RedHill Biopharma (RDHL) 6-K Current report (foreign)

EXHIBIT 2

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

SEPTEMBER 30, 2014

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

SEPTEMBER 30, 2014

TABLE OF CONTENTS

	Page
UNAUDITED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2014 - IN U.S. DOLLARS:
Condensed interim statements of comprehensive loss	2
Condensed interim statements of financial position	3
Condensed interim statements of changes in equity	4
Condensed interim statements of cash flows	5
Notes to the condensed interim financial statements	6-13

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013
	U.S. dollars in thousands
REVENUES:
Licensing revenue		-			-			7,000			-
Other revenue		4			3			13			11
TOTAL REVENUES		4			3			7,013			11
COST OF REVENUE		-			-			(1,050	)		-
RESEARCH AND DEVELOPMENT EXPENSES, net		(4,103	)		(2,207	)		(8,996	)		(5,535	)
GENERAL AND ADMINISTRATIVE EXPENSES		(912	)		(545	)		(2,900	)		(1,768	)
OTHER INCOME		-			-			100			-
OPERATING LOSS		(5,011	)		(2,749	)		(5,833	)		(7,292	)
FINANCIAL INCOME		1,146			53			637			113
FINANCIAL EXPENSES		(371	)		(3	)		(187	)		(9	)
FINANCIAL INCOME, net		775			50			450			104
COMPREHENSIVE LOSS		(4,236	)		(2,699	)		(5,383	)		(7,188	)
LOSS PER ORDINARY SHARE, (U.S. dollars)
BASIC		0.05			0.04			0.06			0.12
DILUTED		0.06			0.04			0.07			0.12

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

2

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited)

	September 30,			December 31,
	2014			2013
	U.S. dollars in thousands
CURRENT ASSETS
Cash and cash equivalents		12,008			11,851
Bank deposits		17,040			19
Financial assets at fair value through profit or loss		-			243
Prepaid expenses and receivables		2,518			488
		31,566			12,601
NON-CURRENT ASSETS
Bank deposits		80			81
Fixed assets		118			103
Intangible assets		2,525			1,555
		2,723			1,739
TOTAL ASSETS		34,289			14,340
CURRENT LIABILITIES
Accounts payable and accrued expenses		2,584			2,415
NON-CURRENT LIABILITIES
Derivative financial instruments, see note 7		1,766			-
TOTAL LIABILITIES		4,350			2,415
EQUITY
Ordinary shares		240			174
Additional paid-in capital		65,461			43,144
Warrants		1,528			1,867
Accumulated deficit		(37,290	)		(33,260	)
TOTAL EQUITY		29,939			11,925
TOTAL LIABILITIES AND EQUITY		34,289			14,340

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

3

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

	Ordinary shares		Additional paid-in capital		Warrants			Accumulated deficit			Total equity
	U.S. dollars in thousands
BALANCE AT JULY 1, 2014		240		65,447		1,528			(33,536	)		33,679
CHANGES IN THE THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2014:
Share-based compensation to employees and service providers		-		-		-			482			482
Exercise of options into ordinary shares		*		14		-			-			14
Comprehensive loss		-		-		-			(4,236	)		(4,236	)
BALANCE AT SEPTEMBER 30, 2014		240		65,461		1,528			(37,290	)		29,939
BALANCE AT JULY 1, 2013		167		39,679		3,232			(27,822	)		15,256
CHANGES IN THE THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2013:
Share-based compensation to employees and service providers		-		-		-			463			463
Exercise of warrants and options into ordinary shares, net		4		1,929		(662	)		-			1,271
Warrants expiration		-		71		(71	)		-			-
Comprehensive loss		-		-		-			(2,699	)		(2,699	)
BALANCE AT SEPTEMBER 30, 2013		171		41,679		2,499			(30,058	)		14,291

*           Represents amount less than $1 thousand.

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

4

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY (continued)

(Unaudited)

