We are exposed to the risk of having claims seeking monetary damages
being filed against us, for example with regard to securities-related claims. In the event that we are required to pay damages for any
such claim, we may be forced to seek bankruptcy or to liquidate because our asset base and revenue base may be insufficient to satisfy
the payment of damages and any insurance that we have obtained may not provide sufficient coverage against potential liabilities.
Our business and operations would suffer in
the event of information technology system failures, including security breaches.
Despite the implementation of security measures, our internal computer
systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security
breach to date, if such an event were to occur and cause interruptions in our operations, causing our business to suffer. To the extent
that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur liability and the further development of our product could be delayed.
A cybersecurity incident, other technology
disruptions or failure to comply with laws and regulations relating to privacy and the protection of data relating to individuals could
negatively impact our business, our reputation and our relationships with customers.
We use computers in substantially all aspects of our business operations.
We also use mobile devices, social networking and other online activities to connect with our employees, suppliers and co-manufacturers.
Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of
information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual
property, including suppliers’ information, private information about employees and financial and strategic information about us
and our business partners. Further, as we pursue new initiatives that improve our operations and cost structure, potentially including
acquisitions, we may also be expand and improve our information technologies, resulting in a larger technological presence and corresponding
exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with new initiatives or acquisitions,
we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and
cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss,
misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information
technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity,
brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a
material adverse effect on our business, financial condition or results of operations.
In addition, we are subject to laws, rules and regulations in the
United States, the European Union and other jurisdictions relating to the collection, use and security of personal information and data.
Such data privacy laws, regulations and other obligations may require us to change our business practices and may negatively impact our
ability to expand our business and pursue business opportunities. We may incur significant expenses to comply with the laws, regulations
and other obligations that apply to us. Additionally, the privacy- and data protection-related laws, rules and regulations applicable
to us are subject to significant change. Several jurisdictions have passed new laws and regulations in this area, and other jurisdictions
are considering imposing additional restrictions. Privacy- and data protection-related laws and regulations also may be interpreted and
enforced inconsistently over time and from jurisdiction to jurisdiction. Any actual or perceived inability to comply with applicable privacy
or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental
investigations, damage our reputation, and adversely affect our business.
Disruptions in the worldwide economy may adversely
affect our business, results of operations and financial condition.
The global economy can be negatively impacted by a variety of factors
such as the spread or fear of spread of contagious diseases (such as the COVID-19 pandemic), man-made or natural disasters, actual or
threatened war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty. Such adverse and uncertain economic
conditions may impact consumer demand for alternative proteins in general, and clean meats specifically, which may in turn impact manufacturer
and retailer demand for our technologies. In addition, our ability to manage normal commercial relationships with suppliers may suffer.
Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns as a result of various factors,
including job losses, inflation, higher taxes, reduced access to credit, change in government economic policy and international trade
disputes. In particular, consumers may reduce the amount of cultured meat that they purchase in favor of conventional meat or other alternative
proteins, which may have lower retail prices, which could indirectly affect our results of operations. Manufacturer and retailers may
become more conservative in response to these conditions and seek to delay commencing cultured market manufacturing operations or reduce
existing operations. Our results of operations will depend upon, among other things, the financial condition of our business customers
and our ability to supply them with the means to manufacture products that appeal to consumers at the right price. Decreases in demand
for the products manufactured by our customers would put downward pressure on margins and would negatively impact our financial results.
Prolonged unfavorable economic conditions or uncertainty may result in end consumers making long-lasting changes to their discretionary
spending behavior on a more permanent basis, which may likewise have an indirect adverse effect on our sales and profitability.
Food safety and food-borne illness incidents may materially adversely
affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and
reducing demand for our product offerings.
Selling food for human consumption involves inherent legal and other risks, and there
is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related
to allergens, food-borne illnesses or other food safety incidents caused by products we sell, or involving our suppliers or co-manufacturers,
could result in the discontinuance of sales of these products or our relationships with such suppliers or co-manufacturers, or otherwise
result in increased operating costs, regulatory enforcement actions or harm to our reputation. Shipment of adulterated or misbranded products,
even if inadvertent, can result in criminal or civil liability. Such incidents could also expose us to product liability, negligence or
other lawsuits, including consumer class action lawsuits. Any claims brought against us may exceed or be outside the scope of our existing
or future insurance policy coverage or limits. Any judgment against us that is more than our policy limits or not covered by our policies
or not subject to insurance would have to be paid from our cash reserves, which would reduce our capital resources.
The occurrence of food-borne illnesses or other food safety incidents could also adversely
affect the price and availability of affected ingredients, resulting in higher costs, disruptions in supply and a reduction in our sales.
Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by our actions, could compel us, our
suppliers, our distributors or our customers, depending on the circumstances, to conduct a recall in accordance with FDA regulations,
comparable state laws or foreign laws such as those of the European Union and the United Kingdom. Food recalls could result in significant
losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time
and potential loss of existing distributors or customers and a potential negative impact on our ability to attract new customers due to
negative consumer experiences or because of an adverse impact on our brand and reputation. The costs of a recall could exceed or be outside
the scope of our existing or future insurance policy coverage or limits.
In addition, food companies have been subject to targeted, large-scale tampering as
well as to opportunistic, individual product tampering, and we, like any food company, could be a target for product tampering. Forms
of tampering could include the introduction of foreign material, chemical contaminants and pathological organisms into consumer products
as well as product substitution. FDA regulations require companies like us to analyze, prepare and implement mitigation strategies specifically
to address tampering (i.e., intentional adulteration) designed to inflict widespread public health harm. If we do not adequately address
the possibility, or any actual instance, of intentional adulteration, we could face possible seizure or recall of our products and the
imposition of civil or criminal sanctions, which could materially adversely affect our business, financial condition and operating results.
RISKS RELATED TO GOVERNMENT REGULATION
We expect that products utilizing our technologies
will be subject to regulations that could adversely affect our business and results of operations.
The manufacture and marketing of food products is highly regulated.
We, our suppliers and licensees, may be subject to a variety of laws and regulations. These laws and regulations apply to many aspects
of our business, including the manufacture, composition and ingredients, packaging, labeling, distribution, advertising, sale, quality
and safety of food products, as well as the health and safety of our employees and the protection of the environment.
We are focused on developing a novel, proprietary three-dimensional
bioprinter to deposit layers of cells (including stem cells and differentiated stem cells), scaffolding, and cell nutrients in a three-dimensional
form of structured cultured meat. The cultured meat, in turn, will be produced by our customers. Peace of Meat intends to produce
cultured avian fat that is anticipated to be used as an ingredient, inter alia, in the production of finished cultured poultry. Neither
we nor Peace of Meat intend to manufacture, distribute and sell branded cultured-meat end products for consumer consumption.
Peace of Meat is a Business-To-Business, or B2B, ingredient producer
and will be subject to regulation by the U.S. Food and Drug Administration, or FDA, to the extent its products are introduced to the United
States for use by a manufacturer to produce cultured meat or other food in the United States, and analogous foreign regulatory bodies
elsewhere. In the United States, the FDA and the U.S. Department of Agriculture, or USDA, Food Safety and Inspection Service, or FSIS,
share an ingredient approval process. The FDA determines the safety of substances and prescribes safe conditions of use. The USDA-FSIS
determines the efficacy and suitability of food ingredients in meat, poultry, and egg products. Thus, the USDA’s efficacy and suitability
requirements will also apply to the extent the ingredients are destined for use in USDA-regulated meat and poultry products.
For the reasons discussed below, we ourselves do not expect to
be directly regulated by the FDA for United States compliance purposes but will apply FDA’s food contact substance standards or
analogous foreign regulations when developing our three-dimensional bioprinter. Specifically, we intend to license our production technology,
as well as provide associated products and services to food processing and food retail companies through a B2B model. From a regulatory
perspective, in the United States, we expect companies manufacturing finished cultured meat products to be subject to regulation by various
government agencies, including the FDA, the USDA, the U.S. Federal Trade Commission, or FTC, Occupational Safety and Health Administration
and the Environmental Protection Agency, as well as the requirements of various state and local agencies and laws, such as the
California Safe Drinking Water and Toxic Enforcement Act of 1986. We likewise expect these products to be regulated by equivalent agencies
outside the United States by various international regulatory bodies.
As the manufacturer of technology used to produce cultured meat,
and consistent with the Federal Food, Drug and Cosmetic Act, Federal Meat Inspection Act, and Poultry Products Inspection Act, we believe
we will not be directly regulated by the FDA or USDA. Rather, we believe the regulatory obligation falls on our customers — cultured
meat producers — to ensure that all food produced using our technology is wholesome and not adulterated. Consistent with food industry
norms, we expect that our customers will therefore request assurances from us that our products are suitable for their intended use from
an FDA regulatory perspective. Therefore, we plan to apply FDA food safety standards when developing our three-dimensional bioprinter
as a means of assuring our customers that our bioprinter is safe for its intended use and will not result in the production of adulterated
food. In particular, we plan to apply applicable food contact substance requirements, such as those of the FDA, when developing its three-dimensional
bioprinter as a means of assuring customers using the Company's technology that our bioprinter is safe for its intended use and will not
result in the production of adulterated food. If we are unable to provide regulatory compliance assurance to our customers, we expect
that our ability to license our production technology would be adversely impacted.
The manufacturing of cultured meat is expected to be subject to
extensive regulations internationally, with products subject to numerous food safety and other laws and regulations relating to the sourcing,
manufacturing, composition and ingredients, storing, labeling, marketing, advertising and distribution of these products. In addition,
enforcement of existing laws and regulations, changes in legal requirements and/or evolving interpretations of existing regulatory requirements
may result in increased compliance costs and create other obligations, financial or otherwise, that could adversely affect our business,
financial condition or operating results. In addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices
Act, or FCPA, and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper
payments to officials or other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance
with anti-bribery laws, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our
employees, contractors or agents. Violations of these laws, or allegations of such violations, could disrupt our business and adversely
impact our results of operations, cash flows and financial condition.
Any changes in, or changes in the interpretation
of, applicable laws, regulations or policies of the USDA, state regulators or similar foreign regulatory authorities that relate to the
use of the word “meat” or other similar words in connection with cultured meat products could adversely affect our business,
prospects, results of operations or financial condition.
The USDA, state regulators or similar foreign
regulatory authorities, such as Health Canada or the Canadian Food Inspection Agency, or CFIA, or authorities of the EU or the EU member
states (e.g., European Food Safety Authority, or EFSA), could take action to impact our ability
to use the term “meat” or similar words, such as “beef”, to describe the product our bioprinters will produce.
In addition, a food may be deemed misbranded if its labeling is false or misleading in any particular way, and the USDA, CFIA, EFSA or
other regulators could interpret the use of the term “meat” or any similar phrase(s) to describe our cultured meat products
as false or misleading or likely to create an erroneous impression regarding their composition. In the U.S., USDA will be developing new
labeling requirements for foods under its jurisdiction produced through cell culture technology as noted in an Advance Notice of Proposed
Rulemaking, or ANPR, published in September 2021.
Failure by our raw materials suppliers to comply
with food safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt
our supply of products and adversely affect our business.
If our suppliers fail to comply with food safety, environmental
or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. In the event of actual or even
alleged non-compliance, we might be forced to find an alternative supplier and we may be subject to lawsuits related to such non-compliance
by our suppliers. As a result, our supply of raw materials could be disrupted or our costs could increase, which would adversely affect
our business, results of operations and financial condition. The failure of any supplier to produce products that conform to our standards
could adversely affect our reputation in the marketplace and result in economic loss. Additionally, actions we may take to mitigate the
impact of any disruption or potential disruption in our supply of raw materials, including increasing inventory in anticipation of a potential
supply or production interruption, may adversely affect our business, results of operations and financial condition.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND POTENTIAL LITIGATION
If we are unable to obtain and maintain effective
patent rights for our products, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality
of our trade secrets or know-how, such proprietary information may be used by others to compete against us.
Since September 2019, we have sought patent protection for certain
of our products, systems, processes, designs and applications. Our success depends in large part on our ability to obtain, maintain, monitor
and enforce patent and other intellectual property protection in the United States and in other countries with respect to our proprietary
technology and new products.
We seek to protect our proprietary position and sustain our competitive advantage by
filing patent applications in the United States and in other countries. Patent prosecution in the United States and the rest of the world
is uncertain, expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications
at a reasonable cost or in a timely manner in all the necessary locations. It is also possible that we will fail to identify patentable
aspects of our research and development output before it is too late to obtain patent protection.
We have a growing
portfolio of 15 provisional and non-provisional pending patent applications, with a robust pipeline.
These are filed with the U.S. Patent and Trademark Office, or USPTO, the World Intellectual Property Organization, or WIPO, and when the
time comes, in various patent offices around the world, such as Israel, China, Japan, Europe, Canada, and South Korea. Three of the pending
patent applications were filed through the Paris Convention Treaty, or PCT. We cannot offer any assurances about which, if any of the
pending patent applications will issue, the scope of protection of any such patent or whether any issued patents will be found invalid
and/or unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by
or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any new products
that we may develop.
Further, there is no assurance that all potentially relevant prior
art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending
patent application. Even if patents do successfully issue, and even if such patents cover our products, third parties may challenge their
validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore,
even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide
exclusivity for our new products, or prevent others from designing around our claims. Any of these outcomes could impair our ability to
prevent competition from third parties, which may have an adverse impact on our business.
If we cannot obtain and maintain effective patent rights for our
products, we may not be able to compete effectively, and our business and results of operations would potentially be harmed.
If we are unable to maintain effective proprietary
rights for our products, we may not be able to compete effectively in our markets.
In addition to the protection afforded by any patents currently
owned and that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary
know-how that is not patentable or that we elect not to patent, processes and helpful devices that are not easily known, knowable or easily
ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product development
processes, that involve proprietary know-how, as well as information or technology that is not covered by patents. However, trade secrets
can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements
with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our
data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of
our information technology systems, as well as implementing various standard operating procedures designed to maintain that integrity.
Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets
and intellectual property may otherwise become known or be independently discovered by competitors.
We cannot provide any assurances that our trade secrets and other
confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not
otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation
or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may
have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property
are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.
Intellectual property rights of third parties
could adversely affect our ability to successfully commercialize our products, and we might be required to litigate or obtain licenses
from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available
on commercially reasonable terms.
At this stage, and in the future it is inherently difficult to
conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected
if existing patents or patents resulting from patent applications issued to third parties or other third-party intellectual property rights
are held to cover our products, systems and processes or elements thereof, or our manufacturing or uses relevant to our development plans.
In such cases, we may be limited, or not be in a position to develop or commercialize products or our product candidates unless we successfully
pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with
the intellectual property rights’ holder, if available on commercially reasonable terms. There may also be pending patent applications
that should they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should
be brought and be successful, we may be required to pay substantial damages, royalties, be forced to abandon our new products or seek
a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at
all.
It is also possible that we have failed to identify relevant third
party patents or applications. For example, U.S. patent applications filed before July 8, 2019 and certain U.S. patent applications filed
after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United
States and elsewhere are published 18 months after the earliest filing for which priority is claimed, with such earliest filing date being
commonly referred to as the priority date. Therefore, patent applications covering our new products or platform technology could have
been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain
limitations, be later amended in a manner that could cover our platform technologies, our new products or the use of our new products.
Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will
be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on
terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented
from or experience substantial delays in pursuing the development of and/or marketing our new products. If we fail in any such dispute,
in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new products that
are held to be infringing. We might, if possible, also be forced to redesign our new products so that we no longer infringe the third
party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial
financial and management resources that we would otherwise be able to devote to our business.
Third-party claims of intellectual property
infringement may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement
of the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which
are owned by third parties, exist in the fields in which we are developing new products. As our industries expand and more patents are
issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary
technology without authorization. There may be third-party patents or patent applications with claims to materials, designs or methods
of manufacture related to the use or manufacture of our products. There may be currently pending patent applications that may later result
in issued patents that our products may infringe. In addition, third parties may obtain patents in the future and claim that use of our
technologies infringes upon these patents.
If any third-party patents were held by a court of competent jurisdiction
to cover aspects of our formulations, processes for designs, or methods of use, the holders of any such patents may be able to block our
ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally
determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at
all.
Parties making claims against us may obtain injunctive or other
equitable relief, which could effectively block our ability to further develop and commercialize one or more of our products. Defense
of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee
resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including
treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more
licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Patent policy and rule changes could increase
the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.
Changes in either the patent laws or interpretation of the patent
laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow
the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United
States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the
United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore
cannot be certain that we were the first to file the invention claimed in our owned and licensed patent or pending applications, or that
we or our licensor were the first to file for patent protection of such inventions. Assuming all other requirements for patentability
are met, in the United States prior to March 15, 2013, the first to make the claimed invention without undue delay in filing, is entitled
to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013,
under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted on September 16, 2011, the United States has moved to a first
to file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted
and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a
material adverse effect on our business and financial condition.
We may be involved in lawsuits to protect or
enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.
Competitors may infringe our intellectual property. If we were
to initiate legal proceedings against a third party to enforce a patent covering one of our new products, the defendant could counterclaim
that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims
alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any
of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion
could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading
statement, during prosecution. Under the Leahy-Smith Act, the validity of U.S. patents may also be challenged in post-grant proceedings
before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
Derivation proceedings initiated by third parties or brought by
us may be necessary to determine the priority of inventions and/or their scope with respect to our patent or patent applications or those
of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it
from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable
terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract
our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on
our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology
from third parties, or enter into development partnerships that would help us bring our new products to market.
Furthermore, because of the substantial amount of discovery required
in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by
disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim
proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse
effect on the price of our traded securities.
We may, in the future, be subject to claims
that our employees, consultants, or independent contractors have wrongfully or unavoidably used or disclosed confidential information
of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We continue to employ individuals who were previously employed
at our competitors or potential competitors. We have established standard operating procedures to try and ensure that our employees, consultants,
and independent contractors do not use the proprietary information or know-how of others in their work for us, but we may nevertheless
be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed
intellectual property, including trade secrets or other proprietary information, of any of our employees’ former employers or other
third parties. Litigation may result and be necessary to defend against these claims. If we fail in defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management
and other employees.
We may be subject to claims challenging the
inventorship of our intellectual property.
We may be subject to claims that former employees, collaborators
or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future
patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting
obligations of consultants or others who are involved in developing our products. Litigation may be necessary to defend against these
and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable
intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting, and defending patents on products, as well
as monitoring their infringement in all countries throughout the world would be prohibitively expensive, and our intellectual property
rights in some countries can be less extensive than those in the United States. In addition, the laws of some foreign countries do not
protect intellectual property rights to the same extent as federal and state laws in the United States.
Competitors may use our technologies in jurisdictions where we
have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where
we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products.
Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting
and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing
countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, which could make it difficult
for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent
rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from
other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications
at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate
and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to monitor and enforce
our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license.
Our articles of association provide that unless
we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims
arising under the Securities Act.
Our articles of association provide that, unless we consent in
writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum
for any claim asserting a cause of action arising under the Securities Act (for the avoidance of any doubt, such provision does not apply
to any claim asserting a cause of action arising under the Exchange Act). Section 22 of the Securities Act creates concurrent jurisdiction
for federal and state courts over all such Securities Act actions. Accordingly, both U.S. state and federal courts have jurisdiction to
entertain such claims. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that
it finds favorable for disputes with us or our directors, officers or other employees and may increase the costs associated with such
lawsuits, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find
these provisions of the articles of association inapplicable to, or unenforceable in respect of, one or more of the specified types of
actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely
affect our business and financial condition. Any person or entity purchasing or otherwise acquiring any interest in our share capital
shall be deemed to have notice of and to have consented to the choice of forum provisions of the articles of association described above.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which
the U.S. federal courts have exclusive jurisdiction.
RISKS RELATED TO OUR OPERATIONS IN ISRAEL
If there are significant shifts in the political,
economic and military conditions in Israel, it could have an adverse impact on our operations.
Our corporate headquarters and research and development facilities
are located in Israel. In addition, most of our employees, officers and directors are residents of Israel. Accordingly, political, economic
and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its neighboring countries. In recent years, these have included hostilities from Hezbollah
in Lebanon and between Israel and Hamas in the Gaza Strip, which resulted in rockets being fired into Israel, causing casualties and disruption
of economic activities. In addition, Israel faces threats from the civil war in Syria and from Iran. Our commercial insurance does not
cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although we expect that
the Israeli government will cover the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot
assure you that such government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred.
Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries
may impose restrictions on doing business with Israel and Israeli companies, whether as a result of hostilities in the region or otherwise.
