Steakholder Foods Ltd 20-F for FY2021
Steakholder Foods Ltd. (STKH)
20-F
2022-03-24
For: 2021-12-31
View Original
Added on
April 05, 2026
About this 20-F
Steakholder Foods Ltd filed this 20-F on March 24, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $18.02M
- compared with a net loss of $18.52M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
OR
For the fiscal year ended December 31 , 2021
OR
OR
Date of event requiring this shell company report
For the transition period from __________ to __________
Commission file number 001-40173
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
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(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The
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Ordinary shares, no par value per share
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The Nasdaq Stock Market LLC*
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*Listed not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission. The American Depositary Shares are registered under the Securities Act of 1933, as amended, pursuant to a separate registration statement on Form F-6 (File No. 333-253915).
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2021, the registrant had outstanding 125,770,107 ordinary shares, no par value.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ☐
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Accelerated filer ☐
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Emerging growth company
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on the attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐
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Other ☐
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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
ii
TABLE OF CONTENTS
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PART III |
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INTRODUCTION
Certain Definitions
In this Annual Report on Form 20-F, unless the context otherwise requires:
| • |
references to “MeaTech,” the “Company,” “us,” “we” and “our” refer to
MeaTech MT Ltd. (formerly MeaTech Ltd.) from its inception until the consummation of the January 2020 merger described herein, and MeaTech
3D Ltd. (the “Registrant”), an Israeli company, thereafter, unless otherwise required by the context; |
| • |
references to “ordinary shares,” “our shares” and similar expressions refer to
the Registrant’s ordinary shares, no nominal (par) value per share; |
| • |
references to “ADS” refer to the American Depositary Shares listed on the Nasdaq Capital Market
(“Nasdaq”) under the symbol “MITC,” each representing ten ordinary shares of the Registrant; |
| • |
references to “dollars,” “U.S. dollars” and “$” are to United States
Dollars; |
| • |
references to “NIS” are to New Israeli Shekels, the currency of the State of Israel;
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| • |
references to the “Companies Law” are to Israel’s Companies Law, 5759-1999, as amended;
and |
| • |
references to the “SEC” are to the United States Securities and Exchange Commission.
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Forward-Looking Statements
This Annual Report on Form 20-F contains forward-looking statements concerning our business,
operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial
performance and condition. Any statements that are not historical facts may be deemed to be forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some
cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,”
“estimates,” “expects,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would,” and similar expressions
intended to identify forward-looking statements, but these are not the only ways these statements are identified. Forward-looking statements
reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should
not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other
applicable laws, we do not intend to update or revise any forward-looking statements. Readers are encouraged to consult the Company’s
filings made on Form 6-K, which are periodically filed with or furnished to the SEC.
Forward-looking statements contained in this prospectus include, but are not limited
to:
| • |
our estimates regarding our expenses, future revenue, capital requirements and needs for additional financing; |
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our expectations regarding the success of our cultured meat manufacturing technologies we are developing, which will require significant
additional work before we can potentially launch commercial sales; |
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our research and development activities associated with technologies for cultured meat manufacturing, including three-dimensional
meat production, which involves a lengthy and complex process; |
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our expectations regarding the timing for the potential commercial launch of our cultured meat technologies; |
| • |
our ability to successfully manage our planned growth, including with respect to our acquisition of Peace of Meat BV, or Peace of
Meat, and any future acquisitions, joint ventures, collaborations or similar transactions; |
| • |
the potential business or economic disruptions caused by the COVID-19 pandemic; |
| • |
the competitiveness of the market for our cultured meat technologies; |
| • |
our ability to enforce our intellectual property rights and to operate our business without infringing, misappropriating, or otherwise
violating the intellectual property rights and proprietary technology of third parties; |
| • |
our ability to predict and timely respond to preferences for alternative proteins and cultured meats and new trends; |
| • |
our ability to attract, hire and retain qualified employees and key personnel; and |
| • |
other risks and uncertainties, including those listed in “Item 3. —Key Information—Risk Factors.” |
1
PART I
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ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not applicable.
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ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
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ITEM 3. |
KEY INFORMATION |
A. Selected Financial Data
[Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business is subject to various risks, including those described
below. You should carefully consider the risks and uncertainties described below and in our future filings with the SEC. If any of the
following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely
affected. Additionally, risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition, results of operations and/or prospects.
SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to a number of risks of which you should be aware before a decision
to invest in the ADSs. You should carefully consider all the information set forth in this prospectus and, in particular, should evaluate
the specific factors set forth in the sections titled “Risk Factors” before deciding whether to invest in the ADSs. Among
these important risks are, but not limited to, the following:
| • |
We have experienced net losses in every period since the inception of MeaTech and we expect to continue incurring significant losses
for the foreseeable future and may never become profitable; |
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We have a limited operating history to date and our prospects will be dependent on our ability to meet a number of challenges;
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Our business and market potential are unproven, and we have limited insight into trends that may emerge and affect our business;
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We are wholly dependent on the success of our cultured meat manufacturing technologies, including our cultured steak technologies,
and we have limited data on the performance of our technologies to date; |
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The research and development associated with technologies for cultured meat manufacturing, including three-dimensional meat production,
is a lengthy and complex process; |
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Business or economic disruptions or global health concerns, including the COVID-19 pandemic, may have an adverse impact on our business
and results of operations; |
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We may not be able to compete successfully in our highly competitive market; |
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We may suffer reputational harm due to real or perceived quality or health issues with products manufactured by our licensees using
our technology; |
2
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Consumer preferences for alternative proteins in general, and more specifically cultured meats, are difficult to predict and may
change, and, if we are unable to respond quickly to new trends, our business may be adversely affected; |
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We have no manufacturing experience or resources and we expect we will incur significant costs to develop this expertise or need
to rely on third parties for manufacturing; |
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We expect that a small number of customers will account for a significant portion of our revenues, and the loss of one or more of
these customers could adversely affect our financial condition and results of operations; |
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We expect that products utilizing our technologies will be subject to regulations that could adversely affect our business and results
of operations; |
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Regulatory authorities may impose new regulations on manufacturers of alternative proteins; |
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Any changes in, or changes in the interpretation of, applicable laws, regulations or policies of the U.S. Department of Agriculture,
state regulators or similar foreign regulatory authorities that relate to the use of the word “meat” or other similar words
in connection with cultured meat products could adversely affect our business, prospects, results of operations or financial condition;
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If we are unable to obtain and maintain effective intellectual property rights for our technologies, we may not be able to compete
effectively in our markets; |
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If there are significant shifts in the political, economic and military conditions in Israel, it could have an adverse impact on
our operations; and |
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If we encounter delays or challenges, such as operational challenges inherent in managing a foreign business, we may not fully realize
the anticipated benefits of the acquisition of Peace of Meat. |
RISKS RELATED TO OUR FINANCIAL CONDITION AND LIQUIDITY REQUIREMENTS
We expect to continue incurring significant losses for the foreseeable
future and may never become profitable.
We have experienced net losses in every period since the inception
of MeaTech. We anticipate that we will continue to incur significant losses for the foreseeable future as our operating expenses and capital
expenditures increase substantially due to our continued investment in our research and development activities and as we hire additional
employees over the coming years. These activities may prove more expensive than we anticipate. We incur significant expenses in developing
our technologies. Accordingly, we may not be able to achieve or sustain profitability, and we expect to incur significant losses for the
foreseeable future.
Our predecessor entity, MeaTech Ltd., commenced cultured meat development
operations in September 2019, and we continue to be in the early stages of development of our technologies. As a result, we have not generated
any revenues since inception of our cultured meat operations, and we do not expect to generate any revenue from operations in the near
term. We may not be able to develop the technology for manufacturing cultured meat at all, or meet the additional technological challenges
to scaling such technology up to an industrial scale from our research and development efforts or successfully market and license our
technologies, once approved. In addition, there is no certainty that there will be sufficient demand to justify the production and marketing
of cultured meat products. The market for alternative proteins in general, and cultured meats specifically, may be small or may not develop.
If cultured meats produced using our industrial-scale cultured
meat manufacturing processes do not gain wide market acceptance, we will not be able to achieve our anticipated growth, revenues or profitability
and we may not be able to continue our business operations.
We will require substantial additional funds to complete our research
and development activities and, if additional funds are not available on acceptable terms or at all, we may need to significantly scale
back or cease our operations.
