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.
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:
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• |
our estimates regarding our expenses, future revenue, capital
requirements and needs for additional financing;
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|
• |
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
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|
• |
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:
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•
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on an actual
basis; and
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| |
•
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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.
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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.
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As of September 30, 2022
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|
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|
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Actual
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|
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As adjusted
|
|
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(U.S. Dollars, in
thousands)
|
|
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Cash and cash
equivalents
|
|
|
11,203
|
|
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|
18,332
|
|
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Derivative
liability
|
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|
(2,450
|
)
|
|
|
(8,044
|
)
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|
Shareholders’ equity:
|
|
|
|
|
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|
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Equity:
|
|
|
|
|
|
|
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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)
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|
|
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Share capital and premium on
shares
|
|
|
(72,231
|
)
|
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|
(74,234
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)
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Capital
reserves
|
|
|
(3,581
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)
|
|
|
(3,721
|
)
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|
Currency translation differences
reserve
|
|
|
2,771
|
|
|
|
2,771
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Accumulated
deficit
|
|
|
48,602
|
|
|
|
49,212
|
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Total shareholders’ capital
equity
|
|
|
(24,439
|
)
|
|
|
(25,973
|
)
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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.
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| |
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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.
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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:
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•
|
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;
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|
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•
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a total of 1,607,728
of our ADSs reserved for future issuance under our 2022 Share
Incentive Plan, as of January 4, 2023;
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|
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•
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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;
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•
|
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:
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the progress and costs of our research and development
activities;
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the costs of development and expansion of our operational
infrastructure;
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the costs and timing of developing technologies sufficient to
allow food production equipment manufacturers and food
manufacturers to product products compliant with applicable
regulations;
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our ability, or that of our collaborators, to achieve
development milestones and other events or developments under
potential future licensing agreements;
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the amount of revenues and contributions we receive under
future licensing, collaboration, development and commercialization
arrangements with respect to our technologies;
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the costs of filing, prosecuting, enforcing and defending
patent claims and other intellectual property rights;
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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;
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the costs of acquiring or undertaking development and
commercialization efforts for any future products or
technology;
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the magnitude of our general and administrative expenses;
and
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any additional costs that we may incur under future in- and
out-licensing arrangements relating to our technologies and futures
products.
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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
itstexture 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.
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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.
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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.
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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.
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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.
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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 that we disclose which requirements we are not following
and the equivalent Israeli requirements. Pursuant to the “foreign
private issuer exemption”:
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Quorum. As permitted under the
Companies Law, pursuant to our articles of association, the quorum
required for an ordinary meeting of shareholders consists of at
least two shareholders present in person or by proxy who hold or
represent between them at least 25% of the voting power of our
shares (and, with respect to an adjourned meeting, generally one or
more shareholders who hold or represent any number of shares),
instead of 33 1∕3% of the issued share capital provided under
Nasdaq Marketplace Rule 5260(c).
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Shareholder Approval. Although the
Nasdaq Marketplace Rules generally require shareholder approval of
equity compensation plans and material amendments thereto, we
follow Israeli practice, which is to have such plans and amendments
approved only by the board of directors, unless such arrangements
are for the compensation of chief executive officer or directors,
in which case they also require the approval of the compensation
committee and the shareholders. In addition, rather than follow the
Nasdaq Marketplace Rule requiring shareholder approval for the
issuance of securities in certain circumstances, we follow Israeli
law, under which a private placement of securities requires
approval by our board of directors and shareholders if it will
cause a person to become a controlling shareholder (generally
presumed at 25% ownership) or if: (a) the securities issued amount
to 20% or more of our outstanding voting rights before the
issuance; (b) some or all of the consideration is other than cash
or listed securities or the transaction is not on market terms; and
(c) transaction will increase the relative holdings of a
shareholder that holds 5% or more of our outstanding share capital
or voting rights or will cause any person to become, as a result of
the issuance, a holder of more than 5% of our outstanding share
capital or voting rights.
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Executive Sessions.
While the Nasdaq Marketplace Rules require that “independent
directors,” as defined in the Nasdaq Marketplace 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.