Any such matters could adversely affect our operations and results of operations, and any losses or damages incurred by us as the result
of such a conflict could have an adverse impact on our business.
Furthermore, our operations could be disrupted by the obligations
of our personnel to perform military service. Some of our employees based in Israel may be called upon to perform military reserve duty
and, in emergency circumstances, may be called to immediate and unlimited active duty. Our operations could be disrupted by the absence
of a significant number of employees due to military service, which could adversely impact our business and results of operations.
Because a substantial portion of our revenues
is expected to be generated in currencies other than our functional currency, we will be exposed to fluctuations in currency exchange
rates, which could negatively affect our financial condition.
In the future, we expect that a substantial portion of our revenues
will be generated in currencies other than our functional currency. Our functional currency, in which we currently maintain our financial
records, is NIS, and our presentation currency, in which we report our financial results, is USD. The functional currency of Peace of
Meat, in which it currently maintains its financial records, is Euros. As a result, our revenues for financial statement purposes might
be negatively affected by fluctuations in the exchange rates of currencies in the countries in which our technologies may be licensed,
and supplementary services provided and products sold.
Currency exchange controls may restrict our
ability to utilize our cash flows.1
We are incorporated in Israel. Most of our executive officers and
directors reside in Israel and most of our assets and the assets of these persons are located outside of the United States.
It may
be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain, a judgment based on
the civil liability provisions of the U.S. federal securities laws. Israeli courts may refuse hear a claim based on a violation of U.S.
securities laws against us or any of our non-U.S. executive officers and directors because Israel may not be the most appropriate forum
to bring such a claim.
Enforcing a U.S. judgment against us and our
executive officers and directors, or asserting U.S. securities law claims in Israel, may be difficult.
We are incorporated in Israel. Most of our executive officers and
directors reside in Israel and most of our assets and the assets of these persons are located outside of the United States. We have been
informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted
in Israel or obtain, a judgment based on the civil liability provisions of the U.S. federal securities laws. Israeli courts may refuse
hear a claim based on a violation of U.S. securities laws against us or any of our non-U.S. executive officers and directors because Israel
may not be the most appropriate forum to bring such a claim.
In addition, even if an Israeli court agrees to hear such a claim,
it may determine that Israeli, and not U.S., law is applicable to the claim. Under Israeli law, if U.S. law is found to be applicable
to such a claim, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain
matters of procedure would be governed by Israeli law. There is little binding case law in Israel addressing these matters. Israeli courts
might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or any of
our non-U.S. executive officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment
if (among other things) it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject
to exceptional cases), or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, or if it was obtained
by fraud or in absence of due process, or if it is at variance with another valid judgment that was given in the same matter between the
same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, at the time the
foreign action was brought.
As a result of the difficulty associated with enforcing a judgment
against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.
If a foreign judgment is enforced by an Israeli court, it generally will be payable
in Israeli currency, which can be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before
an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount
in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign
currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the
Israeli consumer price index, or Israeli CPI, plus interest at the annual statutory rate set by Israeli regulations prevailing at the
time. Judgment creditors must bear the risk of unfavorable exchange rate fluctuations.
Our articles of association provide that unless
we consent otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between
the Company and its shareholders under the Companies Law and the Israeli Securities Law.
The competent courts of Tel Aviv, Israel shall,
unless we consent otherwise in writing, be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the
Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company
to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the
Companies Law or the Israeli Securities Law, 1968, or the Israeli Securities Law. This exclusive forum provision is intended to apply
to claims arising under Israeli law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other
claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision in the articles of association will not
relieve us of our duties to comply with federal securities laws and the rules and regulations thereunder, and our shareholders will
not be deemed to have waived our compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s
ability to bring a claim in a judicial forum of its choosing for disputes us Company or our directors or other employees which may discourage
lawsuits against us, our directors, officers and employees.
Your rights and responsibilities as our shareholder
will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
Since we are incorporated under Israeli law, the rights and responsibilities
of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects
from the rights and responsibilities of shareholders of U.S. corporations. In particular, each of our shareholders has a duty to act in
good faith and in a customary manner in exercising its rights and performing its obligations toward us and other shareholders and to refrain
from abusing its power in, among other things, voting at shareholder meetings on certain matters, such as an amendment to our articles
of association, an increase of our authorized share capital, a merger and approval of related party transactions that require shareholder
approval. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a
shareholders vote or to appoint or prevent the appointment of an office holder has a duty to act in fairness toward us. Israeli law does
not clearly define the substance of these duties. There is limited case law available to assist in understanding the implications of these
provisions that govern shareholder behavior.
Provisions of Israeli corporate and tax law
may deter acquisition transactions.
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 merging company 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. Moreover, a full tender offer,
which as a result would result in the acquirer to hold over 90% of the target company’s voting rights or the target company’s
issued and outstanding share capital (or of a class thereof), requires the acquirer by the Israeli Companies Law, 1999, or the Companies
Law, to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of
the company (or the applicable class). The full tender offer can only be completed if the acquirer receives positive responses from the
holders of at least 95% of the issued share capital (or the applicable class) and if a majority of the offerees that do not have a personal
interest in the tender offer; unless, the shareholders who did not accept the tender offer hold less than 2% of the issued and outstanding
share capital of the company (or of the applicable class), all of the shares that the acquirer offered to purchase will be transferred
to the acquirer by operation of law. the shareholders, including those who indicated their acceptance of the tender offer, may, at any
time within six months following date of acceptance of the tender offer, , and petition an Israeli court to determine whether the tender
offer was for less than fair value and whether the fair value should be paid as determined by the court. However, an offeror may provide
in the offer that a shareholder who accepted the offer will not be entitled to petition the court for appraisal rights as described in
the preceding sentence, as long as the offeror and the company disclosed the information required by law in connection with the full tender
offer. If the full tender offer was not accepted in accordance with any of the above alternatives, the acquirer may not acquire shares
of the company that will increase its holdings to more than 90% of the company’s voting rights or the company’s issued and
outstanding share capital (or of the applicable class) from shareholders who accepted the tender offer. Shares purchased in contradiction
to the full tender offer rules under the Companies Law will have no rights and will become dormant shares.
Furthermore, Israeli tax considerations may make potential transactions
unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders
from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect
to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a
number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and
dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap
transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares
has occurred. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an
acquisition or merger would be beneficial to us or to our shareholders.2
Our articles of association and Israeli law could prevent a takeover
that shareholders consider favorable and could also reduce the market price of our ADSs.
Certain provisions of Israeli law and our articles of association could have the effect
of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or for our shareholders to
elect different individuals to its board of directors, even if doing so would be beneficial to its shareholders, and may limit the price
that investors may be willing to pay in the future for the our ADSs. Among other things:
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Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage
of shares in a company are purchased;
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Israeli corporate law requires special approvals for certain transactions involving directors, officers
or significant shareholders and regulates other matters that may be relevant to these types of transactions; |
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Israeli corporate law does not provide for shareholder action by written consent for public companies,
thereby requiring all shareholder actions to be taken at a general meeting of shareholders;
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our articles of association divide our directors into three classes, each of which is elected once every
three years;
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our articles of association generally require a vote of the holders of a majority of our outstanding ordinary
shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and solely
the amendment of the provision relating to the removal of members of our board of directors, require a vote of the holders of 65% of our
outstanding ordinary shares entitled to vote at a general meeting;
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our articles of association provide that director vacancies may be filled by our board of directors.
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RISKS RELATED TO OWNERSHIP OF THE ADSs AND THIS OFFERING
You will experience immediate
dilution in book value of any ADSs you purchase.
Because the price per share being
offered is substantially higher than our net tangible book value per ADS, you will suffer substantial dilution in the net tangible book
value of any ADSs you purchase in this offering. After giving effect to the sale by us of ADSs in this offering, based on an assumed public
offering price of $1.43 per share, which is the last reported sale price of our ADSs on Nasdaq on January 4, 2023, and after deducting
underwriting discount and commission and offering expenses payable by us, our as adjusted net tangible book value of our ADSs would be
approximately $14.3 million, or approximately $0.74 per ADS, as of September 30, 2022. If you purchase shares in this offering, you
will suffer immediate and substantial dilution of our as adjusted net tangible book value of approximately $0.20 per ADS. To the
extent outstanding options, warrants or offered Pre-Funded Warrants are exercised, you will incur further dilution. See “Dilution”
on page 44 for a more detailed discussion of the dilution you will incur in connection with this offering.
The ADS price may be volatile, and you may
lose all or part of your investment.
The market price of the ADSs could be highly volatile and may fluctuate
substantially, including downward, as a result of many factors, including:
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changes in the prices of our raw materials or the products manufactured in factories using our technologies; |
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the trading volume of the ADSs; |
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the effects of the COVID-19 pandemic; |
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general economic, market and political conditions, including negative effects on consumer confidence and spending levels that could
indirectly affect our results of operations; |
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actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and
annual results; |
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announcements by us or our competitors of innovations, other significant business developments, changes in distributor relationships,
acquisitions or expansion plans; |
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announcement by competitors or new market entrants of their entry into or exit from the alternative protein market; |
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overall conditions in our industry and the markets in which we intend to operate; |
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market conditions or trends in the packaged food sales industry that could indirectly affect our results of operations; |
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addition or loss of significant customers or other developments with respect to significant customers; |
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adverse developments concerning our manufacturers and suppliers; |
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changes in laws or regulations applicable to our products or business; |
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our ability to effectively manage our growth and market expectations with respect to our growth, including relative to our competitors;
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changes in the estimation of the future size and growth rate of our markets; |
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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additions or departures of key personnel; |
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competition from existing products or new products that may emerge; |
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issuance of new or updated research or reports about us or our industry, or positive or negative recommendations or withdrawal of
research coverage by securities analysts; |
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variance in our financial performance from the expectations of market analysts; |
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our failure to meet or exceed the estimates and projections of the investment community or that we may otherwise provide to the public;
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fluctuations in the valuation of companies perceived by investors to be comparable to us; |
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disputes or other developments related to proprietary rights, including patents, and our ability to obtain intellectual property
protection for our products; |
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litigation or regulatory matters; |
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announcement or expectation of additional financing efforts; |
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sales and short-selling of the ADSs; |
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our issuance of equity or debt; |
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changes in accounting practices; |
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ineffectiveness of our internal controls; |
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negative media or marketing campaigns undertaken by our competitors or lobbyists supporting the conventional meat industry;
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the public’s response to publicity relating to the health aspects or nutritional value of products to be manufactured in factories
using our technologies; and |
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other events or factors, many of which are beyond our control. |
In addition, the stock markets have experienced extreme price and
volume fluctuations. Broad market and industry factors may materially harm the market price of the ADSs, regardless of our operating performance.
These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These fluctuations,
as well as general economic, political and market conditions such as recessions, interest rate changes, tariffs, international currency
fluctuations, or the effects of disease outbreaks or pandemics (such as the COVID-19 pandemic), may negatively impact the market price
of the ADSs. In the past, following periods of volatility in the market price of a company’s securities, securities class action
litigation has often been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs
and our management’s attention and resources could be diverted.
The Pre-Funded Warrants and Warrants are speculative in nature.
Except as otherwise set forth therein, the pre-funded warrants and warrants
offered in this offering do not confer any rights of ADS ownership on their holders, such as voting rights, but rather merely represent
the right to acquire ADSs at a fixed price. Specifically with respect to the warrants, commencing on the date of issuance, holders of
the warrants may exercise their right to acquire ordinary shares and pay an exercise price of $1.43 per ADS, prior to five years from
the date of issuance, after which date any unexercised warrants will expire and have no further value. There can be no assurance that
the market price of our ADSs will continue to equal or exceed the exercise price of the warrants offered by this prospectus. In the event
that our ADS price does not exceed the exercise price of such warrants during the period when such warrants are exercisable, the warrants
may not have any value. In addition, the warrants contain a beneficial ownership limitation such that a holder of a warrant with a 4.99%
beneficial ownership limitation would not be able to exercise the warrant for an amount in excess of the beneficial ownership limitation
unless such holder delivers a notice to us increasing the beneficial ownership limitation to up to 9.99%, which notice shall only take
effect following 61 days after such notice is delivered, and a holder of a warrant subject to a 9.99% beneficial limitation may not increase
the beneficial ownership limitation at all.
Specifically with respect to the
Pre-Funded Warrants, commencing on the date of issuance, holders of the Pre-Funded Warrants may exercise their right to acquire ADSs at
any time until exercised in full and pay an exercise price per ADS of $0.0001, subject to adjustment upon certain events. If a purchaser
of Pre-Funded Warrants does not exercise the Pre-Funded Warrants then such purchaser would have pre-paid the aggregate exercise price
less the nominal exercise price without having received the underlying ADSs and under the terms of the Pre-Funded Warrants, a holder of
Pre-Funded Warrants shall not be entitled to the return or refund of all, or any portion, of such pre-paid aggregate exercise price under
any circumstance or for any reason whatsoever. In addition, although the Pre-Funded Warrants are designed to allow a purchaser to acquire
more than 4.99%. (or, at the election of the purchaser, 9.99%) of our outstanding ADSs immediately following consummation of the offering
notwithstanding the beneficial ownership limitation, if a purchaser purchases Pre-Funded Warrants that would cause the purchaser to exceed
the beneficial ownership limitation, then (i) a holder of Pre-Funded Warrants subject to a 4.99% beneficial ownership limitation would
not be able to exercise the Pre-Funded Warrants for an amount in excess of the beneficial ownership limitation unless such purchaser delivers
a notice to us increasing the beneficial ownership limitation to up to 9.99%, which notice shall only take effect following 61 days after
such notice is delivered, and (ii) a holder of Pre-Funded Warrants subject to a 9.99% beneficial limitation may not increase the beneficial
ownership limitation at all.
There is no established market for the Warrants and Pre-Funded Warrants
being offered in this offering.
There is no established trading market for the Warrants and Pre-Funded
Warrants offered in this offering. We do not intend to apply for listing of the Warrants and Pre-Funded Warrants on any securities exchange
or other nationally recognized trading system.
Due to certain provisions contained in our
Warrants, the Warrants and the Pre-Funded Warrants will be treated as a derivative liability, which could cause us to recognize certain
adverse changes to our financial statements. Such accounting treatment may also affect the trading price of our Securities.
Due to certain provisions contained in our Warrants and Pre-Funded
Warrants offered in this offering, our Warrants and Pre-Funded Warrants will be treated as a derivative liability and we will be required
to record the fair value of each Warrant as a liability. As a result, for each reporting period, we will be required to determine the
fair value of each Warrant and record the change in the value of the Warrants from the prior reporting period as a gain or a loss on our
income statement, which will change the value of the liability for the Warrants on our balance sheet. The fair value of our Warrants will
be determined by us based, in part, upon a valuation report obtained from an independent third party valuation firm. This accounting treatment
could cause the market to react negatively to our financial performance, adversely affect the trading prices of our Securities and adversely
affect our shareholders’ equity necessary to maintain our listing on the Nasdaq.
We have broad discretion as to the use of the
net proceeds from this offering and may not use such proceeds effectively.
We currently intend to use the net proceeds from this offering
to develop commercial technologies to manufacture alternative foods, including potential acquisitions of other companies whose technologies
are complementary or synergistic to our own, such as our purchase of Peace of Meat, as described herein in “Business”, and
for general corporate purposes, including working capital requirements. For more information, see “Use of Proceeds.” However,
our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with the manner in which
our management chooses to allocate the net proceeds from this offering. The failure by our management to apply these funds effectively
could have an adverse impact on our business, financial condition and results of operation. Pending their use, we may invest the net proceeds
from this offering in a manner that does not produce income.
If equity research analysts do not publish
research or reports about our business or if they issue inaccurate or unfavorable commentary or downgrade the ADSs, the price of the ADSs
and trading volume could decline.
The trading market for the ADSs depends in part on the research
and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us ceases
coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn
could cause the price of the ADSs or their trading volume to decline. Moreover, if any of the analysts who cover us downgrade the ADSs
or issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our operating results fail
to meet the expectations of the investor community, the price of the ADSs could decline.
This offering may cause the trading price of
our ADSs to decrease.
The price per ADS, together with the number of ADSs we propose
to issue and ultimately will issue if this offering is completed, may result in an immediate decrease in the market price of our ADSs.
This decrease may continue after the completion of this offering.
We have never paid dividends on our share capital
and we do not intend to pay dividends for the foreseeable future.
We have never declared or paid any dividends on our share capital
and do not intend to pay any dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use
in the development and growth of our business and for general corporate purposes. Accordingly, any gains from an investment in the ADSs
will depend on price appreciation of the ADSs, which may never occur. In addition, Israeli law limits our ability to declare and pay dividends,
and may subject our dividends to certain Israeli withholding taxes.
ADS holders may not receive the same distributions
or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, they may not receive dividends
or other distributions on our Ordinary Shares and may not receive any value for them, if it is illegal or impractical to make them available.
The depositary for the ADSs has agreed to pay to ADS holders the
cash dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities underlying the ADSs,
after deducting its fees and expenses. ADS holders will receive these distributions in proportion to the number of Ordinary Shares their
ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available
to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that
require registration under the Securities Act, but that are not properly registered or distributed under an applicable exemption from
registration. In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited
ordinary shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable.
In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may
seek to affect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems
an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights
or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution
of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositary may deduct from such dividends or distributions
its fees and may withhold an amount on account of taxes or other governmental charges to the extent the depositary believes it is required
to make such withholding. These restrictions may cause a material decline in the value of the ADSs.
ADS holders do not have the same rights as
holders of our Ordinary Shares.
ADS holders do not have the same rights as holders of our Ordinary
Shares. For example, ADS holders may not attend shareholders’ meetings or directly exercise the voting rights attaching to
the ordinary shares underlying their ADSs. ADS holders may vote only by instructing the depositary to vote on their behalf.
If we request the depositary to solicit voting instructions from ADS holders (which we are not required to do), the depositary will notify
ADS holders of a shareholders’ meeting and send or make voting materials available to them. Those materials will describe the
matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must
reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of Israel
and the provisions of our articles of association or similar documents, to vote or to have its agents vote the deposited ordinary shares
as instructed by ADS holders. If we do not request the depositary to solicit voting instructions from ADS holders, they can still
send voting instructions, and, in that case, the depositary may try to vote as they instruct, but it is not required to do so. Except
by instructing the depositary as described above, ADS holders won’t be able to exercise voting rights unless they surrender their
ADSs and withdraw the ordinary shares. However, they may not know about the meeting enough in advance to withdraw the ordinary shares.
We cannot assure ADS holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote
their ordinary shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions
or for the manner of carrying out voting instructions. This means that ADS holders may not be able to exercise voting rights and
there may be nothing they can do if their ordinary shares are not voted as they requested. In addition, ADS holders have no right
to call a shareholders’ meeting.
ADS holders may be subject to limitations on
transfer of their ADSs.
ADSs will be transferable on the books of the depositary. However,
the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance
of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the
books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law
or of any government or governmental body, under any provision of the deposit agreement, or for any other reason in accordance with the
terms of the deposit agreement.
As a foreign private issuer whose ADSs are
listed on Nasdaq, we follow certain home country corporate governance practices instead of certain Nasdaq requirements. We are not subject
to U.S. proxy rules and are exempt from certain Exchange Act reporting requirements. If we were to lose our foreign private issuer status,
our costs to modify our practices and maintain compliance under U.S. securities laws and Nasdaq rules would be significantly higher.
We are a foreign private issuer and are not subject to the same
requirements that are imposed upon U.S. domestic issuers by the SEC. We are permitted to follow certain home country corporate governance
practices instead of certain requirements of the rules of Nasdaq. As permitted under the Companies Law, pursuant to our articles of association,
for as so long as we qualify to use the forms of a foreign private issuer, the quorum for an ordinary meeting of shareholders shall be
the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting power
of our shares (and in an adjourned meeting, with some exceptions, a minimum of one shareholder) instead of 33 1⁄3% of our issued
share capital as otherwise required under the Nasdaq corporate governance rules. We may also adopt and approve material changes to equity
incentive plans in accordance with the Companies Law, which does not impose a requirement of shareholder approval for such actions. In
addition, we follow Israeli corporate governance practice instead of the Nasdaq requirements to obtain shareholder approval for certain
dilutive events (such as issuances that will result in a change of control, certain transactions other than a public offering involving
issuances of a 20% or greater interest in us and certain acquisitions of the stock or assets of another company). Additionally, while
the Nasdaq rules require that “independent directors,” as defined in the Nasdaq rules, must have regularly scheduled meetings
at which only “independent directors” are present, Israeli law does not require, nor do our independent directors necessarily
conduct, regularly scheduled meetings at which only they are present. Accordingly, our shareholders may be afforded less protection than
what is provided under the Nasdaq corporate governance rules to investors in U.S. domestic issuers. See “Corporate Governance.”