A significant portion of our research and development activities
has been financed by the issuance of equity securities. We believe that we will continue to expend substantial resources for the foreseeable
future as we work to develop our technologies. These expenditures are expected to include costs associated with research and development,
and manufacturing and supply, as well as general operating expenses. In addition, other unanticipated costs may arise.
There is no certainty that we will be able to obtain funding for
our research and development activities when we need it, on acceptable terms or at all. A lack of adequate funding may force us to reduce
or cease all or part of our research and development activities and business operations. Our operating plan may change because of factors
currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings
or other sources, such as strategic collaborations. Such financing may result in dilution to shareholders, imposition of debt covenants
and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due
to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating
plans.
3
Our future capital requirements depend on many factors, including:
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our progress with current research and development activities; |
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the number and characteristics of any products or manufacturing processes we develop or acquire; |
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the expenses associated with our marketing initiatives; |
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the timing, receipt and amount of milestone, royalty and other payments from future customers and collaborators, if any; |
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the scope, progress, results and costs of researching and developing future products or improvements to existing products or manufacturing
processes; |
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any lawsuits related to our products or commenced against us; |
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the expenses needed to attract, hire and retain skilled personnel; |
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the costs associated with being a public company in the United States; and |
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property claims, including
litigation costs and the outcome of such litigation. |
If our estimates and predictions relating to any of these factors
are incorrect, we may need to modify our operating plan. Additional funds may not be available to us when needed on acceptable terms,
or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate our manufacturing,
research and development activities or other activities that may be necessary to generate revenue and achieve profitability.
There is substantial doubt as to whether we can continue as a going
concern.
Our consolidated financial statements as of December 31, 2021
contain an explanatory paragraph that states that our recurring losses from operations raise substantial doubt about our ability to continue
as a going concern. Our financial statements do not include any measurement or presentation adjustment for assets or liabilities that
might result if we would be unable to continue as a going concern. We have incurred operating losses since inception, have not generated
any revenues and have not achieved profitable operations. Our net loss, accumulated during the development stage through December 31,
2021, totaled approximately $37 million, and we expect to continue to incur substantial losses in future periods while we continue our
research and development activities.
Raising additional capital may cause dilution to our existing shareholders,
restrict our operations or require us to relinquish rights to our technologies.
Until such time, if ever, as we can generate substantial product
revenues, we expect to finance our cash needs through equity offerings, debt financings, government contracts, government and/or other
third-party grants or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances
and licensing arrangements. We will require substantial funding to fund our anticipated commercialization efforts and fund our operating
expenses and other activities. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are
unable to obtain funding on a timely basis, we may be required to significantly curtail our research or development program, or a part
thereof, which would adversely impact our potential revenues, results of operations and financial condition.
RISKS RELATED TO OUR BUSINESS AND STRATEGY
We have a limited operating history to date and our prospects will
be dependent on our ability to meet a number of challenges.
Our business prospects are difficult to predict due to a lack of
operational history, and our success will be dependent on our ability to meet a number of challenges. Because we have a limited operating
history and we are in the early stages of development, you may not be able to evaluate our future prospects accurately. Our prospects
will be primarily dependent on our ability to successfully develop industrial-scale cultured meat manufacturing technologies and processes,
and market these to our customers. If we are not able to successfully meet these challenges, our prospects, business, financial condition
and results of operations could be adversely impacted.
4
We are wholly dependent on the success of our cultured meat manufacturing
technologies, including our cultured steak technologies, and we have limited data on the performance of our technologies to date.
We do not currently have any products or technologies approved
for sale and we are still in the early stages of development. To date, we have limited data on the ability of our technologies to successfully
manufacture cultured meat, towards which we have devoted substantial resources to date. We may not be successful in developing our technologies
in a manner sufficient to support our expected scale-ups and future growth, or at all. We expect that a substantial portion of our
efforts and expenditures over the next few years will be devoted to the development of technologies designed to enable us to market industrial-scale
cultured meat manufacturing processes. We cannot guarantee that we will be successful in developing these technologies on the timeline
we expect or at all. If we are able to successfully develop our cultured meat technologies, we cannot ensure that we will obtain regulatory
approval or that, following approval, upon commercialization our technologies will achieve market acceptance. Any such delay or
failure would materially and adversely affect our financial condition, results of operations and prospects.
The research and development associated with technologies for cultured
meat manufacturing, including three-dimensional meat production, is a lengthy and complex process.
We are focused on developing commercial technologies that companies
can license to manufacture alternative foods without the need for animal butchery, based on rapid growing cycles. To
develop our cultured meat steak technology, we are developing cellular agriculture technology, such as cell lines and approaches to working
with plant-based cell-growth media in a scalable process. We are currently planning to scale up the printing process to provide us with
industrial-scale capabilities. If we are unable to successfully develop our cultured meat manufacturing technologies, we may not be able
to achieve our anticipated growth, revenues or profitability and we may not be able to continue our business operations.
We intend to engage in future acquisitions,
joint ventures or collaborations, similar to our acquisition of Peace of Meat, which may increase our capital requirements, dilute our
shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks. We may not realize the benefits
of these acquisitions, joint ventures or collaborations.
We may evaluate various acquisitions and collaborations, including
licensing or acquiring complementary technologies, intellectual property rights, or businesses. Any potential acquisition, joint venture
or collaboration will entail numerous potential risks, including:
• increased operating expenses
and cash requirements;
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the assumption of additional indebtedness or contingent liabilities; |
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assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating
new personnel; |
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the diversion of our management’s attention from our existing programs and initiatives in pursuing such a strategic merger
or acquisition; |
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retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
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risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing
technologies; and |
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our inability to generate revenue from acquired technologies or products sufficient to meet our objectives in undertaking the acquisition
or even to offset the associated acquisition and maintenance costs. |
In addition, if we undertake acquisitions, we may utilize our cash,
issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result
in significant future amortization expense.
Moreover, we may not be able to locate suitable acquisition or
collaboration opportunities and this inability could impair our ability to grow or obtain access to technologies that may be important
to the development of our business.
Our existing potential collaborations, or any future collaboration
arrangements that we may enter into, may not be successful, which could significantly limit the likelihood of receiving the potential
economic benefits of the collaboration and adversely affect our ability to develop and commercialize our product candidates.
We have entered into a potential collaboration with Tiv Ta’am,
which is reflected in a non-binding letter of intent. Tiv Ta’am has no obligation to collaborate with us and may withdraw from the
proposed collaboration at any time without any liability.
Additionally, we may enter into future collaborations under which
our collaborators have provided, and may in the future provide, funding and other resources for developing and commercializing our cultured
meat manufacturing technologies. We expect to enter into additional collaborations to access additional funding, capabilities and expertise
in the future. Our existing collaborations, and any future collaborations we enter into, may pose a number of risks, including the following:
| • |
collaborators may not perform or prioritize their obligations as expected; |
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collaborators may not pursue development and commercialization of any of our cultured meat manufacturing technologies or may elect
not to continue or renew development or commercialization, changes in the collaborators’ focus or available funding, or external
factors, such as an acquisition, that divert resources or create competing priorities; |
5
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collaborators may provide insufficient funding for the successful development or commercialization of our cultured meat manufacturing
technologies; |
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collaborators could independently develop, or develop with third parties, products or technologies that compete directly or indirectly
with our products or cultured meat manufacturing technologies if the collaborators believe that competitive products are more likely to
be successfully developed or can be commercialized under terms that are more economically attractive than ours; |
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cultured meat manufacturing technologies developed in collaborations with us may be viewed by our collaborators as competitive with
their own products or technologies, which may cause collaborators to cease to devote resources to the development or commercialization
of our products; |
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a collaborator with marketing and distribution rights to one or more of our products or technologies that achieve regulatory approval
may not commit sufficient resources to the marketing and distribution of any such product; |
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disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course
of development of cultured meat manufacturing technologies, may cause delays or termination of the research, development or commercialization
of such technologies, may lead to additional responsibilities for us with respect to such technologies, or may result in litigation or
arbitration, any of which would be time-consuming and expensive; |
| • |
collaborators may not properly maintain, protect, defend or enforce our intellectual property rights or may use our proprietary information
in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose
us to potential litigation; |
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disputes may arise with respect to the ownership of intellectual property developed pursuant to our collaborations; |
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collaborators may infringe, misappropriate or otherwise violate the intellectual property rights of third parties, which may expose
us to litigation and potential liability; |
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collaborations may be terminated for the convenience of the collaborator and, if terminated, the development of our cultured meat
manufacturing technologies may be delayed, and we could be required to raise additional capital to pursue further development or commercialization
of the cultured meat manufacturing technologies; |
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future relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue
securities that dilute our existing shareholders, or disrupt our management and business; and |
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we could face significant competition in seeking appropriate collaborators, and the negotiation process is time-consuming and complex.
