Non-compliance with environmental, social, and governance, or ESG,
practices could harm our reputation, or otherwise adversely impact
our business, while increased attention to ESG initiatives could
increase our costs.
Expectations around a company's management of ESG matters continues
to evolve rapidly, in many instances due to factors that are out of
our control. To the extent ESG
matters negatively impact our reputation, it may also impede our
ability to compete as effectively to attract and retain employees
or customers, which may adversely impact our
operations.
The
Israeli government is currently pursuing extensive changes to
Israel’s judicial system. This has sparked extensive political
debate. In response to the foregoing developments, many
individuals, organizations and institutions, both within and
outside of Israel, have voiced concerns that the proposed changes
may negatively impact the business environment in Israel including
due to reluctance of foreign investors to invest or transact
business in Israel as well as to increased currency fluctuations,
downgrades in credit rating, increased interest rates, increased
volatility in security markets, and other changes in macroeconomic
conditions. To the extent that any of these negative developments
do occur, they may have an adverse effect on our business, our
results of operations and our ability to raise additional funds, if
deemed necessary by our management and board of directors.
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Israeli corporate law does not provide for shareholder action by
written consent for public companies, thereby requiring all
shareholder actions to be taken at a general meeting of
shareholders;
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our
articles of association divide our directors into three classes,
each of which is elected once every three years;
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our
articles of association generally require a vote of the holders of
a majority of our outstanding ordinary shares entitled to vote
present and voting on the matter at a general meeting of
shareholders (referred to as simple majority), and solely the
amendment of the provision relating to the removal of members of
our board of directors, require a vote of the holders of 65% of our
outstanding ordinary shares entitled to vote at a general
meeting;
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our
articles of association provide that director vacancies may be
filled by our board of directors.
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RISKS
RELATED TO OWNERSHIP OF THE ADSs
If we are unable
to maintain compliance with Nasdaq listing standards, our
ADSs may be delisted from the Nasdaq Stock Market and you
may face significant restrictions on the resale of your
shares.
There can be no
assurances that we will be able to maintain
our Nasdaq listing in the future. On March 27, 2023, we
received a notification from Nasdaq that the trading
price of our ADSs did not meet the minimum bid price requirement
of $1.00 per share for a period of 30 consecutive trading
days. We were granted a 180-day compliance period, or September 18,
2023, to regain compliance by achieving a closing bid price of at
least $1.00 per share for a minimum of 10 consecutive
trading days. In the event we are unable to regain compliance with
the Nasdaq Capital Market listing standards and our ADSs
are delisted from the exchange, it would, among other things,
likely lead to a number of negative implications, including an
adverse effect on the price of our ADSs, reduced liquidity in our
ADSs and greater difficulty in obtaining financing. In the event of
a de-listing, we would take actions to restore our compliance with
Nasdaq’s listing requirements, but we can provide no assurance that
any such action taken by us would allow our ADSs to become listed
again, stabilize the market price or improve the liquidity of our
ADSs, prevent our ADSs from dropping below
the Nasdaq minimum bid price requirement in the future,
or prevent future non-compliance with Nasdaq’s listing
requirements. If we cannot restore our compliance with Nasdaq’s
listing requirements, we would pursue eligibility for trading of
these securities on other markets or exchanges, such as the OTCQB
or OTCQX, which are unorganized, inter-dealer, over-the-counter
markets which provides significantly less liquidity than
the Nasdaq Capital Market or other national securities
exchanges.
The ADS
price may be volatile, and you may lose all or part of your
investment.
The
market price of the ADSs could be highly volatile and may fluctuate
substantially, including downward, as a result of many factors,
including:
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changes in
the prices of our raw materials or the products manufactured in
factories using our technologies;
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the trading
volume of the ADSs;
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general
economic, market and political conditions, including negative
effects on consumer confidence and spending levels that could
indirectly affect our results of operations;
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actual or
anticipated fluctuations in our financial condition and operating
results, including fluctuations in our quarterly and annual
results;
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announcements
by us or our competitors of innovations, other significant business
developments, changes in distributor relationships, acquisitions or
expansion plans;
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announcement
by competitors or new market entrants of their entry into or exit
from the alternative protein market;
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overall conditions in our industry and the markets in which we
intend to operate;
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market conditions or trends in the packaged food sales industry
that could indirectly affect our results of operations;
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addition or loss of significant customers or other developments
with respect to significant customers;
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• |
adverse developments concerning our manufacturers and
suppliers;
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changes in laws or regulations applicable to our products or
business;
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our
ability to effectively manage our growth and market expectations
with respect to our growth, including relative to our
competitors;
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changes in the estimation of the future size and growth rate of our
markets;
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announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital
commitments;
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additions or departures of key personnel;
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competition from existing products or new products that may
emerge;
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issuance of new or updated research or reports about us or our
industry, or positive or negative recommendations or withdrawal of
research coverage by securities analysts;
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variance in our financial performance from the expectations of
market analysts;
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our
failure to meet or exceed the estimates and projections of the
investment community or that we may otherwise provide to the
public;
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fluctuations in the valuation of companies perceived by investors
to be comparable to us;
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disputes or other developments related to proprietary rights,
including patents, and our ability to obtain intellectual property
protection for our products;
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litigation or regulatory matters;
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announcement or expectation of additional financing efforts;
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sales and
short-selling of the ADSs;
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our issuance
of equity or debt;
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changes in
accounting practices;
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ineffectiveness of our internal controls;
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negative
media or marketing campaigns undertaken by our competitors or
lobbyists supporting the conventional meat industry;
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the public’s
response to publicity relating to the health aspects or nutritional
value of products to be manufactured in factories using our
technologies; and
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other events
or factors, many of which are beyond our control.
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In
addition, the stock markets have experienced extreme price and
volume fluctuations. Broad market and industry factors may
materially harm the market price of the ADSs, regardless of our
operating performance. These fluctuations often have been unrelated
or disproportionate to the operating performance of those
companies. These fluctuations, as well as general economic,
political and market conditions such as recessions, interest rate
changes, tariffs, international currency fluctuations, or the
effects of disease outbreaks or pandemics (such as the COVID-19
pandemic), may negatively impact the market price of the ADSs. In
the past, following periods of volatility in the market price of a
company’s securities, securities class action litigation has often
been instituted against that company. If we were involved in any
similar litigation, we could incur substantial costs and our
management’s attention and resources could be diverted.
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 of 1933, as amended, or 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 our shareholders.
ADS
holders do not have the same rights as our shareholders. 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 Israeli Companies Law 1999, or
Companies Law, pursuant to our articles of association, 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, we follow Israeli corporate governance practices
instead of Nasdaq requirements with regard to, among other things,
the composition of our board of directors. For example, our board
of directors currently comprises four directors, three of whom we
have determined are independent, however during 2021, the majority
of our board of directors was not deemed to be independent, in
compliance with our home-country requirements. Accordingly, our
shareholders may be afforded less protection that what is provided
under the Nasdaq corporate governance rules to investors in U.S.
domestic issuers. See “Item 16G.
—Corporate Governance—Nasdaq Listing Rules and
Home Country Practices.”
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 may 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 the average percentage of our 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 “Item 10.—Additional Information—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. See “Item 10.—Additional
Information—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,” “global intangible low-taxed
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. 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,
directly,
indirectly, or constructively, 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.
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ITEM 4.
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INFORMATION ON THE COMPANY
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A. History and Development of the Company
We were incorporated in May 2018 in Israel as DocoMed Ltd., and
originally provided digital health services. In July 2019, we
changed our name to MeaTech Ltd. and later Steakholder Innovation
Ltd., or Steakholder Innovation, and commenced our cultured meat
technology development operations. In January 2020, Steakholder
Innovation completed a merger with Ophectra Real Estate and
Investment Ltd., or Ophectra, a company incorporated in Israel
whose shares were traded on the TASE, whereupon the name of
Ophectra was changed to Meat-Tech 3D Ltd., then MeaTech 3D Ltd. and
finally Steakholder Foods Ltd., or Steakholder Foods.
According to the terms of the merger, Steakholder Foods acquired
all outstanding shares of Steakholder Innovation from the
shareholders of Steakholder Innovation, in return for the issuance
of ordinary shares to the shareholders of Steakholder Innovation,
as well as non-tradable merger warrants to receive ordinary shares
upon the achievement of pre-defined milestones, which were achieved
in 2020 and 2021. Steakholder Innovation become Steakholder Foods’
wholly-owned subsidiary.
In connection with the merger, the Tel Aviv District Court for
Economic Affairs approved an arrangement whereby all of Ophectra’s
assets and liabilities, whether certain or contingent, at the time
of the merger were irrevocably assigned to a settlement fund, or
Settlement Fund, for the purpose of settling Ophectra’s pre-merger
liabilities (except for Ophectra’s ownership of 14.74% of the
outstanding shares of Therapin Ltd., as described below). This
includes all future liabilities arising from Ophectra’s activities
prior to the merger (including tax liabilities, if any), and any
commitments made by Ophectra prior to the merger. We also provided
the Settlement Fund approximately NIS 1.3 million (approximately
$0.4 million), which we included in our public listing expenses,
for the purpose of settling any of Ophectra’s debts, and bear no
additional liabilities to the Settlement Fund. Anyone who believed
they had a claim to Ophectra’s assets were invited to lodge their
claims to the trustees. Due to the fact that two years have passed
since the merger, and the fact that the Settlement Fund no longer
contains any assets, its trustees are expected to instigate
proceedings to wind up the Settlement Fund.
Although Steakholder Foods was the legal acquirer of Steakholder
Innovation’s shares as described above, the merger was not
considered a business acquisition as defined in IFRS 3. As a
result, it was determined that Steakholder Innovation is the
acquirer of the business for accounting purposes and the
transaction was treated as a reverse acquisition that does not
constitute a business combination.
Therefore, the consolidated financial statements and financial data
included herein for all periods through and including December 31,
2019 were adjusted retroactively to reflect the financial
statements of Steakholder Innovation, other than the information
concerning earnings per share, which is presented according to the
equity information of Steakholder Foods (then called Ophectra Real
Estate and Investments Ltd.), and our consolidated financial
statements and financial data included herein from January 1, 2020
onward relate to Steakholder Foods.
We temporarily
maintained ownership of 14.74% of the outstanding shares of
Therapin Ltd., or Therapin, a company incorporated in Israel, while
considering a possible collaboration, however, in May 2020, we
returned these holdings to Therapin, and agreed to convert our
investment of NIS 7.25 million in Therapin 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) or in full upon an
exit event, 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.
B. Business Overview
Overview
We are an international deep-tech food company, headquartered in
Rehovot, Israel, that initiated activities in 2019 and are listed
on the Nasdaq Capital Market under the ticker “STKH”. 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 are on a mission to make meat sustainable, delicious, and clean.
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 customized bio-ink in a three-dimensional
geometry to form 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 tissue developed 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.
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. McKinsey & Company estimates between $20 and $25 billion
in sales by 2030, and with regard to the longer term, Barclays
predicted in November 2021 that by 2040, 20% of the demand for meat
globally will be provided by cultivated meat – a $450 billion
market opportunity. Jefferies likewise forecasts a $240-470 billion
meat market, with 9%-18% of global meat demand provided by
cultivated meat by 2040.
The meat industry is showing strong interest in the alternative
protein space, both in plant-based and cell-based proteins. There
are several drivers underlying the strong engagement with
alternative proteins. We believe consumers are looking for less
harmful protein sources, with approaches such as flexitarianism
already an established middle path between vegetarian diets and
those heavy in animal proteins, such as the paleo diet. Many meat
processors have experienced the worst of the COVID-19 pandemic
outbreaks and are seeking to minimize human involvement in the
manufacturing process. To that end, retailers such as Costco and
Walmart are increasingly opening their own meat processing
facilities on which they can rely exclusively without the
involvement of third party manufacturers.
Limitations of Conventional Meat Production
In addition to questions about whether conventional meat production
can adequately provide for the growing global population,
conventional meat production raises serious environmental
issues. According to the United Nations, 8% of the world’s
freshwater is used for raising livestock for meat and leather. At
least 18% of the greenhouse gases entering the atmosphere are from
the livestock industry. 26% of the planet’s ice-free land is used
for livestock grazing and 33% of croplands are used for animal
feed. With regard to treatment of animals in conventional
meat production, more than 70 billion animals are slaughtered
annually with steady increases to be expected in line with
increased demand for meat.
Another common consumer concern with industrial-scale animal
rearing is the reliance on the intensive use of antibiotics.
Antibiotics are used in livestock, especially pigs and poultry, to
manage animal health, and to treat or prophylactically prevent
diseases such as avian flu and swine flu. Their effects on human
health have not been fully resolved, with concerns including the
potential growth of antibiotic-resistant diseases in meat for human
consumption.
