inc.&#148; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a condition to the completion of the Merger, Microbot will conduct one or more private capital raises prior to the
consummation of the Merger, pursuant to which Microbot is required to raise proceeds of at least $4.0 million. Microbot expects the proceeds from this financing, together with its existing cash and cash equivalents, to fund the combined
company&#146;s operations for at least 18 months after the closing of the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the closing of the Merger, StemCells
stockholders will own approximately 5% of the combined company, with the remaining 95% of the combined company ownership comprised 75% of existing Microbot shareholders and 20% by certain advisors (which includes an existing Microbot shareholder)
pursuant to Section&nbsp;5.29 of the Merger Agreement. The transaction has been approved by the board of directors of both companies and the shareholders of Microbot are scheduled to vote on the Merger on September&nbsp;14, 2016. The Merger is
expected to close in the fourth quarter of 2016, subject to the approval of the stockholders of StemCells and other customary closing conditions, which are described in &#147;The Merger Agreement&#148; beginning on page 71. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with the Merger, Microbot will be deemed to be the accounting acquirer because the shareholders of Microbot will effectively
control the combined company following the Merger. The Merger will be treated as a reverse acquisition. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Financial Operations Overview </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Research and Development Expenses </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Research and development expenses consist primarily of salaries and related expenses and overhead for Microbot&#146;s research, development and
engineering personnel, prototype materials and research studies. Microbot expenses its research and development costs as incurred. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General and
Administrative Expenses </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">General and administrative expenses consist primarily of the costs associated with management costs,
obtaining and maintaining Microbot&#146;s patent portfolio, professional fees for accounting, auditing, consulting and legal services, and allocated overhead expenses. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot expects that its general and administrative expenses may increase in the future as it expands its operating activities, maintains and
expands its patent portfolio and incurs additional costs associated with the Merger, the preparation of becoming a public company and maintaining compliance with exchange listing and SEC requirements. Microbot expects these potential increases will
likely include management costs, legal fees, accounting fees, directors&#146; and officers&#146; liability insurance premiums and expenses associated with investor relations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Income Taxes </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has
incurred net losses and has not recorded any income tax benefits for the losses. It is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for
the tax losses to be utilized in the future. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Critical Accounting Policies and Significant Judgments and Estimates </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s management&#146;s discussion and analysis of its financial condition and results of operations are based on its financial
statements, which have been prepared in accordance with U.S. generally accepted accounting </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">127 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
principles, or GAAP. The preparation of these financial statements requires Microbot to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the
disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, Microbot evaluates its estimates and judgments, including those related to accrued research and development expenses. Microbot bases its
estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">While Microbot&#146;s significant accounting policies are described in more detail in the notes to its financial statements appearing
elsewhere in this proxy statement, Microbot believes the following accounting policies are the most critical for fully understanding and evaluating its financial condition and results of operations. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Foreign Currency Translation </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s functional currency is the U.S. dollars, and its reporting currency is the U.S. dollar. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Government Grant and Input Tax Credit Recoveries </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot from time to time has received, and may in the future continue to receive, grants from the Israeli Office of the Chief Scientist to
cover eligible company expenditures. These are presented as other income in the statement of operations and comprehensive loss as the grant funds are used for or applied towards a number of Microbot&#146;s operating expenses, such as salaries and
benefits, research and development and professional and consulting fees. The recoveries are recognized in the corresponding period when such expenses are incurred. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Research and Development Expenses </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot recognizes research and development expenses as incurred, typically estimated based on an evaluation of the progress to completion of
specific tasks using data such as clinical site activations, manufacturing steps completed, or information provided by vendors on their actual costs incurred. Microbot determines the estimates by reviewing contracts, vendor agreements and purchase
orders, and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. These estimates are made as of each
balance sheet date based on facts and circumstances known to Microbot at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, Microbot will adjust the estimate accordingly. Nonrefundable
advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are capitalized as prepaid expenses and
recognized as expense in the period that the related goods are consumed or services are performed. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot may pay fees to third-parties
for manufacturing and other services that are based on contractual milestones that may result in uneven payment flows. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of
the research and development expense. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">128 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Results of Operations </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Comparison of Six Months Ended June&nbsp;30, 2016 and 2015 </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table sets forth the key components of Microbot&#146;s results of operations for the six months ended June&nbsp;30, 2016 and 2015
(in thousands): </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six Months<BR>Ended<BR>June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Increase/<BR>(Decrease)</B></TD>
<TD VALIGN="bottom" ROWSPAN="2">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and Development Expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">263</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">462</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(199</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and Administrative Expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">140</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">109</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Financing Expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(9</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">47</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Research and Development Expenses</I>.&nbsp;&nbsp;&nbsp;&nbsp;Microbot&#146;s research and development
expenses were approximately $263,000 for the six months ended June&nbsp;30, 2016, compared to approximately $462,000 for the same period in 2015. The decrease in research and development expenses of approximately $199,000 in 2016 was primarily due
to a slowdown in activities while management concentrated on the Merger and a potential capital raise. Microbot expects its research and development expenses to increase over time as Microbot advances its development programs and begins pre-clinical
and clinical trials for SCS and TipCAT. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>General and Administrative Expenses</I>.&nbsp;&nbsp;&nbsp;&nbsp;General and administrative
expenses were approximately $140,000 for the six months ended June&nbsp;30, 2016, compared to approximately $31,000 for the same period in 2015. The increase in general and administrative expenses of approximately $109,000 in 2016 was primarily due
to increased fees paid for management consulting services. Microbot believes its general and administrative expenses may increase over time as it advances its programs, increases its headcount and operating activities and incurs expenses associated
with being a public company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Financing Expenses</I>.&nbsp;&nbsp;&nbsp;&nbsp;Financing expenses were approximately $38,000 for the six
months ended June&nbsp;30, 2016, compared to income of approximately $9,000 for the same period in 2015. The increase in interest expenses of $47,000 in 2016 was primarily due to the revaluation of Microbot&#146;s convertible loans and currency
exchange differences. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Comparison of the Years Ended December&nbsp;31, 2015 and 2014 </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table sets forth the key components of Microbot&#146;s results of operations for the years ended December&nbsp;31, 2015, 2014 (in
thousands): </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change&nbsp;in<BR>2015<BR>Versus&nbsp;2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and Development Expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">823</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">837</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1.67</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and Administrative Expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">92</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">65</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">41.53</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Financing Expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">119</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(95</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Research and Development Expenses.&nbsp;&nbsp;&nbsp;&nbsp;</I>Research and development expenses, net for
the fiscal year ended December&nbsp;31, 2015 was $822,759, compared to $836,698 for the fiscal year ended December&nbsp;31, 2014, a decrease of approximately $14,000 or 1.67%. This decrease was primarily attributable to a decrease in expenses
relating to the submission of new and maintenance of existing patents and professional services. A portion of Microbot&#146;s research and development expenses are paid for through grants received from time to time from the Office of Chief Scientist
of the State of Israel. For the fiscal year ended December&nbsp;31, 2015, Microbot received grants totaling $201,388, compared to grants totaling $429,633 for the fiscal year ended December&nbsp;31, 2014. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">129 </P>


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<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Research and development expenses by major programs or categories were as follows (in thousands):
</P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="68%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Change&nbsp;in<BR>2015<BR>Versus&nbsp;2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Wages and related expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">465</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">480</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3.1</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">365</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">537</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(32.0</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Patents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">116</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(68.1</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">158</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">134</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(17.9</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,025</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,267</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(19.1</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Less grants received from Chief Scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(201</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(429</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(53.1</TD>
<TD NOWRAP VALIGN="bottom">)%&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">824</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">838</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>General and Administrative Expenses</I>.&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses for the
fiscal year ended December&nbsp;31, 2015 was $92,018, compared to $65,113 for the fiscal year ended December&nbsp;31, 2014, an increase of approximately $27,000, or 41.5%. This increase was primarily attributable to an increase in accounting and
auditor services relating to a possible going-public transaction and capital raise in 2015. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>Financing
Expenses</I>.&nbsp;&nbsp;&nbsp;&nbsp;Financing expenses, net for the fiscal year ended December&nbsp;31, 2015 was approximately $6,000, compared to approximately $119,000 for the fiscal year ended December&nbsp;31, 2014. Interest expense consists
primarily of bank fees and interest, and currency exchange differences. The decrease in interest expense in 2015 over 2014 was due to primarily to currency exchange differences, as well as to a lesser extent on accumulated interest on outstanding
convertible loans. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Liquidity and Capital Resources </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has incurred losses since inception and negative cash flows from operating activities for the six months ended June&nbsp;30, 2016 and
2015 and for the years ended December&nbsp;31, 2015 and 2014. As of June&nbsp;30, 2016, Microbot had a net working capital of approximately $671,000, consisting primarily of cash and cash equivalents. Microbot anticipates that it will continue to
incur net losses for the foreseeable future as it continues research and development efforts of its product candidates, hires additional staff, including clinical, scientific, operational, financial and management personnel, and incurs additional
costs associated with being a public company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has funded its operations through the issuance of capital stock, grants from the
Israeli Office of the Chief Scientist, and convertible debt. As of June&nbsp;30, 2016, Microbot had raised total net cash of $5,178,125, which was comprised of $3,121,958 upon the issuance of capital shares, a $200,000 strategic investment from
Johnson&nbsp;&amp; Johnson (non-equity and non-dilutive), approximately $1,162,000 upon the sale of convertible promissory notes in 2015 and 2016, and three grants from the Israeli Office of the Chief Scientist totaling $893,673. As of June&nbsp;30,
2016, Microbot had a shareholders&#146; deficit of $504,493 and has incurred a total cumulative loss of $4,421,335 from inception (November 2010) to June&nbsp;30, 2016 (which reflects a net cumulative loss of $3,626,451, after a deduction of the
Chief Scientist grants which totaled $794,884). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s independent registered public accounting firm included an explanatory
paragraph in its report on Microbot&#146;s financial statements as of and for the year ended December&nbsp;31, 2015, describing the continuation of Microbot&#146;s activities and its ability to fulfill its obligations as dependent upon its ability
to receive financing from its shareholders or new investors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot plans to continue to fund its research and development and other
operating expenses, and the associated losses from operations, through working capital obtained from the Microbot Private Placement, future </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">130 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
issuances of debt and/or equity securities and potential collaborations or strategic partnerships with other entities. Microbot also expects to apply for additional grants from the Israeli Office
of the Chief Scientist. The capital raises from issuances of convertible debt and equity securities could result in additional dilution to Microbot&#146;s shareholders. In addition, to the extent Microbot determines to incur additional indebtedness,
Microbot&#146;s incurrence of additional debt could result in debt service obligations and operating and financing covenants that would restrict its operations. Microbot can provide no assurance that financing will be available in the amounts it
needs or on terms acceptable to it, if at all. If Microbot is not able to secure adequate additional working capital when it becomes needed, Microbot may be required to make reductions in spending, extend payment terms with suppliers, liquidate
assets where possible and/or suspend or curtail planned research programs. Any of these actions could materially harm Microbot&#146;s business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Cash Flows </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table
provides a summary of the net cash flow activity for each of the periods set forth below (in thousands): </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="65%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;Month<BR>Ended<BR>June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year Ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash used in operating activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(346</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(405</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(765</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(1,063</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net cash provided by financing activities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">750</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,503</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net increase (decrease) in cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">404</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(407</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(354</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">432</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Comparison of the Six Months Ended June&nbsp;30, 2016 and 2015 </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Cash used in operating activities for the six months ended June&nbsp;30, 2016 was approximately $346,000, calculated by adjusting net loss from
operations by approximately $94,000 to eliminate non-cash and expense items not involving cash flows such as depreciation and accumulated interest on convertible loans, as well as other changes in assets and liabilities resulting in non-cash
adjustments in the income statement. Cash used in operating activities for the six months ended June&nbsp;30, 2015 was approximately $484,000, similarly adjusted by approximately $79,000. Net cash provided by financing activities of $750,000 for the
six months ended June&nbsp;30, 2016 consisted of proceeds from the sale of convertible promissory notes to existing shareholders of Microbot, compared to $nil in the six months ended June&nbsp;30, 2015. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Comparison of the Years Ended December&nbsp;31, 2015 and 2014 </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Cash used in operating activities for the year ended December&nbsp;31, 2015 was approximately $764,000, calculated by adjusting net loss from
operations by approximately $156,000 to eliminate non-cash and expense items not involving cash flows such as depreciation and accumulated interest on convertible loans, as well as other changes in assets and liabilities resulting in non-cash
adjustments in the income statement. Cash used in operating activities for the year ended December&nbsp;31, 2014 was approximately $1,063,000, similarly adjusted by approximately $(42,000). Net cash provided by financing activities of $412,494 for
the year ended December&nbsp;31, 2015 consisted of proceeds from the sale of convertible promissory notes to existing shareholders of Microbot. Net cash provided by financing activities of approximately $1,500,000 for the year ended
December&nbsp;31, 2014 consisted of net proceeds from the exercise of outstanding warrants for shares of the Series A Preferred Stock of Microbot. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Operating Capital Requirements </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">To
date, Microbot has not generated any revenues, and does not have any approved products. Microbot does not know when, or if, it will generate any revenue. Microbot does not expect to generate significant revenue unless and until it obtains regulatory
approval of and commercialize one of its current or future product candidates. Microbot anticipates that it will continue to incur losses for the foreseeable future, and it expects the losses to </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">131 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
increase as it continues the development of, and seeks regulatory approvals for, its product candidates, and begins to commercialize any approved products. Microbot is subject to all of the risks
incident to the development of new medical devices, and it may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. Upon closing of the Merger, Microbot expects to incur
additional costs associated with operating as a public company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Based upon Microbot&#146;s operating plans, Microbot does not currently
have sufficient working capital to fund planned operating expenses for at least 12 months without additional cash. However, as a condition to the completion of the Merger, Microbot will conduct one or more private capital raises prior to the closing
of the Merger, pursuant to which Microbot would raise at least $4.0 million in aggregate. Microbot expects the proceeds from this financing to fund the combined company&#146;s operations for at least 18 months after the closing of the Merger.
Microbot will require additional capital to complete the development, regulatory approval and, if approved, commercialization of SCS and TipCAT, and may also need to raise additional funds to pursue other development activities related to additional
product candidates. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Until such time, if ever, as Microbot can generate substantial revenues, it expects to finance its cash needs through
a combination of equity or debt financings, collaborations, strategic partnerships or licensing arrangements, and Israeli government grants. In any event, Microbot does not expect to achieve revenue prior to the use of cash resulting from the
private placement. Other than with respect to the Microbot Private Placement, Microbot does not have any committed external sources of funds. Additional capital may not be available on reasonable terms, if at all. To the extent that Microbot raises
additional capital through the sale of stock or convertible debt securities, the ownership interest of its shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights
of its common shareholders. Debt financing, if available, may involve agreements that include increased fixed payment obligations and covenants limiting or restricting Microbot&#146;s ability to take specific actions, such as incurring additional
debt, making capital expenditures, declaring dividends, selling or licensing intellectual property rights and other operating restrictions that could adversely impact its ability to conduct its business. If Microbot raises additional funds through
collaborations, strategic partnerships or licensing arrangements with third parties, it may have to relinquish valuable rights to its product candidates, intellectual property, future revenue streams or research programs, or grant licenses on terms
that may not be favorable to it. If Microbot is unable to raise additional funds when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and
commercialize its product candidate to others. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Promissory Notes </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of June&nbsp;30, 2016, Microbot had outstanding convertible promissory notes with an aggregate principal amount of $1,162,000. Of such
promissory notes, an aggregate principal amount of $412,000 were issued October 2015 with a maturity date of July&nbsp;8, 2016 (the &#147;October 2015 Notes&#148;), and the remaining aggregate principal amount of $750,000 were issued in May 2016
with a maturity date of November&nbsp;11, 2017 (the &#147;May 2016 Notes&#148;). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The October 2015 Notes had an interest rate of 10%, and
at maturity converted into an aggregate of 452,650 Series A Preferred Shares and warrants to purchase an aggregate of 452,650 Series A Preferred Shares at an exercise price of $1.00 per share. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The May 2016 Notes have an interest rate of 10%&nbsp;per annum, payable with the principal on the maturity date. The May 2016 Notes will
convert into equity upon the earlier to occur of a &#147;reverse merger&#148; (which would include the Merger) and a &#147;qualified financing&#148; resulting in $2 million or greater gross proceeds, each at a 20% discount to the applicable
valuation. Microbot may also trigger a conversion upon the maturity date at a 20% discount to a deemed valuation of $15 million. The May 2016 Notes also permit prepayment under certain conditions. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">132 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Off Balance Sheet Arrangements </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Quantitative and Qualitative Disclosures about the Market Risk of Microbot </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Interest Rate Risk </I></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot&#146;s cash
and cash equivalents as of June&nbsp;30, 2016 consisted of readily available checking and money market funds. Microbot&#146;s primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S.
interest rates. However, because of the short-term nature of the instruments in Microbot&#146;s portfolio, a sudden change in market interest rates would not be expected to have a material impact on Microbot&#146;s financial condition and/or results
of operations. Microbot does not believe that its cash or cash equivalents have significant risk of default or illiquidity. While Microbot believes its cash and cash equivalents do not contain excessive risk, Microbot cannot provide absolute
assurance that in the future its investments will not be subject to adverse changes in market value. In addition, Microbot maintains significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of
federally insured limits. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>Effects of Inflation </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Inflation generally affects Microbot by increasing its clinical trial costs. Microbot does not believe that inflation and changing prices had a
significant impact on its results of operations for any periods presented herein. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">133 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_76"></A>THE SPECIAL MEETING OF STEMCELLS STOCKHOLDERS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Date, Time and Place </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells
special meeting will be held on October [&#9679;], 2016, at 2:00 p.m., local time, at 39899 Balentine Drive, Suite 200, Newark, CA 94560. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Purpose of
the StemCells Special Meeting </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells special meeting will be held for the following purposes: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">To approve the proposal to adopt the Merger Agreement and the transactions contemplated thereby; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">To approve the Share Issuance Proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">3.</TD>
<TD ALIGN="left" VALIGN="top">To approve the Reverse Stock Split Proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">4.</TD>
<TD ALIGN="left" VALIGN="top">To approve the Authorized Shares Increase Proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">5.</TD>
<TD ALIGN="left" VALIGN="top">To approve the Name Change Proposal; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">6.</TD>
<TD ALIGN="left" VALIGN="top">To approve the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the StemCells Merger Proposals; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">7.</TD>
<TD ALIGN="left" VALIGN="top">To conduct any other business as may properly come before the StemCells special meeting or any adjournment or postponement thereof. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>StemCells Record Date; Shares Entitled to Vote; Principal Accountants </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells has fixed [&#9679;], 2016 as the record date for the determination of stockholders entitled to notice of,
and to vote at, the StemCells special meeting and any adjournment or postponement thereof. Only holders of record of shares of StemCells common stock at the close of business on the record date are entitled to notice of, and to vote at, the
StemCells special meeting. At the close of business on the record date, StemCells had outstanding and entitled to vote [&#9679;] shares of common stock. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The StemCells common stock is the only class of securities entitled to vote at the StemCells special meeting. Each share of StemCells common
stock outstanding on the StemCells record date entitles the holder thereof to one vote on each matter properly brought before the StemCells special meeting, exercisable in person or by proxy. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A representative from Grant Thornton is not expected to be present at the special meeting. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Quorum </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In order to conduct the business
described above at the StemCells special meeting, StemCells must have a quorum present. Stockholders who hold a majority of the StemCells common stock outstanding as of the close of business on the record date for the StemCells special meeting must
be present, either in person or by proxy, in order to constitute a quorum to conduct business at the StemCells special meeting. As of the StemCells record date, there were [&#9679;] shares of StemCells common stock outstanding and entitled to vote
at the StemCells special meeting. Accordingly, the presence, in person or by proxy, of the holders of [&#9679;] shares of StemCells common stock will be required in order to establish a quorum. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Required Vote </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The proposals being
submitted for approval by the StemCells stockholders at the StemCells special meeting will be approved or rejected on the basis of certain specific voting thresholds. In particular: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the approval of the Merger Agreement Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter, either in person or by
proxy, at the StemCells special meeting; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">134 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the approval of the Share Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock cast on the matter, either in person or by proxy, at the StemCells special
meeting; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the approval of the Reverse Stock Split Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter, either in person or by
proxy, at the StemCells special meeting; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the approval of the Authorized Shares Increase Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter, either in person
or by proxy, at the StemCells special meeting; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the approval of the Name Change Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter, either in person or by proxy at
the StemCells special meeting; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the approval of the adjournment of the StemCells special meeting, if necessary, to solicit proxies if there are not sufficient votes in favor of the StemCells Merger Proposals, requires the affirmative vote of the
holders of a majority of the StemCells common stock cast on the matter either in person or by proxy at the StemCells special meeting. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Approval of the Merger Agreement Proposal, the Share Issuance Proposal, the Reverse Stock Split Proposal, and the Authorized Shares
Increase Proposal are required for the completion of the Merger. If any of these proposals are not approved by the StemCells stockholders, the Merger may not be completed. </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Counting of Votes; Treatment of Abstentions and Incomplete Proxies </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If a StemCells stockholder fails to submit a proxy card and fails to vote at the StemCells special meeting, such stockholder&#146;s shares will
not be counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the StemCells special meeting, and will have no effect on the outcome of Proposals No.&nbsp;2 (Share Issuance Proposal) and
No.&nbsp;6 (adjournment to solicit additional proxies, if necessary). However, the failure to submit a proxy card or vote at the StemCells special meeting will have the same effect as voting &#147;AGAINST&#148; Proposals No.&nbsp;1 (Merger Agreement
Proposal), No.&nbsp;3 (Reverse Stock Split Proposal), No.&nbsp;4 (Authorized Shares Increase Proposal), and No.&nbsp;5 (Name Change Proposal). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If a StemCells stockholder submits a proxy card and affirmatively elects to abstain from voting, that proxy will be counted as present for the
purpose of determining the presence of a quorum for the StemCells special meeting, but will not be voted at the StemCells special meeting. As a result, such abstention will have the same effect as voting &#147;AGAINST&#148; StemCells Proposal Nos.
1, 2, 3, 4, 5, and 6. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If a StemCells stockholder submits a proxy card without indicating how such stockholder wishes to vote, the shares
of StemCells common stock represented by such proxy card will be counted as present for the purpose of determining the presence of a quorum for the StemCells special meeting and all of such shares will be voted &#147;FOR&#148; Proposal Nos. 1, 2, 3,
4, 5, and 6. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Voting by StemCells Directors and Executive Officers In connection with the execution and delivery of the Merger Agreement,
on August&nbsp;15, 2016, current and former directors and certain executive officers of StemCells entered into the StemCells Stockholder Voting Agreements pursuant to which each has agreed to vote the shares of StemCells common stock owned as of the
record date of the StemCells&#146; special meeting in favor of the StemCells Merger Proposals. These voting agreements cover approximately 1% of StemCells common stock outstanding on the record date for the StemCells special meeting. Voting of
Proxies by Registered Holders </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Giving a proxy means that a StemCells stockholder authorizes the persons named in the enclosed proxy card
to vote the stockholder&#146;s shares at the StemCells special meeting in the manner such stockholder directs. If you </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">135 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
are a registered StemCells stockholder (that is, you hold your stock in your own name), you may vote in person at the StemCells special meeting or vote by completing and returning the enclosed
proxy card. Whether or not you plan to attend the StemCells special meeting, StemCells urges you to vote by proxy to ensure that your vote is counted. You may still attend the StemCells special meeting and vote in person even if you have already
voted by proxy. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>By mail.</B> You may vote by mailing your signed StemCells proxy card in the enclosed return envelope. Please provide
your proxy instructions only once and as soon as possible so that your shares can be voted at the StemCells special meeting. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>By
Internet or by telephone</B>.<B> </B>Follow the instructions on the StemCells proxy card to vote by Internet or telephone. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>In person
at the meeting.</B> If you attend the StemCells special meeting, you may deliver your completed StemCells proxy card in person or you may vote by completing a ballot, which will be available at the meeting. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Shares Held in Street Name </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If your
shares of StemCells common stock are held in street name in a stock brokerage account or by another nominee, you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions
provided by your broker or other nominee. You may not vote shares of StemCells common stock held in street name by returning a proxy card directly to StemCells or by voting in person at the StemCells special meeting unless you provide a &#147;legal
proxy,&#148; which you must obtain from your broker or other nominee. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Brokers or other nominees who hold shares of StemCells common stock
in street name for a beneficial owner typically have the authority to vote in their discretion on &#147;routine&#148; proposals, even when they have not received instructions from beneficial owners. However, brokers or other nominees are not allowed
to exercise their voting discretion on matters that are determined to be &#147;non-routine&#148; without specific instructions from the beneficial owner. None of the proposals being voted on at StemCells&#146; special stockholder meeting will be
classified as &#147;routine.&#148; &#147;Broker non-votes&#148; are shares held by a broker or other nominee that are represented at the StemCells special meeting, but with respect to which the broker or other nominee is not instructed by the
beneficial owner of such shares to vote on the particular proposal and the broker or other nominee does not have discretionary voting power on such proposal. Therefore, if you are a StemCells stockholder and hold your shares in street name, you
should instruct your broker or other nominee on how to vote your shares to ensure that your shares are voted with respect to each of the StemCells Merger Proposals. &#147;Broker non-votes&#148; will be counted for purposes of determining whether a
quorum exists at the StemCells special meeting. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Revocability of Proxies and Changes to a StemCells Stockholder&#146;s Vote </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If you are a StemCells stockholder and wish to change your vote with respect to any proposal, you may do so by revoking your proxy at any time
prior to the commencement of voting with respect to such proposal at the StemCells special meeting by: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">sending a written notice stating that you would like to revoke your proxy to StemCells&#146; President at StemCells, Inc., 39899 Balentine Drive, Suite 200, Newark, CA 94560; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">submitting new proxy instructions on a new proxy card with a later date; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">if you have voted by Internet or telephone, by casting a new vote over the Internet or by telephone as instructed above; or </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">attending the StemCells special meeting and voting in person (but note that your attendance alone will not revoke your proxy). </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">136 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B></B>If you are a StemCells stockholder of record, revocation of your proxy or voting
instructions by written notice must be received by StemCells&#146; President by no later than the close of business on October [&#9679;], 2016, although you may also revoke your proxy by attending the StemCells special meeting and voting in person.
<B>However, if your shares are held in street name by a broker or other nominee and you have instructed such broker or other nominee to vote your shares, you must follow directions received from your broker or other nominee in order to change those
voting instructions.</B>&nbsp;<B> </B></P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Solicitation of Proxies </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells will bear the cost and expense of preparing, assembling, printing, and mailing this proxy statement, any amendments thereto, the
proxy card, and any additional information furnished to the StemCells stockholders. StemCells will bear any fees paid to the SEC in connection with the filing of this proxy statement. StemCells may also reimburse brokerage houses and other
custodians, nominees, and fiduciaries for their costs of soliciting and obtaining proxies from beneficial owners of StemCells common stock, including the costs of reimbursing brokerage houses and other custodians, nominees, and fiduciaries for their
costs of forwarding this proxy statement and other solicitation materials to such beneficial owners. In addition, proxies may be solicited without extra compensation by directors, officers, and employees of each of StemCells by mail, telephone, fax,
or other methods of communication. StemCells has retained Okapi Partners to assist StemCells in the solicitation of proxies from the StemCells stockholders in connection with the StemCells special meeting. Okapi will receive an initial start-up
payment of $6,500 and a per unit fee for each call completed and each vote obtained as compensation for its services, plus reimbursement of out of pocket expenses. StemCells has agreed to indemnify Okapi against certain liabilities arising out of or
in connection with its engagement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Delivery of Proxy Materials to Households Where Two or More StemCells Stockholders Reside </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements
with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as &#147;householding,&#148; potentially means extra convenience
for stockholders and cost savings for companies. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In connection with the StemCells special meeting, a number of brokers with account
holders who are StemCells stockholders will be householding StemCells&#146; proxy materials. As a result, a single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the
applicable stockholders. Once a StemCells stockholder receives notice from its broker that they will be householding communications to such stockholder&#146;s address, householding will continue until such stockholder is notified otherwise or until
such stockholder revokes its consent. If, at any time, a StemCells stockholder no longer wishes to participate in householding and would prefer to receive a separate proxy statement, such stockholder should notify its broker or contact
StemCells&#146; President at StemCells, Inc., 39899 Balentine Drive, Suite 200, Newark CA 94560. StemCells stockholders who currently receive multiple copies of this proxy statement at their address and would like to request householding of their
communications should contact their broker. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Attending the StemCells Special Meeting </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">All StemCells stockholders as of the StemCells record date, or their duly appointed proxies, may attend the StemCells special meeting. If you
are a registered StemCells stockholder (that is, if you hold your stock in your own name) and you wish to attend the StemCells special meeting, please bring your proxy and evidence of your stock ownership, such as your most recent account statement,
to the StemCells special meeting. You should also bring valid picture identification. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If your shares are held in street name in a stock
brokerage account or by another nominee and you wish to attend the StemCells special meeting, you need to bring a copy of a brokerage or bank statement to the StemCells special meeting reflecting your stock ownership as of the StemCells record date.
You should also bring valid picture identification. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">137 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_77"></A>STEMCELLS PROPOSALS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_78"></A>Proposal No.&nbsp;1: To approve and adopt the Merger Agreement, and approve the transactions contemplated thereby </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells is asking its stockholders to consider and vote on a proposal to adopt the Merger Agreement and approve the transactions contemplated
thereby, including the Merger of Merger Sub with and into Microbot, with Microbot as the surviving corporation and a direct, wholly-owned subsidiary of StemCells. StemCells stockholders should carefully read this proxy statement in its entirety for
more detailed information concerning the Merger Agreement and the transactions contemplated thereby. In particular, StemCells stockholders are directed to the Merger Agreement, which is attached as Annex A to this proxy statement. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Required Vote; Recommendation to StemCells Stockholders </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Approval of the Merger Agreement Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock
outstanding and entitled to vote on the matter, either in person or by proxy, at the StemCells special meeting. For purposes of the vote on this Merger Agreement Proposal, an abstention, a &#147;broker non-vote,&#148; or a failure to submit a proxy
card or vote at the StemCells special meeting will have the same effect as voting &#147;AGAINST&#148; this Merger Agreement Proposal. </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE BOARD OF DIRECTORS OF STEMCELLS UNANIMOUSLY RECOMMENDS A VOTE &#147;FOR&#148; THE MERGER AGREEMENT PROPOSAL. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_79"></A>Proposal No.&nbsp;2: To approve of the issuance of StemCells&#146; common stock in connection with the Merger to advisors and to
shareholders of Microbot, in each case as contemplated by the Merger Agreement. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the effective time of the Merger, without any
action on the part of the holders of Microbot capital stock, each then-outstanding share of Microbot capital stock will be automatically converted into the right to receive a number of shares of StemCells common stock equal to the Exchange Ratio, as
such ratio is calculated pursuant to the formula set forth in the Merger Agreement (see the section entitled &#147;The Merger Agreement &#151; Merger Consideration&#148;). In addition, at the closing of the Merger, StemCells will grant its common
stock to certain advisors as compensation for their work with respect to the Merger. The Exchange Ratio is based on the number of shares of StemCells common stock (after giving effect to the Reverse Stock Split described in Proposal No.&nbsp;3 and
including all shares of StemCells common stock issuable upon the conversion of any StemCells convertible security and shares of StemCells common stock to be issued to certain advisors with respect to the Merger representing, in the aggregate, 20% of
StemCells&#146; post-closing capitalization) and Microbot capital stock outstanding, in each case calculated on a fully diluted basis immediately prior to the completion of the Merger, and will not be determined until that time. Accordingly, any
changes in the number of shares of outstanding capital stock of either StemCells or Microbot prior to the completion of the Merger would result in a corresponding change to the Exchange Ratio. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As a result, upon completion of the Merger, Microbot shareholders are expected to receive shares of StemCells common stock representing an
aggregate of approximately 75% of the outstanding shares of common stock of the combined company, calculated on a fully diluted basis. The Merger will have no effect on the number of shares of StemCells common stock held by current StemCells
stockholders as of immediately prior to the completion of the Merger (subject to any changes in outstanding shares of StemCells common stock as a result of the proposed reverse stock split described in the Reverse Stock Split Proposal below). It is
expected that upon completion of the Merger, such shares will represent an aggregate of approximately 5% of the outstanding shares of common stock of the combined company calculated on a fully diluted basis. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Required Vote; Recommendation of the StemCells Board of Directors </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Approval of this Share Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock
cast on the matter, either in person or by proxy, at the StemCells special </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">138 </P>


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meeting. A failure to submit a proxy card or vote at the StemCells special meeting will result in your shares not being counted as present for the purpose of determining the presence of a quorum,
which is required to transact business at the StemCells special meeting, and will have no effect on the outcome of this Share Issuance Proposal. However, for purposes of the vote on this Share Issuance Proposal, an abstention will be counted as
present for the purpose of determining a quorum, but will have the same effect as voting &#147;AGAINST&#148; this Share Issuance Proposal, and a &#147;broker non-vote&#148; will have no effect on the outcome of this Share Issuance Proposal. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_80"></A>Proposal No.&nbsp;3: To amend StemCells&#146; restated certificate of incorporation to effect a reverse stock split of
StemCells&#146; issued and outstanding common stock within the range of one-for-[</B>&#9679;<B></B><B>] to one-for-[</B>&#9679;<B></B><B>] (with the exact amount to be determined by StemCells&#146; Board of Directors prior to the completion of the
Merger) </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Overview </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146; Board of Directors has unanimously adopted a resolution declaring advisable and recommending to the stockholders for their
approval a proposal to amend the company&#146;s restated certificate of incorporation, as amended to date, to effect a reverse stock split of StemCells&#146; issued and outstanding common stock at any whole number ratio between, and inclusive of,
one-for-[&#9679;] and one-for-[&#9679;] (the &#147;Reverse Stock Split&#148;). Approval of this Proposal Number 3 would grant StemCells&#146; Board the authority, without further action by the stockholders, to carry out the Reverse Stock Split, at
any time within three months after the date stockholder approval for the Reverse Stock Split is obtained from the stockholders, with the exact exchange ratio and timing of the Reverse Stock Split (if at all) to be determined at StemCells&#146;
Board&#146;s discretion. The Board&#146;s decision whether or not (and when) to effect a Reverse Stock Split (and at what whole number ratio to effect the Reverse Stock Split) will be based on a number of factors, including market conditions,
existing and anticipated trading prices for our common stock and the continued listing requirements of the NASDAQ Capital Market. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A
sample form of the certificate of amendment relating to this Proposal Number 3, which StemCells would file with the Secretary of State of the State of Delaware to carry out the Reverse Stock Split, is attached to this proxy statement as Annex C.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As explained below, we are asking our stockholders to approve this Proposal Number 3 because we believe a Reverse Stock Split would
result in a higher price per share for StemCells outstanding shares of our common stock, which should enable us to maintain our listing on NASDAQ and allow the combined company to meet the initial listing standards of the NASDAQ Capital Market. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>What to Expect from a Reverse Stock Split </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If approved by StemCells&#146; stockholders and Board, the Reverse Stock Split would be implemented simultaneously for all of StemCells&#146;
then-outstanding common stock (the &#147;Old Shares&#148;) and the exchange ratio would be the same for all of our issued and outstanding shares of common stock. The Reverse Stock Split would affect all StemCells stockholders uniformly and would not
affect any stockholder&#146;s percentage ownership interests in StemCells, except to the extent that the Reverse Stock Split results in any of our stockholders owning a fractional share, because fractional shares would be rounded up to the nearest
whole share. The Exchange Ratio will be adjusted as a result of the Reverse Stock Split. Shares of common stock issued pursuant to the Reverse Stock Split (the &#147;New Shares&#148;) would remain fully paid and nonassessable. Outstanding derivative
securities exercisable for, or convertible into, our common stock would be proportionally adjusted, as would the exercise and conversion prices of those derivative securities. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Reasons for the Reverse Stock Split </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells approved the proposal authorizing the reverse stock split because it believes that a reverse stock split
will allow the combined company to satisfy the initial listing requirements of the NASDAQ Capital Market, which listing is a condition to the completion of the Merger, and the Board of </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">139 </P>


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Directors of StemCells also believes that the increased market price of StemCells common stock expected to result from the implementation of a reverse stock split may improve the marketability
and liquidity of StemCells common stock. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I>NASDAQ Requirements for Listing on the NASDAQ Capital Market </I></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells common stock is currently quoted on the NASDAQ Capital Market. According to applicable NASDAQ Listing Rules, in a transaction
constituting a &#147;reverse merger&#148; in which an issuer combines with a non-NASDAQ entity, resulting in a change of control of the issuer and potentially allowing the non-NASDAQ entity to obtain a NASDAQ listing, the issuer must apply for
initial inclusion on the applicable NASDAQ market. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Merger Agreement requires that StemCells use its reasonable best efforts to cause
the shares of StemCells common stock to be approved, at or prior to the completion of the Merger, for listing (subject only to notice of issuance) on the NASDAQ Capital Market at and following the completion of the Merger, and the listing of the
shares of StemCells common stock issuable pursuant to the Merger Agreement is a condition to both StemCells&#146; and Microbot&#146;s obligations to complete the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The listing standards of the NASDAQ Capital Market require, among other things, a $4.00 per share minimum bid upon completion of the Merger.
As of the date of the mailing of this proxy statement, StemCells has filed an initial listing application for the NASDAQ Capital Market in connection with the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells expects that a reverse stock split of StemCells common stock will increase the market price of StemCells
common stock so that the combined company is able to achieve the initial listing requirements for the NASDAQ Capital Market upon completion of the Merger and thereafter maintain compliance with the NASDAQ minimum bid price listing standard of $1.00
per share. In determining the exact ratio for the reverse stock split, StemCells intends to use a ratio from within the range of one-for-[&#9679;] to <FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">one-for-[&#9679;]</FONT></FONT>
that would result in a per share price of greater than $4.00 per share following the reverse stock split. Notwithstanding the foregoing, there can be no assurance that the market price per share following the Merger and the reverse stock split will
remain in excess of the minimum bid price for a sustained period of time. In addition, there can be no assurance that the StemCells common stock, or the common stock of the combined company following the completion of the Merger, will not be
delisted due to a failure to meet other continued listing requirements even if the market price per share of StemCells common stock on a post-reverse-stock-split basis remains in excess of the minimum bid requirement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Additionally, the Board of Directors of StemCells believes that a listing on the NASDAQ Capital Market for the shares of common stock of the
combined company may provide a broader market for the common stock of the combined company and facilitate the use of the common stock of the combined company in financing and other transactions. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Effects of the Reverse Stock Split </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the effective date of the reverse stock split, each StemCells stockholder will own a reduced number of shares of StemCells common
stock. However, the reverse stock split will affect all of the StemCells stockholders uniformly and will not, in and of itself, affect any StemCells stockholder&#146;s percentage ownership interests in StemCells, except to the extent that the
reverse stock split results in any of the StemCells stockholders owning a fractional share, as described below. Proportionate voting rights and other rights and preferences of the StemCells stockholders will not be affected by the reverse stock
split, in and of itself, except to the extent that the reverse stock split results in any of the StemCells stockholders owning a fractional share, as described below. For example, a holder of 2% of the voting power of the outstanding shares of
StemCells common stock immediately prior to the reverse stock split will continue to hold 2% of the voting power of the </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">140 </P>


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outstanding shares of StemCells common stock immediately following the reverse stock split and immediately prior to the completion of the Merger. The number of StemCells stockholders of record
will not be affected by the reverse stock split. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The amendment to the StemCells restated certificate of incorporation to effect the
reverse stock split, in and of itself, will not change the number of authorized shares of StemCells common stock. As a result, one of the effects of the reverse stock split will be to effectively increase the proportion of authorized shares of
StemCells common stock which are unissued relative to those which are issued. This effective increase will occur even if the proposal to amend the StemCells restated certificate of incorporation to increase the authorized shares of StemCells common
stock up to [&#9679;] shares, as described in Proposal No.&nbsp;4 below, is not approved. This could result in StemCells or the combined company having the ability to issue more shares without further stockholder approval. Neither StemCells nor
Microbot have any current plan, commitment, arrangement, understanding, or agreement, written or oral, to issue shares of StemCells common stock, other than (a)&nbsp;in connection with the Merger, (b)&nbsp;to satisfy obligations under outstanding
options to purchase shares of StemCells common stock, (c)&nbsp;to satisfy obligations under outstanding options and warrants to purchase Microbot capital stock as such options and warrants are exercised and (d)&nbsp;in connection with the conversion
of outstanding convertible promissory notes of Microbot, each of which, to the extent still outstanding at the closing, will be assumed by StemCells in connection with the Merger (as more fully described elsewhere in this proxy statement). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The reverse stock split will reduce the number of shares of StemCells common stock available for issuance under StemCells&#146; equity
incentive plans in proportion to the reverse stock split ratio selected within the range set forth in this proposal. Under the terms of the outstanding StemCells stock options, the reverse stock split will effect a reduction in the number of shares
of StemCells common stock issuable upon exercise of such outstanding stock options in proportion to the reverse stock split ratio and will effect a proportionate increase in the exercise price of such outstanding stock options. In connection with
the reverse stock split, the number of shares of StemCells common stock issuable upon exercise of outstanding StemCells stock options will be rounded down to the nearest whole share and no cash payment will be made in lieu of any fractional shares
of StemCells common stock that would otherwise be issuable pursuant to such options. The reverse stock split will not in and of itself change the value of a StemCells stock option. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells common stock is currently registered under Section&nbsp;12(b) of the Exchange Act, and StemCells is subject to the periodic
reporting and other requirements of the Exchange Act. The reverse stock split will not affect the registration of StemCells common stock under the Exchange Act. If the reverse stock split is implemented, and the combined company&#146;s initial
listing application with the NASDAQ Capital Market is approved, StemCells common stock will continue to be reported on the NASDAQ Capital Market under the symbol &#147;STEM&#148; (although NASDAQ will likely add the letter &#147;D&#148; to the end
of the trading symbol for a period of 20 trading days to indicate that the reverse stock split has occurred). It is expected that following the Merger, the trading symbol of the combined company will be changed. Microbot has requested the ticker
symbol &#147;MBOT&#148; for this purpose. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table provides estimates of the number of shares of StemCells common stock
authorized, issued and outstanding, reserved for issuance, and authorized but neither issued nor reserved for issuance at the following times: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">prior to the reverse stock split and the completion of the Merger; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">giving effect to a one-for-[&#9679;] reverse stock split but prior to the completion of the Merger; and </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">141 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">giving effect to a one-for-[&#9679;] reverse stock split but prior to the completion of the Merger. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="56%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Shares<BR>Authorized</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Shares Issued<BR>and<BR>Outstanding(1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Shares<BR>Reserved&nbsp;for<BR>Issuance(1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Number of</B><br><B>Shares<BR>Authorized<BR>but Neither<BR>Issued nor<BR>Reserved&nbsp;for<BR>Issuance(1)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Prior to the reverse stock split</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Giving effect to a one-for-[</B>&#9679;<B></B><B>] reverse stock split</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Giving effect to a one-for-[</B>&#9679;<B></B><B>] reverse stock split</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">[</TD>
<TD NOWRAP VALIGN="bottom">&#9679;]&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">These estimates assume [&#9679;] shares of StemCells common stock issued and outstanding prior to the completion of the Merger, which was the number of shares of StemCells common stock issued and outstanding as of
August&nbsp;15, 2016, the date of the Merger Agreement, and such estimates do not include the shares of StemCells common stock issuable to Microbot shareholders or advisors in connection with the Merger. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Upon completion of the Merger, each share of Microbot capital stock will be converted into the right to receive a number of shares of
StemCells common stock equal to the Exchange Ratio. As of September [&#9679;], 2016, the last practicable date before the printing of this proxy statement, [&#9679;]shares of StemCells common stock were outstanding calculated on a fully diluted
basis and [&#9679;] shares of Microbot capital stock were outstanding calculated on a fully diluted basis. Because the Exchange Ratio gives effect to the reverse stock split, if the Merger had been completed as of September [&#9679;], 2016, assuming
a reverse stock split ratio of one-for-four, each share of Microbot capital stock would have converted into and been exchanged for the right to receive [&#9679;] shares of StemCells common stock, which would have resulted in an aggregate issuance of
[&#9679;] shares of StemCells common stock calculated on a fully diluted basis. If the Merger had been completed as of September [&#9679;], 2016, assuming a reverse stock split ratio of one-for-[&#9679;], each share of Microbot capital stock would
have converted into and been exchanged for the right to receive [&#9679;] shares of StemCells common stock, which would have resulted in an aggregate issuance of [&#9679;] shares of StemCells common stock calculated on a fully diluted basis. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Effective Date </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The reverse stock
split will become effective on the date of filing of the certificate of amendment to the StemCells restated certificate of incorporation with the office of the Secretary of State of the State of Delaware. Except as explained below with respect to
fractional shares, on the effective date of the reverse stock split, shares of StemCells common stock issued and outstanding immediately prior to such effective date will be combined and converted, automatically and without any action on the part of
the StemCells stockholders, into new shares of StemCells common stock in accordance with the reverse stock split ratio determined prior to the completion of the Merger within the range set forth in this Reverse Stock Split Proposal. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>No Payment for Fractional Shares </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">No fractional shares will be issued in connection with the reverse stock split. StemCells stockholders of record who otherwise would be
entitled to receive fractional shares, will experience a rounding down of their fractional share to the nearest whole share. The number of whole shares of StemCells common stock to be issued to any holder of Microbot ordinary shares will be rounded
down to the nearest whole number of shares. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Exchange of Stock Certificates </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B></B>As soon as practicable following the effective date of the reverse stock split, StemCells stockholders will be notified that the reverse
stock split has been effected. StemCells&#146; transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-reverse stock split shares will be<B> </B>asked<B>
</B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">142 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>
</B>to surrender to the exchange agent certificates representing pre-reverse stock split shares in exchange for certificates representing post-reverse stock split shares in accordance with the
procedures to be set forth in a letter of transmittal to be sent by the exchange agent. No new certificates will be issued to a StemCells stockholder until such stockholder has surrendered such stockholder&#146;s outstanding certificate(s), together
with the properly completed and executed letter of transmittal to the exchange agent. <B>StemCells stockholders should not destroy any StemCells stock certificates and should not submit any such certificates until requested to do so. </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Accounting Consequences </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The par
value per share of StemCells common stock will remain unchanged at $0.01 per share following the reverse stock split. As a result, on the effective date of the reverse stock split, the stated capital on StemCells&#146; balance sheet attributable to
StemCells common stock will be reduced proportionally, based on the reverse stock split ratio, from its present amount, and the additional paid-in capital account shall be credited with the amount by which the stated capital is reduced. The per
share common stock net income or loss and net book value will be increased because there will be fewer shares of StemCells common stock outstanding. StemCells does not anticipate that any other accounting consequences will arise as a result of the
reverse stock split. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Material U.S. Federal Income Tax Consequences of the Reverse Stock Split </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following discussion summarizes the anticipated material U.S. federal income tax consequences of the reverse stock split. This summary is
based upon current provisions of the Code, existing Treasury Regulations, and current administrative rulings and court decisions, all of which are subject to change and to differing interpretations, possibly with retroactive effect. Any such change
could alter the tax consequences to StemCells or the StemCells stockholders, as described in this summary. This summary is not binding on the IRS, and there can be no assurance that the IRS (or a court, in the event of an IRS challenge) will agree
with the conclusions stated herein. No ruling has been or will be requested from the IRS in connection with the reverse stock split. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This
discussion is not intended to be a complete analysis or description of all potential U.S. federal income tax consequences of the reverse stock split. In addition, the discussion set forth below does not address any U.S. federal non-income tax or any
state, local or foreign tax consequences of the reverse stock split and does not address the tax consequences of any transaction other than the reverse stock split. Moreover, this discussion does not address U.S. federal income tax consequences of
the reverse stock split that may vary with individual circumstances or that are relevant to StemCells stockholders that are subject to particular rules, including, without limitation, persons whose functional currency is not the U.S.
dollar;&nbsp;persons holding StemCells common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a conversion transaction or other integrated investment;&nbsp;persons who are not U.S. Holders (as defined below);
persons holding StemCells common stock through non-U.S. brokers or other non-U.S. intermediaries;&nbsp;banks, insurance companies, and other financial institutions;&nbsp;real estate investment trusts or regulated investment companies;&nbsp;brokers,
dealers, or traders in securities;&nbsp;partnerships or other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes (and investors therein);&nbsp;tax-exempt or governmental entities or
organizations;&nbsp;persons deemed to sell StemCells common stock under the constructive sale provisions of the Code;&nbsp;persons who hold or receive StemCells common stock pursuant to the exercise of any employee stock options or otherwise as
compensation; persons who hold their StemCells common stock other than as a &#147;capital asset&#148; within the meaning of Section&nbsp;1221 of the Code (generally, property held for investment); and individual retirement accounts or other
tax-deferred accounts or tax-qualified retirement plans. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This discussion is limited to holders of StemCells common stock that are U.S.
Holders. For the purposes of this discussion, a &#147;U.S. Holder&#148; is a beneficial owner of StemCells common stock that, for U.S. federal income tax purposes, is or is treated as: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">an individual who is a citizen or resident of the United States, including without limitation an alien individual who is a lawful permanent resident of the United States or who meets the &#147;substantial presence&#148;
test under Section&nbsp;7701(b) of the Code; </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">143 </P>