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If our collaborations do not result in the successful development
of our products, or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone,
earn-out, royalty or other contingent payments under the collaborations. If we do not receive the funding we expect under these agreements,
our development of our cultured meat manufacturing technologies could be delayed and we may need additional resources to develop our technologies.
If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception
of us in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory
approval and commercialization described in this report apply to the activities of our collaborators.
We may not be able to successfully manage our planned growth.
We expect to continue to make investments in our cultured meat
manufacturing technologies. We expect that our annual operating expenses will continue to increase as we invest in further research and
development activities and, ultimately, sales and marketing efforts and customer service and support resources for future customers. Our
failure to expand operational and financial systems in a timely or efficient manner could result in operating inefficiencies, which could
increase our costs and expenses more than we had planned and prevent us from successfully executing our business plan. We may not be able
to offset the costs of operation expansion by leveraging the economies of scale from our growth in negotiations with our suppliers and
contract manufacturers. Additionally, if we increase our operating expenses in anticipation of the growth of our business and this growth
does not meet our expectations, our financial results will be negatively impacted.
If our business grows, we will have to manage additional product
design projects, materials procurement processes, and sales efforts and marketing for an increasing number of products, as well as expand
the number and scope of our relationships with suppliers, distributors and end customers. If we fail to manage these additional responsibilities
and relationships successfully, we may incur significant costs, which may negatively impact our operating results. Additionally, in our
efforts to be first to market with new products with innovative functionality and features, we may devote significant research and development
resources to products and product features for which a market does not develop quickly, or at all. If we are not able to predict market
trends accurately, we may not benefit from such research and development activities, and our results of operations may suffer.
As our future development and commercialization plans and strategies
develop, we expect to need additional managerial, operational, sales, marketing, financial and legal personnel. Our management may need
to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing
these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our
infrastructure, operational mistakes, loss of business opportunities, failure to deliver and timely deliver our products to customers,
loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures
and may divert financial resources from other projects, such as the development of additional new products. If our management is unable
to manage our growth effectively, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced,
and we may not be able to implement our business strategy.
6
If the market does not grow as we expect, we may not achieve sustainable
revenues.
The marketplace for alternative protein manufacturing plants,
which we expect to be our primary market, is dominated by methods that do not involve three-dimensional printing technology. If the market
does not broadly accept three-dimensional printing of cultured meats as an alternative for conventional meat harvesting, or if it adopts
three-dimensional printing based on a technology other than our proprietary bio-ink technology, we may not be able to achieve a sustainable
level of revenues, and our results of operations would be adversely affected as a result. Additionally, cultivated meat is significantly
more expensive than conventional meat. If the price of cultivated meat remains high, this may limit the consumer demand for, and market
acceptance of, products manufactured using our technologies, and we may never be able to compete successfully or generate sufficient revenue
or sustained profitability.
Business or economic disruptions or global health concerns, including
COVID-19, may have an adverse impact on our business and results of operations.
The COVID-19 pandemic has negatively impacted the global economy,
disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. Many countries
around the world, including in Israel, have significant governmental measures being implemented to control the spread of the virus, including
temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct
of business. To date, the impact of the pandemic on our operations has been mainly limited to a temporary closure of our facility earlier
in the year, in the context of a government-mandated general lockdown, which temporary delayed certain of our development activities,
while we implemented remote working and workplace protocols for our employees in accordance with government requirements. While government
restrictions have recently been eased in Israel following a successful vaccination campaign, the extent of the impact of the COVID-19
pandemic on our business and financial performance, including our ability to execute our near-term and long-term business strategies and
initiatives in the expected time frame, will depend on future developments, including the duration and severity of the pandemic and the
impacts of reopening, including possible additional waves, which are uncertain and cannot be predicted.
As a result of the COVID-19 pandemic, including related governmental
guidance or requirements, we may need to close our facilities, at least temporarily, or implement more restrictive policies to comply
with social distancing rules and other requirements. As much of our research and development work requires on-site performance, such steps
may negatively impact productivity and cause other disruptions to our business.
The full extent of the COVID-19 pandemic’s impact on our
business and results of operations depends on future developments that are uncertain and unpredictable, including the duration and spread
of the pandemic, its lasting impact on capital and financial markets, including any economic recession, and any new information that may
emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, among others. At
this point in time, we cannot reasonably estimate the full extent of the COVID-19 pandemic’s impact on our business, financial condition,
results of operations and cash flow.
7
RISKS RELATED TO OUR ACQUISITION OF PEACE OF MEAT
We may not fully realize the anticipated benefits of the acquisition or realize such
benefits within the timing anticipated.
We acquired Peace of Meat because we believe that the acquisition
will be beneficial to us and to our shareholders. However, we may not be able to achieve the anticipated long-term strategic benefits
of the acquisition within the timing anticipated or at all. For example, the benefits from the acquisition will be partially offset by
the significant costs incurred in completing the transaction. Any delays and challenges that may be encountered in the post-acquisition
process of consolidation could have an adverse effect on our business and results of operations, and may affect the value of the ADSs
and our ordinary shares after the completion of the acquisition.
We may have operational challenges in managing Peace of Meat’s
business and staff following the acquisition.
Acquisitions inherently have risks including misjudging key elements
of an acquisition or failing to integrate it in an efficient and timely manner that would disrupt operations. In addition, as Peace of
Meat is located in a different country, which also brings inherent management challenges. Our agreement to acquire Peace of Meat provides
that Peace of Meat will continue to be managed independently within our business for approximately two years from the time of purchase,
adding to the operational complexity of the integration. We may further face operational challenges in managing Peace of Meat’s
business following the acquisition, which could have an adverse effect on our business and results of our operations, and may affect the
value of the ADSs and ordinary shares.
If intangible assets that we recorded in connection with the Peace
of Meat acquisition become impaired, we may have to take significant charges against earnings.
In connection with the accounting for the Peace of Meat acquisition,
we have recorded intangible assets. Under IFRS, we must assess, at least annually and potentially more frequently, whether the value of
indefinite-lived intangible assets has been impaired. Amortizing intangible assets will be assessed for impairment in the event of an
impairment indicator. Any reduction or impairment of the value of intangible assets will result in a charge against earnings, which could
materially adversely affect our results of operations and shareholders’ equity in future periods.
RISKS RELATED TO COMPETITION AND COMMERCIALIZATION OF OUR TECHNOLOGIES
We are an early-stage company with an unproven business model, which makes it difficult
to evaluate our current business and future prospects.
We have no established basis to assure investors that our business
strategies will be successful. We are dependent on unproven technologies and we have no basis to predict acceptance of our technologies
by potential licensees and their customers. The market for cultured meat is new and as yet untested. As a result, the revenue and income
potential of our business and our market are unproven. Further, because of our limited operating history and early stage of development,
and because the market for cultured meat is relatively new and rapidly evolving, we have limited insight into trends that may emerge and
affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business.
Before investing, you should consider an investment in the
ADSs in light of the risks, uncertainties and difficulties frequently encountered by early-stage companies in new and rapidly evolving
markets such as ours. We may not be able to successfully address any or all of these risks. Failure to adequately do so could cause our
business, results of operations and financial condition to suffer.
We may not be able to compete successfully in
our highly competitive market.
The alternative protein market is expected to be highly competitive,
with numerous brands and products competing for limited retailer shelf space, foodservice and restaurant customers and consumers. For
us to compete successfully, we expect that the cultured meats printed using our technologies will need to be competitive in taste, ingredients,
texture, ease of integration into the consumer diet, nutritional claims, convenience, brand recognition and loyalty, product variety,
product packaging and package design, shelf space, reputation, price, advertising and access to restaurant and foodservice customers.
Generally, the food industry is dominated by multinational corporations
with substantially greater resources and operations than us. We cannot be certain that we will successfully compete with larger competitors
that have greater financial, marketing, sales, manufacturing, distributing and technical resources than we do. Conventional food companies
may acquire our competitors or launch their own competing products, and they may be able to use their resources and scale to respond to
competitive pressures and changes in consumer preferences by introducing new products, reducing prices or increasing promotional activities,
among other things. Competitive pressures or other factors could prevent us from acquiring market share or cause us to lose market share,
which may require us to lower prices, or increase marketing and advertising expenditures, either of which would adversely affect our margins
and could result in a decrease in our operating results and profitability. We cannot assure you that we will be able to maintain a competitive
position or compete successfully against such sources of competition.