Existing Alternative Proteins and their Limitations
Negative consumer sentiment towards the perceived ethical, health
and environmental effects of the global meat industry help explain
the strong focus that has developed on creating methods of protein
production that are more sustainable, nutritious and conscious of
animal welfare. Recent years have seen a combination of increasing
consumer awareness and advanced technological development that has
led to substantially increased demand for proteins that do not
involve animal slaughter besides traditional plant-based proteins,
such as soy, peas and chickpeas. Some of the alternative proteins
being developed for human consumption for this purpose
include:
Mycoproteins: Some
of the most commercially successful novel alternative protein
products are currently mycoproteins, which are derived from fungi.
They are high in protein and fiber, low in saturated fat, and
contain no cholesterol. However, they have been associated
with allergic and gastrointestinal reactions. They are fermented to
become a dough, which can develop a texture similar to that of
meat.
Jackfruit: Jackfruit
is a tropical fruit native to India, which has a similar taste to
fruits such as apples and mangoes. While it contains substantially
greater protein than these fruits, its protein content is lower
than that of meat. Therefore, while its texture is somewhat similar
to that of shredded meat, it is not generally viewed as an
alternative to meat for consumers used to animal proteins, due to
the difference in taste from traditional meat products, and its
lower protein content.
Insects: Insects
are an environmentally-friendly source of protein that requires
significantly less land and water, and emits significantly less
greenhouse gases than large mammals raised for slaughter. In
addition, they can be fed food unsuitable for livestock that would
otherwise be wasted. While crickets are the most common source of
edible insects, research is currently taking place on new insect
species of value for food production, as well as methods to produce
them economically at scale. Insects can be consumed in their
natural state; however many cultures consider insect consumption to
be taboo and many people are disgusted by the idea. As a
result, research is taking place into developing insect-based
products in different forms not easily discernable as insect-based,
including flour.
The Cultivated Meat Solution
We believe that cultivated meat grown through cellular agriculture,
which aims to produce cultivated animal proteins without the need
for large-scale slaughter, has the potential to satisfy consumer
desire for meat while also avoiding the negative impacts of
conventional meat production. Cellular agriculture is an
efficient, closely-controlled indoor agricultural process that
utilizes advanced technologies with conceptual similarities to
hydroponics, which are used for growing meat cells rather than
fruit. Cultivated meat is grown in cell culture rather than inside
animals and applies tissue engineering practices for fat and muscle
production for the purpose of human consumption. Instead of animal
slaughter, stem cells are isolated from animal tissue, such as from
an umbilical cord (following birth), an adipose or a muscle tissue,
and then cultivated in
vitro to form protein biomass, 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.
We are engaged with experimentation to develop optimal and
cost-effective cell culture media composition. 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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Mitigating and
reducing of health risks: 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
controlled manufacturing practices that are designed to contribute
to improved nutrition, health and wellbeing. Therefore,
cultivated meat reduces the risk of new diseases and future
pandemics. Plant-based and cultivated meats are expected to be
insusceptible to animal diseases and should therefore not
contribute to pandemic risk because they do not require the use of
live animals. Moreover, cultivated meat does not require
antibiotics during its production and therefore will not contribute
to antibiotic resistance.
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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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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 Strategy
Our vision is to
be a global leader in the production of meat through advanced
biotechnology and engineering solutions for a more sustainable
world, enabling the production of the food of the future. 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, business development bioprinting,
tissue engineering, industrial stem cell growth, software
engineering, electronic and mechanical 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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Commercialize
our technologies for use in consumer and business
markets. We intend to commercialize our
three-dimensional bio-printing capabilities, while also customizing
bio-inks to enable the production of products based on a wide range
of species in accordance with the needs of our partners and
customers. We also 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.
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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 (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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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 companies in fields including
food processing, food retail and cultivated meat. We intend
to charge our customers a production license fee, based upon the
amount of meat printed. We expect that each production facility
will periodically require us to provide them with our proprietary
materials, such as fresh sets of starter cells, for a fee. In
addition, other materials used in the production process, such as
cell-culture media and additives in our bio-inks may be sourced
from third parties. Whether these materials are customized for the
specifics of our production processes, “white-labelled” generic
materials or proprietary materials that we have developed, we may
charge a fee for restocking such materials; however, we have not
yet reached the stage where it would be possible to estimate to
what extent this would contribute to any future revenue
stream. Finally, we
intend to provide paid
product implementation and guidance services to our customers
looking to establish cultivated meat manufacturing facilities. We
expect that each facility licensing our technologies will need to
deal with novel challenges and, as a result, will require the
assistance of our expert knowledge in order to set up and implement
our licensed technologies.
In 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 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. 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.
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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;
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Thee-dimensional, printed, hybrid, structured products such as
hybrid steaks, chicken breast and fish fillets (“ready to cook”);
and
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Fully-cultivated structured meat products, such as 3D-printed
steaks.
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We are focusing on developing complex structured products, starting
with ready-to-cook structured hybrid products, followed by fully
cultivated and structured, maturated whole cuts of meat.
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.
We expect to reach industrial-speed printing capabilities in the
second half of 2023 and generate initial revenues from our hybrid
product technologies commencing in 2024, followed by whole cuts of
meat commencing in 2025.
Omakase Beef Morsels (Photo credit: Shlomo Arbiv)
Meat Ingredients for Hybrid and Unstructured Cultivated
Products
We continue to
develop novel, proprietary, stem-cell-based technologies to produce
fat, muscle and connective tissue biomass from multiple species,
such as beef and fish, 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 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 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.
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.
We expect the media to be composed of food-grade ingredients, with
growth factors 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.
In February 2023, we announced that we had analyzed our muscle
cells and found that they offer the same amino acid profile as that
of the native tissue. The amino acid profile has two important
roles in our cultivated beef products – taste and nutritional
value. Our biology team tested 17 amino acids and compared them to
native tissue, with the results showing that the team was able to
create the same amino acid profile in the lab as in animals, This
demonstrates that cultivated meat has the same biochemical
composition as conventional meat, and we believe that it has the
potential to provide similar nutritional value.
Amino acids are the building blocks of proteins, playing a crucial
role in human nutrition. Meat is a rich source of amino acids,
particularly those that are considered "essential" because the
human body cannot produce them on its own. These essential amino
acids include leucine, isoleucine, valine, lysine, methionine,
phenylalanine, threonine, tryptophan, and histidine. These amino
acids are important for a variety of bodily functions, including
muscle growth and repair, immune function, and hormone production.
The specific amino acid profile of meat, as well as its taste,
varies depending on the animal species and how it is raised, as
well as the cut of meat.
We are also 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 can be isolated from various adult
tissues and give rise to more cells of the same type, such as
either fat or muscle tissues, while stem cells isolated from the
umbilical cord immediately following birth can give rise to
multiple types of cells, including both fat and muscle cells. Each
of these cells has advantages and disadvantages and their
adaptation to our robust meat production process is currently being
evaluated.
Bioreactors
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 initiate differentiation processes
into multiple cell types, such as muscle and fat.
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 and beef cells in the
course of developing both structured and unstructured
products.
Our Bio-Inks
Structured, three-dimensional printed products require the use of
edible 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.
We also have the capability to customize bio-inks for businesses
that we work with, offering the opportunity to 3D print with their
cell lines. This is currently being proven in the collaboration
with Umami Meat as we are customizing the bio-ink to the Umami
Meats Grouper cells.
Proprietary Bioprinting
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.
Modularity
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.
Clean Energy
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.
Additional Technologies
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 cells. 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.
International Expansion
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.
Europe
Peace of Meat Acquisition
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.
Peace of Meat was established in Belgium in 2019 and developed
cultured avian fat directly from animal cells without the need to
grow or kill animals.
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. We currently expect food
technology development activities to continue at our Israeli
headquarters.
On March 7,
2023, we announced a restructuring plan for Peace of Meat, to which
end Peace of Meat began implementing a series of changes designed
to streamline its operations. On April 4, 2023, we announced that
Peace of Meat would close, in the context of optimizing our funds
and investment strategy, alongside enabling a greater focus on
recently-announced core goals such as accelerating the
commercialization of our 3D printing technology.
As part of our
purchase of the shares of Peace of Meat at the end of 2020, Peace
of Meat’s management had been granted full contractual autonomy
throughout 2021 and 2022, and was provided with the funding
required to develop its technologies in accordance with the terms
of the purchase. Following the conclusion of the autonomous period
and following our previously announced plans to restructure Peace
of Meat, we further evaluated the expected return on our
investment, and decided not to provide additional funds to Peace of
Meat, in order to focus our efforts in the advancement of its core
technology 3D printing of cultured products, and potential
collaborations. As a result, Peace of Meat has ceased operations
and is expected to be liquidated. As part of this process, we
expect Peace of Meat’s assets to be realized, following which we
shall consider how and when to continue development of cultivated
avian products. The closure of Peace of Meat is expected to reduce
our expenses by about $4.5 million annually, relative to
2022.
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.
On April 3, 2023, we announced our participation in a strategic
investment round in Wilk Technologies Ltd. (TASE: WILK), alongside
leading players in the food industry, such as Danone and the
Central Bottling Co. Ltd. (owner of Tara, Coca Cola Israel and
more). The transaction was approved by our audit committee (due to
related party considerations) and board of directors. As part of
the investment, we purchased ordinary shares of Wilk in the amount
of $450,000 at a 15% discount below their 45-day average closing
price, giving us a 2.5% stake in Wilk. In parallel with this
investment, we aim to identify synergies with Wilk, including
various types of strategic cooperation with the company surrounding
our proprietary biology and printing technologies.
Sales and Distribution
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 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.
Intellectual Property
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.
Since
the beginning of 2022, we have 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 has received a first office action
indicating an intent to grant upon correction of some minor
procedural deficiencies. 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
the United States, Canada, Australia and New Zealand.
Current development work in the mechanical area will most likely
result in the development of at least two additional intellectual
property registrations.
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.”.
Competition
We expect that demand for our cultivated meat manufacturing
technologies 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 structured 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 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 Cargill, Inc., JBS Foods, Nestlé S.A., Tyson
Foods, Inc., 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 that is
advanced as Steakholder Foods who focused on the scaling up of
three-dimensional bioprinting for the cultivated meat industry. As
far as we know we are the only company to publicly demonstrate our
printing technology in a few of the main food tech events in 2023.
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.
Government Regulation
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. 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 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. In March 2023, the FDA
completed a second such consultation.
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.
Organizational Structure
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.
Employees
As of December 31, 2022, we employed 49 employees based at our
office and laboratory in Rehovot, Israel and Peace of Meat employed
32 employees based at its office and laboratory in Antwerp,
Belgium. On March 7, 2023, we announced a strategic restructuring
for Peace of Meat, including targeted layoffs in areas of the
business that were unrelated to its updated focus, and on April 4,
2023, we announced the expected liquidation of Peace of Meat, as a
result of which it will no longer employ employees.
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.
|
|
ITEM 4A.
|
UNRESOLVED STAFF COMMENTS
|
None.
|
|
ITEM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
The following “Operating and Financial Review and Prospects” should
be read together with the information in our financial statements
and related notes included elsewhere in this Annual Report. The
following discussion is based on our financial information prepared
in accordance with the International Financial Reporting Standards,
or IFRS, as issued by the International Accounting Standards Board,
or IASB, which may differ in material respects from generally
accepted accounting principles in other jurisdictions, including
U.S. GAAP. The following discussion includes forward-looking
statements that involve risks, uncertainties and assumptions. Our
actual results may differ materially from those anticipated in
these forward-looking statements as a result of many factors,
including but not limited to those described in “Risk Factors” and
elsewhere in this Annual Report. Please also see “Forward-Looking
Statements.”
For a discussion of our results of operations for the year ended
December 31, 2021, including a comparison between 2021 and 2020,
refer to “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Results of Operations—Year
Ended December 31, 2021 Compared to Year Ended December 31, 2020”
in our annual report on Form 20-F filed on March 24,
2022.
A. Operating Results
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.
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 December 31, 2022,
our operating tax loss carryforwards were approximately
$23.6 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,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and development
expenses
|
|
$
|
9,801
|
|
|
$
|
7,594
|
|
|
Marketing
expenses
|
|
|
3,044
|
|
|
|
1,628
|
|
|
General and administrative
expenses
|
|
|
6,937
|
|
|
|
8,010
|
|
|
Impairment loss
|
|
|
15,577
|
|
|
|
-
|
|
|
Loss
from
operations
|
|
$
|
35,359
|
|
|
$
|
17,232
|
|
|
Finance
income
|
|
|
4,878
|
|
|
|
509
|
|
|
Finance
expense
|
|
|
286
|
|
|
|
1,299
|
|
|
Finance expense (income),
net
|
|
|
(4,592
|
)
|
|
|
790
|
|
|
Net
loss
|
|
$
|
30,767
|
|
|
$
|
18,022
|
|
Year Ended December 31, 2022 Compared to Year Ended December 31,
2021
Research and development expenses
Research and development expenses increased by approximately $2.2
million, or 29%, to approximately $9.8 million for the year ended
December 31, 2022, compared to $7.6 million for year ended December
31, 2021. 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 Foods’ growing investment in research and
development as it achieves its milestones and expands its cultured
meat technology capabilities.