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In
all other respects, we intend to comply with the rules generally
applicable to U.S. domestic companies listed on the Nasdaq Capital
Market. We may in the future decide to use the foreign private
issuer exemption with respect to some or all of the other Nasdaq
Capital Market corporate governance rules. Accordingly, our
shareholders may not be afforded the same protections as provided
under Nasdaq Marketplace Rules.
Our
board of directors consists of four directors, three of whom are
deemed independent directors under the corporate governance
standards of the Nasdaq Marketplace Rules and the independence
requirements of Rule 10A-3 of the Exchange Act, as well as the
standards of the Companies Law.
Under our
articles of association, our board of directors must consist of no
less than three and no more than seven directors (including the
external directors, if any), divided into three classes with
staggered three-year terms. Each class of directors consists, as
nearly as possible, of one-third of the total number of directors
constituting the entire board of directors. At each annual general
meeting of our shareholders, the election or re-election of
directors following the expiration of the term of office of the
directors of that class of directors will be for a term of office
that expires on the third annual general meeting following such
election or re-election. Therefore, beginning with the annual
general meeting of 2022, each year the term of office of only
one class of directors will expire.
Our
directors are divided among the three classes as follows:
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the Class I
directors are Messrs. Eli Arad and David Gerbi and their respective
terms will expire at the Company’s annual general meeting of
shareholders to be held in 2023;
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the Class II
director is Ms. Sari Singer and her term will expire at the
Company’s annual general meeting of shareholders to be held in
2024; and
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the Class III
director is Mr. Yaron Kaiser his term will expire at the
Company’s annual general meeting of shareholders to be held in
2025.
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Pursuant to our articles of association, the vote
general required to appoint a director is a simple majority vote of
holders of our voting shares participating and voting at the
relevant meeting, provided that (i) in the event of a
contested election, the method of calculation of the votes and the
manner in which the resolutions will be presented to our
shareholders at the general meeting shall be determined by our
board of directors in its discretion, and (ii) in the event
that our board of directors does not or is unable to make a
determination on such matter, then the directors will be elected by
a plurality of the voting power represented at the general meeting
in person or by proxy and voting on the election of
directors.
Each director will hold
office until the annual general meeting of our shareholders for
the year in which such director’s term expires, unless the
tenure of such director expires earlier pursuant to the Companies
Law or unless such director is removed from office. Under our
articles of association, the approval of the holders of at least
65% of the total voting power of our shareholders is generally
required to remove any of our directors from office.
In
addition, our articles of association allow our board of directors
to appoint new directors to fill vacancies which can occur for any
reason or as additional directors, provided that the number of
board members shall not exceed the maximum number of directors
mentioned above. A director so appointed will hold office until the
next annual general meeting of our shareholders for the election of
the class of directors in respect of which the vacancy was created,
or in the case of a vacancy due to the number of directors being
less than the maximum number of directors stated in our articles of
association, until the next annual general meeting of our
shareholders for the election of the class of directors to which
such director was assigned by our board of directors. Our board of
directors may continue to operate for as long as the number of
directors is no less than the minimum number of directors mentioned
above.
In
addition, under the Companies Law, our board of directors must
determine the minimum number of directors who are required to have
financial and accounting expertise. Under applicable regulations, a
director with financial and accounting expertise is a director who,
by reason of his or her education, professional experience and
skill, has a high level of proficiency in and understanding of
business accounting matters and financial statements. He or she
must be able to thoroughly comprehend the financial statements of
the company and initiate discussion regarding the manner in which
financial information is presented. In determining the number of
directors required to have such expertise, the board of directors
must consider, among other things, the type and size of the company
and the scope and complexity of its operations. Our board of
directors has determined that we require at least one director with
the requisite financial and accounting expertise and that Eli Arad
and David Gerbi have such expertise.