Additionally, we are exempt from the rules and regulations under
the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, although
under regulations promulgated under the Companies Law, as an Israeli public company listed on Nasdaq, we are required to disclose the
compensation of our five most highly compensated officers on an individual basis, this disclosure may not be as extensive as that required
of U.S. domestic reporting companies. In addition, we are not required under the Exchange Act to file current reports and quarterly reports,
including financial statements, with the SEC as frequently or as promptly as U.S. domestic reporting companies whose securities are registered
under the Exchange Act. Moreover, we are not required to comply with Regulation FD, which restricts the selective disclosure of material
information. These exemptions and leniencies reduce the frequency and scope of information and protections available to ADS holders in
comparison to those applicable to U.S. domestic reporting companies.
If we cease to qualify as a foreign private issuer, we would be
required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We would lose our foreign
private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are
U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we
are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms
with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify
certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers and we would lose our ability
to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.
Such modifications and subsequent compliance would cause us to incur significant legal, accounting and other expenses that we would not
incur as a foreign private issuer.
If we are a “passive foreign investment company” for
U.S. federal income tax purposes, there may be adverse U.S. federal income tax consequences to U.S. investors
Based on our income and assets, we believe that we should be treated
as a PFIC for the preceding taxable year. However, the determination of our PFIC status is made annually based on the factual tests described
below. Consequently, while we may be a PFIC in future years, we cannot estimate with certainty at this stage whether or not we are likely
to be treated as a PFIC in the current taxable year or any future taxable years. Generally, if, for any taxable year, at least 75 percent
of our gross income is “passive income” or at least 50 percent of our gross assets during the taxable year (based on the average
of the fair market values of the assets determined at the end of each quarterly period) are assets that produce or are held for the production
of passive income, we will be characterized as a PFIC for U.S. federal income tax purposes. Passive income for this purpose generally
includes, among other things, dividends, interest, rents, royalties, gains from commodities and securities transactions, and gains from
assets that produce passive income. However, rents and royalties received from unrelated parties in connection with the active conduct
of a trade or business should not be considered passive income for purposes of the PFIC test. For example, if we were to be characterized
as a PFIC for U.S. federal income tax purposes in any taxable year during which a U.S. Holder (as defined in “Taxation — Material
United States federal income tax considerations”) holds ordinary shares or ADSs, such U.S. Holder could be subject to additional
taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other disposition of our shares,
whether or not we continue to be characterized as a PFIC. Certain adverse consequences of PFIC status can be mitigated if a U.S. Holder
makes a “mark to market” election or an election to treat us as a qualified electing fund, or QEF. Upon request, we expect
to provide the information necessary for U.S. Holders to make “qualified electing fund elections” if we are classified as
a PFIC. See “Taxation—Passive foreign investment company considerations.”
Whether we are a PFIC for any taxable year will depend on the composition
of our income and the composition and value of our assets from time to time. Each U.S. Holder is strongly urged to consult its tax advisor
regarding these issues and any available elections to mitigate such tax consequences.
If we are a controlled foreign corporation,
there could be adverse U.S. federal income tax consequences to certain U.S. Holders.
Each “Ten Percent Shareholder” (as defined below) in
a non-U.S. corporation that is classified as a “controlled foreign corporation,” or a CFC, for U.S. federal income tax purposes
generally is required to include in income for U.S. federal tax purposes such Ten Percent Shareholder’s pro rata share of the CFC’s
“Subpart F income,” “tested income” and investment of earnings in U.S. property, even if the CFC has made no distributions
to its shareholders. Subpart F income generally includes dividends, interest, rents, royalties, gains from the sale of securities and
income from certain transactions with related parties. In addition, a Ten Percent Shareholder that realizes gain from the sale or exchange
of shares in a CFC may be required to classify a portion of such gain as dividend income rather than capital gain. A non-U.S. corporation
generally will be classified as a CFC for U.S. federal income tax purposes if Ten Percent Shareholders own, directly or indirectly, more
than 50% of either the total combined voting power of all classes of stock of such corporation entitled to vote or of the total value
of the stock of such corporation. A “Ten Percent Shareholder” is a United States person (as defined by the Internal Revenue
Code of 1986, as amended, or the Code) who owns or is considered to own 10% or more of the value or total combined voting power of all
classes of stock entitled to vote of such corporation.
The determination of CFC status is complex and includes complex
attribution rules. A non-corporate Ten Percent Shareholder with respect to a CFC generally will not be allowed certain tax deductions
or foreign tax credits generally available to a corporate Ten Percent Shareholder. Failure to comply with CFC reporting obligations may
subject a Ten Percent Shareholder to significant monetary penalties. We cannot provide any assurances that we will furnish to any Ten
Percent Shareholder information that may be necessary to comply with the reporting and tax paying obligations applicable under the CFC
rules of the Code. U.S. Holders should consult their own tax advisors with respect to the potential adverse U.S. tax consequences of becoming
a Ten Percent Shareholder in a CFC.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains statements that are forward-looking statements
about our expectations, beliefs or intentions regarding, among other things, our product development efforts, business, financial condition,
results of operations, strategies, plans and prospects. Forward-looking statements can be identified based on our use of forward-looking
words such as “believe,” “expect,” “intend,” “plan,” “may,” “should,”
“anticipate,” “could,” “might,” “seek,” “target,” “will,” “project,”
“forecast,” “continue” or their negatives or variations of these words or other comparable words, or by the fact
that these statements do not relate strictly to historical matters. Forward-looking statements relate to anticipated or expected events,
activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred,
these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future
results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially
from the activities and results anticipated in forward-looking statements, including, but not limited to, any of the following:
|
• |
our estimates regarding our expenses, future revenue, capital requirements and needs for additional financing; |
|
• |
our expectations regarding the success of our cultured meat manufacturing technologies we are developing, which will require significant
additional work before we can potentially launch commercial sales; |
|
• |
our research and development activities associated with technologies for cultured meat manufacturing, including three-dimensional
meat production, which involves a lengthy and complex process; |
|
• |
our expectations regarding the timing for the potential commercial launch of our cultured meat technologies; |
|
• |
our ability to successfully manage our planned growth, including with respect to our
recent acquisition of Peace of Meat, and any future acquisitions, joint ventures, collaborations or similar transactions;
|
|
• |
the potential business or economic disruptions caused by the COVID-19 pandemic; |
|
• |
the competitiveness of the market for our cultured meat technologies; |
|
• |
our ability to enforce our intellectual property rights and to operate our business without infringing, misappropriating, or otherwise
violating the intellectual property rights and proprietary technology of third parties; |
|
• |
our ability to predict and timely respond to preferences for alternative proteins and cultured meats and new trends; |
|
• |
our ability to predict and timely respond to preferences for alternative proteins and cultured meats and new trends; and |
|
• |
other risks and uncertainties, including those listed under the
heading “Risk Factors” in this prospectus and our Annual Report on Form 20-F for the year ended December 31, 2021, filed with
the SEC on March 24, 2022. |
We believe that our forward-looking statements are reasonable;
however, these statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors (including
those identified above) that may cause our or our industry’s actual results, levels of activity, performance or achievements to
be materially different from those anticipated by the forward-looking statements. We describe and/or refer to many of these risks in greater
detail under the heading “Risk Factors” in this prospectus. Given these uncertainties, you should not rely upon forward-looking
statements as guarantees of future outcomes.
All forward-looking statements
contained herein and in any of the foregoing documents speak only as of the date hereof or of such documents, respectively, and are expressly
qualified in their entirety by the cautionary statements contained within the “Risk Factors” section of those documents. We
do not undertake to update or revise forward-looking statements to reflect events or circumstances that arise after the date on which
such statements are made or to reflect the occurrence of unanticipated events, except as required by law.
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$7.1 million (approximately $8.2 million if the underwriters exercise their over-allotment option in full), assuming the sale of 5,594,406
ADSs and no sale of any Pre-Funded Warrants, based upon an assumed public offering price of $1.43 per ADS, the last reported sale price
of our ADSs on Nasdaq on January 4, 2023, after deducting the estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
A $0.10 increase (decrease) in the assumed public offering price would
increase (decrease) the net proceeds we receive from this offering by $520,280, assuming that the number of shares offered, as set forth
on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering
expenses. Each increase (decrease) of 100,000 in the number of ADSs we are offering would increase (decrease) the net proceeds to us from
this offering by approximately $132,990, assuming no change in the assumed public offering price per ADS.
We currently intend to use the net proceeds from this offering
for general corporate purposes, which may include operating expenses, working capital, future acquisitions or share repurchases, general
capital expenditures and satisfaction of debt obligations. We have not determined the amount of net proceeds to be used specifically for
such purposes. As a result, our management will retain broad discretion in the allocation and use of the net proceeds of this offering,
and investors will be relying on the judgment of our management with regard to the use of these net proceeds. The precise amount use and
timing of the application of such proceeds will depend upon our funding requirements and the availability and cost of other capital. We
have no current agreements, commitments or understandings for any material acquisitions or licenses of any products, businesses or technologies
that are definitive or probable to close. Pending application of the net proceeds for the purposes as described above, we expect
to invest the net proceeds in short-term, interest-bearing securities, investment grade securities, certificates of deposit or direct
or guaranteed obligations of the U.S. government.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our ADSs and
do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion
of our board of directors and will depend on our financial condition, operating results, capital requirements and other factors that our
board of directors considers to be relevant.
CAPITALIZATION
The following table sets forth our capitalization as of September
30, 2022:
| |
• |
on an actual basis; and
|
| |
• |
on an as adjusted basis, to give effect to the assumed issuance
and sale in this offering of 5,594,406 ADSs representing 55,944,056 Ordinary Shares at the assumed public offering price of $1.43
per ADS, the last reported sales price of our ADSs on Nasdaq on January 4, 2023, and assuming no sale of any Pre-Funded Warrants, after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
The information set forth in the following table should be read
in conjunction with, and is qualified in its entirety by, reference to our audited and unaudited financial statements and the notes thereto
included elsewhere in this prospectus.
|
|
|
As of September
30, 2022 |
|
|
|
|
Actual
|
|
|
As adjusted
|
|
|
|
|
(U.S.
Dollars, in thousands) |
|
|
Cash and cash equivalents
|
|
|
11,203 |
|
|
|
18,332 |
|
|
Derivative liability
|
|
|
(2,450 |
) |
|
|
(8,044 |
) |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
Ordinary Shares, no per share: 1,000,000,000 ordinary
shares authorized (actual and as adjusted); 135,767,137 Ordinary Shares issued and outstanding (actual); 199,542,510 Ordinary Shares
outstanding (as adjusted) |
|
|
|
|
|
|
|
|
|
Share capital and premium on shares
|
|
|
(72,231 |
) |
|
|
(74,234 |
) |
|
Capital reserves
|
|
|
(3,581 |
) |
|
|
(3,721 |
) |
|
Currency translation differences reserve
|
|
|
2,771 |
|
|
|
2,771 |
|
|
Accumulated deficit
|
|
|
48,602 |
|
|
|
49,212 |
|
|
Total shareholders’ capital equity
|
|
|
(24,439 |
) |
|
|
(25,973 |
) |
| |
|
Each $0.10 increase (decrease) in
the assumed public offering price of $1.43 per share, which is the last reported sale price of our ADSs on Nasdaq on January 4, 2023,
would increase (decrease) cash and cash equivalents and short term bank deposits by $520,280, and our total shareholders’ equity
on an as adjusted basis by approximately $129,063, assuming the number of shares offered, as set forth on the cover page of this prospectus,
remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by
us. |
| |
|
Each 100,000 increase (decrease)
in the number of ADSs offered in this offering would increase or decrease cash and cash equivalents and short term bank deposits by approximately
$132,990, and our total shareholders’ equity on an as adjusted basis by approximately $32,990, assuming that the price per ADS for
the offering remains at $1.43, which is the last reported sales price of our ADSs on Nasdaq on January 4, 2023, and after deducting the
estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
The outstanding share information in the table above is based on Ordinary Shares representable
by 13,576,714 ADSs outstanding as of September 30, 2022 and excludes:
|
|
• |
1,303,002 ADSs issuable upon the exercise of options and restricted share units to purchase ADSs outstanding
as of January 4, 2023, at a weighted average exercise price of $6.72 per ADS; |
|
|
• |
a total of 1,607,728 of our ADSs reserved for future issuance under our 2022 Share Incentive
Plan, as of January 4, 2023; |
|
|
• |
704,454 ADSs issuable upon exercise of options and restricted share units outstanding as
of January 4, 2023, at an exercise price to be determined at the time of exercise using a pre-determined formula;
|
|
|
• |
3,539,982 ADSs issuable upon the exercise of investor warrants to purchase
ADSs outstanding as of January 4, 2023, at a weighted average exercise price of $7.42 per ADS, which warrants are expected to remain outstanding
at the consummation of this offering; and |
|
|
• |
139,020 ADSs issuable upon exercise of rights to investors that had been
granted and remained outstanding as of January 4, 2023, with no exercise price, vesting based on milestones yet to be achieved.
|
Unless otherwise
indicated, all information contained in this prospectus assumes or gives effect to:
|
|
• |
no exercise or forfeiture of the outstanding options or warrants or settlement
of restricted share units after January 4, 2023; |
| |
• |
no sale of Pre-Funded Warrants in this offering; |
| |
• |
no exercise by the underwriters of their over-allotment option; and
|
| |
• |
no exercise of Underwriter Warrants. |
DILUTION
If you invest in our Securities in this offering, your ownership interest will be immediately
diluted to the extent of the difference between the public offering price per ADS and/or Pre-Funded Warrant and the as adjusted net tangible
book value per ADS after this offering.
Our net tangible book value as of September 30, 2022, was approximately
$12.7 million, or approximately $0.94 per ADS. Our net tangible book value per ADS represents the amount of our total tangible assets
less total liabilities divided by the total number of our Ordinary Shares outstanding as of September 30, 2022, and multiplying such amount
by 10 (one ADS represents 10 Ordinary Shares).
After giving effect to the issuance and sale of the ADSs offered by
us in this offering at an assumed public offering price of $1.43 per ADS, the last reported sale price of our ADSs on Nasdaq on January
4, 2023, and assuming no exercise of the underwriters’ option to purchase additional ADSs (and no sale of any Pre-Funded Warrants
in this offering), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by
us, our as adjusted net tangible book value on September 30, 2022, would have been approximately $14.3 million, or $0.74 per ADS. This
represents an immediate dilution in the as adjusted net tangible book value of $0.17 per ADS to investors purchasing our ADSs in this
offering.
The following table illustrates this calculation on a per share
basis:
|
Assumed offering price per ADS
|
|
|
|
|
$ |
1.43 |
|
|
|
|
|
|
|
|
|
|
|
Net tangible book value per ADS as of September 30,
2022 |
|
$ |
0.94 |
|
|
|
|
|
|
Decrease in net tangible book value per ADS attributable
to the offering |
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As-adjusted net tangible book value per ADS after
giving effect to the offering |
|
|
|
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
Dilution in net tangible book value per ADS to new
investors |
|
|
|
|
|
$ |
0.69 |
|
The outstanding share information in the table above is based on
ordinary shares representable by 13,576,714 ADSs outstanding as of September 30, 2022 and excludes:
|
|
• |
1,303,002 ADSs issuable upon the exercise of options and restricted share units to purchase ADSs outstanding
as of January 4, 2023, at a weighted average exercise price of $6.72 per ADS; |
|
|
|
a total of 1,607,728 of our ADSs reserved for future issuance under our 2022 Share Incentive
Plan, as of January 4, 2023; |
|
|
|
704,454 ADSs issuable upon exercise of options and restricted share units outstanding as
of January 4, 2023, at an exercise price to be determined at the time of exercise using a pre-determined formula;
|
|
|
|
3,539,982 ADSs issuable upon the
exercise of investor warrants to purchase ADSs outstanding as of January 4, 2023, at a weighted average exercise price of $7.42 per ADS,
which warrants are expected to remain outstanding at the consummation of this offering; and |
|
|
|
139,020 ADSs issuable upon exercise of rights to investors that had been granted and remained
outstanding as of January 4, 2023, with no exercise price, vesting based on milestones yet to be achieved.
|
Unless otherwise indicated, all information contained
in this prospectus assumes or gives effect to:
| |
|
no exercise or forfeiture of the outstanding options or warrants or settlement of restricted
share units after January 4, 2023; |
| |
|
no sale of Pre-Funded Warrants in this offering; |
| |
|
no exercise by the underwriters of their over-allotment option; and |
| |
|
no exercise of Underwriter Warrants. |
The above illustration of dilution per share to investors participating
in this offering assumes no exercise of outstanding options to purchase our Ordinary Shares or outstanding warrants to purchase our ADSs
or Ordinary Shares. To the extent outstanding options or warrants are exercised, you may incur further dilution.
A $0.10 increase (decrease) in the assumed
public offering price of $1.43 per ADS, which is the last reported sale price of our ADSs on Nasdaq on January 4, 2023, would increase
(decrease) our net tangible book value per ADS after this offering by $129,063 and the dilution per ADS to new investors by $0.09, assuming
the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering.
An increase (decrease) of 100,000 ADS offered by us, would increase
(decrease) our net tangible book value after this offering by approximately $32,990 and would decrease (increase) the net tangible book
value per ADS after this offering by $0.002 per ADS and would increase (decrease) the dilution per ADS to new investors by $0.002, after
deducting estimated placement agent fees and estimated offering expenses payable by us. The information discussed above is illustrative
only and will adjust based on the actual public offering price and other terms of the offering determined at pricing.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere
in this prospectus. The following discussion is based on our financial information prepared in accordance with IFRS as issued by IASB,
which may differ in material respects from generally accepted accounting principles in other jurisdictions, including U.S. generally accepted
accounting principles, or GAAP. Some of the information contained in this discussion and analysis, particularly with respect to our plans
and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You
should read “Risk Factors” above for a discussion of important factors that could cause actual results to differ materially
from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For a discussion
of our results of operations for the year ended December 31, 2020, including a comparison between 2020 and 2019, refer to “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Year Ended December 31, 2020
Compared to Year Ended December 31, 2019” in our annual report on Form 20-F filed on April 21, 2021.
Operating Results
Revenues
To date, we have not generated any revenue since we commenced our
cultured meat operations. We do not expect to receive any revenue unless and until we complete development of and successfully commence
out-licensing our technologies, or until we receive revenue from a collaboration or other partnership such as a co-development agreement,
or the acquisition of a company that generates revenues. There can be no assurance that we will be successful in developing or ultimately
commercializing our technologies, in establishing revenue-generating collaborations or acquiring revenue-generating companies.
Research and Development Expenses
Research and development activities are our primary focus. We do
not believe that it is possible at this time to accurately project total expenses required for us to reach the point at which we will
be ready to out-license our technologies. Development timelines, the probability of success and development costs can differ materially
from expectations. In addition, we cannot forecast whether and when collaboration arrangements will be entered into, if at all, and to
what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expenses
to increase over the next several years as our development program progresses. We would also expect to incur increased research and development
expenses if we were to identify and develop additional technologies.
Research and development expenses include the following:
|
• |
employee-related expenses, such as salaries and share-based compensation; |
|
• |
expenses relating to outsourced and contracted services, such as external laboratories and consulting, research and advisory services;
|
|
• |
supply and development costs; |
|
• |
expenses, such as materials, incurred in operating our laboratories and equipment; and |
|
• |
costs associated with regulatory compliance. |
We recognize research and development expenses as we incur them.
Marketing expenses consist primarily of professional services,
personnel costs, including share-based compensation related to employees, and business development, public relations and investor relations
services.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel
costs, including share-based compensation related to directors and employees, corporate costs (such as insurance), facility costs, patent
application and maintenance expenses, and professional service costs, including legal, accounting, audit, finance and human resource services,
and other consulting fees.
Based on the reverse acquisition method, the
assets and liabilities of MeaTech (the acquirer for accounting purposes) were recognized in our financial statements at their book value
at the date of closing of the merger in January 2020. The acquisition consideration, in the amount of $11.4 million, was set based on
the closing price of Ophectra's shares on the TASE on the date of closing of the merger, while any surplus proceeds of the acquisition
over the fair value of Ophectra’s net assets (excluding its net assets that were transferred to a settlement in connection with
the merger with Ophectra) were recognized in profit or loss as public listing expenses in the amount of $10.2 million, that did not affect
cash flow.
