Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward - Looking Statements
This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other variations thereon or comparable terminology. These statements are merely predictions and therefore inherently subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance levels of activity, or our achievements, or industry results to be materially different from those contemplated by the forward-looking statements. Such forward-looking statements appear in this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and may appear elsewhere in this quarterly report on Form 10-Q and include, but are not limited to, statements regarding the following:
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the expected development and potential benefits from our products in treating various medical conditions;
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the clinical trials to be conducted according to our license agreement with CHA Biotech Co. Ltd.;
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our plan to execute our strategy independently, using our own personnel, and through relationships with research and clinical institutions or in collaboration with other companies;
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the prospects of entering into additional license agreements, or other forms of cooperation with other companies and medical institutions;
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our pre-clinical and clinical trials plans, including timing of initiation, enrollment and conclusion of trials;
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achieving regulatory approvals, including under accelerated paths;
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receipt of future funding from the Israel Innovation Authority, or IIA;
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our marketing plans, including timing of marketing our first product, PLX-PAD;
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developing capabilities for new clinical indications of placenta expanded (PLX) cells and new products;
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our estimations regarding the size of the global market for our product candidates;
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our expectations regarding our production capacity;
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our expectation to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity;
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our expectations regarding our short- and long-term capital requirements;
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the proposed joint venture, described in the overview below, to be established with Sosei Corporate Venture Capital Ltd. for the clinical development and commercialization of Pluristem’s PLX-PAD cell therapy product in Japan, the plan to enter into definitive agreements
and the timing of entering into such agreements
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our outlook for the coming months and future periods, including but not limited to our expectations regarding future revenue and expenses; and
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information with respect to any other plans and strategies for our business.
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Our business and operations are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. In addition, historic results of scientific research, clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions. Also, historic results referred to in this periodic report would be interpreted differently in light of additional research, clinical and preclinical trials results. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, or the 2016 Annual Report. Readers are also urged to carefully review and consider the various disclosures we have made in that report.
As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Pluristem” mean Pluristem Therapeutics Inc. and our wholly owned subsidiary, Pluristem Ltd., unless otherwise indicated or as otherwise required by the context.
Overview
Pluristem Therapeutics Inc. is a leading developer of placenta-based cell therapy product candidates for the treatment of multiple ischemic, inflammatory and hematologic conditions. Our lead indications are critical limb ischemia, or CLI, recovery after surgery for femoral neck fracture, and acute radiation syndrome, or ARS. A pivotal, multinational clinical trial is currently being conducted with our PLX-PAD product candidate in CLI. In addition, pivotal, multinational clinical trial is planned for our PLX-PAD product candidate in femoral neck fractures. The National Institutes of Health’s National Institute of Allergy and Infectious Diseases, or NIAID, recently completed a dose selection trial with PLX-R18 in the hematologic component of ARS and a pivotal study is planned under the U.S. Food and Drug Administration, or FDA, animal rule once funding will be secured for this project. Each of these indications is a severe unmet medical need.
PLX cells are derived from a class of placental cells that are harvested from donated placentas at the time of full term healthy delivery of a baby. PLX cell products require no tissue matching prior to administration. They are produced using our proprietary three-dimensional expansion technology. Our manufacturing facility complies with the FDA’s current Good Manufacturing Practice requirements and has been approved by the European, Japanese and Israeli regulatory authorities for production of PLX-PAD for late stage trials and marketing. In December 2017, after an audit of our facilities, we were granted manufacturer/importer authorization and Good Manufacturing Practice Certification by Israel’s Ministry of Health. If we obtain FDA approval to market PLX cells, we expect to have in-house production capacity to grow clinical-grade PLX cells in commercial quantities.
Our goal is to make significant progress with our robust clinical pipeline and our anticipated pivotal trials in order to ultimately bring innovative, potent therapies to patients who need new treatment options. We intend to shorten the time to commercialization of our product candidates, by leveraging unique accelerated regulatory pathways that exist in the United States, Europe and Japan to bring innovative products that address life-threatening diseases to the market efficiently. We believe that these accelerated pathways create substantial opportunities for us and for the cell therapy industry as a whole. We are pursuing these accelerated pathways for PLX-PAD in CLI and femoral neck fracture. Our second product candidate, PLX R18, is under development in the United States for ARS via the Animal Rule regulatory pathway, which may result in approval without the prior performance of human efficacy trials. We expect to demonstrate a real-world impact and value from our pipeline, technology platform and commercial-scale manufacturing capacity.