The
Companies Law requires a public Israeli company to have at least
two external directors who meet certain independence criteria to
ensure that they are unaffiliated with the company and its
controlling shareholder. An external director must have either
financial and accounting expertise or professional qualifications,
as defined in the regulations promulgated under the Companies Law,
and at least one of the external directors is required to have
financial and accounting expertise. An external director is
entitled to reimbursement of expenses and compensation as provided
in the regulations promulgated under the Companies Law, but is
otherwise prohibited from receiving any other compensation from the
company, directly or indirectly, during his or her term and for two
years thereafter.
Pursuant to regulations promulgated under the Companies Law, as a
company with shares traded on Nasdaq, we have elected no to comply
with the requirements to appoint external directors and related
rules concerning the composition of the audit committee and
compensation committee of the board of directors. We are still
subject to the gender diversity rule under the Companies Law, which
requires that if, at the time a director is to be elected or
appointed, all members of the board of directors are of the same
gender, the director to be appointed must be of the other gender.
The conditions to the exemptions from the Companies Law
requirements are that: (i) the company does not have a “controlling
shareholder,” as such term is defined under the Companies Law, (ii)
its shares are traded on certain U.S. stock exchanges, including
Nasdaq, and (iii) it comply with the director independence
requirements and the audit committee and compensation committee
composition requirements under U.S. laws, including the rules of
the applicable exchange, that are applicable to U.S. domestic
issuers.
Committees of the Board of Directors
Our
board of directors has established the following committees. Each
committee operates in accordance with a written charter that sets
forth the committee’s structure, operations, membership
requirements, responsibilities and authority to engage
advisors.
Under
the Companies Law, the Exchange Act and Nasdaq Marketplace Rules,
we are required to maintain an audit committee.
The
responsibilities of an audit committee under the Companies Law
include identifying and addressing flaws in the business management
of the company, reviewing and approving related party transactions,
establishing whistleblower procedures, overseeing the company’s
internal audit system and the performance of its internal auditor,
and assessing the scope of the work and recommending the fees of
the company’s independent accounting firm. In addition, the audit
committee is required to determine whether certain related party
actions and transactions are “material” or “extraordinary” for the
purpose of the requisite approval procedures under the Companies
Law and to establish procedures for considering proposed
transactions with a controlling shareholder.
In
accordance with U.S. law and Nasdaq Marketplace Rules, our audit
committee is also responsible for the appointment, compensation and
oversight of the work of our independent auditors and for assisting
our board of directors in monitoring our financial statements, the
effectiveness of our internal controls and our compliance with
legal and regulatory requirements.
Under
the Companies Law, the audit committee must consist of at least
three directors who meet certain independence criteria. Under the
Nasdaq Marketplace Rules, we are required to maintain an audit
committee consisting of at least three independent directors, all
of whom are financially literate and one of whom has accounting or
related financial management expertise. Each of the members of the
audit committee is required to be “independent” as such term is
defined in Rule 10A-3(b)(1) under the Exchange Act.
Our
audit committee currently consists of Eli Arad, Sari Singer and
David Gerbi. All members are independent directors as defined in
the Companies Law, SEC rules and Nasdaq listing requirements. Our
board of directors has determined that all members of our audit
committee meet the requirements for financial literacy under the
applicable rules and regulations of the SEC and Nasdaq Marketplace
Rules. Our board of directors has determined that Eli Arad and
David Gerbi are audit committee financial experts as defined by the
SEC rules and have the requisite financial experience as defined by
the Nasdaq Marketplace Rules.
Under
both the Companies Law and Nasdaq Marketplace Rules, we are
required to establish a compensation committee.
The
responsibilities of a compensation committee under the Companies
Law include recommending to the board of directors, for ultimate
shareholder approval by a special majority, a policy governing the
compensation of directors and officers based on specified criteria,
reviewing modifications to and implementing such compensation
policy from time to time, and approving the actual compensation
terms of directors and officers prior to approval by the board of
directors.
The
Companies Law stipulates that the compensation committee must
consist of at least three directors who meet certain independence
criteria. Under Nasdaq Marketplace Rules, we are required to
maintain a compensation committee consisting of at least two
independent directors; each of the members of the compensation
committee is required to be independent under Nasdaq Marketplace
Rules relating to compensation committee members, which are
different from the general test for independence of board and
committee members.