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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;</TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">an estate, the income of which is subject to U.S. federal income tax regardless of its source; or</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a trust if either a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons (within the meaning of Section&nbsp;7701(a)(30) of
the Code) have the authority to control all substantial decisions of such trust, or the trust has a valid election in effect under applicable Treasury Regulations to be treated as a United&nbsp;States person for U.S. federal income tax purposes.
</TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">If an entity treated as a partnership for U.S. federal income tax purposes holds StemCells common stock, the tax treatment
of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Reverse Stock Split is expected to qualify as a &#147;recapitalization&#148; within the meaning of Section&nbsp;368(a) of the Code.
Assuming the reverse stock split so qualifies, the following consequences will result: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">no gain or loss will be recognized by StemCells as a result of the reverse stock split; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a StemCells stockholder generally will recognize no gain or loss upon the receipt of StemCells common stock in the reverse stock split; </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a StemCells stockholder&#146;s aggregate tax basis in the post-reverse stock split shares of StemCells common stock received in the reverse stock split will be equal to the aggregate tax basis of the pre-reverse stock
split shares of StemCells common stock exchanged therefor; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">a StemCells stockholder&#146;s holding period of the post-reverse stock split shares of StemCells common stock received in the reverse stock split will include such stockholder&#146;s holding period of the pre-reverse
stock split shares exchanged therefor. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">U.S. Holders of StemCells common stock that acquired their shares on different dates
and/or at different prices should consult their tax advisors regarding the proper allocation of the tax basis and holding periods of such shares. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>StemCells stockholders are advised and expected to consult their own tax advisors regarding the U.S. federal income tax consequences of the
reverse stock split in light of their personal circumstances and the consequences of the reverse stock split under U.S. federal non-income tax laws and state, local, and foreign tax laws. </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>No Appraisal Rights </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the
DGCL, StemCells stockholders are not entitled to appraisal rights with respect to the proposed amendment to the StemCells restated certificate of incorporation to effect the reverse stock split and StemCells will not independently provide the
StemCells stockholders with any such rights. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Required Vote; Recommendation of the Board of Directors of StemCells </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The approval of this Reverse Stock Split Proposal will be necessary to enable the combined company to maintain the listing on the NASDAQ
Capital Market upon completion of the Merger, if StemCells&#146; stock price remains below $4.00 per share prior to the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Approval
of this Reverse Stock Split Proposal requires the affirmative vote of the holders of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter, either in person or by proxy, at the StemCells special meeting.
For purposes of the vote on this Reverse Stock Split Proposal, an </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">144 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
abstention, a &#147;broker non-vote,&#148; or a failure to submit a proxy card or vote at the StemCells special meeting will have the same effect as voting &#147;AGAINST&#148; this Reverse Stock
Split Proposal. </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE BOARD OF DIRECTORS OF STEMCELLS UNANIMOUSLY RECOMMENDS A VOTE &#147;FOR&#148; THE REVERSE STOCK SPLIT PROPOSAL.
</B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_81"></A>Proposal No.&nbsp;4: To amend StemCells&#146; restated certificate of incorporation to increase the number of
authorized shares of StemCells common stock from 200,000,000 to [</B>&#9679;<B></B><B>] shares </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Overview </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells has unanimously approved a proposal to amend the StemCells restated certificate of incorporation to
increase the authorized number of shares of StemCells common stock from 200,000,000 shares to [&#9679;] shares. The Board of Directors of StemCells has recommended that this proposal be presented to the StemCells stockholders for approval. The text
of the form of proposed amendment to the StemCells restated certificate of incorporation to increase the authorized shares of StemCells common stock to [&#9679;] shares is included as an attachment to this proxy statement in Annex C. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Reasons for the Increase in Authorized Shares </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Although at present, apart from the shares to be issued in connection with the Merger and the transactions contemplated thereby, the Board of
Directors of StemCells has no other plans to issue the additional shares of StemCells common stock, it desires to have such shares available to provide additional flexibility to use StemCells capital stock for business and financial purposes in the
future. The additional shares may be used for various purposes without further stockholder approval. These purposes may include, among others: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">raising capital; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">providing equity incentives to employees, officers, and directors; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">establishing strategic relationships with other companies. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The terms of the additional shares
of StemCells common stock will be identical to those of the currently outstanding shares of StemCells common stock. Neither StemCells nor Microbot have any current plans, commitments, arrangements, understandings, or agreements, written or oral, to
issue shares of StemCells common stock, other than in connection with the Merger and the transactions contemplated thereby, to satisfy obligations under outstanding options to purchase shares of StemCells common stock, and to satisfy obligations
under outstanding options and warrants to purchase Microbot capital stock as such options and warrants are exercised (following the completion of the Merger), each of which will be assumed by StemCells in connection with the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">By approving this amendment, the StemCells stockholders will (i)&nbsp;approve a series of amendments to the StemCells restated certificate of
incorporation pursuant to which any whole number of shares of StemCells common stock between 200,000,000 and up to [&#9679;] would be authorized for issuance and (ii)&nbsp;authorize the Board of Directors of StemCells to (a)&nbsp;file only one such
amendment, and (b)&nbsp;abandon each amendment not selected. In addition, StemCells may elect not to undertake an increase in authorized shares of StemCells common stock. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Required Vote; Recommendation of the Board of Directors of StemCells </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Depending on the ratio for the reverse stock split contemplated in connection with the Merger, the approval of this Authorized Shares Increase
Proposal may be necessary to enable StemCells to issue the required number of shares of StemCells common stock issuable to Microbot shareholders in connection with the Merger. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">145 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Approval of this Authorized Shares Increase Proposal requires the affirmative vote of the holders
of a majority of the shares of StemCells common stock outstanding and entitled to vote on the matter either in person or by proxy at the StemCells special meeting. For purposes of the vote on this Authorized Shares Increase Proposal, an abstention,
a &#147;broker non-vote,&#148; or a failure to submit a proxy card or vote at the StemCells special meeting will have the same effect as voting &#147;AGAINST&#148; this Authorized Shares Increase Proposal. </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE BOARD OF DIRECTORS OF STEMCELLS UNANIMOUSLY RECOMMENDS A VOTE &#147;FOR&#148; THE AUTHORIZED SHARES INCREASE PROPOSAL. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_82"></A>Proposal No.&nbsp;5: To amend StemCells&#146; restated certificate of incorporation to change the name of StemCells from
&#147;StemCells, Inc.&#148; to &#147;Microbot Medical Inc.&#148; </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Board of Directors of StemCells has unanimously approved a proposal to amend the StemCells restated certificate of incorporation to change
the name of the corporation from &#147;StemCells, Inc.&#148; to &#147;Microbot Medical Inc.&#148; immediately upon the completion of the Merger. The Board of Directors of StemCells has recommended that this proposal be presented to the StemCells
stockholders for approval. The text of the form of the proposed amendment to the StemCells restated certificate of incorporation is attached to this proxy statement as Annex C. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The primary reason for the corporate name change is to allow for recognition of the combined company&#146;s business following the completion
of the Merger and to comply with StemCells&#146; obligations under the Merger Agreement. The current name will no longer accurately reflect the business of the combined company and the mission of the combined company subsequent to the completion of
the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Insofar as the proposed new corporate name will reflect the combined company&#146;s business following the completion of the
Merger, the proposed name change and the amendment to the StemCells restated certificate of incorporation, even if approved by the StemCells stockholders at the StemCells special meeting, will only be filed with the office of the Secretary of State
of the State of Delaware and, therefore become effective, as, if and when the Merger is completed. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Required Vote; Recommendation of the Board of
Directors of StemCells </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Approval of this Name Change Proposal requires the affirmative vote of the holders of a majority of the
shares of StemCells common stock outstanding and entitled to vote on the matter, either in person or by proxy, at the StemCells special meeting. For purposes of the vote on this Name Change Proposal, an abstention, a &#147;broker non-vote,&#148; or
a failure to submit a proxy card or vote at the StemCells special meeting will have the same effect as voting &#147;AGAINST&#148; this Name Change Proposal. </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE BOARD OF DIRECTORS OF STEMCELLS UNANIMOUSLY RECOMMENDS A VOTE &#147;FOR&#148; THE NAME CHANGE PROPOSAL. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_83"></A>Proposal No.&nbsp;6: To approve the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if
there are not sufficient votes in favor of Proposal Nos. 1, 2, 3, 4, or 5 </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells is asking its stockholders to vote on a proposal
to approve the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the StemCells Merger Proposals. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">146 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Required Vote; Recommendation of the Board of Directors of StemCells </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Approval of the adjournment of the StemCells special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in
favor of the StemCells Merger Proposals requires the affirmative vote of the holders of a majority of the shares of StemCells common stock cast, either in person or by proxy, at the StemCells special meeting. A &#147;broker non-vote&#148; or a
failure to submit a proxy card or vote at the StemCells special meeting will have no effect on the outcome of the vote for this Proposal No.&nbsp;6. For purposes of the vote on this Proposal No.&nbsp;6, an abstention will have the same effect as a
vote &#147;AGAINST&#148; such proposal. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE BOARD OF DIRECTORS OF STEMCELLS UNANIMOUSLY RECOMMENDS A VOTE &#147;FOR&#148; THE
ADJOURNMENT OF THE STEMCELLS SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE STEMCELLS MERGER PROPOSALS. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">147 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_84"></A>UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I>The following information and all other information contained in this proxy statement does not give effect to the proposed reverse stock
split described in Proposal No.&nbsp;3 of this proxy statement. </I></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following unaudited pro forma combined financial statements were
prepared using the acquisition method of accounting under existing U.S. generally accepted accounting principles, or GAAP, and give effect to the Merger between StemCells and Microbot. For accounting purposes, Microbot is considered to be acquiring
StemCells in the Merger. Microbot was determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i)&nbsp;Microbot security holders are expected to own approximately 80% of the voting interests
of the combined company immediately following the closing of the Merger; (ii)&nbsp;directors appointed by Microbot will constitute the board of directors of the combined company; and (iii)&nbsp;employees of Microbot will constitute the entire
management of the combined company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The unaudited pro forma combined balance sheet as of June&nbsp;30, 2016 assumes that the Merger took
place on June&nbsp;30, 2016 and combines the historical balance sheets of StemCells and Microbot as of June&nbsp;30, 2016. The unaudited pro forma combined statement of operations for the six months ended June&nbsp;30, 2016 assumes that the Merger
took place as of January&nbsp;1, 2016, and combines the historical results of StemCells and Microbot for the six months ended June&nbsp;30, 2016. The unaudited pro forma combined statement of operations for the year ended December&nbsp;31, 2015
assumes that the Merger took place as of January&nbsp;1, 2015, and combines the historical results of StemCells and Microbot for the year ended December&nbsp;31, 2015. The historical financial statements of StemCells and Microbot have been adjusted
to give pro forma effect to events that are (i)&nbsp;directly attributable to the Merger, (ii)&nbsp;factually supportable, and (iii)&nbsp;with respect to the statements of operations, expected to have a continuing impact on the combined results.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Because Microbot will be treated as the accounting acquirer, Microbot&#146;s assets and liabilities will be recorded at their
precombination carrying amounts and the historical operations that are reflected in the financial statements will be those of Microbot. StemCells&#146; assets and liabilities will be measured and recognized at their fair values as of the transaction
date, and consolidated with the assets, liabilities and results of operations of Microbot after the consummation of the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
unaudited pro forma combined financial statements are based on the assumptions and adjustments that are described in the accompanying notes. The application of the acquisition method of accounting is dependent upon certain valuations and other
studies that have yet to be completed. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed, and have been made solely for the purpose
of providing unaudited pro forma combined financial statements. Differences between these preliminary estimates and the final acquisition accounting, expected to be completed after the closing of the Merger, will occur and these differences could
have a material impact on the accompanying unaudited pro forma combined financial statements and the combined company&#146;s future results of operations and financial position. The actual amounts recorded as of the completion of the Merger may
differ materially from the information presented in these unaudited pro forma combined financial statements as a result of the amount, if any, of capital raised by Microbot between entering the Merger Agreement and closing of the Merger; the amount
of cash used by StemCells&#146; operations between the signing of the Merger Agreement and the closing of the Merger; the timing of closing of the Merger; StemCells&#146; stock price at the closing of the Merger; the results of certain valuations
and other studies that have yet to be completed; and other changes in StemCells&#146; assets and liabilities that occur prior to the completion of the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The unaudited pro forma combined financial statements do not give effect to the potential impact of current financial conditions, regulatory
matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies. The unaudited pro forma combined financial statements have been prepared for illustrative purposes only and are not
necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Microbot and StemCells been a combined company during the specified period. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">148 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The unaudited pro forma combined financial statements, including the notes thereto, should be
read in conjunction with the separate Microbot and StemCells historical financial statements, and their respective management&#146;s discussion and analysis of financial condition and results of operations. Microbot&#146;s historical unaudited
financial statements for six months ended June&nbsp;30, 2016 and historical audited financial statements for the year ended December&nbsp;31, 2015 are included elsewhere in this proxy statement. StemCells&#146; historical unaudited consolidated
financial statements for the three months ended June&nbsp;30, 2016 are included in its Quarterly Report on Form&nbsp;10-Q as filed with the SEC on May&nbsp;10, 2016 and its historical audited consolidated financial statements for the year ended
December&nbsp;31, 2015 are included in its Annual Report on Form&nbsp;10-K as filed with the SEC on March&nbsp;15, 2016. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">149 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Unaudited Pro Forma Consolidated Balance Sheet </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>June 30, 2016 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="48%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>StemCells, Inc.</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Microbot<BR>Medical Ltd.</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro Forma<BR>Merger<BR>Adjustment</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro Forma<BR>Combined</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Assets:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Current assets:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents (A)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,448,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">840,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,289,614</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Restricted cash</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Trust account</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,300,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,300,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other receivables and current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">87,201</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42,924</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">130,125</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,835,962</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">883,777</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,719,739</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Property and equipment, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,911</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,911</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Assets held for sale</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,450,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,450,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Goodwill</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,726,446</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,726,446</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other intangible assets, net (B)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,827</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,461,173</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,500,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,324,789</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">915,688</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">35,187,619</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42,428,096</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Liabilities and Stockholders&#146; Equity (Deficit)</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Current liabilities:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,171,777</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,091</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,179,868</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued expenses and other current liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,343,032</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">205,813</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,548,845</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued expenses wind-down expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,943,310</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,943,310</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue, current</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total current liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,474,945</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">213,904</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,668,849</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loan payable (A)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Fair value of warrant liability</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">591,037</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">591,037</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue, non-current</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,845</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,845</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other long-term liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">126,439</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">126,439</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,213,266</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">213,904</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,427,170</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Liabilities and Stockholders&#146; Deficit</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Stockholders&#146; deficit:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Common stock (C)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">117,291</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(117,291</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Additional paid-in capital (C)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">458,679,539</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(458,679,539</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">32,624,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,206,277</TD>
<TD NOWRAP VALIGN="bottom">(D)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,299,142</TD>
<TD NOWRAP VALIGN="bottom">(E)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Convertible loan (D)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,206,277</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,206,277</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated deficit</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(463,732,581</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,626,451</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">463,732,581</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,626,451</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated other comprehensive income (C)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">47,274</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(47,274</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total stockholders&#146; equity</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(4,888,477</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">701,784</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,187,619</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">29,000,926</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total liabilities and stockholders&#146; equity (deficit)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,324,789</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">915,688</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">35,187,619</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42,428,096</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">150 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Unaudited Pro Forma Consolidated Statement of Operations </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>For the Six Months Ended June&nbsp;30, 2016 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


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<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>StemCells Inc.</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Microbot<BR>Medical Ltd.</B></TD>
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<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro Forma<BR>Merger<BR>Adjustment</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro Forma<BR>Combined</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue from licensing agreements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">52,475</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">52,475</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating expenses:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,902,802</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">262,524</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,165,326</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,044,053</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">140,103</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,184,156</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Wind-down expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803,448</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,803,448</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total operating expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,750,303</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">402,627</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">19,152,930</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss from operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(18,697,828</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(402,627</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(19,100,455</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense):</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Change in fair value of warrant liability</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,846,862</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,846,862</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Conversion of CIRM loan into a grant</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,916,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,916,641</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gain on extinguishment of loan payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">242,931</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">242,931</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Write-down of fixed assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,332,736</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,332,736</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest income</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,312</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,312</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(28,029</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(28,029</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense), net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(2,100</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(37,612</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(39,712</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total other expense, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,651,881</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(37,612</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,614,269</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income (loss)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(7,045,947</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(440,239</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(7,486,186</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic and diluted net income (loss) per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.66</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.10</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.02</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average number of common shares outstanding, basic and diluted</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,746,212</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,920,689</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">333,965,033</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">349,252,245</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">151 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Unaudited Pro Forma Consolidated Statement of Operations </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>For the Year Ended December&nbsp;31, 2015 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


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<TD></TD>
<TD></TD>
<TD></TD>
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<TD></TD>
<TD></TD>
<TD></TD>
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<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
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<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>StemCells Inc.</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Microbot<BR>Medical Ltd.</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro Forma<BR>Merger<BR>Adjustment</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Pro Forma<BR>Combined</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue from licensing agreements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">116,887</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">116,887</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating expenses:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,110,909</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">822,759</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,933,668</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,334,174</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">92,018</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,426,192</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Wind-down expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">392,230</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">392,230</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total operating expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,837,313</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">914,777</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,752,090</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss from operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(36,720,426</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(914,777</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(37,635,203</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Change in fair value of warrant liability</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">913,587</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">913,587</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Impairment of other intangible assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(239,241</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(239,241</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest income</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,544</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,544</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(506,319</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(506,319</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income (expense), net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">129,829</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(6,063</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">123,766</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total other expense, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">305,400</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(6,063</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">299,337</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income (loss)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(36,415,026</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(37,335,866</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic and diluted net income (loss) per share</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(4.56</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.20</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(0.11</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average number of common shares outstanding, basic and diluted</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,983,948</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,920,689</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">333,965,033</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">346,489,981</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top"><I>Adjusted for the 1-for-12 reverse stock split of StemCells Inc. in May 2016.</I> </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">152 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_85"></A>NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
</B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>1. Description of Transaction and Basis of Presentation </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The unaudited pro forma combined financial statements were prepared in accordance with GAAP and pursuant to the rules and regulations of SEC
Regulation&nbsp;S-X, and present the pro forma financial position and results of operations of the combined companies based upon the historical data of StemCells and Microbot. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Description of Transaction </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">On
August&nbsp;15, 2016,&nbsp;StemCells entered the Merger Agreement with Microbot and Merger Sub.&nbsp;Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into Microbot, Merger Sub
will cease to exist and Microbot will survive as a wholly-owned subsidiary of the Company, which is referred to as the Merger. The respective boards of directors of StemCells and Microbot have approved the Merger Agreement and the transactions
contemplated thereby. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">At the effective time of the Merger, each outstanding share of Microbot capital stock will be automatically
converted into the right to receive that number of shares of Company common stock as determined pursuant to the Exchange Ratio. In addition, at the effective time: (i)&nbsp;all outstanding options to purchase shares of Microbot stock will be assumed
by the Company and converted into options to purchase shares of Company common stock, in each case appropriately adjusted based on the Exchange Ratio; and (ii)&nbsp;all outstanding warrants to purchase shares of the capital stock of Microbot will be
assumed by the Company and converted into warrants to purchase shares of Company common stock, in each case appropriately adjusted based on the Exchange Ratio. No fractional shares of Company common stock will be issued in the Merger.&nbsp;Following
the consummation of the Merger, former shareholders of Microbot are expected to own 75% of the combined company, certain advisors with respect to the Merger are expected to own 20% of the combined company and current stockholders of the Company are
expected to own 5% of the combined company, in each case based on the fully diluted shares of each company prior to the consummation of the Merger. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>Basis of Presentation </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot
has preliminarily concluded that the merger represents a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805,&nbsp;Business Combinations. Microbot has not yet completed a valuation
analysis of the fair market value of StemCells&#146; assets to be acquired and liabilities to be assumed. Using the total consideration for the merger, StemCells has estimated the allocations to such assets and liabilities. This preliminary purchase
price allocation has been used to prepare pro forma adjustments in the unaudited pro forma combined balance sheet. The final purchase price allocation will be determined when Microbot has completed the detailed valuations and other studies and
necessary calculations. The final allocation could differ materially from the preliminary allocation used to prepare the pro forma adjustments. The final allocation may include (1)&nbsp;changes in fair values of property and equipment,
(2)&nbsp;changes in allocations to intangible assets and goodwill based on the results of certain valuations and other studies that have yet to be completed and (3)&nbsp;other changes to assets and liabilities. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Microbot and StemCells did not record any provision or benefit for income taxes during the six months ended June&nbsp;30, 2016 or during the
year ended December&nbsp;31, 2015 because each company expects to incur a pre-tax loss in 2016 and incurred a pre-tax loss in 2015 and each company maintains a full valuation allowance on its deferred tax assets. Accordingly, no tax effects have
been provided for the pro forma adjustments described in Note&nbsp;3, &#147;Pro Forma Adjustments.&#148; </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B></B><I></I><B>2</B><I></I><B>. Preliminary
Purchase Price </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Pursuant to the Merger Agreement, at the closing of the merger, StemCells will issue to Microbot shareholders a number
of shares of StemCells common stock representing approximately 95% of the outstanding shares of common stock of the combined company. The estimated preliminary purchase price, which represents </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">153 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
the consideration transferred to StemCells stockholders in the reverse merger is calculated based on the number of shares of common stock of the combined company that StemCells stockholders will
own as of the closing of the merger. The accompanying unaudited pro forma combined financial statements reflect an estimated purchase price of approximately $28.3 million, which consists of the following: </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="83%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Estimated number of shares of the combined company to be owned by StemCells
stockholders(1)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,577,107</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Multiplied by the assumed price per share of StemCells common stock(2)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1.61</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Estimated purchase price</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,299,142</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">Represents the number of shares of common stock of the combined company that StemCells stockholders would own as of the closing of the merger pursuant to the Merger Agreement, including restricted stock awards and
common stock underlying outstanding restricted stock units attributed to precombination services rendered by certain StemCells employees and directors. This amount is calculated, for purposes of these unaudited pro forma combined financial
statements, as 17,577,107 shares of StemCells common stock outstanding as of August&nbsp;29, 2016 on a fully diluted basis that includes, unvested restricted stock units to purchase 139,310 shares of common stock, vested incentive stock options to
purchase 35,798 shares of common stock, and outstanding warrants to purchase 1,144,282 shares of common stock. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">The number of
shares of common stock StemCells will issue to Microbot shareholders, for purposes of these unaudited pro forma combined financial statements, is calculated pursuant to the terms of the Merger Agreement based on StemCells common stock outstanding as
of August&nbsp;29, 2016, as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="84%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Shares of StemCells common stock outstanding as of August&nbsp;29, 2016</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,257,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Outstanding warrants</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,144,282</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Shares of StemCells common stock subject to outstanding restricted stock units</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">175,108</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjusted outstanding shares of StemCells common stock</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,577,107</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Divided by the assumed percentage of StemCells ownership of combined company</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Estimated adjusted total shares of common stock of combined company</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">351,542,140</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Multiplied by the assumed percentage of Microbot ownership of combined company</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">95</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Estimated shares of StemCells common stock issued to advisors and Microbot shareholders upon
closing of merger</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">333,965,033</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">For pro forma purposes, the fair value of StemCells common stock used in determining the purchase price was $1.61 per share based on the closing price of StemCells common stock on August&nbsp;29, 2016, the most recent
practicable date. The pro forma information is illustrative only and the total purchase price at closing of the merger will be adjusted based upon the actual closing price of the common stock of StemCells. A $0.01 increase (decrease) in the per
share stock price would increase (decrease) the total purchase price by approximately $176,000. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Under the acquisition
method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of StemCells based on their estimated fair values as of the merger closing date. The excess of the purchase price over
the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">154 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The allocation of the total preliminary estimated purchase price to the acquired assets and
liabilities assumed of StemCells based on the estimated fair values as of June&nbsp;30, 2016 is as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash, cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right"> 2,448,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Trust account</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,300,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other receivables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">47,201</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other assets, current</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Assets held for sale</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,450,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other intangible assets, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,500,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Goodwill</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,726,446</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts Payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(4,171,777</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued expenses and other current liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(2,343,032</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued expenses wind-down expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,943,310</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue, current</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(16,826</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Fair value of warrant liability</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(591,037</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue, non current</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(20,845</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other long-term liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(126,439</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net assets acquired</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,299,142</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet
to be completed. The purchase price allocation will remain preliminary until Microbot&#146;s management determines the fair values of assets acquired and liabilities assumed. The final determination of the purchase price allocation is anticipated to
be completed as soon as practicable after completion of the merger and will be based on the fair values of the assets acquired and liabilities assumed as of the merger closing date. The final amounts allocated to assets acquired and liabilities
assumed could differ significantly from the amounts presented in the unaudited pro forma combined financial statements. The final allocation may include (1)&nbsp;changes in fair values of property and equipment, (2)&nbsp;changes in allocations to
intangible assets and goodwill based on the results of certain valuations and other studies that have yet to be completed and (3)&nbsp;other changes to assets and liabilities. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>3. Pro Forma Adjustments </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The unaudited
pro forma combined financial statements include pro forma adjustments that are (i)&nbsp;directly attributable to the merger, (ii)&nbsp;factually supportable, and (iii)&nbsp;with respect to the unaudited pro forma combined statements of operations,
expected to have a continuing impact on the results of operations of the combined company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Based on Microbot&#146;s management&#146;s
review of StemCells&#146; summary of significant accounting policies, the nature and amount of any adjustments to the historical financial statements of StemCells to conform to the accounting policies of Microbot are not expected to be significant.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The unaudited pro forma combined financial statements do not reflect the effect of the anticipated StemCells reverse stock split. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The pro forma adjustments, based on preliminary estimates that may change significantly as additional information is obtained, are as follows:
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A. On August&nbsp;15, 2016, concurrently with the execution of the Merger Agreement, the StemCells issued a 5.0% secured note (the
&#147;Note&#148;) to the Investor, in the principal amount of $2 million, for value received, payable upon the earlier of (i)&nbsp;30 days following the consummation of the Merger and (ii)&nbsp;December&nbsp;31, 2016. Proceeds
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">155 </P>


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from the Note are to be used for closing costs in connection with the Merger and operational expenses leading to such closing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">B. Represents the estimated value of StemCells&#146; intellectual property. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">C. To reflect the elimination of StemCells historical stockholders&#146; equity balances, including additional paid-in capital and accumulated
deficit. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">D. Assumes conversion of the convertible loan into common stock of Microbot. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">E. Estimated number of shares of StemCells common stock to be issued (i)&nbsp;to Microbot shareholders in connection with the closing of the
Merger and (ii)&nbsp;to Microbot advisors pursuant to the terms of the Merger Agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">156 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_86"></A>DESCRIPTION OF STEMCELLS CAPITAL STOCK </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_87"></A>Description of Common Stock </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of this proxy statement, StemCells is authorized to issue 200&nbsp;million shares of common stock, par value $0.01 per share. As
of September&nbsp;8, 2016, StemCells had 16,259,598 shares of common stock outstanding and approximately 241 registered stockholders. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The
following summary of certain provisions of the common stock of StemCells does not purport to be complete. You should refer to the restated certificate of incorporation and restated by-laws of StemCells, both of which have been filed with the SEC.
The summary below is also qualified by provisions of applicable law. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, and do
not have cumulative voting rights. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by
our Board of Directors out of funds legally available for dividend payments. The holders of common stock have no preferences or rights of conversion, exchange, pre-emption or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. In the event of any liquidation, dissolution or winding-up of our affairs, holders of common stock will be entitled to share ratably in our assets that are remaining after payment or provision for payment
of all of our debts and obligations and after liquidation payments to holders of outstanding shares of preferred stock, if any. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>NASDAQ Capital
Market Listing </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146; common stock is listed on the NASDAQ Capital Market under the symbol &#147;STEM.&#148; </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_88"></A>Transfer Agent and Registrar </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The transfer agent and registrar for StemCells&#146; common stock is Computershare Trust Company, N.A. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_89"></A>Description of Preferred Stock </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">As of the date of this proxy, StemCells is authorized to issue 1,000,000 shares of preferred stock, par value $0.01 per share. As of
September&nbsp;8, 2016, StemCells had zero shares of our preferred stock outstanding or designated. The following summary of certain provisions of preferred stock does not purport to be complete. You should refer to our restated certificate of
incorporation and our restated by-laws, both of which have been filed with the SEC. The summary below is also qualified by provisions of applicable law. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I>General </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells&#146; board of
directors may, without further action by our stockholders, from time to time, direct the issuance of shares of preferred stock in series and may, at the time of issuance, determine the rights, preferences and limitations of each series, including
voting rights, dividend rights and redemption and liquidation preferences. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of our
common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of our company before any payment is made to the holders of shares of our common stock. In
some circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">157 </P>


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removal of incumbent management. Upon the affirmative vote of our board of directors, without stockholder approval, we may issue shares of preferred stock with voting and conversion rights which
could adversely affect the holders of shares of our common stock. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_90"></A>Anti-Takeover Provisions of StemCells&#146; Certificate
of Incorporation and By-laws </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition to the Board of Directors of StemCells&#146; ability to issue shares of preferred stock, the
StemCells restated certificate of incorporation and amended and restated by-laws contain other provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Board of Directors of StemCells and which may
have the effect of delaying, deferring or preventing a future takeover or change in control of our company unless such takeover or change in control is approved by our Board of Directors. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following provisions of StemCells restated certificate or incorporation and amended and restated by-laws may have the anti-takeover effect
of preventing, discouraging or delaying a change in control of StemCells: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><U>Classified Board of Directors; removal of directors for
cause</U></I>.&nbsp;&nbsp;&nbsp;&nbsp;The restated certificate of incorporation and restated by-laws provide for the Board of Directors to be divided into three classes serving staggered terms. At each annual meeting of stockholders, directors
elected to succeed those directors whose terms expire are elected for a three-year term of office. All directors elected to our classified Board of Directors will serve until the election and qualification of their respective successors or their
earlier resignation or removal. The Board of Directors is authorized to create new directorships and to fill such positions so created and is permitted to specify the class to which any such new position is assigned. The person filling such position
would serve for the term applicable to that class. The Board of Directors (or its remaining members, even if less than a quorum) is also empowered to fill vacancies on the Board of Directors occurring for any reason for the remainder of the term of
the class of directors in which the vacancy occurred. Members of the Board of Directors may only be removed for cause and only by the affirmative vote of 80% of the outstanding voting stock. These provisions are likely to increase the time required
for stockholders to change the composition of the Board of Directors. For example, in general, at least two annual meetings will be necessary for stockholders to effect a change in a majority of the members of the Board of Directors. The provision
for a classified board could prevent a party who acquires control of a majority of our outstanding common stock from obtaining control of our Board of Directors until our second annual stockholders meeting following the date the acquirer obtains the
controlling stock interest. The classified board provision could have the effect of discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us and could increase the likelihood that incumbent
directors will retain their positions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><U>Advance notice provisions for stockholder proposals</U></I>.&nbsp;&nbsp;&nbsp;&nbsp;The
StemCells restated by-laws establish an advance notice procedure for stockholder nominations of candidates for election to our Board of Directors, as well as procedures for including proposed nominations at special meetings at which directors are to
be elected. Stockholders at our annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board or by a stockholder who was a stockholder of record on the
record date for the meeting, who is entitled to vote at the meeting and who has given to our secretary timely written notice, in proper form, of the stockholder&#146;s intention to bring that business before the meeting, and who has complied with
the procedures and requirements set forth in the by-laws. Although the by-laws do not give the Board of Directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a
special or annual meeting, these by-laws may have the effect of precluding the conduct of some business at a meeting if the proper procedures are not followed or may discourage or defer a potential acquirer from conducting a solicitation of proxies
to elect its own slate of directors or otherwise attempting to obtain control of StemCells. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><U>Special meetings of
stockholders</U>.</I>&nbsp;&nbsp;&nbsp;&nbsp;Special meetings of the stockholders may be called only by the Board of Directors, president or secretary upon the application of a majority of the directors. Stockholders are not permitted to call a
special meeting or to require our Board of Directors to call a special meeting. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">158 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><U>No stockholder action by written consent</U>.</I>&nbsp;&nbsp;&nbsp;&nbsp;StemCells&#146;
restated certificate of incorporation and restated by-laws do not permit our stockholders to act by written consent. As a result, any action to be effected by StemCells stockholders must be effected at a duly called annual or special meeting of the
stockholders. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><I><U>Super-majority stockholder vote required for certain actions</U>.</I>&nbsp;&nbsp;&nbsp;&nbsp;The DGCL provides
generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation&#146;s certificate of incorporation or by-laws, unless the corporation&#146;s certificate of incorporation or by-laws,
as the case may be, requires a greater percentage. StemCells&#146; restated certificate of incorporation requires the affirmative vote of the holders of at least 80% of our outstanding voting stock to amend or repeal certain provisions of our
restated certificate of incorporation. This 80% stockholder vote would be in addition to any separate class vote that might in the future be required pursuant to the terms of any preferred stock that might then be outstanding. In addition, an 80%
vote is also required for any amendment to, or repeal of, our restated by-laws by the stockholders. Our restated by-laws may be amended or repealed by a vote of a majority of the total number of authorized directors. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_91"></A>Provisions of Delaware Law Governing Business Combinations </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells is subject to the &#147;business combination&#148; provisions of Section&nbsp;203 of the DGCL. In general, such provisions prohibit a
publicly held Delaware corporation from engaging in any &#147;business combination&#148; transactions with any &#147;interested stockholder&#148; for a period of three years after the date on which the person became an &#147;interested
stockholder,&#148; unless: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">prior to such date, the Board of Directors approved either the &#147;business combination&#148; or the transaction which resulted in the &#147;interested stockholder&#148; obtaining such status; or </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">upon consummation of the transaction which resulted in the stockholder becoming an &#147;interested stockholder,&#148; the &#147;interested stockholder&#148; owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the &#147;interested stockholder&#148;) those shares owned by (a)&nbsp;persons who
are directors and also officers and (b)&nbsp;employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">at or subsequent to such time the &#147;business combination&#148; is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66-2/3% of the outstanding voting stock which is not owned by the &#147;interested stockholder.&#148; </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">A
&#147;business combination&#148; is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an &#147;interested stockholder&#148; is a person who, together with affiliates and
associates, owns 15% or more of a corporation&#146;s voting stock or within three years did own 15% or more of a corporation&#146;s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire the combined company. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">159 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_92"></A>PRINCIPAL STOCKHOLDERS OF STEMCELLS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Except as otherwise noted, the following table sets forth certain information regarding the beneficial ownership of our common stock as of
September&nbsp;8, 2016 by: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each of StemCells&#146; executive officers; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each of StemCells&#146; directors; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">all of StemCells&#146; current directors and executive officers as a group; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each stockholder known by StemCells to beneficially own more than 5% of our common stock. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the
securities. Shares of common stock that may be acquired by an individual or group within 60 days of September&nbsp;8, 2016 pursuant to the exercise of options are deemed to be outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Percentage of ownership is based on 16,259,598 shares of common stock outstanding on
September&nbsp;8, 2016. For additional information, see the sections entitled &#147;The Merger&#151;Interests of the StemCells Directors and Executive Officers in the Merger&#148; and &#147;Principal Stockholders of Combined Company.&#148; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells believes that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock
shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated, the address for each director and executive officer listed is: c/o StemCells, Inc., 39899 Balentine Drive, Newark, CA
94560. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:89.90pt; font-size:8pt; font-family:Times New Roman"><B>Name of Beneficial Owner</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Amount&nbsp;and<BR>Nature of<BR>Beneficial<BR>Ownership</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Percentage of<BR>Class&nbsp;Beneficially<BR>Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Directors and Named Executive Officers</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Eric Bjerkholt(1)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>10,867</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Ricardo Levy(1)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>9,724</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Ian Massey</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>19,970</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Greg Schiffman</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>67,796</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">John Schwartz(2)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>16,641</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Ken Stratton(3)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>22,913</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">*</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">(All current directors and executive officers as a group persons)(4)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><B>&nbsp;</B></TD>
<TD VALIGN="bottom" ALIGN="right"><B>163,994</B></TD>
<TD NOWRAP VALIGN="bottom"><B>&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1.0</TD>
<TD NOWRAP VALIGN="bottom">%</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top">Less than one percent </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">Includes 249 shares issuable upon exercise of fully vested stock options. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">Includes 269 shares issuable upon exercise of fully vested stock options. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(3)</TD>
<TD ALIGN="left" VALIGN="top">Includes 1,259 shares issuable upon exercise of fully vested stock options. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(4)</TD>
<TD ALIGN="left" VALIGN="top">Includes 3,414 shares issuable upon exercise of fully vested stock options. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">160 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_93"></A>PRINCIPAL SHAREHOLDERS OF MICROBOT </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table and the related notes present information on the beneficial ownership of shares of Microbot&#146;s capital stock as of
September&nbsp;8, 2016 by: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each director of Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each executive officer of Microbot; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">all of Microbot&#146;s current directors and executive officers as a group; and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each shareholder known by Microbot to beneficially own more than five percent of Microbot&#146;s common stock on an as-converted basis. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the
securities. The number of shares owned, total shares beneficially owned and the percentage of common stock beneficially owned below assumes, in each case, the conversion of all 3,452,650 shares of outstanding Series A Preferred Stock into Microbot
common stock on a one-for-one basis, for a total of 8,428,390 shares of common stock outstanding on an as-converted basis on September&nbsp;8, 2016. Shares of Common Stock subject to options and warrants currently exercisable or which may become
exercisable within 60&nbsp;days of September&nbsp;8, 2016 are deemed outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the number of shares and percentage beneficially owned by such person,
but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. For the purposes of this section, references to common stock are to the ordinary shares, par value NIS.001 per share, of Microbot. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This table is based on information supplied by Microbot officers, directors and principal shareholders. Except as indicated in the footnotes
to this table, Microbot believes that the shareholders named in this table have sole voting and investment power with respect to all shares of Microbot common stock shown to be beneficially owned by them, based on information provided to us by such
shareholders. Unless otherwise indicated, the address for each director and executive officer listed is: c/o Microbot Medical, 5 Hamada Street, Yokneam 20692, Israel. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:59.25pt; font-size:8pt; font-family:Times New Roman"><B>Beneficial Owner</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Number of<BR>Shares<BR>Beneficially<BR>Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Percentage&nbsp;of<BR>Common<BR>Stock<BR>Beneficially<BR>Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><I>Directors and Executive Officers</I></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Harel Gadot(1)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,320,242</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14.95</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yoav Waizer</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Moshe Shoham(2)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">881,240</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.16</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yoseph Bornstein(3)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,833,300</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21.75</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Solomon Mayer</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">All current directors and executive officers as a group (5&nbsp;persons)(4)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,034,782</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">44.45</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><I>Five Percent Shareholders</I></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">LSA - Life Science Accelerator Ltd.(3)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,833,300</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21.75</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Technion Research and Development Foundation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,228,558</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14.58</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">MEDX Ventures Group LLC(5)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,320,242</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14.98</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Alpha Capital Anstalt(6)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,821,453</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21.35</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leon Lewkowicz(7)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">908,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.58</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Saber Holding GmbH(8)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,308,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15.24</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">Includes 403,592 shares of common stock issuable upon the exercise of options granted to MEDX Ventures Group. All of such shares and options are held by MEDX Ventures Group LLC, which is beneficially owned by
Mr.&nbsp;Gadot. See Note 6 below. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">161 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">Includes 244,700 shares of common stock issuable upon the exercise of options in accordance with the terms of Microbot&#146;s 2015 Stock Option Plan and 42,900 shares of Series A Preferred Stock. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(3)</TD>
<TD ALIGN="left" VALIGN="top">Based on representations and other information made or provided to Microbot by Mr.&nbsp;Bornstein, Mr.&nbsp;Bornstein is the CEO and Director of LSA - Life Science Accelerator Ltd. (&#147;LSA&#148;) and of Shizim Ltd.
(&#147;Shizim&#148;), and Mr.&nbsp;Bornstein is the majority equity owner of Shizim. Shizim is the majority equity owner of LSA. Accordingly, Mr.&nbsp;Bornstein may be deemed to share voting and investment power over the shares beneficially owned by
these entities. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(4)</TD>
<TD ALIGN="left" VALIGN="top">Includes shares of common stock issuable upon the exercise of options as set forth in footnotes (1)&nbsp;and (2). </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(5)</TD>
<TD ALIGN="left" VALIGN="top">Includes 403,592 shares of common stock issuable upon the exercise of granted to MEDX Ventures Group. Mr.&nbsp;Gadot is the Chief Executive Officer, Company Group Chairman and majority equity owner of MEDX Venture Group
and thus may be deemed to share voting and investment power over the shares beneficially owned by this entity. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(6)</TD>
<TD ALIGN="left" VALIGN="top">Consists of 1,501,750 shares of Series A Preferred Stock and warrants to purchase 101,750 shares of Series&nbsp;A Preferred Stock. Mr.&nbsp;Konrad Ackerman and Dr.&nbsp;Nicola Feuerstein, both directors of Alpha Capital
Anstalt, have voting and dispositive control of such shares. Does not include shares that would be issuable upon the conversion of a convertible promissory note of Microbot held by Alpha Capital Anstalt, upon the closing of the Merger. The address
of Alpha Capital is Lettstrasse 32, 9490 Vaduz, Liechtenstein. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(7)</TD>
<TD ALIGN="left" VALIGN="top">Consists of 754,000 shares of Series A Preferred Stock and warrants to purchase 154,000 shares of Series A Preferred Stock. Does not include shares that would be issuable upon the conversion of a convertible promissory
note of Microbot held by Mr.&nbsp;Lewkowicz, upon the closing of the Merger. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(8)</TD>
<TD ALIGN="left" VALIGN="top">Consists of 1,154,000 shares of Series A Preferred Stock and warrants to purchase 154,000 shares of Series&nbsp;A Preferred Stock held directly by Saber Holding GmbH. Avram Berkson and Sandra Berkson may be deemed to
share voting and investment power over the shares beneficially owned by this entity. Does not include shares that would be issuable upon the conversion of a convertible promissory note of Microbot held by Saber Holding GmbH, upon the closing of the
Merger. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">162 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_94"></A>PRINCIPAL STOCKHOLDERS OF COMBINED COMPANY </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The following table and the related notes present information on the beneficial ownership of shares of the combined company by: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each prospective director of the combined company (other than the additional directors to be designated); </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each executive officer of the combined company (other than any additional executive officers to be designated); </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">all of the combined company&#146;s prospective directors (other than the additional directors to be designated) and executive officers as a group; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">each stockholder known by us to beneficially own more than five percent of the combined company&#146;s common stock on an as-converted basis. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the
securities. The number of shares owned, total shares beneficially owned and the percentage of common stock beneficially owned assumes, in each case, the consummation of the Merger, for a total of approximately 315,591,899 shares of the combined
company&#146;s common stock to be outstanding immediately following the consummation of the Merger. Does not include any warrants, options or other convertible securities of the combined company expected to be outstanding at the closing of the
Merger, except that shares of the combined company&#146;s common stock subject to options, warrants and other convertible securities currently exercisable or which may become exercisable within 60 days of September&nbsp;8, 2016 are deemed
outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the
percentage beneficially owned by any other person. The table below does not give effect to the proposed reverse stock split described in Proposal No.&nbsp;3. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This table is based on information supplied by each prospective director, officer and principal stockholder of the combined company. All share
numbers set forth below take into account the exchange of each common share of Microbot outstanding immediately prior to the Merger for approximately 26.58 shares of StemCells common stock in connection with the Merger. Except as indicated in
footnotes to this table, the combined company believes that the stockholders named in this table have sole voting and investment power with respect to all shares of StemCells common stock shown to be beneficially owned by them, based on information
provided by such stockholders. Unless otherwise indicated, the address for each prospective director and executive officer of the combined company listed is: c/o Microbot Medical, 5 Hamada Street, Yokneam 20692, Israel. </P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="62%"></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="11%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:59.25pt; font-size:8pt; font-family:Times New Roman"><B>Beneficial Owner</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Number&nbsp;of&nbsp;Shares<BR>Beneficially&nbsp;Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Percentage&nbsp;of<BR>Common&nbsp;Stock<BR>Beneficially&nbsp;Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><I>Directors and Executive Officers</I></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Harel Gadot(1)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">35,087,335</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.76</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yoav Waizer</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Moshe Shoham(2)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,420,224</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7.27</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Yoseph Bornstein(3)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">48,722,592</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15.44</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Solomon Mayer</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">All current directors and executive officers as a group (5&nbsp;persons)(4)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">107,230,151</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">32.23</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">163 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="62%"></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="12%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:59.25pt; font-size:8pt; font-family:Times New Roman"><B>Beneficial Owner</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Number&nbsp;of&nbsp;Shares<BR>Beneficially&nbsp;Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Percentage&nbsp;of<BR>Common&nbsp;Stock<BR>Beneficially&nbsp;Owned</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><I>Five Percent Stockholders</I></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">LSA - Life Science Accelerator Ltd.(3)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">48,722,592</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15.44</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Technion Research and Development Foundation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">32,650,701</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.35</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">MEDX Ventures Group LLC(5)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">35,087,335</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10.76</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Alpha Capital Anstalt(6)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">86,199,747</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27.09</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leon Lewkowicz(7)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,743,892</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8.68</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Saber Holding GmbH(8)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,374,469</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12.01</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">GreenBlock Capital(9)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,577,107</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Lane Ventures(10)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,577,107</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5.0</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
</TABLE> <P STYLE="line-height:8.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">Includes 10,726,039 shares of the combined company&#146;s common stock issuable upon the exercise of options granted to MEDX Ventures Group. All of such shares and options are held by MEDX Ventures Group LLC, which is
beneficially owned by Mr.&nbsp;Gadot. See Note 5 below. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">Includes 6,503,255 shares of the combined company&#146;s common stock issuable upon the exercise of options in accordance with the terms of Microbot&#146;s 2015 Stock Option Plan. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(3)</TD>
<TD ALIGN="left" VALIGN="top">Based on representations and other information made or provided to Microbot by Mr.&nbsp;Bornstein, Mr.&nbsp;Bornstein is the CEO and Director of LSA and of Shizim, and Mr.&nbsp;Bornstein is the majority equity owner of
Shizim. Shizim is the majority equity owner of LSA. Accordingly, Mr.&nbsp;Bornstein may be deemed to share voting and investment power over the shares beneficially owned by these entities. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(4)</TD>
<TD ALIGN="left" VALIGN="top">Includes shares of the combined company&#146;s common stock issuable upon the exercise of options as set forth in footnotes (1)&nbsp;and (2). </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(5)</TD>
<TD ALIGN="left" VALIGN="top">Includes 10,726,039 shares of the combined company&#146;s common stock issuable upon the exercise of options granted to MEDX Ventures Group. Mr.&nbsp;Gadot is the Chief Executive Officer, Company Group Chairman and
majority equity owner of MEDX Venture Group and thus may be deemed to share voting and investment power over the shares beneficially owned by this entity. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(6)</TD>
<TD ALIGN="left" VALIGN="top">Includes: (a)&nbsp;35,154,214 shares of the combined company&#146;s common stock to be issued to Alpha Capital Anstalt (&#147;Alpha&#148;) as an adviser with respect to the Merger as provided for in the Merger
Agreement; (b)&nbsp;173,106 shares of StemCells common stock held by Alpha prior to the closing of the Merger; (c)&nbsp;2,704,153 shares of the combined company&#146;s common stock issuable upon the exercise of Microbot warrants; and (d)&nbsp;an
estimated 8,257,115 shares of the combined company&#146;s common stock expected to be issued at the closing of the Merger upon the conversion of outstanding convertible notes of Microbot held by Alpha. The actual number of shares of the combined
company underlying such convertible notes is expected to change based on the actual closing date of the Merger to take into account accrued interest through the closing. Mr.&nbsp;Konrad Ackerman and Dr.&nbsp;Nicola Feuerstein, both directors of
Alpha Capital Anstalt, have voting and dispositive control of such shares. The address of Alpha Capital is Lettstrasse 32, 9490 Vaduz, Liechtenstein. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(7)</TD>
<TD ALIGN="left" VALIGN="top">Includes 4,092,772 shares of the combined company&#146;s common stock issuable upon the exercise of Microbot warrants, and an estimated 3,612,483 shares of the combined company&#146;s common stock expected to be issued
at the closing of the Merger upon the conversion of outstanding convertible notes of Microbot held by Mr.&nbsp;Lewkowicz. The actual number of shares of the combined company underlying such convertible notes is expected to change based on the actual
closing date of the Merger to take into account accrued interest through the closing. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(8)</TD>
<TD ALIGN="left" VALIGN="top">Includes 4,092,772 shares of the combined company&#146;s common stock issuable upon the exercise of Microbot warrants, and an estimated 3,612,483 shares of the combined company&#146;s common stock expected to be issued
at the closing of the Merger upon the conversion of outstanding convertible notes of Microbot held by Saber Holding GmbH. The actual number of shares of the combined company underlying such convertible notes is expected to change based on the actual
closing date of the Merger to take into account accrued interest through the closing. Avram Berkson and Sandra Berkson may be deemed to share voting and investment power over the shares beneficially owned by this entity. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(9)</TD>
<TD ALIGN="left" VALIGN="top">Consists of 17,577,107 shares of the combined company&#146;s common stock to be issued to GreenBlock Capital as an adviser with respect to the Merger as provided for in the Merger Agreement. </TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">(10)</TD>
<TD ALIGN="left" VALIGN="top">Consists of 17,577,107 shares of the combined company&#146;s common stock to be issued to Lane Ventures as an adviser with respect to the Merger as provided for in the Merger Agreement. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">164 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_95"></A>OTHER MATTERS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_96"></A>Section&nbsp;16(a) Beneficial Ownership Reporting Compliance </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Section&nbsp;16(a) of the Exchange Act requires StemCells officers and directors, and persons who own more than ten percent of a registered
class of StemCells&#146; equity securities, to file reports of ownership and changes in ownership with the SEC. Such officers, directors and ten-percent stockholders are also required by SEC rules to furnish StemCells with copies of all forms that
they file pursuant to Section&nbsp;16(a). Based on the StemCells&#146; review of the copies of such forms received by it and written representations from certain reporting persons, StemCells believes that during fiscal 2015, its executive officers,
directors and 10% stockholders complied with all other applicable filing requirements. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><A NAME="toc250555_97"></A>Stockholder Proposals </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Stockholders who wish to present proposals for inclusion in the company&#146;s proxy materials for the 2017 Annual Meeting of Stockholders may
do so by following the procedures prescribed in Rule 14a-8 under the Exchange Act. To be eligible, the stockholder proposals must be received by our corporate secretary on or before November&nbsp;23, 2016. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Stockholders who wish to make a proposal at the 2017 Annual Meeting of Stockholders, other than one that will be included in our proxy
materials, must notify us no later than February&nbsp;6, 2017 (see Rule 14a-4 under the Exchange Act). If a stockholder who wishes to present a proposal at the 2017 Annual Meeting of Stockholders fails to notify us by February&nbsp;6, 2017, the
proxies that management solicits for the meeting will confer discretionary authority to vote on the stockholder&#146;s proposal if it is properly brought before the meeting. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Proposals that are not received in a timely manner will not be voted on at the 2017 Annual Meeting. If a proposal is received on time, the
proxies that management solicits for the meeting may still exercise discretionary voting authority on the proposal under circumstances consistent with the proxy rules of the SEC. All stockholder proposals should be marked for the attention of
President, 39899 Balentine Drive, Suite 200, Newark, CA 94560. </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_98"></A>WHERE YOU CAN FIND MORE INFORMATION </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports,
statements or other information that StemCells files at the SEC public reference room in at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. StemCells SEC
filings are also available to the public from commercial document retrieval services and on the website maintained by the SEC at http://www.sec.gov. </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc250555_99"></A>TRADEMARK NOTICE </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">&#147;HuCNS-SC&#148; cells, &#147;Phase II Pathway Study&#148; and &#147;Phase II Radient Study&#148; are trademarks of StemCells in the
United States and other jurisdictions. Other third-party logos and product/trade names are registered trademarks or trade names of their respective companies. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">165 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>MICROBOT MEDICAL LTD. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Index to the Financial Statements </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="94%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_1"><B>Independent auditors&#146; report to the shareholders of Microbot Medical Ltd.
 dated March 25, 2015</B></A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom"><B></B>&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><B>F-2</B></TD>
<TD NOWRAP VALIGN="bottom"><B></B>&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_2">Balance sheets as of December 31, 2014 and December 31, 2013</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_3">Statements of operations for the years ended December 31, 2014 and December 31,
2013</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-4</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_4">Statement of changes in shareholders&#146; equity for the years ended December
 31, 2014, December 31, 2013 and December 31, 2012</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_5">Statements of cash flows for the years ended December 31, 2014 and December 31,
2013</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_6">Notes to the financial statements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-8</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><A HREF="#fin250555_1a">Independent auditors&#146; report to the shareholders of Microbot Medical
 Ltd. dated July 27, 2016</A></B> </P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom"><B></B>&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><B>F-16</B></TD>
<TD NOWRAP VALIGN="bottom"><B></B>&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_2a">Balance sheets as of December 31, 2015 and December 31, 2014 </A></P></TD>