Marketing expenses increased by approximately $1.4 million, or 87%,
to approximately $3.0 million for the year ended December 31, 2022,
compared to $1.6 million for year ended December 31, 2021. The
increase resulted mainly from 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 decreased by approximately $1.1
million, or 13%, to approximately $6.9 million for the year ended
December 31, 2022, compared to approximately $8.0 million for the
year ended December 31, 2021. The decrease resulted mainly from
corporate costs reduction.
Impairment from re-measurement of cash-generating unit
As part of an annual impairment test, we tested the Peace of Meat
Cash-Generating Unit (“CGU”) for impairment as of December 31,
2022. We determined that the value in use of the operation is
negative, and therefore assessed the fair value less costs of
disposal of the CGU. As of the date of publication of these
financial statements, we have not identified a potential market
participant that may purchase the CGU in an arm’s-length
transaction. Thus, we have concluded that the fair value less costs
of disposal of the CGU is immaterial. The fair value less costs of
disposal of the CGU’s IPR&D asset was determined to be zero, as
the Company did not identify any potential buyer for this asset. We
have allocated the impairment loss to the CGU’s fixed assets based
on their fair value. The fair value of fixed assets that are
available for sale to a market participant is based on their
estimated selling value as of the valuation date, net of selling
costs. We estimated the selling value net of selling costs of the
fixed assets based on actual offers received, previous purchases,
and our knowledge of the second-hand industry market. In allocating
the impairment loss, we have not reduced the carrying amount of
each asset below its fair value net of disposal costs on an
individual basis, if determinable. As a result, we recognized
an impairment loss of USD 14,367 thousand for our IPR&D asset
and USD 1,210 thousand for our fixed assets. The total impairment
loss recorded was USD 15,577 thousand.
Net loss increased
by approximately $12.8 million to approximately $30.8 million for
the year ended December 31, 2022, compared to $18.0 million for the
year ended December 31, 2021. Net of the $15.6 million non-cash
impairment and $3.8 million net financial income in 2021 and 2022,
the net loss increased by approximately $2.6 million, or 15%,
driven mainly by increased research and development and marketing
expenses.
Critical Accounting Policies
We describe our significant accounting policies and estimates in
Note 3, Summary of Significant Accounting Policies, to the
consolidated financial statements contained elsewhere in this
annual report. 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, if applicable,
are discussed in Note 3 to our consolidated financial statements,
regarding the impact of the IFRS standards as issued by the IASB
that we will adopt in future periods in our consolidated financial
statements.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the
Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An
emerging growth company may take advantage of specified reduced
reporting and other burdens that are otherwise applicable generally
to public companies. These provisions include:
|
• |
to
the extent that we no longer qualify as a foreign private issuer,
(i) reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements and (ii) exemptions
from the requirement to hold a non-binding advisory vote on
executive compensation, including golden parachute
compensation;
|
|
• |
an
exemption from the auditor attestation requirement in the
assessment of our internal control over financial reporting
pursuant to the Sarbanes-Oxley Act of 2002; and
|
|
• |
an
exemption from compliance with the Critical Audit Matters
requirement that the Public Company Accounting Oversight Board has
adopted regarding a supplement to the auditor’s report providing
additional information about the audit and the financial
statements.
|
We may take
advantage of these exemptions for up to five years or until such
earlier time that we are no longer an emerging growth company. We
would cease to be an emerging growth company upon the earliest to
occur of: (i) the last day of the fiscal year in which we have
total annual gross revenues of $1.235 billion or more; (ii) the
date on which we have issued more than $1.0 billion in
nonconvertible debt during the previous three years; (iii) the date
on which we are deemed to be a large accelerated filer under the
rules of the SEC; or (iv) the last day of the fiscal year following
the fifth anniversary of our initial Nasdaq offering of March 2021.
We may choose to take advantage of some but not all of these
exemptions. Section 107 of the JOBS Act provides that an “emerging
growth company” can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for
complying with new or revised accounting standards. This means that
an “emerging growth company” can delay the adoption of certain
accounting standards until those standards would otherwise apply to
private companies. Given that we currently report and expect to
continue to report our financial results under IFRS as issued by
the IASB, we will not be able to avail ourselves of this extended
transition period and, as a result, we will adopt new or revised
accounting standards on the relevant dates on which adoption of
such standards is required by the IASB.
B. 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 Innovation through December 31, 2022,
we raised an aggregate of $53.0 million in four rounds of private
placements of our securities, our initial public offering of
securities on the Nasdaq and a registered direct offering, and $6.1
million in proceeds from option exercises. As of December 31, 2022,
we had $6.3 million in cash and cash equivalents.
The table below shows a summary of our cash flows for the periods
indicated:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
$
|
(14,253
|
)
|
|
$
|
(13,951
|
)
|
|
Net cash used in investing
activities
|
|
|
(3,533
|
)
|
|
|
(9,191
|
)
|
|
Net cash provided by financing
activities
|
|
|
5,572
|
|
|
|
28,865
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
$
|
(12,214
|
)
|
|
$
|
5,723
|
|
Year Ended December 31, 2022 Compared to Year Ended December 31,
2021
Net
cash used in operating activities
Net cash used in operating activities increased by $0.3 million, or
2%, to approximately $14.3 million for the year ended December 31,
2022 compared to approximately $14.0 million for the year ended
December 31, 2021. This increase was due to the increase in its
research and development and marketing expenses growing activity
with reduction in corporate costs.
Net cash used in investing activities
Net cash used in
investing activities decreased by $5.7 million, or 62%, to
approximately $3.5 million for the year ended December 31, 2022
compared to $9.2 million for the year ended December 31,
2021. This decrease was driven mainly by our investment in
Peace of Meat in year ended December 31, 2021.
Net cash provided by financing activities
Net
cash provided by financing activities decreased by $23.3 million,
or 81%, to approximately $5.6 million for the year ended December
31, 2022 compared to $28.9 million for the year ended December 31,
2021. This decrease was driven mainly from the Company’s initial
Nasdaq public offering and issuance of shares and warrants taking
place in year ended December 31, 2021.
We have incurred
losses and cash flow deficits from operations since the inception
of Steakholder innovation, resulting in an accumulated deficit as
of December 31, 2022 of approximately $67.7 million. 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 third
quarter of 2023 (including January 2023 funding round). We do not
currently have any specific commitments or plans for acquisitions;
to the extent we do engage in acquisitions, we will do so after
ensuring that we will have sufficient funds available to meet our
capital requirements, and such acquisitions are likely to affect
our projected cash needs. To meet future capital needs, we would
need to raise additional capital through equity or debt financing
or other strategic transactions. However, any such financing
may not be on favorable terms or even available to us. Our
failure to obtain sufficient funds on commercially acceptable terms
when needed would have a material adverse effect on our business,
results of operations and financial condition. Our forecast of the
period of time through which our financial resources will be
adequate to support our operations is a forward-looking statement
that involves risks and uncertainties, and the actual amount of our
expenses could vary materially and adversely as a result of a
number of factors. We have based our estimates on assumptions that
may prove to be wrong, and our expenses could prove to be
significantly higher than we currently anticipate.
Our future capital requirements will depend on many factors,
including, but not limited to:
|
• |
the
progress and costs of our research and development
activities;
|
|
• |
the
costs of development and expansion of our operational
infrastructure;
|
|
• |
the
costs and timing of developing technologies sufficient to allow
food production equipment manufacturers and food manufacturers to
product products compliant with applicable regulations;
|
|
• |
our
ability, or that of our collaborators, to achieve development
milestones and other events or developments under potential future
licensing agreements;
|
|
• |
the
amount of revenues and contributions we receive under future
licensing, collaboration, development and commercialization
arrangements with respect to our technologies;
|
|
• |
the
costs of filing, prosecuting, enforcing and defending patent claims
and other intellectual property rights;
|
|
• |
the
costs of contracting with third parties to provide sales and
marketing capabilities for us or establishing such capabilities
ourselves, once our technologies are developed and ready for
commercialization;
|
|
• |
the
costs of acquiring or undertaking development and commercialization
efforts for any future products or technology;
|
|
• |
the
magnitude of our general and administrative expenses; and
|
|
• |
any
additional costs that we may incur under future in- and
out-licensing arrangements relating to our technologies and futures
products.
|
Until we can generate significant recurring revenues, we expect to
satisfy our future cash needs through capital raising or by
out-licensing and/or co-developing applications of one or more of
our product candidates. We cannot be certain that additional
funding will be available to us on acceptable terms, if at all. If
funds are not available on favorable terms, or at all, we may be
required to delay, reduce the scope of or eliminate research or
development efforts or plans for commercialization with respect to
our technologies and make necessary change to our operations to
reduce the level of our expenditures in line with available
resources.
We are a development-stage technology company and it is not
possible for us to predict with any degree of accuracy the outcome
of our research and development efforts. As such, it is not
possible for us to predict with any degree of accuracy any
significant trends, uncertainties, demands, commitments or events
that are reasonably likely to have a material effect on our net
loss, liquidity or capital resources, or that would cause financial
information to not necessarily be indicative of future operating
results or financial condition. However, to the extent possible,
certain trends, uncertainties, demands, commitments and events are
described herein.
Since inception,
we have incurred significant losses and negative cash flows from
operations and have an accumulated deficit of USD 67.7 million. 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. On
January 9, 2023, we consummated a securities purchase agreement
with gross proceeds of approximately USD 6.5 million. Consequently,
our management is of the opinion that our existing cash will be
sufficient to fund operations until the third 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.
Quantitative and Qualitative Disclosures About Market 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 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, 2022, although not in the year
ended December 31, 2021.
C. Research and development, patents and licenses, etc.
For a description of our research and development policies for the
last three years, see “Item 4.—Information on the Company—Business
Overview—Intellectual Property.”
D. Trend Information
Not applicable.
E. 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 in this Annual
Report on Form 20-F.
|
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A. Directors and Senior 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
Annual Report on Form 20-F. 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
|
|
45
|
|
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)
|
|
43
|
|
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).
|
*As previously announced, effective
April 5, 2023, Eitan Noah has been appointed as the Company’s Chief
Financial Officer, replacing Mr. Hefer in this role. For more
information, see Item 8 – Significant Changes.
Executive Officers
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. Mr. Hefer will step down from
his position as our Chief Financial Officer on April 5, 2023, at
which time Mr. Eitan Noah, our current Vice President of Finance
will assume such role. Mr. Hefer 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.
Directors
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, Director
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, Director
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, Director
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.
Family Relationships
There are no family relationships among any of our directors or
officers.
B. Compensation
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
Chief Executive Officer, Chief Financial Officer, Chief
Technologies Officer, and the previous and current Chairmen of our
board of directors, 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(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Hefer
will step down from his position as Chief Financial Officer on
March 23, 2023, at which time Mr. Eitan Noah, our current Vice
President of Finance, will assume the role of Chief Financial
Officer.
|
|
(6) |
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, were
as follows from his appointment in January 2022, until January 24,
2023: (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.
Effective January
24, 2023, pursuant to approvals by our Compensation Committee,
Board of Directors and a general meeting of our shareholders, the
following amendments to the materials terms for Mr. Kaiser were
adopted: his annual fee was adjusted to $290,000, automatically
increased by an amount equal to seven percent at the end of each
year of service commencing from the date of adjustment; his annual
bonus shall be equal to 70% of the bonus awarded to the Chief
Executive Officer in the applicable year; he received an allocation
of restricted share units (RSUs) vesting into 1,340,000 ordinary
shares (currently equivalent to 134,000 ADSs), vesting over three
years from the date of adjustment, pursuant to which 1/12 will vest
every quarter until fully vested, with no exercise price, issued
under the Company’s 2022 Share Incentive Plan and the Capital Gains
tax track pursuant to Section 102 of the Israeli Income Tax
Ordinance (New Version), 1961 and subject to acceleration upon
termination pursuant to either our sale or change in control; and
he received an allocation of performance share units (PSUs) vesting
into 1,340,000 ordinary shares (currently equivalent to 134,000
ADSs), vesting upon achievement of any one of the following
milestones: (i) engagement with a strategic partner / investor (a
corporation operating in the field of food, healthcare,
pharmaceuticals or printing) for an investment in the company or
its subsidiaries, in cash in an amount of not less than five
hundred thousand dollars; (ii) submission of a regulatory approval
to the U.S. FDA, Singapore Food Agency or European Food Safety
Authority, for the commercial sale or distribution of our products;
or (iii) engagement with a strategic partner (as defined above) in
a joint development agreement to collaborate to develop technology
or products for the purpose of later commercialization.