Our
compensation committee currently consists of Eli Arad, Sari Singer
and David Gerbi. All members are independent directors as defined
in the Companies Law, SEC rules and regulations, and Nasdaq
Marketplace Rules.
We do
not have a standing nominating committee. In accordance with Rule
5605(e)(2) of the Nasdaq Rules, a majority of the independent
directors may recommend a director nominee for selection by the
board of directors. Our board of directors believes that the
independent directors can satisfactorily carry out the
responsibility of properly selecting or approving director nominees
without the formation of a standing nominating committee. As we do
not have a standing nominating committee, we will not have a
nominating committee charter in place.
Our
board of directors will consider candidates for nomination who have
a high level of personal and professional integrity, strong ethics
and values and the ability to make mature business judgments. In
general, in identifying and evaluating nominees for director, our
board of directors will also consider experience in corporate
management such as serving as an officer or former officer of a
publicly held company, experience as a board member of another
publicly held company, professional and academic experience
relevant to our business, leadership skills, experience in finance
and accounting or executive compensation practices, whether
candidate has the time required for preparation, participation and
attendance at board meetings and committee meetings, if applicable,
independence and the ability to represent the best interests of our
stockholders.
Under the Companies Law, the board of directors is required to
appoint an internal auditor recommended by the audit committee. The
role of the internal auditor is to examine, among other things,
whether the company’s actions comply with applicable law and proper
business procedures. The internal auditor may not be an interested
party, a director or an officer of the company, or a relative of
any of the foregoing, nor may the internal auditor be our
independent accountant or a representative thereof. Our current
internal auditor is Mr. Daniel Spira, CPA, who is a member of the
board of directors of the Institute of Internal Auditors in Israel
and Chairman of its Auditing and Knesset
Relations Committee.
Fiduciary Duties and Approval of Related Party Transactions
Fiduciary duties of directors and officers
Israeli law imposes a duty of care and a duty of
loyalty on all office holders. An office holder is defined in the
Companies Law as a general manager, chief business manager, deputy
general manager, vice general manager, any other person assuming
the responsibilities of any of these positions regardless of such
person’s title, a director, and any other manager directly
subordinate to the general manager. The duty of care requires
a director or officer to act with the level of care with which a
reasonable director or officer in the same position would have
acted under the same circumstances. The duty of care includes,
among other things, a duty to use reasonable means, under the
circumstances, to obtain information on the advisability of a given
action brought for the office holder’s approval or performed by
virtue of the office holder’s position and other important
information pertaining to such action. The duty of loyalty requires
the director or officer to act in good faith and in the best
interests of the company, and includes, among other things,
the duty to:
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refrain from any act involving a
conflict of interest between the performance of the office holder’s
duties in the company and the office holder’s other duties or
personal affairs;
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refrain from any activity that is
competitive with the business of the company;
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refrain from exploiting any business
opportunity of the company for the purpose of gaining a personal
advantage for the office holder or others; and
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disclose to the company any
information or documents relating to the company’s affairs which
the office holder received as a result of the office holder’s
position.
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Disclosure of Personal Interests of an Office Holder and Approval
of Certain Transactions
Under
the Companies Law, a company may approve an act specified above
which would otherwise constitute a breach of the office holder’s
fiduciary duty, provided that the office holder acted in good
faith, the act or its approval does not harm the company, and the
office holder discloses to the company his or her personal interest
in the transaction (including any significant fact or document) a
sufficient time before the approval of such act. Any such approval
is subject to the terms of the Companies Law, setting forth, among
other things, the appropriate bodies of the company required to
provide such approval, and the methods of obtaining such
approval.