8
We may suffer reputational harm due to real or perceived quality
or health issues with products manufactured by our licensees using our technology.
Any real or perceived quality or food safety concerns or failures
to comply with applicable food regulations and requirements, whether or not ultimately based on fact and whether or not involving us,
or even merely involving unrelated manufacturers, could cause negative publicity and reduced confidence in our company, or the industry
as a whole, which could in turn harm our reputation and sales, and could adversely impact our business, financial condition and operating
results. There can be no assurance that products manufactured by our licensees will always comply with regulatory standards. Although
we expect that our licensees will strive to manufacture products free of pathogenic organisms, these may not be easily detected and cross-contamination
can occur. We cannot assure you that this health risk will always be preempted by quality control processes.
We will have no control over the products manufactured by our licensees,
especially once they are purchased by consumers, who may prepare these products in a manner that is inconsistent with directions or store
them for excessive periods of time, which may adversely affect their quality and safety. If the products manufactured by our licensees
are not perceived as safe or of high quality, then our business, results of operations and financial condition could be adversely affected.
The growing use of social and digital media increases the speed
and extent that information or misinformation and opinions can be shared. Negative publicity about cultured meats produced using our technologies
could seriously damage our reputation.
Failure to improve our technologies may adversely affect our ability
to continue to grow.
In order to continue to grow, we expect we will need to continue
to innovate by developing new technologies or improving existing ones, in ways that meet our standards for quality and will enable our
eventual licensees to manufacture products that appeal to consumer preferences. Such innovation will depend on the technical capability
of our staff in developing and testing product prototypes, including complying with applicable governmental regulations, and the success
of our management and sales and marketing teams in introducing and marketing new technologies. Failure to develop and market new technologies
may cause a negative impact on our business and results of operations.
Additionally, the development and introduction of new technologies
requires substantial research, development and marketing expenditures, which we may be unable to recoup if the new technologies do not
lead to products that gain widespread market acceptance. If we are unsuccessful in meeting our objectives with respect to new or improved
technologies, our business could be harmed.
We may face difficulties if we expand our operations into new geographic
regions, in which we have no prior operating experience.
We intend to license our technologies in numerous geographical
markets. International operations involve a number of risks, including foreign regulatory compliance, tariffs, taxes and exchange controls,
economic downturns, inflation, foreign currency fluctuations and political and social instability in the countries in which we will operate.
Expansion may involve expanding into less developed countries, which may have less political, social or economic stability and less developed
infrastructure and legal systems. It is costly to establish, develop and maintain international operations and develop and promote our
brands in international markets. As we expand our business into other countries, we may encounter regulatory, legal, personnel, technological
and other difficulties that increase our expenses and/or delay our ability to become profitable in such countries, which may have an adverse
impact on our business and brand.
Consumer preferences for alternative proteins in general, and more
specifically cultured meats, are difficult to predict and may change, and, if we are unable to respond quickly to new trends, our business
may be adversely affected.
Our business is focused on the development and marketing of licensable
cultured meat manufacturing technologies. Consumer demand for the cultured meats manufactured using these technologies could change based
on a number of possible factors, including dietary habits and nutritional values, concerns regarding the health effects of ingredients
and shifts in preference for various product attributes. If consumer demand for our products decreases, our business and financial condition
would suffer. Consumer trends that we believe favor sales of products manufactured using our licensed technologies could change based
on a number of possible factors, including a shift in preference from animal-based protein products, economic factors and social trends.
A significant shift in consumer demand away from products manufactured using our technologies could reduce our sales or our market share
and the prestige of our brand, which would harm our business and financial condition.
9
We have no manufacturing experience or resources and we expect
we will incur significant costs to develop this expertise or need to rely on third parties for manufacturing.
We have no manufacturing experience. In order to develop and license
our technologies, we will need to develop, contract for or otherwise arrange for the necessary manufacturing capabilities. We may experience
difficulty in obtaining adequate and timely manufacturing capacity for our proprietary cultured meat printers and bio-inks. We do not
own or lease facilities currently that could be used to manufacture any products that we might develop on an industrial scale, nor do
we have the resources at this time to acquire or lease suitable facilities. If we are unable to build the necessary internal manufacturing
capability or obtain this capability through third parties we will not be able to commercialize our technologies. Even if we develop
or obtain the necessary manufacturing capacity, if we fail to comply with regulations, to obtain the necessary licenses and knowhow or
to obtain the requisite financing in order to comply with all applicable regulations and to own or lease the required facilities in order
to manufacture products, we could be forced to cease operations, which would cause you to lose all of your investment.
Our limited manufacturing capabilities are nascent, and if we fail
to effectively develop manufacturing and production capabilities, our business and operating results and our brand reputation could be
harmed.
We intend to begin manufacturing certain of our culture meat products
in a pilot facility. If we are unable to develop manufacturing capacity to commence cultured chicken fat production, we may not be able
to expedite our market entry or develop an industrial process for cultivating and producing real meat cuts. Additionally, there is risk
in our ability to effectively scale production processes, if developed, to optimize manufacturing capacity for specific products and effectively
manage our supply chain requirements, which involves accurately forecasting demand for each of our products and inventory needs in order
to ensure we have adequate available manufacturing capacity for each such product and to ensure we are effectively managing our inventory.
Our forecasts may be based on multiple assumptions that may cause our estimates to be inaccurate and affect our ability to obtain adequate
manufacturing capacity (whether our own manufacturing capacity or co-manufacturing capacity) and adequate inventory supply in order to
meet the demand for our products, which could prevent us from developing our industrial process and harm our business and prospects.
However, if we overestimate our demand and overbuild our capacity
or inventory, we may have significantly underutilized assets, experience reduced margins, and have excess inventory which we may be required
to write-down or write-off. If we do not accurately align our manufacturing capabilities and inventory supply with demand, if we experience
disruptions or delays in our supply chain, or if we cannot obtain raw materials of sufficient quantity and quality at reasonable prices
and in a timely manner, our business, financial condition and results of operations may be adversely affected.
If developed, our manufacturing and production
operations will be subject to additional risks and uncertainties.
The interruption in, or the loss of operations at, our pilot facility,
which may be caused by work stoppages, labor shortages, strikes or other labor unrest, production disruptions, product quality issues,
local economic and political conditions, restrictive governmental actions, border closures, disease outbreaks or pandemics (such as COVID-19),
the outbreak of hostilities, acts of war, terrorism, fire, earthquakes, severe weather, flooding or other natural disasters at one or
more of these facilities, could delay, postpone or reduce production of some of our products, could impede our ability to develop an industrial
process for cultivating and producing real meat cuts or could otherwise have an adverse effect on our business, results of operations
and financial condition until such time as such interruption is resolved or an alternate source of production is secured.
Because we rely on a limited number of third-party
suppliers, we may not be able to obtain raw materials on a timely basis or in sufficient quantities at competitive prices to produce our
products or meet the demand for our products.
We rely on a limited number of vendors, a portion of which are
located internationally, to supply us with raw materials. Our financial performance depends in large part on our ability to arrange for
the purchase of raw materials in sufficient quantities at competitive prices. We are not assured a continued supply or pricing of raw
materials. Any of our other suppliers could discontinue or seek to alter their relationship with us. We could experience similar delays
in the future from any of our suppliers. Any disruption in the supply of embryonic stem cells or other raw materials would have a material
adverse effect on our business if we cannot replace these suppliers in a timely manner, on commercially reasonable terms, or at all.
In addition, our suppliers manufacture their products at a limited
number of facilities. A natural disaster, severe weather, fire, power interruption, work stoppage or other calamity affecting any of these
facilities, or any interruption in their operations, could negatively impact our ability to obtain required quantities of raw materials
in a timely manner, or at all, which could materially increase our cost and delay our timeline, and have a material effect on our business
and financial condition.