<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-17</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_3a">Statements of operations for the years ended December 31, 2015 and December 31,
 2014</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-18</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_4a">Statement of changes in shareholders&#146; equity for the years ended December
 31, 2015, December 31, 2014 and December 31, 2013</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_5a">Statements of cash flows for the years ended December 31, 2015 and December 31,
 2014</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-20</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_6a">Notes to the financial statements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-22</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Unaudited financial information:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_8">Balance sheets as of June 30, 2016 and 2015 (unaudited), and December 31, 2015
</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-30</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_9">Statements of operations for the six months ended June 30, 2016 and 2015 (unaudited),
 and December 31, 2015</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-31</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_10">Statement of changes in shareholders&#146; equity (deficit) for the six months
 ended June 30, 2016<BR>and June 30, 2015 and year ended December 31, 2015</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-32</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_11">Statements of cash flows for the six months ended June 30, 2016 and 2015 (unaudited)
 and the year ended December 31, 2015</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-33</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#fin250555_12">Notes to the financial statements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">F-35</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-1 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="fin250555_1"></A>INDEPENDENT AUDITORS&#146; REPORT TO THE SHAREHOLDERS OF </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have
audited the accompanying financial statements of <B>Microbot Medical Ltd.</B> (&#147;the Company&#148;), which comprise the balance sheets as of December 31, 2014 and 2013 and the related statement of operations, statements of changes in
shareholders&#146; equity (deficit) and statements of cash flows for the&nbsp;two years then ended and the related notes to the financial statements. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Management&#146;s Responsibility for the Consolidated Financial Statements </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Auditors&#146; Responsibility </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor&#146;s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the Company&#146;s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our audit opinion. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Opinion </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2014 and 2013 and the results of operations, changes in shareholders&#146; equity and cash flows for the two years then ended in accordance with generally accepted accounting principles in the United States of America. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Without qualifying our opinion, we draw attention to Note 1D to the financial statements regarding risk factors and the Company&#146;s business condition. As
described in that note, the Company is dependent on outside financing and on the continuing support of its investors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Brightman Almagor Zohar &amp;
Co. </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Certified Public Accountants </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Member of
Deloitte Touche Tohmatsu Limited </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Israel </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>March
25, 2015 </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-2 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_2"></A>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>BALANCE SHEETS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Note</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>ASSETS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Current assets</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">358,536</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other receivables and current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">4</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">114,211</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">83,147</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">904,457</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">441,683</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Long-term receivables</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,590</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Fixed Assets, net</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">53,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">58,346</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">957,858</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">503,619</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Current liabilities</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Trade accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">19,815</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">39,593</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other current liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">81,457</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">89,373</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">101,272</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">128,966</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Commitments</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">8</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Shareholders&#146; equity </U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Share capital</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,741</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Additional paid-in capital</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,617,450</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated deficit</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,265,372</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,244,538</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">856,586</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">374,653</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">957,858</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">503,619</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:170pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-3 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_3"></A>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>STATEMENTS OF OPERATIONS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Note</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research expenses, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">836,698</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">761,127</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">65,113</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">44,166</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Operating loss</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">901,811</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">805,293</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Financing expenses (income), net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">119,023</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(580</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Loss for the year</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,020,834</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">804,713</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Basic and diluted loss per share (in USD)</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.135</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.107</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average number of shares outstanding used in computing basic and diluted loss per share -
in thousands</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:400pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-4 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_4"></A>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>STATEMENT OF CHANGES IN SHAREHOLDERS&#146; EQUITY </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="45%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Share<BR>Capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Additional</B><br><B>paid-in capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Receipts on<BR>account of<BR>shares</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Accumulated<BR>deficit</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Total</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2012</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">301</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,618,890</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(439,825</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,179,366</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of shares</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,440</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,617,450</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,618,890</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(804,713</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(804,713</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2013</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,741</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(*)1,617,450</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,244,538</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">374,653</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of shares</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">875</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,501,892</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,502,767</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,020,834</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,020,834</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2014</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,265,372</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">856,586</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:450pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-5 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_5"></A>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>STATEMENTS OF CASH FLOWS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="77%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - OPERATING ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,020,834</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(804,713</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjustments required to present cash flows from operating activities (Appendix A)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(42,385</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">51,154</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash used in operating activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,063,219</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(753,559</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - INVESTMENT ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Investment in fixed assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(11,428</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(42,874</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deposit for operational leasing</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,590</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(3,590</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash used in investment activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(7,838</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(46,464</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - FINANCING ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of shares</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,502,767</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Short-term credit from banking entities, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(51,000</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash provided by (used in) financing activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,502,767</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(51,000</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Increase (decrease) in cash and cash equivalents</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">431,710</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(851,023</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cash and cash equivalents - beginning of year</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">358,536</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,209,559</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cash and cash equivalents - end of year</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">358,536</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:350pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-6 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>STATEMENTS OF CASH FLOWS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended&nbsp;December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2013&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:2.00em; text-indent:-2.00em; font-size:10pt; font-family:Times New Roman"><B><U>AppendixA</U> - <U>Adjustments required to present cash flows from operating
activities:</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Income and expense items not involving cash flows:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">16,373</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">14,088</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,373</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,088</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Changed in assets and liabilities:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Decrease (increase) in other receivables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(31,064</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,083</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Increase (decrease) in trade payables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(19,778</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,339</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Increase (decrease) in other payables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(7,916</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,644</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(58,758</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,066</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(42,385</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">51,154</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:350pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-7 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_6"></A>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 1</U> - <U>GENERAL</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Description of business</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company was incorporated and registered with the
Registrar of Companies on November 10, 2010 and commenced its business operations in January 2011. The Company is engaged in the research and development of medical equipment. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Definitions</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="19%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="77%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>The Company</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Microbot Medical Ltd.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Related parties</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">as defined in Accounting Standards Codification 850 (ASC 850)</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>USD or $</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">the U.S. dollar.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>NIS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">New Israeli Shekel.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>TRDF</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Technion Research and Development Foundation.</TD></TR>
</TABLE></DIV> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Use of estimates</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The preparation of financial statements in conformity with U.S
GAAP requires management to make estimates and assumptions pertaining to transactions and matters whose ultimate effect on the financial statements cannot precisely be determined at the time of financial statements preparation. Although these
estimates are based on management&#146;s best judgment, actual results may differ from these estimates. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Risk factors and Company&#146;s business condition</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company has a limited
operating history and faces a number of risks, including uncertainties regarding the development of its product. Additionally, the Company expects that it will continue to incur significant operating costs and losses in connection with the
development of its products and financing of its business development operations. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the
continuation of the Company&#146;s activities and its obligations are dependent upon the receipt of financing from its shareholders or new investors. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">The significant accounting policies applied in the preparation of the financial statements are as follows: </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Basis of presentation</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The financial statements have been prepared in conformity
with accounting principles generally accepted in United Sates of America (&#147;US GAAP&#148;). </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Financial statement in U.S. dollars</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The functional currency of the Company is
the U.S dollar (&#147;dollar&#148;) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-8 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES&nbsp;(Cont.)</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Financial statement in U.S. dollars&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Transactions and balances denominated in dollars are presented at their original amounts.
Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, &#147;Foreign Currency Translation&#148;. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the
statement of operations as financial income or expenses, as appropriate. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Cash and cash equivalents</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents consist of cash and on
demand deposits in banks, and other short-term liquid investments (primarily interest-bearing time deposits) with original maturities of less than three months. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Fair value of financial instruments</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The carrying values of cash and cash
equivalents, other receivables and prepaid expenses, marketable equity securities and other accounts payable approximate their fair value due to the short-term maturity of these instruments. The fair value of derivative warrant liabilities was
estimated using the Black Scholes Merton formula based on inputs including (i) the price of the Company&#146;s shares; (ii) the exercise price of the warrant; (iii) risk-free interest; (iv) term available to exercise or redeem the security and (v)
the volatility of the Company&#146;s share during the relevant term. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>E.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Fixed assets</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Property and equipment are presented at cost, net of investment
grants received and less accumulated depreciation. Depreciation is calculated based on the straight-line method over the estimated useful lives of the assets, as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">25-33</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">10</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">7</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>F.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Related parties</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Detailed disclosure has been provided regarding transactions
with related parties as defined in Accounting Standards Codification 850 (ASC 850). See Note 13 regarding these transactions. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>G.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share premium</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">A premium representing surplus receipts due to shares on their
nominal value (see Note 9). </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>H.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Liabilities due to termination of employer-employee relations</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The employees of
the Company are included under Article 14 of the Severance Compensation Act, 1963 (&#147;Article 14&#148;) for a portion of their salaries. According to Article 14, these employees are entitled to monthly deposits made by the Company on their behalf
with insurance companies. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-9 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES&nbsp;(Cont.)</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>H.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Liabilities due to termination of employer-employee relations&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Payments in accordance with Article 14 release the Company from any future severance payments
(under the Severance Compensation Act, 1963) with respect of those employees. The aforementioned deposits are not recorded as an asset in the Company&#146;s balance sheet, and there is no liability recorded as the Company does not have a future
obligation to make any additional payments. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>I.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Basic and diluted net loss per share</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Basic loss per share is computed by
dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the
weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all potentially dilutive common shares had been issued, using the treasury stock method, in accordance with ASC
260-10 &#147;Earnings per Share&#148;. Potentially dilutive common shares were excluded from the diluted loss per share calculation because they were anti-dilutive. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>J.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Research and development expenses, net</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Research and development expenses, are
charged to the statement of operations as incurred. Grants for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction
from the research and development expenses. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 3</U> - <U>CASH AND CASH EQUIVALENTS</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="70%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Israeli currency</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">630,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">121,100</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deposits in foreign currency</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">149,662</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">226,507</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Short-term shekel deposits</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">9,758</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">10,929</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">358,536</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 4</U> - <U>OTHER RECEIVABLE AND CURRENT ASSETS</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Advances to suppliers</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">499</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Government institutions</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">13,349</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">130</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Prepaid expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">33,334</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">18,412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">778</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Grants receivable from chief scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">65,187</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">63,328</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">114,211</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">83,147</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-10 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 5</U> - <U>FIXED ASSETS, NET</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cost</U></B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">24,588</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">56,705</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">49,343</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">90,008</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">78,580</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Accumulated Depreciation</U></B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,733</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,538</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">22,774</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,061</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,100</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">635</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,607</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,234</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">53,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">58,346</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 6</U> - <U>TRADE ACCOUNTS PAYABLE</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">19,694</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">31,582</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Outstanding checks</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">121</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,011</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">19,815</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">39,593</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 7</U> - <U>OTHER CURRENT LIABILITIES</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Employees</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">56,946</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">17,996</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Government institution</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,754</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,262</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Expenses payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,708</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">54,463</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,049</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,652</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">81,457</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">89,373</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 8</U> - <U>COMMITMENTS</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Office of the Chief Scientist</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company obtained from the Chief Scientist of
the State of Israel grants for participation in research and development for the years 2012 through 2015, and, in return, the Company is obligated to pay royalties amounting to 3% of its future sales up to the amount of the grant. The grant is
linked to the exchange rate of the dollar and bears interest of Libor per annum. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Through the year ended December 31, 2015, total grants
obtained amounted to $507,390. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The refund of the grants is contingent upon the successful outcome of the Company&#146;s research and
development programs and the attainment of sales. The Company has no obligation to refund these </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-11 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 8</U> - <U>COMMITMENTS&nbsp;(Cont.)</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Office of the Chief Scientist&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">
grants, if sales are not generated. The financial risk is assumed completely by the Government of Israel. The grants are received from the Government on a project-by-project basis. If the project
fails the Company has no obligation to repay any grant received for the specific unsuccessful or aborted project. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD ALIGN="left" VALIGN="top">In June 2012, the Company received approval from the Chief Scientist (&#147;CS&#148;) for participation in research and development expenses of up to NIS 2,973,010 (USD 764,466). The CS will participate in 50% of these
expenses for the period from July 1, 2012 until April 30, 2014. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the Company had
received a refund for its participation in the amount of NIS 1,189,204 (USD 305,787). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD ALIGN="left" VALIGN="top">In August 2014, the Company received approval from the CS for participation in research and development expenses of up to NIS 3,594,082 (USD 924,166). The CS will participate in 50% of these expenses for the period from
May 1, 2014 until September 30, 2015. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the Company had received a refund for its
participation in the amount of NIS 784,034 (USD 201,603). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company signed an agreement with the Technion Research and Development Foundation (hereinafter &#147;TRDF&#148;) in June 2012 by which the TRDF transferred a global, exclusive, royalty-bearing license to the
Company in accordance with the license agreement. As partial consideration for the license, the Company shall pay TRDF royalties on net sales (between 1.5%-3%) and on sublicense income as detailed in the agreement. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 9</U> - <U>SHAREHOLDERS&#146; EQUITY</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Composition of share capital</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="66%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">Number of ordinary shares of NIS 0.001 par value</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December&nbsp;31</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Authorized</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issued and outstanding</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="8"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">Number of preferred A shares of NIS 0.001 par value</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Authorized</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issued and outstanding</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,500,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share capital developments</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>(1)</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On November 10, 2010, the date of incorporation, the Company issued 800,000 ordinary shares, NIS 0.001 nominal value each, to its founders. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-12 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 9</U> - <U>SHAREHOLDERS&#146; EQUITY&nbsp;(Cont.)</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share capital developments&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>(2)</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On February 6, 2012, the Company performed a recapitalization of the Company&#146;s share capital by which the Company issued 3,565,000 ordinary shares, NIS 0.001 nominal value each, in accordance with the
recapitalization. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a.</TD>
<TD ALIGN="left" VALIGN="top">The Company allocated 1,021,410 ordinary shares, NIS 0.001 nominal value each, to TRDF in accordance with the recapitalization. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>(3)</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company allocated 2,543,590 ordinary shares, NIS 0.001 nominal value each, to its founders in accordance with the recapitalization. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>(4)</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>In June 2012, the Company allocated 135,000 ordinary shares, NIS 0.001 nominal value each, to TRDF as partial consideration for the transfer of an exclusive, royalty-bearing license in accordance with the license
agreement. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>(5)</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On August 29, 2012, the Company received an investment of USD 1,500,000 from a number of investors in accordance with the share purchase agreement. In addition, the Company issued warrants in a ratio of 1:1 for
the option to purchase the Company&#146;s series A preferred shares, NIS 0.001 nominal value each. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">In 2013, the Company
allocated 1,500,000 series A preferred shares, NIS 0.001 nominal value each, to the investors. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">In February 2014, the investors exercised
the warrants for 1,500,000 series A preferred shares, NIS 0.001 nominal value each, for total consideration of USD 1,500,000. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>(6)</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>Pursuant to the allocation of the series A preferred shares in 2013, the Company allocated an additional 41,500 ordinary shares, NIS 0.001 nominal value each, to the TRDF in accordance with Company&#146;s
obligations as outlined in the license agreement in consideration for intellectual property received and in the framework of the anti-dilution rights issued. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 10</U> - <U>RESEARCH EXPENSES, NET</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Wages and related expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">479,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">576,331</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Materials</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,083</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,841</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Patents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">115,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Office and maintenance</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,258</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,524</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Rent</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,689</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">537,422</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">321,697</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,223</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,804</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">57,086</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,117</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,266,331</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">987,715</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Less grants received from Chief Scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(429,633</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(226,588</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">836,698</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">761,127</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-13 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 11</U> - <U>GENERAL AND ADMINISTRATIVE EXPENSES</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,647</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Legal fees</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,447</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Travel</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,306</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,573</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,404</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,100</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,405</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,399</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">65,113</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">44,166</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 12</U> - <U>FINANCINGS EXPENSES, NET</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bank fees and interest</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,704</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,039</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Exchange differences</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">117,319</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,619</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">119,023</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(580</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 13</U> - <U>RELATED PARTIES</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>L.S.A. Life Sciences Accelerator Ltd.</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company and L.S.A. Life Sciences Accelerator Ltd. are related parties, within the definition of that term in ASC 830. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">L.S.A. Life Sciences Accelerator Ltd. has a 24.3% holding in the Company&#146;s share capital. </TD></TR></TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>The Technion R&amp;D Foundation Ltd.</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Technion R&amp;D Foundation Ltd. holds
15.88% of the Company&#146;s total share capital. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>MEDX Ventures Group LLC</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company and the MEDX Ventures Group LLC are related parties, within the definition of that term in ASC 830. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">The MEDX Ventures Group LLC holds 12.16% of the Company&#146;s total share. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-14 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 14</U> - <U>TAXES ON INCOME</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company is taxed according to Israeli tax laws: </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>1.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Corporate tax rates in Israel</B> </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">The Israeli corporate tax rate was 26.5% and 25% in the
years 2014 and 2013. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>2.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The entity is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the
future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="79%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended<BR>December&nbsp;31</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Deferred tax assets</B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred taxes due to carryforward losses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">600</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">311</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">600</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">311</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Valuation allowance</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(600</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(311</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net deferred tax asset</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-15 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="fin250555_1a"></A>INDEPENDENT AUDITORS&#146; REPORT TO THE SHAREHOLDERS OF </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have
audited the accompanying financial statements of <B>Microbot Medical Ltd.</B> (&#147;the Company&#148;), which comprise the balance sheets as of December 31, 2015 and 2014 and the related statement of operations, statements of changes in
shareholders&#146; equity (deficit) and statements of cash flows for the&nbsp;two years then ended and the related notes to the financial statements. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Management&#146;s Responsibility for the Consolidated Financial Statements </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Auditors&#146; Responsibility </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor&#146;s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the Company&#146;s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our audit opinion. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Opinion </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2015 and 2014 and the results of operations, changes in shareholders&#146; equity and cash flows for the two years then ended in accordance with generally accepted accounting principles in the United States of America. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Without qualifying our opinion, we draw attention to Note 1D to the financial statements regarding risk factors and the Company&#146;s business condition. As
described in that note, the Company is dependent on outside financing and on the continuing support of its investors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Brightman Almagor Zohar &amp;
Co. </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Certified Public Accountants </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Member of
Deloitte Touche Tohmatsu Limited </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Israel </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>July
27, 2016 </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-16 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_2a"></A>BALANCE SHEETS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Note</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>ASSETS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Current assets</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other receivables and current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">4</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">49,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">114,211</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">486,478</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">904,457</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Long-term receivables</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,584</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Fixed Assets, net</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">37,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">53,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">527,742</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">957,858</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Current liabilities</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Trade accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">24,661</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">19,815</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other current liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">148,236</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">81,457</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">172,897</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">101,272</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Long-term liabilities</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Convertible loans from shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">8</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">419,099</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Commitments</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Shareholders&#146; equity </U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Share capital</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="center">10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Additional paid-in capital</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated deficit</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(3,186,212</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,265,372</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(64,254</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">856,586</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">527,742</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">957,858</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:180pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-17 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_3a"></A>STATEMENTS OF OPERATIONS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Note</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research expenses, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">822,759</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">836,698</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">92,018</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">65,113</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Operating loss</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">914,777</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">901,811</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Financing expenses, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">13</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,063</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">119,023</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Loss for the year</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">920,840</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,020,834</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Basic and diluted loss per share (in USD)</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.122</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.135</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average number of shares outstanding used in computing basic and diluted loss per share -
in thousands</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:450pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-18 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_4a"></A>STATEMENT OF CHANGES IN SHAREHOLDERS&#146; EQUITY </U></B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Share<BR>Capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Additional<BR>paid-in<BR>capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Accumulated<BR>deficit</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Total</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2013</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,741</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,617,450</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,244,538</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">374,653</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of shares</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">875</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,501,892</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,502,767</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,020,834</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,020,834</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2014</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,265,372</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">856,586</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2015</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(3,186,212</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(64,254</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:400pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-19 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_5a"></A>STATEMENTS OF CASH FLOWS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="79%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - OPERATING ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,020,834</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjustments required to present cash flows from operating activities (Appendix A)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">156,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(42,385</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash used in operating activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(764,498</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,063,219</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - INVESTMENT ACTIVITIES</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Investment in fixed assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,525</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(11,428</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deposit for operational leasing</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,590</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash used in investment activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(1,525</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(7,838</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - FINANCING ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issuance of shares</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,502,767</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Receipt of loans from shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">412,494</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash provided by financing activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">412,494</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">1,502,767</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Increase (decrease) in cash and cash equivalents</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(353,529</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">431,710</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cash and cash equivalents - beginning of year</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">358,536</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cash and cash equivalents - end of year</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:350pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-20 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>STATEMENTS OF CASH FLOWS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="81%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended&nbsp;December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:2.00em; text-indent:-2.00em; font-size:10pt; font-family:Times New Roman"><B><U>AppendixA</U> - <U>Adjustments required to present cash flows from operating
activities:</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Income and expense items not involving cash flows:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">17,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">16,373</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated interest on convertible loans</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,605</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,851</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,373</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Changed in assets and liabilities:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Decrease (increase) in other receivables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">60,865</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(31,064</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Increase (decrease) in trade payables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,847</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(19,778</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Increase (decrease) in other payables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">66,779</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(7,916</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">132,491</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(58,758</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">156,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42,385</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-21 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="fin250555_6a"></A><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 1</U> - <U>GENERAL</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Description of business</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company was incorporated and registered with the
Registrar of Companies on November 10, 2010 and commenced its business operations in January 2011. The Company is engaged in the research and development of medical equipment. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Definitions</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="22%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="74%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>The Company</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Microbot Medical Ltd</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Related parties</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">as defined in Accounting Standards Codification 850 (ASC 850)</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>USD or $</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">the U.S. dollar.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>TRDF</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Technion Research and Development Foundation</TD></TR>
</TABLE></DIV> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Use of estimates</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The preparation of financial statements in conformity with U.S
GAAP requires management to make estimates and assumptions pertaining to transactions and matters whose ultimate effect on the financial statements cannot precisely be determined at the time of financial statements preparation. Although these
estimates are based on management&#146;s best judgment, actual results may differ from these estimates. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Risk factors and Company&#146;s business condition</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company has a limited
operating history and faces a number of risks, including uncertainties regarding the development of its product. Additionally, the Company expects that it will continue to incur significant operating costs and losses in connection with the
development of its products and financing of its business development operations. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the
continuation of the Company&#146;s activities and its obligations are dependent upon the receipt of financing from its shareholders or new investors </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">The significant accounting policies applied in the preparation of the financial statements are as follows: </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Basis of presentation</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The financial statements have been prepared in conformity
with accounting principles generally accepted in United Sates of America (&#147;US GAAP&#148;). </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Financial statement in U.S. dollars</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The functional currency of the Company is
the U.S dollar (&#147;dollar&#148;) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-22 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES&nbsp;(Cont.)</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Financial statement in U.S. dollars&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Transactions and balances denominated in dollars are presented at their original amounts.
Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, &#147;Foreign Currency Translation&#148;. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the
statement of operations as financial income or expenses, as appropriate. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Cash and cash equivalents</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents consist of cash and demand
deposits in banks, and other short-term liquid investments (primarily interest-bearing time deposits) with original maturities of less than three months. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B>Fair value of financial instruments: </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The carrying values of cash and cash equivalents,
other receivable and prepaid expenses, marketable equity securities and other accounts payable approximate their fair value due to the short-term maturity of these instruments. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>E.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Fixed assets</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Property and equipment are presented at cost, net of investment
grants received and less accumulated depreciation. Depreciation is calculated based on the straight-line method over the estimated useful lives of the assets, as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="85%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"><FONT STYLE="white-space:nowrap">25-33%</FONT></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">10&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">7&nbsp;&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>F.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Related parties</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Detailed disclosure has been provided regarding transactions
with related parties as defined in Accounting Standards Codification 850 (ASC 850). See Note 13 regarding these transactions. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>G.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share premium</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">A premium representing surplus receipts due to shares on their
nominal value (see Note 9). </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>H.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Liabilities due to termination of employer-employee relations</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The employees of
the Company are included under Article 14 of the Severance Compensation Act, 1963 (&#147;Article 14&#148;) for a portion of their salaries. According to Article 14, these employees are entitled to monthly deposits made by the Company on their behalf
with insurance companies. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-23 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES&nbsp;(Cont.)</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>H.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Liabilities due to termination of employer-employee relations&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Payments in accordance with Article 14 release the Company from any future severance payments
(under the Severance Compensation Act, 1963) with respect of those employees. The aforementioned deposits are not recorded as an asset in the Company&#146;s balance sheet, and there is no liability recorded as the Company does not have a future
obligation to make any additional payments. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>I.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B>Basic and diluted net loss per share: </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Basic loss per share is computed by dividing the
net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average
number of common shares outstanding plus the number of additional common shares that would have been outstanding if all potentially dilutive common shares had been issued, using the treasury stock method, in accordance with ASC 260-10 &#147;Earnings
per Share&#148;. Potentially dilutive common shares were excluded from the diluted loss per share calculation because they were anti-dilutive. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>J.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B>Research and development expenses, net: </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Research and development expenses, are charged
to the statement of operations as incurred. Grants for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from the
research and development expenses. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>K.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B>Convertible debentures: </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Proceeds from the sale of debt securities with a conversion
feature are allocated to equity based on the intrinsic value of such conversion feature in accordance with ASC 470-20 &#147;Debt with Conversion and Other Options&#148;, with a corresponding discount on the debt instrument recorded in liabilities
which is amortized in finance expense over the term of the loan. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 3</U> - <U>CASH AND CASH EQUIVALENTS</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="70%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">426,992</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">630,826</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deposits</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,725</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">159,420</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-24 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 4</U> - <U>OTHER RECEIVABLE AND CURRENT ASSETS</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Government institutions</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,820</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">13,349</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Prepaid expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,383</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,334</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,558</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,341</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Grants receivable from chief scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">65,187</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">49,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">114,211</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 5</U> - <U>FIXED ASSETS, NET</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cost</U></B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">58,230</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">56,705</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">91,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">90,008</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Accumulated Depreciation</U></B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,383</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,733</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,905</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">22,774</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,565</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,100</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">53,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,607</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">53,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 6</U> - <U>TRADE ACCOUNTS PAYABLE</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="74%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">24,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">19,694</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Outstanding checks</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">128</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">121</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">24,661</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">19,815</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 7</U> - <U>OTHER CURRENT LIABILITIES</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Employees</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">51,867</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">56,946</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Government institution</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,231</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,754</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Expenses payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">68,455</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,708</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Chief scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,872</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(189</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,049</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">148,236</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">81,457</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-25 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 8</U> - <U>CONVERTIBLE LOAN FROM SHAREHOLDERS</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">On October 8, 2015, the Company signed a convertible loan agreement with the shareholders. According to the loan agreement, the Company will
receive an amount up to USD 500,000. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The loan bears interest of 10%. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The company concluded the conversion feature is not a Beneficial Conversion Feature pursuant to the provisions of ASC 470-20. Accordingly, the
proceeds were recorded in liabilities in their entirely. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 9</U> - <U>COMMITMENTS</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Office of the Chief Scientist</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company obtained from the Chief Scientist of
the State of Israel grants for participation in research and development for the years 2013 through 2015, and, in return, the Company is obligated to pay royalties amounting to 3% of its future sales up to the amount of the grant. The grant is
linked to the exchange rate of the dollar and bears interest of Libor per annum. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Through the year ended December 31, 2015, total grants
obtained amounted to $705,930. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The refund of the grants is contingent upon the successful outcome of the Company&#146;s research and
development programs and the attainment of sales. The Company has no obligation to refund these grants, if sales are not generated. The financial risk is assumed completely by the Government of Israel. The grants are received from the Government on
a project-by-project basis. If the project fails the Company has no obligation to repay any grant received for the specific unsuccessful or aborted project. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD ALIGN="left" VALIGN="top">In June 2012, the Company received approval from the Chief Scientist (&#147;CS&#148;) for participation in research and development expenses of up to NIS 2,973,010 (USD 764,466). The CS will participate in 50% of these
expenses for the period from July 1, 2012 until April 30, 2014. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the Company had
received a refund for its participation in amount of NIS 1,189,204 (USD 305,787). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD ALIGN="left" VALIGN="top">In August 2014, the Company received approval from the CS for participation in research and development expenses of up to NIS 3,594,082 (USD 924,166). The CS will participate in 50% of these expenses for the period from
May 1, 2014 until September 30, 2015. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the Company had received a refund for its
participation in amount of NIS 1,554,156 (USD 400,143). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company signed an agreement with the Technion Research and Development Foundation (hereinafter &#147;TRDF&#148;) in June 2012 by which the TRDF transferred a global, exclusive, royalty-bearing license to the
Company in accordance with the license agreement. As partial consideration for the license, the Company shall pay TRDF royalties on net sales (between 1.5%-3%) and on sublicense income as detailed in the agreement. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-26 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 10</U> - <U>SHARE CAPITAL</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Composition of share capital</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">Number of ordinary shares of NIS 0.001 par value</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December&nbsp;31</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Authorized</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issued and outstanding</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="8"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">Number of preferred A shares of NIS 0.001 par value</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Authorized</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issued and outstanding</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share capital developments</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">On November 10, 2010, the date of incorporation, the Company issued 800,000 ordinary shares, NIS 0.001 nominal value each, to its founders. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">On February 6, 2012, the Company performed a recapitalization of the Company&#146;s share capital by which the Company issued 3,565,000 ordinary shares, NIS 0.001 nominal value each, in accordance with the
recapitalization. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a.</TD>
<TD ALIGN="left" VALIGN="top">The Company allocated 1,021,410 ordinary shares, NIS 0.001 nominal value each, to TRDF in accordance with the recapitalization. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">b.</TD>
<TD ALIGN="left" VALIGN="top">The Company allocated 2,543,590 ordinary shares, NIS 0.001 nominal value each, to its founders in accordance with the recapitalization. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(3)</TD>
<TD ALIGN="left" VALIGN="top">In June 2012, the Company allocated 135,000 ordinary shares, NIS 0.001 nominal value each, to TRDF as partial consideration for the transfer of an exclusive, royalty-bearing license in accordance with the license
agreement. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(4)</TD>
<TD ALIGN="left" VALIGN="top">On August 29, 2012, the Company received an investment of USD 1,500,000 from a number of investors in accordance with the share purchase agreement. In addition, the Company issued warrants in a ratio of 1:1 for the
option to purchase the Company&#146;s series A preferred shares, NIS 0.001 nominal value each. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">In 2013, the Company
allocated 1,500,000 series A preferred shares, NIS 0.001 nominal value each, to the investors. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">In February 2014, the investors exercised
the warrants for 1,500,000 series A preferred shares, NIS 0.001 nominal value each, for total consideration of USD 1,500,000. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(5)</TD>
<TD ALIGN="left" VALIGN="top">Pursuant to the allocation of the series A preferred shares in 2013, the Company allocated an additional 41,500 ordinary shares, NIS 0.001 nominal value each, to the TRDF in accordance with Company&#146;s obligations as
outlined in the license agreement in consideration for intellectual property received and in the framework of the anti-dilution rights issued. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-27 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 11</U> - <U>RESEARCH EXPENSES, NET</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="67%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended&nbsp;December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Wages and related expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">464,481</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">479,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Materials</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,072</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,083</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Patents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,967</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">115,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Office and maintenance</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,122</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,258</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Rent</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">29,442</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,689</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">364,638</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">537,422</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,392</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,223</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">100,033</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">57,086</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,024,147</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,266,331</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Less grants received from chief scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(201,388</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(429,633</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">822,759</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">836,698</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 12</U> - <U>GENERAL AND ADMINISTRATIVE EXPENSES</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended&nbsp;December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">35,063</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Legal fees</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,323</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Travel</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,592</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,306</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,646</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,404</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">26,394</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,405</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">92,018</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">65,113</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 13</U> - <U>FINANCE EXPENSES, NET</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended&nbsp;December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bank fees and interest</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7,362</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">1,704</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Exchange differences</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,299</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">117,319</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,063</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">119,023</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 14</U> - <U>RELATED PARTIES</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>L.S.A. Life Sciences Accelerator Ltd.</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company and L.S.A. Life Sciences Accelerator Ltd. are related parties, within the definition of that term in ASC 830. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">L.S.A. Life Sciences Accelerator Ltd. has a 24.3% holding in the Company&#146;s share capital. </TD></TR></TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>The Technion R&amp;D Foundation Ltd.</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Technion R&amp;D Foundation Ltd. holds
15.88% of the Company&#146;s total share capital. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-28 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 14</U> - <U>RELATED PARTIES&nbsp;(Cont.)</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>MEDX Ventures Group LLC</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company and the MEDX Ventures Group LLC are related parties, within the definition of that term in ASC 830. MEDX is providing management consulting service in monthly consideration of 17 thousand
USD</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">The MEDX Ventures Group LLC holds 12.16% of the Company&#146;s total share. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 15</U> - <U>TAXES ON
INCOME</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company is taxed according to Israeli tax laws: </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>1.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Corporate tax rates in Israel</B> </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">The Israeli corporate tax rate was 26.5% in the years
2015 and 2014. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>2.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The entity is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the
future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="79%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended<BR>December 31</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>In thousands</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Deferred tax assets</B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred taxes due to carryforward losses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">844</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">600</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">844</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">600</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Valuation allowance</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(844</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(600</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net deferred tax asset</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 16</U> - <U>SUBSEQUENT EVENTS</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On March 29, 2016, the company&#146;s program with the Chief Scientist (&#147;CS&#148;) was segregated into two separate programs, one for subcontractors outside of Israel and the other for all other expenses
incurred in Israel. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">With regard to the subcontractors incurred in Israel program, the Company received approval from the
Chief Scientist (&#147;CS&#148;) for participation in research and development expenses of up to NIS 3,041,529 (USD 794,963). The CS will participate in 60% of these expenses. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">With regard to the expenses outside of Israel program, the Company received approval from the Chief Scientist (&#147;CS&#148;) for
participation in research and development expenses of up to NIS 825,000 (USD 215,630). The CS will participate in 30% of these expenses. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On May 11, 2016 The Company signed a convertible loan agreement with several invertors. According to the loan agreement, the Company will receive an amount of USD 750,000. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-29 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_8"></A>BALANCE SHEETS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


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<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
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<TD></TD>
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<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Note</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>ASSETS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Current assets</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">840,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">383,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other receivables and current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42,924</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">75,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">49,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">883,777</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">458,917</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">486,478</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Long term receivables</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,584</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Fixed Assets, net</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,911</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">46,196</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">915,688</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">505,113</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">527,742</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY (DEFICIT)</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Current liabilities</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Trade accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,091</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">44,174</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24,661</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other current liabilities</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">7</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">205,813</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">88,676</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">148,236</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">213,904</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">132,850</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">172,897</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Long term liabilities</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Convertible loan from shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">8</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,206,277</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">419,099</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Commitments</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">9</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Shareholders&#146; equity (deficit)</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Share capital</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">10</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Additional paid-in capital</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated deficit</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,626,451</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(2,749,695</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(3,186,212</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(504,493</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">372,263</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(64,254</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">915,688</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">505,113</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">527,742</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:90pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
<P STYLE="font-size:24pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="60%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="8%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="8%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Harel Gadot -
Director</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Date of approval: September 6, 2016 </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-30 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_9"></A>STATEMENTS OF OPERATIONS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="65%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months ended<BR>June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Note</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research expenses, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">11</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">262,524</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">461,994</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">822,759</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">140,103</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">31,309</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">92,018</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Operating loss</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">402,627</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">493,303</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">914,777</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Financing expenses (income), net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">13</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,612</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(8,980</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,063</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Loss for the period</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">440,239</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">484,323</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">920,840</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Basic and diluted loss per share (in USD)</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.058</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.64</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.122</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average number of shares outstanding used in computing basic and diluted loss per share -
in thousands</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,541</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:450pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-31 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_10"></A>STATEMENT OF CHANGES IN SHAREHOLDERS&#146; EQUITY (DEFICIT) </U></B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="59%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Share<BR>Capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Additional<BR>paid-in<BR>capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Accumulated<BR>deficit</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Total</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - January 1, 2016</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(3,186,212</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(64,254</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(440,239</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(440,239</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - June 30, 2016</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(3,626,451</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(504,493</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Share<BR>Capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Additional<BR>paid-in<BR>capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Accumulated<BR>deficit</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Total</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - January 1, 2015</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,265,372</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">856,586</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(484,323</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(484,323</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - June 30, 2015</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,749,695</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">372,263</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Share<BR>Capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Additional<BR>paid-in<BR>capital</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Accumulated<BR>deficit</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Total</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - January 1, 2015</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(2,265,372</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">856,586</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the year</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Balance - December 31, 2015</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">2,616</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">3,119,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(3,186,212</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">(64,254</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:350pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-32 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U><A NAME="fin250555_11"></A>STATEMENTS OF CASH FLOWS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="70%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months ended<BR>June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - OPERATING ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Loss for the period</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(440,239</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(484,323</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(920,840</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjustments required to present cash flows from operating activities (Appendix A)</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">94,375</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">79,282</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">156,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash used in operating activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(345,864</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(405,041</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(764,498</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - INVESTMENT ACTIVITIES</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Investment in fixed assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,525</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,525</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash used in investment activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,525</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,525</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>CASH FLOWS - FINANCING ACTIVITIES:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Receipt of convertible loans from shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">750,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">412,494</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Net cash provided by financing activities</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">750,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">412,494</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Increase (decrease) in cash and cash equivalents</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">404,136</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(406,566</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(353,529</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cash and cash equivalents - beginning of year</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">790,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cash and cash equivalents - end of year</U></B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">840,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">383,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:350pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-33 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD. </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>STATEMENTS OF CASH FLOWS </U></B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="73%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six months<BR>ended&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:2.00em; text-indent:-2.00em; font-size:10pt; font-family:Times New Roman"><B>AppendixA - <U>Adjustments required to present cash flows from</U></B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; margin-left:2.00em; text-indent:-2.00em; font-size:10pt; font-family:Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;<B><U>operatingactivities</U>:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Income and expense items not involving cash flows:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,769</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,730</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">17,246</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated interest on convertible loans</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,178</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,605</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42,947</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,730</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,851</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Changes in assets and liabilities:</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Decrease (increase) in other receivables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,421</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,974</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">60,865</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Increase (decrease) in trade payables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(16,570</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24,359</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,847</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Increase in other payables</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">57,577</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,219</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">66,779</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">51,428</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">70,552</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">132,491</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">94,375</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">79,282</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">156,342</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:375pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>The accompanying notes are an integral part of the financial statements. </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-34 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>N<A NAME="fin250555_12"></A>OTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 1</U> - <U>GENERAL</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Description of business</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company was incorporated and registered with the
Registrar of Companies on November 10, 2010 and commenced its business operations in January 2011. The Company is engaged in the research and development of medical equipment. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Definitions</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="23%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="73%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>The Company</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Microbot Medical Ltd.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Related parties</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">as defined in Accounting Standards Codification 850 (ASC 850)</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Dollar, USD or $</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">the U.S. dollar.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>TRDF</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center">-</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Technion Research and Development Foundation.</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Use of estimates</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The preparation of financial statements in conformity with U.S
GAAP requires management to make estimates and assumptions pertaining to transactions and matters whose ultimate effect on the financial statements cannot precisely be determined at the time of financial statements preparation. Although these
estimates are based on management&#146;s best judgment, actual results may differ from these estimates. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Risk factors and Company&#146;s business condition</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">To date the Company has not
generated any revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its
current financial resources and through additional raises of capital, however there can be no assurance that such additional funds will be available on terms acceptable to the Company or that the Company will not incur additional unforeseen costs or
expenses. Such conditions raise substantial doubts about the Company&#146;s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying
amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE
2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</U> </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">The significant accounting policies applied in the preparation of the
financial statements are as follows: </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Basis of presentation</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America (&#147;US GAAP&#148;). </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-35 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES&nbsp;(Cont.)</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Financial statement in U.S. dollars</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The functional currency of the Company is
the dollar since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign
currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, &#147;Foreign Currency Translation&#148;. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">All
transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Cash and cash equivalents</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Cash and cash equivalents consist of cash and demand
deposits in banks, and other short-term liquid investments (primarily interest-bearing time deposits) with original maturities of less than three months. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Fair value of financial instruments</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The carrying values of cash and cash
equivalents, other receivable and prepaid expenses, marketable equity securities and other accounts payable approximate their fair value due to the short-term maturity of these instruments. </P>
<P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>E.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Fixed assets</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Property and equipment are presented at cost, net of investment
grants received and less accumulated depreciation. Depreciation is calculated based on the straight-line method over the estimated useful lives of the assets, as follows: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="68%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>%</B></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">25-33</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">10</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">7</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>F.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Related parties</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Detailed disclosure has been provided regarding transactions
with related parties as defined in Accounting Standards Codification 850 (ASC 850). See Note 14 regarding these transactions. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>G.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share premium</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">A premium representing surplus receipts due to shares on their
nominal value (see Note 10). </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>H.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Liabilities due to termination of employer-employee relations</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The employees of
the Company are included under Article 14 of the Severance Compensation Act, 1963 (&#147;Article 14&#148;) for a portion of their salaries. According to Article 14, these employees are entitled to monthly deposits made by the Company on their behalf
with insurance companies. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-36 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 2</U> - <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES&nbsp;(Cont.)</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>H.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Liabilities due to termination of employer-employee relations&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Payments in accordance with Article 14 release the Company from any future severance payments
(under the Severance Compensation Act, 1963) with respect of those employees. The aforementioned deposits are not recorded as an asset in the Company&#146;s balance sheet, and there is no liability recorded as the Company does not have a future
obligation to make any additional payments. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>I.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Basic and diluted net loss per share</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Basic loss per share is computed by
dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the
weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all potentially dilutive common shares had been issued, using the treasury stock method, in accordance with ASC
260-10 &#147;Earnings per Share&#148;. Potentially dilutive common shares were excluded from the diluted loss per share calculation because they were anti-dilutive. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>J.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Research and development expenses, net</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Research and development expenses, are
charged to the statement of operations as incurred. Grants for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction
from the research and development expenses. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>K.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Convertible debentures</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Proceeds from the sale of debt securities with a
conversion feature are allocated to equity based on the intrinsic value of such conversion feature in accordance with ASC 470-20 &#147;Debt with Conversion and Other Options&#148;, with a corresponding discount on the debt instrument recorded in
liabilities which is amortized in finance expense over the term of the loan. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 3</U> - <U>CASH AND CASH EQUIVALENTS</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="58%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">840,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">373,612</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">426,992</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deposits</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,068</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,725</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">840,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">383,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">436,717</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-37 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 4</U> - <U>OTHER RECEIVABLE AND CURRENT ASSETS</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="61%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Government institutions</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7,146</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">21,841</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">9,820</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Prepaid expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">27,426</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,265</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,383</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Shareholders</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">169</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,131</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,558</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Advances for suppliers</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,183</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">42,924</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">75,237</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">49,761</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 5</U> - <U>FIXED ASSETS, NET</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="61%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Cost</U></B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">28,654</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">58,230</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">58,230</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">58,230</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,649</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">91,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">91,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">91,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B><U>Accumulated Depreciation</U></B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research equipment and software</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,683</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,558</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,383</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Furniture and office equipment</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,142</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,447</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">33,905</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Leasehold improvements</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,797</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,332</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,565</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">59,622</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">45,337</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">53,853</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">31,911</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">46,196</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37,680</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 6</U> - <U>TRADE ACCOUNTS PAYABLE</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="62%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,091</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">40,682</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">24,533</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Outstanding checks</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,492</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">128</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,091</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">44,174</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">24,661</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-38 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 7</U> - <U>OTHER CURRENT LIABILITIES</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Employees</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">59,785</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">69,161</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">51,867</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Government institution</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,084</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,920</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,231</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Expenses payable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">34,155</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">68,455</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">595</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(189</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Chief Scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">98,789</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,872</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">205,813</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">88,676</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">148,236</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 8</U> - <U>CONVERTIBLE LOAN FROM SHAREHOLDERS</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On October 8, 2015, the Company borrowed an aggregate of $412,494 from certain existing shareholders of the Company, evidenced by convertible promissory notes executed by the Company (the &#147;October 2015
Notes&#148;). </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The October 2015 Notes had a maturity date of July 8, 2016, and had an interest rate of 10%. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The company concluded the conversion feature is not a Beneficial Conversion Feature pursuant to the provisions of ASC 470-20. Accordingly, the
proceeds were recorded in liabilities in their entirely. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On May 11, 2016 the Company borrowed an aggregate of $750,000 from certain existing shareholders of the Company, evidenced by convertible promissory notes executed by the Company (the &#147;May 2016
Notes&#148;).&nbsp;The May 2016 Notes have a maturity date of November 11, 2017 and bear an interest at a fixed rate of 10% per annum beginning on the issuance date, payable with the principal on the maturity date. The May 2016 Notes will convert
into equity upon the earlier to occur of a &#147;reverse merger&#148; (which would include the merger with StemCells (see Note 16)) and a &#147;qualified financing&#148; resulting in $2 million or greater gross proceeds, each at a 20% discount to
the applicable valuation. The Company may also trigger a conversion upon the maturity date at a 20% discount to a deemed valuation of $15 million. The May 2016 Notes also permit prepayment under certain conditions. </TD></TR></TABLE>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The company concluded the conversion feature is not a Beneficial Conversion Feature pursuant to the provisions of ASC 470-20. Accordingly, the
proceeds were recorded in liabilities in their entirely.<B><U> </U></B> </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 9</U> - <U>COMMITMENTS</U> </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Office of the Chief Scientist</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Company obtained from the Chief Scientist of
the State of Israel (&#147;CS&#148;) grants for participation in research and development for the years 2013 through 2016, and, in return, the Company is obligated to pay royalties amounting to 3% of its future sales up to the amount of the grant.
The grant is linked to the exchange rate of the dollar and bears interest of Libor per annum. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Through the period ended June 30, 2016,
total grants obtained amounted to $893,673. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The refund of the grants is contingent upon the successful outcome of the Company&#146;s
research and development programs and the attainment of sales. The Company has no obligation to refund these grants, if sales are not generated. The financial risk is assumed completely by the Government of
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-39 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 9</U> - <U>COMMITMENTS&nbsp;(Cont.)</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Office of the Chief Scientist&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">
Israel. The grants are received from the Government on a project-by-project basis. If the project fails the Company has no obligation to repay any grant received for the specific unsuccessful or
aborted project. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>B</B></TD>
<TD ALIGN="left" VALIGN="top">In June 2012, the Company received approval from the CS for participation in research and development expenses of up to NIS 2,973,010 (USD 764,466). The CS will participate in 50% of these expenses for the period from
July 1, 2012 until April 30, 2014. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the Company had received a refund for its
participation in the amount of NIS 1,189,204 (USD 305,787). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD ALIGN="left" VALIGN="top">In August 2014, the Company received approval from the CS for participation in research and development expenses of up to NIS 3,594,082 (USD 924,166). The CS will participate in 50% of these expenses for the period from
May 1, 2014 until September 30, 2015. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">As of the date of the financial statements, the Company had received a refund for its
participation in the amount of NIS 1,554,156 (USD 400,143). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>D.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>On March 29, 2016, the Company&#146;s program with the CS was segregated into two separate programs, one for subcontractors outside of Israel and the other for all other expenses incurred in Israel.
</TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">With regard to the subcontractors incurred in Israel program, the Company received approval from the CS for participation in
research and development expenses of up to NIS 3,041,529 (USD 794,963). The CS will participate in 60% of these expenses. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">With regard to
the expenses outside of Israel program, the Company received approval from the CS for participation in research and development expenses of up to NIS 825,000 (USD 215,630). The CS will participate in 30% of these expenses. As of the date of the
financial statements, the Company had received a refund for its participation in the amount of NIS 725,826 (USD 187,743). </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>E.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company signed an agreement with the TRDF in June 2012 by which the TRDF transferred a global, exclusive, royalty-bearing license to the Company in accordance with the license agreement. As partial
consideration for the license, the Company shall pay TRDF royalties on net sales (between 1.5%-3%) and on sublicense income as detailed in the agreement. </TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 10</U> - <U>SHARE CAPITAL</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Composition of share capital</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="61%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Number of ordinary shares of NIS 0.001 par value</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Authorized</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issued and outstanding</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,541,500</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-40 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 10</U> - <U>SHARE CAPITAL&nbsp;(Cont.)</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Composition of share capital&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


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<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December 31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Number of preferred A shares of NIS 0.001 par value</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Authorized</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Issued and outstanding</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,000,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>Share capital developments</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(1)</TD>
<TD ALIGN="left" VALIGN="top">On November 10, 2010, the date of incorporation, the Company issued 800,000 ordinary shares, NIS 0.001 nominal value each, to its founders. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(2)</TD>
<TD ALIGN="left" VALIGN="top">On February 6, 2012, the Company performed a recapitalization of the Company&#146;s share capital by which the Company issued 3,565,000 ordinary shares, NIS 0.001 nominal value each, in accordance with the
recapitalization. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">a.</TD>
<TD ALIGN="left" VALIGN="top">The Company allocated 1,021,410 ordinary shares, NIS 0.001 nominal value each, to TRDF in accordance with the recapitalization. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">b.</TD>
<TD ALIGN="left" VALIGN="top">The Company allocated 2,543,590 ordinary shares, NIS 0.001 nominal value each, to its founders in accordance with the recapitalization. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(3)</TD>
<TD ALIGN="left" VALIGN="top">In June 2012, the Company allocated 135,000 ordinary shares, NIS 0.001 nominal value each, to TRDF as partial consideration for the transfer of an exclusive, royalty-bearing license in accordance with the license
agreement. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(4)</TD>
<TD ALIGN="left" VALIGN="top">On August 29, 2012, the Company received an investment of USD 1,500,000 from a number of investors in accordance with a Series A Preferred Share purchase agreement. In addition, the Company issued warrants in a ratio of
1:1 for the option to purchase the Company&#146;s series A preferred shares, NIS 0.001 nominal value each. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">In 2013, the
Company allocated 1,500,000 series A preferred shares, NIS 0.001 nominal value each, to the investors. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">In February 2014, the investors
exercised the warrants referred to above for 1,500,000 Series A Preferred Shares, NIS 0.001 nominal value each, for total consideration of USD 1,500,000. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">(5)</TD>
<TD ALIGN="left" VALIGN="top">Pursuant to the allocation of the Series A Preferred Shares in 2013, the Company allocated an additional 41,500 ordinary shares, NIS 0.001 nominal value each, to the TRDF in accordance with Company&#146;s obligations as
outlined in the license agreement in consideration for intellectual property received and in the framework of the anti-dilution rights issued. </TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-41 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 11</U> - <U>RESEARCH EXPENSES, NET</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months&nbsp;ended&nbsp;June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2016&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Wages and related expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">228,657</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">235,869</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">464,481</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Materials</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">49,915</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,390</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,072</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Patents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">18,774</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">17,301</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,967</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Office and maintenance</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,330</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,475</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">11,122</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Rent</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,341</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">732</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">29,442</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,424</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">226,115</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">364,638</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,587</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,048</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,392</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,898</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">36,070</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">100,033</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">351,925</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">534,000</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,024,147</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Less grants received from chief scientist</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(89,401</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(72,006</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(201,388</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">262,524</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">461,994</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">822,759</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 12</U> - <U>GENERAL AND ADMINISTRATIVE EXPENSES</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="53%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months&nbsp;ended June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2016&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Professional services</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">125,601</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">8,016</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">35,063</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Legal fees</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,995</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,323</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Travel</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,919</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,442</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,592</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,274</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,272</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,646</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,314</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,579</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">26,394</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">140,103</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">31,309</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">92,018</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 13</U> - <U>FINANCING EXPENSES INCOME, NET</U> </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="10%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Six&nbsp;months&nbsp;ended&nbsp;June&nbsp;30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Year&nbsp;ended<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2016&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2015&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Bank fees and interest</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">20,900</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">438</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">7,362</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Exchange differences</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,712</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(9,418</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,299</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">37,612</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">(8,980</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,063</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 14</U> - <U>RELATED PARTIES</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>L.S.A. Life Sciences Accelerator Ltd.</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company and L.S.A. Life Sciences Accelerator Ltd., a shareholder of the Company controlled by one of the Company&#146;s directors, are related parties, within the definition of that term in ASC 830.
</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-42 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>MICROBOT MEDICAL LTD.</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><U>NOTES TO THE FINANCIAL STATEMENTS</U> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 14</U> - <U>RELATED PARTIES&nbsp;(Cont.)</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>L.S.A. Life Sciences Accelerator Ltd.&nbsp;(Cont.)</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">L.S.A. Life Sciences Accelerator Ltd. has a 24.3% holding in the Company&#146;s share capital. </TD></TR></TABLE> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>B.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>The Technion R&amp;D Foundation Ltd.</U> </B></TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The Technion R&amp;D Foundation Ltd. holds
15.88% of the Company&#146;s total share capital. </P> <P STYLE="font-size:18pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><B>C.</B></TD>
<TD WIDTH="1%" VALIGN="top" STYLE="font-size:8pt">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top"><B><U>MEDX Ventures Group LLC</U> </B></TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">The Company and MEDX Ventures Group LLC, a shareholder of the Company controlled by the Company&#146;s Chairman and CEO, are related parties, within the definition of that term in ASC 830. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">MEDX Ventures Group LLC holds 12.16% of the Company&#146;s total share. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 15</U> - <U>TAXES ON
INCOME</U> </B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B>A.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The Company is taxed according to Israeli tax laws: </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>1.</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Corporate tax rates in Israel</B> </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">The Israeli corporate tax rate was 26.5% and 25% in the
years 2015 and 2016 and onwards. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>2.</B></TD>
<TD ALIGN="left" VALIGN="top"><B></B>The entity is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the
future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts. </TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="66%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of&nbsp;June 30,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>As of<BR>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2016</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2015</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>In thousands</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>In thousands</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Unaudited</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Deferred tax assets</B>:</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred taxes due to carryforward losses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">861</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">729</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">844</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">861</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">729</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">844</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Valuation allowance</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(861</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(729</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(844</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net deferred tax asset</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">$</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">&#151;&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>NOTE 16</U> - <U>SUBSEQUENT EVENTS</U> </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">On July 8, 2016, the October 2015 Notes converted, in accordance with their terms at maturity, into an aggregate of 452,650 Series A Preferred
Shares and warrants to purchase an aggregate of 452,650 Series A Preferred Shares at an exercise price of $1.00 per share. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">On August 15,
2016 the Company has entered into an Agreement and Plan of Merger and Reorganization (the &#147;Merger Agreement&#148;), with StemCells, Inc. (&#147;StemCells&#148;) and C&amp;RD Israel Ltd., a wholly-owned subsidiary of StemCells (&#147;Merger
Sub&#148;), pursuant to which Merger Sub would merge with and into the Company, with the Company as the surviving corporation and a wholly-owned subsidiary of StemCells (the &#147;Merger&#148;). StemCells common stock is currently listed on the
Nasdaq Capital Market.. The Merger is expected to close in the fourth quarter of 2016 upon the fulfillment of certain conditions precedent, as outlined in the Merger Agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">F-43 </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B><A NAME="toc250555_100"></A>Annex A </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">AGREEMENT AND PLAN OF MERGER </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>BY AND AMONG </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>STEMCELLS, INC., </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>C&amp;RD ISRAEL LTD. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>AND </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>MICROBOT MEDICAL
LTD. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Dated as of August 15, 2016 </P> <P STYLE="font-size:24pt; margin-top:0pt; margin-bottom:0pt">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="toc"></A>TABLE OF CONTENTS </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-size:1pt">
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; "><A HREF="#annatoc250555_1">ARTICLE I THE MERGER </A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;1.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_2">Merger of Merger Sub into the Company</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;1.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_3">Closing; Effective Time</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;1.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_4">Effects of the Merger</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;1.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_5">Articles of Association</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;1.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_6">Board of Directors and Officers of the Surviving
Corporation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-2</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; "><A HREF="#annatoc250555_7">ARTICLE II CONVERSION OF SECURITIES </A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_8">Conversion of Stock</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_9">Payment of Consideration</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-3</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_10">[Intentionally Omitted]</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_11">Company Stock Options</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_12">Company Warrants.</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-5</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_13">Required Withholdings</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.7</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_14">Lost Certificates</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.8</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_15">Adjustments</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;2.9</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_16">Tax Consequences</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; "><A HREF="#annatoc250555_17">ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_18">Organization, Etc</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_19">Authority Relative to This Agreement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_20">No Violations, Etc</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_21">Board Approval</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-8</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_22">Capitalization</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-8</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_23">Compliance with Laws</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.7</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_24">Company Financial Statements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.8</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_25">Title to Property</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.9</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_26">Absence of Undisclosed Liabilities</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-9</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.10</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_27">Absence of Changes or Events</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.11</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_28">Capital Stock of Subsidiaries</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.12</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_29">Litigation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.13</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_30">Insurance</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;3.14</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_31">Contracts and Commitments</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-10</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.15</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_32">Labor Matters; Employment and Labor Contracts</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.16</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_33">Intellectual Property Rights</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-12</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.17</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_34">Taxes</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-15</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.18</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_35">[Intentionally Omitted]</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.19</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_36">Regulatory Matters</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-16</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.20</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_37">Environmental Matters</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-18</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.21</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_38">Proxy Statement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.22</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_39">Finders or Brokers</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;3.23</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_40">Takeover Statutes</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom" COLSPAN="3"><A HREF="#annatoc250555_41">ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB </A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_42">Organization, Etc</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-19</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_43">Authority Relative to This Agreement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-20</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_44">No Violations, Etc</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-20</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_45">Board Approval</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-21</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_46">Capitalization</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-21</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_47">Compliance with Laws</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-22</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.7</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_48">Parent SEC Documents</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-22</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-i </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