Finance Expenses (income), Net
Finance expenses (income), net, consisted primarily of a change
in the fair value of financial instruments mandatorily measured at fair value through profit or loss, and exchange rate fluctuations.
We have yet to generate taxable income. As of September 30, 2022, our operating tax
loss carryforwards were approximately $24.3 million.
Our results of operations have varied in the past and can be expected
to vary in the future due to numerous factors. We believe that period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
Below is a summary of our results of operations for the periods indicated (in thousands):
Year Ended December 31, 2021 Compared to Year Ended
December 31, 2020
|
|
|
Year Ended December 31, |
|
|
|
|
2021 |
|
|
2020 |
|
|
USD in thousands |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development expenses |
|
$ |
7,594 |
|
|
$ |
2,491 |
|
|
Marketing expenses |
|
|
1,628 |
|
|
|
506 |
|
|
General and administrative expenses |
|
|
8,010 |
|
|
|
5,380 |
|
|
Public listing expenses |
|
|
- |
|
|
|
10,164 |
|
|
Loss from operations
|
|
$ |
17,232 |
|
|
$ |
18,541 |
|
|
Finance income |
|
|
509 |
|
|
|
110 |
|
|
Finance expense |
|
|
1,299 |
|
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense (income), net |
|
|
790 |
|
|
|
(17 |
) |
|
Net loss
|
|
$ |
18,022 |
|
|
$ |
18,524 |
|
Research and development expenses
Research and development expenses increased by approximately $5.1 million, or 205%,
to approximately $7.6 million for the year ended December 31, 2021, compared to $2.5 million for year ended December 31, 2020. The increase
resulted mainly from payroll expenses, materials and professional services expenditures related to our cultured meat research and development
operations. The increase reflects Steakholder Food’s growing investment in research and development as we achieve our milestones
and expand our cultured meat technology capabilities.
Marketing expenses totaled $2.0 million in the six months ending June 30, 2022 compared
to $0.6 million in the same period in 2021. The 224% increase is mainly due to our increased salary expenses and growing investment in
our U.S. and global marketing activities.
General and administrative expenses
General and administrative expenses increased by approximately
$2.7 million, or 49%, to approximately $8.0 million for the year ended December 31, 2021, compared to approximately $5.4 million for the
year ended December 31, 2020. The increase resulted mainly from personnel costs, corporate expenses, professional services (such as legal
and audit fees) and operating expenditures.
Net loss totaled $9.2 million in the six months ending June 30, 2022 compared to $7.8
million in the same period in 2021. The 18% increase in the operating loss reflects our growing investment in research and development
as well as marketing activities.
Six months Ended June 30, 2022 Compared to Six months
Ended June 30, 2021
|
|
|
Six months Ended June 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
USD in thousands |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development expenses |
|
$ |
4,427 |
|
|
$ |
2,910 |
|
|
Marketing expenses |
|
|
1,959 |
|
|
|
605 |
|
|
General and administrative expenses |
|
|
3,687 |
|
|
|
4,159 |
|
|
Loss from operations
|
|
$ |
10,073 |
|
|
$ |
7,647 |
|
|
Finance income |
|
|
(1,062) |
|
|
|
(401 |
|
|
Finance expense |
|
|
145 |
|
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense (income), net |
|
|
(917) |
|
|
|
92 |
|
|
Net loss
|
|
$ |
9,156 |
|
|
$ |
7,766 |
|
Research and development expenses
Research and development expenses totaled $4.4 million in the six months ending June
30, 2022 compared to $2.9 million in the same period in 2021. The 52% increase reflects our growing investment in research and development
as we achieve our milestones and expand our cultured meat technology capabilities.
Marketing expenses totaled $2.0 million in the six months ending June 30, 2022 compared
to $0.6 million in the same period in 2021. The 224% increase is mainly due to our increased salary expenses and growing investment in
our U.S. and global marketing activities.
General and administrative expenses
General and administrative expenses
totaled $3.7 million in the six months ending June 30, 2022 compared to $4.2 million in the same period in 2021. The 11% decrease was
primarily due to increased salary expenses and increased payments for legal and professional services
Net loss totaled $9.2 million in the six months ending June 30, 2022 compared to $7.8
million in the same period in 2021. The 18% increase in the operating loss reflects our growing investment in research and development
as well as marketing activities.
Nine months Ended September 30, 2022 Compared to Nine
months Ended September 30, 2021
|
|
|
Nine months Ended September 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development expenses |
|
$ |
7,219 |
|
|
$ |
4,928 |
|
|
Marketing expenses |
|
|
2,426 |
|
|
|
872 |
|
|
General and administrative expenses |
|
|
4,982 |
|
|
|
5,961 |
|
|
Loss from operations
|
|
$ |
14,627 |
|
|
$ |
11,761 |
|
|
Finance income |
|
|
(3,258 |
) |
|
|
(457 |
) |
|
Finance expense |
|
|
262 |
|
|
|
434 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense (income), net |
|
|
(2,996 |
) |
|
|
(23 |
) |
|
Net loss
|
|
$ |
11,632 |
|
|
$ |
11,738 |
|
Research and development expenses
Research and development expenses in the nine months ending September 30, 2022 totaled
$7.2 million compared to $4.9 million in the same period in 2021. The 46% increase reflects our growing investment in research and development
as we continue to achieve our milestones and expand our cultivated meat technology capabilities.
Marketing expenses in the nine months ending September 30, 2022 totaled $2.4 million
compared to $0.8 million in the same period in 2021, reflecting increased salary expenses and growing investment in our U.S. and global
marketing activities.
General and administrative expenses
General and administrative expenses in the nine months ending September
30, 2022 totaled $5.0 million compared to $6.0 million in the same period in 2021. The 16% decrease was primarily due to lower insurance
and share-based payment expenses in the current quarter.
Net loss in the nine months ending September 30, 2022 totaled $11.6
million compared to $11.7 million in the same period in 2021. The minor change reflects continued investment in research and development
as well as marketing activities, as indicated above offset by finance income.
Liquidity and Capital Resources
Since the commencement of our cultured meat operations, we have not generated any revenue
and have incurred operating losses and negative cash flows from our operations. We have funded our operations primarily through the sale
of equity securities. From the inception of Steakholder Foods through September 30, 2022, we raised an aggregate of $48.1 million in five
rounds of private placements of our securities and our initial public offering of securities on Nasdaq, or IPO, and $6.1 million in proceeds
from option exercises. As of December 31, 2021 and September 30, 2022, we had $19.2 million and $11.2 in cash and cash equivalents respectively.
The table below shows a summary of our cash flows for the periods indicated:
Year Ended December 31, 2021 Compared to Year Ended December 31,
2020
|
|
|
Year Ended December 31, |
|
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$ |
(13,960 |
) |
|
$ |
(3,832 |
) |
|
Net cash used in investing activities
|
|
|
(9,340 |
) |
|
|
(1,875 |
) |
|
Net cash provided by financing activities
|
|
|
29,023 |
|
|
|
17,345 |
|
|
Net increase in cash and cash equivalents
|
|
$ |
5,723 |
|
|
$ |
11,638 |
|
Net cash used in operating activities
Net cash used in operating activities increased by $10.1 million,
or 264%, to approximately $14.0 million for the year ended December 31, 2021 compared to approximately $3.8 million for the year ended
December 31, 2020. This increase was due to the increase in net loss.
Net cash used in investing activities
Net cash used in investing activities increased by $7.5 million,
or 398%, to approximately $9.3 million for the year ended December 31, 2021 compared to $1.9 million for the year ended December 31, 2020.
This increase was driven mainly by our investment in Peace of Meat and our acquisition of laboratory equipment and other fixed assets.
Net cash provided by financing activities
Net cash provided by financing activities increased by $11.7 million, or 67%, to approximately
$29.0 million for the year ended December 31, 2021 compared to $17.3 million for the year ended December 31, 2020. This increase was driven
mainly from our IPO and issuance of shares and warrants, and receipt of proceeds from the exercise of share options.
Six months Ended June 30, 2022 Compared to Six months Ended June
30, 2021
|
|
|
Six months Ended June 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
USD in thousands |
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$ |
(7,448 |
) |
|
$ |
(5,048 |
) |
|
Net cash used in investing activities
|
|
|
(2,476 |
) |
|
|
(6,381 |
) |
|
Net cash provided by financing activities
|
|
|
(314) |
|
|
|
29,059 |
|
|
Net increase in cash and cash equivalents
|
|
$ |
(10,238) |
|
|
$ |
17,630 |
|
Net cash used in operating activities
Net cash flow used in operating activities totaled $7.4 million in the six months ending
June 30, 2022, compared to $5.0 million in the same period in 2021, reflecting a 48% increase, due mainly to the increased expenditures
of our growing activities, including the addition of Peace of Meat as a subsidiary as of March 2021.
Net cash used in investing activities
Net cash flow used in investment activities totaled $2.5 million
in the six months ending June 30, 2022 compared to $6.3 million in the same period in 2021, reflecting a 61% decrease due mainly to the
non-recurring acquisition of Peace of Meat in 2021.
Net cash provided by financing activities
Net cash flow from financing activities was $0.3 million in the six months ending June
30, 2022 compared to $29.1 million in the same period in 2021, during which our IPO took place.
Nine months Ended September 30, 2022 Compared to Nine months Ended
September 30, 2021
|
|
|
Nine months Ended September 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
USD in thousands |
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$ |
(9,845 |
) |
|
$ |
(9,612 |
) |
|
Net cash used in investing activities
|
|
|
(2,711 |
) |
|
|
(7,402 |
) |
|
Net cash provided by financing activities
|
|
|
5,330 |
|
|
|
28,965 |
|
|
Net increase in cash and cash equivalents
|
|
$ |
(7,226 |
) |
|
$ |
11,951 |
|
Net cash used in operating activities
Net cash flow used in operating activities totaled $9.8 million
in the nine months ending September 30, 2022, compared to $9.6 million in the same period in 2021, reflecting a 2% increase. The changes
were due mainly to increased expenditures as indicated above, including the addition of Peace of Meat as of March 2021, offset by lower
General and Administrative expenses.
Net cash used in investing activities
Net cash flow used in investment activities totaled $2.7 million in the nine months
ending September 30, 2022 compared to $7.4 million in the same period in 2021, reflecting a 62% decrease due mainly to the acquisition
of Peace of Meat during that period.
Net cash provided by financing activities
Net cash flow from financing activities was $5.3 million in the nine months ending September
30, 2022 (primarily resulting from a registered direct offering in June 2022) compared to $29.0 million in the same period in 2021 (during
which we completed our IPO).
We have incurred losses and cash flow deficits from operations
since the inception of Steakholder Foods, resulting in an accumulated deficit as of December 31, 2021 and September 30, 2022, of approximately
$37 million and $48.6 respectively. We anticipate that we will continue to incur net losses for the foreseeable future. We believe that
our existing cash and cash equivalents will be sufficient to fund our projected cash needs through the end of first quarter of 2023. We
do not currently have any specific commitments or plans for acquisitions; to the extent we do engage in acquisitions, we will do so after
ensuring that we will have sufficient funds available to meet our capital requirements, and such acquisitions are likely to affect our
projected cash needs. To meet future capital needs, we would need to raise additional capital through equity or debt financing or other
strategic transactions. However, any such financing may not be on favorable terms or even available to us. Our failure to obtain
sufficient funds on commercially acceptable terms when needed would have a material adverse effect on our business, results of operations
and financial condition. Our forecast of the period of time through which our financial resources will be adequate to support our operations
is a forward-looking statement that involves risks and uncertainties, and the actual amount of our expenses could vary materially and
adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses
could prove to be significantly higher than we currently anticipate.
Our future capital requirements will depend on many factors, including,
but not limited to:
|
• |
the progress and costs of our research and development activities; |
|
• |
the costs of development and expansion of our operational infrastructure; |
|
• |
the costs and timing of developing technologies sufficient to allow food production equipment manufacturers and food manufacturers
to product products compliant with applicable regulations; |
|
• |
our ability, or that of our collaborators, to achieve development milestones and other events or developments under potential future
licensing agreements; |
|
• |
the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements
with respect to our technologies; |
|
• |
the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
|
• |
the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities
ourselves, once our technologies are developed and ready for commercialization; |
|
• |
the costs of acquiring or undertaking development and commercialization efforts for any future products or technology; |
|
• |
the magnitude of our general and administrative expenses; and |
|
• |
any additional costs that we may incur under future in- and out-licensing arrangements relating to our technologies and futures products.
|
Until we can generate significant recurring revenues, we expect
to satisfy our future cash needs through capital raising or by out-licensing and/or co-developing applications of one or more of our product
candidates. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available
on favorable terms, or at all, we may be required to delay, reduce the scope of or eliminate research or development efforts or plans
for commercialization with respect to our technologies and make necessary change to our operations to reduce the level of our expenditures
in line with available resources.
We are a development-stage technology company and it is not possible
for us to predict with any degree of accuracy the outcome of our research and development efforts. As such, it is not possible for us
to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely
to have a material effect on our net loss, liquidity or capital resources, or that would cause financial information to not necessarily
be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties, demands,
commitments and events are described herein.
Since inception, we have incurred significant losses and negative cash flows from operations
and have an accumulated deficit of $48.6 million as of September 30, 2022. We have financed our operations mainly through fundraising
from various investors.
Our management expects that we will continue
to generate losses and negative cash flows from operations for the foreseeable future, including as a result of material expenses such
as leasing expenses. Based on the projected cash flows and cash balances as of September 30, 2022, our management is of the opinion that
our existing cash will be sufficient to fund operations until the end of first quarter of 2023 . As a result, there is substantial
doubt about our ability to continue as a going concern.
Management’s plans include continuing to secure sufficient
financing through the sale of additional equity securities or capital inflows from strategic partnerships. Additional funds may not be
available when we need them on terms that are acceptable to us, or at all. If we are unsuccessful in securing sufficient financing, we
may need to cease operations.
Our financial statements include no adjustments for measurement
or presentation of assets and liabilities, which may be required should we fail to operate as a going concern.
Critical Accounting Policies
We describe our significant accounting policies and estimates in Note 3 to our annual
financial statements included elsewhere in this prospectus. We believe that these accounting policies and estimates are critical in order
to fully understand and evaluate our financial condition and results of operations.
We prepare our financial statements in accordance with IFRS as issued by the IASB.
In preparing these financial statements, management has made judgments, estimates and
assumptions that affect the application of our accounting policies and the reported amounts recognized in the financial statements. On
a periodic basis, we evaluate our estimates, including those related to share-based compensation and derivatives. We base our estimates
on historical experience, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances.
Actual results may differ from these estimates.
Recently-Issued Accounting Pronouncements
Certain recently-issued accounting pronouncements are discussed in Note 3, Summary of
Significant Accounting Policies, to the consolidated financial statements included in elsewhere in this registration statement, regarding
the impact of the IFRS standards as issued by the IASB that we will adopt in future periods in our consolidated financial statements.
Quantitative and Qualitative Disclosures About Market Risk
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in
meeting the obligations associated with our financial liabilities that are settled in cash. Cash flow forecasting is performed in our
operating entities and aggregated at a consolidated level. We monitor forecasts of our liquidity requirements to ensure we have sufficient
cash to meet operational needs. We may be reliant on our ability to raise additional investment capital from the issuance of both debt
and equity securities to fund our business operating plans and future obligations.
Credit risk is the risk of financial loss to us if a debtor or
counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from our receivables.
As part of an agreement with Therapin Ltd. from
May 2020, we agreed to convert an NIS 7.25 million investment in Therapin made by Ophectra and assumed by us at the merger, into an interest-free
loan, to be repaid by the latter at a rate of NIS 0.48 million per annum for ten years (NIS 4.8 million in total) plus NIS 2.45 million
to be paid upon an exit event, including a public offering, or repayment of 14.74% of any distributable surplus or dividend distributed
by Therapin, up to the amount of the outstanding balance, as detailed in our separation agreement with Therapin. As part of the agreement,
Therapin gave us an option to convert the cash payment to equity of Therapin. Therapin has not provided any guarantees in connection with
its repayment of our loan.
We restrict exposure to credit risk in the course of our operations
by investing only in bank deposits.
As we have not invested in securities riskier than short-term bank deposits, we do not
believe that changes in equity prices pose a material risk to our holdings. However, decreases in the market price of our Ordinary Shares
or ADSs could make it more difficult for us to raise additional funds in the future or require us to raise funds at terms unfavorable
to us.
Foreign Currency Exchange Risk
Currency fluctuations could affect us primarily through increased
or decreased foreign currency-denominated expenses. Currency fluctuations had a material effect on our results of operations during the
year ended December 31, 2021, although not in the year ended December 31, 2020.
Critical Accounting Estimates
Critical accounting estimates are those
estimates made in accordance with IFRS that involve a significant level of estimation uncertainty and have had or are reasonably likely
to have a material impact on the financial condition or results of operations of the registrant. For further information, see Note 2E
to our annual consolidated financial statements included elsewhere in this prospectus.
BUSINESS
Our Company
We are an international deep-tech food company that initiated activities in 2019 and
are listed on the Nasdaq Capital Market under the ticker “STKH”. We maintain facilities in Rehovot, Israel and Antwerp, Belgium
and recently commenced activities in the United States. We believe that cultivated meat technologies hold significant potential to improve
meat production, develop a sustainable livestock system, simplify the meat supply chain, and offer consumers a range of new product offerings.
We aim to provide an alternative to industrialized animal farming that reduces carbon
footprint, minimizes water and land usage, and prevents the slaughtering of animals. By adopting a modular factory design, we expect to
be able to offer a sustainable solution for producing a variety of beef, chicken, pork and seafood products, both as raw materials
and whole cuts.
We are developing cultivated meat technologies, including three-dimensional printing
technology, together with biotechnology processes and customizable manufacturing processes in order to manufacture cultivated meat that
does not require animal slaughter. We are developing a novel, proprietary three-dimensional bioprinter to deposit layers of differentiated
stem cells, scaffolding, and cell nutrients in a three-dimensional form of structured cultivated meat. We believe that the cultivated
meat production processes we are developing, which are designed to offer our eventual customers an alternative to industrial slaughter,
have the potential to improve the quality of the environment, shorten global food supply chains, and reduce the likelihood of health hazards
such as zoonotic diseases transferred from animals to humans (including viruses, such as virulent avian influenza and COVID-19, and drug-resistant
bacterial pathogens, such as some strains of salmonella).
In August 2020, we announced the completion of
Project Carpaccio, whereby we printed a thin slice of meat consisting of muscle and fat cells extracted from stem cells, having developed
the entire growth process of the tissue components, followed by three-dimensional printing using our dedicated, in-house printer.
In December 2021, we announced that we had successfully three-dimensionally printed
a 3.67 oz cultivated steak, primarily composed of cultivated fat and muscle tissues. While cultivated meat companies have made some
progress developing unstructured, or even undifferentiated, alternative meat products, such as minced meat and sausage, to the best of
our knowledge, the industry has struggled in developing high-margin, high-value structured and cultivated meat products such as steak.
Unlike minced meat, a cultivated meat steak product has to grow in fibers and contain connective tissues and fat. To be adopted by diners,
we believe that cultivated steaks will need to be meticulously engineered to look and smell like conventional meat, both before and after
cooking, and to taste and feel like meat to the diner. We believe that we are the first company to be developing both a proprietary bioprinter
and the related processes for growing cultivated meat to focus on what we believe is a high value sector of the alternative protein market.
In May 2022, we joined the UN Global
Compact initiative, committing to ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption
and to act in support of the issues embodied in the UN’s Sustainable Development Goals.
We are led by our Chief Executive Officer, Arik
Kaufman, who has founded various Nasdaq- and Tel Aviv Stock Exchange, or TASE, -traded foodtech companies, and currently serves as director
of Wilk Technologies Ltd. He is also a founding partner of BlueOcean Sustainability Fund, LLC, or BlueSoundWaves, led by Ashton
Kutcher, Guy Oseary and Effie Epstein, which has partnered with Steakholder to assist in attempting to accelerate the Company’s
growth. Mr. Kaufman holds extensive personal experience in the fields of food-tech and bio-tech law, and has led and managed numerous
complex commercial negotiations, as part of local and international fundraising, M&A transactions and licensing agreements. We have
carefully selected personnel for the rest of our executive management team who possess substantial industry experience and share our core
values, from fields as diverse as tissue engineering, industrial stem cell growth, and printer and print materials development.
Cultivated Meat Industry and Market Opportunity
Protein is a necessary staple for healthy nutrition. The growth in recent years of both
the human population and global wealth is driving a decades-long trend of accelerating demand for meat. The demand for protein products
has consistently risen in recent decades and is expected to continue to do so. The rising growth of demand for farm animals for the food
industry has created significant environmental, health, financial and ethical challenges.