Events that adversely affect our suppliers of raw materials could
impair our ability to obtain raw material inventory in the quantities at competitive prices that we desire. Such events include problems
with our suppliers’ businesses, finances, labor relations and/or shortages, strikes or other labor unrest, ability to import raw
materials, product quality issues, costs, production, insurance and reputation, as well as local economic and political conditions, restrictive
U.S. and foreign governmental actions, such as restrictions on transfers of funds and trade protection measures, including export/import
duties and quotas and customs duties and tariffs, adverse fluctuations in foreign currency exchange rates, changes in legal or regulatory
requirements, border closures, disease outbreaks or pandemics (such as COVID-19), acts of war, terrorism, natural disasters, fires, earthquakes,
flooding, severe weather, agricultural diseases or other catastrophic occurrences. We continuously seek alternative sources of raw materials
to use in our products, but we may not be successful in diversifying the raw materials we use in our products.
10
If we need to replace an existing supplier, there can be no assurance
that supplies of raw materials will be available when required on acceptable terms, or at all, or that a new supplier would allocate sufficient
capacity to us in order to meet our requirements, fill our orders in a timely manner or meet our strict quality standards.
Litigation or legal proceedings, government investigations or other
regulatory enforcement actions could subject us to civil and criminal penalties or otherwise expose us to significant liabilities and
have a negative impact on our reputation or business.
We operate in a constantly evolving legal and regulatory framework.
Consequently, we are subject to heightened risk of legal claims, government investigations or other regulatory enforcement actions. Although
we have implemented policies and procedures designed to ensure compliance with existing laws and regulations, we cannot assure you that
our employees, temporary workers, contractors or agents will not violate our policies and procedures. Moreover, a failure to maintain
effective control processes could lead to violations, unintentional or otherwise, of laws and regulations. Legal claims, government investigations
or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws and regulations could subject
us to civil and criminal penalties that could materially and adversely affect our product sales, reputation, financial condition and operating
results. For example, in November 2020, the Israel Securities Authority, or ISA, initiated an administrative proceeding against us claiming
negligent misstatement regarding certain immediate and periodic reports published by our predecessor (Ophectra) during the years 2017
and 2018, prior to the merger with MeaTech. These reports relate to Ophectra’s activities prior to establishment of the settlement
fund in connection with the merger. In April 2021, following negotiations with the ISA, we agreed to settle the matter for NIS 0.7 million
($0.22 million). The settlement is subject to approval of the ISA’s Enforcement Committee.
RISKS RELATED TO OUR OPERATIONS
We expect that a small number of customers will account for a significant
portion of our revenues, and the loss of one or more of these customers could adversely affect our financial condition and results of
operations.
We do not expect to generate revenue in the short or medium term.
If we are able to generate revenue, we believe that we will do so through three primary streams: (i) licensing our proprietary intellectual
property to customers for the purpose of commercializing our technologies, including by way of setting up and operating cultured meat
production factories; (ii) brokering the supply of materials needed in the manufacturing process; and (iii) providing consulting and implementation
services to customers. These streams may arise in the context of product co-development. Under this model, we initially expect to derive
a significant portion of our revenues from a few customers. Our financial condition and results of operations could be adversely impacted
if any one of these customers interrupt or curtail their activities, fail to pay for the services that have been performed, terminate
their cultured meat operations, or if we are unable to enter into agreements with new customers on favorable terms. The loss of customers
could adversely affect our financial condition and results of operations.
We may be exposed to the credit risks of our customers, and nonpayment
by these customers and other parties could adversely affect our financial position, results of operations and cash flows.
We may be subject to risks of loss resulting from nonpayment by
our customers. Any material nonpayment by these entities could adversely affect our financial position, results of operations and cash
flows. If customers default on their obligations to us, our financial results and condition could be adversely affected. Some of these
customers may be highly leveraged and subject to their own operating and regulatory risks.
If we are unable to attract and retain qualified employees, our
ability to implement our business plan may be adversely affected.
The loss of the service of employees, such as Mr. Arik Kaufman,
our Chief Executive Officer, would likely delay our achievement of product development and other business objectives, as we may not be
able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative
light by investors and analysts, which may cause the price of our ordinary shares to decline. Although we have employment agreements with
our key employees, these employees could terminate their employment with us at any time on relatively short notice. We do not carry key
man life insurance on any of our executive officers.
Recruiting and retaining qualified scientific, manufacturing and
sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable
terms given the competition among high technology and life sciences companies for similar personnel. We also experience competition from
universities and research institutions in attracting and retaining scientific personnel. In addition, we rely on consultants and advisors,
including scientific advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants
and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities
that may limit their availability to us.
11
Under applicable employment laws, we may not be able to enforce
covenants not to compete.
Our employment agreements generally include covenants not to compete.
These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors
for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work. For
example, Israeli courts have required employers seeking to enforce covenants not to compete to demonstrate that the competitive activities
of a former employee will harm one of a limited number of material interests of the employer, such as the secrecy of a company’s
confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such an interest will
be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our
competitiveness may be diminished.
We are exposed to a risk of substantial loss due to claims that
may be filed against us in the future because our insurance policies may not fully cover the risk of loss to which we are exposed.
We are exposed to the risk of having claims seeking monetary damages
being filed against us, for example with regard to securities-related claims. In the event that we are required to pay damages for any
such claim, we may be forced to seek bankruptcy or to liquidate because our asset base and revenue base may be insufficient to satisfy
the payment of damages and any insurance that we have obtained may not provide sufficient coverage against potential liabilities.
Our business and operations would suffer in the event of information
technology system failures, including security breaches.
Despite the implementation of security measures, our internal computer
systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security
breach to date, if such an event were to occur and cause interruptions in our operations, causing our business to suffer. To the extent
that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur liability and the further development of our product could be delayed.
A cybersecurity incident, other technology disruptions or failure
to comply with laws and regulations relating to privacy and the protection of data relating to individuals could negatively impact our
business, our reputation and our relationships with customers.
We use computers in substantially all aspects of our business operations.
We also use mobile devices, social networking and other online activities to connect with our employees, suppliers and co-manufacturers.
Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of
information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual
property, including suppliers’ information, private information about employees and financial and strategic information about us
and our business partners. Further, as we pursue new initiatives that improve our operations and cost structure, potentially including
acquisitions, we may also be expand and improve our information technologies, resulting in a larger technological presence and corresponding
exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with new initiatives or acquisitions,
we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and
cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss,
misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information
technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity,
brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a
material adverse effect on our business, financial condition or results of operations.
In addition, we are subject to laws, rules and regulations in the
United States, the European Union and other jurisdictions relating to the collection, use and security of personal information and data.
Such data privacy laws, regulations and other obligations may require us to change our business practices and may negatively impact our
ability to expand our business and pursue business opportunities. We may incur significant expenses to comply with the laws, regulations
and other obligations that apply to us. Additionally, the privacy- and data protection-related laws, rules and regulations applicable
to us are subject to significant change. Several jurisdictions have passed new laws and regulations in this area, and other jurisdictions
are considering imposing additional restrictions. Privacy- and data protection-related laws and regulations also may be interpreted and
enforced inconsistently over time and from jurisdiction to jurisdiction. Any actual or perceived inability to comply with applicable privacy
or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental
investigations, damage our reputation, and adversely affect our business.
12
Disruptions in the worldwide economy may adversely affect our business,
results of operations and financial condition.
The global economy can be negatively impacted by a variety of factors
such as the spread or fear of spread of contagious diseases (such as the COVID-19 pandemic), man-made or natural disasters, actual or
threatened war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty. Such adverse and uncertain economic
conditions may impact consumer demand for alternative proteins in general, and clean meats specifically, which may in turn impact manufacturer
and retailer demand for our technologies. In addition, our ability to manage normal commercial relationships with suppliers may suffer.
Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns as a result of various factors,
including job losses, inflation, higher taxes, reduced access to credit, change in government economic policy and international trade
disputes. In particular, consumers may reduce the amount of cultured meat that they purchase in favor of conventional meat or other alternative
proteins, which may have lower retail prices, which could indirectly affect our results of operations. Manufacturer and retailers may
become more conservative in response to these conditions and seek to delay commencing cultured market manufacturing operations or reduce
existing operations. Our results of operations will depend upon, among other things, the financial condition of our business customers
and our ability to supply them with the means to manufacture products that appeal to consumers at the right price. Decreases in demand
for the products manufactured by our customers would put downward pressure on margins and would negatively impact our financial results.
Prolonged unfavorable economic conditions or uncertainty may result in end consumers making long-lasting changes to their discretionary
spending behavior on a more permanent basis, which may likewise have an indirect adverse effect on our sales and profitability.
RISKS RELATED TO GOVERNMENT REGULATION
We expect that products utilizing our technologies will be subject
to regulations that could adversely affect our business and results of operations.