	Ordinary shares			Ordinary shares to be issued			Additional paid-in capital		Warrants			Accumulated deficit			Total equity
	U.S. dollars in thousands
BALANCE AT JANUARY 1, 2014		174			-			43,144		1,867			(33,260	)		11,925
CHANGES IN THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2014:
Share-based compensation to employees and service providers		-			-			-		-			1,353			1,353
Exercise of warrants and options into ordinary shares, net		11			-			5,696		(702	)		-			5,005
Issuance of ordinary shares and warrants		55			-			15,927		1,057			-			17,039
Warrants expiration		-			-			694		(694	)		-			-
Comprehensive loss		-			-			-		-			(5,383	)		(5,383	)
BALANCE AT SEPTEMBER 30, 2014		240	��		-			65,461		1,528			(37,290	)		29,939
BALANCE AT JANUARY 1, 2013		143			8,020			31,469		3,273			(23,887	)		19,018
CHANGES IN THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2013:
Share-based compensation to employees and service providers		-			-			-		-			1,017			1,017
Issuance of ordinary shares and warrants		17			(5,661	)		5,735		9			-			100
Settlement of the royalty obligations		7			(2,359	)		2,352		-			-			-
Exercise of warrants and options into ordinary shares, net		4			-			2,052		(712	)		-			1,344
Warrants expiration		-			-			71		(71	)		-			-
Comprehensive loss		-			-			-		-			(7,188	)		(7,188	)
BALANCE AT SEPTEMBER 30, 2013		171			-			41,679		2,499			(30,058	)		14,291

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

5

REDHILL BIOPHARMA LTD.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013
	U.S. dollars in thousands
OPERATING ACTIVITIES:
Comprehensive loss		(4,236	)		(2,699	)		(5,383	)		(7,188	)
Adjustments in respect of income and expenses not involving cash flow:
Share-based compensation to employees and service providers		482			463			1,353			1,017
Depreciation and amortization		6			7			69			18
Fair value gain on derivative financial instruments		(1,093	)		-			(559	)		-
Fair value gains on financial assets at fair value through profit or loss		-			(6	)		-			(50	)
Revaluation of bank deposits		(12	)		(15	)		(20	)		(13	)
Exchange differences relating to cash and cash equivalents		323			(27	)		109			(32	)
		(294	)		422			952			940
Changes in assets and liability items:
Increase in prepaid expenses and  receivables		(149	)		(192	)		(2,030	)		(580	)
Increase in accounts payable and accrued expenses		875			363			169			846
		726			171			(1,861	)		266
Net cash used in operating activities		(3,804	)		(2,106	)		(6,292	)		(5,982	)
INVESTING ACTIVITIES:
Purchase of fixed assets		(4	)		(3	)		(34	)		(12	)
Purchase of intangible assets		(1,020	)		(200	)		(1,020	)		(200	)
Change in investment in current bank deposits		-			-			(7,000	)		193
Purchase of non-current bank deposits		-			-			(10,000	)		-
Proceeds from sale of financial assets at fair value through profit or loss		-			-			243			876
Net cash provided by (used in) investing activities		(1,024	)		(203	)		(17,811	)		857
FINANCING ACTIVITIES:
Proceeds from issuance of ordinary shares and derivative financial instruments, net		-			-			19,364			100
Exercise of warrants and options into ordinary shares, net		14			1,271			5,005			1,344
Net cash provided by financing activities		14			1,271			24,369			1,444
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,814	)		(1,038	)		266			(3,681	)
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS		(323	)		27			(109	)		32
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		17,145			14,176			11,851			16,814
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD		12,008			13,165			12,008			13,165
Supplementary information on interest received in cash		62			10			77			25

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

6

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL:

a.       General

RedHill Biopharma Ltd. (the "Company") was incorporated in Israel on August 3, 2009 and is active in the pharmaceutical industry. The Company is focused primarily on the development and acquisition of late clinical-stage, proprietary drugs for the treatment of inflammatory and gastrointestinal diseases, including gastrointestinal cancers (the "Drugs"). Additionally, the Company's strategy is to commercialize these Drugs, possibly through cooperation with other pharmaceutical and biotechnology companies, and to acquire rights to additional drugs.

In February 2011, the Company listed its securities on the Tel-Aviv Stock Exchange (“TASE”) and they have been traded on the TASE since then. Since December 2012, the Company's American Depositary Shares (“ADSs”) have been listed on the NASDAQ Capital Market (“NASDAQ”).

The Company's registered address is at 21 Ha'arba'a St, Tel-Aviv, Israel.

The Company is engaged in the research and development of most of its therapeutic candidates and to date has out-licensed only one of its therapeutic candidates. Accordingly, there is no assurance that the Company’s business will generate positive cash flow. Through September 30, 2014, the Company has an accumulated deficit and its activities have been funded through public and private offerings of the Company's securities.

The Company plans to further fund its future operations through commercialization of its therapeutic candidates, out-licensing certain programs and raising additional capital. The Company's current cash resources are not sufficient to complete the research and development of all of the Company's therapeutic candidates. Management expects that the Company will incur more losses as it continues to focus its resources on advancing its therapeutic candidates based on a prioritized plan that will result in negative cash flows from operating activities. The Company believes its existing capital resources should be sufficient to fund its current and planned operations for at least the next 12 months.