According to Statista, the value of the global meat sector was estimated
at $838 billion in 2020, and was forecast to increase to $1.157 billion by 2025. According to market research firm Fortune Business Insights,
the global meat substitute market was estimated at $5.4 billion in 2021 and is expected to grow to $10.8 billion by 2028. According to
Facts and Factors Market Research, the cultivated meat category alone is expected to reach $248 million by 2026, with an annual growth
rate of approximately 16%. McKinsey & Company estimates between $20 and $25 billion in sales by 2030, and with regard to the longer
term, Barclays predicted in November 2021 that by 2040, 20% of the demand for meat globally will be provided by cultivated meat –
a $450 billion market opportunity. Jefferies likewise forecasts a $240-470 billion meat market, with 9%-18% of global meat demand provided
by cultivated meat by 2040.
The meat industry is showing strong interest in the alternative protein space, both
in plant-based and cell-based proteins. There are several drivers underlying the strong engagement with alternative proteins. We believe
consumers are looking for less harmful protein sources, with approaches such as flexitarianism already an established middle path between
vegetarian diets and those heavy in animal proteins, such as the paleo diet. Many meat processors have experienced the worst of the COVID-19
pandemic outbreaks and are seeking to minimize human involvement in the manufacturing process. To that end, retailers such as Costco and
Walmart are increasingly opening their own meat processing facilities on which they can rely exclusively without the involvement of third
party manufacturers.
Limitations of Conventional Meat Production
In addition to questions about whether conventional meat production can adequately provide
for the growing global population, conventional meat production raises serious environmental issues. According to the United Nations,
8% of the world's freshwater is used for raising livestock for meat and leather. At least 18% of the greenhouse gases entering the atmosphere
are from the livestock industry. 26% of the planet's ice-free land is used for livestock grazing and 33% of croplands are used for animal
feed. With regard to treatment of animals in conventional meat production, more than 70 billion animals are slaughtered annually
with steady increases to be expected in line with increased demand for meat.
Another common consumer concern with industrial-scale animal rearing is the reliance
on the intensive use of antibiotics. Antibiotics are used in livestock, especially pigs and poultry, to manage animal health, and to treat
or prophylactically prevent diseases such as avian flu and swine flu. Their effects on human health have not been fully resolved, with
concerns including the potential growth of antibiotic-resistant diseases in meat for human consumption.
Existing Alternative Proteins and their Limitations
Negative consumer sentiment towards the perceived ethical, health and environmental
effects of the global meat industry help explain the strong focus that has developed on creating methods of protein production that are
more sustainable, nutritious and conscious of animal welfare. Recent years have seen a combination of increasing consumer awareness and
advanced technological development that has led to substantially increased demand for proteins that do not involve animal slaughter besides
traditional plant-based proteins, such as soy, peas and chickpeas. Some of the alternative proteins being developed for human consumption
for this purpose include:
Mycoproteins: Some
of the most commercially successful novel alternative protein products are currently mycoproteins, which are derived from fungi. They
are high in protein and fiber, low in saturated fat, and contain no cholesterol. However, they have been associated with allergic
and gastrointestinal reactions. They are fermented to become a dough, which can develop a texture similar to that of meat.
Jackfruit:
Jackfruit is a tropical fruit native to India, which has a similar taste to fruits such as apples and mangoes. While it contains
substantially greater protein than these fruits, its protein content is lower than that of meat. Therefore, while its
texture is somewhat similar to that of shredded meat, it is not generally viewed as an alternative
to meat for consumers used to animal proteins, due to the difference in taste from traditional meat
products, and its lower protein content.
Insects: Insects are
an environmentally-friendly source of protein that requires significantly less land and water, and emits significantly less greenhouse
gases than large mammals raised for slaughter. In addition, they can be fed food unsuitable for livestock that would otherwise be wasted.
While crickets are the most common source of edible insects, research is currently taking place on new insect species of value for food
production, as well as methods to produce them economically at scale. Insects can be consumed in their natural state; however many cultures
consider insect consumption to be taboo and many people are disgusted by the idea. As a result, research is taking place into developing
insect-based products in different forms not easily discernable as insect-based, including flour.
The Cultivated Meat Solution
We believe that cultivated meat grown through cellular agriculture, which aims to produce
cultivated animal proteins without the need for large-scale slaughter, has the potential to satisfy consumer desire for meat while also
avoiding the negative impacts of conventional meat production. Cellular agriculture is an efficient, closely-controlled indoor agricultural
process that utilizes advanced technologies with conceptual similarities to hydroponics, which are used for growing meat cells rather
than fruit. Cultivated meat is grown in cell culture rather than inside animals and applies tissue engineering practices for fat and muscle
production for the purpose of human consumption. Instead of animal slaughter, stem cells are isolated from animal tissue, such as from
an umbilical cord (following birth), an adipose or a muscle tissue, and then cultivated in vitro to
form muscle fibers and fat cells. While also known as “cultured meat”, “clean meat”, “in vitro meat”
or “lab-grown meat”, the term “cultivated meat” has gained the most traction as of late and is the term believed
to best appeal to consumers.
Cultivated meat production is an advanced technology that operates as part of the wider
field of cellular agriculture, which entails growing animal cells in bioreactors and is an emerging solution to the growing demand for
alternative proteins. We are aware of a few dozen companies and institutions actively working to develop technologies and other products
to meet this demand, some of whom are focused on producing red and white meats, while others are focused on fish and crustaceans. Some
of these companies are working on culturing various types of cells, such as chicken, pork, kangaroo and foie gras. We believe this push
of scaling-up cellular agriculture has the potential to offer a solution to the scale and environmental challenges confronting conventional
meat production. Other alternative protein companies are already selling plant-based meat substitutes, but to our knowledge, these companies
are not focused on the production of real meat products produced with animal cells without pea or soy ingredients.
We are engaged with experimentation to develop optimal and cost-effective cell culture
media. In so doing, we are also exploring a range of types of and sources for growth factors suited to cell culture. These sources are
expected to be sustainable and ethical, providing a route to enabling efficient and cost-effective processes. While many challenges remain,
surveys are consistently showing consumer openness toward, and enthusiasm for, cultivated meat. According to “Consumer Acceptance
of Cultured Meat: An Updated Review (2018–2020)” published by researchers at the University of Bath, “the evidence suggests
that, while most people see more societal benefits than personal benefits of eating cultivated meat, there is a large potential market
for cultivated meat products in many countries around the world. Cultivated meat is generally seen as more acceptable than other food
technologies, and more appealing than other alternative proteins like insects. Although it is not as broadly appealing as plant-based
proteins, evidence suggests it may be more uniquely positioned to appeal to meat-lovers who are resistant to other alternative proteins,
and it is more appealing to certain demographic groups".
We believe that cultivated meat could have several potential advantages over conventionally-harvested
meat:
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Environmental:
At least 18% of the greenhouse gases entering the atmosphere today are from the livestock industry. Research shows that the expected environmental
footprint of cultivated meat includes approximately 78% to 96% fewer greenhouse gas emissions, 63%-95%
less land use, 51% to 78% less water use,
and 7% to 45% less energy use than conventionally-produced beef, lamb, pork and poultry. This suggests that the environmental consequences
of switching from large-scale, factory farming to lab-grown cultivated meat could have a long-term positive impact on the environment.
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Cost:
While the precise economic value of harvested cells has yet to be determined, the potential to harvest large numbers of cells from a small
number of live donor animals gives rise to the possibility of considerably higher returns than traditional agriculture, with production
cycles potentially measured in months rather than years. By comparison, raising a cow for slaughter generally takes an average of 18 months,
over which period 15,400 liters of water and 7 kilograms of feed will be consumed for every kilogram of beef produced. While the
original cultivated burger is thought to have cost around $330 thousand, consulting firm CE Delft estimates that economies of scale combined
with technological improvements will bring the cost of cultivated meat down to less than $8 per kilogram by 2035.
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Animal Suffering: More and more people are grappling with the ethical
question of whether humanity should continue to slaughter animals for food. There is a growing trend of opposition to the way animals
are raised for slaughter, often in small, confined spaces with unnatural feeding patterns. In many cases, such animals suffer terribly
throughout their lives. This consideration is likely a factor in many consumers choosing to incorporate more flexitarian, vegetarian and
vegan approaches to their diets in recent years. |
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Controlled Growing Environment: Another potential benefit of cultivated
meat is that its growth environment is designed to be less susceptible to biological risk and disease, through standardized, tailored
production methods consistent with good manufacturing practices that are controls to contribute to improved nutrition, health and wellbeing.
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Alternate Use of Natural Resources: Eight percent of the world’s
freshwater supply and one third of croplands are currently used to provide for livestock. The development of cultivated meat is expected
to free up many of these natural resources, especially in developing economies where they are most needed. |
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Food Waste: The conventional meat industry’s largest waste management
problem relates to the disposal of partially-used carcasses, which are usually buried, incinerated, rendered or composted, with attendant
problems such as land, water or air pollution. Cultivated meat offers a potential solution for this problem, with only the desired cuts
of meat being produced for consumption and only minimal waste product generated with no leftover carcass. |
Our vision is to be a global leader in the production of meat through advanced biotechnology
and engineering solutions for a more sustainable world. We are committed to making the right choice of meat for end consumers simple by
developing high-quality meat that is slaughter-free, delicious, nutritious, and safer than farm-raised meat, We accomplish this by adopting
a factory design intended to offer a sustainable solution for producing a variety of beef, chicken, sea-food and pork products,
whether as raw materials or final consumer products.
Our technologies and processes have the potential to be sustainable. We are developing
a meat production process that is designed to provide sustainability in an industry that, due to inefficiencies inherent in conventional
meat farming, is not otherwise expected to be able to meet the growing demand for protein caused by rising population numbers and global
affluence. These include the large amounts of land and water use that are needed for raising livestock, which causes precious natural
resources to be squandered and the release of methane and other greenhouse gases by livestock.
We are designing our cellular agriculture and bioprinting processes to be modular so
that customers can initiate their cultivated meat activities at scales suitable for their specific needs and to grow their activities
as their needs evolve. Whether a customer wishes to manufacture a hybrid product that includes cultivated and plant-based ingredients,
cultivated fat as a raw material, or even 3D-printed steak, each facility can be adapted to scale-out product capabilities and production
volumes.
We are developing a fully automated, clean and proprietary process for cultivated meat
manufacturing in a controlled, sterile environment, which is expected to significantly increase food safety. Our production facilities
will not house a single animal and will contain robust integrated monitoring systems and minimal human interaction, which will greatly
reduce the risk of pathogen contamination of the type claimed to have caused the COVID-19 pandemic and numerous other human health crises.
We have carefully selected personnel for our management team who possess substantial
industry experience, from diverse fields including the food industry, bioprinting, tissue engineering, industrial stem cell growth, software
engineering, electronic and mechanic engineering and print materials development. We believe that this blend of talent and experience
in managers who share our core values gives us the requisite insights and capabilities to execute our plan to develop technologies designed
to meet demand in a scalable, profitable and sustainable way.
To achieve our mission, we intend to:
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Perfect the development of our cultivated meat manufacturing technology and processes.
We intend to continue developing and refining our processes, procedures and equipment until we are in a position to commercialize our
technologies, whether by manufacturing final products for consumers (B2C and B2B2C models) or ingredients for industrial use, as well
as in outlicensing (B2B models). We are continuing to tackle the technological challenges involved in scaling up both our biological
and printing processes to industrial-scale levels. |
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Commercialize our technologies for use in consumer and business markets. We
intend to provide ingredients to business customers for use in consumer products in order to help meet the growing demand for sustainable,
slaughter-free cultivated meat products. For example, manufacturers of meat alternatives, such as vegetarian sausages, may choose to include
our cultivated fat biomass in their products in order to deliver the signature meaty flavors, aromas and textures of the meat that is
otherwise provided by the conventional meat of species such as chicken, beef and pork. We believe that this combination has the potential
to unlock a new level of meat experience.
In addition, we intend to license our production technology as well as provide associated products, such
as cell lines, printheads, bioreactors and incubators, and services, such as technology implementation, training, and engineering support, whether
directly or through contractors, to food processing and food retail companies. We intend to charge our customers a production license
fee, based upon the amount of meat printed. We expect that each production facility will periodically require us to provide them with
our proprietary materials, such as fresh sets of starter cells, for a fee. In addition, other materials used in the production process,
such as cell-culture media and additives in our bio-inks may be sourced from third parties. Whether these materials are customized for
the specifics of our production processes, “white-labelled” generic materials or proprietary materials that we have developed,
we may charge a fee for restocking such materials; however, we have not yet reached the stage where it would be possible to estimate to
what extent this would contribute to any future revenue stream. Finally, we intend to provide
paid product implementation and guidance services to our customers looking to establish cultivated meat manufacturing facilities. We expect
that each facility licensing our technologies will need to deal with novel challenges and, as a result, will require the assistance of
our expert knowledge in order to set up and implement our licensed technologies. |
In addition, we envisage demand for our ingredients
in industrial applications other than human consumption, including cosmetics, which involve the extensive use of fat, and pet food. However,
our current focus remains the development of cultivated meat and its ingredients for human consumption.
In December 2022, we announced that we will focus
on commercialization of our 3D bio-printer in 2023 to accelerate our go-to-market strategy through business collaborations and partnerships.
To facilitate an accelerated go-to-market plan, we will focus resources on dedicating business personnel to create and develop partnerships
during 2023.
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Develop
additional alternative proteins to meet growing industry demand. There are substantial technological challenges inherent in expanding
our offering beyond our current cultivated beef, pork and avian technologies to additional alternative proteins and cell lines.
However, we believe that our experience, know-how and intellectual property portfolio form an excellent basis from which to surmount such
challenges. Our first step in this direction was the 2021 acquisition of Peace of Meat BV, or Peace of Meat, with the aim of developing
avian fat for the alternative meat industry by applying proprietary technology to mimic the cellular composition of conventional poultry.
In addition, in January 2023, we announced a collaboration with Singaporean cultivated seafood developer, Umami Meats, to develop 3D-printed
structured eel and grouper products pursuant to a grant from the Singapore-Israel R&D Foundation. The initiative is being funded by
a grant from the Singapore-Israel Industrial R&D Foundation (SIIRD), a cooperation between Enterprise Singapore (ESG) and the Israel
Innovation Authority (IIA). The collaboration aims to develop a scalable process for producing structured cultivated fish products and
will involve the use of our newly-developed technology for mimicking the flaky texture of cooked fish which was the subject of a recent
patent application.
By the end of the first quarter of 2023, we intend to complete the project’s
first prototype, a structured hybrid grouper product printed using our proprietary three-dimensional bio-printing technology and bio-inks,
customized for cells provided by Umami Meats. |
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Acquire synergistic and complementary technologies and assets. We
intend to optimize our processes and diversify our product range to expand the cultivated meat technologies upon which marketable products
can be based. We intend to accomplish this through a combination of internal development, acquisitions and collaborations, with a view
to complementing our own processes and diversifying our product range along the cultivated meat production value chain in order to introduce
cultivated products to the global market as quickly as possible. See also “- Additional Technologies” below. |
The Commercialization Roadmap
The following table sets forth a road map for the expected commercialization of substitutes
for conventionally-farmed meat, which include:
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Fully-plant-based meat-like offerings that are already commercially available but lack the organoleptic properties of meat, primarily
flavor, aroma, texture and color; |
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Hybrid meat products of the type that we are developing, which combines real cultivated fat with plant-based protein to offer meatier
products with enhanced organoleptic properties; |
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Unstructured meat products, such as hamburgers and minced meat; and |
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Fully-cultivated structured meat products, such as 3D-printed steaks. |
We are focusing on developing cultivated fat, primarily for the purpose of commercializing
hybrid meat products in the short term, and developing the technologies needed for both unstructured and 3D-printed, structured, cultivated
meat products.
In September 2022, we announced the development of Omakase Beef Morsels, a richly-marbled,
structured meat product developed using our proprietary 3D-printing process. Inspired by the marbling standard of Wagyu beef, we believe
that Omakase Beef Morsels are an innovative culinary achievement elegantly designed as a meat lover's delicacy for premium dining experiences.
The product is made up of multiple layers of muscle and fat tissue, which have been
differentiated from bovine stem cells, and showcases the control, flexibility and consistency inherent in our bioprinting technology.
Each layer is printed separately using two different bio-inks – one for muscle and one for fat. The layers can be printed in a variety
of muscle/fat sequences to obtain differing results of juiciness and marbling of the cut.
Subject to the receipt of novel food regulatory
approvals, we expect to be able to initiate scale-up production in the second half of 2023 and generate initial revenues from our cultivated
ingredients (such as fat and muscle) and hybrid products commencing in 2024, followed by whole cuts of meat commencing in 2025.
Omakase Beef Morsels (Photo credit: Shlomo Arbiv)
Meat and Poultry Ingredients for Hybrid and Unstructured Cultivated Products
Both we and our Belgian subsidiary, Peace of Meat, continue to develop novel, proprietary,
stem-cell-based technologies to produce fat, muscle and connective tissue biomass from multiple species, such as chicken, beef and pork
without harming any animals. We are leveraging this technology, including through novel hybrid food products, to expedite market entry
while we develop an industrial process for cultivating and producing real meat, including through the use of three-dimensional bioprinting
technology. The first expected application of the technology is in hybrid food products, which combines plant-based protein with cultivated
animal fat biomass and is designed to provide meat analogues with qualities of “meatiness”, such as taste and texture, closer
to that of conventional meat products than are currently available in the market today. To this end, we have conducted a number of taste
tests where we demonstrated the potential that our cultivated fat biomass has to enhance the taste of plant-based protein products. We
believe that a product comprised of as little as 10-25% of our cultivated fat biomass combined with plant-based protein has the potential
to enhance meatiness. Our cultivated fat biomass is designed to be free of antibiotics and can be tailored to provide personalized nutritional
profiles.
Our fat biomass production technology relies on the use of cells derived from proprietary
cell lines. These cells grow naturally in suspension and in high densities. They also proliferate continuously, are relatively large and
tend to easily accumulate lipid. This quality of the cells makes them an excellent candidate for producing cultivated fat, so we have
used them to build a robust cell line that is free of genetic modifications, which we are now attempting to upscale towards industrial
production volumes. Our most advanced cell line is being built with non-GMO or GMO pluripotent stem cells that can differentiate into
muscle cells and fat cells and form connective tissue, which need fewer high-cost media components, such as growth factors, for their
development. As a result, these cells may have higher growth potential with lower costs than alternative technologies. We have likewise
developed the process for isolating, growing and differentiating bovine stem cells into muscle fibers, fat biomass and connective tissue.
In July 2021, Peace of Meat cultivated just over 700 grams of pure chicken fat biomass
in a single production run. We believe that producing this quantity of pure cultivated material in one run is a breakthrough toward potentially
manufacturing cultivated chicken fat at an industrial scale.
Single production run of chicken fat biomass.
Some of the steps which we are taking in order to keep the growth media cost low include:
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Replacing expensive, animal-derived components in cell growth media with chemical
replacements, including through in-house production, with a view to completing animal-free growth media and bio-ink by the first
half of 2023; |
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Cell line optimizations, such as through high-throughput analyses of evolved isolates; |
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Bioprocess optimization and media recycling; |
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Upscaled growth factor production, such as through hollow fiber bioreactors; and |
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Long-term market optimization as a result of expected increased demand. |
Structured Fully-Cultivated Meat
In addition to meat ingredients for use in hybrid meats and unstructured, cultivated
meat, we are developing the technology and processes to produce cultivated meat steak at an industrial scale. We are working to achieve
this by creating an end-to-end technology that combines cellular agriculture with bioprinting to produce complex meat structures. We are
developing cellular agriculture technology, such as cell lines, and approaches to working with growth media to support the growth of cells
such as fat and muscle cells in a scalable process, and have demonstrated an ability to differentiate stem cells into fat and muscle cells.
The media will be composed of food-grade ingredients and we expect their growth factors to be similar to those produced naturally in the
bodies of cattle, albeit free of fetal bovine serum, traditionally a significant component of cellular growth media that is harvested
from animals. We are engaged with experimentation to develop optimal and cost-effective antibiotic-free cell culture media, and are exploring
a range of types of, and sources for, growth factors suited to cell culture. These sources are expected to be sustainable and ethical,
providing a route to enabling effective and cost-effective processes. The processes we are developing are designed to allow cells of interest,
following humane tissue extraction from the umbilical cord or biopsy, to be isolated, replicated, grown and maintained in
vitro under controlled, laboratory conditions.