The manufacture and marketing of food products is highly regulated.
We, our suppliers and licensees, may be subject to a variety of laws and regulations. These laws and regulations apply to many aspects
of our business, including the manufacture, composition and ingredients, packaging, labeling, distribution, advertising, sale, quality
and safety of food products, as well as the health and safety of our employees and the protection of the environment.
We are focused on developing a novel, proprietary three-dimensional
bioprinter to deposit layers of cells (including stem cells and differentiated stem cells), scaffolding, and cell nutrients in a three-dimensional
form of structured cultured meat. The cultured meat, in turn, will be produced by our customers. Peace of Meat intends to produce
cultured avian fat that is anticipated to be used as an ingredient, inter alia, in the production of finished cultured poultry. Neither
we nor Peace of Meat intend to manufacture, distribute and sell branded cultured-meat end products for consumer consumption.
Peace of Meat is a Business-To-Business, or B2B, ingredient producer
and will be subject to regulation by the U.S. Food and Drug Administration, or FDA, to the extent its products are introduced to the United
States for use by a manufacturer to produce cultured meat or other food in the United States, and analogous foreign regulatory bodies
elsewhere. In the US, the FDA and the U.S. Department of Agriculture’s, or USDA's, Food Safety and Inspection Service, or FSIS share
an ingredient approval process. FDA determines the safety of substances and prescribes safe conditions of use. USDA-FSIS determines
the efficacy and suitability of food ingredients in meat, poultry, and egg products. Thus, the USDA’s efficacy and suitability requirements
will also apply to the extent the ingredients are destined for use in USDA-regulated meat and poultry products.
For the reasons discussed below, we ourselves do not expect to
be directly regulated by the FDA for United States compliance purposes but will apply FDA’s food contact substance standards or
analogous foreign regulations when developing our three-dimensional bioprinter. Specifically, we intend to license our production technology,
as well as provide associated products and services to food processing and food retail companies through a B2B model. From a regulatory
perspective, in the United States, we expect companies manufacturing finished cultured meat products to be subject to regulation by various
government agencies, including the FDA U.S. Department of Agriculture, U.S. Federal Trade Commission, or FTC, Occupational Safety and
Health Administration and the Environmental Protection Agency, as well as the requirements of various state and local agencies,
such as the California Safe Drinking Water and Toxic Enforcement Act of 1986. We likewise expect these products to be regulated by equivalent
agencies outside the United States by various international regulatory bodies.
13
As the manufacturer of technology used to produce cultured meat,
and consistent with the Federal Food, Drug and Cosmetic Act, Federal Meat Inspection Act, and Poultry Products Inspection Act, we believe
we will not directly be regulated by the FDA or USDA. Rather, we believe the regulatory obligation falls on our customers — cultured
meat producers — to ensure that all food produced using our technology is wholesome and not adulterated. Consistent with food industry
norms, we expect that our customers will therefore request assurances from us that our products are suitable for their intended use from
an FDA regulatory perspective. Therefore, we plan to apply FDA food safety standards when developing our three-dimensional bioprinter
as a means of assuring our customers that our bioprinter is safe for its intended use and will not result in the production of adulterated
food. In particular, we plan to apply applicable food contact substance requirements, such as those of the FDA, when developing its three-dimensional
bioprinter as a means of assuring customers using the Company's technology that our bioprinter is safe for its intended use and will not
result in the production of adulterated food. If we are unable to provide regulatory compliance assurance to our customers, we expect
that our ability to license our production technology would be adversely impacted.
The manufacturing of cultured meat is expected to be subject to
extensive regulations internationally, with products subject to numerous food safety and other laws and regulations relating to the sourcing,
manufacturing, composition and ingredients, storing, labeling, marketing, advertising and distribution of these products. In addition,
enforcement of existing laws and regulations, changes in legal requirements and/or evolving interpretations of existing regulatory requirements
may result in increased compliance costs and create other obligations, financial or otherwise, that could adversely affect our business,
financial condition or operating results. In addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices
Act, or FCPA, and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper
payments to officials or other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance
with anti-bribery laws, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our
employees, contractors or agents. Violations of these laws, or allegations of such violations, could disrupt our business and adversely
impact our results of operations, cash flows and financial condition.
Any changes in, or changes in the interpretation of, applicable
laws, regulations or policies of the USDA, state regulators or similar foreign regulatory authorities that relate to the use of the word
“meat” or other similar words in connection with cultured meat products could adversely affect our business, prospects, results
of operations or financial condition.
The USDA, state regulators or similar foreign regulatory authorities,
such as Health Canada or the Canadian Food Inspection Agency, or CFIA, or authorities of the European Union (EU) or the EU member states
(e.g., European Food Safety Authority, or EFSA), could take action to impact our ability to use
the term “meat” or similar words, such as “beef”, to describe the product our bioprinters will produce. In addition,
a food may be deemed misbranded if its labeling is false or misleading in any particular way, and the USDA, CFIA, EFSA or other regulators
could interpret the use of the term “meat” or any similar phrase(s) to describe our cultured meat products as false or misleading
or likely to create an erroneous impression regarding their composition. In the U.S., USDA will be developing new labeling requirements
for foods under its jurisdiction produced through cell culture technology as noted in an Advance Notice of Proposed Rulemaking (ANPR)
published in September 2021.
Failure by our raw materials suppliers to comply with food safety,
environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products
and adversely affect our business.
If our suppliers fail to comply with food safety, environmental
or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. In the event of actual or even
alleged non-compliance, we might be forced to find an alternative supplier and we may be subject to lawsuits related to such non-compliance
by our suppliers. As a result, our supply of raw materials could be disrupted or our costs could increase, which would adversely affect
our business, results of operations and financial condition. The failure of any supplier to produce products that conform to our standards
could adversely affect our reputation in the marketplace and result in economic loss. Additionally, actions we may take to mitigate the
impact of any disruption or potential disruption in our supply of raw materials, including increasing inventory in anticipation of a potential
supply or production interruption, may adversely affect our business, results of operations and financial condition.
14
RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND POTENTIAL LITIGATION
If we are unable to obtain and maintain effective patent rights
for our products, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality of our trade
secrets or know-how, such proprietary information may be used by others to compete against us.
Since September 2019, we have sought patent protection for certain
of our products, systems, processes, designs and applications. Our success depends in large part on our ability to obtain, maintain, monitor
and enforce patent and other intellectual property protection in the United States and in other countries with respect to our proprietary
technology and new products.
We seek to protect our proprietary position and sustain our competitive
advantage by filing patent applications in the United States and in other countries. Patent prosecution in the United States and the rest
of the world is uncertain, expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent
applications at a reasonable cost or in a timely manner in all the necessary locations. It is also possible that we will fail to identify
Patentable aspects of our research and development output before it is too late to obtain patent protection.
We have a growing portfolio of 14 provisional and non-provisional
pending patent applications, with a robust pipeline. These are filed with the U.S. Patent and Trademark Office, or USPTO, the World Intellectual
Property Organization, or WIPO, and when the time comes, in various patent offices around the world, such as Israel, China, Japan, Europe,
Canada, and South Korea. Three of the pending patent applications were filed through the Paris Convention Treaty, or PCT. We cannot offer
any assurances about which, if any of the pending patent applications will issue, the scope of protection of any such patent or whether
any issued patents will be found invalid and/or unenforceable or will be threatened by third parties. Any successful opposition to these
patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful
commercialization of any new products that we may develop.
Further, there is no assurance that all potentially relevant prior
art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending
patent application. Even if patents do successfully issue, and even if such patents cover our products, third parties may challenge their
validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore,
even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide
exclusivity for our new products, or prevent others from designing around our claims. Any of these outcomes could impair our ability to
prevent competition from third parties, which may have an adverse impact on our business.
If we cannot obtain and maintain effective patent rights for our
products, we may not be able to compete effectively, and our business and results of operations would potentially be harmed.
If we are unable to maintain effective proprietary rights for our
products, we may not be able to compete effectively in our markets.
In addition to the protection afforded by any patents currently
owned and that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary
know-how that is not patentable or that we elect not to patent, processes and helpful devices that are not easily known, knowable or easily
ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product development
processes, that involve proprietary know-how, as well as information or technology that is not covered by patents. However, trade secrets
can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements
with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our
data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of
our information technology systems, as well as implementing various standard operating procedures designed to maintain that integrity.
Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets
and intellectual property may otherwise become known or be independently discovered by competitors.