In May 2015, we announced that the PLX-PAD cell program in CLI had been selected for the Adaptive Pathways pilot project of the European Medicines Agency, or EMA. During fiscal year 2017, the FDA, and several EU regulatory agencies cleared our application to begin the pivotal Phase III trial of PLX-PAD cells in the treatment of CLI for patients who are unsuitable for revascularization
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This multinational Phase III trial is being conducted in the United States and Europe.
Our intention is to file a request for marketing authorization in the United States and in Europe following a successful completion of this 250-patient (estimated) trial. An interim efficacy analysis is planned to be conducted based on data from the first 125 patients. If these trials yield positive results, they could lead to early conditional marketing approval in Europe.
In September, 2017, we announced that the FDA has granted a fast track designation to our ongoing Phase III study of PLX-PAD cells for the treatment of CLI in patients ineligible for revascularization. The FDA’s fast track designation is a process designed to facilitate the development and expedite the review of drug to treat serious conditions and unmet medical needs. With fast track designation, there is an increased possibility for a priority review by the FDA of PLX-PAD cells for the treatment of CLI.
In August 2016, our CLI program in the European Union was awarded a Euro 7,600,000 (approximately $9,100,000) grant. The grant is part of the European Union’s Horizon 2020 program. The Phase III study of PLX-PAD in CLI will be a collaborative project carried out by an international consortium led by the Berlin-Brandenburg Center for Regenerative Therapies together with us and with participation of additional third parties. The grant will cover a significant portion of the CLI program costs. An amount of Euro 1,900,000 (approximately $2,300,000) is a direct grant allocated to us for manufacturing and other costs, and we also expect to have direct benefit from cost savings resulting from grant amounts allocated to the other consortium members.
In July 2017, the consortium amended the consortium agreement, pursuant to which the original grant allocation has been amended such that we will receive an additional direct grant of Euro 1,000,000 (approximately $1,200,000). The additional direct grant was allocated to us from the total amount of the original grant.
In December 2016, we announced that we signed a binding term sheet with Sosei Corporate Venture Capital Ltd., or Sosei CVC, for the establishment of a new Japanese corporation, or NewCo, for the clinical development and commercialization of our PLX-PAD cell therapy product in Japan for CLI. The parties plan to establish NewCo in Japan, in which we will own 35% of the equity in return for our contribution of a perpetual license to commercialize PLX-PAD for CLI in Japan. All proprietary rights related to PLX-PAD will be exclusively owned by us. Sosei CVC’s investment fund, Sosei RMF1, together with additional Japanese investors, will raise and invest approximately $11 million, equivalent to approximately ¥1.3 billion, in return for ownership of 65% of NewCo. We are still in discussions with Sosei CVC and other related investors in order to finalize the terms of a definitive agreement. In December 2015, we reached an agreement with Japan’s Pharmaceuticals and Medical Devices Agency on the design of the final trial needed to apply for conditional approval of PLX-PAD cells in the treatment of CLI. The approval of the protocol for the 75-patient trial was part of a larger agreement on the development of PLX-PAD via Japan’s new accelerated regulatory pathway for regenerative medicine.
In January 2018, we announced that the FDA cleared our Expanded Access Program, or EAP, for the use of our PLX-PAD cell treatment in patients with CLI. EAP allows the use of an investigational medical product outside of clinical trials and is usually granted in cases where patients are unsuitable for inclusion under the study protocol and the patient’s condition is life-threatening with an unmet medical need. As part of the EAP, our PLX-PAD cell therapy will be made available to a limited number of Rutherford Category 5 CLI patients in the United States who are unsuitable for revascularization and cannot take part in the our ongoing Phase III clinical study.
In January 2017, we announced that we had completed enrollment of all 172 patients in the randomized, double blind, placebo controlled, multinational Phase II intermittent claudication, or IC, clinical trial. We anticipate data readouts in second quarter of 2018.
