Management's Discussion and Analysis of Financial Condition and Results of Operations as of

Management's Discussion and

Analysis of Financial Condition and Results of Operations

as of December 31, 2016, and for the calendar year then ended

Results for the Year Ended December 31, 2016

and development expenses for the year ended December 31, 2016 were $4.2 million, an increase of $1.6 million, or 63%, compared

to $2.6 million for the year ended December 31, 2015. The increase resulted primarily from expenses for an additional PK study

we conducted in 2016, expenses associated with the preparation of our New Drug Application for KIT-302, and expenses for our renal

function clinical trial that commenced in 2016.

and administrative expenses for the year ended December 31, 2016 were $3.0 million, an increase of $1.5 million, or 99%,

compared to $1.5 million for the year ended December 31, 2015. The increase resulted from an increase in salaries and related

expenses, including the addition of our Vice-President Business Development, and expenses related to our securities being listed

on the NASDAQ since November 2015.

income, net for the year ended December 31, 2016 was $77,000 and is primarily related to income from bank deposits, net of

exchange rate differences. Finance expense, net for the year ended December 31, 2015 was $133,000 and was primarily related to

exchange rate differences.

Company's net loss before finance expenses due to fair value adjustments of derivative instruments (primarily our Series A Warrants

traded on NASDAQ) for the year ended December 31, 2016 amounted to $7.1 million, compared with a loss of $4.2 million for

the year ended December 31, 2015.

addition, a non-cash expense of $5.0 million was incurred due to the change in the fair value of derivative instruments. This

change in fair value relates primarily to our Series A Warrants which included anti-dilution protection. The anti-dilution

protection expired in November 2016.