15
We cannot provide any assurances that our trade secrets and other
confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not
otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation
or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may
have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property
are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.
Intellectual property rights of third parties could adversely affect
our ability to successfully commercialize our products, and we might be required to litigate or obtain licenses from third parties in
order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable
terms.
At this stage, and in the future it is inherently difficult to
conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected
if existing patents or patents resulting from patent applications issued to third parties or other third-party intellectual property rights
are held to cover our products, systems and processes or elements thereof, or our manufacturing or uses relevant to our development plans.
In such cases, we may be limited, or not be in a position to develop or commercialize products or our product candidates unless we successfully
pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with
the intellectual property rights’ holder, if available on commercially reasonable terms. There may also be pending patent applications
that should they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should
be brought and be successful, we may be required to pay substantial damages, royalties, be forced to abandon our new products or seek
a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at
all.
It is also possible that we have failed to identify relevant third
party patents or applications. For example, U.S. patent applications filed before July 8, 2019 and certain U.S. patent applications filed
after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United
States and elsewhere are published 18 months after the earliest filing for which priority is claimed, with such earliest filing date being
commonly referred to as the priority date. Therefore, patent applications covering our new products or platform technology could have
been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain
limitations, be later amended in a manner that could cover our platform technologies, our new products or the use of our new products.
Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will
be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on
terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented
from or experience substantial delays in pursuing the development of and/or marketing our new products. If we fail in any such dispute,
in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new products that
are held to be infringing. We might, if possible, also be forced to redesign our new products so that we no longer infringe the third
party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial
financial and management resources that we would otherwise be able to devote to our business.
Third-party claims of intellectual property infringement may prevent
or delay our development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement
of the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which
are owned by third parties, exist in the fields in which we are developing new products. As our industries expand and more patents are
issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary
technology without authorization. There may be third-party patents or patent applications with claims to materials, designs or methods
of manufacture related to the use or manufacture of our products. There may be currently pending patent applications that may later result
in issued patents that our products may infringe. In addition, third parties may obtain patents in the future and claim that use of our
technologies infringes upon these patents.
If any third-party patents were held by a court of competent jurisdiction
to cover aspects of our formulations, processes for designs, or methods of use, the holders of any such patents may be able to block our
ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally
determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at
all.
Parties making claims against us may obtain injunctive or other
equitable relief, which could effectively block our ability to further develop and commercialize one or more of our products. Defense
of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee
resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including
treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more
licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
16
Patent policy and rule changes could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.
Changes in either the patent laws or interpretation of the patent
laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow
the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United
States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the
United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore
cannot be certain that we were the first to file the invention claimed in our owned and licensed patent or pending applications, or that
we or our licensor were the first to file for patent protection of such inventions. Assuming all other requirements for patentability
are met, in the United States prior to March 15, 2013, the first to make the claimed invention without undue delay in filing, is entitled
to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013,
under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted on September 16, 2011, the United States has moved to a first
to file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted
and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a
material adverse effect on our business and financial condition.
We may be involved in lawsuits to protect or enforce our intellectual
property, which could be expensive, time consuming, and unsuccessful.
Competitors may infringe our intellectual property. If we were
to initiate legal proceedings against a third party to enforce a patent covering one of our new products, the defendant could counterclaim
that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims
alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any
of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion
could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading
statement, during prosecution. Under the Leahy-Smith Act, the validity of U.S. patents may also be challenged in post-grant proceedings
before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
Derivation proceedings initiated by third parties or brought by
us may be necessary to determine the priority of inventions and/or their scope with respect to our patent or patent applications or those
of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it
from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable
terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract
our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on
our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology
from third parties, or enter into development partnerships that would help us bring our new products to market.
Furthermore, because of the substantial amount of discovery required
in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by
disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim
proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse
effect on the price of our traded securities.
We may, in the future, be subject to claims that our employees,
consultants, or independent contractors have wrongfully or unavoidably used or disclosed confidential information of third parties or
that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We continue to employ individuals who were previously employed
at our competitors or potential competitors. We have established standard operating procedures to try and ensure that our employees, consultants,
and independent contractors do not use the proprietary information or know-how of others in their work for us, but we may nevertheless
be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed
intellectual property, including trade secrets or other proprietary information, of any of our employees’ former employers or other
third parties. Litigation may result and be necessary to defend against these claims. If we fail in defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management
and other employees.
We may be subject to claims challenging the inventorship of our
intellectual property.
We may be subject to claims that former employees, collaborators
or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future
patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting
obligations of consultants or others who are involved in developing our products. Litigation may be necessary to defend against these
and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable
intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a distraction to management and other employees.
17
We may not be able to protect our intellectual property rights
throughout the world.
Filing, prosecuting, and defending patents on products, as well
as monitoring their infringement in all countries throughout the world would be prohibitively expensive, and our intellectual property
rights in some countries can be less extensive than those in the United States. In addition, the laws of some foreign countries do not
protect intellectual property rights to the same extent as federal and state laws in the United States.
Competitors may use our technologies in jurisdictions where we
have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where
we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products.
Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting
and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing
countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, which could make it difficult
for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent
rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from
other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications
at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate
and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to monitor and enforce
our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license.
RISKS RELATED TO OUR OPERATIONS IN ISRAEL
If there are significant shifts in the political, economic and
military conditions in Israel, it could have an adverse impact on our operations.
Our corporate headquarters and research and development facilities
are located in Israel. In addition, most of our employees, officers and directors are residents of Israel. Accordingly, political, economic
and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its neighboring countries. In recent years, these have included hostilities from Hezbollah
in Lebanon and between Israel and Hamas in the Gaza Strip, which resulted in rockets being fired into Israel, causing casualties and disruption
of economic activities. In addition, Israel faces threats from the civil war in Syria and from Iran. Our commercial insurance does not
cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although we expect that
the Israeli government will cover the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot
assure you that such government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred.
Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries
may impose restrictions on doing business with Israel and Israeli companies, whether as a result of hostilities in the region or otherwise.
Any such matters could adversely affect our operations and results of operations, and any losses or damages incurred by us as the result
of such a conflict could have an adverse impact on our business.
Furthermore, our operations could be disrupted by the obligations
of our personnel to perform military service. Some of our employees based in Israel may be called upon to perform military reserve duty
and, in emergency circumstances, may be called to immediate and unlimited active duty. Our operations could be disrupted by the absence
of a significant number of employees due to military service, which could adversely impact our business and results of operations.
Because a substantial portion of our revenues is expected to be
generated in currencies other than our functional currency, we will be exposed to fluctuations in currency exchange rates, which could
negatively affect our financial condition.
In the future, we expect that a substantial portion of our revenues
will be generated in currencies other than our functional currency. Our functional currency, in which we currently maintain our financial
records, is NIS, and our presentation currency, in which we report our financial results, is USD. The functional currency of Peace of
Meat, in which it currently maintains its financial records, is Euros. As a result, our revenues for financial statement purposes might
be negatively affected by fluctuations in the exchange rates of currencies in the countries in which our technologies may be licensed,
and supplementary services provided and products sold.
Currency exchange controls may restrict our ability to utilize
our cash flows.
We expect to receive proceeds from sales of any product we may
develop, and also to pay a portion of our operational costs and expenses, in U.S. dollars, Euros and other foreign currencies. However,
we may be subject to existing or future rules and regulations on currency conversion. In 1998, the Israeli currency control regulations
were liberalized significantly, and there are currently no currency controls in place. Legislation remains in effect, however, pursuant
to which such currency controls could be imposed in Israel by administrative action at any time. We cannot assure that such controls will
not be reinstated, or if reinstated, that they would not have an adverse effect on our operations.
18
Enforcing a U.S. judgment against us and our executive officers
and directors, or asserting U.S. securities law claims in Israel, may be difficult.
We are incorporated in Israel. Most of our executive officers and
directors reside in Israel and most of our assets and the assets of these persons are located outside of the United States. Therefore,
a judgment obtained against us or any of these persons in the United States, including one based on the civil liability provisions of
the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It may also
be difficult to affect service of process on these persons in the United States or to assert U.S. securities laws claims in original actions
instituted in Israel.
Even if an Israeli court agrees to hear such a claim, it may determine
that Israeli, and not U.S., law is applicable to the claim. Under Israeli law, if U.S. law is found to be applicable to such a claim,
the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of
procedure would be governed by Israeli law. There is little binding case law in Israel addressing these matters.