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.”
2018 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
We adopted the
2022 Share Incentive Plan, or the 2022 Plan, on June 10, 2022, and
a general meeting of our shareholders approved the 2022 Plan on
March 30, 2023. 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.
C. Board Practices
Board of Directors
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.
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 2026;
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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.
External Directors
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.
Audit Committee
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.
Compensation Committee
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.
Director Nominations
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.
Internal Auditor
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
directors and officers of a company. 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 his approval or performed by virtue of his
position and other important information pertaining to such action.
The duty of loyalty requires the director or officer to act in good
faith and for the benefit of the company.
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 reasonable 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. An office holder is not obliged to
disclose such information if the personal interest of the office
holder derives solely from the personal interest of his or her
relative in a transaction that is not considered an extraordinary
transaction.
If the transaction is an extraordinary transaction, the office
holder must also disclose any personal interest held by:
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the office holder’s relatives (spouse, siblings, parents,
grandparents, descendants, spouse’s descendants and the spouses of
any of these people); or
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any company in which the office holder or his or her relatives
holds 5% or more of the shares or voting rights, serves as a
director or general manager or has the right to appoint at least
one director or the general manager.
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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 “Item 6.B.
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 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.
A “personal interest” is defined under the Companies Law as the
personal interest of a person in an action or in a transaction of
the company, including the personal interest of such person’s
relative or the interest of any other corporate body in which the
person and/or such person’s relative is a director or general
manager, a 5% shareholder or holds 5% or more of the issued and
outstanding share capital of the company or of its voting rights,
or has the right to appoint at least one director or the general
manager, but excluding a personal interest stemming solely from the
fact of holding shares in the company. A personal interest also
includes (i) a personal interest of a person who votes according to
a proxy of another person, including in the event that the other
person has no personal interest, and (ii) a personal interest of a
person who gave a proxy to another person to vote on his or her
behalf regardless of whether the discretion of how to vote lies
with the person voting.
An “extraordinary transaction” is defined under the Companies Law
as any of the following:
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a transaction other than in the ordinary course of business;
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a transaction that is not on market terms; or
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a transaction that may have a material impact on the company’s
profitability, assets or liabilities.
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Disclosure of Personal Interests of a Controlling Shareholder and
Approval of Transactions
Pursuant to the Companies Law, the disclosure requirements that
apply to an office holder also apply to a controlling shareholder
of a public company. 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 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 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.
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) 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 (the Compensation Special Majority Requirement).
However, if the shareholders of the company do not approve a
compensation arrangement with an 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.
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
(the Compensation Special Majority Requirement). However, if the
shareholders of the company do not approve the compensation
arrangement with the chief executive officer, 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 a special majority vote as discussed above with
respect to the approval of director compensation). In addition, 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 a prior business relationship
with the company or a controlling shareholder of the company 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.
Compensation Policy
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.
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 an
acceptable 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. The 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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|
|
•
|
a financial obligation imposed on the officeholder for the benefit
of all of the parties damaged by the violation of an administrative
proceeding;
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|
|
•
|
expenses incurred by an officeholder in connection with an
Administrative Proceeding conducted in his regard, including
reasonable litigation expenses, and including attorneys’
fees;
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|
|
•
|
expenses incurred by an officeholder in connection with a
proceeding under the Antitrust Law, 5748-1988 and/or in connection
with it (a “Proceeding Under the Antitrust Law”), conducted
regarding him, including reasonable litigation expenses, and
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.
|
As permitted under the Israeli 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 any other
person;
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|
•
|
Breach of the fiduciary duty to the Company, provided that the
officeholder acted in good faith and had reasonable grounds to
assume that his act would not adversely affect the Company’s best
interests;
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|
|
•
|
financial liability imposed upon him in favor of another
person;
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|
|
•
|
financial liability imposed on the officeholder for the benefit of
all of the parties damaged by the violation of an administrative
proceeding;
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|
•
|
expenses incurred or to be incurred by an officer in connection
with an Administrative Proceeding, including reasonable litigation
expenses, and including attorneys’ fees;
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|
|
•
|
Expenses incurred or to be incurred in connection with a proceeding
under the Antitrust 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.
|
Under the Companies Law, a company may not indemnify, exculpate or
insure an office holder against any of the following:
|
|
•
|
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;
|
|
|
•
|
an act or omission committed with intent to derive illegal personal
benefit; or
|
|
|
•
|
a fine, monetary sanction or forfeit levied against the office
holder.
|
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 or
controlling shareholders, their relatives and third parties in
which controlling shareholders have a personal interest, also by
the shareholders.
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 annual report, 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.
D. Employees
As of December 31, 2022, we had 49 employees based at our office
and laboratory in Rehovot, Israel and Peace of Meat employed 32
employees based at its office and laboratory in Antwerp, Belgium.
On March 7, 2023, we announced a strategic restructuring for Peace
of Meat, including targeted layoffs in areas of the business that
were unrelated to its updated focus, and on April 4, 2023, we
announced the expected liquidation of Peace of Meat, as a result of
which it will no longer employ employees.
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 and include 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.
E. Beneficial Ownership of Executive Officers and Directors
The beneficial ownership of our ordinary shares (including ordinary
shares represented by ADSs) is determined in accordance with the
rules of the SEC. Under these rules, a person is deemed to be a
beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or to direct the voting of
the security, or investment power, which includes the power to
dispose of or to direct the disposition of the security. For
purposes of the table below, we deem ordinary shares issuable
pursuant to options or warrants that are currently exercisable or
exercisable within 60 days of the date of this Annual Report on
Form 20-F, if any, to be outstanding and to be beneficially owned
by the person holding the options or warrants for the purposes of
computing the percentage ownership of that person, but we do not
treat them as outstanding for the purpose of computing the
percentage ownership of any other person.
Unless otherwise noted below, each shareholder’s address is
c/o Steakholder Foods Ltd., 5 David Fikes St., Rehovot
7638205, Israel.
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|
|
Shares
Beneficially Owned
|
|
|
Name of
Beneficial Owner
|
|
Number
|
|
|
Percentage(1)
|
|
|
Directors and executive officers
|
|
|
|
|
|
|
|
Arik
Kaufman(2)
|
|
|
491,600
|
|
|
|
*
|
|
|
Guy
Hefer(3)
|
|
|
333,330
|
|
|
|
*
|
|
|
Dan
Kozlovski(4)
|
|
|
133,340
|
|
|
|
*
|
|
|
Yaron Kaiser(5)
|
|
|
3,003,610
|
|
|
|
1.7
|
%
|
|
David Gerbi(6)
|
|
|
218,510
|
|
|
|
*
|
|
|
Eli
Arad(7)
|
|
|
167,010
|
|
|
|
*
|
|
|
Sari
Singer(8)
|
|
|
168,460
|
|
|
|
*
|
|
|
All directors and executive officers as a group (7 persons)
|
|
|
4,515,860
|
|
|
|
2.6
|
%
|
|
* |
Less than one percent (1%).
|
|
(1) |
Based on 172,071,117 Ordinary Shares outstanding as of March 22,
2023.
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|
(2) |
Consists of 283,270 Ordinary Shares and options to purchase 208,330
Ordinary Shares exercisable within 60 days of the date of this
annual report, with an exercise price of $0.519. These options
expire on March 16, 2026.
|
|
(3) |
Consists of options to purchase 187,500 Ordinary Shares exercisable
within 60 days of the date of this annual report, with an exercise
price of NIS 3.49 ($0.96), expiring on March 24, 2025, and
options to purchase 145,830 Ordinary Shares exercisable within 60
days of the date of this annual report, with an exercise price of
$0.716, expiring on July 20, 2025.
|
|
(4) |
Consists of options to purchase 133,340 Ordinary Shares exercisable
within 60 days of the date of this annual report, with an exercise
price of NIS 1.90 ($0.52). These options expire on August 5,
2024.
|
| (5) |
Consists of 1,435,280 Ordinary Shares based on information provided
to us by Mr. Kaiser, options to purchase 116,660 Ordinary Shares
exercisable within 60 days of the date of this annual report, with
an exercise price of $0.519, expiring on March 16, 2026, restricted
share units vesting into 111,670 Ordinary Shares within 60 days of
the date of this annual report, and performance share units that
may vest into 1,340,000 Ordinary Shares within 60 days of this
annual report if their associated performance targets are met
during such period.
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|
(6) |
Consists of 96,450 Ordinary Shares, RSUs vesting into 7,490
Ordinary Shares within 60 days of the date of this annual report
and options to purchase 114,570 Ordinary Shares within 60 days of
the date of this annual report with an exercise price of $0.716.
These options expire on July 20, 2025.
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|
(7) |
Consists of 44,950 Ordinary Shares, RSUs vesting into 7,490
Ordinary Shares within 60 days of the date of this annual report
and options to purchase 114,570 Ordinary Shares within 60 days of
the date of this annual report with an exercise price of $0.716.
These options expire on July 20, 2025.
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| (8) |
Consists of 44,910 Ordinary Shares, RSUs vesting into 8,980
Ordinary Shares within 60 days of the date of this annual report
and options to purchase 114,570 Ordinary Shares within 60 days of
the date of this annual report with an exercise price of $0.716.
These options expire on July 20, 2025.
|
F. Action to Recover Erroneously Awarded Compensation
Not applicable.
|
|
ITEM 7.
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
A. Major Shareholders
The following table sets forth certain information regarding the
beneficial ownership of our outstanding ordinary shares, including
ordinary shares represented by ADSs, as of the date of this Annual
Report on Form 20-F, by each person or entity who we know
beneficially owns 5% or more of the outstanding ordinary shares.
For purposes of the table below, we deem ordinary shares issuable
pursuant to options or warrants that are currently exercisable or
exercisable within 60 days of the date of this Annual Report on
Form 20-F, if any, to be outstanding and to be beneficially owned
by the person holding the options or warrants for the purposes of
computing the percentage ownership of that person, but we do not
treat them as outstanding for the purpose of computing the
percentage ownership of any other person.
None of our shareholders have different voting rights from other
shareholders. We are not aware of any arrangement that may, at a
subsequent date, result in a change of control of our
company.
As of the date of this Annual Report on Form 20-F, there are five
shareholders of record of our ordinary shares, of whom two are in
the United States. The number of record holders is not
representative of the number of beneficial holders of our ordinary
shares, as most of the shares we have issued, including those
represented by ADSs are currently recorded in the name of our ADS
registrar, The Bank of New York Mellon. Based upon a review of the
information provided to us by The Bank of New York Mellon, as of
March 1, 2023, there were 25 holders of record of the ADSs on
record with the Depository Trust Company. These numbers are not
representative of the number of beneficial holders of our ADSs nor
is it representative of where such beneficial holders reside, since
many of these ADSs were held of record by brokers or other
nominees.
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|
|
Ordinary Shares Beneficially Owned
|
|
|
Name of Beneficial Owner
|
|
Number
|
|
|
Percentage
|
|
|
5% or greater shareholders
|
|
|
|
|
|
|
|
Shimon
Cohen
|
|
|
12,175,320
|
|
|
|
7.1
|
%
|
(1) Based
on 172,071,117 Ordinary Shares outstanding as of March 22,
2023.
(2)
This
information is based solely on a Schedule 13D filed with the SEC on
September 22, 2022, pursuant to which Shimon Cohen reported that he
is the direct and beneficial owner of 12,175,320 Ordinary
Shares, which represents (i) 305,616 ADSs held by Mr. Cohen in his
individual capacity and (ii) 437,245 ADSs, 222,068 ADSs and 252,603
ADSs held indirectly by Mr. Cohen through S.C. Ma’agarei Enosh
Ltd., Reshet Bitachon Ltd. and Ma’agarim Proyektim Ltd.,
respectively, each of which Mr. Cohen is the sole owner, manager
and shareholder. The address for Shimon Cohen is 20 Derech
HaShalom, Tel Aviv, 61250 Israel.
B. Related Party Transactions
The following is a description of the material transactions we
entered into with related parties since the beginning of 2020. We
believe that we have executed all of our transactions with related
parties on terms no less favorable to us than those we could have
obtained from unaffiliated third parties.
Our Board of Directors, acting through our Audit Committee, is
responsible for the review, approval, or ratification of related
party transactions between us and related persons. Under Israeli
law, related party transactions are subject to special approval
requirements, see “Management — Fiduciary duties and approval of
specified related party transactions and compensation under Israeli
law.”
