Elron Ventures : Financial Statements as of March 31, 2023

ELRON VENTURES LTD.

English Translation of Periodic Report for the First Quarter of 2023

Filed with the Israel Securities Authority

Part	Content
I	Material Changes and Updates that Occurred in Elron's Business
II	Board of Directors Report
III	Interim Financial Statements
IV	Effectiveness of the Internal Control over Financial Reporting and
	Disclosure

ELRON VENTURES LTD.

English Translation of Periodic Report for the First Quarter of 2023

Filed with the Israel Securities Authority

Part I

Material Changes and Updates that Occurred in Elron's Business for the Three Months ended March 31, 2023

Elron Ventures Ltd.

("Elron" or the "Company")

English Translation of Quarterly Report

for the First Quarter of 2023

Part I

Material Changes and Updates that Occurred in the Company's

Business in the Three Months Ended March 31, 2023

Details according to Regulation 39A of the Israel Securities Regulations (Periodic

and Immediate Reports), 1970

In this section:
"Board of Directors Report"	English Translation of Elron's Board of
	Directors Report for the First Quarter of
	2023, included in Part II of this report.
"Financial Statements"	English Translation of Elron's Interim
	Consolidated Financial Statements as of
	March 31, 2023, included in Part III of this
	report.
"Annual Report"	Elron's Annual Report for the year ended
	December 31, 2022 filed with the Israeli
	Securities Authority.

The rest of the terms in this report shall have the meaning ascribed to them in the Annual Report, unless stated explicitly otherwise.

The matters described below are in addition to the developments and changes that occurred in the first quarter of 2023 that were already previously described in Part I of the Annual Report. The matters described below are presented according to the section numbers in Part I of the Annual Report.

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1. Section 7 of Part I of the Annual Report - General Environment and Impact of External Factors on Elron's Operations1

Further to Section 7 of Part I of the Annual Report and footnote 5 thereof, Pitchbook- NVCA reported that US VC activity dropped in all stages and sectors in the first quarter of 2023. Likewise, IVC-LeumiTech reported that the first quarter of 2023 was the weakest quarter in Israel hi-tech capital raising since 2018. This state is adversely affecting our portfolio companies' ability to raise capital and achieve their desired valuations.

In the first quarter of 2023, US deal activity for early-stage venture (A + B financing rounds) declined significantly, a six-quarter consecutive decline in deal value and the lowest deal value observed since the second quarter of 2020. Late-stage (C + D financing rounds) deal value in the US declined for the seventh straight quarter. In Israel, A series returned to levels last seen in the third quarter of 2020, prior to the exceptional quarterly amounts raised between 2021-2022. The number of mid (B + C rounds) to late rounds was back down to 2018 levels. Deal value of mid rounds was slightly above the 2018 average, while late rounds experienced a smaller decline.

Pitchbook-NVCA attribute these declines to economic volatility and a lack of exits, which has led many investors to slow their deployment of capital into larger rounds in an effort to preserve capital. Low capital supply relative to capital demand, among other contributing factors, has continued to create an increasingly investor-friendly venture market, and contributed to the valuation declines observed in the first quarter of 2023. Likewise, IVC-LeumiTech reported that the first quarter of 2023 saw very weak exit activity in Israel. This state is adversely affecting the exit prospects of our portfolio companies.

Accordingly, Elron continues streamlining its headquarter expenses and intends to continue to focus on its existing cyber and software group companies and on identifying

1 The sources of information for this part are: Pitchbook-NVCA Venture Monitor, Q1 2023 IVC & LeumiTech: Israel Tech Review Q1/2023

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new investments in the cyber and software field, while focusing on the cooperation with Rafael, through RDC.

2. Section 15 of Part I of the Annual Report - Investments

In the first quarter of 2023, Elron (directly and indirectly) invested approximately $2.4 million in group companies. For further details, see Section 1.4 of the Board of Directors' Report and Note 3 to the Financial Statements.

3. Section 19 of Part I of the Annual Report - Material Agreements and Collaboration Agreements

Further to Section 19.2 of Part I of the Annual Report, with regard to the CartiHeal Transaction, in March 2023, the Interim Period (as defined in the Annual Report) has ended and an updated offer from Bioventus for the payment of the debt was rejected by the Sellers and Bioventus did not pay the full balance due under the Transaction by the end of the Interim Period with an additional extension of one day and did not meet the conditions for extending the Interim Period. As a result, the return of the CartiHeal shares to the sellers and the cancellation of implementation of the Transaction is final.

In accordance with the updated agreement, and in light of the above cancellation, all sums paid by Bioventus to the sellers in the past in connection with the Transaction, as well as the funds that Bioventus invested in CartiHeal (and shares of CartiHeal issued to them as a result) and/or transferred in order to finance CartiHeal's activities, will not be refunded to Bioventus.

Following the aforementioned cancellation of the Transaction and the return of the shares, Elron holds approximately 27.5% of CartiHeal's share capital on a fully diluted basis, and the investment in CartiHeal was included in Elron's financial reports for the first quarter of 2023 as an investment in an associate company, and qualifies for the criteria for classification as a main company in Elron's reports (as defined in Section

2.1.5 of Part A of the Annual Report, for details regarding CartiHeal, see Section 24 of Part A of the Annual Report).

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