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<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.8</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_49">Parent Financial Statements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-23</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.9</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_50">Title to Property</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.10</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_51">Absence of Undisclosed Liabilities</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.11</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_52">Absence of Changes or Events</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.12</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_53">Capital Stock of Subsidiaries</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.13</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_54">Litigation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.14</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_55">Insurance</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-25</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.15</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_56">Contracts and Commitments</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-25</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.16</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_57">Labor Matters; Employment and Labor Contracts</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-26</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.17</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_58">Intellectual Property Rights</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-27</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.18</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_59">Taxes</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-30</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.19</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_60">Employee Benefit Plans; ERISA</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-31</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.20</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_61">Regulatory Matters</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-33</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.21</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_62">Environmental Matters</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-35</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.22</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_63">Proxy Statement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-35</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.23</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_64">Finders or Brokers</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-36</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.24</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_65">Takeover Statutes</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-36</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;4.25</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_66">Valid Issuance </A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-36</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom" COLSPAN="3"><A HREF="#annatoc250555_67">ARTICLE V COVENANTS </A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-36</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_68">Conduct of Company Business During Interim Period</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-36</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_69">Conduct of Parent Business During Interim Period</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-38</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_70">No Solicitation by the Company</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_71">No Solicitation by Parent</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-42</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_72">Access to Information</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-44</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_73">Parent Proxy Statement; Related Matters</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-44</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.7</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_74">Parent Special Meeting; Parent Board Recommendation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-45</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.8</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_75">Company Special Meeting; Company Board Recommendation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-45</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.9</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_76">Reasonable Best Efforts</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-46</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.10</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_77">Public Announcements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-47</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.11</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_78">Notification of Certain Matters</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-47</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.12</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_79">Indemnification of Parent Directors and Officers</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-47</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.13</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_80">[Intentionally Omitted.]</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-48</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.14</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_81">Composition of Parent Board, Management</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-48</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.15</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_82">Parent Consent as Sole Stockholder of Merger Sub</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-48</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.16</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_83">Exchange Listing</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.17</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_84">Takeover Statutes</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.18</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_85">Further Assurances</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.19</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_86">Stockholder Litigation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.20</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_87">No Control</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.21</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_88">Parent Charter Amendment</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-49</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.22</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_89">Net Cash Position</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-50</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.23</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_90">Treatment of Parent Warrants</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-50</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.24</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_91">Validity of Private Placement for Merger Shares</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-50</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.25</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_92">[Intentionally Omitted]</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.26</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_93">Company Private Placement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.27</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_94">Employee Waiver and Release</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.28</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_95">Unaudited Financial Statements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.29</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_96">Additional Equity Obligations</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;5.30</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_97">Parent IP</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-ii </P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center"><B>Page</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom" COLSPAN="3"><A HREF="#annatoc250555_98">ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES </A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="bottom">&nbsp;&nbsp;&nbsp;&nbsp;6.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_99">Parent Stockholder Approval </A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;6.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_100">Company Stockholder Approval</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;6.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_101">Statute or Decree</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;6.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_102">Listing of Shares</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;6.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_103">Exchange Act Registration</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;6.6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_104">OCS Approval</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-51</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><A HREF="#annatoc250555_105">ARTICLE VII ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PARTIES </A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-52</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;7.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_106">Additional Conditions to the Obligations of the Company</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-52</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;7.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_107">Additional Conditions to the Obligations of Parent and Merger
Sub</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-52</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><A HREF="#annatoc250555_108">ARTICLE VIII TERMINATION </A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-53</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;8.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_109">Termination</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-53</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;8.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_110">Notice of Termination; Effect of Termination</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-54</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;8.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_111">Fees and Expenses</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-55</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><A HREF="#annatoc250555_112">ARTICLE IX MISCELLANEOUS </A></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-55</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_113">Non-Survival of Representations, Warranties, Covenants and
Agreements</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-55</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_114">Amendment and Modification</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-55</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_115">Waiver of Compliance; Consents</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-55</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.4</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_116">Notices</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-55</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.5</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_117">Assignment; Third-Party Beneficiaries</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-56</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.6</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_118">Governing Law</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-56</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.7</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_119">Specific Enforcement; Consent to Jurisdiction</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-56</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.8</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_120">Exclusive Remedy</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.9</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_121">Counterparts</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.10</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_122">Severability</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.11</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_123">Interpretation</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.12</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_124">Entire Agreement</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-58</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;9.13</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><A HREF="#annatoc250555_125">WAIVER OF JURY TRIAL</A></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;</TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right">A-58</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; "><B>EXHIBITS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; ">Exhibit A&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
Definitions</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; ">Exhibit B-1 &nbsp;&nbsp;&nbsp;&nbsp;Form of Parent Voting Agreement</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman; ">Exhibit B-2 &nbsp;&nbsp;&nbsp;&nbsp;Form of Company Voting Agreement</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-iii </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B><I>Execution Version </I></B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>AGREEMENT AND PLAN OF </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>MERGER AND REORGANIZATION </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This<B> AGREEMENT AND PLAN OF MERGER AND REORGANIZATION</B> (as amended or modified in accordance with its terms, this
<B><I>&#147;Agreement&#148;</I></B>) is made and entered into as of August 15, 2016 by and among StemCells, Inc., a Delaware corporation (<B><I>&#147;Parent&#148;</I></B>), C&amp;RD Israel Ltd., an Israeli corporation and wholly-owned subsidiary of
Parent (<B><I>&#147;Merger Sub&#148;</I></B>), and Microbot Medical Ltd., a company organized under the laws of the State of Israel (the <B><I>&#147;Company&#148;</I></B>).&nbsp;Certain capitalized terms used in this Agreement are defined in
<B>Exhibit A</B>. </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>RECITALS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>A.</B> Parent, Merger Sub and the Company intend to effect a merger of Merger Sub with and into the Company (the
<B><I>&#147;Merger&#148;</I></B>) in accordance with this Agreement and the provisions of Sections 314-327 the Companies Law of the State of Israel, 5759-1999 (together with the rules and regulations promulgated thereunder, the
&#147;<B><I>ICL</I></B>&#148;), pursuant to which Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>B.</B> The board of directors of Parent has unanimously approved and declared advisable the Merger, upon the terms and subject to the
conditions set forth herein, has determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, Parent and its stockholders, and has determined to recommend that Parent stockholders
approve, among other things, the Parent Charter Amendment and the issuance of Parent Common Stock as contemplated by this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>C.</B> The board of directors of Merger Sub has unanimously approved and declared advisable the Merger, upon the terms and subject to the
conditions set forth herein, and has determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, Merger Sub and Parent as the sole stockholder of Merger Sub. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>D.</B> The board of directors of the Company has unanimously approved and declared advisable the Merger, upon the terms and subject to the
conditions set forth herein, and has determined to recommend that Company stockholders adopt the Agreement and approve the Merger. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>E.</B> In order to induce Parent and Merger Sub to enter into this Agreement and to cause the Merger to be consummated, the Company has
entered into a letter agreement with certain investors to provide financing of at least $4.0 million, which amount would provide the Surviving Corporation with at least eighteen (18) months of cash to fund operations of Parent post-Closing, assuming
the Net Cash at Closing is zero, such funding to be received by the Company at least two (2) business days prior to the Closing of the Merger (the <B><I>&#147;Company Private Placement&#148;</I></B>). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>F.</B> It is intended that the Merger qualify as a reorganization within the meaning of Section&nbsp;368(a) of the Internal Revenue Code of
1986, as amended (the <B><I>&#147;Code&#148;</I></B>). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>G.</B> Immediately after the execution of this Agreement, each of the Key
Company Stockholders will execute and deliver to Parent a Voting Agreement, substantially in the form attached here to as <B>Exhibit B-1</B> (the <B>&#147;</B><B><I>Company Voting Agreement</I></B><B>&#148;</B>). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>H.</B> Immediately after the execution of this Agreement, each of the Key Parent Stockholders will execute and deliver to the Company a
Voting Agreement, substantially in the form attached hereto as <B>Exhibit B-2</B> (the <B><I>&#147;Parent Voting Agreement&#148;</I></B>). </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-1 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>NOW, THEREFORE,</B> in consideration of the mutual covenants and agreements hereinafter set
forth and subject to the terms and conditions hereof, the parties hereto, intending to be legally bound, agree as follows: </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_1">
</A>ARTICLE I </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>THE MERGER </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_2"></A>1.1 Merger of Merger Sub into the Company</B>.&nbsp;At the Effective Time and subject to and
upon the terms and conditions of this Agreement and the applicable provisions Sections 314 through 327 of the ICL: (i) Merger Sub (as the target company (Chevrat Ha&#146;Ya&#146;ad)) shall be merged with and into the Company (as the absorbing
company (HaChevra Ha&#146;Koletet)); (ii)&nbsp;the separate existence of Merger Sub shall cease; and (iii) the Company shall continue as the surviving corporation and a wholly-owned subsidiary of Parent governed by Israeli law.&nbsp;The Company, as
the surviving entity of the Merger, is hereinafter sometimes referred to as the <B><I>&#147;</I></B><B><I>Surviving Corporation.</I></B><B><I>&#148;</I></B> </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_3"></A>1.2</B> <B>Closing; Effective Time</B><B>. </B>Unless this Agreement is terminated pursuant to
ARTICLE&nbsp;VIII hereof, the closing of the Merger and the other transactions contemplated hereby (the <B><I>&#147;</I></B><B><I>Closing</I></B><B><I>&#148;</I></B>) will take place at 10:00 a.m. Eastern Time on a date to be specified by the
parties hereto (the <B><I>&#147;</I></B><B><I>Closing Date</I></B><B><I>&#148;</I></B>), which date shall be no later than the second (2nd) business day after satisfaction or waiver of the conditions set forth in ARTICLE VI and ARTICLE VII (other
than those conditions that by their terms are to be satisfied at the Closing), unless another time or date is agreed to by the parties hereto. The Closing shall take place at the offices of Ropes &amp; Gray LLP located at Prudential Tower, 800
Boylston Street, Boston, Massachusetts 02199, or at such other location as the parties hereto shall mutually agree.&nbsp;At the Closing, the parties hereto shall file with the Israeli Companies Registrar (the <B><I>&#147;</I></B><B><I>Companies
Registrar</I></B><B><I>&#148;</I></B>) a notice informing the Companies Registrar of the Merger and requesting that, promptly after notice that the Closing has occurred, the Companies Registrar issue a certificate evidencing the completion of the
Merger, in accordance with Section 325(5) of the ICL (the &#147;<B><I>Certificate of Merger</I></B>&#148;). The Merger shall become effective upon issuance by the Companies Registrar, after the Closing, of the Certificate of Merger (the
<B><I>&#147;</I></B><B><I>Effective Time</I></B><B><I>&#148;</I></B>). </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_4"></A>1.3</B> <B>Effects
of the Merger</B><B>.</B>&nbsp;The effects of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the ICL.&nbsp;Without limiting the foregoing, at the Effective Time, by virtue of, and
simultaneously with, the Merger and without any further action on the part of Parent, Merger Sub, the Company or any shareholder of the Company in accordance with the ICL, all of the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_5"></A>1.4</B> <B>Articles of Associatio</B><B>n</B><B>.</B><B>&nbsp;</B>The parties hereto shall
take all necessary action so that, at the Effective Time, the articles of association of the Company shall be amended and restated in their entirety in such form and substance as shall be reasonably agreeable to Parent, Merger Sub and the Company,
to be determined in good faith no later than five (5) business days after the date hereof, until thereafter changed or amended as provided therein or by Applicable Law. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_6"></A>1.5 Board of Directors and Officers of the Surviving Corporation.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) The directors of the Company immediately prior to the Effective Time shall be the directors of the Surviving Corporation immediately after
the Effective Time, and shall hold office in accordance with the articles of association of the Surviving Corporation, in each case until his or her successor is duly elected or appointed and qualified or until his earlier death, resignation or
removal. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation
immediately after the Effective Time and shall hold such offices in accordance with the bylaws of the Surviving Corporation, in each case until his or her successor is duly appointed and qualified or until his earlier death, resignation or removal.
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-2 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_7"></A>ARTICLE II </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CONVERSION OF SECURITIES </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_8"></A>2.1</B> <B>Conversion of Stock</B><B>.</B>&nbsp;As of the Effective Time, by virtue of the
Merger, and without any action on the part of the holders of any outstanding shares of Company Stock or capital stock of Merger Sub: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a)
Except as otherwise provided in Section 2.1(b) or Section 2.3, each share of Company Stock outstanding immediately prior to the Effective Time shall be automatically converted into the right to receive that number of shares of Parent Common Stock
equal to the Exchange Ratio (all such shares of Parent Common Stock to be issued pursuant to this Section 2.1(a) are collectively referred to herein as the <B><I>&#147;Merger Consideration&#148;</I></B>), it being understood that the shares of
Parent Common Stock issuable as Merger Consideration will be subject to the restrictions set forth in this Section 2.1(a).&nbsp;As of the Effective Time, all such converted shares of Company Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each certificate which immediately prior to the Effective Time represented any such shares of Company Stock (each, a <B><I>&#147;Certificate&#148;</I></B>) shall thereafter represent only the
right to receive the applicable portion of the Merger Consideration in exchange therefor in accordance with Section 2.2. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Each share
of Company Stock held by the Company or owned by Parent or any of the Parent Subsidiaries immediately prior to the Effective Time shall be canceled, and no payment shall be made with respect thereto. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Each share of capital stock of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and become one (1)
share of common stock of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The certificates representing shares of Parent Common Stock issuable in the Merger hereunder, or any other securities issued in respect
of such shares upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall bear the following legends (along with any other legends that may be required under applicable foreign, state and federal corporate
and securities laws): </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER STATE SECURITIES LAWS AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE, DISTRIBUTION OR OTHER TRANSFER, PLEDGE OR HYPOTHECATION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_9"></A>2.2 Payment of Consideration.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Prior to the Effective Time, Parent shall enter into an agreement with a bank or trust company selected by Parent and reasonably
acceptable to the Company to act as the exchange agent (the <B><I>&#147;Exchange Agent&#148;</I></B>) for the purpose of delivering the Merger Consideration in exchange for Certificates. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) At or prior to the Effective Time, Parent shall supply or cause to be supplied to or for the account of the Exchange Agent in trust for
the benefit of the holders of Company Stock, for exchange pursuant to this Section&nbsp;2.2, certificates representing the shares of Parent Common Stock issuable pursuant to Section 2.1.&nbsp;The shares of Parent Common Stock so deposited with the
Exchange Agent, together with any dividends or other distributions received by the Exchange Agent with respect to such shares of Parent Common Stock are referred to collectively as the <B><I>&#147;Exchange Fund&#148;</I></B>. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-3 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Promptly after the Effective Time, Parent shall send, or shall cause the Exchange Agent to
send, to each holder of record of shares of Company Stock at the Effective Time a letter of transmittal and instructions (which shall specify that (i) the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and (ii) which shall otherwise be in customary form and contain such provisions as Parent may reasonably specify) for use in the exchange of such holder&#146;s Certificates for the applicable portion of the
Merger Consideration. Thereafter, each such holder of shares of Company Stock that have been converted into the right to receive the applicable portion of the Merger Consideration shall be entitled to receive such applicable portion of the Merger
Consideration in respect of such shares of Company Stock, in each case upon surrender to the Exchange Agent of a Certificate, together with a properly completed letter of transmittal and all other documents reasonably required by the Exchange
Agent.&nbsp;Until so surrendered or transferred, as the case may be, each such Certificate shall represent after the Effective Time for all purposes only the right to receive such applicable portion of the Merger Consideration.&nbsp;In addition, no
dividends or other distributions declared or made with respect to Parent Common Stock with a record date after the Effective Time shall be paid or otherwise delivered to any holder of Company Stock until such holder surrenders or transfers the
applicable Certificate(s) in accordance with this Section 2.2(c) (at which time such holder shall be entitled, subject to the effect of applicable abandoned property, escheat or similar laws, to receive all such dividends and other distributions,
without interest). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The transfer books of the Company shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of Company Stock outstanding immediately prior to the Effective Time thereafter on the records of the Company.&nbsp;If, after the Effective Time, Certificates are presented to Parent, the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged for the applicable portion of the Merger Consideration to the extent provided for, and in accordance with the procedures set forth, in this ARTICLE II. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to this Section 2.2 that remains unclaimed by the
holders of Company Stock following the first (1st) anniversary of the Closing Date shall be delivered to Parent or Parent&#146;s designee, and any such holders who have not exchanged Certificates for the applicable portion of the Merger
Consideration in accordance with this Section 2.2 prior to that time shall thereafter look only to Parent, as unsecured creditors thereof, for satisfaction of their claims for such applicable portion of the Merger Consideration.&nbsp;Notwithstanding
anything to the contrary in this Agreement, none of the Exchange Agent, Parent, the Surviving Corporation nor any party hereto shall be liable to any holder of Company Stock as of immediately prior to the Effective Time for any amounts delivered to
a public official pursuant to any applicable abandoned property, escheat or similar law.&nbsp;Immediately prior to such time when the amounts would otherwise escheat to or become property of any Government Authority, any amounts remaining unclaimed
by holders of Company Stock immediately prior to the Effective Time shall become, to the extent permitted by Applicable Law, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) No fractional shares of Parent Common Stock shall be issued in connection with the Merger, and no certificates or scrip for any such
fractional shares shall be issued.&nbsp;The number of whole shares to be issued to any holder of Company Stock shall be rounded down to the nearest whole number of shares of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such holder). Holders of Company Stock shall receive no consideration in lieu of fractional shares of Parent Common Stock. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) If any shares of Company Stock outstanding as of immediately prior to the Effective Time are unvested or subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock purchase or similar agreement with the Company or under which the Company has any rights, then (except to the extent provided in any binding agreement between the Company
and the holder thereof): (i) the shares of Parent Common Stock issued in exchange for such shares of Company Stock will also be unvested and subject to the same repurchase option, risk of forfeiture or other condition; and (ii)&nbsp;the certificates
representing such shares of Parent Common Stock may accordingly be marked with appropriate legends.&nbsp;Prior to the Effective Time, the </P>
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Company shall use its reasonable best efforts to ensure that, from and after the Effective Time, Parent is entitled to exercise any such repurchase option or other right set forth in any such
restricted stock purchase or similar agreement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_10"></A>2.3 [Intentionally Omitted] </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_11"></A>2.4 Company Stock Options.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) At the Effective Time, each Company Stock Option that is outstanding and unexercised immediately prior to the Effective Time, whether or
not vested, shall be converted into and become an option to purchase Parent Common Stock, and Parent shall assume such Company Stock Option in accordance with the terms of the Microbot 2015 Stock Option Plan (the <B>&#147;Company Equity
Plan&#148;</B>) and the terms of the Contract by which such Company Stock Option is evidenced.&nbsp;All rights with respect to Company Common Stock under Company Stock Options assumed by Parent shall thereupon be converted into rights with respect
to Parent Common Stock.&nbsp;Accordingly, from and after the Effective Time: (i) each Company Stock Option assumed by Parent may be exercised solely for shares of Parent Common Stock; (ii) the number of shares of Parent Common Stock subject to each
Company Stock Option assumed by Parent shall be determined by multiplying the number of shares of Company Common Stock that were subject to such Company Stock Option immediately prior to the Effective Time by the Exchange Ratio, and rounding the
resulting number down to the nearest whole number of shares of Parent Common Stock; (iii) the per share exercise price for the Parent Common Stock issuable upon exercise of each Company Stock Option assumed by Parent shall be determined by dividing
the per share exercise price of Company Common Stock subject to such Company Stock Option, as in effect immediately prior to the Effective Time, by the Exchange Ratio, and rounding the resulting exercise price up to the nearest whole cent; and (iv)
any restriction on the exercise of any Company Stock Option assumed by Parent shall continue in full force and effect and the term, exercisability, vesting schedule and other provisions of such Company Stock Option shall otherwise remain unchanged
as a result of the assumption of such Company Stock Option; <U>provided</U>, <U>however</U>, that the board of directors of Parent or a committee thereof shall succeed to the authority and responsibility of the board of directors of the Company or
any committee thereof with respect to each Company Stock Option assumed by Parent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) [Intentionally Omitted] </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) At the Effective Time, Parent may assume the Company Equity Plan.&nbsp;If Parent assumes the Company Equity Plan, then, under such the
Company Equity Plan, Parent shall be entitled to grant stock awards, to the extent permissible under Applicable Law, using the share reserves of the Company Equity Plan as of the Effective Time (including any shares returned to such share reserves
as a result of the termination of Company Stock Options that are assumed by Parent pursuant to Section&nbsp;2.4(a)), except that: (i) stock covered by such awards shall be shares of Parent Common Stock; (ii) all references in the Company Equity Plan
to a number of shares of Company Common Stock shall be deemed amended to refer instead to a number of shares of Parent Common Stock determined by multiplying the number of referenced shares of Company Common Stock by the Exchange Ratio, and rounding
the resulting number down to the nearest whole number of shares of Parent Common Stock; and (iii) the board of directors of Parent or a committee thereof shall succeed to the authority and responsibility of the board of directors of the Company or
any committee thereof with respect to the administration of the Company Equity Plan. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Prior to the Effective Time, the Company and
Parent shall take all action that may be necessary (under the Company Equity Plan and otherwise) to effectuate the provisions of this Section 2.4 and to ensure that, from and after the Effective Time, holders of Company Stock Options have no rights
with respect thereto other than those specifically provided in this Section&nbsp;2.4. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_12"></A>2.5 Company Warrants.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) At the Effective Time, each Company Warrant that is outstanding and unexercised immediately prior to the Effective Time, shall be
converted into and become a warrant to purchase Parent </P>
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Common Stock, and Parent shall assume such Company Warrant in accordance with the terms (as in effect as of the date of this Agreement) of the applicable Company Warrant and the terms of the
Contract by which such Company Warrant is evidenced. All rights with respect to Company Preferred Stock under the Company Warrants assumed by Parent shall thereupon be converted into rights with respect to Parent Common Stock. Accordingly, from and
after the Effective Time: (i) each Company Warrant assumed by Parent may be exercised solely for shares of Parent Common Stock; (ii) the number of shares of Parent Common Stock subject to each Company Warrant assumed by Parent shall be determined by
multiplying the number of shares of Company Preferred Stock that were subject to such Company Warrant immediately prior to the Effective Time by the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of
Parent Common Stock; (iii) the per share exercise price for the Parent Common Stock issuable upon exercise of each Company Warrant assumed by Parent shall be determined by dividing the per share exercise price of Company Preferred Stock subject to
such Company Warrant, as in effect immediately prior to the Effective Time, by the Exchange Ratio, and rounding the resulting exercise price up to the nearest whole cent; and (iv) any restriction on the exercise of any Company Warrant assumed by
Parent shall continue in full force and effect and the term, exercisability, vesting schedule and other provisions of such Company Warrant shall otherwise remain unchanged as a result of the assumption of such Company Warrant; provided, however,
that the board of directors of Parent or a committee thereof shall succeed to the authority and responsibility of the board of directors of the Company or any committee thereof with respect to each Company Warrant assumed by Parent. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Prior to the Effective Time, the Company shall take all actions necessary or reasonably requested by Parent (including obtaining any
necessary consents) to effectuate the provisions of this Section 2.5. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_13"></A>2.6</B>
<B>Required Withholdings</B><B>.</B>&nbsp;Each of the Exchange Agent, Parent and the Surviving Corporation shall be entitled to deduct and withhold from the Merger Consideration such amounts, if any, as may be required to be deducted or withheld
therefrom under the Code or any other Applicable Law.&nbsp;To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been delivered or otherwise paid to the Person to whom
such amounts would otherwise have been delivered or otherwise paid pursuant to the Merger and this Agreement. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_14">
</A>2.7</B> <B>Lost Certificates</B><B>.</B><B>&nbsp;</B>If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit (in form and substance reasonably acceptable to Parent) of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if reasonably required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the applicable portion of the Merger Consideration as contemplated by this ARTICLE&nbsp;II. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_15"></A>2.8</B> <B>Adjustments</B><B>.</B>&nbsp;If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company or Parent shall occur, as a result of any reclassification, recapitalization, stock split (including any reverse stock split), merger,
combination, exchange or readjustment of shares, subdivision or other similar transaction, or any stock dividend thereon with a record date during such period, the Exchange Ratio shall be appropriately adjusted to eliminate the effect of such event
on the Exchange Ratio or any such other amounts payable pursuant to this Agreement. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_16"></A>2.9</B> <B>Tax Consequences</B><B>.</B>&nbsp;For U.S. federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368(a) of the Code.&nbsp;The parties to this Agreement adopt this Agreement as a &#147;plan of reorganization&#148; within the meaning of Section 1.368-2(g) of the United
States Treasury Regulations. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_17"></A>ARTICLE III </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>REPRESENTATIONS AND WARRANTIES OF THE COMPANY </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The Company represents and warrants to Parent and Merger Sub as of the date hereof and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date as follows, in each case subject to the exceptions set forth in the disclosure schedule delivered to Parent and dated as of the date hereof (the <B><I>&#147;Company Disclosure
Schedule&#148;</I></B>): </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_18"></A>3.1</B> <B>Organization, Etc</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Israel, and has all
requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted.&nbsp;The Company does not have any Subsidiaries or own an equity interest in any other Person. The Company is duly qualified
to do business, and is in good standing (with respect to jurisdictions that recognize such concept), in each foreign jurisdiction where the character of its owned or leased properties or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to result in a Company Material Adverse Effect. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) The Company is not in violation of any provision of its articles of association or other organizational documents (in each case, as
applicable).&nbsp;Schedule&nbsp;3.1(b) of the Company Disclosure Schedule sets forth: (i)&nbsp;each foreign jurisdiction in which the Company is qualified to do business; and (ii)&nbsp;the names of the current directors and officers of the
Company.&nbsp;The Company has made available to Parent accurate and complete copies of the articles of association and any other organizational documents (in each case, as applicable) of the Company, in each case as currently in effect. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_19"></A>3.2</B> <B>Authority Relative to This Agreement</B><B>.</B>&nbsp;The Company has all
requisite corporate power and authority to deliver this Agreement and to perform its covenants and obligations hereunder. The execution and delivery by the Company of this Agreement, the performance by the Company of its covenants and obligations
hereunder and thereunder and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company and no additional corporate proceedings on the
part of the Company are necessary to authorize the execution and delivery by the Company of this Agreement, other than the approval of this Agreement and the transactions contemplated hereby, including the Merger, by holders of a majority of the
Company Stock voted at the Company Special Meeting or by Written Consent, including by a majority of each class of shares of capital stock of the Company (the <B><I>&#147;</I></B><B><I>Company Stockholder Approval</I></B>&#148;).&nbsp;This Agreement
has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of Parent and Merger Sub, constitutes a valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors&#146; rights generally, by general equitable principles or
by principles of good faith and fair dealing, regardless of whether enforcement is sought in equity or at law. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_20">
</A>3.3</B> <B>No Violations, Etc</B><B>.</B>&nbsp;No filing with or notification to, and no permit, authorization, consent or approval of, any Government Authority is necessary on the part of the Company in connection with the consummation by the
Company of the transactions contemplated hereby, including the Merger, except: (i)&nbsp;for the filings and notifications required by the ICL; (ii)&nbsp;for receipt of a Certificate of Merger from the Companies Registrar in accordance with the ICL;
(iii) approval of the Office of Chief Scientist at the Israeli Ministry of Economy and (iv) where the failure to make such filing or notification or to obtain such permit, authorization, consent or approval would not reasonably be expected to result
in a Company Material Adverse Effect.&nbsp;Neither the execution and delivery of this Agreement by the Company, nor the consummation of the transactions contemplated hereby, including the Merger, by the Company, nor compliance by the Company with
all of the provisions hereof will, subject to obtaining the Company Stockholder Approval in accordance with Applicable Law: (x)&nbsp;conflict with or result in any breach of any </P>
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provision of the articles of association, memorandum of association or other organizational documents (in each case, as applicable) of the Company; (y)&nbsp;violate any Applicable Law; or
(z)&nbsp;result in a violation or breach of, constitute (with or without due notice or lapse of time or both) a default under, result in any material change in or give rise to any right of termination, cancellation, acceleration, redemption or
repurchase under any of the terms, conditions or provisions of any material Company Contract.&nbsp;Schedule 3.3 of the Company Disclosure Schedule lists all consents, notices, waivers and approvals required to be obtained in connection with the
consummation of the transactions contemplated hereby, including the Merger, under any material Company Contracts. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_21">
</A>3.4</B> <B>Board Approval.</B>&nbsp;The board of directors of the Company has:&nbsp;(a)&nbsp;approved and adopted, and declared the advisability of, this Agreement and the transactions contemplated hereby, including the Merger;
(b)&nbsp;determined that the transactions contemplated hereunder are in the best interests of the Company and its shareholders and that creditors of the Company are not anticipated to be adversely affected as a result of the Merger; and (c) subject
to Section 5.3(d), resolved to make and maintain the Company Board Recommendation. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_22"></A>3.5</B> <B>Capitalization</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) The authorized capital stock of the Company consists of 20,000,000 shares of Company Common Stock and 4,000,000 shares of Company
Preferred Stock.&nbsp;As of the date hereof, there were: (i)&nbsp;4,571,848 shares of Company Common Stock outstanding; (ii) Company Stock Options to purchase an aggregate of 903,592 shares of Company Common Stock are outstanding or committed for
grant; (iii) 2,409,750 shares of Company Preferred Stock outstanding; and (iv) no treasury shares.&nbsp;As of the date hereof, other than (x) 500,000 shares of Company Common Stock reserved for issuance pursuant to the Company Equity Plan and
403,592 shares of Company Common Stock reserved for issuance underlying options granted to the Chief Executive Officer of the Company, (y) 409,750 shares of Company Preferred Stock reserved for issuance under outstanding Company Warrants and (z)
598,225 shares of Company Preferred Stock reserved for issuance upon the conversion of outstanding convertible debentures of the Company (such number of shares assuming accrued interest of three months from issue date), the Company has no shares of
Company Stock reserved for issuance. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) All outstanding shares of Company Stock have been duly authorized and validly issued, are fully
paid and nonassessable and are not subject to, and were not issued in violation of, any preemptive rights, purchase option, call option, right of first refusal, subscription right or any similar right under any provision of Applicable Law, the
Company&#146;s articles of association or any Company Contract that was not duly waived. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Schedule 3.5(c) of the Company Disclosure
Schedule contains an accurate and complete list, as of the date hereof, of each outstanding Company Stock Option, including with respect to each such Company Stock Option, the holder, date of grant, exercise price, vesting schedule, expiration date,
number of shares of Company Common Stock subject thereto and an indication of the form of award pursuant to which such Company Stock Option was granted.&nbsp;Except as set forth in Section 3.5(a) or Schedule 3.5(c) of the Company Disclosure
Schedule, there are no issued, reserved for issuance or outstanding: (i) equity interests in, other voting securities of or other ownership interests in the Company; (ii) securities of the Company convertible into or exchangeable for equity
interests in, other voting securities of or other ownership interests in the Company; (iii) warrants, calls, options or other rights to acquire from the Company, or other obligations of the Company to issue, any equity interests in, other voting
securities of or other ownership interests in the Company or securities directly or indirectly convertible into or exercisable or exchangeable for equity interests in, other voting securities of or other ownership interests in the Company; or
(iv)&nbsp;restricted shares, stock appreciation rights, performance units, contingent value rights, &#147;phantom&#148; stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the
value or price of any equity interests in, other voting securities of or other ownership interests in the Company (the items in clauses (i) through (iv) being referred to collectively as the <B><I>&#147;Company Securities&#148;</I></B>). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) An accurate and complete copy of the Company Equity Plan, and of the forms of all agreements and instruments and any amendments thereto
relating to or issued under each thereof, have been </P>
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made available to Parent.&nbsp;There are no agreements to amend, modify or supplement any such agreements, instruments or forms.&nbsp;Each award under the Company Equity Plan was granted in
accordance with the terms of the Company Equity Plan, and each Company Stock Option was granted with a per share exercise price no lower than par or nominal value of one (1) share of Company Common Stock. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_23"></A>3.6</B> <B>Compliance with Laws</B><B>.</B><B>&nbsp;</B>The Company has not violated or
failed to comply with any Applicable Law material to the operation of the Company&#146;s business. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_24">
</A>3.7</B> <B>Company Financial Statements</B><B>.</B>&nbsp;The financial statements for the Company as of and for the years ended December 31, 2013, 2014 and 2015 as provided to Parent prior to the date hereof, are herein referred to as the
<B>&#147;</B><B><I>Audited Financial Statements</I></B>.<B>&#148;</B>&nbsp;The financial statements for the Company as of June 30, 2016 as provided to Parent prior to the date hereof, are herein referred to as the <B><I>&#147;</I></B><B><I>Unaudited
</I></B><B><I>Financial Statements</I></B><B><I>&#148;</I></B> and, with the Audited Financial Statements, the &#147;<B><I>Company Financial Statements</I></B>.&#148;&nbsp;The balance sheet of the Company as of June 30, 2016 is herein referred to as
the <B><I>&#147;</I></B><B><I>Company Balance Sheet</I></B><B><I>&#148;</I></B>.&nbsp;Each of: (i) the Audited Financial Statements (including, in each case, any related notes thereto)&nbsp;was prepared in accordance with accounting principles
generally accepted in the United States (<B><I>&#147;</I></B><B><I>GAAP</I></B><B><I>&#148;</I></B>) as in effect on the date of such Audited Financial Statements (or such other date as may be reflected in such Audited Financial Statements), in each
case applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto); and (ii)&nbsp;the Company Financial Statements (including, in each case, any related notes thereto) fairly presented, in all
material respects, the financial position of the Company at the respective dates thereof and the results of their operations and cash flows for the periods indicated, consistent with the books and records of the&nbsp;Company (except as may be
indicated in the notes thereto or, in the case of any unaudited portion of the Company Financial Statements, except as such unaudited portion of the Company Financial Statements may omit footnotes and may be subject to potential year-end adjustments
that are not expected, either individually or in the aggregate, to be material).&nbsp;No financial statements of any Person other than the Company actually included in the Company Financial Statements are required by GAAP to be included in the
Company Financial Statements.&nbsp;Except as required by GAAP, the Company has not, between the last day of its most recently ended fiscal year and the date of this Agreement, made or adopted any material change in its accounting methods, practices
or policies in effect on such last day of its most recently ended fiscal year.&nbsp;The Company has not had any material dispute with any of its auditors regarding accounting matters or policies during any of its past three (3) full fiscal years or
during the current fiscal year that is currently outstanding or that resulted (or would reasonably be expected to result) in an adjustment to, or any restatement of, the Company Financial Statements.&nbsp;No current or former independent auditor for
the Company has resigned or been dismissed from such capacity as a result of or in connection with any disagreement with the Company on a matter of accounting practices. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_25"></A>3.8</B> <B>Title to Property</B><B>.</B>&nbsp;The Company has good title to all of its
material tangible properties, interests in tangible properties and tangible assets, both real and personal, reflected in the Company Balance Sheet, and have valid leasehold interests in all material leased properties and assets, in each case free
and clear of all mortgages, claims, liens, pledges, charges or encumbrances of any kind or character (collectively, <B>&#147;</B><B><I>Liens</I></B><B>&#148;</B>) other than Permitted Liens.&nbsp;Schedule&nbsp;3.8 of the Company Disclosure Schedule
identifies each parcel of real property owned or leased by the Company. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_26"></A>3.9</B>
<B>Absence of Undisclosed Liabilities</B><B>.</B>&nbsp;The Company has no liabilities of a nature required by GAAP to be reflected in a consolidated balance sheet or the notes thereto, other than: (i)&nbsp;liabilities identified as such in the
&#147;liabilities&#148; column of the Company Balance Sheet; (ii) liabilities that have been incurred by the Company since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice that, individually or
in the aggregate, do not exceed $100,000; (iii) liabilities for performance of obligations under Company Contracts; and (iv)&nbsp;liabilities and obligations under this Agreement and investment banking, accounting, legal and other fees incurred by
the Company in connection with the negotiation, execution and delivery of this Agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-9 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_27"></A>3.10</B> <B>Absence of Changes or
Events</B><B>.</B><B>&nbsp;</B>Except as contemplated by this Agreement, since June 30, 2016: (i) there has been no Company Material Adverse Effect; and (ii) there has not been any action or omission by the Company that, if taken during the Interim
Period without Parent&#146;s consent, would constitute a breach of Section 5.1. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_28"></A>3.11</B>
<B>Capital Stock of Subsidiaries</B><B>.</B>&nbsp;The Company does not directly or indirectly own any interest in any Person. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_29"></A>3.12 Litigation.</B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Except as disclosed on Schedule 3.12(a) of the Company Disclosure Schedule, there is no private or governmental investigation, claim,
action, suit (whether in law or in equity), arbitration, mediation or proceeding of any nature (each, an <B><I>&#147;Action&#148;</I></B>) pending or, to the knowledge of the Company, threatened against the Company, or any of its officers, directors
and managers (in their capacities as such), or involving any of its assets, before any Government Authority, arbitrator or mediator.&nbsp;There is no Action pending or, to the knowledge of the Company, threatened which in any manner challenges,
seeks to or is reasonably likely to prevent, enjoin, alter or delay the consummation of any of the transactions contemplated by this Agreement, including the Merger, or otherwise prevent or delay the Company from performing its obligations
hereunder. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) There is no outstanding judgment, order, writ, injunction, rule or decree of any arbitrator, mediator or Government
Authority (each, an <B><I>&#147;Order&#148;</I></B>) to which the Company or any of its assets is or was a party or by which the Company, or any of its assets is bound, the terms of which have not been satisfied by the Company. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_30"></A>3.13</B> <B>Insurance</B><B>.</B>&nbsp;Schedule&nbsp;3.13 of the Company Disclosure Schedule
lists: (i) all insurance policies (including all workers&#146; compensation insurance policies) covering the business, properties or assets of the Company or any Company Employee Benefit Plan or its fiduciaries; (ii) the premiums and coverages of
such policies; and (iii) all claims in excess of $100,000 made against any such policies since January 1, 2013.&nbsp;All such policies are in effect, and accurate and complete copies of all such policies have been made available to Parent.&nbsp;The
Company has not received written notice of the cancellation or threat of cancellation of any of such policies. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_31">
</A>3.14</B> <B>Contracts and Commitments</B>.</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Except as set forth on Schedule 3.14(a) of the Company Disclosure Schedule, the Company
is not a party to or bound by any of the following: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) any Contract that provides for post-employment or post-consulting liabilities or
obligations, including severance pay; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) any Contract under which payments or obligations will be increased, accelerated or vested by
the occurrence (whether alone or in conjunction with any other event) of any of the transactions contemplated by this Agreement, including the Merger, or under which the value of the payments or obligations will be calculated on the basis of any of
the transactions contemplated by this Agreement, including the Merger, whether pursuant to a change in control or otherwise; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iii) any
Contract currently in force relating to the disposition or acquisition of assets where the fair market value of such assets exceeds $100,000, in each case other than inventory sold in the ordinary course of business; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iv) any Contract relating to an ownership interest in any corporation, partnership, joint venture or other business enterprise or Person;
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(v) any Contract for the purchase of materials, supplies, equipment or services, under which the aggregate payments made to one party or
group of related parties during the past twelve (12) months exceeded, or for the following twelve (12) months is expected to exceed, $100,000; </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-10 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(vi) any Contract relating to the guarantee (whether absolute or contingent) by the Company of
(A)&nbsp;the performance of any other Person (other than the Company) or (B) the whole or any part of the indebtedness or liabilities of any other Person (other than the Company); </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(vii) any Contract relating to the indemnification by the Company of its officers, directors, managers or agents; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(viii) any material Contract of indemnification or guaranty; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ix) any power of attorney authorizing the incurrence of an obligation on the part of the Company; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(x) any Contract which limits or restricts (A)&nbsp;where the Company may conduct business, (B) the type or lines of business (current or
future) in which the Company may engage or (C)&nbsp;any acquisition of assets or stock (tangible or intangible) by the Company; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xi) any
Contract under which the aggregate payments or receipts for the past twelve (12) months exceeded, or for the following twelve (12) months is expected to exceed, $100,000; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xii) any Contract for the borrowing or lending of money, or the availability of credit (except credit extended by the Company to customers
in the ordinary course of business and consistent with past practice); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xiii) any Contract relating to any hedging, option (other than
options granted to service providers in connection with the performance of services), derivative or other similar transaction and any foreign exchange position or contract for the exchange of currency; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xiv) any collective bargaining agreements; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xv) any Contract relating to the employment of individuals who serve as officers of the Company; or </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xvi) any Contract that would otherwise be required to be filed as an exhibit to a periodic report under the Exchange Act, as provided by
Item 601 of Regulation S-K promulgated under the Exchange Act. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each Contract of the type described in this Section 3.14(a) and in
existence as of the date hereof is referred to herein as a <B><I>&#147;Company Contract&#148;</I></B>. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) An accurate and complete copy
of each Company Contract (including all amendments thereto) has been made available to Parent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Neither the Company nor, to the
knowledge of the Company, any other party to a Company Contract, is in material breach, violation or default under, or has received written notice that it has breached, violated or defaulted under (nor, to the knowledge of the Company, does there
exist any condition under which, with the passage of time or the giving of notice or both, would reasonably be expected to cause such a breach, violation or default under), any Company Contract material to the Company&#146;s operation of its
business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Each Company Contract is a valid, binding and enforceable obligation of the Company and, to the knowledge of the Company,
of the other party or parties thereto, in accordance with its terms and is in full force and effect, in each case except to the extent enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors&#146; rights generally or by general equitable principles or by principles of good faith and fair dealing (regardless of whether enforcement is sought in equity or at law). </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-11 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_32"></A>3.15</B> <B>Labor Matters; Employment and Labor
Contracts</B>.</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Except as disclosed on Schedule 3.15(a) of the Company Disclosure Schedule, the Company is not party to any union
Contract or other collective bargaining agreement, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any employees of the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) There is no labor strike, slowdown or stoppage pending or, to the knowledge of the Company, threatened against the Company.&nbsp;No
petition for certification has been filed and is pending or, to the knowledge of the Company, threatened to be filed before the National Labor Relations Board or any comparable foreign regulatory agency or body with respect to any employees of the
Company.&nbsp;There are no material Actions pending or, to the knowledge of the Company, threatened between the Company and any of its employees.&nbsp;Except as disclosed on Schedule 3.15(b) of the Company Disclosure Schedule, the employment of each
of the employees of the Company is &#147;at will&#148; and the Company has no contractual obligation to provide any particular form or period of notice prior to terminating the employment of any of its employees.&nbsp;The Company is not currently a
party, or has since January 1, 2013 been a party, to any Contract whereby it leases employees or other service providers from another Person. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) No current or former employee of the Company is, or since January 1, 2013 has been, employed by the Company outside of the United States
or Israel. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_33"></A>3.16</B> <B>Intellectual Property Rights</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Schedule 3.16(a) of the Company Disclosure Schedule accurately identifies and describes each proprietary product or service currently
licensed to the Company, developed, manufactured, marketed or sold by or on behalf of the Company, including products or services currently designated as development candidates with a unique internal name by the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Schedule 3.16(b) of the Company Disclosure Schedule accurately identifies: (i) each item of Registered IP in which the Company has or
purports to have an ownership interest of any nature (whether exclusively, jointly with another Person, exclusively licensed to the Company or otherwise); (ii) the jurisdiction in which such item of Registered IP has been registered or filed and the
applicable registration or serial number; and (iii) any other Person that has an ownership interest in such item of Registered IP and the nature of such ownership interest; and (iv) each Company IP that is a granted patent that in any way covers any
product or service identified in Schedule 3.16(a) of the Company Disclosure Schedule.&nbsp;The Company has provided to Parent reasonable access to accurate and complete copies of all applications and correspondence to and from the Government
Authority related to each such item of Registered IP. For the avoidance of doubt, for published applications and patents, the Company furnishing to Parent the relevant application, serial or patent number of the Registered IP shall be considered
reasonable access. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Schedule 3.16(c) of the Company Disclosure Schedule accurately identifies: (i) all Intellectual Property Rights
or Intellectual Property licensed to the Company (other than any non-customized software that (x) is so licensed solely in executable or object code form pursuant to a non-exclusive, internal use software license, (y) is not incorporated into, or
used directly in the development, manufacturing or distribution of, any of the Company&#146;s products or services and (z)&nbsp;is generally available on standard terms for less than $25,000); (ii) the corresponding Contract(s) pursuant to which
such Intellectual Property Rights or Intellectual Property is licensed to the Company; and (iii) whether the license or licenses granted to the Company is exclusive or non-exclusive. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Schedule 3.16(d) of the Company Disclosure Schedule accurately identifies each Contract pursuant to which any Person has been granted by
the Company any license under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any Company IP.&nbsp;Except as set forth on Schedule 3.16(d) of the Company Disclosure Schedule, neither the
Company are bound by, and no Company IP </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-12 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
is subject to, any Contract containing any covenant or other provision that in any way limits or restricts the ability of the Company to use, exploit, assert or enforce any Company IP anywhere in
the world, except field and geographical restrictions in applicable licenses to Company IP granted to the Company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) The Company has
provided to Parent an accurate and complete copy of each standard form of Company IP Contract used by the Company at any time since January 1, 2013, including each standard form of: (i) employee agreement containing any intellectual property
assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision; (ii)&nbsp;consulting or independent contractor agreement containing any intellectual property assignment or license of Intellectual
Property or Intellectual Property Rights or any confidentiality provision; and (iii)&nbsp;confidentiality or nondisclosure agreement (each as applicable).&nbsp;Schedule 3.16(e) of the Company Disclosure Schedule accurately identifies each Company IP
Contract that deviates in any material respect from the corresponding standard form agreement provided to Parent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) The Company
exclusively owns all right, title and interest to and in the Company IP (other than Intellectual Property Rights exclusively licensed to the Company as identified in Schedule 3.16(c) of the Company Disclosure Schedule or otherwise as identified in
Schedule 3.16(b)) free and clear of any Liens (other than non-exclusive licenses granted pursuant to the Contracts listed in Schedule 3.16(d) of the Company Disclosure Schedule and the Permitted Liens listed in Schedule 3.16(d) of the Company
Disclosure Schedule).&nbsp;Without limiting the generality of the foregoing: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) All documents and instruments necessary to perfect the
rights of the Company in the Company IP have been validly executed, delivered and, if related to Registered IP, filed in a timely manner with the appropriate Government Authority, where required. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) Except for Registered IP identified on Schedule 3.16(b) of the Company Disclosure Schedule, no funding, facilities or personnel of any
Government Authority were used, directly or indirectly, to develop or create, in whole or in part, any of the Company IP. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iii) Since
January 1, 2013, the Company has not assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any Intellectual Property Right to any other Person. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iv) To the Company&#146;s knowledge, the Company owns or otherwise has, and as of immediately following the Effective Time the Surviving
Corporation will continue to have, the Intellectual Property Rights needed to conduct their respective businesses as currently conducted and commercialize the products and services that are currently being developed. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) To the Company&#146;s knowledge, all Company IP that is Registered IP is valid, subsisting and enforceable.&nbsp;Without limiting the
generality of the foregoing, to the Company&#146;s knowledge: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) Each U.S. patent application and U.S. patent in which the Company has
an ownership interest or exclusive license and the right to prosecute was filed within one (1) year of a printed publication, public use or offer for sale of each invention described in the U.S. patent application or U.S. patent.&nbsp;Each foreign
patent application and foreign patent in which the Company has an ownership interest or exclusive license and the right to prosecute was filed or claims priority to a patent application filed prior to each invention described in the foreign patent
application or foreign patent being made available to the public. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) Except as set forth on Schedule 3.16(g)(ii) of the Company
Disclosure Schedule, no trademark or trade name owned, used or applied for by the Company conflicts or interferes with any trademark or trade name owned, used or applied for by any other Person.&nbsp;No event or circumstance (including a failure to
exercise adequate quality controls and an assignment in gross without the accompanying goodwill) has occurred or exists that has resulted in, or would reasonably be expected to result in, the abandonment of any trademark owned, used or applied for
by or on behalf of the Company. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-13 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iii) Each item of Company IP that is Registered IP is in compliance with all legal
requirements, other than any legal requirement that can be met with reasonable effort with respect to such Registered IP so as to avoid revocation, cancellation, or lapse or otherwise adversely affect its enforceability, use, or priority, and all
filings, payments and other actions required to be made or taken to maintain such item of Registered IP in full force and effect have been made by the applicable deadline.&nbsp;Except as set forth on Schedule 3.16(g)(iii)(a) of the Company
Disclosure Schedule, no application for a patent, copyright or trademark registration or any other type of Registered IP owned or exclusively licensed to and filed by or on behalf of the Company at any time since January 1, 2013 has been abandoned
or allowed to lapse.&nbsp;Schedule 3.16(g)(iii)(b) of the Company Disclosure Schedule accurately identifies and describes each action, filing and payment that has arisen as of the date hereof and that must be taken or made on or before the date that
is one hundred eighty (180) days after the date hereof in order to maintain an item of Company IP that is Registered IP in full force and effect. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iv) All assignments to the Company of inventorship, authorship or ownership rights relating to Company IP that is Registered IP are valid
and enforceable.&nbsp;Each of the Patents identified on Schedule 3.16(b) of the Company Disclosure Schedule as being owned by the Company properly identifies each and every inventor of the claims thereof as determined in accordance with the laws of
the jurisdiction in which such Patent is issued or such Patent is pending.&nbsp;Each of the Patents identified on Schedule 3.16(c) of the Company Disclosure Schedule as being exclusively licensed to the Company properly identifies each and every
inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such Patent is issued or such Patent is pending. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(v) Except as set forth on Schedule 3.16(g)(v) of the Company Disclosure Schedule, no interference, opposition, reissue, reexamination or
other Action is, or since January 1, 2013 has been, pending or, to the Company&#146;s knowledge, threatened, in which the scope, validity or enforceability of any Company IP that is Registered IP is being or has been or is expected by the Company to
be contested or challenged.&nbsp;To the Company&#146;s knowledge, there is no basis for a claim that any Company IP that is Registered IP is invalid or unenforceable. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) Each Person who is or was an employee or contractor of the Company and who is or was involved in the creation or development of any
Company IP has signed an agreement containing an assignment of Intellectual Property Rights to the Company.&nbsp;No current or former stockholder, officer, director, employee, consultant or contractor of the Company has any claim, right (whether or
not currently exercisable) or interest to or in any Company IP.&nbsp;To the Company&#146;s knowledge, no employee of the Company is: (x) bound by or otherwise subject to any Contract restricting him or her from performing his or her duties for the
Company; or (y) in breach of any Contract with any former employer or other Person concerning Intellectual Property Rights or confidentiality obligations.&nbsp;Since January 1, 2013, the Company has not assigned or otherwise transferred ownership
of, or agreed to assign or otherwise transfer ownership of, any Intellectual Property Right to any other Person. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) The Company has
taken all reasonable steps for a company of its size and resources to maintain the confidentiality of and otherwise protect and enforce their rights in all material proprietary information that the Company holds, or purports to hold, as a trade
secret. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) The Company is, and the Company never was, a contributor to any industry standards body or similar organization that could
require or obligate the Company to grant or offer to any other Person any license or right to any Company IP. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) To the Company&#146;s
knowledge, since January 1, 2013 no Person has infringed, misappropriated or otherwise violated, and no Person is currently infringing, misappropriating or otherwise violating, any Company IP.&nbsp;Schedule 3.16(k) of the Company Disclosure Schedule
accurately identifies (and the Company has provided to Parent an accurate and complete copy of) each letter or other written or electronic communication or </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-14 </P>


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correspondence that has been sent or otherwise delivered since January 1, 2013 by or to the Company or any of its Representatives regarding any actual, alleged or suspected infringement or
misappropriation of any Company IP, and provides a brief description of the current status of the matter referred to in such letter, communication or correspondence. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated hereby,
including the Merger, will, with or without notice or lapse of time, result in or give any other Person the right or option to cause or declare: (i) a loss of, or Lien on, any Company IP; (ii) a breach of any license agreement listed or required to
be listed in Schedule 3.16(c) of the Company Disclosure Schedule; (iii) the release, disclosure or delivery of any Company IP by or to any escrow agent or other Person; or (iv) the grant, assignment or transfer to any other Person of any license or
other right or interest under, to or in any of the Company IP. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) To the Company&#146;s knowledge, the Company has not infringed
(directly, contributorily, by inducement or otherwise), misappropriated or otherwise violated any Intellectual Property Right of any other Person, including but not limited to, by the making, using, or selling of any proprietary products or services
set forth in Schedule 3.16(a) of the Company Disclosure Schedule.&nbsp;Without limiting the generality of the foregoing, except as set forth on Schedule 3.16(m) of the Company Disclosure Schedule, (i) no infringement, misappropriation or similar
claim or Action is pending or, to the Company&#146;s knowledge, threatened against the Company or against any other Person who may be entitled to be indemnified, defended, held harmless or reimbursed by the Company with respect to such claim or
Action and (ii) the Company has never received any written notice or other written communication (whether in electronic form or otherwise) relating to any actual, alleged or suspected infringement, misappropriation or violation of any Intellectual
Property Rights of another Person. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(n) Except as disclosed on Schedule 3.16(n) of the Company Disclosure Schedule or pursuant to
licenses for off-the-shelf software, the Company is not a party to any Contract requiring any future payment of royalties by the Company for the use of any Intellectual Property Rights or Intellectual Property. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(o) To the Company&#146;s knowledge, the Company is not bound by any Contract to indemnify, defend, hold harmless or reimburse any other
Person with respect to any Intellectual Property infringement, misappropriation or similar claim.&nbsp;The Company has never assumed, or agreed to discharge or otherwise take responsibility for, any existing or potential liability of another Person
for infringement, misappropriation or violation of any Intellectual Property Right. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(p) No claim or Action involving any Intellectual
Property or Intellectual Property Right owned by or exclusively licensed to the Company is pending or, to the Company&#146;s knowledge, has been threatened, except for any such claim or Action that, if adversely determined, would not adversely
affect: (i) the use or exploitation of such Intellectual Property or Intellectual Property Right by the Company; or (ii) the manufacturing, distribution or sale of any product or service being developed, offered, manufactured, distributed or sold by
or on behalf of the Company. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_34"></A>3.17</B> <B>Taxes</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) The Company has filed all material Tax Returns required to be filed by them, and all such Tax Returns are accurate and complete in all
material respects.&nbsp;The Company has paid all Taxes due and payable as shown on such Tax Returns.&nbsp;No unresolved deficiencies for any Taxes have been proposed, asserted or assessed, in each case, in writing, against the Company, other than
deficiencies that are reflected by reserves maintained in accordance with GAAP and are being contested in good faith and by appropriate procedures. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Since June 30, 2010, the Company: (i) has not granted any presently operative waiver of any statute of limitations with respect to, or
any extension of a period for the assessment of, any Tax other than as the </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-15 </P>