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. For further
information, see “Management - Employment and Consulting
Agreements.”
Directors and Officers Insurance Policy and Indemnification and
Exculpation Agreements
In accordance with our articles of association, we have obtained
Directors and Officers insurance for our executive officers and
directors, and provide indemnification, exculpation and exemption
undertakings to each of our directors and officers to the fullest
extent permitted by the Companies Law.
Private Issuances of Securities
In January 2020, following the closing of the merger between
MeaTech and Ophectra, we issued former shareholders of Steakholder
Innovations warrants to receive ordinary shares, including to the
following then-related parties: (1) warrants to receive 1,036,098
ordinary shares each to Sharon Fima, then our Chief Executive
Officer and Chief Technical Officer, and Omri Schanin, then our
Deputy Chief Executive Officer; and (2) warrants to receive
1,291,158 ordinary shares to Liran Damati, then a substantial
shareholder. The warrants had no exercise price and vested upon the
achievement of pre-defined milestones in 2020 and 2021.
In May 2020, pursuant to approvals of our audit committee, board of
directors and a general meeting of our shareholders: (1) we issued
1,043,846 ordinary shares and options to purchase 6,030,286
ordinary shares at an exercise price of NIS 3.36 (approximately
$0.92) per share in return for a private investment of $750,000 by
EL Capital Investments LLC, a company controlled by Mr. Steven
Lavin, who was concurrently appointed to our board of directors as
its chairman; and (2) we issued options to purchase 1,967,327
ordinary shares at an exercise price of NIS 2.49 (approximately
$0.68) per share and options to purchase 1,967,328 ordinary shares
at an exercise price of NIS 3.486 (approximately $0.96) to Silver
Road Capital Ltd., the majority of whose shares were owned by
directors at the time, Mr. Steven Lavin and Mr. Daniel
Ayalon.
Engagement with BlueSoundWaves
On October 6, 2021, we entered into a services and collaboration
agreement, or the Services and Collaboration Agreement, with
BlueOcean Sustainability Fund, LLC, or BlueSoundWaves, pursuant to
which BlueSoundWaves provides us with marketing and promotional
services, strategic consulting advice, and partner and investor
engagement services in the United States. As consideration for such
services, BlueSoundWaves received (i) an option to purchase
6,215,770 ordinary shares, currently equal to 621,577 ADSs, and
(ii) 1,243,150 of our ordinary restricted shares, currently equal
to 124,315 ADSs.
BlueOcean Sustainability Management Fund LP, a Cayman partnership,
and the managing partner of BlueSoundWaves holds all of the
outstanding share capital of BlueOcean Kayomot Ltd., an Israeli
company. Messrs. Kaufman and Kaiser are directors of BlueOcean
Kayomot Ltd. and founding partners of BlueSoundWaves. Mr. Kaufman
also serves as the chief executive officer of BlueOcean Kayomot
Ltd. See Item 10.C for additional discussion of the Services and
Collaboration Agreement.
C. Interests of
Experts and Counsel
Not applicable.
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|
ITEM 8.
|
FINANCIAL INFORMATION
|
A. Consolidated Statements and other Financial Information
See “Item 18.—Financial Statements” in this Annual Report on Form
20-F.
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.
Dividend Distributions
We have never declared or paid cash dividends to our shareholders.
Currently we do not intend to pay cash dividends. We currently
intend to reinvest any future earnings in developing and expanding
our business. Any future determination relating to our dividend
policy will be at the discretion of our Board of Directors and will
depend on a number of factors, including future earnings, our
financial condition, operating results, contractual restrictions,
capital requirements, business prospects, applicable Israeli law
and other factors our Board of Directors may deem relevant.
B. Significant Changes
Since December 31, 2022, the following significant changes have
occurred:
Fundraising Round
On January 9,
2023, we consummated an underwritten public offering of 1,550,000
American Depositary Shares (“ADSs”) at a price of $1.00 per ADS and
pre-funded warrants to purchase 4,950,000 ADSs at a purchase price
of $0.9999 per warrant and an exercise price of $0.0001 per
warrant, for total immediate gross proceeds of approximately $6.5
million. As part of the offering, we issued warrants to purchase
6,500,000 ADSs, exercisable immediately for a period of five years,
with an exercise price of $1.00 per ADS. Underwriting discounts and
other offering expenses totaled approximately $0.7 million. In
addition, we granted the underwriters a 45-day option to purchase
up to an additional 975,000 ADSs and/or warrants at the public
offering price, less discounts and commissions, solely to cover
over-allotments, if any, which was not exercised.
In connection with the offering, we entered into an agreement with
an existing investor to reduce the exercise price of outstanding
warrants to purchase up to 1,857,143 ADS which were issued in our
July 2022 registered direct offering (the “Prior Warrants”) from
$3.50 per ADS to $1.00 per ADS, and to extend the term of the Prior
Warrants until January 10, 2028.
Appointment of Chief Financial Officer
On March 2, 2023,
we announced that our Vice President of Finance, Mr. Eitan Noah,
will be assuming the position of Chief Financial Officer, as
our current Chief Financial Officer, Guy Hefer, has decided to step
down from his role for personal reasons, all effective April 5,
2023.
Eitan Noah, B.A., CPA, has been our Vice President of Finance since
January 2021. He is an integral member of our finance team,
demonstrating exceptional leadership and financial acumen during
his tenure, with a deep understanding of our operations,
financials, and strategic priorities. Before joining us, Mr. Noah
was Director of Finance at Inception XR, Inc., and Controller and
FP&A Manager at Fluence Corp. Ltd. Prior to that, he was a
senior associate at PwC Israel. He holds a Bachelor’s degree in
Economics from the Ben-Gurion University of the Negev, Israel, and
is a certified practicing accountant in Israel.
|
|
ITEM 9.
|
THE
OFFER AND LISTING
|
A. Offer and Listing Details
ADSs
The ADSs, representing our ordinary shares, traded on Nasdaq under
the symbol “MITC” between March 12, 2021 and August 2, 2022, and
have traded under the symbol “STKH” since then.
Ordinary Shares
Our ordinary shares were traded on the TASE between January 26,
2020 and August 3, 2021, when we voluntarily de-listed them from
trade on the TASE. Our ordinary shares were traded under the symbol
“MEAT” until March 2021, and thereafter under the symbol “MITC.”
Some of our ordinary shares are traded over the counter under the
symbol MTTCF.
B. Plan of Distribution
Not applicable.
C. Markets
For a description of our publicly-traded ADSs, see “Item 9.— Offer
and Listing Details —ADSs.” For a description of our ordinary
shares, see “Item 9.— Offer and Listing Details —Ordinary
Shares.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
|
|
ITEM 10.
|
ADDITIONAL INFORMATION
|
A. Share Capital
Not applicable.
B. Articles of Association
The information set forth in our prospectus dated January 9, 2023,
filed with the SEC pursuant to Rule 424(b), under the headings
“Description of Share Capital” is incorporated herein by
reference.
C. Material Contracts
On October 6, 2021, we entered into the Services and Collaboration
Agreement with BlueSoundWaves, a sustainability focused fund led by
led by Ashton Kutcher, Guy Oseary and Effie Epstein. Pursuant to
the Services and Collaboration Agreement, BlueSoundWaves provides
us marketing and promotional services, strategic consulting advice,
and partner and investor engagement services in the United
States.
As consideration for such services, BlueSoundWaves received (i) an
option to purchase 6,215,770 ordinary shares, currently equal to
621,577 ADSs, and (ii) 1,243,150 of our ordinary restricted shares,
currently equal to 124,315 ADSs. The exercise price per ordinary
share of the ordinary share option and restricted ordinary share
option is the greater of (a) the closing price per ADS on October
5, 2021 ($6.65) divided by the number of ordinary shares
represented by the ADS and (b) the closing price per ADS on the day
prior to the exercise of the options less a discount ranging from
25% to 75% depending on how much higher the exercise price is
compared to the price determined under subsection (a) of this
paragraph. The options granted pursuant to this agreement will vest
over a three-year period, with one-third vesting on the first
anniversary of the Services and Collaboration Agreement with the
remaining amount vesting in equal quarterly installments for the
remaining period. If either party provides notice to terminate the
agreement, the quarterly vesting will be cancelled. A percentage of
the options described above will immediately vest and be
exercisable upon the occurrence of certain trading milestones,
investment milestones or change of control event. We have also
agreed to reimburse BlueSoundWaves its reasonable out of pocket
expenses which have been previously approved.
The Services and Collaboration Agreement will remain in effect
until terminated in accordance with its terms. Each party has the
right to terminate upon 60 days prior written notice after the
12-month anniversary of the effective date. Either party may also
terminate the Services and Collaboration Agreement upon the
occurrence of a material breach which remains uncured 30 days after
the breaching party has received notice of the breach. Any portion
of the vested options to purchase ordinary shares or restricted
ordinary shares will expire on the second anniversary of the
termination of the Services and Collaboration Agreement, or
otherwise expire on the 10th anniversary.
For other agreements with related parties, see “Item 7.—Major
Shareholders and Related Party Transactions—Related Party
Transactions.”
D. Exchange Controls
Non-residents of Israel who purchase our ordinary shares outside of
Israel with U.S. dollars or other foreign currency will be able to
convert dividends (if any) thereon, and any amounts payable upon
the dissolution, liquidation or winding up of the affairs of the
Company, as well as the proceeds of any sale in Israel of the
ordinary shares to an Israeli resident, into freely repatriable
dollars, at a rate of exchange prevailing at the time of
conversion, pursuant to regulations issued under the Currency
Control Law, 1978, provided that Israeli income tax has been
withheld by the Company with respect to such amounts.
E. Taxation
The following description is not intended to constitute a complete
analysis of all tax consequences relating to the acquisition,
ownership and disposition of our ordinary shares or ADSs. You
should consult your own tax advisor concerning the tax consequences
of your particular situation, as well as any tax consequences that
may arise under the laws of any state, local, foreign or other
taxing jurisdiction.
Israeli tax considerations
and government programs
The following is a summary of the current tax regime in the State
of Israel, which applies to us and to persons who hold our ordinary
shares or ADSs.
This summary does not discuss all the aspects of Israeli tax law
that may be relevant to a particular investor in light of his or
her personal investment circumstances or to some types of investors
subject to special treatment under Israeli law. Examples of this
kind of investor include traders in securities or persons who do
not hold our ordinary shares or ADSs as a capital asset. Some parts
of this discussion are based on a new tax legislation which has not
been subject to judicial or administrative interpretation. The
discussion should not be construed as legal or professional tax
advice and does not cover all possible tax considerations.
HOLDERS AND POTENTIAL INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE ISRAELI OR OTHER TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES OR ADSs,
INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL
TAXES.
General corporate tax
structure in Israel
Israeli resident companies are generally subject to corporate tax
on both ordinary income and capital gains, currently at the rate of
23% of a company’s taxable income. Capital gains derived by an
Israeli resident company are subject to tax at the prevailing
corporate tax rate.
Taxation of our shareholders
Capital gains
Capital gains tax is generally imposed on the disposal of capital
assets by an Israeli resident, and on the disposal of capital
assets by a non-Israeli resident if those assets (i) are located in
Israel, (ii) are shares or a right to shares in an Israeli resident
corporation, (iii) represent, directly or indirectly, rights to
assets located in Israel, or (iv) a right in a foreign resident
corporation, which in its essence is the owner of a direct or
indirect right to property located in Israel (with respect to the
portion of the gain attributed to the property located in Israel),
unless a specific exemption is available or unless a tax treaty
between Israel and the shareholder’s country of residence provides
otherwise. The ITO distinguishes between “Real Capital Gain” and
“Inflationary Surplus.” Real Capital Gain is the excess of the
total capital gain over Inflationary Surplus. The Inflationary
Surplus is a portion of the total capital gain which is equivalent
to the increase of the relevant asset’s price that is attributable
to the increase in the Israeli consumer price index or, in certain
circumstances, a foreign currency exchange rate, between the date
of purchase and the date of sale. Inflationary Surplus is not
currently subject to tax in Israel.
Real Capital Gain accrued by individuals on the sale of our
ordinary shares or ADSs will be taxed at the rate of 25%. However,
if the individual shareholder is a “Substantial Shareholder”
(i.e., a person who holds,
directly or indirectly, alone or together with another, 10% or more
of one of the Israeli resident company’s means of control) at the
time of sale or at any time during the preceding 12-month period,
such gain will be taxed at the rate of 30%.
Individual and corporate shareholders dealing in securities in
Israel are taxed at the tax rates applicable to business income in
2022, a tax rate of 23% for corporations and a marginal tax rate of
up to 47% for individuals, unless contrary provisions in a relevant
tax treaty applies. In addition, a 3% excess tax (as discussed
below) is levied on individuals whose total taxable income in
Israel in 2022 exceeded NIS 663,240.