In July 2016, we announced our intent to conduct a Phase III trial assessing our PLX-PAD cells in recovery following surgery for femoral neck fracture in the United States and Europe. In addition, the EMA, confirmed that this indication would also be eligible for the Adaptive Pathways project.
In September 2017, our Phase III study of PLX-PAD cells to support recovery following surgery for femoral neck fracture was awarded a Euro 7,400,000 (approximately $8,900,000) grant. The grant is part of the European Union’s Horizon 2020 program. The Phase III study of PLX-PAD to support recovery following surgery for femoral neck fractures will be a collaborative project carried out by an international consortium led by Charite Universitätsmedizin Berlin, together with us, and with participation of additional third parties. The grant will cover a significant portion of the project costs. An amount of Euro 2,400,000 (approximately $2,900,000) is a direct grant allocated to us for manufacturing and other costs, and we also expect to have a direct benefit from cost savings resulting from grant amounts allocated to the other consortium members.
In November, 2017, we announced that the U.S. Patent and Trademark Office issued a patent titled, “Skeletal muscle regeneration using mesenchymal system cells”. This key patent, which has already been granted to us in Europe, Hong Kong and Israel, addresses the use of mesenchymal stem cells for skeletal muscle regeneration used either directly after, or shortly after, post-surgical muscle injury.
In May 2017, we announced promising results of our non-human primates, or NHPs, pilot study for PLX-R18 as a treatment for ARS. The study, conducted and funded by the NIAID, was designed to assess the safety and efficacy of PLX-R18 following intramuscular injection into irradiated and non-irradiated NHPs. Efficacy measures included survival as well as level of bone marrow function, which is affected by exposure to high levels of radiation as may occur in a nuclear accident or attack. These data will help support a pivotal study designed to meet the requirements for a Biologics License Application submission under the FDA’s Animal Rule regulatory pathway.
In December 2015, we also signed a Memorandum of Understanding for a collaboration with Fukushima Medical University, Fukushima Global Medical Science Center. The purpose of the collaboration is to develop our PLX-R18 cells for the treatment of ARS, and for morbidities following radiotherapy in cancer patients. In August 2017, we announced that a pilot study of our PLX-R18 cell therapy will be initiated by the U.S. Department of Defense’s Armed Forces Radiobiology Research Institute, part of the Uniformed Services University of Health Sciences. The study will examine the effectiveness of PLX-R18 as a treatment for ARS prior to, and within the first 24 hours of exposure to radiation.
In October 2017, we announced that the FDA granted us an orphan drug designation for our PLX-R18 cell therapy for the prevention and treatment of ARS.
PLX R18 is also under development in a Phase I trial in the United States and Israel for incomplete hematopoietic recovery following hematopoietic cell transplantation, or HCT. We initiated the trial in fiscal year 2017 in the United States. In October 2017, we received an approval from the Israeli Ministry of Health to initiate this Phase I trial in Israel as well.
In October 2017, the nTRACK, a collaborative project carried out by an international consortium led by LEITAT, was awarded a Euro 6,800,000 (approximately $8,000,000) non-royalty bearing grant. An amount of Euro 500,000 (approximately $600,000) is a direct grant allocated to us. We also expect to benefit from cost savings resulting from grant amounts allocated to the other consortium members.
In September 2017, we signed an agreement with Tel Aviv Sourasky Medical Center (Ichilov Hospital) to conduct a Phase I/II trial of PLX-PAD cell therapy for the treatment of Steroid-Refractory Chronic Graft-Versus-Host-Disease. This trial is an investigator initiated study. As such, Tel Aviv Sourasky Medical Center will support the study and will be responsible for its design and implementation.
In January 2018, we announced the publication of a peer-reviewed article in a journal which examined the effect of PLX-immune cells on the proliferation of over 50 lines of human cancerous cells. Data showed that the PLX-immune cells exhibited an anti-proliferative effect on a wide range of human cancer cell types, with a strong inhibitory effect on various lines of breast, colorectal, kidney, liver, lung, muscle and skin cancers. We have also conducted a pre-clinical study of female mice harboring human triple negative breast cancer. In this study, the results showed a statistically significant reduction in tumor size as well as complete tumor remission in 30% of treated recipients.