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result of extending the due date of a Tax Return; (ii) has not granted to any Person a power of attorney with respect to Taxes, which power of attorney will be in effect as of or following the
Closing; (iii)&nbsp;has not received a written inquiry from any taxing authority regarding the filing of Tax Returns in a jurisdiction where it is not presently filing Tax Returns; or (iv) has not availed itself of any Tax amnesty or similar relief
in any taxing jurisdiction.&nbsp;There are no current audits of federal, state, local or foreign Tax Returns of the Company by any taxing authority. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) The Company has not assumed any material liability for the Taxes of another Person under any Contract which liability remains
unpaid.&nbsp;The Company is not bound by any Tax sharing agreement or similar arrangements (including any Tax indemnity arrangements) the principal subject of which is Taxes. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) There is no Lien for Taxes on any of the assets of the Company, except for Permitted Liens. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) The Company has properly withheld on all material amounts paid to employees and have paid over such amounts to the appropriate taxing
authorities. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) The Company is not and has not been a member of an affiliated group of corporations filing a consolidated federal
income Tax Return (or a group of corporations filing a consolidated, combined or unitary income Tax Return under comparable provisions of state, local or foreign Tax law) other than a group the common parent of which is or was the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) The Company has not taken or agreed to take any action that would prevent the Merger from constituting a reorganization within the
meaning of Section 368(a) of the Code, including, without limitation, any action or transaction that would cause the Merger to fail to satisfy the continuity of business enterprise or continuity of interest requirements set forth in Treasury
Regulations Section 1.368-1(d) and 1.368-1(e), respectively. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) Notwithstanding any provision of this Agreement to the contrary, (i)
the foregoing provisions of this Section 3.17 constitute the sole and exclusive representations and warranties by the Company regarding Taxes, Tax Returns and other matters relating to Taxes. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_35"></A>3.18 [Intentionally Omitted]</B> </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_36"></A>3.19</B> <B>Regulatory Matters</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) The Company holds all material licenses, permits, franchises, variances, registrations, exemptions, Orders and other governmental
authorizations, consents, approvals and clearances of a Government Authority, and, to the extent required, have submitted all material notices to, all Government Authorities that regulate the quality, identity, strength, purity, safety, efficacy or
manufacturing of the Company&#146;s current or under-development products (any such Government Authority, a <B><I>&#147;</I></B><B><I>Company Regulatory Agency</I></B><B><I>&#148;</I></B>) required for the lawful operation of the businesses of the
Company (the <B><I>&#147;</I></B><B><I>Company Permits</I></B><B><I>&#148;</I></B>), except, in each case, as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.&nbsp;All such Company
Permits are valid and in full force and effect.&nbsp;None of such Company Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement. Except as set forth in
Schedule 3.19(a) of the Company Disclosure Schedules, the Company is the sole and exclusive owner of the Company Permits and the associated filings and applications with any Company Regulatory Agency, including any 510(k) submission, premarket
approval, investigational device exemption application, comparable regulatory application or filing made or held by or issued to the Company (collectively, the <B><I>&#147;Company Regulatory Filings&#148;</I></B>) and hold all right, title and
interest in and to all Company Regulatory Filings free and clear of any Lien other than Permitted Liens. The Company has not granted any third party any right or license to use, access or reference any of the Company Regulatory Filings, including,
without limitation, any of the know-how contained in any of the Company Regulatory Filings or rights (including any regulatory exclusivities) associated with each such Company Regulatory Filing. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-16 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Since January&nbsp;1, 2013, there has not occurred any breach or violation of, default (with
or without notice or lapse of time or both) under or event giving rise to any right of termination, amendment or cancellation of (with or without notice or lapse of time or both), any Company Permit, except as would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.&nbsp;The Company is in compliance in all material respects with the terms of all Company Permits, and no event has occurred and no facts or circumstances exist that, to the
knowledge of the Company, would reasonably be expected to result in the revocation, cancellation, non-renewal or adverse modification of any Company Permit. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Since January&nbsp;1, 2013, all material applications, submissions, information and data utilized by the Company as the basis for, or
submitted by or, to the knowledge of the Company, on behalf of the Company in connection with, any and all requests for Company Permits when submitted to the applicable Company Regulatory Agency, were, to the Company&#146;s knowledge, accurate and
complete in all material respects as of the date of submission, and any updates, changes, corrections or modifications to such applications, submissions, information and data required under Applicable Law have been submitted to the applicable
Company Regulatory Agency. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Since January&nbsp;1, 2013, the Company has not committed any act, made any statement or failed to make
any statement that would reasonably be expected to provide a basis for any Company Regulatory Agency to invoke its policy with respect to &#147;Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities&#148; or similar policies
under Applicable Law. To the knowledge of the Company, neither the Company&#146;s agents or subcontractors has been convicted of any crime or engaged in any conduct which has resulted or could result in debarment or disqualification by any
applicable Government Authority, and there are no proceedings pending or threatened that reasonably might be expected to result in criminal or civil liability or debarment or disqualification by any applicable Government Authority. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) The Company nor, to the knowledge of the Company, any director, officer, agent, employee or other Person associated with or acting on
behalf of the Company has: (i)&nbsp;used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii)&nbsp;made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii)&nbsp;violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended (the <B><I>&#147;</I></B><B><I>FCPA</I></B><B><I>&#148;</I></B>), or any
similar Applicable Law; or (iv)&nbsp;made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Since
January 1, 2013, there has not been any voluntarily or involuntarily initiated, conducted, or issued recall, market withdrawal, safety alert, warning, &#147;dear doctor&#148; letter, market correction, or investigator notice relating to an alleged
material lack of safety or efficacy of any product of the Company or product candidate of the Company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) The Company is in compliance
in all material respects with all Applicable Laws and any other letters, notices or guidance issued by any Government Authority which regulate the sale of medical device products in any jurisdiction. There are no pending or, to the knowledge of the
Company, threatened regulatory Actions (other than non-material routine or periodic inspections or reviews) against the Company. Since January 1, 2013 there have been no written notices, reports, warning letters, or untitled letters alleging or
asserting noncompliance in any material respect with any Applicable Law relating to the Company or the products or product candidates of the Company or any subpoenas or investigative demands or other written inquiries that would reasonably be
interpreted as raising a compliance concern sent or delivered by any Government Authority with regard to any product or any product candidate of the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) [Intentionally Omitted] </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) The Company is and has been in compliance in all material respects with all Applicable Laws requiring the maintenance or submission of
reports or records under requirements administered by any applicable Government Authority. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-17 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) To the knowledge of the Company, all studies, tests, and preclinical and clinical research
being conducted by the Company, and to the knowledge of the Company, on behalf of the Company, are being, and at all times have been, conducted in compliance in all material respects with all Applicable Laws. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) Neither the Company nor any officer, director, managing employee (as those terms are defined in 42 C.F.R. &#167; 1001.1001) of the
Company, nor, to the knowledge of the Company, any agent (as such term is defined in 42 C.F.R. &#167; 1001.1001(a)(1)(ii)) of the Company is a party to, or bound by, any order, individual integrity agreement, corporate integrity agreement or other
formal or informal agreement with any Government Authority concerning compliance with the laws governing Federal Health Care Programs or any comparable foreign program. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) Neither the Company nor any officer, director, managing employee (as those terms are defined in 42 C.F.R. &#167; 1001.1001) of the
Company, nor, to the knowledge of the Company, any agent (as such term is defined in 42 C.F.R. &#167; 1001.1001(a)(1)(ii)) of the Company: (i) has been debarred, excluded or suspended from participation in any Federal Health Care Program; (ii) has
had a civil monetary penalty assessed against it, him or her under Section 1128A of the Social Security Act of 1935, codified at Title 42, Chapter 7, of the United States Code (the <B><I>&#147;</I></B><B><I>Social Security
Act</I></B><B><I>&#148;</I></B>); (iii) is currently listed on the General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; (iv) to the knowledge of the Company, is the target
or subject of any current investigation by a Government Authority relating to any Federal Health Care Program related offense; or (v) is currently charged with or convicted of any criminal offense relating to the delivery of an item or service under
any Federal Health Care Program or any comparable foreign program. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) To the knowledge of the Company, there are no pending or
threatened filings against the Company of an action relating to the Company under any foreign, federal or state whistleblower statute, including under the False Claims Act of 1863 (31 U.S.C. &#167; 3729 et seq.). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(n) To the knowledge of the Company, the Company is not under investigation by any Government Authority for a violation of the Health
Insurance Portability and Accountability Act of 1995, as amended by the Health Information Technology for Economic and Clinical Health Act (<B><I>&#147;</I></B><B><I>HIPAA</I></B><B><I>&#148;</I></B>), or the regulations contained in 45 C.F.R. Parts
160 and 164, including receiving any notices from the United States Department of Health and Human Services Office of Civil Rights relating to any such violations, or any comparable state or local laws. To the knowledge of the Company, the Company
has been in compliance in all material respects with foreign, federal and state data breach laws. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_37">
</A>3.20 Environmental Matters.</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) No Hazardous Materials are present, as a result of the actions of the Company or, to the knowledge
of the Company, as a result of any actions of any other Person, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that the Company has at any time owned, operated, occupied or leased, in
each case as would result in a material violation of any Environmental Laws. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) The Company has not transported, stored, used,
manufactured, disposed of, released or exposed any Person to Hazardous Materials in material violation of any Environmental Law, nor has the Company disposed of, transported, sold, used, released, exposed any Person to or manufactured any product
containing a Hazardous Material (collectively, <B><I>&#147;Hazardous Materials Activities&#148;</I></B>) in material violation of any Environmental Laws. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) No material Action is pending or, to the knowledge of the Company, threatened, concerning any Company Permit, Hazardous Material or
Hazardous Materials Activity of the Company.&nbsp;Since January 1, 2013, the Company has not received written notice that the Company is responsible, or potentially responsible, for the investigation, remediation, cleanup or similar action at any
property presently or formerly used by the Company for recycling, disposal or handling of Hazardous Materials. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-18 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_38"></A>3.21</B> <B>Proxy
Statement</B><B>.</B>&nbsp;The information regarding the Company supplied by the Company for inclusion in the proxy statement to be sent to Parent&#146;s stockholders in connection with the solicitation of proxies in favor of (i) the approval of the
Parent Charter Amendment and (ii) the Reverse Stock Split (if applicable) and (iii) the approval of the issuance of shares of Parent Common Stock pursuant to this Agreement (and any amendment or supplement thereto) (the
<B><I>&#147;</I></B><B><I>Proxy Statement</I></B><B><I>&#148;</I></B>), in each case, at the date the Proxy Statement (and any amendment or supplement thereto) is first mailed to Parent stockholders and at the time of the Parent Special Meeting (or
any adjournment or postponement thereof), will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.&nbsp;The representations and warranties contained in this Section&nbsp;3.21 will not apply to statements or omissions included in the Proxy Statement (and, in each case, any amendment or supplement
thereto) based upon information regarding Parent or any Parent Subsidiary supplied to the Company in writing by Parent for use therein.&nbsp;The Proxy Statement (and, in each case, any amendment or supplement thereto) will, subject to Section
5.3(d), include the Company Board Recommendation. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_39"></A>3.22</B> <B>Finders or
Brokers</B><B>.</B><B>&nbsp;</B>The Company has not employed or retained any investment banker, broker, finder or other intermediary who is or might be entitled to any fee or commission in connection with the transactions contemplated by this
Agreement, including the Merger. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_40"></A>3.23</B> <B>Takeover Statutes</B><B>.</B>&nbsp;The
Company has taken all action necessary to exempt or exclude this Agreement and the transactions contemplated hereby, including the Merger, from: (i) the restrictions on business combinations set forth in Section 2 of the Israeli Anti-Trust Law-1988;
and (ii) any other similar antitakeover law, statute or regulation (each, a <B><I>&#147;</I></B><B><I>Takeover Statute</I></B><B><I>&#148;</I></B>).&nbsp;Accordingly, no Takeover Statute applies to this Agreement or the transactions contemplated
hereby, including the Merger, with respect to the Company.&nbsp;The Company does not have any stockholder rights plan, &#147;poison pill&#148; or similar plan or arrangement in effect. </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_41"></A>ARTICLE IV </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Parent and Merger Sub represent and warrant to the Company as of the date hereof and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date as follows, in each case subject to the exceptions set forth in the disclosure schedule delivered to the Company and dated as of the date hereof (the <B><I>&#147;</I></B><B><I>Parent Disclosure
Schedule</I></B><B><I>&#148;</I></B>) and to any disclosures set forth in the Parent SEC Documents (without giving effect to any amendment to any such Parent SEC Document filed on or after the date of this Agreement and excluding any disclosures
that contain general, cautionary, predictive or forward-looking statements): </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_42"></A>4.1</B>
<B>Organization, Etc</B>.</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and the laws of the State of Israel, respectively, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted.&nbsp;Each of the
Subsidiaries of Parent, all of which are listed on Schedule&nbsp;4.1(b) of the Parent Disclosure Schedule (the <B><I>&#147;Parent Subsidiaries&#148;</I></B>), was duly organized or formed, is validly existing and in good standing (with respect to
jurisdictions that recognize such concept) under the laws of the jurisdiction of its organization or formation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being
conducted.&nbsp;Each of Parent and the Parent Subsidiaries is duly qualified to do business, and is in good standing (with respect to jurisdictions that recognize such concept), in each foreign jurisdiction where the character of its owned or leased
properties or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to result in a Parent Material Adverse Effect. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Neither Parent nor any of the Parent Subsidiaries is in violation of any provision of its
certificate of incorporation, bylaws, certificate of formation, limited liability company agreement or other charter documents (in each case, as applicable).&nbsp;Schedule&nbsp;4.1(b) of the Parent Disclosure Schedule sets forth: (i)&nbsp;the full
name of each Parent Subsidiary and any other entity in which Parent has an equity interest, together with details regarding its capitalization and the ownership interest of Parent (and each other Person, if applicable) therein; (ii)&nbsp;the
jurisdiction in which each such Parent Subsidiary or other entity is organized; (iii)&nbsp;each foreign jurisdiction in which Parent and each of the Parent Subsidiaries is qualified to do business; and (iv)&nbsp;the names of the current directors
and officers of Parent and each Parent Subsidiary (or their equivalents in the case of any Parent Subsidiary that is not a corporation).&nbsp;Parent has made available to the Company accurate and complete copies of the certificate of incorporation,
bylaws, certificate of formation, limited liability company agreement and any other charter documents (in each case, as applicable) of Parent and each Parent Subsidiary, in each case as currently in effect. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_43"></A>4.2</B> <B>Authority Relative to This Agreement</B><B>.</B>&nbsp;Each of Parent and Merger
Sub has all requisite corporate power and authority: (i) to execute and deliver this Agreement; and (ii)&nbsp;assuming the approval of the Parent Charter Amendment, the Reverse Stock Split (if applicable) and the issuance of shares of Parent Common
Stock pursuant to this Agreement, in each case, by the holders of a majority of the outstanding shares of Parent Common Stock present and entitled to vote thereon at the Parent Special Meeting (or at any adjournment or postponement thereof) (the
<B><I>&#147;</I></B><B><I>Parent</I></B> <B><I>Stockholder Approval</I></B><B><I>&#148;</I></B>) and the adoption of this Agreement and the approval of the transactions contemplated hereby, including the Merger, by Parent as the sole stockholder of
Merger Sub, to consummate the transactions contemplated hereby, including the Merger.&nbsp;The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, including the Merger, have been duly and validly
authorized by the boards of directors of Parent and Merger Sub and no other corporate proceedings on the part of Parent or Merger Sub (other than obtaining the Parent Stockholder Approval and the adoption of this Agreement and the approval of the
transactions contemplated hereby, including the Merger, by Parent as the sole stockholder of Merger Sub, and filing the Certificate of Merger with the Companies Registrar) are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, including the Merger.&nbsp;This Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a valid and
binding agreement of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors&#146; rights generally, by general equitable principles or by principles of good faith and fair dealing, regardless of whether enforcement is sought in equity or at law. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_44"></A>4.3</B> <B>No Violations, Etc</B><B>.</B>&nbsp;No filing with or notification to, and no
permit, authorization, consent or approval of, any Government Authority is necessary on the part of the Parent or any Parent Subsidiary in connection with the consummation by Parent and Merger Sub of the transactions contemplated hereby, including
the Merger, except: (i)&nbsp;for the filing of the Certificate of Merger as required by the ICL and (ii)&nbsp;where the failure to make such filing or notification or to obtain such permit, authorization, consent or approval would not reasonably be
expected to result in a Parent Material Adverse Effect.&nbsp;Neither the execution and delivery of this Agreement by Parent and Merger Sub, nor the consummation of the transactions contemplated hereby, including the Merger, by Parent and Merger Sub,
nor compliance by Parent and Merger Sub with all of the provisions hereof will, subject to obtaining the Parent Stockholder Approval in accordance with Applicable Law (and subject to the adoption of this Agreement and the approval of the
transactions contemplated hereby, including the Merger, by Parent as the sole stockholder of Merger Sub): (x)&nbsp;conflict with or result in any breach of any provision of the certificate of incorporation, bylaws, certificate of formation, limited
liability company or other charter documents (in each case, as applicable) of Parent or any Parent Subsidiary; (y)&nbsp;violate any Applicable Law; or (z)&nbsp;result in a violation or breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in any material change in or give rise to any right of termination, cancellation, acceleration, redemption or repurchase under any of the terms, conditions or provisions of any material Parent
Contract.&nbsp;Schedule 4.3 of </P>
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the Parent Disclosure Schedule lists all consents, notices, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby, including
the Merger, under any material Parent Contracts. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_45"></A>4.4</B> <B>Board
Approval</B><B>.</B>&nbsp;The board of directors of Parent has: (a)&nbsp;approved an amendment to the certificate of incorporation of Parent (the <B><I>&#147;</I></B><B><I>Parent Charter Amendment</I></B><B><I>&#148;</I></B>) to effect, without any
further action on the part of Parent or any stockholder of Parent, (i) an increase to the number of authorized shares of Parent Common Stock to a number to be determined by the Company, if necessary, (ii) a change of the name of Parent to
&#147;Microbot Medical Inc.&#148; or any other name designated by the Company and (iii) the Reverse Stock Split; (b) approved the change of Parent&#146;s trading symbol to a symbol chosen by the Company; (c) approved and adopted, and declared the
advisability of, this Agreement and the transactions contemplated hereby, including the Merger; (d)&nbsp;determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of Parent
and Parent&#146;s stockholders; and (e)&nbsp;subject to Section 5.4(d), resolved to make and maintain the Parent Board Recommendation.&nbsp;The board of directors of Merger Sub has: (A)&nbsp;approved and adopted, and declared the advisability of,
this Agreement and the transactions contemplated hereby, including the Merger; and (B)&nbsp;determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of Merger Sub and Parent
as the sole stockholder of Merger Sub. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_46"></A>4.5</B> <B>Capitalization</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) The authorized capital stock of Parent consists of 200,000,000 shares of Parent Common Stock and 1,000,000 shares of Parent Preferred
Stock.&nbsp;As of the date hereof, there were: (i)&nbsp;12,006,856 shares of Parent Common Stock outstanding; (ii) Parent Stock Options and restricted stock units to purchase an aggregate of 233,515 shares of Parent Common Stock; (iii)&nbsp;no
shares of Parent Preferred Stock outstanding or designated; and (iv)&nbsp;no treasury shares.&nbsp;As of the date hereof, other than 6,898,841 shares of Parent Common stock reserved for issuance upon the exercise of outstanding warrants,
202,872&nbsp;shares of Parent Common Stock reserved for issuance pursuant to Parent&#146;s 2006 Equity Incentive Plan (as amended from time to time prior to the date hereof, the <B><I>&#147;2006 Plan&#148;</I></B>), and an aggregate of 1,284,576
shares of Parent Common Stock reserved for issuance pursuant to both Parent&#146;s 2012 Commencement Incentive Plan (as amended from time to time prior to the date hereof, the &#147;2012 Plan&#148;) and Parent&#146;s 2013 Equity Incentive Plan (as
amended from time to time prior to the date hereof, and together with the 2006 Plan and the 2012 Plan, the <B><I>&#147;Parent Stock Plans&#148;</I></B>), Parent has no shares of Parent Common Stock reserved for issuance. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) All outstanding shares of Parent Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and are not
subject to, and were not issued in violation of, any preemptive rights, purchase option, call option, right of first refusal, subscription right or any similar right under any provision of Applicable Law, Parent&#146;s certificate of incorporation
or bylaws or any Parent Contract.&nbsp;No Parent Subsidiary owns any Parent Common Stock. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Schedule 4.5(c) of the Parent Disclosure
Schedule contains an accurate and complete list, as of the date hereof, of each outstanding Parent Stock Option, including with respect to each such Parent Stock Option, the holder, date of grant, exercise price, vesting schedule, expiration date,
number of shares of Parent Common Stock subject thereto and an indication of the form of award pursuant to which such Parent Stock Option was granted.&nbsp;Except as set forth in Schedule 4.5(c) of the Parent Disclosure Schedule, there are no
issued, reserved for issuance or outstanding: (i) equity interests in, other voting securities of or other ownership interests in Parent; (ii) securities of Parent convertible into or exchangeable for equity interests in, other voting securities of
or other ownership interests in Parent; (iii) warrants, calls, options or other rights to acquire from Parent, or other obligations of Parent to issue, any equity interests in, other voting securities of or other ownership interests in Parent or
securities directly or indirectly convertible into or exercisable or exchangeable for equity interests in, other voting securities of or other ownership interests in Parent; or (iv)&nbsp;restricted shares, stock appreciation rights, performance
units, contingent value rights, &#147;phantom&#148; stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of any equity interests in, other voting
</P>
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securities of or other ownership interests in Parent (the items in clauses (i) through (iv) being referred to collectively as the <B><I>&#147;Parent Securities&#148;</I></B>).&nbsp;The issuance
of Parent Common Stock as contemplated by this Agreement will not cause any adjustment to the number of shares of Parent Common Stock issuable upon conversion or exercise of any outstanding Parent Stock Options or other convertible Parent
Securities. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Accurate and complete copies of each Parent Stock Plan, and of the forms of all agreements and instruments and any
amendments thereto relating to or issued under each thereof, have been made available to the Company.&nbsp;There are no agreements to amend, modify or supplement any such agreements, instruments or forms.&nbsp;Each award under a Parent Stock Plan
was granted in accordance with the terms of such Parent Stock Plan, and each Parent Stock Option was granted with a per share exercise price no lower than the fair market value of one (1) share of Parent Common Stock as of the grant date, as
determined by the board of directors of Parent in good faith. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_47"></A>4.6</B> <B>Compliance with
Laws</B><B>.</B><B>&nbsp;</B>Neither Parent nor any Parent Subsidiary has violated or failed to comply with any Applicable Law material to the operation of Parent&#146;s business. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_48"></A>4.7</B> <B>Parent SEC Documents</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Since January 1, 2013, Parent has timely filed with the Securities and Exchange Commission (the <B><I>&#147;SEC&#148;</I></B>) all
required forms, reports, statements, certifications, prospectuses and documents required to be filed by it with the SEC (collectively, and together with any exhibits and schedules thereto and any other information incorporated therein, the
<B><I>&#147;Parent SEC Documents&#148;</I></B>).&nbsp;Each of the Parent SEC Documents complied as to form, when filed (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such subsequent filing), in all
material respects with Applicable Law, including the applicable provisions of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the <B><I>&#147;Sarbanes-Oxley Act&#148;</I></B>) and in each case, any rules and regulations
promulgated thereunder, each as in effect on the date so filed (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such subsequent filing).&nbsp;No Parent Subsidiary is required to file any statements,
reports, schedules, forms or other documents with the SEC. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Accurate and complete copies of the Parent SEC Documents have been made
available (including via EDGAR) to the Company.&nbsp;As of their respective dates (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such subsequent filing, or, if a registration statement, as amended or
supplemented, if applicable, by a filing prior to the date of this Agreement pursuant to the Securities Act, on the date such registration statement or amendment became effective), none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.&nbsp;As of the date
of this Agreement, there are no outstanding or unresolved comments received from SEC staff with respect to the Parent SEC Documents.&nbsp;To Parent&#146;s knowledge, none of the Parent SEC Documents is the subject of ongoing SEC review or
investigation, other than any review or investigation initiated as a result of the transactions contemplated by this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c)
Parent has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act).&nbsp;Such disclosure controls and procedures are designed to ensure that all material information required to be disclosed by
Parent in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC (and such disclosure controls and procedures are effective) and all
such material information is, in all material respects, made known to Parent&#146;s principal executive officer and principal financial officer. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Parent has established and maintains a system of internal controls over financial reporting (as defined in Rule 13a-15 under the Exchange
Act) that is reasonably designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with GAAP for external purposes and includes policies and
procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of </P>
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the assets of Parent, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and
expenditures of Parent are being made only in accordance with authorizations of management and directors of Parent, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
Parent&#146;s assets that could have a material effect on its financial statements, and such system of internal controls over financial report is reasonably effective.&nbsp;Parent has disclosed, based on its most recent evaluation prior to the date
of this Agreement, to Parent&#146;s outside auditors and the audit committee of Parent&#146;s board of directors: (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as
defined in Rule 13a-15 under the Exchange Act) which are reasonably likely to adversely affect Parent&#146;s ability to record, process, summarize and report financial information; and (ii) any material fraud, within the knowledge of Parent, that
involves management or other employees who have a significant role in Parent&#146;s internal controls over financing reporting.&nbsp;As of the date hereof, there is no reason to believe that Parent&#146;s independent auditors, chief executive
officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when required.&nbsp;To
the knowledge of Parent, neither Parent nor any of the Parent Subsidiaries nor Parent&#146;s independent auditors have identified or been made aware of: (x) any significant deficiency or material weakness in the design or operation of Parent&#146;s
internal controls; (y) any illegal act or fraud, whether or not material, that involves Parent&#146;s management or other employees; or (z) any reasonably credible claim or allegation regarding any of the foregoing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Each of the principal executive officer of Parent and the principal financial officer of Parent (or each former principal executive
officer of Parent and each former principal financial officer of Parent, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act, in each case, with
respect to the Parent SEC Documents, and the statements contained in such certifications were complete, correct and accurate on the date such certifications were made.&nbsp;For purposes of this section, &#147;principal executive officer&#148; and
&#147;principal financial officer&#148; shall have the meanings given to such terms in the Sarbanes-Oxley Act. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Parent is, and has at
all times since January 1, 2013 been, in compliance in all material respects with the applicable listing requirements of the Exchange, and has not since January 1, 2008 received any notice asserting any non-compliance with the listing requirements
of the Exchange. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_49"></A>4.8</B> <B>Parent Financial Statements</B><B>.</B>&nbsp;The
consolidated financial statements for Parent and the Parent Subsidiaries as of and for the years ended December 31, 2013, 2014 and 2015 and the quarter ended June 30, 2016, in each case provided to the Company prior to the date hereof, are herein
referred to as the <B><I>&#147;</I></B><B><I>Parent Financial Statements</I></B><B><I>&#148;</I></B> and the balance sheet of Parent as of June 30, 2016 is herein referred to as the <B><I>&#147;</I></B><B><I>Parent Balance
Sheet</I></B><B><I>&#148;</I></B>.&nbsp;Each of the Parent Financial Statements (including, in each case, any related notes thereto): (i)&nbsp;was prepared in accordance with GAAP as in effect on the date of such Parent Financial Statements (or such
other date as may be reflected in such Parent Financial Statements), in each case applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of any unaudited portion of the Parent
Financial Statements, except as such unaudited portion of the Parent Financial Statements may omit footnotes and may be subject to potential year-end adjustments that are not expected, either individually or in the aggregate, to be material); and
(ii)&nbsp;fairly presented, in all material respects, the consolidated financial position of Parent and the Parent Subsidiaries at the respective dates thereof and the consolidated results of their operations and cash flows for the periods
indicated, consistent with the books and records of Parent and the Parent Subsidiaries (except as may be indicated in the notes thereto or, in the case of any unaudited portion of the Parent Financial Statements, except as such unaudited portion of
the Parent Financial Statements may omit footnotes and may be subject to potential year-end adjustments that are not expected, either individually or in the aggregate, to be material).&nbsp;No financial statements of any Person other than Parent and
the Parent Subsidiaries actually included in the Parent Financial Statements are required by GAAP to be included in the Parent Financial Statements.&nbsp;Except as required by GAAP, Parent has not, between the last day of its most recently ended
fiscal year and the date of this Agreement, made or adopted any material change in its accounting methods, </P>
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practices or policies in effect on such last day of its most recently ended fiscal year.&nbsp;Parent has not had any material dispute with any of its auditors regarding accounting matters or
policies during any of its past three (3) full fiscal years or during the current fiscal year that is currently outstanding or that resulted (or would reasonably be expected to result) in an adjustment to, or any restatement of, the Parent Financial
Statements. No current or former independent auditor for Parent has resigned or been dismissed from such capacity as a result of or in connection with any disagreement with Parent on a matter of accounting practices. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_50"></A>4.9</B> <B>Title to Property</B><B>.</B>&nbsp;Parent and the Parent Subsidiaries have good
title to all of their respective material tangible properties, interests in tangible properties and tangible assets, both real and personal, reflected in the Parent Balance Sheet, and have valid leasehold interests in all material leased properties
and assets, in each case free and clear of all Liens other than Permitted Liens.&nbsp;Schedule&nbsp;4.9 of the Parent Disclosure Schedule identifies each parcel of real property owned or leased by Parent or any of the Parent Subsidiaries. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_51"></A>4.10</B> <B>Absence of Undisclosed Liabilities</B><B>.</B>&nbsp;Neither Parent, nor any of
the Parent Subsidiaries or the entities listed on Schedule 4.1(b) of the Parent Disclosure Schedule has any liabilities of a nature required by GAAP to be reflected in a consolidated balance sheet or the notes thereto, other than:
(i)&nbsp;liabilities identified as such in the &#147;liabilities&#148; column of the Parent Balance Sheet; (ii) liabilities that have been incurred by Parent since the date of the Parent Balance Sheet in the ordinary course of business consistent
with past practice that, individually or in the aggregate, do not exceed $100,000; (iii) liabilities for performance of obligations under Parent Contracts; and (iv) liabilities and obligations under this Agreement and investment banking, accounting,
legal and other fees incurred by Parent in connection with the negotiation, execution and delivery of this Agreement. To the knowledge of Parent, all of the accounts payable and accrued expenses of Parent and the Parent Subsidiaries, as of the date
of this Agreement, are disclosed on Schedule 4.10 of the Parent Disclosure Schedules. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_52"></A>4.11</B> <B>Absence of Changes or Events</B><B>.</B><B>&nbsp;</B>Except as contemplated by
this Agreement, since March 31, 2016: (i) there has been no Parent Material Adverse Effect; and (ii) there has not been any action or omission by Parent or any of the Parent Subsidiaries that, if taken during the Interim Period without the
Company&#146;s consent, would constitute a breach of Section 5.2. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_53"></A>4.12</B> <B>Capital
Stock of Subsidiaries</B><B>.</B>&nbsp;Parent is directly or indirectly the record and beneficial owner of all of the outstanding shares of capital stock or other equity interests of each of the Parent Subsidiaries and the entities listed on
Schedule 4.1(b) of the Parent Disclosure Schedule.&nbsp;All of such shares or other equity interests have been duly authorized and are validly issued, fully paid, nonassessable and free of preemptive rights with respect thereto and are owned by
Parent free and clear of any Lien with respect thereto, in each case other than Permitted Liens or as otherwise described on Schedule 4.12 of the Parent Disclosure Schedule.&nbsp;There are no proxies or voting agreements with respect to such shares
or other equity interests, and there are no existing options, warrants, calls, subscriptions or other rights or other agreements or commitments obligating Parent or any of the Parent Subsidiaries to issue, transfer, sell, repurchase or redeem any
shares of capital stock or other equity securities of any Parent Subsidiary or any other securities convertible into, exercisable for, or evidencing the right to subscribe for any such shares (collectively, the <B><I>&#147;Parent Subsidiary
Securities&#148;</I></B>).&nbsp;Except as set forth on Schedule 4.1(b) of the Parent Disclosure Schedule, Parent does not directly or indirectly own any interest in any Person. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_54"></A>4.13</B> <B>Litigation</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Except as disclosed on Schedule 4.13(a) of the Parent Disclosure Schedule, there is no Action pending or, to the knowledge of Parent,
threatened against Parent, any of the Parent Subsidiaries or any of their respective officers, directors and managers (in their capacities as such), or involving any of their respective assets, before any Government Authority, arbitrator or
mediator.&nbsp;There is no Action pending or, to the knowledge of Parent, threatened which in any manner challenges, seeks to or is reasonably likely to prevent, enjoin, alter or delay the consummation of any of the transactions contemplated by this
Agreement, including the Merger, or otherwise prevent or delay Parent or Merger Sub from performing its obligations hereunder. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-24 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) There is no outstanding Order to which Parent, any Parent Subsidiary or any of their
respective assets is or was a party or by which Parent, any Parent Subsidiary or any of their respective assets is bound, the terms of which have not been satisfied by Parent or such Parent Subsidiary. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_55"></A>4.14</B> <B>Insurance</B><B>.</B>&nbsp;Schedule&nbsp;4.14 of the Parent Disclosure Schedule
lists: (i) all insurance policies (including all workers&#146; compensation insurance policies) covering the business, properties or assets of Parent and the Parent Subsidiaries or any Parent Employee Benefit Plan or its fiduciaries; (ii) the
premiums and coverages of such policies; (iii) all claims in excess of $100,000 made against any such policies since January 1, 2013; and (iv) all claims made against any such policies that remain open and/or unresolved as of the date of this
Agreement.&nbsp;All such policies are in effect, and accurate and complete copies of all such policies have been made available to the Company.&nbsp;Parent has not received written notice of the cancellation or threat of cancellation of any of such
policies. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_56"></A>4.15</B> <B>Contracts and Commitments</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Except as set forth on Schedule 4.15(a) of the Parent Disclosure Schedule, none of Parent, the Parent Subsidiaries nor any of the entities
listed on Schedule&nbsp;4.1(b) of the Parent Disclosure Schedule is a party to or bound by any of the following: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) any Contract that
provides for post-employment or post-consulting liabilities or obligations, including severance pay; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) any Contract under which
payments or obligations will be increased, accelerated or vested by the occurrence (whether alone or in conjunction with any other event) of any of the transactions contemplated by this Agreement, including the Merger, or under which the value of
the payments or obligations will be calculated on the basis of any of the transactions contemplated by this Agreement, including the Merger, whether pursuant to a change in control or otherwise; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iii) any Contract currently in force relating to the disposition or acquisition of assets where the fair market value of such assets exceeds
$100,000, in each case other than inventory sold in the ordinary course of business; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iv) any Contract relating to an ownership interest
in any corporation, partnership, joint venture or other business enterprise or Person, excluding wholly-owned Parent Subsidiaries; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(v)
any Contract for the purchase of materials, supplies, equipment or services, under which the aggregate payments made to one party or group of related parties after during the past twelve (12) months exceeded, or for the following twelve (12) months
is expected to exceed, $100,000; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(vi) any Contract relating to the guarantee (whether absolute or contingent) by Parent or any of the
Parent Subsidiaries of (A)&nbsp;the performance of any other Person (other than Parent or a wholly-owned Parent Subsidiary) or (B) the whole or any part of the indebtedness or liabilities of any other Person (other than Parent or a wholly-owned
Parent Subsidiary); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(vii) any Contract relating to the indemnification by Parent of its officers, directors, managers or agents; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(viii) any material Contract of indemnification or guaranty; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ix) any power of attorney authorizing the incurrence of an obligation on the part of Parent or the Parent Subsidiaries; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(x) any Contract which limits or restricts (A)&nbsp;where Parent or any of the Parent Subsidiaries may conduct business, (B) the type or
lines of business (current or future) in which Parent or any of the Parent Subsidiaries may engage or (C)&nbsp;any acquisition of assets or stock (tangible or intangible) by Parent or any of the Parent Subsidiaries; </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-25 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xi) any Contract under which the aggregate payments or receipts for the past twelve (12) months
exceeded, or for the following twelve (12) months is expected to exceed, $100,000; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xii) any Contract for the borrowing or lending of
money, or the availability of credit (except credit extended by Parent or any of the Parent Subsidiaries to customers in the ordinary course of business and consistent with past practice); </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xiii) any Contract relating to any hedging, option (other than options granted to service providers in connection with the performance of
services), derivative or other similar transaction and any foreign exchange position or contract for the exchange of currency; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xiv) any
collective bargaining agreements; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xv) any Contract relating to the employment of individuals who serve as officers of Parent or any
Parent Subsidiary; or </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(xvi) any Contract that would otherwise be required to be filed as an exhibit to a periodic report under the
Exchange Act, as provided by Item 601 of Regulation S-K promulgated under the Exchange Act. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each Contract of the type described in this
Section 4.15(a) and in existence as of the date hereof is referred to herein as a <B><I>&#147;Parent Contract&#148;</I></B>. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) An
accurate and complete copy of each Parent Contract (including all amendments thereto) has been made available to the Company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c)
Neither Parent nor any of the Parent Subsidiaries, nor, to the knowledge of Parent, any other party to a Parent Contract, is in material breach, violation or default under, or has received written notice that it has breached, violated or defaulted
under (nor, to the knowledge of Parent, does there exist any condition under which, with the passage of time or the giving of notice or both, would reasonably be expected to cause such a breach, violation or default under), any Parent Contract
material to the operation of Parent&#146;s business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Each Parent Contract is a valid, binding and enforceable obligation of Parent
and any applicable Parent Subsidiary and, to the knowledge of Parent, of the other party or parties thereto, in accordance with its terms and is in full force and effect, in each case except to the extent enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors&#146; rights generally or by general equitable principles or by principles of good faith and fair dealing (regardless of whether enforcement is sought in equity or
at law). </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_57"></A>4.16</B> <B>Labor Matters; Employment and Labor Contracts</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Except as disclosed on Schedule 4.16(a) of the Parent Disclosure Schedule, neither Parent nor any of the Parent Subsidiaries is party to
any union Contract or other collective bargaining agreement, nor, to the knowledge of Parent, are there any activities or proceedings of any labor union to organize any employees of Parent or any Parent Subsidiary. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) There is no labor strike, slowdown or stoppage pending or, to the knowledge of Parent, threatened against Parent or any of Parent
Subsidiaries.&nbsp;No petition for certification has been filed and is pending or, to the knowledge of Parent, threatened to be filed before the National Labor Relations Board with respect to any employees of Parent or any of the Parent
Subsidiaries.&nbsp;There are no material Actions pending or, to the knowledge of Parent, threatened between Parent or any of the Parent Subsidiaries and any of their respective employees.&nbsp;Except as disclosed on Schedule 4.16(b) of the Parent
Disclosure Schedule, the employment of each of the employees of Parent and each Parent Subsidiary is &#147;at will&#148; and neither Parent nor any Parent Subsidiary </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-26 </P>


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has any contractual obligation to provide any particular form or period of notice prior to terminating the employment of any of their respective employees.&nbsp;Neither Parent nor any Parent
Subsidiary is currently a party to any Contract whereby it leases employees or other service providers from another Person. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) No
current or former employee of Parent or any Parent Subsidiary is, or since January 1, 2013 has been, employed by Parent or any Parent Subsidiary outside of the United States. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_58"></A>4.17</B> <B>Intellectual Property Rights</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Schedule 4.17(a) of the Parent Disclosure Schedule accurately identifies and describes each proprietary product or service currently
developed, manufactured, marketed or sold by or on behalf of Parent or any of the Parent Subsidiaries, including products or services currently designated as development candidates with a unique internal name by Parent or any of the Parent
Subsidiaries. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Parent has provided Company with a true, accurate, and complete (i) patent docket dated June 7, 2016 and (ii) 2016 IP
budget, dated February 16, 2016, showing: Schedule 4.17(b) of the Parent Disclosure Schedule accurately identifies: (i) each item of Registered IP in which Parent or any of the Parent Subsidiaries has or purports to have an ownership interest of any
nature (whether exclusively, jointly with another Person, or otherwise); (ii) the jurisdiction in which such item of Registered IP has been registered or filed and the applicable registration or serial number; (iii) any other Person that has an
ownership interest in such item of Registered IP and the nature of such ownership interest and (iv) each Parent IP that is a granted patent that in any way covers any product or service identified in Schedule 4.17(a) of the Parent Disclosure
Schedule.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Schedule 4.17(c) of the Parent Disclosure Schedule accurately identifies: (i) all Intellectual Property Rights or
Intellectual Property licensed to Parent or any of the Parent Subsidiaries (other than any non-customized software that (x) is so licensed solely in executable or object code form pursuant to a non-exclusive, internal use software license, (y) is
not incorporated into, or used directly in the development, manufacturing or distribution of, any of Parent&#146;s or the Parent Subsidiaries&#146; products or services and (z)&nbsp;is generally available on standard terms for less than $25,000);
(ii) the corresponding Contract(s) pursuant to which such Intellectual Property Rights or Intellectual Property is licensed to Parent or the Parent Subsidiaries; and (iii) whether the license or licenses granted to Parent or the Parent Subsidiaries
are exclusive or non-exclusive. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Schedule 4.17(d) of the Parent Disclosure Schedule accurately identifies each Contract pursuant to
which any Person has been granted by Parent or any of the Parent Subsidiaries any license under, or otherwise has received or acquired any exclusive right (whether or not currently exercisable) or interest in, any Parent IP.&nbsp;Except as set forth
on Schedule 4.17(d) of the Parent Disclosure Schedule, neither Parent nor any of the Parent Subsidiaries are bound by, and no Parent IP is subject to, any Contract containing any covenant or other provision that in any way limits or restricts the
ability of Parent or any of the Parent Subsidiaries to use, exploit, assert or enforce any Parent IP anywhere in the world, except field and geographical restrictions in applicable licenses to Parent IP granted to Parent. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Parent has provided to the Company an accurate and complete copy of each standard form of Parent IP Contract used by Parent or any of the
Parent Subsidiaries at any time since January 1, 2013, including each standard form of: (i) employee agreement containing any intellectual property assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality
provision; (ii)&nbsp;consulting or independent contractor agreement containing any intellectual property assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision; and (iii)&nbsp;confidentiality
or nondisclosure agreement.&nbsp;Schedule 4.17(e) of the Parent Disclosure Schedule accurately identifies each Parent IP Contract that deviates in any material respect from the corresponding standard form agreement provided to the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Parent and the Parent Subsidiaries exclusively own all right, title and interest to and in Parent IP (other than Intellectual Property
Rights exclusively licensed to Parent or the Parent Subsidiaries as identified in Schedule 4.17(c) of the Parent Disclosure Schedule or otherwise as identified in Schedule 4.17(b)) free and </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-27 </P>


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clear of any Liens (other than non-exclusive licenses granted pursuant to the Contracts listed in Schedule 4.17(d) of the Parent Disclosure Schedule and the Permitted Liens listed in Schedule
4.17(d) of the Parent Disclosure Schedule).&nbsp;Without limiting the generality of the foregoing: </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) All documents and instruments
necessary to perfect the rights of Parent and the Parent Subsidiaries in Parent IP have been validly executed, delivered and, if related to Registered IP, filed in a timely manner with the appropriate Government Authority, where required. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) Except for Registered IP identified on Schedule 4.17(b) of the Parent Disclosure Schedule, no funding, facilities or personnel of any
Government Authority were used, directly or indirectly, to develop or create, in whole or in part, any of Parent IP. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iii) Since January
1, 2013, neither Parent nor any of the Parent Subsidiaries have assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any Intellectual Property Right to any other Person. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) To Parent&#146;s knowledge, all Parent IP that is Registered IP is valid, subsisting and enforceable.&nbsp;Without limiting the
generality of the foregoing, to Parent&#146;s knowledge: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) Each U.S. patent application and U.S. patent in which Parent or any of the
Parent Subsidiaries has an ownership interest or exclusive license and the right to prosecute was filed within one (1) year of a printed publication, public use or offer for sale of each invention described in the U.S. patent application or U.S.
patent.&nbsp;Each foreign patent application and foreign patent in which Parent or any of the Parent Subsidiaries has an ownership interest or exclusive license and the right to prosecute was filed or claims priority to a patent application filed
prior to each invention described in the foreign patent application or foreign patent being made available to the public. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) Except as
set forth on Schedule 4.17(g)(ii) of the Parent Disclosure Schedule, no&nbsp;trademark or trade name owned, used or applied for by Parent or any of the Parent Subsidiaries conflicts or interferes with any trademark or trade name owned, used or
applied for by any other Person.&nbsp;No event or circumstance (including a failure to exercise adequate quality controls and an assignment in gross without the accompanying goodwill) has occurred or exists that has resulted in, or would reasonably
be expected to result in, the abandonment of any trademark owned, used or applied for by or on behalf of Parent or any of the Parent Subsidiaries. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iii) Each item of Parent IP that is Registered IP is in compliance with all legal requirements, other than any legal requirement that can be
met with reasonable effort with respect to such Registered IP so as to avoid revocation, cancellation, or lapse or otherwise adversely affect its enforceability, use, or priority, and all filings, payments and other actions required to be made or
taken to maintain such item of Registered IP in full force and effect have been made by the applicable deadline.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(iv) All assignments to
Parent of inventorship, authorship or ownership rights relating to Parent IP that is Registered IP are valid and enforceable.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(v) Except
as set forth on Schedule 4.17(g)(v) of the Parent Disclosure Schedule, no interference, opposition, reissue, reexamination or other Action is, or since January 1, 2013 has been, pending or, to Parent&#146;s knowledge, threatened, in which the scope,
validity or enforceability of any Parent IP that is Registered IP is being or has been or is expected by Parent to be contested or challenged.&nbsp;To Parent&#146;s knowledge, there is no basis for a claim that any Parent IP that is Registered IP is
invalid or unenforceable. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) Each Person who is or was an employee or contractor of Parent or any of the Parent Subsidiaries and who is
or was involved in the creation or development of any Parent IP has signed an agreement </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-28 </P>


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containing an assignment of Intellectual Property Rights to Parent or one of the Parent Subsidiaries.&nbsp;No current or former stockholder, officer, director, employee, consultant or contractor
of Parent or any of the Parent Subsidiaries has any claim, right (whether or not currently exercisable) or interest to or in any Parent IP.&nbsp;To Parent&#146;s knowledge, no employee of Parent or any of the Parent Subsidiaries is: (x) bound by or
otherwise subject to any Contract restricting him or her from performing his or her duties for Parent or the Parent Subsidiaries; or (y) in breach of any Contract with any former employer or other Person concerning Intellectual Property Rights or
confidentiality obligations.&nbsp;Since January 1, 2013, neither Parent nor any of the Parent Subsidiaries have assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any Intellectual Property Right
to any other Person. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) Parent and the Parent Subsidiaries have taken all reasonable steps for a company of its size and resources to
maintain the confidentiality of and otherwise protect and enforce their rights in all material proprietary information that Parent or any of the Parent Subsidiaries holds, or purports to hold, as a trade secret. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) Neither Parent nor any of the Parent Subsidiaries are, and neither Parent nor any of the Parent Subsidiaries ever were, a contributor to
any industry standards body or similar organization that could require or obligate Parent or any of the Parent Subsidiaries to grant or offer to any other Person any license or right to any Parent IP. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) To Parent&#146;s knowledge, since January 1, 2013 no Person has infringed, misappropriated or otherwise violated, and no Person is
currently infringing, misappropriating or otherwise violating, any Parent IP.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) Neither the execution, delivery or performance of this
Agreement nor the consummation of any of the transactions contemplated hereby, including the Merger, will, with or without notice or lapse of time, result in or give any other Person the right or option to cause or declare: (i) a loss of, or Lien
on, any Parent IP; (ii) a breach of any license agreement listed or required to be listed in Schedule 4.17(c) of the Parent Disclosure Schedule; (iii) the release, disclosure or delivery of any Parent IP by or to any escrow agent or other Person; or
(iv) the grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any of Parent IP. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) To Parent&#146;s knowledge, neither Parent nor any of the Parent Subsidiaries have infringed (directly, contributorily, by inducement or
otherwise), misappropriated or otherwise violated any Intellectual Property Right of any other Person, including but not limited to, by the making, using, or selling of any proprietary products or services set forth in Schedule 4.17(a) of the Parent
Disclosure Schedule.&nbsp;Without limiting the generality of the foregoing, except as set forth on Schedule 4.17(m) of the Parent Disclosure Schedule, (i) no infringement, misappropriation or similar claim or Action is pending or, to Parent&#146;s
knowledge, threatened against Parent or any of the Parent Subsidiaries or against any other Person who may be entitled to be indemnified, defended, held harmless or reimbursed by Parent or any of the Parent Subsidiaries with respect to such claim or
Action and (ii) neither Parent nor any of the Parent Subsidiaries have ever received any written notice or other written communication (whether in electronic form or otherwise) relating to any actual, alleged or suspected infringement,
misappropriation or violation of any Intellectual Property Rights of another Person. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(n) Except as disclosed on Schedule 4.17(n) of the
Parent Disclosure Schedule or pursuant to licenses for off-the-shelf software, Parent is not a party to any Contract requiring any future payment of royalties by Parent or any of the Parent Subsidiaries for the use of any Intellectual Property
Rights or Intellectual Property. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(o) To Parent&#146;s knowledge, neither Parent nor any of the Parent Subsidiaries are bound by any
Contract to indemnify, defend, hold harmless or reimburse any other Person with respect to any Intellectual Property infringement, misappropriation or similar claim.&nbsp;Neither Parent nor any of the Parent Subsidiaries have ever assumed, or agreed
to discharge or otherwise take responsibility for, any existing or potential liability of another Person for infringement, misappropriation or violation of any Intellectual Property Right. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-29 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(p) No claim or Action involving any Intellectual Property or Intellectual Property Right owned
by or exclusively licensed to Parent or any of the Parent Subsidiaries is pending or, to Parent&#146;s knowledge, has been threatened, except for any such claim or Action that, if adversely determined, would not adversely affect: (i) the use or
exploitation of such Intellectual Property or Intellectual Property Right by Parent or any of the Parent Subsidiaries; or (ii) the manufacturing, distribution or sale of any product or service being developed, offered, manufactured, distributed or
sold by or on behalf of Parent or any of the Parent Subsidiaries. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(q) The failure by Parent or any Parent Subsidiary to register,
reregister, renew, extend, or reapply, or otherwise keep effective, the Parent IP, shall not give any current licensor, licensee or other third Person having an interest in any such Parent IP the right to demand penalties (cash or otherwise) from
Parent or any Parent Subsidiary. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(r) With respect to all registered Parent IP that Parent has permitted to lapse, Parent has timely
notified all licensees, licensors and other third Persons having a contractual right with respect to any such Parent IP, of such lapsed Parent IP. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_59"></A>4.18 Taxes.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Parent and each of the Parent Subsidiaries have filed all material Tax Returns required to be filed by them, and all such Tax Returns are
accurate and complete in all material respects.&nbsp;Parent and each of the Parent Subsidiaries have paid (or Parent has paid on behalf of each of the Parent Subsidiaries) all Taxes due and payable as shown on such Tax Returns.&nbsp;No unresolved
deficiencies for any Taxes have been proposed, asserted or assessed, in each case, in writing, against Parent or any of the Parent Subsidiaries, other than deficiencies that are reflected by reserves maintained in accordance with GAAP and are being
contested in good faith and by appropriate procedures. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Since June 30, 2010, neither Parent nor any of the Parent Subsidiaries: (i)
has granted any presently operative waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax other than as the result of extending the due date of a Tax Return; (ii) has granted to any Person
a power of attorney with respect to Taxes, which power of attorney will be in effect as of or following the Closing; (iii)&nbsp;has received a written inquiry from any taxing authority regarding the filing of Tax Returns in a jurisdiction where it
is not presently filing Tax Returns; or (iv) has availed itself of any Tax amnesty or similar relief in any taxing jurisdiction.&nbsp;There are no current audits of federal, state, local or foreign Tax Returns of Parent or of any of the Parent
Subsidiaries by any taxing authority. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Neither Parent nor any of the Parent Subsidiaries has assumed any material liability for the
Taxes of another Person under any Contract which liability remains unpaid.&nbsp;Neither Parent nor any of the Parent Subsidiaries is bound by any Tax sharing agreement or similar arrangements (including any Tax indemnity arrangements) the principal
subject of which is Taxes. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) There is no Lien for Taxes on any of the assets of Parent or any of the Parent Subsidiaries, except for
Permitted Liens. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Neither Parent nor any of the Parent Subsidiaries is party to any contract or arrangement that could, in connection
with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, result, separately or in the aggregate, in the payment of any &#147;excess parachute payment&#148; to a
&#147;disqualified individual&#148; for purposes of Section 280G or Section 4999 of the Code and the regulations thereunder (and any comparable provisions of state, local or foreign Tax law). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Parent and each of the Parent Subsidiaries have properly withheld on all material amounts paid to employees and have paid over such
amounts to the appropriate taxing authorities. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-30 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) Neither Parent nor any Parent Subsidiary is or has been a member of an affiliated group of
corporations filing a consolidated federal income Tax Return (or a group of corporations filing a consolidated, combined or unitary income Tax Return under comparable provisions of state, local or foreign Tax law) other than a group the common
parent of which is or was Parent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) Neither Parent nor Merger Sub has taken or agreed to take any action that would prevent the Merger
from constituting a reorganization within the meaning of Section 368(a) of the Code, including, without limitation, any action or transaction that would cause the Merger to fail to satisfy the continuity of business enterprise or continuity of
interest requirements set forth in Treasury Regulations Section 1.368-1(d) and 1.368-1(e), respectively. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) Notwithstanding any
provision of this Agreement to the contrary, (i) the foregoing provisions of this Section 4.18 constitute the sole and exclusive representations and warranties by the Parent regarding Taxes, Tax Returns and other matters relating to Taxes. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_60"></A>4.19</B> <B>Employee Benefit Plans; ERISA</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Schedule 4.19(a) of the Parent Disclosure Schedule lists all: (i)&nbsp;&#147;employee pension benefit plans&#148; as defined in Section
3(2) of ERISA (<B><I>&#147;Pension Plans&#148;</I></B>); (ii) &#147;employee welfare benefit plans&#148; as defined in Section&nbsp;3(1) of ERISA (<B><I>&#147;Welfare Plans&#148;</I></B>) whether or not subject to ERISA; (iii) stock bonus, stock
option, restricted stock, phantom stock, stock appreciation right, stock purchase or other equity compensation plans; bonus, profit-sharing, change-in-control or other incentive plans; deferred compensation arrangements; severance plans; holiday or
vacation plans; sabbatical programs; relocation arrangements; or any other material fringe benefit programs; and (iv) other material employee benefit or compensation plans, programs, policies or arrangements excluding any that are Parent Contracts,
in each case covering employees and directors of Parent or any Parent Subsidiary that either are maintained or contributed to by Parent or any of the Parent Subsidiaries or to which Parent or any of the Parent Subsidiaries is obligated to make
payments or otherwise has or may have any liability (collectively, the <B><I>&#147;Parent Employee Benefit Plans&#148;</I></B>). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b)
With respect to each Parent Employee Benefit Plan, Parent and each of the Parent Subsidiaries are in compliance with and have performed all obligations required under, in each case, in all material respects, the applicable provisions of ERISA, the
Code and other Applicable Laws, and the terms of such Parent Employee Benefit Plan and each Parent Employee Benefit Plan has been administered in compliance with its terms and Applicable Laws, including ERISA and the Code. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) All material contributions to, and material payments from the Parent Employee Benefit Plans that are required to have been made in
accordance with the Parent Employee Benefit Plans have been timely made, and timely deposits of employee contributions have been made. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) With respect to each Parent Employee Benefit Plan intended to be &#147;qualified&#148; within the meaning of Section 401(a) of the Code,
each such Parent Employee Benefit Plan and the trusts, if any, maintained thereunder, are the subjects of a favorable determination or opinion letter from the IRS with respect to its qualification or Tax exemption, as the case may be, and no event
has occurred and no condition exists with respect to the form or operation of such Parent Employee Benefit Plan that would cause the loss of such qualification or the imposition of any material liability, penalty or Tax under ERISA or the
Code.&nbsp;No Parent Employee Benefit Plan that is intended to qualify under Section&nbsp;401(a) of the Code has permitted investment in Parent Securities. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) There are no: (i) Actions pending or, to the knowledge of Parent, threatened by any Government Authority involving the Parent Employee
Benefit Plans; nor (ii)&nbsp;Actions pending or, to the knowledge of Parent, threatened claims (other than routine claims for benefits) against any Parent Employee Benefit Plans, against the assets of any of the trusts under any Parent Employee
Benefit Plans or against any </P>
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fiduciary of any Parent Employee Benefit Plans or against Parent or any Parent Subsidiary with respect to such Parent Employee Benefit Plans or asserting any rights or claims to benefits under
any Parent Employee Benefit Plan or against the assets of any trust under such Parent Employee Benefit Plan.&nbsp;To the knowledge of Parent, there are no facts which would form the basis for any Action contemplated by this Section 4.19(e). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) For the past six (6) years from the date hereof, none of Parent, any of the Parent Subsidiaries nor any employee of the foregoing, nor
any trustee, administrator, other fiduciary or any other &#147;party in interest&#148; or &#147;disqualified person&#148; with respect to the Pension Plans or Welfare Plans maintained by Parent or any of the Parent Subsidiaries, has engaged in a
&#147;prohibited transaction&#148; (as such term is defined in Section 4975 of the Code or Section 406 of ERISA) except as would not create a material liability for Parent, other than one which qualifies for an applicable statutory exemption. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) None of Parent, any of the Parent Subsidiaries nor any of the Parent ERISA Affiliates sponsors, maintains, administers or contributes to,
nor have they, in the past six (6) years from the date hereof, sponsored, maintained, administered or contributed to, or had any liability with respect to, any Pension Plan subject to Title IV of ERISA, Sections 412, 430 or 4971 of the Code or
Section&nbsp;302 of ERISA. No Parent Employee Benefit Plan is: (i) a &#147;multiemployer plan&#148; (within the meaning of Section 3(37) of ERISA); (ii) a &#147;multiple employer plan&#148; (within the meaning of Section 413(c) of the Code); (iii) a
&#147;voluntary employees&#146; beneficiary association&#148; (within the meaning of Section 501(c)(9) of the Code); or (iv) a &#147;multiple employer welfare arrangement&#148; (within the meaning of Section 3(40) of ERISA). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) With respect to each of the Parent Employee Benefit Plans, accurate and complete copies of the following documents have been made
available to the Company: (i)&nbsp;the plan document and any related trust agreement, including amendments thereto; (ii) any current summary plan descriptions and other material communications to participants relating to the plan; (iii) each plan
trust, insurance, annuity or other funding contract or service provider agreement related thereto; (iv) the most recent plan financial statements and actuarial or other valuation reports prepared with respect thereto, if any; (v) the most recent IRS
determination or opinion letter, if any; (vi) copies of the most recent plan year nondiscrimination and coverage testing results for each plan subject to such testing requirements; and (vii) the most recent annual reports (Form 5500) and all
schedules attached thereto for each Parent Employee Benefit Plan that is subject to ERISA and Code reporting requirements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) None of
the Welfare Plans maintained by Parent or any of the Parent Subsidiaries provides for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and then only at the expense of the participant or the participant&#146;s beneficiary. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, including the Merger,
will, either alone or in combination with a termination of employment: (i) entitle any current or former employee, officer, director or other service provider of Parent or any of the Parent Subsidiaries to severance pay, a change of control payment
or any other payment by the Company, or Parent and any of the Parent Subsidiaries; or (ii)&nbsp;accelerate the time of payment or vesting, or increase the amount of compensation due any such employee, officer, director or other service provider, in
either case pursuant to a Parent Employee Benefit Plan. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) Parent and each Parent Subsidiary is in compliance in all material respects
with the WARN Act.&nbsp;In the past two (2) years: (i) neither Parent nor any Parent Subsidiary has effectuated a &#147;plant closing&#148; (as defined in the WARN Act) affecting any site of employment or one (1) or more facilities or operating
units within any site of employment or facility of its business; (ii) there has not occurred a &#147;mass layoff&#148; (as defined in the WARN Act) affecting any site of employment or facility of Parent or any of the Parent Subsidiaries; and (iii)
neither Parent nor any Parent Subsidiary has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or
</P>
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regulation.&nbsp;Neither Parent nor any Parent Subsidiary has caused any of its employees to suffer an &#147;employment loss&#148; (as defined in the WARN Act) during the ninety (90) day period
prior to the date hereof or any similar event that when aggregated with enough such other events would trigger the advance notice requirements of the WARN Act. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_61"></A>4.20</B> <B>Regulatory Matters</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Parent and the Parent Subsidiaries hold all material licenses, permits, franchises, variances, registrations, exemptions, orders and other
governmental authorizations, consents, approvals and clearances, and have submitted all material notices to, all Government Authorities, including all authorizations under the FDCA, the PHSA and the regulations of the FDA promulgated thereunder, and
any other Government Authority that regulates the quality, identity, strength, purity, safety, efficacy or manufacturing of Parent&#146;s current or under-development products (any such Government Authority, a <B><I>&#147;</I></B><B><I>Parent
Regulatory Agency</I></B><B><I>&#148;</I></B>) required for the lawful operation of the businesses of Parent and the Parent Subsidiaries as presently conducted (the <B><I>&#147;</I></B><B><I>Parent Permits</I></B><B><I>&#148;</I></B>).&nbsp;All such
Parent Permits are valid and in full force and effect.&nbsp;None of such Parent Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement. Parent and the Parent
Subsidiaries are the sole and exclusive owner of the Parent Permits and the associated filings and applications with the FDA or other Parent Regulatory Agency, including any biologics license application, new drug application, 510(k) submission,
premarket approval, investigational new drug or investigational device exemption application, comparable regulatory application or filing made or held by or issued to Parent and the Parent Subsidiaries (collectively, the <B><I>&#147;Parent
Regulatory Filings&#148;</I></B>) and hold all right, title and interest in and to all Parent Regulatory Filings free and clear of any Lien. Parent and the Parent Subsidiaries have not granted any third party any right or license to use, access or
reference any of the Parent Regulatory Filings, including, without limitation, any of the know-how contained in any of the Parent Regulatory Filings or rights (including any regulatory exclusivities) associated with each such Parent Regulatory
Filing. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Since January&nbsp;1, 2013, there has not occurred any breach or violation of, default (with or without notice or lapse of
time or both) under or event giving rise to any right of termination, amendment or cancellation of (with or without notice or lapse of time or both), any Parent Permit.&nbsp;Parent and the Parent Subsidiaries are in compliance in all material
respects with the terms of all Parent Permits, and no event has occurred and no facts or circumstances exist that, to the knowledge of Parent, would reasonably be expected to result in the revocation, cancellation, non-renewal or adverse
modification of any Parent Permit. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Since January&nbsp;1, 2013, all material applications, submissions, information and data utilized
by Parent or the Parent Subsidiaries as the basis for, or submitted by or, to the knowledge of Parent, on behalf of Parent or the Parent Subsidiaries in connection with, any and all requests for Parent Permits when submitted to the FDA or other
Parent Regulatory Agency, were accurate and complete in all material respects as of the date of submission, and any updates, changes, corrections or modifications to such applications, submissions, information and data required under Applicable Law
have been submitted to the FDA or other Parent Regulatory Agency. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Since January&nbsp;1, 2013, neither Parent nor any of the Parent
Subsidiaries has committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA or any other Parent Regulatory Agency to invoke its policy with respect to &#147;Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities&#148; or similar policies under Applicable Law.&nbsp;Neither Parent&#146;s nor any of the Parent Subsidiaries&#146; agents or subcontractors has been convicted of any crime or engaged in
any conduct which has resulted or could result in debarment or disqualification by the FDA or any other Government Authority, and there are no proceedings pending or threatened that reasonably might be expected to result in criminal or civil
liability or debarment or disqualification by the FDA or any other Government Authority. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Neither Parent nor any of the Parent
Subsidiaries nor, to the knowledge of Parent, any director, officer, agent, employee or other Person associated with or acting on behalf of Parent or any of the Parent </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-33 </P>