Notwithstanding the foregoing, generally, capital gain derived from
the sale of our ordinary shares or ADSs by a shareholder who is a
non-Israeli resident (whether an individual or a corporation)
should be exempt from Israeli capital gain tax, provided, among
others, that:(i) the ordinary shares or ADSs were purchased upon or
after the listing of the securities on the stock exchange, and (ii)
the seller does not have a permanent establishment in Israel to
which the derived capital gain is attributable. However,
non-Israeli entities (including corporations) will not be entitled
to the foregoing exemption if Israeli residents, whether directly
or indirectly: (i) have a controlling interest of more than 25% in
such non-Israeli entity or (ii) are the beneficiaries of, or are
entitled to, 25% or more of the revenues or profits of such
non-Israeli entity. In addition, such exemption is not applicable
to a person whose gains from selling or otherwise disposing of the
shares or ADSs are deemed to be business income. In addition, the
sale of ordinary shares or ADSs may be exempt from Israeli capital
gains tax under the provisions of an applicable tax treaty. For
example, the U.S.-Israel Tax Treaty, or the Treaty, generally
exempts U.S. residents (for purposes of the U.S.-Israel Treaty)
holding the shares as a capital asset from Israeli capital gains
tax in connection with such sale, exchange or disposition unless
either (i) the U.S. treaty resident owns, directly or indirectly,
10% or more of the Israeli resident company’s voting rights at any
time within the 12-month period preceding such sale, exchange or
disposition; (ii) the seller, if an individual, has been present in
Israel for a period or periods aggregating to 183 days or more
during the relevant taxable year; (iii) the capital gain from the
sale, exchange or disposition was derived through a permanent
establishment of the U.S. resident in Israel; (iv) the capital gain
arising from such sale, exchange or disposition is attributed to
real estate located in Israel, or (v) the capital gains arising
from such sale, exchange or disposition is attributed to
royalties. In any such case, the sale, exchange or disposition of
such shares or ADSs would be subject to Israeli tax, to the extent
applicable; however, under the U.S.-Israel Treaty, a U.S. resident
would be permitted to claim a credit for the Israeli tax against
the U.S. federal income tax imposed with respect to the sale,
exchange or disposition, subject to the limitations in U.S. laws
applicable to foreign tax credits. The U.S.-Israel Treaty does not
provide such credit against any U.S. state or local taxes.
In some instances where our shareholders may be liable for Israeli
tax on the sale of their shares or ADSs, the payment of the
consideration may be subject to withholding tax at source in
Israel. Shareholders may be required to demonstrate that they are
exempt from tax on their capital gains in order to avoid
withholding tax at source at the time of sale. Specifically, in
transactions involving a sale of all of the shares of an Israeli
resident company, in the form of a merger or otherwise, the Israel
Tax Authority may require from shareholders who are not liable for
Israeli tax to sign declarations in forms specified by this
authority or obtain a specific exemption from the Israel Tax
Authority to confirm their status as non-Israeli residents, and, in
the absence of such declarations or exemptions, may require the
purchaser of the shares to withhold tax at source.
Upon the sale of securities traded on a stock exchange, a detailed
return, including a computation of the tax due, must be filed and
an advance payment must be made on January 31 and July 31 of every
tax year, in respect of sales of securities made within the
previous six months by Israeli residents for whom tax has not
already been deducted. However, if all tax due was withheld at
source according to applicable provisions of the ITO and the
regulations promulgated thereunder, there is no need to file a
return and no advance payment must be paid, provided that
(i) such income was not generated from business conducted in
Israel by the taxpayer, (ii) the taxpayer has no other taxable
sources of income in Israel with respect to which a tax return is
required to be filed and an advance payment does not need to be
made, and (iii) the taxpayer is not obligated to pay excess
tax (as further explained below). Capital gains are also reportable
on the annual income tax return.
Dividends
Israeli residents who are individuals are generally subject to
Israeli income tax for dividends paid (other than bonus shares or
share dividends) at 25%, or 30% if the recipient of such dividend
is a Substantial Shareholder, as defined above, at the time of
distribution or at any time during the preceding 12-month period.
Israeli resident corporations are generally exempt from Israeli
corporate tax on the receipt of dividends paid on shares of Israeli
resident corporations.
Non-Israeli residents (whether individuals or corporations) are
generally subject to Israeli income tax on the receipt of dividends
paid on ordinary shares at the rate of 25% or 30% (if the dividend
recipient is a Substantial Shareholder at the time of distribution
or at any time during the preceding 12-month period). Such
dividends are generally subject to Israeli withholding tax at a
rate of 25% so long as the shares are registered with a nominee
company (whether the recipient is a Substantial Shareholder or
not), unless a reduced rate is provided under an applicable tax
treaty (subject to the receipt in advance of a valid certificate
from the Israel Tax Authority allowing for a reduced tax rate).
Under the U.S.- Israel Treaty and subject to the eligibility to the
benefits under such treaty, the maximum rate of tax withheld at
source in Israel on dividends paid to a holder of our ordinary
shares who is a U.S. resident (for purposes of the U.S.-Israel
Treaty) is 25%. However, for dividends not generated by an Approved
Enterprise, Benefited Enterprise or Preferred Enterprises (which
are benefitted tax regimes under the Law for Encouragement of
Capital Investments-1959) and paid to a U.S. corporation holding
10% or more of the outstanding voting capital throughout the tax
year in which the dividend is distributed as well as during the
previous tax year, the maximum rate of withholding tax is generally
12.5%, provided that not more than 25% of the gross income of the
Israeli resident paying corporation for such preceding year
consists of certain types of dividends and interest.
Notwithstanding the foregoing, dividends distributed from income
attributed to an Approved Enterprise, Benefited Enterprise or
Preferred Enterprise are not entitled to such reduction under such
tax treaty but are subject to withholding tax at the rate of 15% or
20% for such a United States corporate shareholder, provided that
the conditions related to the holding of 10% of our voting capital
and to our gross income for the previous year (as set forth in the
previous sentence) are met. The aforementioned rates under the
U.S.-Israel Treaty would not apply if the dividend income is
derived through a permanent establishment of the U.S. resident in
Israel.
If the dividend is attributable partly to income derived from an
Approved Enterprise, Benefited Enterprise or Preferred Enterprise,
and partly to other sources of income, the withholding rate will be
a blended rate reflecting the relative portions of the two types of
income. U.S. residents (for purposes of the U.S.-Israel Treaty) who
are subject to Israeli withholding tax on a dividend may be
entitled to a credit or deduction for United States federal income
tax purposes up to the amount of the taxes withheld, subject to
detailed rules contained in U.S. tax law.
A non-Israeli resident who receives dividends from which tax was
withheld is generally exempt from the obligation to file tax
returns in Israel in respect of such income, provided, inter alia,
that (i) such income was not derived from a business conducted in
Israel by the taxpayer, (ii) the taxpayer has no other taxable
sources of income in Israel with respect to which a tax return is
required to be filed and (iii) the taxpayer is not obliged to pay
excess tax (as further explained below).
Excess Tax
Individuals who are subject to tax in Israel (whether any such
individual is an Israeli resident or non-Israeli resident) are also
subject to an additional tax at a rate of 3% on annual income
exceeding NIS 663,240 for 2022 (which amount is linked to the
annual change in the Israeli consumer price index), including, but
not limited to, dividends, interest and capital gain.
Estate and gift tax
Israeli law presently does not impose estate or gift taxes.
Material United States federal income tax considerations
The following discussion describes material United States federal
income tax considerations relating to the acquisition, ownership,
and disposition of shares or ADSs by a U.S. Holder (as defined
below) that acquires our shares or ADSs and holds them as a capital
asset. This discussion is based on the tax laws of the United
States, including the Code, Treasury regulations promulgated or
proposed thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof. These
tax laws are subject to change, possibly with retroactive effect,
and subject to differing interpretations that could affect the tax
consequences described herein. In addition, this section is based
in part upon the representations of the depositary and the
assumption that each obligation in the deposit agreement and any
related agreements will be performed in accordance with its terms.
This discussion does not address the tax consequences to a U.S.
Holder under the laws of any state, local or foreign taxing
jurisdiction.
For purposes of this discussion, a “U.S. Holder” is a beneficial
owner of our shares or ADSs that, for United States federal income
tax purposes, is:
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an
individual who is a citizen or resident of the United States,
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a
domestic corporation (or other entity taxable as a
corporation);
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an
estate the income of which is subject to United States federal
income taxation regardless of its source; or
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a
trust if (1) a court within the United States is able to exercise
primary supervision over the trust’s administration and one or more
United States persons have the authority to control all substantial
decisions of the trust or (2) a valid election under the Treasury
regulations is in effect for the trust to be treated as a United
States person.
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A “Non-U.S. Holder” is a beneficial owner of our ordinary
shares that is neither a U.S. Holder nor a partnership (or other
entity treated as a partnership for United States federal income
tax purposes).
This discussion does not address all aspects of United States
federal income taxation that may be applicable to U.S. Holders in
light of their particular circumstances or status (including, for
example, banks and other financial institutions, insurance
companies, broker and dealers in securities or currencies, traders
that have elected to mark securities to market, regulated
investment companies, real estate investment trusts, partnerships
or other pass-through entities, corporations that accumulate
earnings to avoid U.S. federal income tax, tax-exempt
organizations, pension plans, persons that hold our shares as part
of a straddle, hedge or other integrated investment, persons
subject to alternative minimum tax or whose “functional currency”
is not the U.S. dollar).
If a partnership (including any entity or arrangement treated as a
partnership for United States federal income tax purposes) holds
our shares or ADSs, the tax treatment of a person treated as a
partner in the partnership for United States federal income tax
purposes generally will depend on the status of the partner and the
activities of the partnership. Partnerships (and other entities or
arrangements so treated for United States federal income tax
purposes) and their partners should consult their own tax
advisors.
In general, and taking into account the earlier assumptions, for
United States federal income and Israeli tax purposes, a holder
that holds ADRs evidencing ADSs will be treated as the owner of the
shares represented by those ADRs. Exchanges of shares for ADRs, and
ADRs for shares, generally will not be subject to United States
federal income or Israeli tax.
This discussion addresses only U.S. Holders and does not discuss
any tax considerations other than United States federal income tax
considerations. Prospective investors are urged to consult their
own tax advisors regarding the United States federal, state, and
local, and non-United States tax consequences of the purchase,
ownership, and disposition of our shares or ADSs.
We do not expect to make any distribution with respect to our
shares or ADSs. However, if we make any such distribution, under
the United States federal income tax laws, and subject to the
passive foreign investment company, or PFIC, rules discussed below,
the gross amount of any dividend we pay out of our current or
accumulated earnings and profits (as determined for United States
federal income tax purposes) will be includible in income for a
U.S. Holder and subject to United States federal income taxation.
Dividends paid to a noncorporate U.S. Holder that constitute
qualified dividend income will be taxable at a preferential tax
rate applicable to long-term capital gains of, currently, 20
percent, provided that the U.S. Holder holds the shares or ADSs for
more than 60 days during the 121-day period beginning 60 days
before the ex-dividend date and meets other holding period
requirements. If we are treated as a PFIC, dividends paid to a U.S.
Holder will not be treated as qualified dividend income. If we are
not treated as a PFIC, dividends we pay with respect to the shares
or ADSs generally may be qualified dividend income, provided that
the holding period requirements are satisfied by the U.S.
Holder.
A U.S. Holder must include any Israeli tax withheld from the
dividend payment in the gross amount of the dividend even though
the holder does not in fact receive it. The dividend is taxable to
the holder when the holder, in the case of shares, or the
Depositary, in the case of ADSs, receives the dividend, actually or
constructively. The amount of the dividend distribution includible
in a U.S. Holder’s income will be the U.S. dollar value of the NIS
payments made, determined at the spot NIS/U.S. dollar rate on the
date the dividend distribution is includible in income, regardless
of whether the payment is in fact converted into U.S. dollars.
Generally, any gain or loss resulting from currency exchange
fluctuations during the period from the date the dividend payment
is included in income to the date the payment is converted into
U.S. dollars will be treated as ordinary income or loss and will
not be eligible for the special tax rate applicable to qualified
dividend income. The gain or loss generally will be income or loss
from sources within the United States for foreign tax credit
limitation purposes.
Dividends paid with respect to our ordinary shares or ADSs will be
treated as foreign source income, which may be relevant in
calculating the holder’s foreign tax credit limitation. The
limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this
purpose, dividends that we distribute generally should constitute
“passive category income,” or, in the case of certain U.S. Holders,
“general category income.” A foreign tax credit for foreign taxes
imposed on distributions may be denied if holders do not satisfy
certain minimum holding period requirements. The rules relating to
the determination of the foreign tax credit are complex, and you
should consult your tax advisor to determine whether and to what
extent you will be entitled to this credit.