The
Companies Law requires that an office holder promptly disclose to
the company any direct or indirect personal interest that he or she
may have and all related material information or documents known to
him or her relating to any existing or proposed transaction by the
company. An interested office holder’s disclosure must be made
promptly and, in any event, no later than the first meeting of the
board of directors at which the transaction is considered. A
personal interest includes an interest of any person in an act or
transaction of a company, including a personal interest of one’s
relative or of a corporate body in which such person or a relative
of such person is a 5% or greater shareholder, director, or general
manager or in which such person has the right to appoint at least
one director or the general manager, but excluding a personal
interest stemming solely from one’s ownership of shares in the
company. A personal interest includes the personal interest of a
person for whom the office holder holds a voting proxy or the
personal interest of the office holder with respect to the officer
holder’s vote on behalf of a person for whom he or she holds a
proxy even if such shareholder has no personal interest in the
matter.
If it
is determined that an office holder has a personal interest in a
non-extraordinary transaction (meaning any transaction that is in
the ordinary course of business, on market terms or that is not
likely to have a material impact on the company’s profitability,
assets or liabilities), approval by the board of directors is
required for the transaction unless the company’s articles of
association provide for a different method of approval. Any such
transaction that is adverse to the company’s interests may not be
approved by the board of directors.
Approval first by the company’s audit committee and subsequently by
the board of directors is required for an extraordinary transaction
(meaning any transaction that is not in the ordinary course of
business, not on market terms or that is likely to have a material
impact on the company’s profitability, assets or liabilities) in
which an office holder has a personal interest.
Under
the Companies Law, unless the articles of association of a company
provide otherwise, a transaction with an office holder or with a
third party in which the office holder has a personal interest,
which is not an extraordinary transaction, requires approval by the
board of directors or a committee authorized by the board of
directors. If the transaction considered is an extraordinary
transaction with an office holder or third party in which the
office holder has a personal interest, then audit committee
approval is required prior to approval by the board of directors.
Under specific circumstances, shareholder approval may also be
required. For the approval of compensation arrangements with
directors and executive officers, see “Compensation—Compensation of
Directors and Executive Officers.”
Any
persons who have a personal interest in the approval of a
transaction that is brought before a meeting of the board of
directors or the audit committee may generally not be present at
the meeting or vote on the matter. However, if the chairman of the
board of directors or the chairman of the audit committee, as
applicable, has determined that the presence of an office holder
with a personal interest is required, such office holder may be
present at the meeting for the purpose of presenting the matter.
Notwithstanding the foregoing, a director who has a personal
interest may be present at the meeting of the board of directors or
the audit committee (as applicable) and vote on the matter if a
majority of the members of the board of directors or the audit
committee (as applicable) have a personal interest in the approval
of such transaction. If a majority of the directors at a board of
directors meeting have a personal interest in the transaction, such
transaction also generally requires approval of the shareholders of
the company.
Disclosure of Personal Interests of a Controlling Shareholder and
Approval of Transactions
Pursuant to the Companies Law, certain disclosure requirements also
apply to a controlling shareholder of a public company, in which a
controlling shareholder has a personal interest. For these
purposes, a controlling shareholder is any shareholder that has the
ability to direct the company’s actions, including any shareholder
holding 25% or more of the voting rights if no other shareholder
owns more than 50% of the voting rights in the company. Two or more
shareholders with a personal interest in the approval of the same
transaction are deemed to be one shareholder. Extraordinary
transactions with a controlling shareholder or in which a
controlling shareholder has a personal interest, including a
private placement in which a controlling shareholder has a personal
interest, and the terms of engagement of the company, directly or
indirectly, with a controlling shareholder or a controlling
shareholder’s relative (including through a corporation controlled
by a controlling shareholder), regarding the company’s receipt of
services from the controlling shareholder, and if such controlling
shareholder is also an office holder or employee of the company,
regarding his or her terms of employment, require the approval of
each of (i) the audit committee (or the compensation committee with
respect to the terms of the engagement as an office holder or
employee, including insurance, indemnification and compensation),
(ii) the board of directors and (iii) the shareholders, in that
order. In addition, the shareholder approval must fulfill one of
the following requirements:
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a majority of the shares held by shareholders who are not
controlling shareholders and have no personal interest in the
transaction and are voting at the meeting must be voted in favor of
approving the transaction, excluding abstentions; or
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the shares voted by shareholders who are non-controlling
shareholders and who have no personal interest in the transaction
who vote against the transaction represent no more than 2% of the
voting rights in the company.