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Subsidiaries has: (i)&nbsp;used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii)&nbsp;made any direct or
indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii)&nbsp;violated or is in violation of any provision of the FCPA or any similar Applicable Law; or (iv)&nbsp;made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Since January 1, 2013, there has not been any voluntarily or
involuntarily initiated, conducted, or issued recall, market withdrawal, safety alert, warning, &#147;dear doctor&#148; letter, market correction, or investigator notice relating to an alleged material lack of safety or efficacy of any product of
Parent or product candidate of Parent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) Parent is in compliance in all material respects with all Applicable Laws and any other
letters, notices or guidance issued by the FDA or any Government Authority which regulate the sale of pharmaceutical products or biological, or device products in any jurisdiction. There are no pending or, to the knowledge of Parent, threatened
regulatory Actions (other than non-material routine or periodic inspections or reviews) against Parent or its Subsidiaries. Since January 1, 2013 there have been no written notices, reports, warning letters, or untitled letters alleging or asserting
noncompliance in any material respect with any Applicable Law relating to Parent or any Parent Subsidiary or the products or product candidates of Parent or any Parent Subsidiary or any subpoenas or investigative demands or other written inquiries
that would reasonably be interpreted as raising a compliance concern sent or delivered by any Government Authority with regard to any product or any product candidate of Parent or any Parent Subsidiary. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) There are no ongoing manufacturing operations by Parent or by any Parent Subsidiary. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) Parent is and has been in compliance in all material respects with all Applicable Laws requiring the maintenance or submission of reports
or records under requirements administered by the FDA or any other Government Authority, including Adverse Experiences, Serious Adverse Events, and Serious Injuries.&nbsp;There have been no Serious Adverse Events or Serious Injuries associated with
the use (including in clinical trials) of the products or product candidates of Parent or any Parent Subsidiary that have not been reported to the FDA in accordance with Applicable Law. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) To the knowledge of Parent, all studies, tests, and preclinical and clinical research being conducted by Parent and Parent Subsidiaries,
and to the knowledge of Parent, on behalf of Parent and Parent Subsidiaries, were at all times, conducted incompliance in all material respects with all Applicable Laws, including, as applicable, good laboratory practice regulations set forth in 21
C.F.R. Part 58, good clinical practices, as defined or recognized by the FDA, including the ICH Tripartite Guideline for Good Clinical Practice, other applicable provisions of the Federal Food, Drug and Cosmetic Act and its applicable implementing
regulations at 21 C.F.R. Parts 50, 54, 56, 58, 312 and 812, and comparable laws of any other Government Authority; and there are no ongoing studies, tests, or preclinical or clinical research being conducted by, or on behalf of, Parent or any Parent
Subsidiary. No clinical trial conducted by Parent or any Parent Subsidiary or, to the knowledge of Parent, on behalf of Parent or any Parent Subsidiary has been terminated or suspended prior to completion for safety or non-compliance reasons, and
neither the FDA nor any other Government Authority, clinical investigator or institutional review board that has or had jurisdiction over or participated in any such clinical trial has initiated, or, to the knowledge of Parent, threatened to
initiate, any action to place a clinical hold order on, or otherwise terminate, materially delay or suspend, any such ongoing clinical trial, or to disqualify, restrict or debar any clinical investigator or other Person or entity involved in any
such clinical trial. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) Neither Parent nor any Parent Subsidiary nor any officer, director, managing employee (as those terms are
defined in 42 C.F.R. &#167; 1001.1001) of Parent or any Parent Subsidiary, nor, to the knowledge of Parent, any agent (as such term is defined in 42 C.F.R. &#167; 1001.1001(a)(1)(ii)) of Parent or any Parent Subsidiary is a party to, or bound by,
any order, individual integrity agreement, corporate integrity agreement or other formal or informal agreement with any Government Authority concerning compliance with the laws governing Federal Health Care Programs. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) Neither Parent nor any Parent Subsidiary nor any officer, director, managing employee (as
those terms are defined in 42 C.F.R. &#167; 1001.1001) of Parent or any Parent Subsidiary, nor, to the knowledge of the Parent, any agent (as such term is defined in 42 C.F.R. &#167; 1001.1001(a)(1)(ii)) of Parent or any Parent Subsidiary: (i) has
been debarred, excluded or suspended from participation in any Federal Health Care Program; (ii) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the Social Security Act; (iii) is currently listed on the
General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; (iv) to the knowledge of Parent, is the target or subject of any current investigation by a Government Authority
relating to any Federal Health Care Program related offense; or (v) is currently charged with or convicted of any criminal offense relating to the delivery of an item or service under any Federal Health Care Program. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) To the knowledge of Parent, there are no pending or threatened filings against Parent or any Parent Subsidiary of an action relating to
Parent or any Parent Subsidiary&nbsp;under any federal or state whistleblower statute, including under the False Claims Act of 1863 (31 U.S.C. &#167; 3729 et seq.). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(n) To the knowledge of Parent, neither Parent nor any Parent Subsidiary is under investigation by any Government Authority for a violation
of HIPAA or the regulations contained in 45 C.F.R. Parts 160 and 164, including receiving any notices from the United States Department of Health and Human Services Office of Civil Rights relating to any such violations, or any comparable state or
local laws. Neither Parent nor any Parent Subsidiaries are &#147;covered entities&#148; as that term is defined in HIPAA. Parent and the Parent Subsidiaries have been in compliance in all material respects with federal and state data breach laws.
</P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_62"></A>4.21</B> <B>Environmental Matters</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) No Hazardous Materials are present, as a result of the actions of Parent or any of the Parent Subsidiaries or, to the knowledge of Parent,
as a result of any actions of any other Person, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Parent or any of the Parent Subsidiaries has at any time owned, operated, occupied or
leased, in each case as would result in a material violation of any Environmental Laws. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Neither Parent nor any of the Parent
Subsidiaries has transported, stored, used, manufactured, disposed of, released or exposed any Person to Hazardous Materials in material violation of any Environmental Law, nor has Parent or any of the Parent Subsidiaries engaged in any Hazardous
Materials Activities in material violation of any Environmental Laws. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) No material Action is pending or, to the knowledge of Parent,
threatened, concerning any Parent Permit, Hazardous Material or Hazardous Materials Activity of Parent or any of the Parent Subsidiaries.&nbsp;Since January 1, 2013, Parent and the Parent Subsidiaries have not received written notice that Parent or
any of the Parent Subsidiaries are responsible, or potentially responsible, for the investigation, remediation, cleanup or similar action at any property presently or formerly used by Parent or any of the Parent Subsidiaries for recycling, disposal
or handling of Hazardous Materials. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_63"></A>4.22</B> <B>Proxy
Statement</B><B>.</B><B>&nbsp;</B>The Proxy Statement, at the date the Proxy Statement (and any amendment or supplement thereto) is first mailed to Parent stockholders and at the time of the Parent Special Meeting (or any adjournment or postponement
thereof), will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not
misleading.&nbsp;The representations and warranties contained in this Section&nbsp;4.22 will not apply to statements or omissions included in the Proxy Statement (and any amendment or supplement thereto) based upon information regarding the Company
supplied to Parent in writing by the Company for use therein (it being understood that all other information in the Proxy Statement (and any amendment or supplement thereto) will be deemed to have been supplied by Parent).&nbsp;The Proxy Statement
(and any amendment or supplement thereto) will, when filed, comply as to form in all material respects with the applicable requirements of the Exchange Act and, subject to Section 5.4(d), the Proxy Statement will include the Parent Board
Recommendation. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_64"></A>4.23</B> <B>Finders or
Brokers</B><B>.</B><B>&nbsp;</B>Except for the entities listed on Schedule 4.23,<B> </B>an accurate and complete copy of each of whose engagement letters have been provided to the Company prior to the date hereof, neither Parent nor any of the
Parent Subsidiaries has employed or retained any investment banker, broker, finder or other intermediary who is or might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement, including the Merger.
</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_65"></A>4.24</B> <B>Takeover Statutes</B><B>.</B>&nbsp;Parent has taken all action necessary to
exempt or exclude this Agreement and the transactions contemplated hereby, including the Merger, from all applicable Takeover Statutes.&nbsp;Accordingly, no Takeover Statute applies to this Agreement or the transactions contemplated hereby,
including the Merger, with respect to Parent.&nbsp;Parent does not have any stockholder rights plan, &#147;poison pill&#148; or similar plan or arrangement in effect. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_66"></A>4.25</B> <B>Valid Issuance</B><B>.</B>&nbsp;The shares of Parent Common Stock to be issued as
Merger Consideration pursuant to this Agreement have been duly authorized and will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable and will not be subject to any restriction on resale
under the Securities Act, other than restrictions imposed by Rules 144 and 145 under the Securities Act. </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_67"></A>ARTICLE V </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>COVENANTS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_68"></A>5.1</B> <B>Conduct of Company Business During Interim Period</B><B>.</B>&nbsp;Except as
contemplated or required by this Agreement or as expressly consented to in writing by Parent, during the period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time (the
<B><I>&#147;</I></B><B><I>Interim Period</I></B><B><I>&#148;</I></B>), the Company will: (i) conduct its operations according to its ordinary course of business; (ii) use its reasonable best efforts to preserve intact its business, to keep available
the services of its officers and employees and to maintain existing relationships with licensors, licensees, suppliers, distributors, consultants, customers and others having business relationships with it, except in each case, to the extent that
the termination of any such services or relationships is in the ordinary course of business; and (iii)&nbsp;not take any action which would reasonably be expected to adversely affect its ability to consummate the Merger or the other transactions
contemplated hereby.&nbsp;Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement or as set forth on Schedule 5.1 of the Company Disclosure Schedule, during the Interim Period, the Company will
not, without the prior written consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned), directly or indirectly, do any of the following: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) other than in the ordinary course of business or after prior written notice to Parent, (i) enter into any Contract that would have been a
Company Contract were the Company a party or subject thereto on the date of this Agreement; or (ii) terminate or amend in any material respect any Company Contract or waive any material right thereunder; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) other than after prior written notice to Parent, adopt any new severance plan or grant any severance or termination payments to any
officer or director of the Company, except payments pursuant to written agreements or policies existing on the date hereof and previously disclosed in writing to Parent or as required by applicable Israeli law; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) other than in the ordinary course of business, after prior written notice to Parent, or with respect to the Company Private Placement,
declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any capital stock or other equity security or split, combine or reclassify any capital stock or other equity security or issue or
authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock or other equity security; </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-36 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) repurchase or otherwise acquire, directly or indirectly, any shares of capital stock or
other equity security, except pursuant to rights of repurchase of any such shares under the Company Equity Plan; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) other than with
respect to the Company Private Placement, cause, permit or propose any material amendments to the certificate of incorporation, bylaws, certificate of formation or limited liability company agreement (in each case, as applicable) of the Company;
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) other than in the ordinary course of business, sell, lease, license, encumber or otherwise dispose of any properties or assets which
are material, individually or in the aggregate, to the business of the Company; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) other than in the ordinary course of business or
with respect to the Company Private Placement, incur any indebtedness for borrowed money or guarantee any such indebtedness, or issue or sell any debt securities, or warrants or rights to acquire debt securities, of the Company; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) enter into any &#147;keep well&#148; or other contract to maintain any financial statement condition of any Person other than a
wholly-owned Subsidiary or enter into any arrangement having the economic effect of the foregoing; </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) [Intentionally Omitted]; </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) pay, discharge, settle, compromise or satisfy any material pending or threatened Action, claim, liability or obligation (whether absolute,
accrued, asserted or unasserted, contingent or otherwise), other than (i) the payment or discharge of liabilities or obligations of the Company with respect to amounts owed to vendors or suppliers in the ordinary course of business, (ii) settlements
or compromises of Actions in the ordinary course of business, (iii) settlements or compromises involving payments by the Company not in excess of $100,000 individually, or more than $250,000 in the aggregate, and (iv) with respect to Taxes; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) authorize, solicit, propose or announce an intention to authorize, recommend or propose, or enter into any Contract with respect to, any
plan of liquidation or dissolution, any acquisition of a material amount of assets or securities, any disposition of a material amount of assets, any partnership, association or joint venture, or other than with respect to the Company Private
Placement, any material change in capitalization; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) [Intentionally Omitted]; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) maintain its books and records in a manner other than in the ordinary course of business consistent with past practice; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(n) enter into any hedging, option, derivative or other similar transaction or any foreign exchange position or contract for the exchange of
currency, except in the ordinary course of business; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(o) institute any material change in its accounting methods, principles or
practices other than as required by GAAP or for purposes of compliance with the Exchange and the Securities Act and Exchange Act; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(p) in
respect of any Taxes: (i) except as required by Applicable Law, change any material election, change any material accounting method, enter into any material closing agreement, settle any material claim or assessment or consent to any material
extension or waiver of the limitation period applicable to any material claim or assessment or amend any material Tax Return; or (ii) enter into any material Tax-sharing agreement or similar arrangement (including any Tax indemnity arrangement) the
principal subject of which is Taxes; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(q) (i) issue, deliver or sell, or authorize the issuance, delivery or sale of, any Company
Securities, other than the Company Private Placement, the grant of Company Stock Options to new employees or other </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-37 </P>


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employees of the Company, the issuance of any shares of Company Stock upon the exercise of Company Stock Options or existing warrants, or upon the conversion of existing convertible promissory
notes; (ii) file a registration statement under the Securities Act with respect to an initial public offering of any Company Securities; or (iii) amend any term of any Company Security (whether by merger, consolidation or otherwise); </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(r) enter into any agreement that, prior to the Effective Time, would limit the Company, or following the Effective Time, would limit Parent,
the Surviving Corporation or any of the other Parent Subsidiaries, from engaging in any line of business, competing with any Person or selling any product or service; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(s) [Intentionally Omitted]; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(t) take any action that would prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code; or </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(u) agree or commit to do any of the foregoing. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_69"></A>5.2</B> <B>Conduct of Parent Business During Interim Period</B><B>.</B>&nbsp;Except as
contemplated or required by this Agreement or as expressly consented to in writing by the Company,&nbsp;during the Interim Period, each of Parent and the Parent Subsidiaries will: (i) timely file all required Parent SEC Documents required to be
filed by it with the SEC under Applicable Law in a timely manner, with such Parent SEC Documents complying as to form, when filed, in all material respects with Applicable Law; (ii) maintain compliance in all material respects with the applicable
listing requirements of the Exchange; and (iii)&nbsp;not take any action which would reasonably be expected to adversely affect its ability to consummate the Merger or the other transactions contemplated hereby.&nbsp;Without limiting the generality
of the foregoing, and except as otherwise expressly provided in this Agreement or as set forth on Schedule 5.2 of the Parent Disclosure Schedule, during the Interim Period, Parent will not, and will not permit the Parent Subsidiaries to, without the
prior written consent of the Company&nbsp;(which consent shall not be unreasonably withheld, delayed or conditioned), directly or indirectly, do any of the following: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) other than in the ordinary course of business, (i) enter into any Contract that would have been a Parent Contract were Parent or any of
the Parent Subsidiaries a party or subject thereto on the date of this Agreement; or (ii) terminate or amend in any material respect any Parent Contract or waive any material right thereunder; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) adopt any new severance plan or grant any severance or termination payments to any officer or director of Parent or any of the Parent
Subsidiaries, except payments pursuant to written agreements or policies existing on the date hereof and previously disclosed in writing to the Company; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any capital stock or
other equity security or split, combine or reclassify any capital stock or other equity security or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock or other equity security;
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) repurchase or otherwise acquire, directly or indirectly, any shares of capital stock or other equity security, except pursuant to
rights of repurchase of any such shares under any Parent Stock Plan; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) cause, permit or propose any material amendments to the
certificate of incorporation, bylaws, certificate of formation or limited liability company agreement (in each case, as applicable) of Parent or any of the Parent Subsidiaries; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) other than in the ordinary course of business, sell, lease, license, encumber or otherwise dispose of any properties or assets which are
material, individually or in the aggregate, to the business of Parent and the Parent Subsidiaries, taken as a whole; </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-38 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) incur any indebtedness for borrowed money or guarantee any such indebtedness, in each case,
other than in the ordinary course of business or pursuant to the secured note and corresponding security agreement entered into by Parent in connection with this Agreement (the <B><I>&#147;Debt Commitment&#148;)</I></B>, or issue or sell any debt
securities or warrants or rights to acquire debt securities of Parent or any Parent Subsidiary, as the case may be; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) enter into any
&#147;keep well&#148; or other contract to maintain any financial statement condition of any Person other than a wholly-owned Parent Subsidiary or enter into any arrangement having the economic effect of the foregoing; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) adopt or amend any employee benefit or employee equity purchase or employee option plan, hire any employee or otherwise enter into any
employment Contract, pay any special bonus or special remuneration to any director or employee of Parent or any Parent Subsidiary, except any such amendments required by Applicable Law, or increase the salaries or wage rates of the officers or
employees of Parent or any Parent Subsidiary, except increases in the salaries or wage rates of non-officer employees in the ordinary course of business or except as required by the terms of a Parent Contract as in existence on the date hereof; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) pay, discharge, settle, compromise or satisfy any pending or threatened Action, claim, liability or obligation (whether absolute,
accrued, asserted or unasserted, contingent or otherwise), other than (i) the payment or discharge of liabilities or obligations of Parent with respect to amounts owed to vendors or suppliers in the ordinary course of business; (ii) settlements or
compromises of Actions in the ordinary course of business, (iii) settlements or compromises involving payments by Parent or any Parent Subsidiary not in excess of $100,000 individually, or more than $250,000 in the aggregate, and (iv) with respect
to Taxes; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) authorize, solicit, propose or announce an intention to authorize, recommend or propose, or enter into any Contract with
respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities, any disposition of a material amount of assets, equity or other securities, any material change in capitalization, or any partnership,
association or joint venture; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) (i) purchase any insurance policy; (ii) fail to renew any insurance policy naming it as a beneficiary
or a loss payee; or (iii) take any steps or fail to take any steps that would permit any insurance policy naming it as a beneficiary or a loss payee to be canceled, terminated or materially altered; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) maintain its books and records in a manner other than in the ordinary course of business consistent with past practice; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(n) enter into any hedging, option, derivative or other similar transaction or any foreign exchange position or contract for the exchange of
currency other than in the ordinary course of business and consistent with past practice; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(o) institute any change in its accounting
methods, principles or practices other than as required by GAAP or the rules and regulations promulgated by the SEC; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(p) in respect of
any Taxes: (i) except as required by Applicable Law, change any material election, change any material accounting method, enter into any material closing agreement, settle any material claim or assessment or consent to any material extension or
waiver of the limitation period applicable to any material claim or assessment or amend any material Tax Return; or (ii) enter into any material Tax-sharing agreement or similar arrangement (including any Tax indemnity arrangement) the principal
subject of which is Taxes; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(q) except as expressly contemplated by this Agreement, including in connection with the Warrant Amendment,
(i) issue, deliver or sell, or authorize the issuance, delivery or sale of, any Parent Securities or </P>
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Parent Subsidiary Securities, other than the issuance of any shares of Parent Common Stock upon the exercise of Parent Stock Options or Parent Securities existing on the date of this Agreement;
or (ii) amend any term of any Parent Security or any Parent Subsidiary Security (in each case, whether by merger, consolidation or otherwise); </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(r) enter into any agreement that would limit Parent, the Surviving Corporation or any of the other Parent Subsidiaries, from engaging in any
line of business, competing with any Person or selling any product or service; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(s) make capital expenditures in excess of $50,000 in the
aggregate or any expenditures not contemplated by the budget of Parent previously delivered to the Company and updated through the date of this Agreement; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(t) take any action that would prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code; or </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(u) agree or commit to do any of the foregoing. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_70"></A>5.3</B> <B>No Solicitation by the Company</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Subject to Section 5.3(b) and Section 5.3(d), during the Interim Period, the Company shall not, nor shall it authorize or permit any of
its Representatives to, directly or indirectly, except as otherwise provided below: (i) solicit, initiate or knowingly encourage or knowingly facilitate (including by way of furnishing any non-public information relating to the Company), or
knowingly induce or knowingly take any other action which would reasonably be expected to lead to the making, submission or announcement of, any proposal or inquiry that constitutes, or is reasonably likely to lead to, an Acquisition Proposal; (ii)
other than informing Persons of the provisions contained in this Section 5.3, enter into, continue or participate in any discussions or any negotiations regarding any Acquisition Proposal or otherwise take any action to knowingly facilitate or
knowingly induce any effort or attempt to make or implement an Acquisition Proposal (including any Acquisition Proposal received prior to the date of this Agreement); (iii) approve, endorse or recommend an Acquisition Proposal or any letter of
intent, memorandum of understanding or Contract contemplating an Acquisition Proposal or requiring the Company to abandon or terminate its obligations under this Agreement, or enter into any of the foregoing; or (iv) agree, resolve or commit to do
any of the foregoing.&nbsp;The Company shall, and shall cause its Representatives to, immediately cease and cause to be terminated all discussions or negotiations with any Person previously conducted with respect to any Acquisition
Proposal.&nbsp;The Company shall promptly deny to any third party access to any data room (virtual or actual) containing any confidential information previously furnished to any such third party relating to any Acquisition Proposal. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Notwithstanding anything in this Section 5.3 to the contrary, at any time prior to obtaining the Company Stockholder Approval, in
response to an unsolicited written Acquisition Proposal that the board of directors of the Company determines in good faith (after consultation with its outside legal counsel) constitutes or would reasonably be expected to result in a Superior
Proposal (and that did not result from a violation of Section 5.3(a)), the Company may, upon a good faith determination by the board of directors of the Company (after receiving the advice of its outside counsel) that failure to take such action
would be inconsistent with the Company&#146;s board of directors&#146; fiduciary duties to the Company&#146;s stockholders under Applicable Law: (x) furnish information with respect to the Company to the Person making such Acquisition Proposal (and
such Person&#146;s Representatives), provided that the Company and such Person first enter into a confidentiality agreement with confidentiality provisions that are not less restrictive to such Person than the provisions of the Confidentiality
Agreement are to Parent and that would not prohibit compliance by the Company with the provisions of this Section 5.3, and provided further that all such information shall have been previously provided to Parent or is concurrently provided to Parent
at the same time that it is provided to such Person; and (y) participate in discussions or negotiations with the Person making such Acquisition Proposal (and such Person&#146;s Representatives) regarding such Acquisition Proposal. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) The Company shall promptly, but in no event later than forty-eight (48) hours, notify Parent
in writing if any proposal, offer or inquiry is received by, or any discussions or negotiations are sought to be initiated or continued with, the Company in respect of any Acquisition Proposal.&nbsp;Such notice shall advise Parent in writing of the
Company&#146;s intention to participate or engage in discussions or negotiations with, or furnish non-public information to, such Person and shall, in any such notice to Parent, indicate the identity of the Person making such proposal, offer,
inquiry or other contact and the material terms and conditions of any proposals or offers (and shall include with such notice copies of any written materials received from or on behalf of such Person relating to such proposal, offer, inquiry or
other request), and thereafter shall promptly keep Parent informed of all material developments affecting the status and the material terms of any such proposal, offer, inquiry or other request and of the status of any such discussions or
negotiations relating thereto (including providing Parent with any additional written materials received relating to such proposal, offer, inquiry or other request). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The board of directors of the Company shall not: (i) fail to make the Company Board Recommendation to the Company&#146;s stockholders in
accordance with Section 5.8(b); (ii) withhold, withdraw, amend, qualify or modify in a manner adverse to Parent, or publicly propose to withhold, withdraw, amend, qualify or modify in a manner adverse to the Company, the Company Board
Recommendation; (iii) adopt, approve, recommend, endorse or otherwise declare advisable the adoption of any Acquisition Proposal; or (iv) resolve, agree or publicly propose to take any such actions (each such foregoing action or failure to act in
clauses (i) through (iv) being referred to as a <B><I>&#147;Change in Company Board Recommendation&#148;</I></B>).&nbsp;Notwithstanding the foregoing, the board of directors of the Company may, at any time prior to obtaining the Company Stockholder
Approval, take any of the actions set forth in Section 5.3(d)(i)-(ii) below, provided that prior to taking any such action, the Company complies with Section 5.3(e) of this Agreement: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) effect a Change in Company Board Recommendation in response to an Acquisition Proposal if the board of directors of the Company concludes
in good faith: (A) after consultation with outside counsel, that the failure to take such action would be inconsistent with its fiduciary duties to the Company&#146;s stockholders under Applicable Law; and (B) after consultation with the
Company&#146;s outside counsel, that the Acquisition Proposal constitutes a Superior Proposal; and </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) effect a Change in Company Board
Recommendation in response to an Intervening Event if the board of directors of the Company concludes in good faith, after consultation with outside counsel, that the failure to take such action would be inconsistent with its fiduciary duties to the
Company&#146;s stockholders under Applicable Law. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Notwithstanding anything to the contrary set forth in Section 5.3(d), the board of
directors of the Company shall not be entitled to make a Change in Company Board Recommendation as contemplated by Section 5.3(d)(i) or Section 5.3(d)(ii) unless: (i) the Company shall have first provided prior written notice to Parent that it
intends to take any of the foregoing actions (a <B><I>&#147;</I></B><B><I>Company Notice</I></B><B><I>&#148;</I></B>), which Company Notice shall, if the basis for the proposed action by the board of directors of the Company is not related to a
Superior Proposal, contain a description of the events, facts and circumstances giving rise to such proposed action or, if the basis for the proposed action by the board of directors of the Company is a Superior Proposal, contain a description of
the material terms and conditions of such Superior Proposal, including a copy of the definitive acquisition agreement in the form to be entered into (it being understood and agreed that the delivery of such Company Notice shall not, in and of
itself, be deemed to be a Change in Company Board Recommendation); and (ii) Parent does not make, within three (3) business days after the receipt of such Company Notice, a proposal that would, in the good faith judgment of the board of directors of
the Company (after consultation with outside counsel), cause such events, facts and circumstances to no longer form the basis for the board of directors of the Company to effect a Change in Company Board Recommendation or cause the Acquisition
Proposal previously constituting a Superior Proposal to no longer constitute a Superior Proposal, as the case may be, provided that (x) any material change in such events, facts and circumstances or any amendment to any material term of such
Superior Proposal or (y) with respect to any previous Change in Company Board Recommendation, any material change in the principal </P>
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stated rationale by the Company board of directors for such previous Change in Company Board Recommendation, shall, in the case of either (x) or (y), require a new Company Notice and a new three
(3) business day period. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Nothing contained in this Section 5.3 or elsewhere in this Agreement shall prohibit the Company or the
board of directors of the Company from: (i) taking and disclosing to the Company&#146;s stockholders a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act; or (ii) making any
disclosure to the Company&#146;s stockholders if, in the good faith judgment of the board of directors of the Company, after consultation with outside counsel, the failure to make such disclosure would be inconsistent with the Company&#146;s board
of directors&#146; fiduciary duties to the Company&#146;s stockholders under Applicable Law; <U>provided</U>, <U>however</U>, that this Section 5.3(f) shall not affect the obligations of the Company and the board of directors of the Company and the
rights of Parent under Section 5.3(d) and Section 5.3(e) to the extent applicable to such disclosure (it being understood that neither any &#147;stop, look and listen&#148; letter or similar communication of the type contemplated by Rule 14d-9(f)
under the Exchange Act, nor any accurate disclosure of factual information (other than the Company or the board of directors of the Company taking any action set forth in Section 5.3(d) and Section 5.3(e) of this Agreement) to the Company&#146;s
stockholders that is required to be made to such stockholders under Applicable Law or in satisfaction of the Company&#146;s board of directors&#146; fiduciary duties under Applicable Law, shall be deemed to be a Change in Company Board
Recommendation). </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_71"></A>5.4</B> <B>No Solicitation by Parent</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Subject to Section 5.4(b) and Section 5.4(d), during the Interim Period, Parent shall not, nor shall it authorize or permit any of the
Parent Subsidiaries or any of its or their respective Representatives to, directly or indirectly, except as otherwise provided below: (i)&nbsp;solicit, initiate or knowingly encourage or knowingly facilitate (including by way of furnishing any
non-public information relating to Parent or any Parent Subsidiary), or knowingly induce or knowingly take any other action which would reasonably be expected to lead to the making, submission or announcement of, any proposal or inquiry that
constitutes, or is reasonably likely to lead to, an Acquisition Proposal; (ii) other than informing Persons of the provisions contained in this Section 5.4, enter into, continue or participate in any discussions or any negotiations regarding any
Acquisition Proposal or otherwise take any action to knowingly facilitate or knowingly induce any effort or attempt to make or implement an Acquisition Proposal (including any Acquisition Proposal received prior to the date of this Agreement); (iii)
approve, endorse or recommend an Acquisition Proposal or any letter of intent, memorandum of understanding or Contract contemplating an Acquisition Proposal or requiring Parent to abandon or terminate its obligations under this Agreement, or enter
into any of the foregoing; or (iv) agree, resolve or commit to do any of the foregoing.&nbsp;Parent shall, and shall cause the Parent Subsidiaries and its and their respective Representatives to, immediately cease and cause to be terminated all
discussions or negotiations with any Person previously conducted with respect to any Acquisition Proposal.&nbsp;Parent shall promptly deny to any third party access to any data room (virtual or actual) containing any confidential information
previously furnished to any such third party relating to any Acquisition Proposal. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Notwithstanding anything in this Section 5.4 to
the contrary, at any time prior to obtaining the Parent Stockholder Approval, in response to an unsolicited written Acquisition Proposal that the board of directors of Parent determines in good faith (after consultation with its outside legal
counsel) constitutes or would reasonably be expected to result in a Superior Proposal (and that did not result from a violation of Section 5.4(a)), Parent may, upon a good faith determination by the board of directors of Parent (after receiving the
advice of its outside counsel) that failure to take such action would be inconsistent with the Parent&#146;s board of directors&#146; fiduciary duties to Parent&#146;s stockholders under Applicable Law: (x) furnish information with respect to Parent
to the Person making such Acquisition Proposal (and such Person&#146;s Representatives), provided that Parent and such Person first enter into a confidentiality agreement with confidentiality provisions that are not less restrictive to such Person
than the provisions of the Confidentiality Agreement are to the Company and that would not prohibit compliance by Parent with the provisions of this Section 5.4, and provided further that all </P>
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such information shall have been previously provided to the Company or is concurrently provided to the Company at the same time that it is provided to such Person; and (y) participate in
discussions or negotiations with the Person making such Acquisition Proposal (and such Person&#146;s Representatives) regarding such Acquisition Proposal. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Parent shall promptly, but in no event later than forty-eight (48) hours, notify the Company in writing if any proposal, offer or inquiry
is received by, or any discussions or negotiations are sought to be initiated or continued with, Parent in respect of any Acquisition Proposal.&nbsp;Such notice shall advise the Company in writing of Parent&#146;s intention to participate or engage
in discussions or negotiations with, or furnish non-public information to, such Person and shall, in any such notice to the Company, indicate the identity of the Person making such proposal, offer, inquiry or other contact and the material terms and
conditions of any proposals or offers (and shall include with such notice copies of any written materials received from or on behalf of such Person relating to such proposal, offer, inquiry or other request), and thereafter shall promptly keep the
Company informed of all material developments affecting the status and the material terms of any such proposal, offer, inquiry or other request and of the status of any such discussions or negotiations relating thereto (including providing the
Company with any additional written materials received relating to such proposal, offer, inquiry or other request). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The board of
directors of Parent shall not: (i) fail to make the Parent Board Recommendation to Parent&#146;s stockholders in accordance with Section 5.7(b); (ii) withhold, withdraw, amend, qualify or modify in a manner adverse to the Company, or publicly
propose to withhold, withdraw, amend, qualify or modify in a manner adverse to the Company, the Parent Board Recommendation; (iii) adopt, approve, recommend, endorse or otherwise declare advisable the adoption of any Acquisition Proposal; or (iv)
resolve, agree or publicly propose to take any such actions (each such foregoing action or failure to act in clauses (i) through (iv) being referred to as a <B><I>&#147;Change in Parent Board Recommendation&#148;</I></B>).&nbsp;Notwithstanding the
foregoing, the board of directors of Parent may, at any time prior to obtaining the Parent Stockholder Approval, take any of the actions set forth in Section 5.4(d)(i)-(ii) below, provided that prior to taking any such action, Parent complies with
Section 5.4(e) of this Agreement: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(i) effect a Change in Parent Board Recommendation in response to an Acquisition Proposal if the board
of directors of Parent concludes in good faith: (A) after consultation with outside counsel, that the failure to take such action would be inconsistent with its fiduciary duties to Parent&#146;s stockholders under Applicable Law; and (B) after
consultation with Parent&#146;s financial advisor and outside counsel, that the Acquisition Proposal constitutes a Superior Proposal; and </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:17%; font-size:10pt; font-family:Times New Roman">(ii) effect a Change in Parent Board Recommendation in response to an Intervening Event if the board of directors of Parent concludes in good
faith, after consultation with outside counsel, that the failure to take such action would be inconsistent with its fiduciary duties to Parent&#146;s stockholders under Applicable Law. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Notwithstanding anything to the contrary set forth in Section 5.4(d), the board of directors of Parent shall not be entitled to make a
Change in Parent Board Recommendation as contemplated by Section 5.4(d)(i) or Section 5.4(d)(ii) unless: (i) Parent shall have first provided prior written notice to the Company that it intends to take any of the foregoing actions (a
<B><I>&#147;Parent Notice&#148;</I></B>), which Parent Notice shall, if the basis for the proposed action by the board of directors of Parent is not related to a Superior Proposal, contain a description of the events, facts and circumstances giving
rise to such proposed action or, if the basis for the proposed action by the board of directors of Parent is a Superior Proposal, contain a description of the material terms and conditions of such Superior Proposal, including a copy of the
definitive acquisition agreement in the form to be entered into (it being understood and agreed that the delivery of such Parent Notice shall not, in and of itself, be deemed to be a Change in Parent Board Recommendation); and (ii) the Company does
not make, within three (3) business days after the receipt of such Parent Notice, a proposal that would, in the good faith judgment of the board of directors of Parent (after consultation with outside counsel), cause such events, facts and
circumstances to no longer form the basis for the board of directors of Parent to effect a Change in Parent Board Recommendation or cause the </P>
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Acquisition Proposal previously constituting a Superior Proposal to no longer constitute a Superior Proposal, as the case may be, provided that (x) any material change in such events, facts and
circumstances or any amendment to any material term of such Superior Proposal or (y) with respect to any previous Change in Parent Board Recommendation, any material change in the principal stated rationale by the Parent board of directors for such
previous Change in Parent Board Recommendation, shall, in the case of either (x) or (y), require a new Parent Notice and a new three (3) business day period. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Nothing contained in this Section 5.4 or elsewhere in this Agreement shall prohibit Parent or the board of directors of Parent from: (i)
taking and disclosing to Parent&#146;s stockholders a position contemplated by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act; or (ii) making any disclosure to Parent&#146;s stockholders if, in the
good faith judgment of the board of directors of Parent, after consultation with outside counsel, the failure to make such disclosure would be inconsistent with the Parent&#146;s board of directors&#146; fiduciary duties to Parent&#146;s
stockholders under Applicable Law; <U>provided</U>, <U>however</U>, that this Section 5.4(f) shall not affect the obligations of Parent and the board of directors of Parent and the rights of the Company under Section 5.4(d) and Section 5.4(e) to the
extent applicable to such disclosure (it being understood that neither any &#147;stop, look and listen&#148; letter or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act, nor any accurate disclosure of factual
information (other than Parent or the board of directors of Parent taking any action set forth in Section 5.4(d) and Section&nbsp;5.4(e) of this Agreement) to Parent&#146;s stockholders that is required to be made to such stockholders under
Applicable Law or in satisfaction of the Parent&#146;s board of directors&#146; fiduciary duties under Applicable Law, shall be deemed to be a Change in Parent Board Recommendation). </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_72"></A>5.5</B> <B>Access to Information</B><B>.</B><B>&nbsp;</B>During the Interim Period, each of
Parent and the Company shall, and shall cause its respective Representatives to, upon reasonable notice and request: (i)&nbsp;furnish to each other and each other&#146;s Representatives reasonable access during normal business hours to its offices,
properties, personnel, books and records; and (ii) furnish to each other and each other&#146;s Representatives such financial and operating data and other information as may be reasonably requested, including reports to the Company and its
designated Representatives regarding the use of Parent&#146;s cash funds prior to the Closing Date.&nbsp;Any investigation pursuant to this Section 5.5 shall be conducted in a manner so as not to interfere unreasonably with the conduct of the
business of Parent or the Parent Subsidiaries or the Company.&nbsp;In addition, nothing contained in this Section 5.5 shall require Parent or the Parent Subsidiaries or the Company to take any action that would, in the good faith judgment of Parent
or the Company, as applicable, constitute a waiver of the attorney-client or similar privilege or trade secret protection held by Parent or the Parent Subsidiaries or the Company, as applicable, or violate confidentiality obligations owing to third
parties; <U>provided</U>, <U>however</U>, that each of Parent and the Company shall make a good faith effort to accommodate any reasonable request from the other for access or information pursuant to this Section 5.5 in a manner that does not result
in such a waiver or violation.&nbsp;All information furnished pursuant to this Section 5.5 shall be subject to that certain Mutual Confidential Disclosure Agreement, dated as of June 8, 2016, with Parent and the other signatory thereto (the
<B><I>&#147;Investor&#148;</I></B><I>)</I>, which is also applicable to and binding upon Company pursuant to the Letter of Intent between Parent, Company and the Investor named therein, dated July 27, 2016 (the <B><I>&#147;Confidentiality
Agreement&#148;</I></B>). </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_73"></A>5.6</B> <B>Parent Proxy Statement; Related Matters</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Following the date hereof, as soon as reasonably practicable, Parent shall prepare and file with the SEC the Proxy Statement (which Proxy
Statement shall comply with the rules and regulations promulgated by the SEC).&nbsp;In connection with the foregoing, each party shall promptly notify the other of the receipt of all comments of the SEC with respect to the Proxy Statement and of any
request by the SEC for any amendment or supplement thereto or for additional information and shall promptly provide to the other party copies of all correspondence between such party and/or any of its Representatives and the SEC with respect to the
Proxy Statement.&nbsp;The Company and its Representatives will be given a reasonable opportunity to be involved in the drafting of the Proxy Statement and any amendment or supplement thereto and any such correspondence prior to
</P>
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its filing with the SEC.&nbsp;Parent and the Company shall each use its reasonable best efforts to promptly provide responses to the SEC with respect to all comments received on the Proxy
Statement from the SEC.&nbsp;Each of Parent and the Company shall promptly furnish to each other all information, and take all such other actions (including using its reasonable best efforts to obtain any required consents of their respective
independent auditors), as may reasonably be requested in connection with any action by any of them in connection with the preceding sentences of this Section 5.6(a).&nbsp;Whenever any party hereto learns of the occurrence of any event or the
existence of any fact which is required to be set forth in an amendment or supplement to the Proxy Statement pursuant to Applicable Law, such party shall promptly inform the other of such event or fact and comply with all of its obligations pursuant
to this Section 5.6(a) relating to effecting such amendment or supplement to the Proxy Statement. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_74">
</A>5.7</B> <B>Parent Special Meeting; Parent Board Recommendation</B>.</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Following the date hereof, Parent will take all action
necessary in accordance with the DGCL and its certificate of incorporation and bylaws to duly call, give notice of, convene and hold as promptly as practicable a special meeting of Parent&#146;s stockholders (the <B><I>&#147;Parent Special
Meeting&#148;</I></B>) to seek the Parent Stockholder Approval, including mailing the Proxy Statement to its stockholders as promptly as reasonably practicable following clearance of the Proxy Statement by the SEC.&nbsp;Parent&#146;s obligation to
call, convene and hold the Parent Special Meeting shall not be affected by a Change in Parent Board Recommendation, unless the Agreement is terminated pursuant to ARTICLE VIII.&nbsp;Parent, subject to Section 5.4, will use its reasonable best
efforts to solicit from its stockholders proxies in favor of the approval of the issuance of shares of Parent Common Stock pursuant to this Agreement, and will take all other action reasonably necessary or advisable to obtain the Parent Stockholder
Approval.&nbsp;Notwithstanding anything to the contrary contained in this Agreement, Parent may adjourn or postpone the Parent Special Meeting to the extent necessary to ensure that any necessary supplement or amendment to the Proxy Statement (as
determined by Parent in good faith and upon the advice of outside counsel) is provided to Parent&#146;s stockholders a reasonable time in advance of the Parent Special Meeting (or at any adjournment or postponement thereof), or if as of the time for
which the Parent Special Meeting (or any adjournment or postponement thereof) is scheduled there are insufficient shares of Parent Common Stock represented in person or by proxy to constitute a quorum necessary to conduct the business of the Parent
Special Meeting or to adopt this Agreement and approve the transactions contemplated hereby, including the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) To the extent
reasonably necessary to comply with applicable listing criteria of the Exchange or otherwise to permit the issuance of the Merger Consideration hereunder (either alone or in conjunction with the Parent Charter Amendment to increase the authorized
shares of Parent Common Stock), Parent will submit to the holders of Parent Common Stock at the Parent Special Meeting a proposal to approve a reverse stock split of Parent Common Stock whereby each share of Parent Common Stock issued and
outstanding immediately prior to the filing of such amendment to the certificate of incorporation of Parent shall be converted into and become a number of fully paid and nonassessable shares of Parent Common Stock, with such at a reverse stock split
ratio in the range mutually agreed to by the Company and Parent (the <B><I>&#147;Reverse Stock Split&#148;</I></B>). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Except as
permitted by Section 5.4: (i) the board of directors of Parent shall recommend that Parent&#146;s stockholders vote in favor of (A) the Parent Charter Amendment, (B) the Reverse Stock Split, as applicable, and (C) the issuance of shares of Parent
Common Stock pursuant to this Agreement at the Parent Special Meeting (or any adjournment or postponement thereof) (the <B><I>&#147;Parent Board Recommendation&#148;</I></B>); and (ii) the Proxy Statement shall include the Parent Board
Recommendation. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_75"></A>5.8</B> <B>Company Special Meeting; Company Board
Recommendation</B>.</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Following the date hereof, the Company will take all action necessary in accordance with the ICL and its articles
of association to duly call, give notice of, convene and hold as promptly as practicable a special meeting of the Company&#146;s stockholders (the <B><I>&#147;</I></B><B><I>Company </I></B><B><I>Special Meeting</I></B><B><I>&#148;</I></B>) to seek
the Company Stockholder Approval, including mailing any applicable materials to its stockholders as promptly as reasonably </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-45 </P>


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practicable. Alternatively, in accordance with the ICL and its articles of association, the Company may seek the Company Stockholder Approval by written consent (the
<B><I>&#147;</I></B><B><I>Written Consent</I></B><B><I>&#148;</I></B>).&nbsp;The Company&#146;s obligation to call, convene and hold the Company Special Meeting shall not be affected by a Change in Company Board Recommendation, unless the Agreement
is terminated pursuant to ARTICLE VIII.&nbsp;The Company, subject to Section 5.3, will use its reasonable best efforts to solicit from its stockholders proxies or Written Consent in favor of the adoption of this Agreement and the approval of the
transactions contemplated hereby, including the Merger, and will take all other action necessary or advisable to obtain the Company Stockholder Approval.&nbsp;Notwithstanding anything to the contrary contained in this Agreement, the Company may
adjourn or postpone the Company Special Meeting to the extent necessary to ensure that any necessary supplement or amendment to the information provided to the Company&#146;s stockholders (as determined by the Company in good faith and upon the
advice of outside counsel) is provided to the Company&#146;s stockholders a reasonable time in advance of the Company Special Meeting (or at any adjournment or postponement thereof), or if as of the time for which the Company Special Meeting (or any
adjournment or postponement thereof) is scheduled there are insufficient shares of Company Stock represented in person or by proxy to constitute a quorum necessary to conduct the business of the Company Special Meeting or to adopt this Agreement and
approve the transactions contemplated hereby, including the Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Except as permitted by Section 5.3: (i) the board of directors
of the Company shall recommend that the Company&#146;s stockholders vote in favor of (A) the adoption of this Agreement and (B) the approval of the transactions contemplated by this Agreement, including the Merger, at the Parent Special Meeting (or
any adjournment or postponement thereof) or by Written Consent (the <B><I>&#147;Company Board Recommendation&#148;</I></B>); and (ii) the Proxy Statement shall include the Company Board Recommendation. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_76"></A>5.9</B> <B>Reasonable Best Efforts</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Each of Parent and Merger Sub, on the one hand, and the Company, on the other hand, shall as promptly as practicable following the date of
this Agreement use its reasonable best efforts to obtain and maintain in connection with the transactions contemplated by this Agreement, including the Merger, all approvals, consents, registrations, permits, authorizations and other confirmations
of all Government Authorities, which, if not obtained, would result in a Parent Material Adverse Effect or Company Material Adverse Effect, as applicable or would result in the failure to satisfy the conditions set forth in Articles VI and VII. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Each of Parent, Merger Sub and the Company shall: (i)&nbsp;cooperate and coordinate with the other in the making of any filings or
submissions that are required to be made under any Applicable Laws or requested to be made by any Government Authority in connection with the transactions contemplated by this Agreement, including the Merger; (ii)&nbsp;supply the other or its
Representatives with any material information that may be required or requested by any Government Authority in connection with such filings or submissions; and (iii)&nbsp;use their reasonable best efforts to offer to take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby, including the Merger, including by taking all such actions and doing all such things necessary to
resolve such objections, if any, as any Government Authority or Person may assert under any Applicable Laws and to avoid or eliminate each and every impediment under any Applicable Law that may be asserted by any Government Authority so as to enable
the transactions contemplated hereby, including the Merger, to be consummated as soon as expeditiously possible. In furtherance of the foregoing, the Company shall as promptly as practicable following the date of this Agreement take all actions and
provide all requisite documents and notifications relating to this Agreement and the transactions contemplated hereby, including the Merger, as is required to obtain approval for the consummation of the transactions contemplated by this Agreement,
including the Merger, from the Office of the Chief Scientist at the Israeli Ministry of Economy. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Each of the Parent, Merger Sub and
the Company shall use reasonable best efforts to structure the Merger to qualify as a reorganization under the provisions of Section 368 of the Code.&nbsp;Both prior to and after the Effective Time, each party&#146;s books and records shall be
maintained, and all federal, state and local income </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-46 </P>


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tax returns and schedules thereto shall be filed, in a manner consistent with the Merger being qualified as a reverse triangular merger under Section 368(a)(2)(E) of the Code (and comparable
provisions of any applicable state or local laws), except to the extent the Merger is determined in a final administrative or judicial decision not to qualify as a reorganization within the meaning of Section 368(a) of the Code. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Parent shall use reasonable best efforts to initiate and process the liquidation or transfer the assets of, pay or satisfy all
obligations and other liabilities of, and dissolve, Stem Cells Sciences Holdings Limited and Stem Cell Sciences (UK) Limited, it being understood that the completion of the liquidation of such entities will not be complete prior to the Closing as a
result of waiting periods required under Applicable Law and accordingly will not be a condition to the Closing. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_77">
</A>5.10</B> <B>Public Announcements</B><B>.</B>&nbsp;Before issuing any press release or otherwise making any public statement with respect to any of the transactions contemplated hereby, including the Merger, Parent, Merger Sub and the Company
agree to consult with each other as to its form and substance, and agree not to issue any such press release or general communication to employees or make any public statement prior to obtaining the prior written consent of the other (which consent
shall not be unreasonably withheld, delayed or conditioned), except to the extent that Parent, Merger Sub or the Company, as the case may be, is advised by outside counsel that such public statement is required by Applicable Law.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_78"></A>5.11</B> <B>Notification of Certain Matters</B><B>.</B>&nbsp;The Company shall give prompt
notice to Parent of: (i) the occurrence or nonoccurrence of any event which would be likely to cause the failure of either of the conditions set forth in Section 7.2(a) or Section 7.2(b) to be met as of any time during the Interim Period;
(ii)&nbsp;the Company&#146;s receipt of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement, including the
Merger (unless such consent has been previously identified on Schedule 3.3 of the Company Disclosure Schedule); or (iii) the existence of any facts or circumstances that would reasonably be expected to result in a Company Material Adverse
Effect.&nbsp;Parent shall give prompt notice to the Company of: (x) the occurrence or nonoccurrence of any event which would be likely to cause the failure of either of the conditions set forth in Section 7.1(a) or Section 7.1(b) to be met as of any
time during the Interim Period; (y)&nbsp;Parent&#146;s or any Parent Subsidiary&#146;s receipt of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement, including the Merger (unless such consent has been previously identified on Schedule 4.3 of the Parent Disclosure Schedule); or (z) the existence of any facts or circumstances that would reasonably be
expected to result in a Parent Material Adverse Effect.&nbsp;The delivery of any notice pursuant to this Section&nbsp;5.11 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice nor be deemed to have
amended any of the disclosures set forth in the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable, to have qualified the representations and warranties contained herein or to have cured any misrepresentation or breach of a
representation or warranty that otherwise might have existed hereunder by reason of such material development.&nbsp;No disclosure after the date of this Agreement of the untruth of any representation and warranty made in this Agreement will operate
as a cure of any breach of the failure to disclose the information, or&nbsp;of any untrue representation or warranty made herein. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_79"></A>5.12</B> <B>Indemnification of Parent Directors and Officers</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) From and after the Effective Time, Parent shall continue to indemnify and hold harmless each present and former director or officer of
Parent or any Parent Subsidiary (each, together with such Person&#146;s heirs, executors or administrators, a <B><I>&#147;Parent Indemnified Person&#148;</I></B>) against any Damages incurred in connection with any Action arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time or any Action instituted by any Parent Indemnified Person to enforce this Section 5.12 or any other indemnification or advancement right of such Parent Indemnified Person,
whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Parent is currently permitted to indemnify such Parent Indemnified Person under Applicable Law and under its certificate of incorporation and bylaws as
in effect on the date of this Agreement (including the advancing of expenses to the fullest extent permitted under Applicable Law). </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-47 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Parent shall not enter into any Contract relating to the indemnification of the officers or
directors of Parent or any Parent Subsidiary, or of any other Person, during the Interim Period without the prior written consent of the Company, which may be withheld in its reasonable discretion, it being understood that any such agreements will
not expand the rights of Parent&#146;s officers or directors or impose new obligations, costs or expenses on the Surviving Corporation or on Parent post-Closing beyond what is provided for or contemplated in this Section 5.12. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) Prior to the Effective Time, Parent shall purchase, and for a period of six (6) years following the Effective Time Parent shall continue
in effect, a directors&#146; and officers&#146; liability &#147;tail&#148; insurance policy or policies covering the Parent Indemnified Persons for events occurring at or prior to the Effective Time, which insurance shall be of at least the same
coverage and amounts and contain terms and conditions which are no less advantageous to the Parent Indemnified Persons than the coverage, amounts, terms and conditions of the directors&#146; and officers&#146; liability insurance policy maintained
by Parent as of the date of this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The rights of each Parent Indemnified Person hereunder shall be in addition to, and not
in limitation of, any other rights such Parent Indemnified Person may have under the certificate of incorporation and bylaws of Parent or any other similar organizational documents of Parent or any of its Subsidiaries, any other indemnification
agreement or arrangement, the DGCL or otherwise.&nbsp;This Section 5.12 shall survive the consummation of the Merger, and is intended to be for the benefit of, and shall be enforceable by, the Parent Indemnified Persons, their heirs and personal
representatives, shall be binding on Parent, the Surviving Corporation and their successors and assigns and may not be amended, altered or repealed after the Effective Time without the prior written consent of the affected Parent Indemnified
Persons.&nbsp;In the event that Parent, the Surviving Corporation or any of their successors or assigns: (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation
or merger; or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each case, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation (as the case may be)
are obligated to honor the indemnification obligations set forth in this Section 5.12.&nbsp;Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors&#146; and officers&#146; insurance
claims under any policy that is or has been in existence with respect to Parent or any of the Parent Subsidiaries or their respective officers, directors and employees, it being understood and agreed that the indemnification provided for in this
Section 5.12 is not prior to, or in substitution for, any such claims under any such policies. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_80">
</A>5.13 [Intentionally Omitted.]</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_81"></A>5.14 Composition of Parent Board,
Management.</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Parent shall take all actions necessary to ensure that, effective as of immediately following the Effective Time,
Parent&#146;s existing Board of directors shall resign and the replacement board of directors shall consist of the members designated by the Company in writing within five (5) business days of the date of this Agreement, each to hold office from and
after the Effective Time until the earliest of the appointment of his respective successor, his resignation or his proper removal. To the extent required by Applicable Law, Parent shall file and distribute a Schedule 14F prior to the Closing Date to
permit such members to so hold office from the Effective Time. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Parent shall take all actions necessary to ensure that, effective as
of immediately following the Effective Time, Parent&#146;s remaining employees and officers shall resign and the replacement executive officers of Parent shall consist of the members designated by the Company in writing within five (5) business days
of the date of this Agreement, each to hold office from and after the Effective Time until the earliest of the appointment of his respective successor, his resignation or his proper removal. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_82"></A>5.15</B> <B>Parent Consent as Sole Stockholder of Merger Sub</B><B>.</B>&nbsp;Parent shall
deliver to the Company within two (2) business days of the date of this Agreement evidence of its approval, as the sole stockholder of Merger Sub, of the adoption of this Agreement and of the transactions contemplated hereby, including the Merger.
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-48 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_83"></A>5.16 Exchange Listing.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Parent shall promptly, and in any event within five (5) business days after the filing of the preliminary Proxy Statement, contact the
Exchange to determine the requirements for the shares of Parent Common Stock to be listed on the Exchange at and after the Effective Time.&nbsp;Parent shall use its reasonable best efforts to (a) cause the shares of Parent Common Stock to be
approved, at or prior to the Effective Time, for listing (subject only to notice of issuance) on the Exchange at and after the Effective Time, including paying any required fees and submitting any listing application and listing agreement, if any,
required by the Exchange at least 60 days prior to the Effective Time, and (b) change the trading symbol of Parent to a symbol chosen by the Company, effective at, or as soon as practicable after, the Effective Time. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Parent shall use its best efforts to do all things necessary or advisable to continue the listing of Parent Common Stock on the Exchange,
and shall promptly provide the Company with true, correct and complete copies of any and all correspondences with and to the Exchange. Any responses by Parent with respect to any communication by the Exchange shall be provided to the Exchange only
after providing the Company with reasonable opportunity to provide advice and input in respect of such response. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_84">
</A>5.17</B> <B>Takeover Statutes</B><B>.</B> <I></I>At all times prior to the Effective Time, each of Parent and the Company shall: (i)&nbsp;take all reasonable action necessary to ensure that no Takeover Statute is or becomes applicable to this
Agreement or the transactions contemplated hereby, including the Merger; and (ii)&nbsp;if any Takeover Statute becomes applicable to this Agreement or the transactions contemplated hereby, including the Merger, take all reasonable action necessary
to ensure that the transactions contemplated by this Agreement, including the Merger, may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such Takeover Statute on this
Agreement or the transactions contemplated hereby, including the Merger. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_85"></A>5.18</B>
<B>Further Assurances</B><B>.</B>&nbsp;At and after the Effective Time, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_86"></A>5.19</B> <B>Stockholder Litigation</B><B>.</B>&nbsp;Parent shall give the Company the
opportunity to participate in, and if the Company so elects, Parent and the Company shall reasonably cooperate with respect to, the defense or settlement of any stockholder litigation against Parent and/or its directors or executive officers
relating to the Merger, this Agreement or any transaction contemplated by this Agreement, whether commenced prior to or after the execution and delivery of this Agreement, and Parent shall not settle or offer to settle any such litigation without
the prior written consent of the Company, which consent will not be unreasonably withheld, conditioned or delayed. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_87">
</A>5.20</B> <B>No Control.</B>&nbsp;Nothing contained in this Agreement will give Parent, directly or indirectly, the right to control or direct the Company&#146;s operations prior to the Effective Time.&nbsp;Prior to the Effective Time, the
Company will exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.&nbsp;Nothing contained in this Agreement will give the Company, directly or indirectly, the right to control or
direct Parent&#146;s or any Parent Subsidiary&#146;s operations prior to the Effective Time.&nbsp;Prior to the Effective Time, Parent will exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over
its and the Parent Subsidiaries&#146; respective operations. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_88"></A>5.21</B> <B>Parent Charter
Amendment</B><B>.</B>&nbsp;Immediately prior to the Effective Time, and subject to obtaining the Parent Stockholder Approval, Parent shall file with the Secretary of State of the State of Delaware the Parent Charter Amendment. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-49 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_89"></A>5.22 Net Cash Position.</B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) Parent shall prepare and deliver (such date of delivery, the <B><I>&#147;Cash Determination Date&#148;</I></B>) to the Company ten (10)
business days prior to the anticipated Closing (the <B><I>&#147;Anticipated Closing Date&#148;</I></B>), a schedule (the &#147;<B><I>Net Cash Schedule</I></B>&#148;) setting forth, in reasonable detail, the Net Cash of Parent as of the Cash
Determination Date and Parent&#146;s good faith estimate of Net Cash to be held by Parent as of the Closing, together with the work papers and back-up materials used in preparing such Net Cash Schedule. After delivery of the Net Cash Schedule by
Parent, the Company shall have an opportunity to review the Net Cash Schedule and Parent shall provide the Company and its Representatives with access to the books and records, books of account, accountant&#146;s work papers, and personnel and
accountants of Parent and shall cause the employees, accountants and other Representatives of Parent to cooperate with the Company and its Representatives at reasonable times and upon reasonable notice in connection with their review of such
documents and information. Neither delivery of the Net Cash Schedule nor any review thereof (or failure to review) by the Company or its Representatives shall be deemed to be a waiver of the conditions set forth in Section 7.1(d). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Within five (5) business days after Parent delivers the Net Cash Schedule (a <B><I>&#147;Response Date&#148;</I></B>), the Company will
have the right to dispute any part of the Net Cash Schedule by delivering a written notice to Parent setting forth in reasonable detail any item in the Net Cash Schedule that the Company believes is not correct (a <B><I>&#147;Dispute
Notice&#148;</I></B>). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) If on or prior to the Response Date, (i) the Company notifies Parent in writing that it has no objections to
the Net Cash Schedule, or (ii) the Company fails to deliver a Dispute Notice as provided in Section 5.22(b), then the Net Cash Schedule will be deemed to have been finally determined for purposes of this Agreement and to represent the Net Cash at
the Cash Determination Date for purposes of this Agreement, and Parent will not be required to determine the Net Cash again provided that the Closing Date occurs no later than ten (10) business days after the Cash Determination Date unless
additional liabilities have accrued between the Cash Determination Date and the Closing Date, in which case Parent will be required to determine the Net Cash again prior to the Closing Date taking into account such additional liabilities and submit
a new Net Cash Schedule pursuant to Section 5.22(a). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) If the Company delivers a Dispute Notice on or prior to the Response Date, then
Representatives of Parent and the Company will promptly meet and attempt in good faith to resolve the disputed item(s) and negotiate an agreed-upon determination of the Net Cash, which agreed upon amount will be deemed to have been finally
determined for purposes of this Agreement and to represent the Net Cash at the Cash Determination Date for purposes of this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) If Representatives of Parent and the Company are unable to negotiate an agreed-upon determination of the Net Cash at the Cash
Determination Date pursuant to Section 5.22(d) within three (3) business days after delivery of the Dispute Notice (or such other period as Parent and Company may mutually agree upon), then the Company may pursue any available remedy under this
Agreement, including (without limiting Parent&#146;s rights and remedies under this Agreement) asserting that the closing condition set forth in Section 7.1(d) has not been satisfied or asserting that it may terminate this Agreement pursuant to
Section 8.1(g). </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_90"></A>5.23</B> <B>Treatment of Parent Warrants</B>.<B>&nbsp;</B>Promptly
following the date of this Agreement, Parent will use reasonable best efforts to enter into agreements or other Contracts by no later than August 18, 2016 with certain of the institutional holders holding Parent&#146;s outstanding and unexercised
warrants providing for the surrender or amendment of such warrants, together with such other terms and conditions as may be agreed upon between Parent and the Company (the &#147;Warrant Amendment&#148;). </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_91"></A>5.24</B> <B>Validity of Private Placement for Merger Shares</B><B>.</B>&nbsp;In connection
with the solicitation of the Company Stockholder Approval, the Company shall deliver to any individual or entity listed on Schedule 5.29 and each holder of Company Stock or any securities convertible into, exchangeable for, or representing the right
to subscribe for, purchase, or otherwise receive any shares of Company Stock or any other equity security of the Company, a standard form of accredited investor questionnaire.&nbsp;In reliance on such accredited investor questionnaires, Parent and
the Company shall take such action as reasonably necessary </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-50 </P>