RESULTS OF OPERATIONS – SIX AND THREE MONTHS ENDED DECEMBER 31, 2017 COMPARED TO SIX AND THREE MONTHS ENDED DECEMBER 31, 2016.
Revenues
Revenues for the six and three month periods ended December 31, 2017 were $50,000, versus no revenues generated in the six and three month period ended December 31, 2016. All revenues in the period ended December 31, 2017 were related to the sale of our PLX cells for research use.
Research and Development Expenses, Net
Research and development expense, net (costs less participation and grants by the IIA and other parties) for the six months ended December 31, 2017 increased by 1% from $10,200,000 for the six months ended December 31, 2016 to $10,315,000. This increase is
mainly attributed to: (1) an increase in payroll expenses related to differences in exchange rates, an increase in the number of employees and increases in average salaries, and (2) a decrease in IIA participation ($3,300,000 was approved in calendar year 2016 compared to $1,500,000 that was approved in calendar year 2017). The increase was partially offset by a decrease in subcontractors’ expenses related to clinical studies such as our CLI and IC studies. In addition, it was also offset by participation of $485,000 of the European Union with respect to the Horizon 2020 grants which commenced in calendar year 2017.
Research and development expense, net (costs less participation and grants by the IIA and other parties) for the three months ended December 31, 2017 increased by 8% from $5,202,000 for the three months ended December 31, 2016 to $5,638,000. This increase is mainly attributed to
an increase in materials consumption and an increase in payroll expenses, consisting of an increase in the number of employees, increases in average salaries and differences in exchange rates. The increase was partially offset by a decrease in subcontractors’ expenses related to clinical studies such as our CLI and IC studies. In addition, it was also offset by participation of $317,000 of the European Union with respect to the Horizon 2020 grants which commenced in calendar year 2017.
General and Administrative Expenses
General and administrative expenses for the six months ended December 31, 2017 increased by 89% from $3,010,000 for the six months ended December 31, 2016 to $5,683,000, mainly due to: (1) an increase in stock-based compensation expenses related to the amount of restricted stock units granted, (2) an increase in payroll expenses related to an increase in the number of employees, increases in average salaries and differences in exchange rates, and (3) an increase in corporate activities expenses.
General and administrative expenses for the three months ended December 31, 2017 increased by 102% from $1,446,000 for the three months ended December 31, 2016 to $2,920,000, mainly due to: (1) an increase in stock-based compensation expenses related to the amount of restricted stock units granted, (2) an increase in payroll expenses related to an increase in the number of employees, increases in average salaries and differences in exchange rates, and (3) an increase in corporate activities expenses.
Financial Income, Net
Financial income, net, increased from a net income of $276,000 for the six months ended December 31, 2016 to a net income of $293,000 for the six months ended December 31, 2017. This increase is mainly attributable to increased income from exchange rates, since during the six months ended December 31, 2017, there was a decrease of 0.8% of the U.S. dollar against the New Israeli Shekel, or NIS, compared to a decrease of 0.03% of the U.S. dollar against the NIS during the six months ended December 31, 2016, and from our hedging instruments related to the strength of the U.S. dollar against the NIS. The increase was partially offset by lower income from our marketable securities mainly attributable to an expense of $850,000 resulting from other-than-temporary impairment loss recognized in the six months ended December 31, 2017.
Financial income, net, increased from a net financial income of $38,000 for the three months ended December 31, 2016 to a net financial income of $238,000 for the three months ended December 31, 2017. This increase is mainly attributable to increased income from exchange rates, since during the three months ended December 31, 2017, there was a decrease of 1.8% of the U.S. dollar against the NIS compared to an increase of 2.3% of the U.S. dollar against the NIS during the three months ended December 31, 2016, and from our hedging instruments related to the strength of the U.S. dollar against the NIS.
This increase was partially offset by lower income mainly attributable to the sale of our marketable securities which occurred in the three months ended September 30, 2017.