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Such
majority determined in accordance with the majority requirement
described above is hereinafter referred to as the Compensation
Special Majority Requirement.
Any
such transaction for which the term is more than three years must
be approved in the same manner every three years, unless with
respect to certain transactions as permitted by the Companies Law,
the audit committee has determined that a longer term is reasonable
under the circumstances. In addition, transactions with a
controlling shareholder or a controlling shareholder’s relative who
serves as an executive officer in a company, directly or indirectly
(including through a corporation under his control), involving the
receipt of services by a company or their compensation can have a
term of five years from the company’s initial public offering under
certain circumstances.
The Companies Law requires that every shareholder that
participates, in person or by proxy, in a vote regarding a
transaction with a controlling shareholder, must indicate in
advance or in the ballot whether or not that shareholder has a
personal interest in the vote in question. Failure to so indicate
generally results in the invalidation of that shareholder’s vote
for purposes of the Compensation Special Majority
Requirement.
Disclosure of Compensation of Executive Officers
For so
long as we qualify as a foreign private issuer, we are not required
to comply with the proxy rules applicable to U.S. domestic filers,
including the requirement applicable to emerging growth companies
to disclose the compensation of our chief executive officer and
other two most highly compensated executive officers on an
individual, rather than an aggregate, basis. Nevertheless,
regulations promulgated under the Companies Law require us to
disclose in the proxy statement for the annual general meeting of
our shareholders (or to include a reference therein to other
previously furnished public disclosure) the annual compensation of
our five most highly compensated executive officers on an
individual, rather than an aggregate, basis. This disclosure will
not be as extensive as that required of a U.S. domestic
issuer.
Compensation of Directors and Executive Officers
Directors. Under
the Companies Law, the compensation of our directors requires the
approval of our compensation committee, the subsequent approval of
the board of directors and, unless exempted under regulations
promulgated under the Companies Law, the approval of the
shareholders at a general meeting. If the compensation of our
directors is inconsistent with our compensation policy, then,
provided that those provisions that must be included in the
compensation policy according to the Companies Law have been
considered by the compensation committee and board of directors,
and provided that shareholder approval is obtained by the
Compensation Special Majority Requirement.
Executive Officers (other
than the Chief Executive Officer). The Companies Law
requires the approval of the compensation of a public company’s
executive officers (other than the chief executive officer and who
does not also serve as a director) in the following order: (i) the
compensation committee, (ii) the company’s board of directors and
(iii) if such compensation arrangement is inconsistent with the
company’s compensation policy, the company’s shareholders (approved
by the Compensation Special Majority Requirement). However, if the
shareholders of the company do not approve a compensation
arrangement with a non-director executive officer that is
inconsistent with the company’s compensation policy, the
compensation committee and board of directors may override the
shareholders’ decision if each of the compensation committee and
the board of directors provide detailed reasons for their
decision.
An
amendment to an existing compensation arrangement with a
non-director executive officer requires only the approval of the
compensation committee, if the compensation committee determines
that the amendment is immaterial. However, if such non-director
executive officer is subordinate to the chief executive officer, an
immaterial amendment to an existing compensation arrangement shall
not require the approval of the compensation committee if
(i) such amendment is approved by the chief executive officer,
(ii) the company’s compensation policy allows for such
immaterial amendments to be approved by the chief executive officer
and (iii) the engagement terms are consistent with the
company’s compensation policy.
Chief Executive
Officer. The Companies Law requires the approval of the
compensation of a public company’s chief executive officer in the
following order: (i) the company’s compensation committee, (ii) the
company’s board of directors and (iii) the company’s shareholders
(approved by the Compensation Special Majority Requirement).