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to ensure that the issuance of shares of Parent Common Stock in the Merger shall validly qualify for an exemption from the registration and prospectus delivery requirements of the Securities Act
and the equivalent state &#147;blue-sky&#148; laws. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_92"></A>5.25 [Intentionally Omitted].</B>
</P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_93"></A>5.26</B> <B>Company Private Placement</B><B>.</B>&nbsp;The Company shall conduct one or
more private capital raises prior to the Closing, to effect the Company Private Placement. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_94"></A>5.27</B> <B>Employee Waiver and Release</B><B>.</B>&nbsp;Parent shall use its reasonable best
efforts to obtain duly executed and delivered waiver and release agreements, in form and substance reasonable acceptable to the Company, with the employees of Parent and of Parent Subsidiaries, all of whom are listed on Schedule 5.27 of the Parent
Disclosure Schedule. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_95"></A>5.28</B> <B>Unaudited Financial Statements</B>.&nbsp;The Company
shall revise and update its Unaudited Financial Statements within 14 (fourteen) days of the date of this Agreement, so the Unaudited Financial Statements are prepared in accordance with GAAP. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_96"></A>5.29</B> <B>Additional Equity Obligations.</B>&nbsp;At Closing, Parent shall issue to the
consultants listed on Schedule 5.29 of the Parent Disclosure Schedule the number of shares of Parent Common Stock (or other securities as agreed to in writing by such consultant and the parties hereto) set forth opposite such consultant&#146;s name
representing, in the aggregate, 20% of Parent&#146;s post-Closing capitalization on the Closing Date (on a fully diluted basis calculated on the same basis as Parent Fully Diluted Stock). </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_97"></A>5.30</B> <B>Parent IP</B>.&nbsp;Subject to Section 4.17(q), it is acknowledged and agreed by
the parties hereto that nothing in this Agreement requires or obligates Parent, the Surviving Corporation or any surviving Parent Subsidiary, to preserve intact, maintain in good standing or existence, or maintain the registration of, any Parent IP
at any time. </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_98"></A>ARTICLE VI </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">The respective obligations of each party to this Agreement to effect the Merger shall be subject to the fulfillment on or before the Effective
Time of each of the following conditions, any one or more of which may be waived in writing by all the parties hereto: </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_99">
</A>6.1</B> <B>Parent Stockholder Approval</B><B>.</B>&nbsp;The Parent Stockholder Approval shall have been obtained at the Parent Special Meeting (or at any adjournment or postponement thereof). </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_100"></A>6.2</B> <B>Company Stockholder Approval</B><B>.</B>&nbsp;The Company Stockholder Approval
shall have been obtained at the Company Special Meeting (or at any adjournment or postponement thereof). </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_101">
</A>6.3</B> <B>Statute or Decree</B><B>.</B>&nbsp;No Applicable Law or Order shall have been enacted, entered, promulgated or enforced by any Government Authority, which remains in effect and&nbsp;which prohibits the consummation of the Merger or
otherwise makes the Merger illegal. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_102"></A>6.4</B> <B>Listing of
Shares</B><B>.</B><B>&nbsp;</B>The Parent Common Stock shall be listed on the Exchange and shall have been approved for listing (subject only to notice of issuance) on the Exchange under a symbol chosen by the Company, effective at the Effective
Time. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_103"></A>6.5</B> <B>Exchange Act Registration</B>.&nbsp;Parent shall be registered under
Section 12(b) of the Exchange Act. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_104"></A>6.6</B> <B>OCS Approval</B>.&nbsp;The Company shall
have obtained the approval of the transactions contemplated by this Agreement, including the Merger, of the Office of Chief Scientist at the Israeli Ministry of Economy. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-51 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_105"></A>ARTICLE VII </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PARTIES </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_106"></A>7.1</B> <B>Additional Conditions to the Obligations of the Company</B><B>.</B>&nbsp;The
obligations of the Company to effect the Merger shall be subject to the fulfillment of each of the following additional conditions, any one or more of which may be waived in writing by the Company: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) (i) The representations and warranties of Parent and Merger Sub set forth in ARTICLE IV (other than those representations and warranties
specifically set forth in clause&nbsp;&#147;(ii)&#148; below) shall be true and correct at and as of the date of this Agreement and as of the Effective Time as if made at and as of the Effective Time (or, in the case of those representations and
warranties that are made as of a particular date or period, as of such date or period), except where the failure of such representations and warranties to be true and correct (disregarding all qualifications or limitations as to
&#147;materially&#148;, &#147;Parent Material Adverse Effect&#148; and words of similar import set forth therein) has not had, individually or in the aggregate, a Parent Material Adverse Effect; and (ii) the representations and warranties of Parent
and Merger Sub set forth in Section 4.5 shall be true and correct in all respects, except for de minimis inaccuracies, as of the date of this Agreement and as of the Effective Time as if made at and as of the Effective Time; and (iii) the
representations and warranties of Parent and Merger Sub set forth in Section 4.1, Section 4.2, clause &#147;(i)&#148; of Section 4.11, Section 4.23 and Section 4.24 shall be true and correct in all respects as of the date of this Agreement and as of
the Effective Time as if made at and as of the Effective Time. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) Parent and Merger Sub shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement to be performed or complied with by them on or prior to the Closing Date, disregarding the agreements and obligations set forth in Section 5.23. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) There shall not have occurred and be continuing any Parent Material Adverse Effect between the date of this Agreement and the Closing
Date. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The Net Cash of Parent at the Closing shall not be less than zero. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) Parent shall have furnished to the Company a certificate executed by its principal executive officer to evidence compliance with the
conditions set forth in Section 7.1(a), Section 7.1(b), Section 7.1(c) and Section 7.1(d) of this Agreement. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_107">
</A>7.2</B> <B>Additional Conditions to the Obligations of Parent and Merger Sub</B><B>.</B>&nbsp;The obligations of Parent and Merger Sub to effect the Merger shall be subject to the fulfillment of each of the following additional conditions, any
one or more of which may be waived in writing by Parent: </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) (i) The representations and warranties of the Company set forth in
ARTICLE&nbsp;III (other than those representations and warranties specifically set forth in clause &#147;(ii)&#148; below) shall be true and correct at and as of the date of this Agreement and as of the Effective Time as if made at and as of the
Effective Time (or, in the case of those representations and warranties that are made as of a particular date or period, as of such date or period), except where the failure of such representations and warranties to be true and correct (disregarding
all qualifications or limitations as to &#147;materially&#148;, &#147;Company Material Adverse Effect&#148; and words of similar import set forth therein) has not had, individually or in the aggregate, a Company Material Adverse Effect; (ii) the
representations and warranties set forth in Section 3.5 shall be true and correct in all respects, except for de minimis inaccuracies, as of the date of this Agreement and as of the Effective Time as if made at and as of the Effective Time; and
(iii) the representations and warranties set forth in Section 3.1, Section 3.2, clause &#147;(i)&#148; of Section 3.10, Section&nbsp;3.22 and Section 3.23 shall be true and correct in all respects as of the date of this Agreement and as of the
Effective Time as if made at and as of the Effective Time. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) The Company shall have performed and complied in all material respects
with all agreements and obligations required by this Agreement to be performed or complied with by it on or prior to the Closing Date. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-52 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) There shall not have occurred and be continuing any Company Material Adverse Effect between
the date of this Agreement and the Closing Date. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) The Company Private Placement shall have been consummated. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) The Company shall have furnished to Parent a certificate executed by its principal executive officer to evidence compliance with the
conditions set forth in Section 7.2(a), Section 7.2(b) and Section 7.2(c) of this Agreement. </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_108"></A>ARTICLE
VIII </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>TERMINATION </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_109"></A>8.1</B> <B>Termination</B><B>.</B>&nbsp;This Agreement may be terminated at any time prior
to the Effective Time, whether before or after the Parent Stockholder Approval or Company Stockholder Approval is obtained (except as otherwise set forth below): </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) by mutual written consent of Parent and the Company; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) by either Parent or the Company if the Merger shall not have been consummated by November 15, 2016 (the <B><I>&#147;Outside
Date&#148;</I></B>); <U>provided</U> <U>however</U>, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party hereto whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure to act constitutes a material breach of this Agreement; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) by Parent or the Company if any Applicable Law irrevocably prohibits or makes the Merger illegal, or if an Order has been entered by a
Government Authority of competent jurisdiction permanently restraining, enjoining or otherwise prohibiting the Merger and such Order has become final and non-appealable, provided in each case that the party seeking to terminate this Agreement
pursuant to this Section 8.1(c) has performed its obligations under Section 5.9 to resist, resolve or remove such Applicable Law or Order; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) by Parent or the Company if the Parent Special Meeting shall have been held and completed (including any adjournments or postponements
thereof), Parent&#146;s stockholders shall have taken a final vote on a proposal to approve (i) the Parent Charter Amendment, (ii) the Reverse Stock Split, if applicable, and (iii) the issuance of shares of Parent Common Stock pursuant to this
Agreement, and the Parent Stockholder Approval shall not have been obtained; <U>provided</U>, <U>however</U>, that a party shall not be permitted to terminate this Agreement pursuant to this Section 8.1(d) if the failure to obtain the Parent
Stockholder Approval is attributable to a failure on the part of such party seeking to terminate this Agreement to perform any material obligation required to be performed by such party at or prior to the Effective Time pursuant to this Agreement;
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) by Parent or the Company if the Company Special Meeting shall have been held and completed (including any adjournments or
postponements thereof), the Company&#146;s stockholders shall have taken a final vote on a proposal to adopt this Agreement and approve the transactions contemplated hereby, including the Merger, and the Company Stockholder Approval shall not have
been obtained; <U>provided</U>, <U>however</U>, that a party shall not be permitted to terminate this Agreement pursuant to this Section 8.1(e) if the failure to obtain the Company Stockholder Approval is attributable to a failure on the part of
such party seeking to terminate this Agreement to perform any material obligation required to be performed by such party at or prior to the Effective Time pursuant to this Agreement; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) by Parent, upon a breach of any representation, warranty, covenant or obligation on the part of the Company set forth in this Agreement,
or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Section 7.2(a) or Section 7.2(b) would not be satisfied </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-53 </P>


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as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that such breach by the Company or inaccuracy in the Company&#146;s
representations and warranties cannot be cured by the Company or, if capable of being cured, shall not have been cured by the Company, in each case within thirty (30) days following receipt by the Company of written notice of such breach or
inaccuracy from Parent (it being understood that Parent may not terminate this Agreement pursuant to this Section 8.1(f) if it shall have materially breached this Agreement and remains in breach of this Agreement as of the date of such proposed
termination); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) by the Company, upon a breach of any representation, warranty, covenant or obligation on the part of Parent or Merger
Sub set forth in this Agreement, or if any representation or warranty of Parent or Merger Sub shall have become untrue, in either case such that the conditions set forth in Section 7.1(a) or Section 7.1(b) would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have become untrue, provided that such breach by Parent or Merger Sub or inaccuracy in Parent&#146;s or Merger Sub&#146;s representations and warranties cannot be cured by Parent or
Merger Sub or, if capable of being cured, shall not have been cured by Parent or Merger Sub, in each case within thirty (30) days following receipt by Parent of written notice of such breach or inaccuracy from the Company (it being understood that
the Company may not terminate this Agreement pursuant to this Section&nbsp;8.1(e) if it shall have materially breached this Agreement and remains in breach of this Agreement as of the date of such proposed termination); </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) by the Company if, prior to obtaining the Parent Stockholder Approval, the board of directors of Parent has (i) effected any Change in
Parent Board Recommendation; (ii) failed to publicly reaffirm the Parent Board Recommendation within two (2) business days of the Company&#146;s request; or (iii) failed to recommend against, or taken a neutral position with respect to, a tender or
exchange offer related to an Acquisition Proposal in any position taken pursuant to Rules 14d-9 and 14e-2 under the Exchange Act; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) by
the Company if Parent, after receiving an Acquisition Proposal, shall have materially violated or breached any of its obligations under Section 5.4(b) with respect to such Acquisition Proposal; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) by the Company prior to August 19, 2016 if holders of at least eighty percent&nbsp;(80%) of the outstanding Series B Warrants issued on
March 14, 2016 have not agreed to the Warrant Amendment by August 18, 2016 (it being understood that the Company may not terminate this Agreement pursuant to this Section&nbsp;8.1(j) if it shall have materially breached this Agreement and remains in
breach of this Agreement as of the date of such proposed termination); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(k) by Parent if, prior to obtaining the Company Stockholder
Approval, the board of directors of the Company has (i) effected any Change in Company Board Recommendation; (ii) failed to publicly reaffirm the Company Board Recommendation within two (2) business days of Parent&#146;s request; or (iii) failed to
recommend against, or taken a neutral position with respect to, a tender or exchange offer related to an Acquisition Proposal in any position taken pursuant to Rules 14d-9 and 14e-2 under the Exchange Act; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(l) by Parent if the Company, after receiving an Acquisition Proposal, shall have materially violated or breached any of its obligations
under Section 5.3(b) with respect to such Acquisition Proposal; or </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(m) automatically without action of either of the parties hereto if
Investor has not funded the initial $2.0 million pursuant to the Debt Commitment within one (1) business day of the date of this Agreement. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_110"></A>8.2</B> <B>Notice of Termination; Effect of Termination</B><B>.</B>&nbsp;A party desiring to
terminate this Agreement pursuant to Section 8.1 (other than Section 8.1(a)) shall give written notice of such termination to the other party in accordance with Section 9.4, specifying the provision or provisions hereof pursuant to which such
termination is being effected.&nbsp;In the event of the valid termination of this Agreement as provided in Section 8.1, except as set forth in this Section&nbsp;8.2 or in Section 8.3, each of which shall survive the termination of this Agreement,
this Agreement shall forthwith become void and have no effect, without any liability on the </P>
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part of any party hereto other than liability for any breach of this Agreement occurring prior to such termination.&nbsp;No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_111"></A>8.3</B> <B>Fees and Expenses</B>.</P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) All fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including the Merger, shall be
paid by the party incurring such expenses whether or not the Merger is consummated. </P> <P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B><A NAME="annatoc250555_112"></A>ARTICLE IX </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>MISCELLANEOUS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_113"></A>9.1</B> <B>Non-Survival of Representations, Warranties, Covenants and
Agreements</B><B>.</B>&nbsp;None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations,
warranties, covenants and agreements, will survive the Effective Time, except for (a) those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Effective Time, and (b) this ARTICLE
IX. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><A NAME="annatoc250555_114"></A><B>9.2</B> <B>Amendment and Modification</B><B>.</B>&nbsp;This Agreement may be
amended, modified or supplemented only by the written agreement of Parent, Merger Sub and the Company at any time prior to the Effective Time; <U>provided</U>, <U>however</U>, that after either the Parent Stockholder Approval or the Company
Stockholder Approval is obtained there shall be no amendment or waiver that, pursuant to Applicable Law, requires further Parent Stockholder Approval or Company Stockholder Approval, as applicable, without the receipt of such further Parent
Stockholder Approval or Company Stockholder Approval, as applicable. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><A NAME="annatoc250555_115"></A><B>9.3</B> <B>Waiver
of Compliance; Consents</B><B>.</B>&nbsp;Any failure of Parent or Merger Sub, on the one hand, or the Company, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by the Company (with respect to
any failure by Parent or Merger Sub) or by Parent or Merger Sub (with respect to any failure by the Company), respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party
hereto, such consent shall be deemed effective when given in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 9.3. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_116"></A>9.4</B> <B>Notices</B><B>.</B>&nbsp;All notices, requests, demands, claims and other
communications that are required to be or may be given under this Agreement must be in writing and shall be deemed to have been effectively given:&nbsp;(i) upon personal delivery to the recipient; (ii) by email; provided, that the email is confirmed
by the means described in clauses (i), (ii) or (iii)&nbsp;one (1) business day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt, in each case to the intended recipient
at the following addresses: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
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<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="46%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">if to Parent or Merger Sub, to:</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">StemCells, Inc.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">39899 Balentine Drive, Suite 200</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Newark, CA 94560</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">Attention:&nbsp;General
Counsel</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Email: Ken.Stratton@stemcellsinc.com</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-55 </P>


<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="46%"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">with a copy to:</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Ropes &amp; Gray LLP</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Prudential Tower</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">800 Boylston Street</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Boston, MA 02199</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Attention: Marko Zatylny</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Email&nbsp;: <U>Marko.Zatylny@ropesgray.com</U></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">if to the Company, to:</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Microbot Medical Ltd.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">5 Hamada St.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Yokneam 2069204, Israel</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Attention:&nbsp;Harel Gadot</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Email: <U>Harel@microbotmedical.com</U></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">with copies to:</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Ruskin Moscou Faltischek, P.C.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">1425 RXR Plaza</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">East Tower, 15<SUP STYLE="font-size:85%; vertical-align:top">th</SUP> Floor</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Uniondale, NY 11556</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Attention: Stephen E. Fox</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Email: sfox@rmfpc.com</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">and</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Mintz, Levin, Cohn, Ferris, Glovsky</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">and Popeo, P.C.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">One Financial Center</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Boston, MA 02111</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Attention:&nbsp;John R. Pomerance, Esq.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Email: <U>JPomerance@mintz.com</U></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">or to such other address as any party shall have furnished to the other by notice given in accordance with this
Section&nbsp;9.4. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_117"></A>9.5 Assignment; Third-Party Beneficiaries.</B>&nbsp;Neither this
Agreement nor any right, interest or obligation hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties hereto.&nbsp;This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.&nbsp;This Agreement is not intended to confer any rights or remedies upon any Person other than: (i) the parties hereto; and (ii) the Parent Indemnified Persons only after the Effective
Time and only with respect to Section 5.12. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_118"></A>9.6 Governing Law.</B>&nbsp;This Agreement
shall be governed by the laws of the State of Delaware, and, with respect to the Merger, the laws of the State of Israel, without reference to principles of conflicts of laws that would result in the application of the laws of any other
jurisdiction. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_119"></A>9.7 Specific Enforcement; Consent to Jurisdiction.</B>&nbsp;The parties
hereto agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties hereto do not perform their obligations pursuant to this Agreement in accordance with its
specified terms or otherwise breach such terms.&nbsp;Accordingly, the parties acknowledge and agree that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity.&nbsp;Each of the parties agrees that it will not oppose the granting of an injunction, specific
performance and other equitable relief as provided herein on the basis that: (i) any party has an adequate remedy at law; or (ii) an award of specific performance is not an appropriate remedy for any reason at law or in equity.&nbsp;In addition,
each of the parties hereto: (x)&nbsp;consents to submit itself to the personal jurisdiction of any federal court located in the State of Delaware or any state court located in the State of Delaware in the event that any dispute arises out of this
Agreement or the transactions contemplated hereby, including the Merger; (y) agrees that it will not attempt to deny or defeat </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-56 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman">
such personal jurisdiction by motion or other request for leave from any such court; and (z)&nbsp;agrees that it will not bring any action relating to this Agreement or the transactions
contemplated hereby, including the Merger, in any court other than a federal court located in the State of Delaware or a state court located in the State of Delaware. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_120"></A>9.8 Exclusive Remedy.</B>&nbsp;The sole and exclusive remedy of each party hereto in the
event of a breach of any representation or warranty set forth in this Agreement by another party hereto shall be: (i)&nbsp;termination of this Agreement in accordance with ARTICLE VIII; or (ii) the remedies set forth in Section 9.7. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><A NAME="annatoc250555_121"></A><B>9.9 Counterparts.</B>&nbsp;This Agreement may be executed in any number of counterparts and
by facsimile signatures, any one of which need not contain the signatures of more than one party and each of which shall be an original, but all such counterparts taken together shall constitute one and the same instrument.&nbsp;The exchange of
copies of this Agreement or amendments thereto and of signature pages by facsimile transmission or by e-mail transmission in portable digital format (or similar format) shall constitute effective execution and delivery of such instrument(s) as to
the parties and may be used in lieu of the original Agreement or amendment for all purposes.&nbsp;Signatures of the parties transmitted by facsimile or by e-mail transmission in portable digital format (or similar format) shall be deemed to be their
original signatures for all purposes. </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_122"></A>9.10 Severability.</B>&nbsp;Any term or provision
of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction.&nbsp;If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties hereto agree that the
court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified.&nbsp;In the event such court does not exercise the power granted to it in the prior sentence, the parties
hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or
provision. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_123"></A>9.11 Interpretation. </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(a) For purposes of this Agreement, whenever the context requires, the singular number will include the plural, and vice versa, the masculine
gender will include the feminine and neuter genders, the feminine gender will include the masculine and neuter genders, and the neuter gender will include masculine and feminine genders. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(b) When calculating the time period before which, within which or following which any act is to be done or step taken pursuant to this
Agreement, the date that is referenced in calculating such period will be excluded (for example, if an action is to be taken within two&nbsp;(2) days of a triggering event and such event occurs on a Tuesday, then the action must be taken by
Thursday).&nbsp;If the last day of such period is a non-business day, the period in question will end on the next succeeding business day. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(c) As used in this Agreement, the words &#147;include&#148; and &#147;including&#148; and variations thereof, will not be deemed to be terms
of limitation, but rather will be deemed to be followed by the words &#147;without limitation&#148;. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(d) Except as otherwise expressly
indicated, all references in this Agreement to a &#147;Section&#148;, &#147;Article&#148;, &#147;Preamble&#148;, &#147;Recitals&#148; or &#147;Exhibit&#148; are intended to refer to a Section, Article, the Preamble, the Recitals or an Exhibit of
this Agreement, and all references to a &#147;Schedule&#148; are intended to refer to a Schedule of the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-57 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(e) As used in this Agreement, the terms &#147;hereof&#148;, &#147;hereunder&#148;,
&#147;herein&#148; and words of similar import will refer to this Agreement as a whole and not to any particular provision, Section, Exhibit or Schedule of this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(f) Each party hereto has participated in the drafting of this Agreement, which each party hereto acknowledges is the result of extensive
negotiations among the parties hereto.&nbsp;Consequently, this Agreement will be interpreted without reference to any rule or precept of Applicable Law that states that any ambiguity in a document be construed against the drafter. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(g) Any reference in this Agreement to &#147;$&#148; or &#147;dollars&#148; will mean U.S.&nbsp;dollars. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(h) All references to any section of any law include any amendment of, and/or successor to, that section. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) The table of contents and Article and Section headings contained in this Agreement are for reference purposes only and do not limit or
otherwise affect any of the substance of this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(j) All terms defined in this Agreement shall have such defined meanings when
used in the Parent Disclosure Schedule or Company Disclosure Schedule or any certificate or other document made or delivered pursuant hereto or thereto unless otherwise defined therein. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_124"></A>9.12</B> <B>Entire Agreement</B><B>.</B>&nbsp;This Agreement and the Confidentiality
Agreement, including the exhibits hereto and the documents and instruments referred to herein (including the Parent Disclosure Schedule and the Company Disclosure Schedule), embody the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein.&nbsp;There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein and therein. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:4%; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><A NAME="annatoc250555_125"></A>9.13</B> <B>WAIVER OF JURY TRIAL</B><B>.</B>&nbsp;EACH OF PARENT, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE
MERGER. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-58 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their
respective duly authorized officers as of the date first written above. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


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<TD WIDTH="49%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>STEMCELLS, INC.</B></TD></TR></TABLE></DIV> <DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="12%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="87%"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">Ian J. Massey</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Name:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Ian J. Massey, Ph.D.</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Title:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">President and Chief Executive Officer</TD></TR></TABLE></DIV> <DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt">


<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="49%"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>C&amp;RD ISRAEL LTD.</B></TD></TR></TABLE></DIV> <DIV ALIGN="right">
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<TD WIDTH="12%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="87%"></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>

<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">Asaf Elkoni</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Name:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Asaf Elkoni</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Title:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Director</TD></TR></TABLE></DIV> <DIV ALIGN="right">
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<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>MICROBOT MEDICAL LTD.</B></TD></TR></TABLE></DIV> <DIV ALIGN="right">
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<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">Harel Gadot</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Name:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Harel Gadot</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Title:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">President and Chief Executive Officer</TD></TR>
</TABLE></DIV> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION] </P>

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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>EXHIBIT A </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CERTAIN DEFINITIONS </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Acquisition Proposal&#148;</I></B> shall mean any offer, proposal or indication of interest (other than an offer, proposal or
indication of interest by a party to this Agreement) contemplating or otherwise relating to any transaction or series of related transactions involving any: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) merger, consolidation, share exchange, business combination, issuance of securities, direct or indirect acquisition of securities,
recapitalization, tender offer, exchange offer or other similar transaction in which: (i) a Person or &#147;group&#148; (as defined in the Exchange Act and the rules promulgated thereunder) of Persons directly or indirectly acquires beneficial or
record ownership of securities representing more than 15% of the outstanding shares of any class of voting securities of the Subject Company; or (ii) the Subject Company issues securities representing more than 15% of the outstanding shares of any
class of voting securities of the Subject Company; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) sale, lease, exchange, transfer, acquisition or disposition of any assets that
constitute or account for: (i) 15% or more of the consolidated net revenues of the Subject Company, consolidated net income of the Subject Company or consolidated book value of the Subject Company; or (ii) 15% or more of the fair market value of the
assets of the Subject Company; or </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(c) liquidation or dissolution of the Subject Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Action&#148;</I></B> shall have the meaning set forth in Section 3.12(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Affiliate&#148;</I></B> shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled
by, or under common control with such Person. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Agreement&#148;</I></B> shall have the meaning set forth in the Preamble to
this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Applicable Law&#148;</I></B> shall mean, with respect to any Person, any transnational, domestic or foreign
federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, Order or other similar requirement enacted, adopted, promulgated or applied by a Government Authority that is binding
upon or applicable to such Person, as the same may be amended from time to time unless expressly specified otherwise herein. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Audited Financial Statements&#148;</I></B> shall have the meaning set forth in Section 3.7. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Unaudited Financial Statements&#148;</I></B> shall have the meaning set forth in Section 3.7. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Certificate&#148;</I></B> shall have the meaning set forth in Section 2.1(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Certificate of Merger&#148;</I></B> shall have the meaning set forth in Section 1.2. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Change in Company Board Recommendation&#148;</I></B> shall have the meaning set forth in Section 5.3(d). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Change in Parent Board Recommendation&#148;</I></B> shall have the meaning set forth in Section 5.4(d). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Closing&#148;</I></B> shall have the meaning set forth in Section 1.2. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Closing Date&#148;</I></B> shall have the meaning set forth in Section 1.2. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Code&#148;</I></B> shall have the meaning set forth in the Recitals to this Agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-1 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Companies Registrar&#148; </I></B>shall have the meaning set forth in Section 1.2.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company&#148;</I></B> shall have the meaning set forth in the Preamble to this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Balance Sheet&#148;</I></B> shall have the meaning set forth in Section 3.7. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Board Recommendation&#148;</I></B> shall have the meaning set forth in Section 5.8(b). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Common Stock&#148;</I></B> shall mean the ordinary shares, par or nominal value NIS 0.01 per share, of the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Contract&#148;</I></B> shall have the meaning set forth in Section 3.14(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Disclosure Schedule&#148;</I></B> shall have the meaning set forth in ARTICLE III. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Employee Benefit Plans&#148;</I></B> shall have the meaning set forth in Section 3.18(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Equity Plan&#148;</I></B> shall have the meaning set forth in Section 2.4(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Financial Statements&#148;</I></B> shall have the meaning set forth in Section 3.7. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Fully Diluted Stock&#148;</I></B> shall mean, as of any specific time, the total number of shares of Company Common Stock
outstanding, together with (i) all shares of Company Common Stock issuable upon the conversion of any shares of Company Preferred Stock then outstanding or Company Preferred Stock issuable under any note, warrant or other Contract; and (ii) all
shares of Company Common Stock that the Company may be required to issue or deliver pursuant to any (A)&nbsp;outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of Company Common
Stock; or (B)&nbsp;outstanding security or Contract that is or may become convertible into or exchangeable&nbsp;for any shares of Company Common Stock, in each case of clause &#147;(A)&#148; and &#147;(B)&#148; regardless of the conversion or
exercise price, whether vested or unvested and any other terms and conditions thereof. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company IP&#148;</I></B> shall mean
all Intellectual Property Rights and Intellectual Property owned (solely or jointly) by or exclusively licensed to the Company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company IP Contract&#148;</I></B> shall mean any Contract to which the Company is a party or by which the Company is bound, that
contains any assignment or license of, covenant not to assert or enforce or granting of any other rights in, any Intellectual Property Right, including but not limited to any Company IP or other Intellectual Property developed by, with, or for the
Company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Material Adverse Effect&#148;</I></B> shall mean any change, circumstance, condition, development, effect,
event, occurrence, result or state of facts that, individually or when taken together with any other such change, circumstance, condition, development, effect, event, occurrence, result or state of facts, has or would reasonably be expected to (a)
have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of the Company, except that none of the following shall be taken into account in determining whether there has been a Company Material
Adverse Effect: (i) changes in general economic or political conditions or the securities market in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) to the extent they do not
disproportionately affect the Company; (ii) changes in or affecting the industries in which the Company operates to the extent they do not disproportionately affect the Company in any material respect; (iii) changes, effects or circumstances
resulting from the announcement or pendency of this Agreement or the consummation of the transactions contemplated hereby or compliance with the terms of this Agreement; (iv) any specific action taken at the written request of the Parent or Merger
Sub or expressly required by this Agreement; and (v) continued losses from operations or decreases in cash balances of the Company; or (b) prevent the ability of Company to consummate the transactions contemplated hereby.. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-2 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Notice&#148;</I></B> shall have the meaning set forth in Section 5.3(e). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Permits&#148;</I></B> shall have the meaning set forth in Section 3.19(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Preferred Stock&#148; </I></B>shall mean the Series A Preferred Stock of the Company, par or nominal value NIS 0.001 per
share and any other class or series of preferred stock of the Company issued after the date of this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company
Private Placement&#148;</I></B> shall have the meaning set forth in Section 5.27. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Regulatory Agency&#148;</I></B>
shall have the meaning set forth in Section 3.19(a). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Regulatory Filings&#148;</I></B> shall have the meaning set
forth in Section 3.19(a). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Securities&#148;</I></B> shall have the meaning set forth in Section 3.5(c). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Special Meeting&#148;</I></B> shall have the meaning set forth in Section 5.8(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Stock&#148;</I></B> shall mean the Company Common Stock and the Company Preferred Stock. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Stock Option&#148;</I></B> shall mean an option to purchase shares of Company Common Stock granted under the Company
Equity Plan or otherwise to employees of the Company for compensation purposes. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Stockholder Approval&#148;</I></B>
shall have the meaning set forth in Section 3.2. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Voting Agreement&#148;</I></B> shall have the meaning set forth in
the Recitals to this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Company Warrant&#148;</I></B> shall mean a warrant to purchase shares of Company Stock. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Confidentiality Agreement&#148;</I></B> shall have the meaning set forth in Section 5.5. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Contract&#148;</I></B> shall mean, with respect to any Person, any agreement, instrument, contract, obligation, commitment or
arrangement, in each case, in writing, to which such Person is a party, other than any Company Employee Benefit Plan or any Parent Employee Benefit Plan. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Damages&#148;</I></B> shall mean any loss, damage, injury, liability, claim, demand, settlement, judgment, award, fine, penalty,
Tax, fee (including reasonable attorneys&#146; fees), charge, cost (including costs of investigation) or expense of any nature. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Companies Registrar&#148;</I></B> shall have the meaning set forth in Section 1.2. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;DGCL&#148;</I></B> shall mean the General Corporation Law of the State of Delaware. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Effective Time&#148;</I></B> shall have the meaning set forth in Section 1.2. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Environmental Law&#148; </I></B>shall mean any Applicable Law, rule or regulation promulgated by any Government Authority relating
to: (i) the control of any potential Hazardous Materials or protection of the air, water or land; (ii) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation of Hazardous Materials; (iii) human health and
safety with respect to exposures to and management of Hazardous Materials; or (iv)&nbsp;the environment. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;ERISA&#148;</I></B>
shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations issued thereunder. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-3 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Exchange&#148;</I></B> shall mean the NASDAQ Capital Market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Exchange Act&#148; </I></B>shall mean the Securities Exchange Act of 1934, as amended. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Exchange Agent&#148;</I></B> shall have the meaning set forth in Section 2.2(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Exchange Fund&#148;</I></B> shall have the meaning set forth in Section 2.2(b). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Exchange Ratio&#148;</I></B> shall mean that number of shares of Parent Common Stock equal to the quotient obtained by dividing
(i) the product obtained by multiplying (A) 3 (three) times (B) the Parent Fully Diluted Stock, as determined immediately prior to the Effective Time (but after effecting the Reverse Stock Split, if applicable, and including the shares of Parent
Common Stock issued pursuant to Section 5.29); by (ii) the Company Fully Diluted Stock, as determined immediately prior to the Effective Time. For purposes of clarity, (a) absent the issuance of the Parent Common Stock pursuant to Section 5.29,
holders of Parent Common Stock prior to the Closing will hold, on a fully diluted basis, five percent (5%) of Parent after giving effect to the Merger and issuing the Merger Consideration and (b) assuming the issuance of the Parent Common Stock
pursuant to Section 5.29, holders of Company Securities prior to the Closing will hold, on a fully diluted basis, seventy five percent (75%) of Parent after giving effect to the Merger and issuing the Merger Consideration. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;FCPA&#148;</I></B> shall have the meaning set forth in Section 3.19(e). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;FDA&#148;</I></B> shall mean the United States Food and Drug Administration. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;FDCA&#148;</I></B> shall mean the Federal Food, Drug and Cosmetic Act of 1938, as amended. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Federal Health Care Program&#148; </I></B>shall mean Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the
Social Security Act) or any other state or federal health care program. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;GAAP&#148;</I></B> shall have the meaning set forth
in Section 3.7. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Government Authority&#148;</I></B> shall mean any transnational, domestic or foreign federal, state or local
governmental, regulatory or administrative authority, department, court, agency, commission or official, including any political subdivision thereof, or any non-governmental self-regulatory agency, commission or authority (including the Exchange).
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Hazardous Materials&#148;</I></B> shall mean and include any substance that has been designated by any Government Authority
or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated
pursuant thereto, in all cases excluding office and janitorial supplies (insofar as they are stored or used in the ordinary course of business). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Hazardous Materials Activities&#148;</I></B> shall have the meaning set forth in Section 3.20(b). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;HIPAA&#148;</I></B> shall have the meaning set forth in Section 3.19(n). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Intellectual Property&#148;</I></B> shall mean and include all algorithms, biological materials, cell lines, clinical data,
chemical compositions or structures, databases and data collections, diagrams, formulae, inventions (whether or not patentable), know-how, logos, marks, methods, processes, proprietary information, protocols, schematics, specifications, software,
techniques, URLs, web sites, works of authorship, and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing such as instruction manuals, laboratory notebooks, prototypes,
samples, studies, and summaries). </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-4 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Intellectual Property Rights&#148;</I></B> shall mean and include all rights of the
following types, which may exist or be created under the laws of any jurisdiction in the world: (i)&nbsp;rights associated with works of authorship, including exclusive exploitation rights, copyrights and moral rights; (ii) trademark and trade name
rights and similar rights; (iii) trade secret rights; (iv) Patents rights; (v) other proprietary rights in Intellectual Property of every kind and nature; and (vi) all registrations, renewals, extensions, combinations, divisions, or reissues of, and
applications for, any of the rights referred to in the foregoing clauses (i) through (v). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Interim Period&#148;</I></B> shall
have the meaning set forth in Section 5.1. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Intervening Event&#148;</I></B> shall mean, with respect to Person, a material
event or circumstance that arises or occurs after the date of this Agreement and was not, prior to the date of this Agreement, known or reasonably foreseeable by the board of directors of such Person, provided that in no event shall the receipt,
existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof constitute an Intervening Event. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Investor&#148;</I></B> shall have the meaning set forth in Section 5.5. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;IRS&#148;</I></B> shall have the meaning set forth in Section 3.18(h). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Key Company Stockholder&#148;</I></B> shall mean each of MEDX Ventures Group LLC, Moshe Shoham, Leon Lewkowicz and Life Science
Accelerator Ltd. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Key Parent Stockholder&#148;</I></B> shall mean each of Eric Bjerkholt, R. Scott Greer, Ricardo B. Levy,
Gregory Schiffman, John J. Schwartz, Kenneth B. Stratton, Alan Trounson and Irving L. Weissman. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">An individual shall be deemed to have
<B><I>&#147;knowledge&#148;</I></B> of a particular fact, circumstance or matter if such individual is aware of such fact, circumstance or matter after reasonable inquiry. A Person (other than an individual) shall be deemed to have
&#147;knowledge&#148; of a particular fact, circumstance or other matter if any individual who is serving, at the time the same is to be determined, as a director or officer of such Person has knowledge of such fact, circumstance or other matter.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Merger&#148;</I></B> shall have the meaning set forth in the Recitals to this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Merger Consideration&#148; </I></B>shall have the meaning set forth in Section 2.1(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Merger Sub&#148;</I></B> shall have the meaning set forth in the Preamble to this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Net Cash&#148;</I></B> means, as of any particular time, on a consolidated basis, (x) Parent&#146;s and Parent Subsidiaries&#146;
cash and cash equivalents, short-term investments, and restricted cash, plus (y) accounts receivable as specifically contemplated by the line item &#147;other receivables&#148; in Parent&#146;s unaudited balance sheet for the fiscal period ended
June 30, 2016 and filed with the SEC, but only to the extent of cash collections thereon through the Closing Date, minus (z) the aggregate of the following obligations and liabilities of Parent and Parent Subsidiaries, to the extent such obligations
and liabilities are probable and can be reasonably estimated (including those cash-settled liabilities and obligations that would be reflected on a balance sheet prepared in accordance with GAAP), calculated without duplication: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) All current liabilities (other than non-cash current liabilities) and long term liabilities (other than non-cash long term liabilities),
including but not limited to any litigation costs, accounts payable and severance payments; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) All indebtedness for borrowed money or
in respect of capitalized leases or the purchase of assets (including all principal, accrued interest thereon (and if such indebtedness is not prepayable, all remaining interest to be paid or accrued through maturity thereof), and any other amounts
payable to the holders of such indebtedness as a result of or in connection with, the consummation of the Contemplated Transactions); </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-5 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iii) Any and all contractual cash obligations, including but not limited to operating lease
payments, capital lease equipment and loan payables. Notwithstanding the foregoing, the calculation of the obligations and liabilities in calculating Net Cash herein shall exclude any obligations or liabilities of Parent to the Investor or any of
its affiliates or assignees; provided that such amount shall not exceed $4.4 million; and </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iv) any litigation costs, expenses,
settlements and judgments (whether actual or projected). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Net Cash Schedule&#148;</I></B> shall have the meaning set forth in
Section 5.22. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Order&#148;</I></B> shall have the meaning set forth in Section 3.12(b). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Outside Date&#148;</I></B> shall have the meaning set forth in Section 8.1(b). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent&#148;</I></B> shall have the meaning set forth in the Preamble to this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Balance Sheet&#148;</I></B> shall have the meaning set forth in Section 4.8. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Board Recommendation&#148;</I></B> shall have the meaning set forth in Section 5.7(c). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Charter Amendment&#148;</I></B> shall have the meaning set forth in Section 4.4. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Common Stock&#148;</I></B> shall mean the common stock, par value $0.01 per share, of Parent. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Contract&#148;</I></B> shall have the meaning set forth in Section 4.15(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Disclosure Schedule&#148;</I></B> shall have the meaning set forth in ARTICLE IV. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Employee Benefit Plans&#148;</I></B> shall have the meaning set forth in Section 4.19(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent ERISA Affiliate&#148;</I></B> shall mean any person (as defined in Section 3(9) of ERISA) that is or has been a member of
any group of persons described in Section 414(b), (c), (m) or (o) of the Code, including Parent or any of the Parent Subsidiaries. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Financial Statements&#148;</I></B> shall have the meaning set forth in Section 4.8. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Fully Diluted Stock&#148;</I></B> shall mean, as of any specific time, the total number of shares of Parent Common Stock
outstanding, together with (i) all shares of Parent Common Stock issuable upon the conversion of any shares of Parent Preferred Stock then outstanding or Parent Preferred Stock issuable under any note, warrant or other Contract; and (ii) all shares
of Parent Common Stock that the Company may be required to issue or deliver pursuant to any (A)&nbsp;outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of Parent Common Stock; or
(B)&nbsp;outstanding security or Contract that is or may become convertible into or exchangeable for any shares of Parent Common Stock, in each case of clause &#147;(A)&#148; and &#147;(B)&#148; regardless of the conversion or exercise price,
whether vested or unvested and any other terms and conditions thereof. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Indemnified Person&#148;</I></B> shall have the
meaning set forth in Section 5.12(a). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent IP&#148;</I></B> shall mean all Intellectual Property Rights and Intellectual
Property owned (solely or jointly) by or exclusively licensed to Parent or any of the Parent Subsidiaries. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent IP
Contract&#148;</I></B> shall mean any Contract to which Parent or any of the Parent Subsidiaries is a party or by which Parent or any of the Parent Subsidiaries is bound, that contains any assignment or license of,
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-6 </P>


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covenant not to assert or enforce or granting of any other rights in, any Intellectual Property Right, including but not limited to any Parent IP or other Intellectual Property developed by,
with, or for Parent or any of the Parent Subsidiaries. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Material Adverse Effect&#148;</I></B> shall mean any change,
circumstance, condition, development, effect, event, occurrence, result or state of facts that, individually or when taken together with any other such change, circumstance, condition, development, effect, event, occurrence, result or state of
facts, has or would reasonably be expected to (a) have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of Parent and the Parent Subsidiaries, taken as a whole, except that none of the
following shall be taken into account in determining whether there has been a Parent Material Adverse Effect: (i) changes in general economic or political conditions or the securities market in general (whether as a result of acts of terrorism, war
(whether or not declared), armed conflicts or otherwise) to the extent they do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole; (ii) changes in or affecting the industries in which Parent operates to the extent
they do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, in any material respect; (iii) changes, effects or circumstances resulting from the announcement or pendency of this Agreement or the consummation of the
transactions contemplated hereby or compliance with the terms of this Agreement; (iv) any specific action taken at the written request of the Company or expressly required by this Agreement; (v) continued losses from operations or decreases in cash
balances of Parent or the Parent Subsidiaries or on a consolidated basis among Parent and the Parent Subsidiaries; and (vi) any further reductions, either voluntary or involuntary, in Parent&#146;s personnel; or (b) prevent or materially delay the
ability of Parent and Merger Sub to consummate the transactions contemplated hereby, in each case when viewed on a long-term or short-term basis. No change, circumstance, condition, development, effect, event, occurrence, result or state of facts
relating to Parent&#146;s Intellectual Property, equipment and leasehold improvements shall be taken into account in determining whether there has been a Parent Material Adverse Effect. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Notice&#148;</I></B> shall have the meaning set forth in Section 5.4(e). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Permits&#148;</I></B> shall have the meaning set forth in Section 4.20(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Preferred Stock&#148;</I></B> shall mean the undesignated or designated preferred stock, par value $0.01 per share, of
Parent. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Regulatory Agency&#148;</I></B> shall have the meaning set forth in Section 4.20(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Regulatory Filings&#148;</I></B> shall have the meanings set forth in Section 4.20(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent SEC Documents&#148;</I></B> shall have the meaning set forth in Section 4.7(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Securities&#148;</I></B> shall have the meaning set forth in Section 4.5(c). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Special Meeting&#148;</I></B> shall have the meaning set forth in Section 5.7(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Stock Option&#148;</I></B> shall mean an option to purchase shares of Parent Common Stock granted under any Parent Stock
Plan. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Stock Plans&#148;</I></B> shall have the meaning set forth in Section 4.5(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Stockholder Approval&#148;</I></B> shall have the meaning set forth in Section 4.2. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Subsidiaries&#148;</I></B> shall have the meaning set forth in Section 4.1(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Subsidiary Securities&#148;</I></B> shall have the meaning set forth in Section 4.12. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-7 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Parent Voting Agreement&#148;</I></B> shall have the meaning set forth in the
Recitals to this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Patents&#148;</I></B> shall mean patents and patent applications (including provisional,
continuation, divisional, continuation-in-part, reexamination, and reissue patent applications and any patents issuing therefrom) and utility models, industrial designs, and other government-issued rights protecting inventions and industrial
designs, however denominated, registered with any governmental entity and all applications for any of the foregoing. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Pension
Plans&#148;</I></B> shall have the meaning set forth in Section 4.19(a). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Permitted Liens&#148; </I></B>shall mean and
include: (i)&nbsp;Liens for current Taxes not yet due and payable or which are being contested in good faith; (ii)&nbsp;such imperfections of title, Liens and easements as do not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair business operations involving such properties; (iii) inchoate mechanics&#146; and materialmen&#146;s Liens for construction in progress; (iv) workmen&#146;s,
repairmen&#146;s, warehousemen&#146;s and carriers&#146; Liens arising in the ordinary course of business; (v)&nbsp;Liens securing debt reflected on the Company Balance Sheet or Parent Balance Sheet, as applicable; (vi) matters that would be
disclosed on current title reports or surveys that arise or have arisen in the ordinary course of business; (vii)&nbsp;Liens recorded pursuant to any Environmental Law; (xiii) licenses of Intellectual Property; or (ix)&nbsp;Liens or failures to have
good and valid title which have not had, or would not reasonably be expected to result in, a Company Material Adverse Effect or Parent Material Adverse Effect, as applicable. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Person&#148;</I></B> shall mean any individual, group, organization, corporation, partnership, joint venture, limited liability
company, trust or entity of any kind. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;PHSA&#148;</I></B> shall mean the Public Health Service Act of 1944, as amended. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Proxy Statement&#148;</I></B> shall have the meaning set forth in Section 3.21. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Registration Statement&#148;</I></B> shall have the meaning set forth in Section 5.26. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Registered IP&#148;</I></B> shall mean all Intellectual Property Rights that are registered, filed, or issued under the authority
of any Government Authority, including all patents, registered copyrights and registered trademarks and all applications for any of the foregoing. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Representatives&#148;</I></B> shall mean a Person&#146;s officers, directors, employees, agents, attorneys, accountants, advisors
and representatives. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Reverse Stock Split&#148;</I></B> shall have the meaning set forth in Section 5.7(b). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Sarbanes-Oxley Act&#148;</I></B> shall have the meaning set forth in Section 4.7(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;SEC&#148;</I></B> shall have the meaning set forth in Section 4.7(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Securities Act&#148; </I></B>shall mean the Securities Act of 1933, as amended. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Social Security Act&#148;</I></B> shall have the meaning set forth in Section 3.19(l). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Subject Company&#148;</I></B> shall mean a party to this Agreement who is the subject of an Acquisition Proposal. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Subsidiary&#148;</I></B>, when used with respect to any Person, shall mean any corporation or other organization, whether
incorporated or unincorporated, of which: (i) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar
</P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-8 </P>


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functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person (through ownership of securities, by contract or otherwise); or (ii)
such Person or any Subsidiary of such Person is a general partner of any general partnership or a manager of any limited liability company. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Superior Proposal&#148;</I></B> shall mean a bona fide written Acquisition Proposal (provided that, for purposes of this
definition, references to 15% in the definition of &#147;Acquisition Proposal&#148; shall be deemed to be references to 50%) which the board of directors of&nbsp;the Subject Company determines in good faith (after consultation with its financial
advisor): (i) to be reasonably likely to be consummated if accepted; and (ii) to be more favorable to the Subject Company&#146;s stockholders from a financial point of view than the Merger, in each case, taking into account at the time of
determination all relevant circumstances, including the various legal, financial and regulatory aspects of the proposal, all the terms and conditions of such proposal and this Agreement, any changes to the terms of this Agreement offered by the
other party in response to such Acquisition Proposal and the ability of the Person making such Acquisition Proposal to consummate the transactions contemplated by such Acquisition Proposal (based upon, among other things, expectation of obtaining
required approvals). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Surviving Corporation&#148;</I></B> shall have the meaning set forth in Section 1.1. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Takeover Statute&#148;</I></B> shall have the meaning set forth in Section 3.23. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Tax&#148;</I></B> or <B><I>&#147;Taxes&#148;</I></B> refers to any and all federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities relating to taxes, including taxes based upon or measured by gross receipts, income (gross or net), profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations imposed by law for the Taxes of another Person, including
under Treasury Regulations Section 1.1502-6 and analogous provisions of foreign, state and local law. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Tax
Return&#148;</I></B> or <B><I>&#147;Tax Returns&#148;</I></B> refers to all federal, state and local and foreign returns, schedules, estimates, information statements and reports filed or required to be filed by Parent, the Parent Subsidiaries, or
the Company, in each case, relating to Taxes. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Warrant Amendment&#148; </I></B>shall have the meaning set forth in Section
5.23. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;WARN Act&#148; </I></B>shall mean the U.S. Worker Adjustment and Retraining Notification Act and the rules and
regulations issued thereunder and any similar applicable state or local law and the rules and regulations issued thereunder. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Welfare Plans&#148;</I></B> shall have the meaning set forth in Section 4.19(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B><I>&#147;Written Consent&#148;</I></B> shall have the meaning set forth in Section 5.8(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>************** </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-A-9 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>EXHIBIT B-1 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>FORM OF PARENT STOCKHOLDER VOTING AGREEMENT </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VOTING AGREEMENT </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>THIS
VOTING AGREEMENT</B> (this <B>&#147;</B><B><I>Agreement</I></B>&#148;) dated August 15, 2016, is entered into among Microbot Medical Ltd., a company organized under the laws of the State of Israel (&#147;<B><I>Company</I></B>&#148;), and each of the
stockholders listed on Schedule I to this Agreement (each a &#147;<B><I>Stockholder</I></B>&#148; and collectively, the &#147;<B><I>Stockholders</I></B>&#148;). </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>W I T N E S S E T H: </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>WHEREAS, </B>StemCells, Inc., a Delaware corporation (&#147;<B><I>Parent</I></B>&#148;), [MERGER SUB], an Israeli corporation and
wholly-owned subsidiary of Parent (&#147;<B><I>Merger Sub</I></B>&#148;), and the Company have entered into an Agreement and Plan of Merger and Reorganization, dated as of August 15, 2016 (as it may be amended or supplemented from time to time, the
&#147;<B><I>Merger Agreement</I></B>&#148;), pursuant to which and upon the terms and subject to the conditions thereof, Merger Sub will be merged with and into the Company, and the Company will be the surviving entity (the
&#147;<B><I>Merger</I></B>&#148;); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>WHEREAS,</B> as of the date hereof, each Stockholder is the record and beneficial owner of the
number of shares (the &#147;<B><I>Shares</I></B>&#148;) of Parent Common Stock, set forth opposite such Stockholder&#146;s name on Schedule I attached hereto (such Shares, together with any other shares of capital stock of Parent acquired by such
Stockholder after the date hereof and during the term of this Agreement (including through the exercise of any stock options, warrants or any other convertible or exchangeable securities or similar instruments), being collectively referred to herein
as such Stockholder&#146;s &#147;<B><I>Subject Shares</I></B>&#148;); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>WHEREAS,</B> as a condition to the consummation of the Merger,
and in order to induce the Company to enter into the Merger Agreement and consummate the Merger, the Company has required that each Stockholder agree, and each Stockholder is willing to agree, to the matters set forth herein; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>NOW, THEREFORE,</B> in contemplation of the foregoing and in consideration of the mutual agreements, covenants, representations and
warranties contained herein and intending to be legally bound hereby, the Company, on the one hand, and each Stockholder, severally and not jointly, on the other hand, agree as follows: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 1.<U> Defined Terms</U>.&nbsp;Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 2. <U>Voting of Shares</U>. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) <U>Voting</U>.&nbsp;Until this Agreement or the Merger Agreement is terminated in accordance with its terms, Stockholder hereby agrees to
vote (or cause to be voted) all of Stockholder&#146;s Subject Shares, at every annual, special or other meeting of the stockholders of Parent, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or
otherwise: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) in favor of the approval of the Parent Charter Amendment, the Reverse Stock Split and the issuance of shares of Parent
Common Stock pursuant to the Merger Agreement, and any actions required in furtherance thereof; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) against any action or agreement
that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation of Parent under the Merger Agreement; and </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-1-1 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iii) against (A)&nbsp;any Acquisition Proposal involving Parent or any of its subsidiaries, or
(B)&nbsp;any action that is intended, or would reasonably be expected, to impede, interfere with, prevent, delay, postpone or adversely affect the Merger or the transactions contemplated by the Merger Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Prior to the termination of this Agreement, Stockholder shall not enter into any agreement, understanding or arrangement (whether written or oral) with any
Person to vote or give instructions in any manner inconsistent with clauses &#147;(i)&#148;, &#147;(ii)&#148; or &#147;(iii)&#148; of this Section 2(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) <U>Grant of Irrevocable Proxy</U>.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) Contemporaneously with the execution of this Agreement: (i) Stockholder shall deliver to the Company a proxy in the form attached hereto
as Exhibit A, which shall be irrevocable to the fullest extent permitted by law with respect to the securities&nbsp;referred to therein (the &#147;<B><I>Proxy</I></B>&#148;); and (ii) if applicable, Stockholder shall cause to be delivered to the
Company an additional proxy (in the form attached hereto as Exhibit A) executed on behalf of the record owner of any outstanding Subject Shares that are owned beneficially (within the meaning of Rule 13d-3 under the Exchange Act) but not of record
by Stockholder. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) Stockholder shall not enter into any tender, voting or other agreement, understanding or arrangement, or grant a
proxy or power of attorney with respect to Stockholder&#146;s Subject Shares that is inconsistent with this Agreement or otherwise take any other action with respect to Stockholder&#146;s Subject Shares that would in any way restrict, limit or
interfere with the performance of the Stockholder&#146;s obligations hereunder or the transactions contemplated hereby or under any proxy delivered to the Company by Stockholder or on Stockholder&#146;s behalf. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 3. <U>Fiduciary Responsibilities</U>.&nbsp;Stockholder does not make (or shall not be deemed to have made) any agreement or
understanding herein in such person&#146;s capacity as a director or officer of Parent. Without limiting the generality of the foregoing, Stockholder signs solely in his, her or its capacity as the record and beneficial owner of Stockholder&#146;s
Subject Shares and nothing herein shall limit or affect any actions taken by Stockholder (or an affiliate or designee of Stockholder) in his or her capacity as an officer or director of Parent in exercising his or her or Parent&#146;s or
Parent&#146;s board of directors&#146; rights in connection with the Merger Agreement or otherwise and such actions shall not be deemed to be a breach of this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 4. <U>Representations and Warranties of Stockholder</U>.&nbsp;Stockholder represents and warrants to the Company as follows: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) <U>Binding Agreement</U>.&nbsp;Stockholder has the capacity to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.&nbsp;Stockholder has duly and validly executed and delivered this Agreement and, assuming the due authorization, execution and delivery of this Agreement by the Company, this Agreement constitutes a legal, valid and binding
obligation of Stockholder, enforceable against Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors&#146; rights
generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) <U>No Conflict</U>.&nbsp;Neither the execution and delivery of this Agreement by&nbsp;Stockholder, nor the performance by Stockholder of
its obligations hereunder will (i)&nbsp;require any consent, approval, authorization or permit of, registration, declaration or filing (except for such filings as may be required under the federal securities laws or as would not prevent, delay or
otherwise impair Stockholder&#146;s ability to perform its obligations hereunder) with, or notification to, any Government Authority, (ii) if Stockholder is an entity, result in a violation of, or default under, or conflict with any provision of its
certificate of incorporation, bylaws, partnership agreement, limited liability company agreement or similar organizational documents, (iii)&nbsp;result in a violation or breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, trust, agreement, instrument, commitment, </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-1-2 </P>