If the Company is unable to commercialize or further out-license its remaining therapeutic candidates or obtain future financing, the Company may be forced to delay, reduce the scope of, or eliminate one or more of its research, development programs or commercialization related to the therapeutic candidates, any of which may have a material adverse effect on the Company's business, financial condition and results of operations.

b.       Approval of the condensed interim financial statements

These condensed interim financial statements were approved by the Board of Directors on November 9, 2014.

7

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 2 - BASIS OF PREPARATION OF THE CONDENSED INTERIM FINANCIAL STATEMENTS:

a.    The Company's condensed interim financial statements for the nine and three months ended September 30, 2014 (the "Condensed Interim Financial Statements") have been prepared in accordance with International Accounting Standard IAS 34, “Interim Financial Reporting”. These Condensed Interim Financial Statements, which are unaudited, do not include all disclosures necessary for a complete statement of financial position, results of operations, and cash flow in conformity with generally accepted accounting principles. The Condensed Interim Financial Statements should be read in conjunction with the annual financial statements as of December 31, 2013 and for the year then ended and their accompanying notes, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board (“IASB”). The results of operations for the nine and three months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period.

The accounting policies and calculation methods applied in the preparation of the Condensed Interim Financial Statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2013.

b.    New IFRSs not yet in effect, and which the Company did not elect to adopt early, were listed in the 2013 annual financial statements.

NOTE 3 - AGREEMENT WITH SALIX PHARMACEUITICALS:

On February 27, 2014, the Company entered into an exclusive agreement by which Salix Pharmaceuticals, Inc. ("Salix") licensed the worldwide exclusive rights to one of the Company's pharmaceutical candidates, an encapsulated formulation for bowel preparation, and rights to other purgative developments. Under the license agreement, Salix paid an upfront payment of $7 million with subsequent potential milestone payments up to a total of $5 million. Salix has also agreed to pay the Company tiered royalties on net sales, ranging from low single-digit up to low double-digits. As there were no further obligations of the Company under the agreement with Salix to develop any product based on the license and related intellectual property granted to Salix, the upfront payment of $7 million was recognized as revenue in the statement of comprehensive loss.

NOTE 4 - AGREEMENTS COVERING INTELLECTUAL PROPERTY:

a.   On March 7, 2014, the Company entered into a licensing agreement with Temple University to secure certain patent rights related to RHB-102 for the treatment of chemotherapy and radiotherapy-induced nausea and vomiting. Those patents had previously been licensed to the Company by SCOLR Pharma Inc. ("SCOLR") which has since announced that it has ceased business operations. The Company therefore terminated the agreement with SCOLR and licensed the patents directly from Temple University, the original owner of the patents. Under the agreement, the Company agreed to pay Temple University certain future payments.

8

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 4 - AGREEMENTS COVERING INTELLECTUAL PROPERTY (continued):

b.   Following the agreement with Salix, and under the purchase agreement from August 11, 2010, between the Company and an Australian company from which it purchased the worldwide exclusive rights to an encapsulated formulation for bowel preparation and rights to other purgative developments sold to Salix, the Company paid to the Australian company $1 million. The amount paid was recognized as cost of revenue in the statement of comprehensive loss.

c.   On June 30, 2014, the Company entered into an agreement with Wilex AG ("Wilex"), a German publically-traded company, that grants the Company with the exclusive worldwide (excluding China, Hong Kong, Taiwan and Macao) development and commercialization rights for all indications to an oncology drug candidate. Under the terms of the agreement, the Company agreed to pay Wilex an upfront payment in the amount of $1 million. Under the terms of the agreement, the Company has also agreed to pay Wilex potential tiered royalties on net revenues, ranging from mid-teens up to 30%. Such potential royalties are due until the later of (i) the expiration of the last to expire licensed patent that covers the product in the relevant country; and (ii) the expiration of regulatory exclusivity in the relevant country. The amount of $1 million was paid in July 2014.

d.   On August 13, 2014, the Company entered into a binding exclusive option agreement with RESprotect GmbH ("RESprotect"), a German company. Under the terms of the agreement, the Company has an option to acquire the worldwide exclusive rights of an oncology drug candidate for all indications (excluding pancreatic cancer indication in South Korea). The option is for one year period, which may be extended by the Company under certain agreed terms for additional year. During the option period, the Company may, at its discretion, conduct development activities with the drug candidate. The total payment, for both the option and the acquisition of the rights, should the Company elect to exercise the option will be $100,000, as well as potential milestone payments and tiered royalties on net revenues, ranging from single-digit to mid-teens. In August 2014, the Company paid an amount of $20,000 in consideration of the option period for the first year. If the Company will exercise the option, such amount will be fully deducted from the up-front payment of $100,000, as described above.