Net Loss
Net loss for the six and three month periods ended December 31, 2017 was $15,614,000 and $8,229,000, respectively, as compared to net loss of $12,934,000 and $6,610,000 for the six and three month periods ended December 31, 2016, respectively. The changes were mainly due to the increases in general and administrative expenses, as described above. Net loss per share for the six and three month periods ended December 31, 2017 was $0.15 and $0.08, respectively, as compared to $0.16 and $0.08 for the six and three month periods ended December 31, 2016.
For the six and three month periods ended December 31, 2017 and December 31, 2016, we had weighted average shares of common stock outstanding of 101,224,325, 105,130,191 and 80,856,219, 81,038,879, respectively, which were used in the computations of net loss per share for the six and three month periods.
The increase in weighted average common shares outstanding reflects the issuance of additional shares, mainly related to the issuances of shares from a public offerings we conducted in January and October 2017, issuances of shares to employees and consultants, issuances of shares pursuant to our At Market Issuance Sales Agreement, or the ATM Agreement, and shares issued as a result of exercises of options and warrants.
Liquidity and Capital Resources
As of December 31, 2017, our total current assets were $37,074,000 and total current liabilities were $5,797,000. On December 31, 2017, we had a working capital surplus of $31
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277,000, stockholders' equity of $36,961,000 and an accumulated deficit of $205,185,000. We finance our operations, and plan to continue doing so, from our existing cash, issuances of our securities, sales of the marketable securities we hold and funds from grants from the IIA, Israel’s Ministry of Economy, European Union and other research grants.
Our cash and cash equivalents as of December 31, 2017 amounted to $8
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581,000 compared to $7,334,000 as of December 31, 2016, and compared to $4,707,000 as of June 30, 2017. Cash balances changed in the six months ended December 31, 2017 and 2016 for the reasons presented below.
Operating activities used cash of $10,018,000 in the six months ended December 31, 2017, compared to $9,699,000 in the six months ended December 31, 2016. Cash used in operating activities in the six months ended December 31, 2017 and 2016 consisted primarily of payments of salaries to our employees and payments of fees to our consultants, suppliers, subcontractors, and professional services providers, including the costs of clinical studies, offset by grants from the IIA, Israel’s Ministry of Economy and Horizon 2020.
Investing activities used cash of $2,033,000 in the six months ended December 31, 2017, compared to cash provided of $10,806,000 for the six months ended December 31, 2016. The investing activities in the six months ended December 31, 2017 consisted primarily of $9,721,000 related to investment in short term deposits, investment of $1,146,000 in marketable securities and payments of $185,000 related to investment in property and equipment, offset by cash provided from the sale and redemption of marketable securities of $9,019,000.
The investing activities in the six months ended December 31, 2016 consisted primarily of the withdrawal of $8,542,000 of short term deposits and $4,093,000 provided from the sale and redemption of marketable securities, offset by investment of $1,562,000 in marketable securities and payments of $273,000 related to investment in property and equipment.
Financing activities generated cash of $15,925,000 during the six months ended December 31, 2017, compared to $4,000 for the six months ended December 31, 2016. The cash generated in the six months ended December 31, 2017 from financing activities is related to net proceeds of $13,646,000 from issuing shares of our common stock in a public offering we conducted in October 2017, net proceeds of $1,160,000 from issuing shares of our common stock from the exercise of warrants, net proceeds of $1,026,000 from issuing shares of our common stock under our ATM Agreement, proceeds of $88,000 related to grant received from the Israel-United States Binational Industrial Research and Development Foundation and exercises of options by employees. The cash generated in the six months ended December 31, 2016 from financing activities was related to exercises of options by employees.
On October 31, 2017, we completed a public offering in Israel, pursuant to our existing shelf registration statement in the United States and a shelf registration statement filed in Israel, pursuant to which we raised aggregate gross proceeds of $15,051,000 through the sale of 9,000,000 shares of our common stock at a purchase price of NIS 5.90 (approximately $1.67 per share). The net proceeds, after deducting fees and expenses related to the offering, were $13,646,000.
In July 2017, we entered into the ATM Agreement with FBR Capital Markets & Co., MLV & Co. LLC and Oppenheimer & Co. Inc., each an Agent, which provides that, upon the terms and subject to the conditions and limitations set forth in the ATM Agreement, we may elect, from time to time, to issue and sell shares of common stock having an aggregate offering price of up to $80,000,000 through any of the Agents. We are not obligated to make any sales of common stock under the ATM Agreement. During the six month period ended December 31, 2017, we sold an aggregate of 834,040 shares of common stock pursuant to the ATM Agreement at an average price of $1.33 per share.