To the extent a distribution with respect to our shares or ADSs
exceeds our current or accumulated earnings and profits, as
determined under United States federal income tax principles, the
distribution will be treated, first, as a tax-free return of the
U.S. Holder’s investment, up to the holder’s adjusted tax basis in
its shares or ADSs, and, thereafter, as capital gain, which is
subject to the tax treatment described below in “—Gain on Sale,
Exchange or Other Taxable Disposition.”
Subject to certain limitations, the Israeli tax withheld in
accordance with the Treaty and paid over to Israel will be
creditable or deductible against a U.S. Holder’s United States
federal income tax liability.
Subject to the discussion below under “Information reporting and
backup withholding,” if you are a Non-U.S. Holder, you
generally will not be subject to United States federal income (or
withholding) tax on dividends received by you on your ordinary
shares, unless you conduct a trade or business in the United States
and such income is effectively connected with that trade or
business (or, if required by an applicable income tax treaty, the
dividends are attributable to a permanent establishment or fixed
base that such holder maintains in the United States).
Gain on sale, exchange or other taxable disposition
Subject to the PFIC rules described below under “—Passive Foreign
Investment Company
Considerations,” a U.S. Holder that sells, exchanges or otherwise
disposes of shares or ADSs in a taxable disposition generally will
recognize capital gain or loss for United States federal income tax
purposes equal to the difference between the U.S. Dollar value of
the amount realized and the holder’s tax basis, determined in U.S.
Dollars, in the shares or ADSs. Gain or loss recognized on such a
sale, exchange or other disposition of shares or ADSs generally
will be long-term capital gain if the U.S. Holder’s holding period
in the shares or ADSs exceeds one year. Long-term capital gains of
non-corporate U.S. Holders are generally taxed at preferential
rates. The gain or loss generally will be income or loss from
sources within the United States for foreign tax credit limitation
purposes. A U.S. Holder’s ability to deduct capital losses is
subject to limitations.
Subject to the discussion below under “Information reporting and
backup withholding,” if you are a Non-U.S. Holder, you generally
will not be subject to United States federal income or withholding
tax on any gain realized on the sale or exchange of such ordinary
shares unless:
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such gain is effectively connected with your conduct of a trade or
business in the United States (or, if required by an applicable
income tax treaty, the gain is attributable to a permanent
establishment or fixed base that such holder maintains in the
United States); or
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you
are an individual and have been present in the United States for
183 days or more in the taxable year of such sale or exchange and
certain other conditions are met.
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For a cash basis taxpayer, units of foreign currency paid or
received are translated into U.S. dollars at the spot rate on the
settlement date of the purchase or sale. In that case, no foreign
currency exchange gain or loss will result from currency
fluctuations between the trade date and the settlement date of such
a purchase or sale. An accrual basis taxpayer, however, may elect
the same treatment required of cash basis taxpayers with respect to
purchases and sales of our ordinary shares that are traded on an
established securities market, provided the election is applied
consistently from year to year. Such election may not be changed
without the consent of the IRS. An accrual basis taxpayer who does
not make such election may recognize exchange gain or loss based on
currency fluctuations between the trade date and the settlement
date. Any foreign currency gain or loss a U.S. Holder realizes will
be U.S. source ordinary income or loss.
The determination of whether the ADSs or ordinary shares are traded
on an established securities market is not entirely clear under
current U.S. federal income tax law. Please consult your tax
advisor regarding the proper treatment of foreign currency gains or
losses with respect to a sale or other disposition of our ordinary
shares.
Passive foreign investment company considerations
Based on our income and assets, we believe that we may be treated
as a PFIC for the preceding taxable year. However, the
determination of our status is made annually based on the factual
tests described below. Consequently, while we may be treated as 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 for the
current or future taxable years. If we were classified as a PFIC in
any taxable year, a U.S. Holder would be subject to special rules
with respect to distributions on and sales, exchanges and other
dispositions of the shares or ADSs. We will be treated as a PFIC
for any taxable year in which at least 75 percent of our gross
income is “passive income” or at least 50 percent of the average
percentage of our assets during the taxable year, assuming we were
not a controlled foreign corporation, or CFC, for the year being
tested, 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.
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 are not considered passive income for purposes of the
PFIC test. In determining whether we are a PFIC, a pro rata portion
of the income and assets of each corporation in which we own,
directly or indirectly, at least a 25% interest (by value) is taken
into account.
Excess distribution rules
If we were a PFIC with respect to a U.S. Holder, then unless the
holder makes one of the elections described below, a special tax
regime would apply to the U.S. Holder with respect to (a) any
“excess distribution” (generally, aggregate distributions in any
year that are greater than 125% of the average annual distribution
received by the holder in the shorter of the three preceding years
or the holder’s holding period for the shares or ADSs) and (b) any
gain realized on the sale or other disposition of the shares or
ADSs. Under this regime, any excess distribution and realized gain
will be treated as ordinary income and will be subject to tax as if
(a) the excess distribution or gain had been realized ratably over
the U.S. Holder’s holding period, (b) the amount deemed realized in
each year had been subject to tax in each year of that holding
period at the highest marginal rate for such year (other than
income allocated to the current period or any taxable period before
we became a PFIC, which would be subject to tax at the U.S.
Holder’s regular ordinary income rate for the current year and
would not be subject to the interest charge discussed below), and
(c) the interest charge generally applicable to underpayments of
tax had been imposed on the taxes deemed to have been payable in
those years. If we were determined to be a PFIC, this tax treatment
for U.S. Holders would apply also to indirect distributions and
gains deemed realized by U.S. Holders in respect of stock of any of
our subsidiaries determined to be PFICs. In addition, dividend
distributions would not qualify for the lower rates of taxation
applicable to long-term capital gains discussed above under
“Dividends”.
A U.S. Holder that holds the shares or ADSs at any time during a
taxable year in which we are classified as a PFIC generally will
continue to treat such shares or ADSs as shares or ADSs in a PFIC,
even if we no longer satisfy the income and asset tests described
above, unless the U.S. Holder elects to recognize gain, which will
be taxed under the excess distribution rules as if such shares or
ADSs had been sold on the last day of the last taxable year for
which we were a PFIC.
Certain elections by a U.S. Holder would alleviate some of the
adverse consequences of PFIC status and would result in an
alternative treatment of the shares or ADSs, as described below.
However, we do not currently intend to provide the information
necessary for U.S. Holders to make “QEF elections,” as described
below, and the availability of a “mark-to-market election” with
respect to the shares or ADSs is a factual determination that will
depend on the manner and quantity of trading of our shares or ADSs,
as described below. A mark-to-market election cannot be made with
respect to the stock of any of our subsidiaries.
QEF election
If we were a PFIC, the rules above would not apply to a U.S. Holder
that makes an election to treat our shares or ADSs as stock of a
“qualified electing fund” or QEF. A U.S. Holder that makes a QEF
election is required to include in income its pro rata share of our
ordinary earnings and net capital gain as ordinary income and
long-term capital gain, respectively, subject to a separate
election to defer payment of taxes, which deferral is subject to an
interest charge. A U.S. Holder makes a QEF election generally by
attaching a completed IRS Form 8621 to a timely filed United States
federal income tax return for the year beginning with which the QEF
election is to be effective (taking into account any extensions). A
QEF election can be revoked only with the consent of the IRS. In
order for a U.S. Holder to make a valid QEF election, we must
annually provide or make available to the holder certain
information. We cannot provide any assurances that we will provide
to U.S. Holders the information required to make a valid QEF
election.
Mark-to-market election
If we were a PFIC, the rules above also would not apply to a U.S.
Holder that makes a “mark-to-market” election with respect to the
shares or ADSs, but this election will be available with respect to
the shares or ADSs only if they meet certain minimum trading
requirements to be considered “marketable stock” for purposes of
the PFIC rules. In addition, a mark-to-market election generally
could not be made with respect to the stock of any of our
subsidiaries unless that stock were itself marketable stock, and
the election may therefore be of limited benefit to a U.S. Holder
that wants to avoid the excess distribution rules described above.
Shares or ADSs will be marketable stock if they are regularly
traded on a national securities exchange that is registered with
the Securities and Exchange Commission or on a non-U.S. exchange or
market that meets certain requirements under the Treasury
regulations. Shares or ADSs generally will be considered regularly
traded during any calendar year during which they are traded, other
than in de
minimis quantities, on at least 15 days during each
calendar quarter. Any trades that have as their principal purpose
meeting this requirement will be disregarded.
A U.S. Holder that makes a valid mark-to-market election for the
first tax year in which the holder holds (or is deemed to hold) our
shares or ADSs and for which we are a PFIC will be required to
include each year an amount equal to the excess, if any, of the
fair market value of such shares or ADSs the holder owns as of the
close of the taxable year over the holder’s adjusted tax basis in
such shares or ADSs. The U.S. Holder will be entitled to a
deduction for the excess, if any, of the holder’s adjusted tax
basis in the shares or ADSs over the fair market value of such
shares or ADSs as of the close of the taxable year, but only to the
extent of any net mark-to-market gains with respect to such shares
or ADSs included by the U.S. Holder under the election for prior
taxable years. The U.S. Holder’s basis in such shares or ADSs will
be adjusted to reflect the amounts included or deducted pursuant to
the election. Amounts included in income pursuant to a
mark-to-market election, as well as gain on the sale, exchange or
other taxable disposition of such shares or ADSs, will be treated
as ordinary income. The deductible portion of any mark-to-market
loss, as well as loss on a sale, exchange or other disposition of
our shares or ADSs to the extent that the amount of such loss does
not exceed net mark-to-market gains previously included in income,
will be treated as ordinary loss.
The mark-to-market election applies to the taxable year for which
the election is made and all subsequent taxable years, unless the
shares cease to be treated as marketable stock for purposes of the
PFIC rules or the IRS consents to its revocation. The excess
distribution rules described above generally will not apply to a
U.S. Holder for tax years for which a mark-to-market election is in
effect. However, if we were a PFIC for any year in which the U.S.
Holder owns the shares or ADSs but before a mark-to-market election
is made, the interest charge rules described above would apply to
any mark-to-market gain recognized in the year the election is
made.
PFIC reporting obligations
A U.S. Holder of PFIC shares must generally file an annual
information return on IRS Form 8621 (Information Return by a
Shareholder of a Passive Foreign Investment Company or Qualified
Electing Fund) containing such information as the U.S. Treasury
Department may require. The failure to file IRS Form 8621 could
result in the imposition of penalties and the extension of the
statute of limitations with respect to U.S. federal income
tax.
U.S. Holders are urged to consult their tax advisors as to our
status as a PFIC, and the tax consequences to them if we were a
PFIC, including the reporting requirements and the desirability of
making, and the availability of, a QEF election or a mark-to-market
election with respect to the shares or ADSs.
Non-corporate U.S. Holders that are individuals, estates or trusts
and whose income exceeds certain thresholds generally are subject
to a 3.8% tax on all or a portion of their net investment income,
which may include their gross dividend income and net gains from
the disposition of shares or ADSs. A United States person that is
an individual, estate or trust is encouraged to consult its tax
advisors regarding the applicability of this Medicare tax to its
income and gains in respect of any investment in our shares or
ADSs.
Information reporting with respect to foreign financial
assets
Individual U.S. Holders may be subject to certain reporting
obligations on IRS Form 8938 (Statement of Specified Foreign
Financial Asset) with respect to the shares or ADSs for any taxable
year during which the U.S. Holder’s aggregate value of these and
certain other “specified foreign financial assets” exceed a
threshold amount that varies with the filing status of the
individual. This reporting obligation also applies to domestic
entities formed or availed of to hold, directly or indirectly,
specified foreign financial assets, including the shares or ADSs.
Significant penalties can apply if U.S. Holders are required to
make this disclosure and fail to do so.
Information reporting and backup withholding
In general, information reporting, on IRS Form 1099, will apply to
dividends in respect of shares or ADSs and the proceeds from the
sale, exchange or redemption of shares of ADSs that are paid to a
holder of shares or ADSs within the United States (and in certain
cases, outside the United States), unless such holder is an exempt
recipient such as a corporation. Backup withholding (currently at a
24% rate) may apply to such payments if a holder of shares or ADSs
fails to provide a taxpayer identification number (generally on an
IRS Form W-9) or certification of other exempt status or fails to
report in full dividend and interest income.
Backup withholding is not an additional tax. A U.S. Holder
generally may obtain a refund of any amounts withheld under the
backup withholding rules that exceed the U.S. Holder’s income tax
liability by filing a refund claim with the Internal Revenue
Service.