However, if the shareholders of the company do not approve the
compensation arrangement with the chief executive officer who is
not a director, the compensation committee and board of directors
may override the shareholders’ decision if each of the compensation
committee and the board of directors provide a detailed report for
their decision. The approval of each of the compensation committee
and the board of directors should be in accordance with the
company’s compensation policy; however, in special circumstances,
they may approve compensation terms of a chief executive officer
that are inconsistent with such policy provided that they have
considered those provisions that must be included in the
compensation policy according to the Companies Law and that
shareholder approval was obtained (by the Compensation Special
Majority Requirement ). In the case of a new chief executive
officer, the compensation committee may waive the shareholder
approval requirement with regards to the approval of the engagement
terms of a candidate for the chief executive officer position, if
the compensation committee determines that the compensation
arrangement is consistent with the company’s compensation policy,
and that the chief executive officer did not have on the date of
his appointment or during the two-year period preceding his
appointment, an “affiliation” (including an employment
relationship, a business or professional relationship or control)
with the company or a controlling shareholder of the company or a
relative thereof and that subjecting the approval of the engagement
to a shareholder vote would impede the company’s ability to employ
the chief executive officer candidate. However, if the chief
executive officer candidate will serve as a member of the board of
directors, such candidate’s compensation terms as chief executive
officer must be approved in accordance with the
rules applicable to approval of compensation of
directors
Under
the Companies Law, we are required to approve, at least once every
three years, a compensation policy with respect to our directors
and officers. Following the recommendation of our compensation
committee, the compensation policy must be approved by our board of
directors and our shareholders. The shareholder approval must be by
a simple majority of all votes cast, provided that (i) such
majority includes a simple majority of the votes cast by
non-controlling shareholders having no personal interest in the
matter or (ii) the total number of votes of shareholders mentioned
in clause (i) above who voted against such transaction does not
exceed 2% of the total voting rights in the company.
Under
special circumstances, the board of directors may approve the
compensation policy despite the objection of the shareholders on
the condition that the compensation committee and then the board of
directors decide, on the basis of detailed grounds, and after
discussing again with the compensation policy, that approval of the
compensation policy, despite the objection of shareholders, is for
the benefit of the company.
Directors’ Service Contracts
There
are no arrangements or understandings between us and any of our
subsidiaries, on the one hand, and any of our directors, on the
other hand, providing for benefits upon termination of their
employment or service as directors of our company or any of our
subsidiaries.
Under
the Companies Law, a shareholder has a duty to refrain from abusing
its power in the company and to act in good faith and in a
customary manner in exercising its rights and performing its
obligations to the company and other shareholders, including, among
other things, when voting at meetings of shareholders on the
following matters:
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an amendment to the articles of association;
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an increase in the company’s authorized share capital;
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the approval of related party transactions and acts of office
holders that require shareholder approval.
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A
shareholder also has a general duty to refrain from discriminating
against other shareholders.
The
remedies generally available upon a breach of contract also apply
to a breach of the shareholder duties mentioned above, and in the
event of discrimination against other shareholders, additional
remedies may be available to the injured shareholder.
In
addition, any controlling shareholder, any shareholder that knows
that its vote can determine the outcome of a shareholder vote and
any shareholder that, under a company’s articles of association,
has the power to appoint or prevent the appointment of an office
holder, or any other power with respect to a company, is under a
duty to act with fairness towards the company. The Companies Law
does not describe the substance of this duty except to state that
the remedies generally available upon a breach of contract also
apply in the event of a breach of the duty to act with fairness,
taking the shareholder’s position in the company into
account.
Exculpation, Insurance and Indemnification of Directors and
Officers
Under
the Companies Law, a company may not exculpate an office holder
from liability for a breach of the duty of loyalty. An Israeli
company may exculpate an office holder in advance from liability to
the company, in whole or in part, for damages caused to the company
as a result of a breach of duty of care but only if a provision
authorizing such exculpation is included in its articles of
association. Our articles of association include such a provision.
An Israeli company may not exculpate in advance a director from
liability arising from a breach of his or her duty of care in
connection with a prohibited dividend or distribution to
shareholders.