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arrangement or understanding applicable to Stockholder or Stockholder&#146;s Subject Shares, or result in the creation of a security interest, lien, charge, encumbrance, equity or claim with
respect to any of Stockholder&#146;s Subject Shares, except, in the case of clause (iii), as would not prevent, delay or otherwise impair Stockholder&#146;s ability to perform its obligations hereunder, (iv) require any consent, authorization or
approval of any Person other than a Government Authority, except, in the case of clause (iv), as would not prevent, delay or otherwise impair Stockholder&#146;s ability to perform its obligations hereunder or (v) violate or conflict with any order,
writ, injunction, decree, rule, regulation or law applicable to Stockholder or Stockholder&#146;s Subject Shares.&nbsp;If Stockholder is a married individual and Stockholder&#146;s Subject Shares constitute community property or otherwise need
spousal approval in order for this Agreement to be a legal, valid and binding obligation of Stockholder, this Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding obligation of, Stockholder&#146;s
spouse, enforceable against such spouse in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors&#146; rights generally and by general
equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(c) <U>Ownership of
Shares</U>.&nbsp;Stockholder is the record and beneficial owner of the Shares and options, warrants and any additional rights to acquire Shares set forth opposite&nbsp;Stockholder&#146;s name on Schedule I attached hereto free and clear of any
security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such Shares),
except for any such encumbrances arising hereunder.&nbsp;Other than as set forth on Schedule I, as of the date of this Agreement, Stockholder does not own (beneficially or otherwise) any shares of Parent Common Stock or any options, warrants, notes
or other rights to acquire shares of Parent Common Stock.&nbsp;No Person has any right to acquire from Stockholder any of the securities set forth on Schedule I and Stockholder has no obligation to sell or dispose of any such securities.&nbsp;Except
for the rights granted to the Company under this Agreement, Stockholder holds exclusive power to vote the Shares set forth opposite Stockholder&#146;s name on Schedule I attached hereto.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(d) <U>Broker Fees</U>.&nbsp;No broker, investment banker, financial advisor or other person is entitled to any broker&#146;s, finder&#146;s,
financial advisor&#146;s or other similar fee or commission based upon arrangements made by or on behalf of Stockholder in connection with its entering into this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(e) <U>Accuracy of Representations</U>.&nbsp;The representations and warranties contained in this Agreement are accurate in all respects as of
the date hereof and will be accurate in all respects at all times prior to the termination of this Agreement as if made on and as of any such time or date. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 5. <U>Transfer and Other Restrictions</U>.&nbsp;Until this Agreement is terminated in accordance with its terms: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) <U>Certain Prohibited Transfers</U>.&nbsp;Stockholder agrees not to (directly or indirectly): </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) (A) sell, transfer, pledge, encumber, assign, make any short sale of, or enter into any hedging or similar transaction having the same
economic effect as a sale, or otherwise dispose of Stockholder&#146;s Subject Shares or any interest contained therein, or (B) enter into any contract, option or other arrangement or understanding with respect to any matter referred to in clause
&#147;(A)&#148; relating to the Stockholder&#146;s Subject Shares or any interest contained therein (each of the matters in clauses &#147;(A)&#148; and &#147;(B&#148;) collectively referred to herein as a
<I>&#147;</I><B><I>Transfer</I></B><I>&#148;</I>); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) grant any proxies or powers of attorney or enter into a voting agreement or
other arrangement with respect to Stockholder&#146;s Subject Shares, other than this Agreement; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iii) enter into, or deposit
Stockholder&#146;s Subject Shares into, a voting trust or take any other action which would, or could reasonably be expected to, result in a diminution of the voting power represented by any of Stockholder&#146;s Subject Shares; or </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iv) commit or agree to take any of the foregoing actions. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-1-3 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) <U>Permitted Transfers</U>.&nbsp;Section 5(a) hereof shall not prohibit a Transfer of Subject
Shares by Stockholder (any such Transfer, a <B><I>&#147;Permitted Transfer&#148;</I></B>): (i) if Stockholder is an individual: (A) to any member of Stockholder&#146;s immediate family; or to a trust or other estate planning vehicle for the benefit
of Stockholder or any member of Stockholder&#146;s immediate family; or (B) upon the death of Stockholder to Stockholder&#146;s heirs; (ii) if Stockholder is a partnership or limited liability company, to one or more partners or members of
Stockholder or to an affiliated corporation, trust or other business entity under common control with Stockholder; or (iii) to another holder of the capital stock of Parent that has signed a voting agreement in substantially the form hereof;
provided however, that a Transfer referred to on this Section 5(b) shall be permitted only if, as a precondition to such Transfer, the transferee agrees in writing, reasonably satisfactory in form and substance to the Company, to be bound by all of
the terms of this Agreement and provides a Proxy as required by Section 2(b) hereof. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(c) <U>Efforts</U>.&nbsp;Stockholder agrees not to
take any action which would make any representation or warranty of Stockholder herein untrue or incorrect in any material respect as of any time prior to the termination hereof or take any action that would have the effect of preventing or disabling
it from performing its obligations under this Agreement.&nbsp;Subject to Section 3 hereof, until this Agreement is terminated in accordance with its terms, Stockholder shall use its reasonable best efforts to take, or cause to be taken, all actions
reasonably necessary or desirable to vote (or cause to be voted) all of Stockholder&#146;s Subject Shares in accordance with Section 2(a) of this Agreement (including executing and delivering additional documents as the Company may request, at the
cost and expense of the Company). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(d) <U>Additional Shares</U>.&nbsp;In the event (i)&nbsp;of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital stock of Parent on, of or affecting Stockholder&#146;s Subject Shares or (ii)&nbsp;Stockholder becomes the beneficial owner of any additional shares of Parent Common
Stock or other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 2(a) hereof, then the terms of this Agreement shall apply to the shares of capital stock or other securities of Parent
held by Stockholder immediately following the effectiveness of the events described in clause (i)&nbsp;or Stockholder becoming the beneficial owner thereof, as described in clause (ii), as though they were Stockholder&#146;s Subject Shares
hereunder.&nbsp;Stockholder hereby agrees, until this Agreement is terminated in accordance with its terms, to notify the Company of the number of any new shares of Parent Common Stock acquired by Stockholder, if any, after the date hereof. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 6. <U>No Solicitation</U>.&nbsp;Until this Agreement is terminated in accordance with its terms, Stockholder shall not, nor shall
Stockholder permit any investment banker, attorney or other advisor or representative of the Stockholder to, directly or indirectly through another Person, take any action that Parent is prohibited from taking or authorizing to be taken pursuant to
Section 5.4 of the Merger Agreement; <I>provided</I>, <I>however</I>, that any action which is permitted by the Merger Agreement to be taken by Stockholder (or an affiliate or designee of Stockholder) in his or her capacity as a director or officer
of Parent or which is permitted by Section 3 hereof shall not be prohibited by the foregoing so long as such action is taken by Stockholder (or such affiliate or designee) in his or her actual capacity as a director or officer of Parent. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 7. <U>Specific Enforcement; Jurisdiction</U>.&nbsp;Stockholder agrees that irreparable damage would occur in the event that any of the
provisions of this Agreement or the Proxy were not performed in accordance with the terms hereof or were otherwise breached and that the Company shall be entitled to specific performance of the terms hereof in addition to any other remedy which may
be available at law or in equity.&nbsp;It is accordingly agreed that the Company will be entitled to an injunction or injunctions to prevent breaches of this Agreement or the Proxy and to enforce specifically the terms and provisions of this
Agreement or the Proxy in any state or federal court located in the State of Delaware or in the Court of Chancery of the State of Delaware, the foregoing being in addition to any other remedy to which they are entitled at law or in equity.&nbsp;In
addition, each of Stockholder and the Company hereto (a) consents to submit itself to the personal jurisdiction of any state or federal court located in the State of Delaware or in the Court of Chancery of the State of Delaware in the event any
dispute arises out of this Agreement or any of the transactions contemplated by this Agreement or the Proxy, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any
</P>
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such court, and (c) agrees that it will not bring any action relating to this Agreement or the Proxy or any of the transactions contemplated by this Agreement in any court other than a state or
federal court located in the State of Delaware or the Court of Chancery of the State of Delaware. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 8.
<U>Termination</U>.&nbsp;This Agreement shall terminate and cease to have any force or effect on the earliest of (a) the termination of the Merger Agreement in accordance with its terms, (b) the written agreement of the Company and Stockholder to
terminate this Agreement, (c) the consummation of the Merger, and (d) the amendment, modification or waiver of the Merger Agreement to alter the Merger Consideration in a manner adverse to Stockholder unless such amendment, modification or waiver
has been consented to by Stockholder in writing prior to or simultaneously with such amendment, modification or waiver; <I>provided</I>,<I> however</I>, that (i) Sections 8 through 19 shall survive any termination of this Agreement and (ii)
termination of this Agreement shall not relieve any party from liability for any breach of its obligations hereunder committed prior to such termination. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 9. <U>Notices</U>.&nbsp;All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally, mailed by certified mail (return receipt requested) or sent by overnight carrier or by facsimile (upon confirmation of receipt) to the parties at the following addresses or at such other as shall be specified by the parties
by like notice: (a) if to Parent, to the appropriate address set forth in Section 9.4 of the Merger Agreement (with a copy to Ropes &amp; Gray LLP); (b) if to the Company, to the appropriate address set forth in Section 9.4 of the Merger Agreement
(with a copy to each of Ruskin Moscou Faltischek, P.C. and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.), and (c) if to Stockholder, to the appropriate address set forth on Schedule I hereto. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 10. <U>Stockholder Information</U>.&nbsp;Stockholder agrees to permit Parent to publish and disclose in the Proxy Statement and any
other public disclosure that the Company and Parent mutually determine to be necessary and desirable in connection with the Merger and any of the other transactions contemplated by the Merger Agreement the identity of Stockholder and the ownership
of securities of Parent or the Company and the nature of Stockholder&#146;s commitments, arrangements and understandings under this Agreement and the Proxy.&nbsp;Parent shall provide drafts of such disclosures to be made in the Proxy Statement and
such other public disclosures to Stockholder reasonably in advance of such disclosures and shall consider in good faith any comments provided by Stockholder in a timely manner. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 11. <U>Certain Events</U>.&nbsp;Stockholder agrees that this Agreement and the obligations hereunder shall attach to
Stockholder&#146;s Subject Shares and shall be binding upon any person or entity to which legal or beneficial ownership of Stockholder&#146;s Subject Shares shall pass, whether by operation of law or otherwise, including Stockholder&#146;s heirs,
guardians, administrators or successors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 12. <U>Entire Agreement</U>.&nbsp;This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 13. <U>Amendment</U>.&nbsp;This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery
of a written agreement executed by the Company and Stockholder. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 14. <U>Successors and Assigns</U>.&nbsp;Neither this Agreement
nor any rights or obligations hereunder shall be assigned (by operation of law or otherwise) or delegated to any Person without the prior written consent of the other parties hereto and any attempted assignment or delegation thereof shall be void
<I>ab initio</I>.&nbsp;This Agreement will be binding upon, inure to the benefit of and be enforceable by each party and such party&#146;s heirs, beneficiaries, executors, successors, representatives and permitted assigns.&nbsp;Nothing in this
Agreement is intended to confer on any Person (other than the parties hereto and their successors and permitted assigns) any rights or remedies of any nature. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-1-5 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 15. <U>Counterparts</U>.&nbsp;This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, and delivered by means of facsimile transmission, electronic delivery or otherwise, each of which when so executed and delivered shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement and shall be sufficient to bind the parties hereto to the terms and conditions of this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 16. <U>GOVERNING LAW</U>.&nbsp;THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW THEREOF. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 17.
<U>Waiver</U>.&nbsp;Subject to the remainder of this Section 17, at any time prior to the termination of this Agreement, any party hereto may: (i) extend the time for performance of any of the obligations or other acts of the other parties to this
Agreement; (ii) waive any inaccuracy in or breach of any representation, warranty, covenant or obligation of the other party to this Agreement or in any document (including the Proxy) delivered pursuant to this Agreement; and (iii) waive compliance
with any covenant, obligation or condition for the benefit of such party contained in this Agreement.&nbsp;No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement shall operate as a waiver of such
power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.&nbsp;No party shall be deemed
to have waived any power, right, privilege or remedy available to such party arising out of this Agreement, unless such waiver is expressly set forth in a written instrument duly executed and delivered by the party waiving such power, right,
privilege or remedy; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 18. <U>Severability</U>.&nbsp;If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any
applicable law, then such contravention or invalidity shall not invalidate the entire Agreement.&nbsp;Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall
render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 19. <U>Several Obligations</U>.&nbsp;Notwithstanding anything to the contrary in this Agreement, the obligations of each Stockholder
who is a signatory to this Agreement are several and not joint.&nbsp;In no event shall any Stockholder who is a signatory to this Agreement have any liability or obligation with respect to the acts or omissions of any other Stockholder who is also a
signatory to this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 20. <U>Headings</U>.&nbsp;The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><I></I>[<I>The remainder of this page is intentionally
blank.</I>]<I> </I></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-1-6 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed, individually or by
its respective officer thereunto duly authorized, as of the date first written above. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:ARIAL; font-size:10pt">


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<TD WIDTH="88%"></TD></TR>


<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3">&nbsp;&nbsp;&nbsp;&nbsp;M<SMALL>ICROBOT</SMALL> M<SMALL>EDICAL</SMALL> L<SMALL>TD</SMALL>.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top">&nbsp;&nbsp;&nbsp;&nbsp;By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3">&nbsp;&nbsp;&nbsp;&nbsp;Name:</TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3">&nbsp;&nbsp;&nbsp;&nbsp;Title:</TD></TR></TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:ARIAL; font-size:10pt">


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<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="93%"></TD></TR>

<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
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<TD HEIGHT="16"></TD>
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<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
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<TD HEIGHT="16" COLSPAN="3"></TD></TR>
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<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
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<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
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<TD VALIGN="top" COLSPAN="3"><B>S<SMALL>TOCKHOLDER</SMALL>:</B></TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
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<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:ARIAL">&nbsp;</P></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">Name:</TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center">A-B-1-7 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center"><B>SCHEDULE I TO </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center"><B>VOTING AGREEMENT </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:ARIAL; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="35%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="31%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="30%"></TD></TR>
<TR STYLE="font-family:ARIAL; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:20.45pt; font-size:8pt; font-family:ARIAL"><B>Name</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:ARIAL" ALIGN="center"><B>Shares of Parent Common Stock</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:ARIAL" ALIGN="center"><B>Options to Purchase Parent Common<BR>Stock</B></P></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:ARIAL; font-size:10pt">
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</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center">A-B-1-8 </P>


<p Style='page-break-before:always'>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center"><B>E<SMALL>XHIBIT</SMALL> A </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center"><B>F<SMALL>ORM</SMALL> <SMALL>OF</SMALL> I<SMALL>RREVOCABLE</SMALL> P<SMALL>ROXY</SMALL> </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center">A-B-1-9 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center"><B>I<SMALL>RREVOCABLE</SMALL> P<SMALL>ROXY</SMALL> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">Each undersigned stockholder (each a &#147;<B><I>Stockholder</I></B>&#148;) of StemCells, Inc., a Delaware corporation
(&#147;<B><I>Parent</I></B>&#148;), severally and not jointly, hereby irrevocably (to the fullest extent permitted by law) appoints and constitutes Microbot Medical Ltd., a company organized under the laws of the State of Israel (the
&#147;<B><I>Company</I></B>&#148;) and Harel Gadot, solely in his capacity as an executive officer of the Company, and each of them, the attorneys and proxies of the Stockholder, with full power of substitution and resubstitution, to the full extent
of Stockholder&#146;s rights with respect to the outstanding shares of capital stock of Parent owned of record by the Stockholder as of the date of this proxy, which shares are specified on the final page of this proxy.&nbsp;(The shares of the
capital stock of Parent referred to in the immediately preceding sentence are referred to as the &#147;<B><I>Shares</I></B>.&#148;)&nbsp;Upon the execution of this proxy, all prior proxies given by Stockholder with respect to any of the Shares are
hereby revoked, and Stockholder agrees that no subsequent proxies inconsistent with this Proxy will be given with respect to any of the Shares. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">This proxy is irrevocable, is coupled with an interest and is granted in connection with, and as security for, the Voting Agreement, dated as of the
date hereof, between the Company and Stockholder (the &#147;<B><I>Voting Agreement</I></B>&#148;), and is granted in consideration of and as an inducement to the Company entering into the Agreement and Plan of Merger and Reorganization, dated as of
the date hereof, among Parent,&nbsp;CR&amp;D Israel Ltd., an Israeli corporation and wholly-owned subsidiary of Parent (&#147;<B><I>Merger Sub</I></B>&#148;) and the Company (the &#147;<B><I>Merger Agreement</I></B>&#148;), whereby Merger Sub will
be merged with and into the Company (the &#147;<B><I>Merger</I></B>&#148;).&nbsp;This proxy will terminate on the termination of the Voting Agreement in accordance with its terms.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">Prior to the termination of the Voting Agreement or the Merger Agreement, the attorneys and proxies named above will be empowered, and may exercise this
proxy, to vote any Shares owned by Stockholder, at any meeting of the stockholders of Parent, however called, or at any adjournment or postponement thereof and on every action or approval by written consent of the stockholders of Parent: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:ARIAL">(i) in favor of the approval of the Parent Charter Amendment, the Reverse Stock Split and the issuance of shares of Parent Common Stock pursuant to the
Merger Agreement, and any actions required in furtherance thereof; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:ARIAL">(ii) against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other obligation of Parent under the Merger Agreement; and </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:ARIAL">(iii)&nbsp;against
(a)&nbsp;any Acquisition Proposal (as defined in the Merger Agreement) involving Parent or any of its subsidiaries, or (b)&nbsp;any action that is intended, or would reasonably be expected, to impede, interfere with, prevent, delay, postpone or
adversely affect the Merger or the transactions contemplated by the Merger Agreement.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">Stockholder may vote the Shares on all other matters not
referred to in this proxy, and the attorneys and proxies named above may not exercise this proxy with respect to such other matters. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">This proxy
shall be binding upon the heirs, estate, executors, personal representatives, successors and assigns of the Stockholder (including any transferee of any of the Shares). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:ARIAL">Any term or provision of this proxy that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions of this proxy or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.&nbsp;Upon such determination that any term or provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this proxy so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center">[<I>Signature page follows</I>] </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center">A-B-1-10 </P>


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<TD VALIGN="top">Dated:&nbsp;August &nbsp;&nbsp;&nbsp;&nbsp;, 2016</TD>
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<TD VALIGN="top"><B>S<SMALL>TOCKHOLDER</SMALL></B></TD></TR>
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<TD VALIGN="top">Signature</TD></TR>
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<TD VALIGN="top">Printed Name</TD></TR>
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<TD VALIGN="top">Number of shares of capital stock of Parent owned of record as of the date of this proxy:</TD></TR>
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<TD VALIGN="top">Number of options to purchase capital stock of Parent owned of record as of the date of this proxy:</TD></TR>
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 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:ARIAL" ALIGN="center">A-B-1-11 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Exhibit B-2 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>FORM OF COMPANY STOCKHOLDER VOTING AGREEMENT </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VOTING AGREEMENT </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>THIS
VOTING AGREEMENT</B> (this <B>&#147;</B><B><I>Agreement</I></B>&#148;) dated August 15, 2016, is entered into among StemCells, Inc., a Delaware Corporation (&#147;<B><I>Parent</I></B>&#148;), each of the stockholders listed on Schedule I to this
Agreement (each a &#147;<B><I>Stockholder</I></B>&#148; and collectively, the &#147;<B><I>Stockholders</I></B>&#148;), and Microbot Medical Ltd., a company organized under the laws of the State of Israel (&#147;<B><I>Company</I></B>&#148;). </P>
<P STYLE="margin-top:24pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>W&nbsp;I&nbsp;T&nbsp;N&nbsp;E&nbsp;S&nbsp;S&nbsp;E&nbsp;T&nbsp;H: </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>WHEREAS,</B> Parent, C&amp;RD Israel Ltd., an Israeli corporation and wholly-owned subsidiary of Parent (&#147;<B><I>Merger
Sub</I></B>&#148;), and the Company have entered into an Agreement and Plan of Merger and Reorganization, dated as of August 15, 2016 (as it may be amended or supplemented from time to time, the &#147;<B><I>Merger Agreement</I></B>&#148;), pursuant
to which and upon the terms and subject to the conditions thereof, Merger Sub will be merged with and into the Company, and the Company will be the surviving entity (the &#147;<B><I>Merger</I></B>&#148;); </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>WHEREAS,</B> as of the date hereof, each Stockholder is the record and beneficial owner of the number of shares (the
&#147;<B><I>Shares</I></B>&#148;) of Company Stock, set forth opposite such Stockholder&#146;s name on Schedule I attached hereto (such Shares, together with any other shares of capital stock of the Company acquired by such Stockholder after the
date hereof and during the term of this Agreement (including through the exercise of any stock options, warrants or any other convertible or exchangeable securities or similar instruments), being collectively referred to herein as such
Stockholder&#146;s &#147;<B><I>Subject Shares</I></B>&#148;); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>WHEREAS,</B> as a condition to the consummation of the Merger, and in
order to induce Parent to enter into the Merger Agreement and consummate the Merger, Parent has required that each Stockholder agree, and each Stockholder is willing to agree, to the matters set forth herein; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>NOW, THEREFORE,</B> in contemplation of the foregoing and in consideration of the mutual agreements, covenants, representations and
warranties contained herein and intending to be legally bound hereby, Parent, on the one hand, and each Stockholder, severally and not jointly, on the other hand, agree as follows: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 1.<U> Defined Terms</U>.&nbsp;Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 2. <U>Voting of Shares</U>. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) <U>Voting</U>.&nbsp;Until this Agreement or the Merger Agreement is terminated in accordance with its terms, Stockholder hereby agrees to
vote (or cause to be voted) all of Stockholder&#146;s Subject Shares, at every annual, special or other meeting of the stockholders of the Company, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting or
otherwise: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) in favor of the Merger and the adoption of the Merger Agreement and the approval of the transactions contemplated by the
Merger Agreement, and any actions required in furtherance thereof; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) against any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other obligation of the Company under the Merger Agreement; and </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iii) against (A)&nbsp;any Acquisition Proposal involving the Company or any of its subsidiaries, or (B)&nbsp;any action that is intended, or
would reasonably be expected, to impede, interfere with, prevent, delay, postpone or adversely affect the Merger or the transactions contemplated by the Merger Agreement. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-1 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Prior to the termination of this Agreement, Stockholder shall not enter into any agreement, understanding or
arrangement (whether written or oral) with any Person to vote or give instructions in any manner inconsistent with clauses &#147;(i)&#148;, &#147;(ii)&#148; or &#147;(iii)&#148; of this Section 2(a). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) <U>Grant of Irrevocable Proxy</U>.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) Contemporaneously with the execution of this Agreement: (i) Stockholder shall deliver to Parent a proxy in the form attached hereto as
Exhibit A, which shall be irrevocable to the fullest extent permitted by law with respect to the securities&nbsp;referred to therein (the &#147;<B><I>Proxy</I></B>&#148;); and (ii) if applicable, Stockholder shall cause to be delivered to Parent an
additional proxy (in the form attached hereto as Exhibit A) executed on behalf of the record owner of any outstanding Subject Shares that are owned beneficially (within the meaning of Rule 13d-3 under the Exchange Act) but not of record by
Stockholder. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) Stockholder shall not enter into any tender, voting or other agreement, understanding or arrangement, or grant a proxy
or power of attorney with respect to Stockholder&#146;s Subject Shares that is inconsistent with this Agreement or otherwise take any other action with respect to Stockholder&#146;s Subject Shares that would in any way restrict, limit or interfere
with the performance of the Stockholder&#146;s obligations hereunder or the transactions contemplated hereby or under any proxy delivered to Parent by Stockholder or on Stockholder&#146;s behalf. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 3. <U>Fiduciary Responsibilities</U>.&nbsp;If Stockholder (or an affiliate or designee of Stockholder) is or becomes during the term
hereof a director or officer of the Company, Stockholder does not make (or shall not be deemed to have made) any agreement or understanding herein in such person&#146;s capacity as such director or officer of the Company. Without limiting the
generality of the foregoing, Stockholder signs solely in his, her or its capacity as the record and beneficial owner of Stockholder&#146;s Subject Shares and nothing herein shall limit or affect any actions taken by Stockholder (or an affiliate or
designee of Stockholder) in his or her capacity as an officer or director of the Company in exercising his or her or the Company&#146;s or the Company&#146;s board of directors&#146; rights in connection with the Merger Agreement or otherwise and
such actions shall not be deemed to be a breach of this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 4. <U>Representations and Warranties of
Stockholder</U>.&nbsp;Stockholder represents and warrants to Parent as follows: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) <U>Binding Agreement</U>.&nbsp;Stockholder has the
capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby.&nbsp;Stockholder has duly and validly executed and delivered this Agreement and, assuming the due authorization, execution and delivery of this
Agreement by Parent, this Agreement constitutes a legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors&#146; rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) <U>No Conflict</U>.&nbsp;Neither the execution and delivery of this Agreement by&nbsp;Stockholder, nor the performance by Stockholder of
its obligations hereunder will (i)&nbsp;require any consent, approval, authorization or permit of, registration, declaration or filing (except for such filings as may be required under the federal securities laws or as would not prevent, delay or
otherwise impair Stockholder&#146;s ability to perform its obligations hereunder) with, or notification to, any Government Authority, (ii) if Stockholder is an entity, result in a violation of, or default under, or conflict with any provision of its
certificate of incorporation, bylaws, partnership agreement, limited liability company agreement or similar organizational documents, (iii)&nbsp;result in a violation or breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, or acceleration) under any contract, trust, agreement, instrument, commitment, arrangement or understanding applicable to Stockholder or Stockholder&#146;s Subject Shares, or result
in the creation of a security interest, lien, charge, encumbrance, equity or claim with respect to any of Stockholder&#146;s Subject </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-2 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
Shares, except, in the case of clause (iii), as would not prevent, delay or otherwise impair Stockholder&#146;s ability to perform its obligations hereunder, (iv) require any consent,
authorization or approval of any Person other than a Government Authority, except, in the case of clause (iv), as would not prevent, delay or otherwise impair Stockholder&#146;s ability to perform its obligations hereunder or (v) violate or conflict
with any order, writ, injunction, decree, rule, regulation or law applicable to Stockholder or Stockholder&#146;s Subject Shares.&nbsp;If Stockholder is a married individual and Stockholder&#146;s Subject Shares constitute community property or
otherwise need spousal approval in order for this Agreement to be a legal, valid and binding obligation of Stockholder, this Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding obligation of,
Stockholder&#146;s spouse, enforceable against such spouse in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors&#146; rights
generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(c) <U>Ownership of Shares</U>.&nbsp;Stockholder is the record and beneficial owner of the Shares and options, warrants and any additional
rights to acquire Shares set forth opposite&nbsp;Stockholder&#146;s name on Schedule I attached hereto free and clear of any security interests, liens, charges, encumbrances, equities, claims, options or limitations of whatever nature and free of
any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such Shares), except for any such encumbrances arising hereunder.&nbsp;Other than as set forth on Schedule I, as of the date of this
Agreement, Stockholder does not own (beneficially or otherwise) any shares of Company Stock or any options, warrants, notes or other rights to acquire shares of Company Stock.&nbsp;No Person has any right to acquire from Stockholder any of the
securities set forth on Schedule I and Stockholder has no obligation to sell or dispose of any such securities.&nbsp;Except for the rights granted to Parent under this Agreement, Stockholder holds exclusive power to vote the Shares set forth
opposite Stockholder&#146;s name on Schedule I attached hereto.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(d) <U>Broker Fees</U>.&nbsp;No broker, investment banker, financial
advisor or other person is entitled to any broker&#146;s, finder&#146;s, financial advisor&#146;s or other similar fee or commission based upon arrangements made by or on behalf of Stockholder in connection with its entering into this Agreement.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(e)<U> Accuracy of Representations</U>.&nbsp;The representations and warranties contained in this Agreement are accurate in all respects
as of the date hereof and will be accurate in all respects at all times prior to the termination of this Agreement as if made on and as of any such time or date.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 5.<U> Transfer and Other Restrictions</U>.&nbsp;Until this Agreement is terminated in accordance with its terms: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(a) <U>Certain Prohibited Transfers</U>.&nbsp;Stockholder agrees not to (directly or indirectly): </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(i) (A) sell, transfer, pledge, encumber, assign, make any short sale of, or enter into any hedging or similar transaction having the same
economic effect as a sale, or otherwise dispose of Stockholder&#146;s Subject Shares or any interest contained therein, or (B) enter into any contract, option or other arrangement or understanding with respect to any matter referred to in clause
&#147;(A)&#148; relating to the Stockholder&#146;s Subject Shares or any interest contained therein (each of the matters in clauses &#147;(A)&#148; and &#147;(B&#148;) collectively referred to herein as a
<I>&#147;</I><B><I>Transfer</I></B><I>&#148;</I>); </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(ii) grant any proxies or powers of attorney or enter into a voting agreement or
other arrangement with respect to Stockholder&#146;s Subject Shares, other than this Agreement; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iii) enter into, or deposit
Stockholder&#146;s Subject Shares into, a voting trust or take any other action which would, or could reasonably be expected to, result in a diminution of the voting power represented by any of Stockholder&#146;s Subject Shares; or </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:13%; font-size:10pt; font-family:Times New Roman">(iv) commit or agree to take any of the foregoing actions. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-3 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(b) <U>Permitted Transfers</U>.&nbsp;Section 5(a) hereof shall not prohibit a Transfer of Subject
Shares by Stockholder (any such Transfer, a <B><I>&#147;Permitted Transfer&#148;</I></B>): (i) if Stockholder is an individual: (A) to any member of Stockholder&#146;s immediate family; or to a trust or other estate planning vehicle for the benefit
of Stockholder or any member of Stockholder&#146;s immediate family; or (B) upon the death of Stockholder to Stockholder&#146;s heirs; (ii) if Stockholder is a partnership or limited liability company, to one or more partners or members of
Stockholder or to an affiliated corporation, trust or other business entity under common control with Stockholder, or if Stockholder is a trust, to a beneficiary; or (iii) to another holder of the capital stock of the Company that has signed a
voting agreement in substantially the form hereof; provided however, that a Transfer referred to on this Section 5(b) shall be permitted only if, as a precondition to such Transfer, the transferee agrees in writing, reasonably satisfactory in form
and substance to Parent, to be bound by all of the terms of this Agreement and provides a Proxy as required by Section 2(b) hereof. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(c)
<U>Efforts</U>.&nbsp;Stockholder agrees not to take any action which would make any representation or warranty of Stockholder herein untrue or incorrect in any material respect as of any time prior to the termination hereof or take any action that
would have the effect of preventing or disabling it from performing its obligations under this Agreement.&nbsp;Subject to Section 3 hereof, until this Agreement is terminated in accordance with its terms, Stockholder shall use its reasonable best
efforts to take, or cause to be taken, all actions reasonably necessary or desirable to vote (or cause to be voted) all of Stockholder&#146;s Subject Shares in accordance with Section 2(a) of this Agreement (including executing and delivering
additional documents as Parent may request, at the cost and expense of Parent). </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(d) <U>Additional Shares</U>.&nbsp;In the event
(i)&nbsp;of any stock dividend, stock split, recapitalization, reclassification, combination or exchange of shares of capital stock of the Company on, of or affecting Stockholder&#146;s Subject Shares or (ii)&nbsp;Stockholder becomes the beneficial
owner of any additional shares of Company Stock or other securities entitling the holder thereof to vote or give consent with respect to the matters set forth in Section 2(a) hereof, then the terms of this Agreement shall apply to the shares of
capital stock or other securities of the Company held by Stockholder immediately following the effectiveness of the events described in clause (i)&nbsp;or Stockholder becoming the beneficial owner thereof, as described in clause (ii), as though they
were Stockholder&#146;s Subject Shares hereunder.&nbsp;Stockholder hereby agrees, until this Agreement is terminated in accordance with its terms, to notify Parent of the number of any new shares of Company Stock acquired by Stockholder, if any,
after the date hereof. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 6. <U>Appraisal Rights</U>.&nbsp;Stockholder hereby agrees not to exercise any appraisal rights or any
dissenters&#146; rights that Stockholder may have (whether under applicable law or otherwise) or could potentially have or acquire in connection with the Merger Agreement, and the transactions contemplated by the Merger Agreement, including the
Merger. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 7. <U>No Solicitation</U>.&nbsp;Until this Agreement is terminated in accordance with its terms, Stockholder shall not,
nor shall Stockholder permit any investment banker, attorney or other advisor or representative of the Stockholder to, directly or indirectly through another Person, take any action that the Company is prohibited from taking or authorizing to be
taken pursuant to Section 5.3 of the Merger Agreement; <I>provided</I>, <I>however</I>, that any action which is permitted by the Merger Agreement to be taken by Stockholder (or an affiliate or designee of Stockholder) in his or her capacity as a
director or officer of the Company or which is permitted by Section 3 hereof shall not be prohibited by the foregoing so long as such action is taken by Stockholder (or such affiliate or designee) in his or her actual capacity as a director or
officer of the Company. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 8. <U>Specific Enforcement; Jurisdiction</U>.&nbsp;Stockholder agrees that irreparable damage would occur
in the event that any of the provisions of this Agreement or the Proxy were not performed in accordance with the terms hereof or were otherwise breached and that Parent shall be entitled to specific performance of the terms hereof in addition to any
other remedy which may be available at law or in equity.&nbsp;It is accordingly agreed that Parent will be entitled to an injunction or injunctions to prevent breaches of this Agreement or the Proxy and to enforce specifically the terms and
provisions of this Agreement or the Proxy in any state or federal court located </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-4 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
in the State of Delaware or in the Court of Chancery of the State of Delaware, the foregoing being in addition to any other remedy to which they are entitled at law or in equity.&nbsp;In
addition, each of Stockholder and Parent hereto (a) consents to submit itself to the personal jurisdiction of any state or federal court located in the State of Delaware or in the Court of Chancery of the State of Delaware in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this Agreement or the Proxy, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c)
agrees that it will not bring any action relating to this Agreement or the Proxy or any of the transactions contemplated by this Agreement in any court other than a state or federal court located in the State of Delaware or the Court of Chancery of
the State of Delaware. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 9. <U>Termination</U>.&nbsp;This Agreement shall terminate and cease to have any force or effect on the
earliest of (a) the termination of the Merger Agreement in accordance with its terms, (b) the written agreement of Parent and Stockholder to terminate this Agreement, (c) the consummation of the Merger, and (d) the amendment, modification or waiver
of the Merger Agreement to alter the Merger Consideration in a manner adverse to Stockholder unless such amendment, modification or waiver has been consented to by Stockholder in writing prior to or simultaneously with such amendment, modification
or waiver; <I>provided</I>,<I> however</I>, that (i) Sections 8 through 19 shall survive any termination of this Agreement and (ii) termination of this Agreement shall not relieve any party from liability for any breach of its obligations hereunder
committed prior to such termination. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 10. <U>Notices</U>.&nbsp;All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, mailed by certified mail (return receipt requested) or sent by overnight carrier or by facsimile (upon confirmation of receipt) to the parties at the following addresses or at such
other as shall be specified by the parties by like notice: (a) if to Parent, to the appropriate address set forth in Section 9.4 of the Merger Agreement (with a copy to Ropes &amp; Gray LLP); (b) if to the Company, to the appropriate address set
forth in Section 9.4 of the Merger Agreement (with a copy to each of Ruskin Moscou Faltischek, P.C. and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.), and (c) if to Stockholder, to the appropriate address set forth on Schedule I hereto.</P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 11. <U>Stockholder Information</U>.&nbsp;Stockholder agrees to permit Parent to publish and disclose in the Proxy Statement and any
other public disclosure that Parent and the Company mutually determine to be necessary and desirable in connection with the Merger and any of the other transactions contemplated by the Merger Agreement the identity of Stockholder and the ownership
of securities of the Company or Parent and the nature of Stockholder&#146;s commitments, arrangements and understandings under this Agreement and the Proxy.&nbsp;Parent shall provide drafts of such disclosures to be made in the Proxy Statement and
such other public disclosures to Stockholder reasonably in advance of such disclosures and shall consider in good faith any comments provided by Stockholder in a timely manner. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 12. <U>Certain Events</U>.&nbsp;Stockholder agrees that this Agreement and the obligations hereunder shall attach to
Stockholder&#146;s Subject Shares and shall be binding upon any person or entity to which legal or beneficial ownership of Stockholder&#146;s Subject Shares shall pass, whether by operation of law or otherwise, including Stockholder&#146;s heirs,
guardians, administrators or successors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 13. <U>Entire Agreement</U>.&nbsp;This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 14. <U>Amendment</U>.&nbsp;This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery
of a written agreement executed by Parent and Stockholder. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 15. <U>Successors and Assigns</U>.&nbsp;Neither this Agreement nor any
rights or obligations hereunder shall be assigned (by operation of law or otherwise) or delegated to any Person without the prior written consent </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-5 </P>


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of the other parties hereto and any attempted assignment or delegation thereof shall be void <I>ab initio</I>.&nbsp;This Agreement will be binding upon, inure to the benefit of and be enforceable
by each party and such party&#146;s heirs, beneficiaries, executors, successors, representatives and permitted assigns.&nbsp;Nothing in this Agreement is intended to confer on any Person (other than the parties hereto and their successors and
permitted assigns) any rights or remedies of any nature. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 16. <U>Counterparts</U>.&nbsp;This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts, and delivered by means of facsimile transmission, electronic delivery or otherwise, each of which when so executed and delivered shall be deemed to be an original and
all of which when taken together shall constitute one and the same agreement and shall be sufficient to bind the parties hereto to the terms and conditions of this Agreement. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 17. <U>GOVERNING LAW</U>.&nbsp;THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW THEREOF. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 18.
<U>Waiver</U>.&nbsp;Subject to the remainder of this Section 18, at any time prior to the termination of this Agreement, any party hereto may: (i) extend the time for performance of any of the obligations or other acts of the other parties to this
Agreement; (ii) waive any inaccuracy in or breach of any representation, warranty, covenant or obligation of the other party to this Agreement or in any document (including the Proxy) delivered pursuant to this Agreement; and (iii) waive compliance
with any covenant, obligation or condition for the benefit of such party contained in this Agreement.&nbsp;No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement shall operate as a waiver of such
power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.&nbsp;No party shall be deemed
to have waived any power, right, privilege or remedy available to such party arising out of this Agreement, unless such waiver is expressly set forth in a written instrument duly executed and delivered by the party waiving such power, right,
privilege or remedy; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 19. <U>Severability</U>.&nbsp;If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any
applicable law, then such contravention or invalidity shall not invalidate the entire Agreement.&nbsp;Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall
render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 20. <U>Several Obligations</U>.&nbsp;Notwithstanding anything to the contrary in this Agreement, the obligations of each Stockholder
who is a signatory to this Agreement are several and not joint.&nbsp;In no event shall any Stockholder who is a signatory to this Agreement have any liability or obligation with respect to the acts or omissions of any other Stockholder who is also a
signatory to this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 21. <U>Headings</U>.&nbsp;The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Section 22. <U>Other Agreements</U>. Contemporaneously
with the execution of this Agreement, Parent and Company are entering into agreements with certain other holders of Company Stock on the same terms as this Agreement (the &#147;<B><I>Other Voting Agreements</I></B>&#148;). Neither Parent nor the
Company shall enter into any amendment or modification of, or grant any waiver under, any Other Voting Agreement, unless the same amendment or modification of, or grant of waiver under, this Agreement is offered to Stockholder. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><I></I>[<I>The remainder of this page is intentionally blank.</I>]<I> </I></P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed,
individually or by its respective officer thereunto duly authorized, as of the date first written above. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD WIDTH="91%"></TD></TR>


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<TD VALIGN="top" COLSPAN="3">S<SMALL>TEM</SMALL>C<SMALL>ELLS</SMALL>, I<SMALL>NC</SMALL>.</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">By:</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Name:</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Title:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" COLSPAN="3">S<SMALL>TOCKHOLDER</SMALL>:</TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">By:</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Name:</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Title:</TD></TR>
</TABLE></DIV>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-7 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed,
individually or by its respective officer thereunto duly authorized, as of the date first written above. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top" COLSPAN="3">M<SMALL>ICROBOT</SMALL> M<SMALL>EDICAL</SMALL> L<SMALL>TD</SMALL>.:</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">By:</P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">&nbsp;</P></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Name:</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top">Title:</TD></TR>
</TABLE></DIV>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-8 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>SCHEDULE I TO </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VOTING AGREEMENT </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


<TR>
<TD WIDTH="20%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="18%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="19%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="14%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="19%"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; border-bottom:1.00pt solid #000000; width:20.00pt; font-size:8pt; font-family:Times New Roman"><B>Name</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Address</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Shares of Company</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Preferred Stock</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Shares&nbsp;of&nbsp;Company</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Common Stock</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Options to Purchase</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Company&nbsp;Common&nbsp;Stock</B></P></TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
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<TD VALIGN="bottom">&nbsp;</TD>
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<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-9 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>E<SMALL>XHIBIT</SMALL> A </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>F<SMALL>ORM</SMALL> <SMALL>OF</SMALL> I<SMALL>RREVOCABLE</SMALL> P<SMALL>ROXY</SMALL> </B></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-10 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>I<SMALL>RREVOCABLE</SMALL> P<SMALL>ROXY</SMALL> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Each undersigned stockholder (each a &#147;<B><I>Stockholder</I></B>&#148;) of Microbot Medical Ltd., a company organized under the laws of
the State of Israel (the &#147;<B><I>Company</I></B>&#148;), severally and not jointly, hereby irrevocably (to the fullest extent permitted by law) appoints and constitutes StemCells, Inc., a Delaware corporation (&#147;<B><I>Parent</I></B>&#148;)
and Kenneth Stratton, solely in his capacity as an executive officer of Parent, and each of them, the attorneys and proxies of the Stockholder, with full power of substitution and resubstitution, to the full extent of Stockholder&#146;s rights with
respect to the outstanding shares of capital stock of the Company owned of record by the Stockholder as of the date of this proxy, which shares are specified on the final page of this proxy.&nbsp;(The shares of the capital stock of the Company
referred to in the immediately preceding sentence are referred to as the &#147;<B><I>Shares</I></B>.&#148;)&nbsp;Upon the execution of this proxy, all prior proxies given by Stockholder with respect to any of the Shares are hereby revoked, and
Stockholder agrees that no subsequent proxies inconsistent with this Proxy will be given with respect to any of the Shares. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This proxy is
irrevocable, is coupled with an interest and is granted in connection with, and as security for, the Voting Agreement, dated as of the date hereof, between Parent, Stockholder and the Company (the &#147;<B><I>Voting Agreement</I></B>&#148;), and is
granted in consideration of and as an inducement to Parent entering into the Agreement and Plan of Merger and Reorganization, dated as of the date hereof, among Parent, C&amp;RD, an Israeli corporation and wholly-owned subsidiary of Parent
(&#147;<B><I>Merger Sub</I></B>&#148;), and the Company (the &#147;<B><I>Merger Agreement</I></B>&#148;), whereby Merger Sub will be merged with and into the Company (the &#147;<B><I>Merger</I></B>&#148;).&nbsp;This proxy will terminate on the
termination of the Voting Agreement in accordance with its terms.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Prior to the termination of the Voting Agreement or the Merger
Agreement, the attorneys and proxies named above will be empowered, and may exercise this proxy, to vote any Shares owned by Stockholder, at any meeting of the stockholders of the Company, however called, or at any adjournment or postponement
thereof and on every action or approval by written consent of the stockholders of the Company: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(i) in favor of the Merger and the
adoption of the Merger Agreement and the approval of the transactions contemplated by the Merger Agreement, and any actions required in furtherance thereof; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(ii) against any action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any
other obligation of the Company under the Merger Agreement; and </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">(iii)&nbsp;against (a)&nbsp;any Acquisition Proposal (as defined in the
Merger Agreement) involving the Company or any of its subsidiaries, or (b)&nbsp;any action that is intended, or would reasonably be expected, to impede, interfere with, prevent, delay, postpone or adversely affect the Merger or the transactions
contemplated by the Merger Agreement.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Stockholder may vote the Shares on all other matters not referred to in this proxy, and the
attorneys and proxies named above may not exercise this proxy with respect to such other matters. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">This proxy shall be binding upon the
heirs, estate, executors, personal representatives, successors and assigns of the Stockholder (including any transferee of any of the Shares). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Any term or provision of this proxy that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions of this proxy or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.&nbsp;Upon such determination that any term or provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this proxy so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><I></I>[<I>Signature page follows</I>]<I> </I></P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-11 </P>


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<TD VALIGN="top">Dated:&nbsp;August &nbsp;&nbsp;&nbsp;&nbsp;, 2016</TD>
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<TD VALIGN="top"><B>S<SMALL>TOCKHOLDER</SMALL></B></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">&nbsp;</P></TD></TR>
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<TD VALIGN="top">Signature</TD></TR>
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<TD VALIGN="top">Printed Name</TD></TR>
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<TD VALIGN="bottom">&nbsp;</TD>
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<TD VALIGN="top">Number of shares of capital stock of Company owned of record as of the date of this proxy:</TD></TR>
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</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">A-B-2-12 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B><A NAME="toc250555_102"></A>Annex B </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>C<SMALL>ARABINER</SMALL> LLC </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>214 G<SMALL>RANT</SMALL> A<SMALL>VENUE</SMALL>, S<SMALL>UITE</SMALL> 350 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>S<SMALL>AN</SMALL> F<SMALL>RANCISCO</SMALL>, CA 94108 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">August 14, 2016 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Board of Directors </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">StemCells, Inc. </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">7707 Gateway Blvd #140 </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Newark, CA 94560 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Members of the Board of Directors: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">We understand that StemCells, Inc. (&#147;Parent&#148;), and a wholly-owned subsidiary of Parent (the &#147;Merger Sub&#148;), and MicroBot
Medical Ltd. (the &#147;Company&#148;), propose to enter into an Agreement and Plan of Merger and Reorganization, substantially in the form of the draft dated as of August 4, 2016 (the &#147;Merger Agreement&#148;), pursuant to which Merger Sub will
issue shares of Parent common stock&nbsp;(the &#147;Offer&#148;) to acquire all the issued and outstanding shares of Company common stock in exchange for Parent common stock (the &#147;Common Stock&#148;&nbsp;and the &#147;Consideration&#148;). </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Following the consummation of the Offer, the Merger Agreement provides for, among other things, the merger (the &#147;Merger&#148; and,
together with the Offer, the &#147;Transaction&#148;) of Merger Sub with the Company pursuant to which the separate corporate existence of Merger Sub shall cease and the Parent shall continue as the surviving corporation of the Merger.&nbsp;The
Merger Agreement also provides for financing commitments to the Parent and the Company, respectively, (the &#147;Financing Commitments&#148;) that are material elements of the Transaction. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Carabiner LLC (&#147;Carabiner&#148;) is regularly engaged in the valuation of businesses in connection with mergers and acquisitions,
partnerships, private financings, financial restructurings, and other activities. We have been engaged by the Parent pursuant to an engagement letter dated July 31, 2106 (the &#147;Engagement Letter&#148;) to render a fairness opinion to the Board
of Directors of the Parent in connection with the Transaction. We will receive a fee for our services pursuant to the Engagement Letter, which will be payable upon delivery of this opinion, and we also will be reimbursed for expenses incurred. The
Parent has agreed to indemnify Carabiner against liabilities arising out of or in connection with the services rendered by Carabiner under such Engagement Letter. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">You have asked for our opinion as to whether the Consideration to be paid by the Parent pursuant to the Merger Agreement is fair, from a
financial point of view, to the holders of the Common Stock. In conducting our analysis and arriving at the opinion expressed herein, we have, among other things, (i) reviewed the draft Merger Agreement dated August 4, 2016, as well as the draft
term sheets and commitment letters for the Financing Commitments, which, for purposes of this opinion we have assumed, with your permission, to be identical in all material respects to the documents to be executed; (ii) reviewed certain financial
and other information about the Parent that was publicly available as well as the draft Form 10-Q the Parent anticipates filing on August 15, 2016 in which it discloses, among other items, the principal terms of the Transaction and the Financing
Commitments; (iii) reviewed information furnished to us by the Parent&#146;s and the Company&#146;s management, including certain internal financial analyses, budgets, reports and other information; (iv) held discussions with various members of
senior management of the Parent and the Company concerning historical and current operations, financial conditions and prospects, including recent financial performance; (v) reviewed the recent share trading price history of the Parent; (vi)
reviewed the valuation of the Company implied by the Consideration; (vii) reviewed the valuations of publicly traded companies that we deemed comparable in certain respects to the Company; (viii) reviewed the financial terms of selected acquisition
transactions involving companies in lines of business that we deemed comparable in certain respects to the business of the Company. In addition, we have conducted such other quantitative reviews, analyses, and inquiries relating to the Company as we
considered appropriate in rendering this opinion. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">B-1 </P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In our review and analysis and in rendering this opinion, we have assumed and relied upon, but
have not assumed any responsibility to independently investigate or verify, the accuracy, completeness and fair presentation of all financial and other information that was provided to us by the Parent and the Company or that was publicly available
to us (including, without limitation, the information described above), or that was otherwise reviewed by us. This opinion is expressly conditioned upon such information (whether written or oral) being complete, accurate and fair in all respects
material to our analysis. We have further relied upon the assurances of management of the Parent or the Company that they are unaware of any facts that would make the information provided to us incomplete or misleading in any respect. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our analyses were based, among other things, on the financial projections of the Company (the &#147;Financial Projections&#148;) furnished to
us by senior management of the Company. With respect to the Financial Projections, we note that projecting future results of any company is inherently subject to uncertainty. We express no opinion as to the Financial Projections or the assumptions
on which they are based. In addition, in rendering this opinion, we have assumed that the Financial Projections have been reasonably prepared by management and reflect management&#146;s best currently available estimates and good faith judgment of
the future competitive, operating and regulatory environment and related financial performance of the Company. Although the Financial Projections did not form the principal basis for our opinion, but rather constituted one of many items that we
employed, changes to the Financial Projections could affect the opinion rendered herein. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Our opinion speaks only as of the dates hereof
and we expressly disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting our opinion of which we become aware after the date hereof. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In our review, we did not obtain or receive any independent evaluation or appraisal of the assets or liabilities of, nor did we conduct a
comprehensive physical inspection of any of the assets of, the Company, nor have we been furnished with any such evaluations or appraisals or reports of such physical inspections, nor do we assume any responsibility to obtain any such evaluations,
appraisals or inspections. Our opinion is based on economic, monetary, regulatory, market and other conditions existing and which can be evaluated as of the date hereof. We have made no independent investigation of any legal or accounting matters
affecting the Company, and we have assumed the correctness in all respects material to our analysis of all legal and accounting advice given to the Parent and its Board of Directors, including, without limitation, advice as to the legal, accounting
and tax consequences of the terms of, and transactions contemplated by, the Merger Agreement to the Parent and its stockholders. In addition, in preparing this opinion, we have not taken into account any tax consequences of the Transaction to either
the Parent or to any holder of Common Stock. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In rendering this opinion we have also assumed that: (i) in all respects material to our
analysis that the representations and warranties of each party contained in the Merger Agreement and the Financing Commitments are true and correct, that each party will perform all of the covenants and agreements required to be performed by it
under the Merger Agreement and the Financing Commitments and that all conditions to the consummation of the Transaction will be satisfied without waiver thereof; (ii) there is not now, and there will not as a result of the consummation of the
transactions contemplated by the Merger Agreement be, any default, or event of default, under any indenture, credit agreement or other material agreement or instrument to which the Parent or the Company or any of their subsidiaries or affiliates is
a party. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">In addition, we were not requested to and did not provide advice concerning the structure, the specific amount of the
consideration, or any other aspects of the Transaction, or to provide services other than the delivery of this opinion. We were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all
or any part of the Parent or any other alternative transaction. We did not participate in negotiations with respect to the terms of the Transaction and related transactions. Consequently, we have assumed that such terms are the most beneficial terms
from the Parent&#146;s perspective that could under the circumstances be negotiated among the parties to such Transaction. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">B-2 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">It is understood that our opinion is solely for the use and benefit of the Board of Directors of
the Parent in its consideration of the Transaction, and our opinion does not address the relative merits of the transactions contemplated by the Merger Agreement as compared&nbsp;to any alternative transactions that might be available to the Parent,
nor does it address the underlying business decision by the Parent to engage in the Transaction or the terms of the Merger Agreement or the documents referred to therein. Our opinion does not constitute a recommendation as to how any holder of
shares of Common Stock should vote or act on any matter relevant to the Merger Agreement. Our opinion may not be used or referred to by the Parent, or quoted or disclosed to any person in any matter, without our prior written consent.
Notwithstanding the foregoing, if required by law, our opinion may be included in the Parent&#146;s proxy statement or similar disclosure document with respect to the Transaction; provided that it is reproduced in full, and that any summary of, or
other description of, the opinion in such proxy statement or other disclosure document, or other reference to Carabiner or its opinion, will be acceptable to Carabiner and its counsel in their sole discretion. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Based upon and subject to the foregoing, we are of the opinion that, as of the date hereof, the Consideration to be paid by the Parent
pursuant to the Merger Agreement is fair, from a financial point of view, to the holders of the Common Stock. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top">Very truly yours,</TD></TR>
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<TD VALIGN="top">/s/ Carabiner LLC</TD></TR>
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<TD VALIGN="top">Carabiner LLC</TD></TR>
</TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">B-3 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right"><B><A NAME="toc250555_103"></A>Annex C </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">CERTIFICATE OF AMENDMENT TO THE </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">RESTATED CERTIFICATE OF INCORPORATION OF </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">STEMCELLS, INC. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">StemCells, Inc.
(the &#147;Corporation&#148;), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the &#147;DGCL&#148;), hereby certifies that </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top">Pursuant to the DGCL, upon the filing of this Certificate of Amendment to the Restated Certificate of Incorporation (the &#147;Charter&#148;), each [&#9679;] shares of the Corporation&#146;s common stock, par value
$0.01 per share, issued and outstanding immediately prior to the Effective Time (the &#147;Old Shares&#148;) shall automatically be combined into one validly issued, fully paid and non-assessable share of common stock without any further action by
the Corporation or the holder thereof, subject to the treatment of fractional share interests as described below (the &#147;Reverse Stock Split&#148;). The Corporation shall not issue fractional shares in connection with the Reverse Stock Split.
Holders of Old Shares who would otherwise be entitled to receive a fraction of a share on account of the Reverse Stock Split shall have their fractional share rounded up to the nearest whole number as of the Effective Time. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">2.</TD>
<TD ALIGN="left" VALIGN="top">Upon filing of this certificate of Amendment to the Charter, section ONE of the Charter is hereby amended to read in its entirety as set forth below: </TD></TR></TABLE>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">The name of this corporation is &#147;Microbot Medical Inc.&#148; </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">3.</TD>
<TD ALIGN="left" VALIGN="top">Upon filing of this certificate of Amendment to the Charter, the first paragraph of section THREE of the Charter is hereby amended to read in its entirety as set forth below: </TD></TR></TABLE>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman">The total number of shares of stock that this Corporation shall have authority to issue is [&#9679;], consisting of [&#9679;] shares of Common
Stock, with a par value of $0.01 per share (the &#147;Common Stock&#148;), and [&#9679;] shares of Undesignated Preferred Stock with a par value of $0.01 per share (the &#147;Undesignated Preferred Stock&#148;). </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">4.</TD>
<TD ALIGN="left" VALIGN="top">This Certificate of Amendment was duly adopted in accordance with Section&nbsp;242 of the DGCL. The Board of Directors duly adopted resolutions setting forth and declaring advisable this Certificate of Amendment and
directed that the proposed Amendment be considered by the stockholders of the Corporation. A meeting of stockholders was duly called upon notice in accordance with Section&nbsp;222 of the DGCL and held on [&#9679;], 2016, at which meeting the
necessary number of shares were voted in favor of the proposed amendment. The stockholders of the Corporation duly adopted this Certificate of Amendment. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">5.</TD>
<TD ALIGN="left" VALIGN="top">The remaining provisions of the Charter, including without limitation the remaining provisions of section THREE, are not affected by the aforementioned amendment and remain in full force and are not affected by this
Certificate of Amendment. </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">IN WITNESS WHEREOF, StemCells, Inc. has caused this Certificate of Amendment to be signed by its President and
General Counsel, Kenneth B. Stratton, on this [&#9679;] day of [&#9679;], 2016. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top" COLSPAN="3"><B>STEMCELLS, INC.</B></TD></TR>
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<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top">By:</TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000">&nbsp;</TD>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000">&nbsp;</TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Name:</P> <P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman">Title:</P></TD></TR>
</TABLE></DIV>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">C-1 </P>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