F. Dividends and Paying Agents
Not applicable
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the information reporting requirements of the
Exchange Act applicable to foreign private issuers and under those
requirements will file reports with the SEC. Those reports may be
inspected without charge at the locations described below. As a
foreign private issuer, we are exempt from the rules 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. In
addition, we are not required under the Exchange Act to file
periodic reports and financial statements with the SEC as
frequently or as promptly as United States companies whose
securities are registered under the Exchange Act.
We maintain a corporate website at www.steakholderfoods.com. We
intend to post our Annual Report on Form 20-F on our website
promptly following it being filed with the SEC. Information
contained on, or that can be accessed through, our website does not
constitute a part of this Annual Report on Form 20-F. We have
included our website address in this Annual Report on Form 20-F
solely as an inactive textual reference.
Our SEC filings are available to you on the SEC’s website at
http://www.sec.gov. This site contains reports, proxy and
information statements and other information regarding issuers that
file electronically with the SEC. The information on that website
is not part of this Annual Report on Form 20-F.
With respect to references made in this Annual Report on Form 20-F
to any contract or other document of Steakholder Foods, such
references are not necessarily complete and you should refer to the
exhibits attached or incorporated by reference to this Annual
Report on Form 20-F for copies of the actual contract or
document.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
Not applicable.
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ITEM 11.
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QUANTITATIVE AND QUALITATIVE DISCLOSURE ON MARKET RISK
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For quantitative and qualitative information regarding our market
risk, see “Item 5 — Operating and Financial Review and Prospects —
Liquidity and Capital Resources — Quantitative and Qualitative
Disclosures About Market Risk” and Note 23 to our financial
statements.
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ITEM 12.
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DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
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A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
The Bank of New York Mellon is the depositary of the ADSs. Each ADS
represents ten ordinary shares (or a right to receive ten ordinary
shares). Each ADS will also represent any other securities, cash or
other property which may be held by the depositary. The
depositary’s office at which the ADSs are administered and its
principal executive office are located at 240 Greenwich Street, New
York, New York 10286.
A deposit agreement among us, the depositary, ADS holders and all
other persons indirectly or beneficially holding ADSs sets out ADS
holder rights as well as the rights and obligations of the
depositary. New York law governs the deposit agreement and the
ADSs. A copy of the deposit agreement was filed as Exhibit 4.1 to
our amended registration statement on Form F-1 filed with the SEC
on March 5, 2021 and is incorporated by reference herein.
Fees and Expenses
Pursuant to the terms of the deposit agreement, the holders of the
ADSs will be required to pay the following fees:
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Persons depositing or withdrawing ordinary
shares or ADS holders must pay
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For:
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$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
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Issuance of ADSs, including issuances resulting from a distribution
of ordinary shares or rights or other property Cancellation of ADSs
for the purpose of withdrawal, including if the deposit agreement
terminates
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$.05 (or less) per ADS
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Any cash distribution to ADS holders
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A fee equivalent to the fee that would be payable if securities
distributed to you had been ordinary shares and the ordinary shares
had been deposited for issuance of ADSs
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Distribution of securities distributed to holders of deposited
securities (including rights) that are distributed by the
depositary to ADS holders
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$.05 (or less) per ADS per calendar year
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Depositary services
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Registration or transfer fees
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Transfer and registration of ordinary shares on our share register
to or from the name of the depositary or its agent when you deposit
or withdraw ordinary shares
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Expenses of the depositary
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Cable, telex and facsimile transmissions (when expressly provided
in the deposit agreement)
Converting foreign currency to U.S. dollars
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Taxes and other governmental charges the depositary or the
custodian have to pay on any ADSs or ordinary shares underlying
ADSs, such as stock transfer taxes, stamp duty or withholding
taxes
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As necessary
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Any charges incurred by the depositary or its agents for servicing
the deposited securities
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As necessary
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The depositary collects its fees for delivery and surrender of ADSs
directly from investors depositing ordinary shares or surrendering
ADSs for the purpose of withdrawal or from intermediaries acting
for them. The depositary collects fees for making distributions to
investors by deducting those fees from the amounts distributed or
by selling a portion of distributable property to pay the fees. The
depositary may collect its annual fee for depositary services by
deduction from cash distributions or by directly billing investors
or by charging the book-entry system accounts of participants
acting for them. The depositary may collect any of its fees by
deduction from any cash distribution payable (or by selling a
portion of securities or other property distributable) to ADS
holders that are obligated to pay those fees. The depositary may
generally refuse to provide fee-attracting services until its fees
for those services are paid.
From time to time, the depositary may make payments to us to
reimburse us for costs and expenses generally arising out of
establishment and maintenance of the ADS program, waive fees and
expenses for services provided to us by the depositary or share
revenue from the fees collected from ADS holders. In performing its
duties under the deposit agreement, the depositary may use brokers,
dealers, foreign currency or other service providers that are owned
by or affiliated with the depositary and that may earn or share
fees, spreads or commissions.
The depositary may convert foreign currency itself or through any
of its affiliates and, in those cases, acts as principal for its
own account and not as an agent, fiduciary or broker on behalf of
any other person and earns revenue, including, without limitation,
fees and spreads that it will retain for its own account. The
revenue is based on, among other things, the difference between the
exchange rate assigned to the currency conversion made under the
deposit agreement and the rate that the depositary or its affiliate
receives when buying or selling foreign currency for its own
account. The depositary makes no representation that the exchange
rate used or obtained in any currency conversion under the deposit
agreement will be the most favorable rate that could be obtained at
the time or that the method by which that rate will be determined
will be most favorable to ADS holders, subject to its obligations
under the deposit agreement. The methodology used to determine
exchange rates used in currency conversions is available upon
request.
PART II
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ITEM 13.
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DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
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Not applicable.
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ITEM 14.
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
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Initial Public Offering
In March 2021, we sold 2,721,271 ADSs, each representing ten
ordinary shares, no par value, in our U.S. initial public offering
at a public offering price of $10.30 per ADS. Gross proceeds,
including proceeds generated from the partial exercise of the
underwriter’s option to purchase additional ADSs, were $28 million.
Net proceeds to us, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us were
approximately $24.7 million. The effective date of the registration
statement on Form F-1 (File No. 333-253257) for our U.S. initial
public offering of ADSs was March 11, 2021. The offering closed on
March 17, 2021. H.C. Wainwright, Inc. acted as the sole underwriter
in the offering.
The net proceeds from our initial public offering are held in cash
and cash equivalents and we expect they will meet our capital
requirements until the fourth quarter of 2022. 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. None of the net proceeds of our initial
public offering were paid directly or indirectly to any director,
officer, general partner of ours or to their associates, persons
owning ten percent or more of any class of our equity securities,
or to any of our affiliates.
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ITEM 15.
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CONTROLS AND PROCEDURES
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A. |
Disclosure Controls and
Procedures
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We have performed an evaluation of the effectiveness of our
disclosure controls and procedures that are designed to ensure that
the material financial and non-financial information required to be
disclosed to the SEC is recorded, processed, summarized and
reported timely. Based on our evaluation, our management, including
our chief executive officer and chief financial officer, has
concluded that our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end
of the period covered by this report are effective. Notwithstanding
the foregoing, there can be no assurance that our disclosure
controls and procedures will detect or uncover all failures of
persons within the Company to disclose material information
otherwise required to be set forth in our reports.
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B. |
Management’s Annual Report on Internal Control over Financial
Reporting
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Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) promulgated under the Exchange Act. Our
internal control system was designed to provide reasonable
assurance to our management and board of directors regarding the
reliability of financial reporting and the preparation and fair
presentation of published financial statements for external
purposes in accordance with generally accepted accounting
principles. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation
and may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with policies or
procedures may deteriorate.
Our management assessed our internal control over financial
reporting as of December 31, 2022, the end of our
fiscal year. Management based its assessment on criteria
established in Internal Control—Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The assessment included evaluation of elements
such as the design and operating effectiveness of key financial
reporting controls, process documentation, accounting policies and
our overall control environment.
Based on its assessment, our management has concluded that our
internal control over financial reporting was effective as of the
end of the fiscal year to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes
in accordance with International Financial Reporting Standards. We
reviewed the results of our management’s assessment with the Audit
Committee of our Board of Directors.
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C. |
Attestation Report of the Registered Public Accounting
Firm
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This Annual Report on Form 20-F does not include an attestation
report of the company’s registered public accounting firm as the
company is considered an emerging growth company.
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D. |
Changes in Internal Control over Financing Reporting
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There were no changes in our internal control over financial
reporting that occurred during the period covered by this Annual
Report on Form 20-F that have materially affected, or that are
reasonably likely to materially affect, our internal control over
financial reporting.
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ITEM 16A.
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AUDIT
COMMITTEE FINANCIAL EXPERT
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Our board of directors has determined that all members of our audit
committee are financially literate as determined in accordance with
Nasdaq rules and that Messrs. Eli Arad and David Gerbi are
qualified to serve as “audit committee financial experts” as
defined by SEC rules. The audit committee financial experts are
independent directors.
We have adopted a Code of Business Conduct and Ethics (the “Code of
Ethics”) that is applicable to all of our directors, executives and
other employees, and those of our affiliates. A copy of the Code of
Conduct is available on our website at www.steakholderfoods.com.
Any waivers of the Code of Ethics for directors and officers
require the approval of the audit committee of our board of
directors. We expect that any amendments to the Code of Conduct
will be disclosed on our website.
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ITEM
16C.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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Fees Paid to Independent Registered Public Accounting Firm
Somekh Chaikin, a
member firm of KPMG International, located in Tel Aviv, Israel
(PCAOB ID 1057), has served as our independent registered public
accounting firm for 2022 and 2021. Following are Somekh Chaikin’s
fees for professional services in each of the respective fiscal
years:
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Year ended December 31,
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2022
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2021
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USD, in thousands
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Audit fees(1)
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295
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336
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Tax fees(2)
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25
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3
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Total
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320
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339
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(1)
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Audit fees consist of fees billed or expected to be billed for the
annual audit services engagement and other audit services, which
are those services that only the external auditor can reasonably
provide, and include the Company audit; statutory audits; comfort
letters and consents; attest services; and assistance with and
review of documents filed with the TASE and SEC.
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(2)
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Tax fees include fees billed for tax compliance services that were
rendered during the most recent fiscal year, including the
preparation of original and amended tax returns and claims for
refund; tax consultations, such as assistance and representation in
connection with tax audits and appeals, tax advice related to
mergers and acquisitions, transfer pricing, and requests for
rulings or technical advice from taxing authority; tax planning
services; and expatriate tax planning and services.
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Policy on Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
Our Audit Committee has the sole authority to approve the scope of
the audit and any audit-related services, as well as all audit fees
and terms. The Audit Committee must pre-approve any audit and
non-audit services provided by our independent registered public
accounting firm. The Audit Committee will not approve the
engagement of the independent registered public accounting firm to
perform any services that the independent registered public
accounting firm would be prohibited from providing under applicable
laws, rules and regulations, including those of
self-regulating organizations. The Audit Committee reviews and
pre-approves the statutory audit fees that can be provided by the
independent registered public accounting firm on an annual
basis.
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ITEM 16D.
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EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not applicable.
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ITEM 16E.
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PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATED PURCHASERS
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Not applicable.
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ITEM 16F.
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CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
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Not applicable.
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ITEM 16G.
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CORPORATE GOVERNANCE
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Nasdaq Listing Rules and Home Country Practices
The Sarbanes-Oxley Act, as well as related rules subsequently
implemented by the SEC, requires foreign private issuers, such as
us, to comply with various corporate governance practices. As a
foreign private issuer, we are permitted to follow certain Israeli
corporate governance practices instead of Nasdaq rules, provided
that we disclose which requirements we are not following and the
equivalent Israeli requirements. Below is a concise summary of the
significant ways in which our corporate governance practices differ
from the corporate governance requirements of Nasdaq applicable to
domestic U.S. listed companies:
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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 Listing Rule 5260(c).
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• |
Shareholder
Approval. Although the Nasdaq Listing 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 Listing
Rules 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 Listing Rules require that
“independent directors,” as defined in the Nasdaq Listing 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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ITEM 16H.
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MINE
SAFETY DISCLOSURE |
Not applicable.
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ITEM
16I. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS |
Not applicable.
PART III
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ITEM 17. |
FINANCIAL STATEMENTS |
The Registrant has responded to Item 18 in lieu of responding to
this Item.
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ITEM 18.
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FINANCIAL STATEMENTS |
See the financial statements beginning on page F-1. The following
financial statements and financial statement schedules are filed as
part of this Annual Report on Form 20-F together with the report of
the independent registered public accounting firm.