On January 8, 2018, we sold our entire holdings in CHA Biotech Co. Ltd, or CHA, consisting of 400,368 shares of CHA, on the open market for aggregate net proceeds of approximately $10,500,000, representing a net gain to us of $6,200,000 million.
During the six months ended December 31, 2017, we received cash of approximately $1,504,000 from the IIA towards our research and development expenses. According to the IIA grant terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology developed using this and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid. In the absence of such sales, no payment is required. Through December 31, 2017, total grants obtained from the IIA aggregated to approximately $25,974,000 and total royalties paid and accrued amounted to $168,000.
The IIA has supported our activity in the past twelve years. Our last program, for the twelfth year, was approved by the IIA in 2017 and relates to a grant of approximately $1,500,000. The grant was used to cover research and development expenses for the period of January 1, 2017 to December 31, 2017.
As of December 31, 2017, we received total grants of approximately $1,566,000 in cash from the European Union research and development consortium under our CLI program in the Horizon 2020.
During the six months ended December 31, 2017, we received cash of approximately $50,000 from a third party from the sale of our PLX cells for research use.
During the six months ended December 31, 2017, we were awarded approximately $43,000 (NIS 150,000) by the Israeli Ministry of Labor, Social Affairs and Social Services related to “Equal Employment” program which aims to reward and honor Israeli employers who demonstrate and promote gender equality in employment.
The currency of our financial portfolio is mainly in U.S. dollars and we use options contracts in order to hedge our exposures to currencies other than the U.S. dollar. For more information, please see Item 7A. - “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on form 10-K for the fiscal year ended June 30, 2017.
We have an effective Form S-3 registration statement, filed under the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or the SEC, using a “shelf” registration process. Under this shelf registration process, we may, from time to time, sell common stock, preferred stock and warrants to purchase common stock, and units of two or more of such securities in one or more offerings up to a total dollar amount of $200,000,000. As of February 6, 2018, we have been deemed to have sold $80,000,000 pursuant to our existing shelf under our ATM Agreement and $15,051,000 of gross proceeds relating to our public offering of 9,000,000 shares of our common stock.
Outlook
We have accumulated a deficit of $205,185,000 since our inception in May 2001. We do not expect to generate any revenues from sales of products in the next twelve months. Our cash needs will increase in the foreseeable future. We expect to generate revenues, which in the short and medium terms will unlikely exceed our costs of operations, from the sale of licenses to use our technology or products.
We will be required to obtain additional liquidity resources in order to support the commercialization of our products and maintain our research and development and clinical trials activities.
We are continually looking for sources of funding, including non-diluting sources such as the IIA grants, the European Union grant and other research grants, and sales of our common stock.
As of December 31, 2017, our cash position (cash and cash equivalents, short-term bank deposits and marketable securities) totaled approximately $35,292,000. We are addressing our liquidity issues by implementing initiatives to allow the continuation of our activities. Our current operating plan includes various assumptions concerning the level and timing of cash outflows for operating activities and capital expenditures. Our ability to successfully carry out our business plan, which includes a cost-reduction plan should we be unable to raise sufficient additional capital, is primarily dependent upon our ability to (1) obtain sufficient additional capital, (2) entering into license agreements to use or commercialize our products and (3) receive other sources of funding, including non-diluting sources such as the IIA grants, the Horizon 2020 grant and other grants. There are no assurances, however, that we will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of our products.
During January 2018, we sold 626,800 additional shares of common stock under the ATM Agreement at an average price of $1.57 per share for aggregate gross proceeds of $986,000.
According to management’s estimates, liquidity resources as of December 31, 2017, together with the proceeds received from the sale of CHA shares and the issuance of additional shares under the ATM Agreement through January 2018, will be sufficient to maintain our operations into the fourth quarter of fiscal year 2019. Our inability to raise funds to carry out our business plan will have a severe negative impact on our ability to remain a viable company.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.