We are developing proprietary bioprinting and tissue engineering technologies to enable
the design and bioprinting of three-dimensional tissues. Our goal is for the meat produced using these technologies to have an authentic
texture, flavor, appearance and aroma without being limited to the precise combinations of existing meat tissue, so that fat content of
the meat, for example, can be adjusted to amounts other than those occurring naturally in animals in order to meet varied consumer preferences
for fattier or leaner cuts of meat. We believe that the novel processes that we are developing have the potential to eventually be competitive
with conventional manufacturing technologies for premium products as large-scale production of meat tissues will create new lines of meat
without any unnecessary animal use.
In the course of developing our technologies, we intend to develop a large-scale technology
demonstration model. We have set forth below an illustration of the process that we are developing that we believe will, upon completion,
allow us and our customers to develop and manufacture cultivated steaks at industrial scale.
We are working on slaughter-free meat development processes, including cell proliferation
and differentiation and experiments with stem cell growth media to grow high-density stem cells based solely on compounds produced in
laboratory processes.
In these experiments, we have developed stem cells able to differentiate into fat or
muscle cells which allows for the maturation of fat tissue and muscle fibers following an isolation process of specific stem cells from
sources, such as bovine umbilical cords or muscle tissue. These cells are nourished with nutritional compounds that we develop as a growth
medium to direct their differentiation into fat tissue or muscle tissue as needed.
In February 2022, we announced the successful development of a novel technology process
in which muscle cells are fused into significant muscle fibers that better resemble those in whole cuts of meat. Bovine stem cells were
isolated, proliferated in the lab and differentiated into matured muscle cells with improved muscle fiber density, thickness and length.
Cell source for cultivated meat products
The process of industrial scale meat printing necessitates the isolation and development
of cells able to produce both animal muscle and fat tissues. Our proprietary cell lines are isolated from various sources that harbor
these properties. For example, adult stem cells are isolated from various adult tissues, such as fat and muscle tissues, and stem cells
are isolated from the umbilical cord immediately following birth. Each of these cells has advantages and disadvantages and their adaptation
to our robust meat production process is currently being evaluated.
We are using software-controlled bioreactors to foster cell proliferation. The initial
growth phase leverages exponential growth of stem cells to achieve sufficient cell volumes for food production. These stem cells undergo
differentiation into multiple cell types, such as muscle and fat, as well as cell maturation.
We are in the process of developing cell-culturing processes and protocols for use in
bioreactor systems. Such bioreactor systems will enable monitoring and control of growth parameters, as well as testing and development
of efficient and economical cell-growth processes in industrial breeding containers. Separate from the bioreactor development process,
we have commenced development of a cell-suspension growth process. This growth process is different from cell growth on laboratory plates.
We expect that the newly-developed processes may allow cell growth on a scale needed for industrial-scale meat development. We have already
developed a cell-suspension growth process using chicken, porcine and beef cells in the course of developing both structured and unstructured
products.
Structured, three-dimensional printed products require the use of bio-inks, which are
printable biological materials produced from the biomass produced in our bioreactors, as well as scaffolding materials. Bioinks produced
differ in their differentiation potential into muscle, fat and connective tissue. In this step, our bio-inks are printed in thin layers
in the desired combination, which provides creative control over the steak design, in a process that maintains the ongoing viability of
the bio-ink cells. Since the printed layers are composed of viable cells, they are then able to coalesce and mature in an incubator with
the help of bonding agents that serve as a scaffold that forms three-dimensional tissues. We are in the process of optimizing the characteristics
of our proprietary bio-inks, including composition, motility, viscosity, temperature, structural stability, density and jettability, or
the ability to be dispersed by a printer, as well as the factors helping the cells to connect in three-dimensional tissues.
Bioprinting is a process of fashioning a specific type or types of native or manipulated
cells configured to form the edible tissue analog by depositing scaffolding material mixed with cells and other bio-inks. This is done
through the use of an inkjet-style printer with drop-on-demand capabilities where inks are printed precisely into a three-dimensional
design.
The image below depicts a potential laboratory model that we could use for the development
and production of cultivated meat steaks.
After the completion of the bioprinting process, the tissue is transferred into a special
incubator, where, in addition to providing nutrients and other chemical and biological agents, the system may physically manipulate the
tissue. This “training” process increases the muscle cells differentiation, a process in which a cell changes its function
and phenotype, and produces a stronger, more fibrous tissue.
To date, we have printed several cell types, which coalesced into fat and muscle tissue
grown in our laboratory. In December 2021, we announced that we had successfully three-dimensionally printed a 3.67 ounce cultivated steak
that was primarily composed of cultivated fat and muscle tissues without using soy or pea protein. The cells used to make the steak were
produced with an advanced proprietary process that started by isolating bovine stem cells from tissue samples and multiplying them. Upon
reaching sufficient cellular mass, stem cells were formulated into bio-inks compatible with our proprietary 3D bioprinter. The bio-inks
were printed from a digital design file of a steak structure. The printed product was placed in an incubator to mature, allowing the stem
cells to differentiate into fat and muscle cells and develop into fat and muscle tissue to form our steak.
In May 2022, we announced
the development of a novel, multi-nozzle 3D bioprinting system for industrial scale production of complex cultivated meat products without
impacting cell viability. We plan to offer the technology to third parties via our wholly-owned private subsidiary, Steakholder Innovation
Ltd. as a potential additional revenue stream and to accelerate commercialization. We aim to conclude our first strategic engagement
to this end in the second half of 2023.
In addition, in December 2022, we announced the development of a temperature-controlled
print bed for our industrial-scale printer, which is a step forward on our path toward mass production of cultivated meat using 3D printing
technology. Temperature control is a critical requirement when printing a cultivated product containing live cells. Maintaining optimal
temperature poses a challenge in the architecture of our industrial printers, so the development of temperature-controlled print beds
is a major milestone on the path to production at scale, whereby contactless electromagnetic power is delivered to the print bed which
is connected to a wireless communication module that monitors and controls its temperature.
Cultivated Steak Scaffolding
Growing three-dimensional meat presents a unique challenge. Typically, animal cells
must remain within 200 microns of a nutrient supply in order to survive. This is little more than the width of a human hair and is known
as the diffusion limit. It is the reason that cells grow along the surface of a petri dish rather than forming vertical piles.
In the next step of the process that we are developing, we intend to build a scaffold
to support the growth of three-dimensional meat. A “scaffold”, or “biocompatible scaffolding”, refers to
an engineered platform having a predetermined three-dimensional structure that mimics the environment of the natural extracellular material,
or ECM. The ECM is a three-dimensional network of large molecules that provide structural and biochemical support to surrounding cells.
Collagen is the most abundant component in the ECM that supports the development and growth of complex tissues, and specifically, also
muscle tissues. Engineering of bovine muscle tissues in vitro while avoiding the use of animal derived collagen requires the development
of plant based scaffolds that would imitate the properties of the ECM. Plants are an obvious candidate for scaffolding as they are sustainable,
cost worthy and could be processed to have similar properties of collagen fibers. We are developing technology to allow for the formation
of a composite scaffold.
We are focused on developing a process that will allow our food technology customers
to operate a high-throughput manufacturing process for high-quality, healthy meat. Our cellular agriculture and bioprinting processes
are being designed to be modular, meaning that they can work using different factory sizes. We believe we could license our technology
to customers with industrial plants close to urban areas seeking to provide “just in time”, logistically-efficient, local
and premium cellular agriculture. In addition, we believe a licensee of our technology could build a plant in a locality that does not
have the resources needed for industrial animal husbandry, which would allow places like the United Arab Emirates, Hong Kong or Singapore
to potentially become more agriculturally independent by increasing food security. As costs continue to decrease, we believe licensees
of our technology could also build production facilities in localities where there is high agricultural seasonality or desertification
risk.
Illustration of a contemplated cultivated meat manufacturing plant.
We are developing processes intended to achieve high-volume manufacturing capabilities
in line with the needs of today’s value-added food processors and other meat and food industry players. To this end, we are working
on processes to scale up production, beginning with different cell types, including induced pluripotent stem cells and embryonic stem
cells. We expect high-volume stem cell production to feed into differentiation bioreactors that are dedicated to producing fat and muscle
cells. These cells are the key input for our downstream productization stages.
The processes we are developing are advanced biotechnological processes that are intended
to produce cultivated meat in a clean environment with minimal environmental impact. We envision that factories utilizing our technologies
will exist in greater harmony with their environment than typical current factories by supporting sustainability, utilizing renewable
energy sources and recycling or treating their own waste.
We may incorporate novel bioreactor technologies that benefit cellular agriculture and
the development of low-cost cell culture media not based on fetal bovine serum.
We also plan to add cell line types to expand the
development of cultivated meat to other types of animals, as well as achieving market penetration in the shortest timeframe possible,
which would allow us to realize the great potential in the market. We are developing cultivated meat, both unstructured hybrid products
and structured, three-dimensional printed products, with an initial emphasis on bovine and porcine cells, and our subsidiary, Peace of
Meat, is developing cultivated avian fat, initially for use in hybrid products. We estimate that the first hybrid products based on Peace
of Meat technology may enter the market as early as 2025. Beyond hybrid products, cultivated fat is expected to be a component in other
fat-based products, whether edible or otherwise, and an integrated component in our printing technology. We are working to create synergy
and added value to the cultivated meat market, while also sustaining animal welfare and meeting the growing global demand for meat.
United States
In March 2022, we
announced that we intended to open a U.S. office. We expect the new space will include activities in research and development, investor
relations and business development. In September 2022, we commenced development of a bovine cell line in the United States. by isolating
cells sourced from cattle raised on a farm approved by the United States Department of Agriculture, or USDA. We plan to make a
regulatory submission in the United States for approval of our cultivated meat in the second half of 2023.
In February 2021, we finalized our acquisition of Peace of Meat, a Belgian producer
of cultivated avian products, for up to $19.9 million in cash and equity, depending on milestone achievements. We intend to leverage Peace
of Meat’s cultivated avian technologies to diversify our own bovine-oriented technologies and expedite our entry into the market
for plant-based meat alternatives and cultivated products. Peace of Meat was established in Belgium in 2019 and is developing cultivated
avian fat directly from animal cells without the need to grow or kill animals. In 2020, Peace of Meat was awarded a subsidy of approximately
$1.33 million from the Flemish government, of which $0.5 million has been received, and has received approximately $1 million in private
investments. We bought Peace of Meat for approximately $20 million in a cash- and equity-based milestone deal. We believe that the innovative
technology of Peace of Meat has the potential to support an industrial process for the production of cultivated avian fat. Peace of Meat
has entered into a number of scientific and commercial collaborations, is in the process of positioning itself as a future B2B provider
with the potential to cover the entire value chain, has accelerated research and production processes in the industry and has conducted
taste tests for hybrid products that it has developed. It intends to open a pilot plant in Belgium.
In April 2021, we commenced food technology development activities through our European
subsidiary, MeaTech Europe BV, with an initial focus on hybrid foods using Peace of Meat’s cultivated fat. Hybrid foods are products
composed of both plant and cultivated meat ingredients that have the potential to offer a meatier experience than purely plant-based meat
alternatives.
In March 2022, we announced that Peace of Meat intends to build
an R&D facility and pilot plant in Belgium. The new facility is designed to expand and accelerate our cultivated avian technology
and R&D capabilities and help propel our market entry.
In May 2022, Peace of Meat signed a strategic agreement with 3FBIO Ltd., trading as
ENOUGH, a leader in the field of mycoprotein, a fungi-based fermented food ingredient, which is expected to help accelerate commercialization
of our culture avian fat product. This innovative initiative is expected to create advanced hybrid alternative meat products that better
resemble the flavor, aroma, texture, and even nutritional value of conventional meat.
We plan to make a regulatory submission for approval
of our cultivated meat in the European Union in the first half of 2023.
Asia
In November 2022, we received a
registered trademark for our name in Japan, which we view as an important next step in our plans to penetrate the Japanese market and
other markets in Asia. This follows on our collaboration with Umami Meats for the joint development of 3D-printed cultivated structured
seafood. In addition, we plan to make a regulatory submission for approval of our cultivated meat in Singapore in the first half of 2023.
We are working to develop and establish sales and distribution capabilities. In the
event that we complete the development of our technologies and secure adequate funding, we intend to consider commercialization collaborations
where appropriate.
Apart from end consumers in B2C and B2B2C models of branded products, we believe that
our ideal business customers will be value-added food processors and retailers that wish to benefit from cultivated meat manufacturing
capabilities. We intend to provide our corporate customers with a solution to these needs in the form of highly-automated, cleaner and
‘just-in-time’ manufacturing of cultivated meat products using a repeatable, consistent manufacturing process. Our goal is
for our customers to be able to streamline their meat supply chain, introduce greater manufacturing flexibility and locate their cultivated
meat production facilities closer to the point of retail or consumption.
We intend to provide our business licensees with assistance in constructing facilities
to employ our proprietary technology and processes. We expect that we will need to collaborate with third parties to obtain and make available
to our customers the expertise necessary to provide this assistance. In addition, we intend to procure the equipment our licensees need
to deploy our proprietary technology and processes from third-party providers. Some equipment, such as piping, clean rooms and packing
and freezing equipment are standard industry equipment and can be sourced on open markets. Other equipment, such as bioreactors and our
proprietary bioprinters, will need to be produced by contract manufacturers.
We have sought and continue to seek patent protection as well as other intellectual
property rights for our products, processes and technologies in the United States and internationally. Our policy is to pursue, maintain,
expand, protect and defend our patent rights and trade secrets, which we believe enable us to deliver long-term protection for the proprietary
technologies, inventions and improvements that are commercially important to the development of our business.
During the course of 2022, we received notices of grant or allowance
for patent applications in the USA, Canada, Australia and New Zealand relating to our development of systems and methods to apply external
forces to muscle tissue that result in the development of high-quality complex structured meat.
We have a growing portfolio of 15 provisional and non-provisional
patent applications pending with the USPTO, WIPO (filed through the Paris Convention Treaty, or PCT, and in various countries worldwide.
A provisional patent application is a preliminary application, and establishes a priority date for the patenting process of inventions
disclosed therein.
Our existing patent portfolio can currently be divided into three main areas:
Mechanical: covering printer components and peripherals used in the fabrication of the
tissue cultures with two applications filed at the national stage of prosecution. The first; directed to print heads operable in
a bioprinting systems for the fabrication of edible biostructures using drop-on-demand, the print heads specifically designed to accommodate
bio fluids of suspended systems without causing demixing, while still delivering bio fluids with high accuracy and precision.
Following a favorable patentability opinion, the Application was filed in the USPTO
and is currently undergoing accelerated examination having received a grant for a petition to make special under the Patent Prosecution
Highway (PPH) program. The second application currently undergoing examination in 7 countries, is directed to systems and methods
of physically manipulating a resilient container (bladder) of bioprinted tissue culture having non-random three dimensional cell structure
over 4 dimensions, namely elongation, compression, torsion and shear, to modulate the tissue and achieve the desired texture for each
meat type. The Application was already granted in United States, Australia, and New Zealand, and was given a notice of allowance in Canada.
Current development work in the mechanical area will most likely result in the development
of additional intellectual property, although at this point it remains to be seen whether it would be registerable.
Biological: covering initial materials used in the process with several provisional,
and PCT applications filed and currently pending.
These include an application directed to methods for harvesting ICM from bovine blastocysts;
methods and compositions for the xeno-free propagation of bESC on bovine umbilical stem cells (bUCSC), derived from a bovine umbilical
cord; the use of plant-based lecithins and/or their components in a composition as a differentiation drivers for use in selectively promoting
adipocytes differentiation; and methods and compositions for accelerated myotube formation.
Applications: covering the final consumable formed using mechanical and biological inputs,
with a couple of applications currently pending.
These include a provisional application for a beef-emulating consumable formed of stacked
3D-pronted layers of muscle and fat tissues; and an application for a method and composition for achieving the flaky characteristics associated
with fish.
In addition to patent applications, we maintain trade secrets covering know-how and
proprietary information relating to our core technologies and make practicable efforts to protect our confidential trade secrets.
To this end, we require our employees engaged in the development of intellectual property to enter into confidentiality agreements prohibiting
the disclosure of confidential information and further, require disclosure and assignment of any inventions and associated intellectual
property rights that are important to our business. Additionally, we require all entering employees to represent they are not bringing
in, or are using any third party’s Trade Secrets.
We have also registered our new name, Steakholder Foods, and brand name as registered trademarks in various
countries, and maintain ongoing rights to our domain name. Steakholder Foods® was registered in Japan and the European Community
and is currently undergoing examination in several other countries, including the United States.
While our policy is to obtain patents by application, license or otherwise, to maintain
trade secrets and to seek to operate without infringing on the intellectual property rights of third parties, technologies related to
our business have been rapidly developing in recent years. Additionally, patent applications that we may file or license from third parties
may not result in the issuance of patents, and our current or future issued patents may be challenged, invalidated or circumvented. Therefore,
we cannot predict the extent of claims that may be allowed or enforced against our patents, nor be certain of the priority of inventions
covered by pending third-party patent applications. If third parties prepare and file patent applications that also claim technology or
therapeutics to which we have rights, we may have to engage in proceedings to determine priority of invention, which could result in substantial
costs to us, even if the eventual outcome is favorable. Moreover, because of the extensive time required for clinical development and
regulatory review of products we may develop, it is possible that the patent or patents on which we rely to protect such products could
expire or be close to expiration by the commencement of commercialization, thereby reducing the value of such patent. Loss or invalidation
of certain of our patents, or a finding of unenforceability or limited scope of certain of our intellectual property, could also have
a material adverse effect on us. See “Risk Factors — Risks Related to our Intellectual Property and Potential Litigation.”.
We expect that demand for our cultivated meat manufacturing plants will be driven by
consumer demand for alternative proteins and, more specifically, consumer acceptance of cultivated meat as the alternative protein of
choice. We believe that we will compete with other cultivated meat manufacturers, alternative protein manufacturers and the conventional
meat industry as a whole. We expect to directly compete with companies licensing know-how or otherwise enabling the establishment
of cultivated meat manufacturing plants. We are aware of certain companies that have announced plans to provide their cultivated meat
technology on a B2B basis; however, we are not currently aware of a potential competitor focusing on complex, industrial-scale, bioprinted,
high-value real meats, such as steak.
Companies such as Upside Foods, Inc. and Mosa Meat BV are focused on producing red meats,
while BluNalu, Inc. is focusing on fish and Shiok Meats Pte. Ltd. is focusing on crustaceans. There are different companies working on
culturing varying cell types, such as chicken, pork, kangaroo and foie gras. This push on scaling-up cellular agriculture can serve as
a solution to the scale and environmental challenges confronting traditional meat production. Other alternative protein competitors such
as Beyond Meat, Inc. and Impossible Foods, Inc. are already selling plant-based meat substitutes, but to the best of our knowledge, these
companies are not focused on the production of real meat products produced with animal cells.
Companies Developing Vegetable and Insect Protein Alternatives
There are numerous companies focused on developing meat substitutes. In order for a
product to achieve commercial acceptance as an alternative to meat, it must have an appearance, taste, smell and nutritional values that
are similar enough to the type of meat that it seeks to replace or with which it seeks to compete. These meat substitute companies generally
employ proprietary formulae for manufacturing that are based wholly on ingredients of plant origin. In addition, we are aware of several
companies developing insect-protein production capabilities, employing among other insects, flies, larvae and grasshoppers.
Companies Developing Cultivated Meat
The cellular agriculture meat sector is in early stages of development. The sector is
currently primarily comprised of companies developing a full technology stack from developing cell lines to scaling up cellular cultivation,
developing media and researching the food technology aspects of the final product. Market dynamics have led to a large number of companies
operating in this manner. We are aware of approximately one company that operates in the cell-based field that is developing cellular
agriculture for ground-meat alternatives and appears to be progressing with its technological development. This company has indicated
readiness to bring cell-based meat products to market as early as the fourth quarter of 2022 or 2023. We do not believe that any
companies in this space have already developed the capability to produce industrial quantities at prices low enough to compete on a dollar-per-pound
basis against conventionally-harvested meat.
A number of larger companies have begun engaging in this sector. For example, companies
such as Merck & Co., Inc. and Lonza Group AG are currently investing in capabilities to accommodate the market’s desire for
change in the cell culture media market. Additionally, a number of bioreactor companies are rumored to be interested in the cellular agriculture
market opportunity. Over time, we expect that larger players will continue to increase their exposure to cellular meat production either
by selling to, or collaborating with, the many start-ups in the space.