As
permitted under the Companies Law, our articles of association
provide that we may indemnify an office holder in respect of the
following liabilities, payments and expenses incurred for acts
performed by him or her as an office holder, either in advance of
an event or following an event:
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financial liability that was imposed upon him in favor of
another person pursuant to a judgment, including a compromise
judgment or an arbitrator’s award approved by a court;
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reasonable litigation expenses, including attorneys’ fees paid
by an officeholder following an investigation or proceeding
conducted against him by an authority authorized to conduct such
investigation or proceeding, and which ended without the filing of
an indictment against him and without any financial obligation
being imposed on him as an alternative to a criminal proceeding, or
which ended without the filing of an indictment against him but
with the imposition of a financial obligation as an alternative to
a criminal proceeding for an offense which does not require proof
of mens rea or in connection with a financial sanction;
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reasonable litigation expenses, including attorneys’ fees paid
by the officeholder or which he was required to pay by a court, in
a proceeding filed against him by the Company or on its behalf or
by another person, or in criminal charges from which he was
acquitted, or in criminal charges in which he was convicted of an
offense which does not require proof of mens rea;
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certain compensation payments made to an injured party imposed
on an office holder by an administrative proceeding, pursuant to
certain provisions of the Israeli Securities Law;
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expenses incurred by an officeholder in connection with an
administrative proceeding conducted in such officer holder’s
regard, including reasonable litigation expenses, and including
attorneys’ fees; and
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any other liability or expense in respect of which it is
permitted or shall be permitted by Law to indemnify an
officeholder.
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As
permitted under the Companies Law, our articles of association
provide that we may insure an office holder against the following
liabilities incurred for acts performed by him or her as an office
holder:
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Breach of the duty of care to the Company or to a third party,
including a breach arising out of the negligent conduct of
the office holder;
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Breach of the duty of care to the Company, provided that the
office holder acted in good faith and had reasonable grounds to
believe that the act would not prejudice the company ;
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financial liability imposed upon an office holder in favor of
a third party;
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financial liability imposed on the office holder in favor of a
third-party harmed by a breach in an administrative proceeding,
pursuant to certain provisions of the Israeli Securities Law;
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expenses incurred or to be incurred by an office holder in
connection with an administrative proceeding, instituted against
him or her, pursuant to certain provisions of the Israeli
Securities Law, including reasonable litigation expenses, and
including attorneys’ fees; and
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any other event in respect of which it is permitted and/or
shall be permitted by Law to insure the liability of an
officeholder.
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Under the Companies Law, a company may not indemnify, exculpate or
insure an office holder against any of the following:
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a breach of the duty of loyalty, except for indemnification
and insurance for a breach of the duty of loyalty to the company to
the extent that the office holder acted in good faith and had a
reasonable basis to believe that the act would not prejudice the
company;
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a breach of duty of care committed intentionally or
recklessly, excluding a breach arising out of the negligent conduct
of the office holder;
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an act or omission committed with intent to derive illegal
personal benefit; or
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a fine, monetary sanction or forfeit levied against the office
holder.
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Under
the Companies Law, exculpation, indemnification and insurance of
office holders must be approved by the compensation committee and
the board of directors and, with respect to directors, the
chief executive officer or controlling shareholders, their
relatives and third parties in which controlling shareholders have
a personal interest, also by the shareholders. However, under
regulations promulgated under the Companies Law, the insurance of
office holders shall not require shareholder approval and may be
approved by only the compensation committee if the engagement terms
are determined in accordance with the company’s compensation
policy, which was approved by the shareholders by the same special
majority required to approve a compensation policy, provided that
the insurance policy is on market terms and the insurance policy is
not likely to materially impact the company’s profitability,
assets, or obligations.
Our
articles of association permit us to exculpate, indemnify and
insure our office holders to the fullest extent permitted or to be
permitted by law. Our office holders are currently covered by a
directors’ and officers’ liability insurance policy. As of the date
of this prospectus, no claims for directors’ and officers’
liability insurance have been filed under this policy and we are
not aware of any pending or threatened litigation or proceeding
involving any of our office holders, including our directors, in
which indemnification is sought.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our Ordinary Shares as of January 4, 2023
and after this offering by: