POLYPID LTD. AND ITS SUBSIDIARY INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2021 U.S. DOLLARS IN THOUSANDS UNAUDITED INDEX Page Condensed Consolidated Balance Sheets 2 - 3 Condensed Consolidated St

LTD. AND ITS SUBSIDIARY

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DOLLARS IN THOUSANDS

LTD. AND ITS SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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

LTD. AND ITS SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

dollars in thousands (except share and per share data)

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

LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

dollars in thousands (except share and per share data)

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

LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY

dollars in thousands (except share data)

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

LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY

dollars in thousands (except share data)

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

LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

dollars in thousands

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

LTD. AND ITS SUBSIDIARY

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

Company wholly-owns subsidiaries in the Unites States of America and Romania.

June 30, 2021, the Company has been primarily engaged in research and development.

Company expects to continue to incur substantial losses over the next several years during its clinical development phase. To fully execute

its business plan, the Company will need to complete phase III clinical studies and certain development activities as well as manufacture

the required clinical and commercial production batches in the pilot manufacturing plant. Further, the Company's product candidates will

require regulatory approval prior to commercialization and the Company will need to establish sales, marketing and logistic infrastructures.

These activities may span over many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays

in completing these activities could adversely impact the Company.

of June 30, 2021, the Company's had cash, cash equivalents, short-term deposits and long-term deposits of $52,906. During the six

months ended June 30, 2021, the Company incurred a net loss of $19,164 and had negative cash flows from operating activities of

$13,551. In addition, the Company had an accumulated deficit of $151,450 as of June 30, 2021. Management plans to seek additional

equity financing through private and public offerings or strategic partnerships and, in the longer term, by generating revenues from

Company's future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional

financing discussed above; (ii) completion of all required clinical studies; (iii) the success of its research and development; activities;

(iv) the manufacture of all required clinical and commercial production batches; (v) marketing approval by the relevant regulatory authorities;

and (vi) market acceptance of the Company's product candidates.

can be no assurance that the Company will be successful in obtaining additional financing on favorable terms, or at all or will succeed

in achieving the clinical, scientific and commercial milestones as detailed above.

2:- SIGNIFICANT ACCOUNTING POLICIES

unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements

and notes for the year ended December 31, 2020.

unaudited interim consolidated financial statements of the Company as of June 30, 2021 and for the six months then ended, have been

prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for

interim financial information. Accordingly, they do not include all the information and footnotes required by generally

accounting principles for annual consolidated financial statements. In the opinion of our management, all material adjustments considered

necessary for a fair presentation of the financial information as of and for the periods presented have been included.

significant accounting policies followed in the preparation of these unaudited interim consolidated financial statements are consistent

to those applied in the preparation of the latest annual consolidated financial statements.

preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates

and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from

an "emerging growth company", the Jumpstart Our Business Startups Act ("JOBS Act") allows the Company to delay

adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to

private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below

reflect this election.

February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-02, "Leases," which would require lessees to recognize assets and liabilities on the balance sheet for most leases,

whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to current

practice. Under the guidance, the Company would also be required to provide enhanced disclosures. The guidance states that a lessee would

recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset

2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

guidance will be effective for the Company beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023.

The Company is in the initial stage of its assessment of the new standard and is currently evaluating the quantitative impact of adoption,

and the related disclosure requirements. The Company anticipates the adoption of this standard will result in an increase in its noncurrent

assets, and current and noncurrent liabilities recorded on the consolidated balance sheets. The Company is currently evaluating the effect

that ASU 2016-02 will have on its consolidated financial statements.

December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,"

which simplifies the accounting for income taxes by removing a variety of exceptions within the framework of Accounting Standards Codification

("ASC") Topic 740. These exceptions include the exception to the incremental approach for intra period tax allocation in

the event of a loss from continuing operations and income or a gain from other items (such as other comprehensive income), and the exception

to using general methodology for the interim period tax accounting for year-to-date losses that exceed anticipated losses. The guidance

will be effective for the Company beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023. Early adoption

is permitted. The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements and

related disclosures.

3:- COMMITMENTS AND CONTINGENT LIABILITIES

minimum lease payments under non-cancelable operating leases as of June 30, 2021 (unaudited) are as follows:

of June 30, 2021 (unaudited), the Company made advance payments on account of installments on car leases in the amount of $74.

and rental expenses for the six months ended June 30, 2021 (unaudited) and June 30, 2020 were $566 and $500, respectively.