Currently, cellular agriculture companies are for the most part paving their own path,
with a goal of producing meat cells suitable as a replacement for ground meat. The ground meat type of cellular product may also be suitable
as an ingredient in a hybrid plant-based food product. The cell-types relevant to this effort are primarily muscle and fat cells. What
exactly these cell-based companies will offer is likely to be affected by consumer expectations and underlying cost structures. We believe
that these companies may have to mix their cellular meat product with plant-based ingredients in the interests of cost or appearance.
Companies Developing Structured Cultivated Meat Products
To our knowledge, there is currently no other company focused on the scaling up of
three-dimensional bioprinting. However, there are companies attempting to produce steaks by means of other approaches, such as growing
bovine cells, including fat, muscle and connective tissue on a pre-prepared scaffold, in order to create a contiguous piece of meat, which
has so far yielded steaks.
Regulators around the world are in the process of developing a regulatory approval process
for cultivated meat. Cultivated meat is not yet generally commercially available, but technologies like ours are anticipated to facilitate
the imminent scaling up of cultivated meat production. In general, cultivated meat production is expected to be subject to extensive regulatory
laws and regulations in the United States and in other jurisdictions such as Canada, Japan, the European Union and the United
Kingdom. In the United States, existing food safety requirements are expected to apply. Additional details are being developed at the
U.S. Food and Drug Administration, or FDA, and the U.S. Department of Agriculture, or USDA, pursuant to a Memorandum of Understanding,
or MOU, published by the FDA and USDA on March 7, 2019 entitled the “Formal Agreement to Regulate Cell-Cultured Food Products from
Cell Lines of Livestock and Poultry.” For example, the FDA anticipates publishing Draft Guidance on premarket safety oversight
by December 31, 2022, and in September 2021, the USDA published an Advance Notice of Proposed Rulemaking (ANPR), indicating that the USDA
will be developing new labeling requirements for foods under its jurisdiction produced through cell culture technology.
Under the MOU, which is expected to affect our customers producing cultivated meat,
the two agencies will operate under a joint regulatory framework wherein the FDA will oversee cell collection, cell banks and cell growth
and differentiation. A transition from FDA to USDA oversight will then occur during the cell harvest stage, at which point the USDA will
oversee the production and labeling of cultivated meat. The USDA will be advancing new labeling requirements. To the best of our knowledge,
the regulatory approval details under development, including the Draft Guidance on FDA premarket oversight, are not expected to apply
to our business directly, but they are instructive as to the regulatory requirements that our cultivated meat production customers are
expected to face and their expectations of us, in the form of customer assurances, regarding our products.
At this time, our business is limited to developing cultivated meat production technology,
such as bioprinters, that will be marketed to cultivated meat producers, and that of Peace of Meat, which is limited to developing cultivated
meat ingredients, such as cultivated avian fat. In the United States, and consistent with the Federal Food, Drug and Cosmetic Act, or
the FDCA, the Federal Meat Inspection Act, and the Poultry Products Inspection Act, food ingredient manufacturers, like Peace of Meat,
must comply with the FDA’s food production requirements under the FDCA, as amended by the Food Safety Modernization Act, to ensure
that the food is safe, and the USDA's requirements that the ingredients, when used in USDA-regulated meat and poultry products, are effective
and suitable for their intended use.
In addition, production equipment manufacturers must ensure that their products do not
contribute to the production of adulterated food. The regulatory obligation falls on the food manufacturer to ensure that all food produced,
including cultivated meat, is wholesome and not adulterated. Therefore, when sourcing food processing equipment, such as the three-dimensional
bioprinter that we are developing, our customers will request assurances that the bioprinter is safe for its intended use and will not
result in the production of adulterated food. We intend to monitor developments at the FDA and USDA in connection with the MOU to determine
whether any specific requirements or recommendations are published with specific regard to cultivated meat equipment manufacturers.
In the United States, we expect companies manufacturing cultivated meat products to
be subject to regulation by various government agencies, including the FDA, USDA, and the FTC. Equivalent foreign regulatory authorities
include the Canadian Food Inspection Agency, the Japanese Food Safety Commission, the European Food Safety Authority and authorities of
the EU member states, the State Food and Drug Administration of China and the Singapore Food Agency, or SFA. These agencies, among
other things, prescribe the requirements and establish the standards for food quality and safety, and regulate various food technologies,
including alternative meat product composition, ingredients, manufacturing, labeling and other marketing and advertising to
consumers.
In June 2022, Singapore was the first country to approve cultivated meat for sale. The
SFA has published comprehensive guidance explaining all of the requirements necessary for the safety assessment of novel foods, covering
all of the specifications required for the approval of cultivated meat in Singapore.
In November 2022, the FDA announced that it completed its first pre-market consultation
of human food made from cultured animal cells. Through a process with a U.S.-based cultivated meat technology company, which involved
evaluating the company’s production process and the cultured cell material made by the production process, including the establishment
of cell lines and cell banks, manufacturing controls, and all components and inputs, the FDA determined that it had no further questions
about the company’s safety conclusion. As this was the first instance of the FDA giving the greenlight to a cultivated meat product,
the FDA further announced that the world is experiencing a food revolution and the FDA is committed to supporting innovation in the food
supply.
We expect that federal, state and foreign regulators will have the authority
to inspect our customers’ facilities to evaluate compliance with applicable food safety requirements. Federal, state and foreign
regulatory authorities also require that certain nutrition and product information appear on the product labels of our customers’
food products and, more generally, that such labels, marketing and advertising be truthful, non-misleading and not deceptive to consumers.
As the cell-based agriculture industry is young and its regulatory framework is emerging
and evolving, legislation and regulation may evolve to raise barriers to our go-to-market strategies.
In addition to federal regulatory requirements in the United States, certain states
impose their own manufacturing and labeling requirements. For example, states typically require facility registration with the relevant
state food safety agency, and those facilities are subject to state inspections as well as federal inspections. Further, states can impose
state-specific labeling requirements. In the United States, the USDA will be developing new labeling requirements for foods under its
jurisdiction produced through cell culture technology as noted in an Advance Notice of Proposed Rulemaking (ANPR) published in September
2021.
We are subject to labor and employment laws, laws governing advertising, privacy laws,
safety regulations and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale
of merchandise. Our operations are subject to various laws and regulations relating to environmental protection and worker health and
safety matters. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
Environmental, Health and Safety Matters
We, our agents and our service providers, including our manufacturers, may be subject
to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges,
noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated
sites. We believe that our business, operations and facilities, including, to our knowledge, those of our agents and service providers,
are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations. Based
on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on
us. However, significant expenditures could be required in the future if we, our agents or our service providers are required to comply
with new or more stringent environmental or health and safety laws, regulations or requirements.
Except as stated above, we are not aware of any environmental risks related to our operations,
and therefore, we do not believe that environmental regulations will have a significant effect on us. However, in the future, we may be
required to meet environmental protection standards or regulations which could have a material impact on our activities, activities, profitability
and ability to remain competitive.
Our subsidiaries and the countries of their incorporation are as follows:
|
Name |
|
Jurisdiction of
Incorporation |
|
|
Parent |
|
% Ownership
(direct or
otherwise) |
|
|
Steakholder Foods USA, Inc. |
|
|
Delaware, U.S. |
|
|
Steakholder Foods Ltd. |
|
|
100 |
% |
|
Steakholder Innovation Ltd. |
|
|
Israel |
|
|
Steakholder Foods Ltd. |
|
|
100 |
% |
|
Steakholder Foods Europe BV |
|
|
Belgium |
|
|
Steakholder Foods Ltd. |
|
|
100 |
% |
|
Peace of Meat BV |
|
|
Belgium |
|
|
Steakholder Foods Europe BV |
|
|
100 |
% |
Property and Infrastructure
Our principal executive offices and laboratory are located at 5 David Fikes St., Rehovot,
Israel. The laboratory and office space total approximately 18,300 square feet. The lease for this facility will expire in January 2026,
although we have an option to renew it for four years, and the annual rent (including parking fees) is approximately $0.7 million, linked
to the Israeli CPI.
As of December 31, 2022, we had
49 employees based at our office and laboratory in Rehovot, Israel and 32 employees based at our office in Antwerp, Belgium.
Local labor laws govern the length of the workday and workweek, minimum wages for employees,
procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination,
Social Security payments or regional equivalents, and other conditions of employment, including equal opportunity and anti-discrimination
laws. None of our employees is party to any collective bargaining agreements. We generally provide our employees with benefits and working
conditions beyond the required minimums. We believe we have a good relationship with our employees, and have never experienced any employment-related
work stoppages.
Legal Proceedings
From time to time, we may be party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not currently involved in any legal proceedings that could reasonably
be expected to have a material adverse effect on our business, prospects, financial condition or results of operations.
MANAGEMENT
The following table sets forth the name, age and position of each of our executive officers
and directors as of the date of this prospectus. Unless otherwise stated, the address of our executive officers and directors is Steakholder
Foods Ltd., 5 David Fikes St., Rehovot 7638205, Israel.
|
Name |
|
Age |
|
Position |
|
Executive Officers: |
|
|
|
|
|
Arik Kaufman |
|
42 |
|
Chief Executive Officer |
|
Guy Hefer |
|
41 |
|
Chief Financial Officer |
|
Dan Kozlovski |
|
38 |
|
Chief Technologies Officer |
|
Non-Employee Directors: |
|
|
|
|
|
Yaron Kaiser |
|
44 |
|
Chairman of the Board of Directors |
|
David Gerbi(1)(2)(3) |
|
43 |
|
Director |
|
Eli Arad(1)(2)(3) |
|
50
|
|
Director |
|
Sari Singer(1)(2)(3) |
|
42 |
|
Director |
(1) Member of the audit committee
(2) Member of the compensation committee
(3) Independent director as defined under Nasdaq
Marketplace Rule 5605(a)(2) and SEC Rule 10A-3(b)(1).
Arik Kaufman, Chief Executive Officer
Arik Kaufman has
served as our Chief Executive Officer since January 2022. He has founded various Nasdaq- and TASE-traded foodtech companies, and
currently serves as director of Wilk Technologies Ltd. He is also a founding partner of the BlueSoundWaves collective, led by Ashton
Kutcher, Guy Oseary and Effie Epstein, which recently partnered with Steakholder Foods to assist in attempting to accelerate the Company’s
growth. Mr. Kaufman holds extensive personal experience in the fields of food-tech and bio-tech law, and has led and managed numerous
complex commercial negotiations, as part of local and international fundraising, M&A transactions and licensing agreements. He holds
a B.A. degree in Law from Reichman University (formerly the Interdisciplinary Center Hertzliya).
Guy Hefer, Chief Financial Officer
Guy Hefer has served as our Chief Financial
Officer since October 2020. He has over ten years of experience in investment banking and corporate finance roles. Between 2019 and 2020,
he was the chief financial officer of Prytek Holdings Pte Ltd., a private holding group investing in technology companies globally. Prior
to that, Mr. Hefer was an investment banker at Leumi Partners Ltd. between 2018 and 2019 and GCA Altium Israel Ltd. between 2017 and 2018
in Israel and at Barclays investment banking division between 2011 and 2016 in the UK and in Israel. Prior to that Guy worked at Fahn
Kanne Grant Thornton Israel, an accounting firm in Israel between 2009 and 2011. Mr. Hefer holds a B.A. degree in Accounting and Economics
from the Tel Aviv University, Israel.
Dan Kozlovski, Chief Technologies Officer
Dan Kozlovski has served as our Chief Technologies
Officer since February 2022, having previously served as our Vice President of Research & Development from August 2020 after joining
us in December 2019. He specializes in R&D and product development, with expertise in three-dimensional computer-aided design. Mr.
Kozlovski has more than ten years of experience working in high-technology companies in the printing market. Previously, he served as
Future Platform R&D Mechanical Engineer at HP Indigo Division from June 2018 to December 2019. Mr. Kozlovski has also worked as Mechanical
Team Leader at Nano Dimension Ltd. from August 2015 to June 2018. Mr. Kozlovski holds a B.Sc. degree in Mechanical Engineering from Ben
Gurion University of the Negev and an Executive MBA in Technology, Innovation & Entrepreneurship Management from Tel Aviv University.
Yaron Kaiser, Chairman of the Board of Directors
Yaron Kaiser has founded various Nasdaq-
or TASE-traded foodtech companies, and has served as Chairperson of Wilk Technologies Ltd. since January 2021. Mr. Kaiser is a founding
partner of the BlueSoundWaves collective since 2021, and practices law in the fields of securities, commercial and corporate law, representing
numerous public companies on fundraising, IPOs, M&A, the Israel Securities Authority and corporate governance, most recently at JST
& Co., Law Office, between 2010 and May 2021, and since then as a founding partner of Kaufman Kaiser Raz, Law Firm. He holds an LL.B.
degree from the College of Management Academic Studies, Israel.
Eli Arad has served as a director since
February 2018. Mr. Arad has been chief executive officer of the real-estate and life science investment company Merchavia Holdings and
Investments Ltd (TASE:MRHL) since 2011. Mr. Arad has served as a director of Cleveland Diagnostics, Inc., a clinical-stage biotechnology
company developing technology to improve cancer diagnostics since 2016, E.N. Shoham Business Ltd. (TASE:SHOM) since 2019, and a number
of privately-held companies (Veoli Ltd., Train Pain Ltd., EFA Ltd., Nervio Ltd. and Cardiosert Ltd.). He has had leadership roles in many
biomedical startup companies, and has extensive experience in all areas of financial management. Mr. Arad is a certified practicing accountant
who holds a diploma in Accounting from Ramat Gan College and an Executive B.A. (Hons.) in Business Administration from the Ruppin Academic
Center.
David Gerbi has served as a director since
August 2019. Mr. Gerbi is managing partner of accounting firm Gerbi & Co., and serves as Chief Financial Officer of Israir Group Ltd.
(TASE:ISRG) since 2017, Erech Finance Cahalacha Ltd. (TASE:EFNC) since 2019, Nur Ink Innovations Ltd. (TASE:NURI) since June 2021 and
Bee-io Honey Ltd. (TASE:BHNY) since November 2021. Mr. Gerbi holds a B.A. in Business Administration and Accounting from the Israeli College
of Management Academic Studies and an M.B.A. in Finance from Tel Aviv University.
Sari Singer has served as a director since
March 2021. Ms. Singer has served as General Counsel and Executive Vice President at NewMed Energy LP (formerly Delek Drilling LP),
the oil and gas arm of the Delek Group in Israel, and a partner in the Leviathan offshore gas field, as well as other petroleum assets
offshore Israel and Cyprus, since 2012, where she has led significant strategic processes, including restructurings and complex financing
rounds totaling some $7 billion in various transactions in the international and domestic markets. Ms. Singer holds an LL.B. (cum laude)
from Tel Aviv University and has been a member of the Israel Bar since 2007.
There are no family relationships among any of our directors or
officers.
Compensation of Executive Officers and Directors
Aggregate Compensation of Office Holders
The aggregate compensation we paid
to our executive officers and directors for the year ended December 31, 2022, was approximately $1.3 million. This amount includes approximately
$0.2 million paid, set aside or accrued to provide pension, severance, retirement or similar benefits or expenses, but does not include
share-based compensation expenses, or business travel, professional and business association dues and expenses reimbursed to office holders,
and other benefits commonly reimbursed or paid by companies in our industry. As of the date of this prospectus, options to purchase 2,472,540
Ordinary Shares granted to our officers and directors were outstanding under our share option plans at a weighted average exercise price
of $0.62 per share, in addition to 157,790 restricted share units with no exercise price.
Individual Compensation of Office Holders
The table and summary below outlines
the compensation granted to our then-Chief Executive Officer and Chief Technology Officer, the then-Chairman of our board of directors,
our then-Deputy Chief Executive Officer, our Chief Financial Officer and our then-Vice President of Research and Development (now Chief
Technologies Officer), with respect to the year ended December 31, 2022. For purposes of the table and the summary below, “compensation”
includes base salary, bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone
and social benefits and any undertaking to provide such compensation.
|
Name and Principal Position
|
|
Salary(1)
|
|
|
Bonus(2)
|
|
|
Equity-Based
Compensation(3)
|
|
|
Other
Compensation(4)
|
|
|
Total |
|
| |
|
(USD in thousands)
|
|
|
Mr. Arik Kaufman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
$ |
235 |
|
|
$ |
- |
|
|
$ |
88 |
|
|
$ |
8 |
|
|
$ |
331 |
|
|
Mr. Guy Hefer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
210 |
|
|
|
34 |
|
|
|
83 |
|
|
|
- |
|
|
|
327 |
|
|
Mr. Dan Kozlovski |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Technologies Officer
|
|
|
201 |
|
|
|
42 |
|
|
|
51 |
|
|
|
- |
|
|
|
294 |
|
|
Mr. Yaron Kaiser |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board of Directors
|
|
|
161 |
|
|
|
- |
|
|
|
62 |
|
|
|
8 |
|
|
|
231 |
|
|
Mr. Steven H. Levin
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chairman of the Board of
Directors(5)
|
|
$ |
57 |
|
|
$ |
- |
|
|
$ |
108 |
|
|
$ |
- |
|
|
$ |
165 |
|
|
(1) |
Salary includes the officer’s gross salary plus payment by us of social benefits on behalf of the officer. Such benefits may
include payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance Policy), pension, severance,
risk insurance (e.g., life, or work disability insurance), payments for social security and tax gross-up payments, vacation, medical insurance
and benefits, convalescence or recreation pay and other benefits and perquisites consistent with our policies. |
|
(2) |
Represents annual bonuses paid in
2022 with respect to 2021. |
|
(3) |
Represents the equity-based compensation expenses,
based on the options’ fair value on the grant date, calculated in accordance with applicable accounting guidance for equity-based
compensation. For a discussion of the assumptions used in reaching this valuation, see Note 10(B) to our annual consolidated financial
statements included elsewhere in this prospectus. |
|
(4) |
Represents consulting services provided
prior to commencement of the aforementioned current position. |
|
(5) |
Mr. Levin resigned his position as Chairman on January 24, 2022. |
Employment Agreements and Director Fees
We have entered into written employment
agreements with each of our executive officers, which provide for notice periods of varying duration for termination of the agreement
by us or by the relevant executive officer, during which time the executive officer will continue to receive base salary and benefits.
These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions.
However, the enforceability of the noncompetition provisions may be limited under applicable law. See “Risk Factors — Risks
relating to our operations — Under applicable employment laws, we may not be able to enforce covenants not to compete” for
a further description of the enforceability of non-competition clauses.
The material employment terms for
Mr. Kaufman, our Chief Executive Officer, are as follows: (1) a gross annual salary of NIS 564,000 ($160,000); (2) reimbursement of annual
travel expenses of up to NIS 60,000 ($17,000); (3) options to purchase 500,000 Ordinary Shares (currently equivalent to 50,000 ADSs),
vesting over three years from the date of his appointment as Chief Executive Officer, pursuant to which 1/12 will vest every quarter until
fully vested, expiring one year following Mr. Kaufman’s cessation of service in all then-applicable capacities, but in any case
after four years, with an exercise price of $0.519 per ordinary share (currently equivalent to $5.19 per ADS) and subject to acceleration
upon termination pursuant to our sale or change in control; (4) an annual performance bonus in the aggregate amount of NIS 282,000 ($80,000),
subject to his meeting certain performance milestones as determined by our board of directors on an annual basis; (5) termination of the
employment relationship upon provision of six months’ advance notice by either party; (6) severance pay equal to 25% of the gross
annual salary upon termination of Mr. Kaufman’s employment by us, not for cause, following three to twelve months of service, or
50% following twelve or more months of service (or 50% of these amounts upon Mr. Kaufman’s resignation); and (7) social benefits
that we pay on behalf of officers, such as payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance
Policy), pension, severance, risk insurance (e.g., life, or work disability insurance), payments for social security and tax gross-up
payments, vacation, medical insurance and benefits, convalescence or recreation pay and other benefits and perquisites consistent with
our policies, such as inclusion in our directors’ and officers’ liability insurance policy, and provision of indemnification,
exculpation and exemption undertakings to the fullest extent permitted by the Companies Law.