NOTE 5 - EQUITY:

a.   In January 2014, the Company raised an aggregate gross amount of $8.5 million from two new investors in the form of private placements of ADSs and warrants.

The Company issued a total of 894,740 ADSs and warrants to purchase 357,896 ADSs at a purchase price of $9.5 per unit of one ADS and 0.4 warrants (the “Unit”). The warrants have a three-year term and may be exercised either for cash or on a cashless basis at an exercise price of $11 per ADS. In addition, if the Company issues new securities at a price per unit which is less than $9.5 (such lower price, the "Subsequent Offering Price"), the Company will issue to the investors a number of additional ADSs as necessary to reduce the effective price per Unit to equal the Subsequent Offering Price (“Price Protection Right”). If ordinary shares and/or ADSs are offered with any other rights, the Subsequent Offering Price will be calculated for each unit in such offering, consisting of one ordinary share (or ADS) plus the number of other rights per share in such offering.

9

 REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 5 - EQUITY (continued):

The Price Protection Right applies until the Company raises a certain threshold of capital.  The threshold of capital is $28 million in the agreement with the first investor and $25.5 million in the agreement with the second investor, who invested $2.5 million and signed one day later.

As of September 30, 2014, following additional capital raisings by the Company of $11.7 million (see b below), the threshold of capital that must be raised by the Company until the Price Protection Rights will no longer apply is $13.8 millionfor both investors.

The warrants were classified as a non-current derivative financial liability due to a net settlement provision. In addition, the Price Protection Right also represents a non-current derivative financial liability. These derivative financial liabilities are recognized and subsequently measured at fair value through profit or loss. The residual amounts of the proceeds were attributed to the ADSs, which were classified as equity.

The fair value of the warrants is computed using the Black and Scholes option pricing model. The fair value of the Price Protection Right is computed using a common valuation model, which takes into account specific scenarios. The fair value of the warrants and the Price Protection Right upon issuance was $2.05 million and $279,000, respectively, and was computed based on the price of an ordinary share and based on the following key parameters: risk-free interest rate of 0.13% - 0.87% and an average standard deviation of 33.38% - 53.33%. The  values of the warrants and Price Protection Right as of September 30, 2014, are based on the price of an ordinary share and based on the following key parameters: risk-free interest rate of 0.03% - 0.72% and an average standard deviation of 45.21% - 40.05%.

b.   In January 2014, the Company raised an aggregate gross amount of $11.7 million from Israeli investors in the form of a private placement. The Company issued a total of 10,458,740 ordinary shares and warrants to purchase an additional 4,183,496 ordinary shares, which have a three-year term and are exercisable at an exercise price of $1.4 per ordinary share. The net proceeds were allocated to the issued shares and warrants, based on the fair value of each of these instruments that were recognized as equity.

c.   During the nine-month period ended September 30, 2014, the Company received a notice of exercise with respect to non-tradable warrants that had been granted to investors who participated in the November 2012 Private Placement. Accordingly, the Company issued 682,200 ordinary shares for $964,000, net of issuance costs.

d.   From January 2014 through February 2, 2014, the Company received notifications on the exercise of the warrants (Series 1) that were issued as part of the Company’s initial public offering on the TASE, at an exercise price per ordinary share of $1.25. Accordingly the Company issued 3,246,082 ordinary shares for $4 million, net of related costs. In February 2014, the remaining 3,905,068 unexercised warrants (Series 1) expired along with any right or claim whatsoever of the holders.

e.   In March 2014, the Company received a notice of exercise with respect to options that had been issued to an employee in August 2011. Accordingly, the Company issued 60,000 ordinary shares for $41,000.

f.   In September 2014, the Company received a notice of exercise with respect to options that had been issued to a consultant of the Company. Accordingly, the Company issued 90,000 ordinary shares for $14,000.

10

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 6 - SHARE-BASED PAYMENTS:

a.   On March 19, 2014, the Board of Directors of the Company granted 1,830,016 options to employees and consultants of the Company under the Company’s stock options plan.  The fair value of the options grant on the date of grant was $1.26 million.

Each option is exercisable into one ordinary share at an exercise price of $1.48 per share. The options will vest as follows: for employees and consultants of the Company who had provided services exceeding one year to the Company as of the grant date, the options will vest in 16 equal quarterly installments over a four-year period. For employees and consultants of the Company who had not provided services to the Company exceeding one year as of the grant date, the options will vest as follows: 1/4 of the options will vest one year following the grant date and the rest over the following three years in 12 equal quarterly installments.
 