The material terms for Mr. Kaiser, the Chairman of our board of directors, are as follows:
(1) an annual fee of $150,000, to be paid in four equal quarterly installments in USD or in NIS at the then-current exchange rate, which
will automatically increase by an amount equal to seven percent at the end of each year of service; (2) reimbursement of annual travel
expenses of up to $18,000; (3) options to purchase 350,000 Ordinary Shares (currently equivalent to 35,000 ADSs), vesting over three years
from the date of his appointment as Chairman, pursuant to which 1/12 will vest every quarter until fully vested, expiring one year following
Mr. Kaiser’s cessation of service in all then-applicable capacities, but in any case after four years, with an exercise price of
$0.519 per ordinary share (currently equivalent to $5.19 per ADS) and subject to acceleration upon termination pursuant to our sale or
change in control; (4) an annual bonus equal to 50% of the bonus awarded to the Chief Executive Officer in the applicable year; (5) severance
pay equal to 12.5% of Mr. Kaiser’s annual fee upon the involuntary termination of his directorship, not for cause, following three
to twelve months of service, or 25% following twelve or more months of service (or 50% of these amounts upon Mr. Kaiser’s resignation);
and (6) other benefits and perquisites consistent with our policies, such as inclusion in our directors’ and officers’ liability
insurance policy, and provision of indemnification, exculpation and exemption undertakings to the fullest extent permitted by the Companies
Law.
In addition, we pay fees to our non-executive directors in return
for their service on our board of directors, in accordance with our compensation policy.
Our other employees are employed under the terms prescribed in
their respective employment contracts. The employees are entitled to the social benefits prescribed by law and as otherwise provided in
their agreements. These agreements each contain provisions standard for a company in our industry regarding non-competition, confidentiality
of information and assignment of inventions. Under currently applicable labor laws, we may not be able to enforce covenants not to compete
and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. See “Risk
Factors—Risks Related to Our Operations” for a further description of the enforceability of non-competition clauses.
Executive officers are also employed on the terms and conditions
prescribed in employment agreements. These agreements provide for notice periods of varying duration for termination of the agreement
by us or by the relevant executive officer, during which time the executive officer will continue to receive base salary and benefits.
See “Risk Factors—Risks Related to Our Operations—If we are unable to attract and retain qualified employees, our ability
to implement our business plan may be adversely affected.”
Option and RSU Allocation Plan
In June 2018, the board of directors of Ophectra adopted our Option and RSU Allocation
Plan, as amended, or the share option plan, to issue options to purchase our Ordinary Shares and restricted stock units to our directors,
officers, employees and consultants, and those of our affiliated companies (as such term is defined under share option plan), or the Grantees.
The share option plan is administered by our board of directors or a committee that was designated by the board of directors for such
purpose, or the Administrator.
Under the share option plan, we may grant options to purchase Ordinary Shares and/or
RSUs, or options, under four tracks: (i) Approved 102 capital gains options through a trustee, which was approved by the Israeli Tax Authority
in accordance with Section 102(a) of the Israeli Income Tax Ordinance (New Version), 1961, or ITO, and granted under the tax track set
forth in Section 102(b)(2) of the ITO. The holding period under this tax track is 24 months from the date of issuance of options to the
trustee or such period as may be determined in any amendment of Section 102 of the ITO, or any applicable tax ruling or guidelines; (ii)
Approved 102 earned income options through a trustee, granted under the tax track set forth is Section 102(b)(1) of the ITO. The holding
period under this tax track is 12 months from the date of issuance of options to the trustee or such period as may be determined in any
amendment of Section 102 of the ITO; (iii) Unapproved 102 options (the options will not be issued through a trustee and will not be subject
to a holding period); and (iv) 3(i) options (the options will not be subject to a holding period). These options shall be subject to taxation
pursuant to Section 3(i) of the ITO, or Section 3(i).
Options pursuant to the first three tax tracks (under Section 102
of the ITO) can be granted to our employees and directors and the grant of options under Section 3(i) can be granted to our consultants
and controlling shareholders (a controlling shareholder is defined under the Section 102 of the ITO is a person who holds, directly or
indirectly, alone or together with a “relative,” (i) the right to at least 10% of the company’s issued capital or 10%
of the voting power; (ii) the right to hold at least 10% of the company’s issued capital or 10% of the voting power, or the right
to purchase such rights; (iii) the right to receive at least 10% of the company’s profits; or (iv) the right to appoint a company’s
director). Grantees who are not Israeli residents may be granted options that are subject to the applicable tax laws in their respective
jurisdictions.
We determine, in our sole discretion, under which of the first
three tax tracks above the options are granted and we notify the Grantee in a grant letter, as to the elected tax track. As mentioned
above, consultants and controlling shareholders can only be granted Section 3(i) options.
The number of Ordinary Shares authorized to be issued under the
share option plan will be proportionately adjusted for any increase or decrease in the number of Ordinary Shares issued as a result of
a distribution of bonus shares, change in our capitalization (split, combination, reclassification of the shares or other capital change),
or issuance of rights to purchase Ordinary Shares or payment of a dividend. We will not issue fractions of Ordinary Shares and the number
of Ordinary Shares shall be rounded up to the closest number of ordinary shares.
In the event of a (i) merger or consolidation in which we (in this
context, specifically Steakholder Foods Ltd.) are not the surviving entity or pursuant to which the other company becomes our parent company
or that pursuant to which we are the surviving company but another entity holds 50% or more of our voting rights, (ii) an acquisition
of all or substantially all of our Ordinary Shares, (iii) the sale of all or substantially all of our assets, or (iv) any other event
with a similar impact, we may exchange all of our outstanding options granted under the share option plan that remain unexercised prior
to any such transaction for options to purchase shares of the successor corporation (or those of an affiliated company) following the
consummation of such transaction.
The exercise price of an option granted under the share option
plan will be specified in the grant letter every Grantee received from us in which the Grantee notifies of the decision to grant him/her
options under the share option plan, and will be denominated in our functional currency at the time of grant or the currency in which
the Grantee is paid, at our discretion.
The Administrator may, in its absolute discretion, accelerate the
time at which options granted under the share option plan or any portion of which will vest.
Unless otherwise determined by the Administrator, in the event
that the Grantee’s employment was terminated, not for Cause (as defined in the share option plan), the Grantee may exercise that
portion of the options that had vested as of the date of such termination until the end of the specified term in the grant letter or the
share option plan. The portion of the options that had not vested at such date, will be forfeited and can be re-granted to other Grantees,
in accordance with the terms of the share option plan.
At the discretion of our board of directors, and subject to receipt of taxation authority
approvals, we may allow Grantees to exercise their options on a cashless basis.
2022 Share Incentive Plan
The 2022 Share Incentive Plan, or the 2022 Plan, provides for the
grant of equity-based incentive awards to our employees, directors, office holders, service providers and consultants in order to incentivize
them to increase their efforts on behalf of the Company and to promote the success of the Company’s business.
Shares Available for Grants. The maximum
number Shares (which means ordinary shares, of no par value, (including ordinary shares resulting or issued as a result of share split,
reverse share split, bonus shares, combination or other recapitalization events, and including in the form of ADSs), or shares of such
other class of shares as shall be designated by the board of directors of the Company in respect of the relevant award) available for
issuance under the 2022 Plan is equal to the sum of (i) 8,500,000 Shares, (ii) 1,127,850 Shares, which represents the number of Shares
available for issuance under the Option and RSU Allocation Plan, or the Prior Plan, on the effective date of the 2022 Plan, and (iii)
an annual increase on the first day of each year beginning in 2023 and on January 1st of each calendar year thereafter and ending on January
1, 2032, equal to the lesser of (A) 5% of the outstanding ordinary shares of the Company on the last day of the immediately preceding
calendar year, on a fully diluted basis; and (B) such amount as determined by our board of directors if so determined prior to January
1 of a calendar year. Shares issued under the 2022 Plan may be, in whole or in part, authorized but unissued Shares, (and, subject to
obtaining a ruling as it applies to 102 awards) treasury shares (dormant shares) or otherwise Shares that shall have been or may be repurchased
by the Company (to the extent permitted pursuant to the Companies Law).
Any Shares (a) underlying an award granted under the 2022 Plan or an award granted under
the Prior Plan (in an amount not to exceed 8,498,490 Shares under the Prior Plan) that has expired, or was cancelled, terminated, forfeited,
or settled in cash in lieu of issuance of Shares, for any reason, without resulting in the issuance of Shares; (b) if permitted by the
Company, subject to an award that are tendered to pay the exercise price of an award; or withholding tax obligations with respect to an
award; or if permitted by the Company, subject to an award that are not delivered to a Grantee because such Shares are withheld
to pay the exercise price of such award; or withholding tax obligations with respect to such award may again be available for issuance
under the 2022 Plan and for issuance upon exercise or (if applicable) vesting thereof for the purposes of the 2022 Plan, unless determined
otherwise by the Board. Our board of directors may also reduce the number of ordinary shares reserved and available for issuance under
the 2022 Plan in its discretion.
The maximum aggregate number of Shares that may be issued pursuant
to the exercise of incentive stock options granted under the 2022 Plan, or the ISO Limit, shall be the sum of (a) the aggregate number
of Shares set forth in clauses (a) and (b) in the above paragraph; and (b) any Shares underlying awards granted under the Prior Plan that
are returned to the 2022 Plan (not to exceed 8,498,490 Shares). To the extent permitted under Section 422 of the United States Internal
Revenue Code of 1986, and any applicable regulations promulgated thereunder, all as amended (the “Code”), any Shares covered
by an award that has expired, or was cancelled, terminated, forfeited, or settled in cash without the issuance of Shares shall not count
against the ISO Limit. Shares that actually have been issued under the 2022 Plan shall not become available for future issuance hereunder
pursuant to incentive stock options.
Administration. Our board of directors, or a duly authorized
committee of our board of directors, or the Administrator, or the Administrator, will administer the 2022 Plan. Under the 2022 Plan,
the Administrator has the authority, subject to applicable law, to interpret the terms of the 2022 Plan and any award agreements or awards
granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option
award, the fair market value of an ordinary share, the time and vesting schedule applicable to an award or the method of payment for an
award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2022 Plan and
take all other actions and make all other determinations necessary for the administration of the 2022 Plan.
The Administrator also has the authority to approve the conversion, substitution, cancellation
or suspension under and in accordance with the 2022 Plan of any or all option awards or ordinary shares, and the authority to modify option
awards to eligible individuals who are foreign nationals or are individuals who are employed outside Israel to recognize differences in
local law, tax policy or custom, in order to effectuate the purposes of the 2022 Plan but without amending the 2022 Plan; provided,
that if the Administrator takes such action with respect to an award held by a U.S. service provider, it shall do so in accordance with
the requirements of Section 409A of the Code, if applicable.
The Administrator also has the authority to amend and rescind rules and regulations
relating to the 2022 Plan or terminate the 2022 Plan at any time before the date of expiration of its ten year term.
Eligibility. The 2022 Plan provides for
granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance
(New Version) 5271-1961, and the regulations and rules promulgated thereunder, all as amended from time to time (the “Ordinance”),
and Section 3(i) of the Ordinance and in compliance with Section 422 of the Code and Section 409A of the Code as they relate to U.S. service
providers when granted Nonqualified Stock Options, and to U.S. service providers who are Employees when granted Incentive Stock
Options.
Grants. All awards granted pursuant to
the 2022 Plan will be evidenced by an award agreement, in a form approved, from time to time, by the Administrator in its sole discretion.
The award agreement will set forth the terms and conditions of the award, including the type of award, number of shares subject to such
award, vesting schedule and conditions (including performance goals or measures) and the exercise price, if applicable. Certain awards
under the 2022 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional
requirements on the terms and conditions of such awards.
Unless otherwise determined by the Administrator and stated in the award agreement,
and subject to the conditions of the 2022 Plan, awards vest and become exercisable under the following schedule: 25% of the shares covered
by the award on the first anniversary of the vesting commencement date determined by the Administrator (and in the absence of such determination,
the date on which such award was granted) and 6.25% of the Shares covered by the award at the end of each subsequent three-month period
thereafter over the course of the following three years; provided that the grantee remains continuously as an employee or provides services
to the company throughout such vesting dates.
Each award will expire ten years from the date of the grant thereof, unless such shorter
term of expiration is otherwise designated by the Administrator.
Awards. The 2022 Plan provides for the
grant of stock options (including incentive stock options and nonqualified stock options), ordinary shares, restricted shares, RSUs, stock
appreciation rights and other share-based awards.
Options granted under the 2022 Plan to the Company employees who are U.S. residents
may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options.
The exercise price of an option may not be less than the par value of the Shares (if the Shares bear a par value) for which such option
is exercisable. The exercise price of an Incentive Stock Option may not be less than 100% of the fair market value of the underlying share
on the date immediately preceding the day of the grant or such other amount as may be required pursuant to the Code, and in the case of
Incentive Stock Options granted to ten percent stockholders, not less than 110%.
Nonqualified stock options may not be granted to a U.S. service provider unless (i)
the Shares underlying such options constitute “service recipient stock” under Section 409A of the Code and such options
meet the other requirements to be exempt from Section 409A of the Code or (ii) such options comply with the requirements of Section 409A
of the Code. A nonqualified stock option may be granted with an exercise price lower than the minimum exercise price set forth above if
(i) such option is granted pursuant to an assumption or substitution for another option in accordance with and pursuant to Section 409A
of the Code or (ii) the Administrator expressly determined that the option will have a lower exercise price and the Option complies with
Section 409A of the Code or meets another exemption under Section 409A of the Code.
Incentive stock options may be granted only to U.S. service providers who are employees
of the Company. However, if for any reason an option (or portion thereof) does not qualify as an incentive stock option, then, to the
extent of such non-qualification, such option (or portion thereof) shall be treated as a nonqualified stock option granted under the 2022
Plan.
An RSU may be awarded to any service provider, including under Section 102 of the
Ordinance. Subject to Applicable Law, RSUs may be granted in consideration of a reduction in the recipient’s other compensation.
No payment of exercise price shall be required as consideration for RSUs, unless included in the award agreement or as required by applicable
law. The grantee shall not possess or own any ownership rights in the Shares underlying the RSUs. Settlement of vested RSUs shall be made
in the form of Shares. Distribution to a grantee of an amount (or amounts) from settlement of vested RSUs can be deferred to a date after
vesting as determined by the Administrator; provided, that no such deferral shall be made with respect to RSUs held by a U.S. service
provider if such deferral would cause such RSUs to fail to qualify for an exemption under Section 409A of the Code and become subject
to the requirements of Section 409A of the Code, unless expressly determined by the Administrator, or would violate the requirements of
Section 409A. In no event shall any dividends or dividend equivalent rights be paid before the vesting of the portion of the RSUs to which
such dividends or dividend equivalent rights relate, unless otherwise provided for in an award agreement or determined by the Committee.
Any RSUs granted under the 2022 Plan that are not exempt from the requirements of Section 409A of the Code shall contain such restrictions
or other provisions so that such RSUs will comply with the requirements of Section 409A of the Code.
Exercise. An award under the 2022 Plan
may be exercised by providing the Company with a written or electronic notice of exercise and full payment of the exercise price for such
shares underlying the award, if applicable, in such form and method as may be determined by the Administrator and permitted by applicable
law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price and purchase price obligations
arising in connection with awards under the 2022 Plan, the Administrator may, in its discretion, accept cash, provide for net withholding
of shares in a cashless exercise mechanism or direct a securities broker to sell shares and deliver all or a part of the proceeds to the
Company or the trustee. The exercise period of an award will be determined by the Administrator and stated in the award agreement, but
will in no event be longer than ten (10) years from the date of grant of the award. Notwithstanding anything to the contrary, the Administrator
may extend the periods for which awards held by any grantee may continue to vest and/or be exercisable; it being clarified that such awards
may lose their entitlement to certain tax benefits under applicable law; if done so with respect to a U.S service provider, the Administrator
shall act in accordance with Section 409A of the Code, as applicable.
Transferability. Other than by will, the
laws of descent and distribution or as otherwise provided under the 2022 Plan, neither the options nor any right in connection with such
options are assignable or transferable.
Termination of Employment. In the event
of termination of a grantee’s employment or service with the Company or any of its affiliates, all vested and exercisable awards
held by such grantee as of the date of termination may be exercised within three months after such date of termination, unless otherwise
determined by the Administrator, but in no event later than the date of expiration of the award as set forth in the award agreement. After
such three-month period, all such unexercised awards will terminate and the shares covered by such awards shall again be available for
issuance under the 2022 Plan.
In the event of termination of a grantee’s employment or service with the Company
or any of its affiliates due to such grantee’s death or permanent disability, or in the event of the grantee’s death within
the three month period (or such longer period as determined by the Administrator) following his or her termination of service, all vested
and exercisable awards held by such grantee as of the date of termination may be exercised by the grantee or the grantee’s legal
guardian, estate or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within one year
after such date of termination, unless otherwise provided by the Administrator, but in no event later than the date of expiration of the
award as set forth in the award agreement. Any awards which are unvested as of the date of such termination or which are vested but not
then exercised within the one year period following such date, will terminate and the shares covered by such awards shall again be available
for issuance under the 2022 Plan.
Notwithstanding any of the foregoing, if a grantee’s employment or services with
the Company or any of its affiliates is terminated for “cause” (as defined in the 2022 Plan), all outstanding awards held
by such grantee (whether vested or unvested) will terminate on the date of such termination and the shares covered by such awards shall
again be available for issuance under the 2022 Plan.
Any Option that is intended to be an incentive stock option and is exercised later than
three (3) months after the grantee ceases to be employed by the Company (or any parent or subsidiary), except in the case of death or
“Disability” (as defined in Section 22(e)(3) of the Code), will be deemed a nonqualified stock option. If the grantee ceases
to be employed by the Company (or any parent or subsidiary) due to disability, any option that is intended to be an incentive stock option
and is exercised later than twelve (12) months after such termination date will be deemed a nonqualified stock option.
Voting Rights. Except with respect to restricted
share awards, grantees will not have the rights as a shareholder of the Company with respect to any shares covered by an award until the
award has vested and/or the grantee has exercised such award, paid any exercise price for such award and becomes the record holder of
the shares. With respect to restricted share awards, grantees will possess all incidents of ownership of the restricted shares, including
the right to vote and receive dividends on such shares.
Dividends. Grantees holding restricted
share awards will be entitled to receive dividends and other distributions with respect to the shares underlying the restricted share
award. Any stock split, stock dividend, combination of shares or similar transaction will be subject to the restrictions of the original
restricted share award. Grantees holding RSUs will not be eligible to receive dividend but may be eligible to receive dividend equivalents.
Transactions. In the event of a share split,
reverse share split, share dividend, recapitalization, combination or reclassification of the Company’s shares, the Administrator
in its sole discretion may, and where required by applicable law shall, without the need for a consent of any holder, make an appropriate
adjustment in order to adjust (i) the number and class of shares reserved and available for the outstanding awards, (ii) the number and
class of shares covered by outstanding awards, (iii) the exercise price per share covered by any award, (iv) the terms and conditions
concerning vesting and exercisability and the term and duration of the outstanding awards, (v) the type or class of security, asset or
right underlying the award (which need not be only that of the Company, and may be that of the surviving corporation or any affiliate
thereof or such other entity party to any of the above transactions), and (vi) any other terms of the award that in the opinion of the
Administrator should be adjusted; provided that any fractional shares resulting from such adjustment shall be rounded to the nearest whole
share unless otherwise determined by the Administrator. In the event of a distribution of a cash dividend to all shareholders, the Administrator
may determine, without the consent of any holder of an award, that the exercise price of an outstanding and unexercised award shall be
reduced by an amount equal to the per share gross dividend amount distributed by the Company, subject to applicable law.
In the event of a merger or consolidation of the Company or a sale of all, or substantially
all, of the Company’s shares or assets or other transaction having a similar effect on the Company, or change in the composition
of the board of directors, or liquidation or dissolution, or such other transaction or circumstances that our board of directors determines
to be a relevant transaction, then without the consent of the grantee, (i) unless otherwise determined by the Administrator, any outstanding
award will be assumed or substituted by such successor corporation, or (ii) regardless of whether or not the successor corporation assumes
or substitutes the award (a) provide the grantee with the option to exercise the award as to all or part of the shares, and may provide
for an acceleration of vesting of unvested awards, (b) cancel the award and pay in cash, shares of the Company, the acquirer or other
corporation which is a party to such transaction or other property as determined by the Administrator as fair in the circumstances, or
(c) provide that the terms of any award shall be otherwise amended, modified or terminated, as determined by the Administrator to be fair
in the circumstances. Changes with respect to awards held by U.S. service providers shall be made in accordance with the requirements
of Section 409A of the Code or Section 424 of the Code, as applicable and to the extent necessary to avoid adverse tax consequences under
Section 409A of the Code, a transaction or other event will not be deemed a Merger/Sale for purposes of awards granted to U.S. service
providers unless the transaction or other event qualifies as a change in control event within the meaning of Section 409A of the Code.
Corporate Governance Practices
As a foreign private issuer, we are permitted to follow certain
Israeli corporate governance practices instead of the Nasdaq Capital Market corporate governance rules, or the Nasdaq Marketplace Rules,
provided th