The fair value of the options was computed using the binomial model and the underlying data used was mainly the following: price of the Company's ordinary share: $1.44, expected volatility: 52.3%, risk-free interest rate: 2.31% and expected useful life to exercise: 7 years.

The options will be exercisable, either in full or in part, from the vesting date until the end of 7 years from the date of grant.

b.   On April 30, 2014, a general meeting of the Company’s shareholders resolved, subsequent to the approval of the Company’s Board of Directors on March 19, 2014, to allocate an aggregate of 1,760,000 options under the Company’s stock options plan to the Company's directors, including the Company's Chief Executive Officer, Mr. Dror Ben-Asher and the Company’s Deputy Chief Executive Officer, Finance and Operations, Mr. Ori Shilo. The fair value of the options granted to directors, on the date of approval by the general meeting of the Company’s shareholders, was $1.20 million.

Furthermore, on May 4, 2014, subsequent to the approval of the Company’s Board of Directors on March 19, 2014, the Company allocated an aggregate of 150,000 options under the Company’s stock options plan to a new employee. The fair value of the options grant on the date of grant was $0.1 million.

Each option is exercisable into one ordinary share at an exercise price of $1.48 per share. The options will vest as follows: for employees and consultants of the Company who had provided services exceeding one year to the Company as of the grant date, the options will vest in 16 equal quarterly installments over a four-year period. For employees and consultants of the Company who had not provided services to the Company exceeding one year as of the grant date, the options will vest as follows: 1/4 of the options will vest one year following the grant date and the rest over the following three years in 12 equal quarterly installments.

The fair value of the options was computed using the binomial model and the underlying data used was mainly the following: price of the Company's ordinary share: $1.43, expected volatility: 51.6%, risk-free interest rate: 2.25% and expected useful life to exercise: 7 years.

The options will be exercisable, either in full or in part, from the vesting date until the end of 7 years from the date of grant.

11

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 7 - FINANCIAL INSTRUMENTS:

a.   Fair value hierarchy

The following table presents Company assets and liabilities measured at fair value:

	Level 1		Level 2		Level 3		Total
	U.S. dollars in thousands
September 30, 2014:
Liabilities -
derivative financial instruments		-		1,491		275		1,766
December 31, 2013:
Assets -
financial assets at fair value through profit or loss		243		-		-		243

b.    Fair value measurements using significant unobservable input (Level 3)

The following table presents the change in instruments measured at level 3 for the period ended September 30, 2014:

	Derivative financial instruments
	U.S. dollars in thousands
Proceeds received during the reported period		279
Amounts recognized in profit and loss		(4	)
Balance at September 30, 2014		275

The fair value of the above-mentioned derivative financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

c.   The carrying amount of cash and cash equivalents, current and non-current bank deposits, receivables and account payables and accrued expenses approximate their fair values.

12

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 8 - LOSS PER ORDINARY SHARE:

a.   Basic

The basic loss per share is calculated by dividing the comprehensive loss by the weighted average number of ordinary shares in issue during the period.

	Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013
Comprehensive loss (U.S. dollars in thousands)		(4,236	)		(2,699	)		(5,383	)		(7,188	)
Weighted average number of ordinary shares
outstanding during the period (in thousands)		87,904			62,637			86,179			61,800
Basic loss per share (U.S. dollars)		0.05			0.04			0.06			0.12

b.   Diluted

The diluted loss per share for the three and nine month period ended September 30, 2013 is identical to the basic loss per share since the effect of potential dilutive shares is anti-dilutive.

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares, which is calculated using the Treasury Method. The Company has two categories of dilutive potential ordinary shares: warrants issued to investors and options issued to employees and service providers.

	Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013
Comprehensive loss (U.S. dollars in thousands)		(4,236	)		(2,699	)		(5,383	)		(7,188	)
Adjustment for financial income of warrants		(1,339	)		-			(555	)		-
Loss used to determine diluted loss per share		(5,575	)		(2,699	)		(5,938	)		(7,188	)
Weighted average number of ordinary shares
outstanding during the period (in thousands)		87,904			62,637			86,179			61,800
Adjustment for -
Warrants		819			-			821			-
Weighted average number of ordinary shares for diluted loss per share (in thousands)		88,723			62,637			87,000			61,800
Diluted loss per share (U.S. dollars)		0.06			0.04			0.07			0.12

13