Subject to specified time limitations and legal procedures, under
the rules of private international law currently prevailing in Israel, Israeli courts may enforce a final U.S. judgment in a civil matter,
including judgments based upon the civil liability provisions of the U.S. securities laws and including a monetary or compensatory judgment
in a non-civil matter, provided that:
| • |
the judgment is enforceable in the state in which it was given; |
| • |
the judgment was rendered by a court of competent jurisdiction under the rules of private international law prevailing in Israel;
|
| • |
the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts; |
| • |
adequate service of process has been effected and the defendant has had a reasonable opportunity to be heard; |
| • |
the judgment and the enforcement of the judgment are not contrary to the law, public policy, security or sovereignty of the State
of Israel; |
| • |
the judgment was not obtained by fraudulent means and does not conflict with any other valid judgment in the same matter between
the same parties; and |
| • |
an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in
the foreign court. |
There is little binding case law in Israel that addresses the matters
described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect
any damages awarded by either a U.S. or foreign court.
If a foreign judgment is enforced by an Israeli court, it generally
will be payable in Israeli currency, which can be converted into non-Israeli currency and transferred out of Israel. The usual practice
in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the
equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment
in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be
linked to the Israeli CPI plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors
must bear the risk of unfavorable exchange rate fluctuations.
Your rights and responsibilities as our shareholder will be governed
by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
Since we are incorporated under Israeli law, the rights and responsibilities
of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects
from the rights and responsibilities of shareholders of U.S. corporations. In particular, each of our shareholders has a duty to act in
good faith and in a customary manner in exercising its rights and performing its obligations toward us and other shareholders and to refrain
from abusing its power in, among other things, voting at shareholder meetings on certain matters, such as an amendment to our articles
of association, an increase of our authorized share capital, a merger and approval of related party transactions that require shareholder
approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling
shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent
the appointment of an office holder has a duty to act in fairness toward us. Israeli law does not clearly define the substance of these
duties, but these provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically
imposed on shareholders of U.S. corporations.
19
Provisions of Israeli corporate and tax law may deter acquisition
transactions.
Israeli corporate law regulates mergers, requires tender offers
for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant
shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated
unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar
of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the
merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for
all of a company's issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of
at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do
not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least
98% of the company's outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer,
may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the
shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly,
unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the
acquirer or the company published all required information with respect to the tender offer prior to the tender offer's response date.
Furthermore, Israeli tax considerations may make potential transactions
unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders
from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect
to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a
number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and
dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap
transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares
has occurred. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an
acquisition or merger would be beneficial to us or to our shareholders.
RISKS RELATED TO OWNERSHIP OF THE ADSs
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:
| • |
changes in the prices of our raw materials or the products manufactured in factories using our technologies; |
| • |
the trading volume of the ADSs; |
| • |
the effects of the COVID-19 pandemic; |
| • |
general economic, market and political conditions, including negative effects on consumer confidence and spending levels that could
indirectly affect our results of operations; |
| • |
actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and
annual results; |
| • |
announcements by us or our competitors of innovations, other significant business developments, changes in distributor relationships,
acquisitions or expansion plans; |
| • |
announcement by competitors or new market entrants of their entry into or exit from the alternative protein market; |
| • |
overall conditions in our industry and the markets in which we intend to operate; |
| • |
market conditions or trends in the packaged food sales industry that could indirectly affect our results of operations; |
| • |
addition or loss of significant customers or other developments with respect to significant customers; |
| • |
adverse developments concerning our manufacturers and suppliers; |
| • |
changes in laws or regulations applicable to our products or business; |
| • |
our ability to effectively manage our growth and market expectations with respect to our growth, including relative to our competitors;
|
| • |
changes in the estimation of the future size and growth rate of our markets; |
| • |
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
| • |
additions or departures of key personnel; |
| • |
competition from existing products or new products that may emerge; |
20
| • |
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; |
| • |
variance in our financial performance from the expectations of market analysts; |
| • |
our failure to meet or exceed the estimates and projections of the investment community or that we may otherwise provide to the public;
|
| • |
fluctuations in the valuation of companies perceived by investors to be comparable to us; |
| • |
disputes or other developments related to proprietary rights, including patents, and our ability to obtain intellectual property
protection for our products; |
| • |
litigation or regulatory matters; |
| • |
announcement or expectation of additional financing efforts; |
| • |
our cash position; |
| • |
sales and short-selling of the ADSs; |
| • |
our issuance of equity or debt; |
| • |
changes in accounting practices; |
| • |
ineffectiveness of our internal controls; |
| • |
negative media or marketing campaigns undertaken by our competitors or lobbyists supporting the conventional meat industry;
|
| • |
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 |
| • |
other events or factors, many of which are beyond our control. |
In addition, the stock markets have experienced extreme price and
volume fluctuations. Broad market and industry factors may materially harm the market price of the ADSs, regardless of our operating performance.
These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These fluctuations,
as well as general economic, political and market conditions such as recessions, interest rate changes, tariffs, international currency
fluctuations, or the effects of disease outbreaks or pandemics (such as the COVID-19 pandemic), may negatively impact the market price
of the ADSs. In the past, following periods of volatility in the market price of a company’s securities, securities class action
litigation has often been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs
and our management’s attention and resources could be diverted.
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.
21
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.
22
If we cease to qualify as a foreign private issuer, we would be
required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We would lose our foreign
private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are
U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we
are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms
with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify
certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers and we would lose our ability
to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.
Such modifications and subsequent compliance would cause us to incur significant legal, accounting and other expenses that we would not
incur as a foreign private issuer.
If we are a “passive foreign investment company” for U.S. federal income
tax purposes, there may be adverse U.S. federal income tax consequences to U.S. investors
Based on our income and assets, we believe that we should be treated
as a PFIC for the preceding taxable year. However, the determination of our PFIC status is made annually based on the factual tests described
below. Consequently, while we may be a PFIC in future years, we cannot estimate with certainty at this stage whether or not we are likely
to be treated as a PFIC in the current taxable year or any future taxable years. Generally, if, for any taxable year, at least 75 percent
of our gross income is “passive income” or at least 50 percent of our gross assets during the taxable year (based on the average
of the fair market values of the assets determined at the end of each quarterly period) are assets that produce or are held for the production
of passive income, we will be characterized as a PFIC for U.S. federal income tax purposes. Passive income for this purpose generally
includes, among other things, dividends, interest, rents, royalties, gains from commodities and securities transactions, and gains from
assets that produce passive income. However, rents and royalties received from unrelated parties in connection with the active conduct
of a trade or business should not be considered passive income for purposes of the PFIC test. For example, if we were to be characterized
as a PFIC for U.S. federal income tax purposes in any taxable year during which a U.S. Holder (as defined in “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. Upon request, we expect to provide the information necessary for U.S. Holders to make “qualified electing
fund elections” if we are classified as a PFIC. See “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” and investment of earnings in U.S. property, even if the CFC has made no distributions
to its shareholders. Subpart F income generally includes dividends, interest, rents, royalties, gains from the sale of securities and
income from certain transactions with related parties. In addition, a Ten Percent Shareholder that realizes gain from the sale or exchange
of shares in a CFC may be required to classify a portion of such gain as dividend income rather than capital gain. A non-U.S. corporation
generally will be classified as a CFC for U.S. federal income tax purposes if Ten Percent Shareholders own, directly or indirectly, more
than 50% of either the total combined voting power of all classes of stock of such corporation entitled to vote or of the total value
of the stock of such corporation. A “Ten Percent Shareholder” is a United States person (as defined by the Internal Revenue
Code of 1986, as amended, or the Code) who owns or is considered to own 10% or more of the value or total combined voting power of all
classes of stock entitled to vote of such corporation.
The determination of CFC status is complex and includes complex
attribution rules. A non-corporate Ten Percent Shareholder with respect to a CFC generally will not be allowed certain tax deductions
or foreign tax credits generally available to a corporate Ten Percent Shareholder. Failure to comply with CFC reporting obligations may
subject a Ten Percent Shareholder to significant monetary penalties. We cannot provide any assurances that we will furnish to any Ten
Percent Shareholder information that may be necessary to comply with the reporting and tax paying obligations applicable under the CFC
rules of the Code. U.S. Holders should consult their own tax advisors with respect to the potential adverse U.S. tax consequences of becoming
a Ten Percent Shareholder in a CFC.
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|
ITEM 4. |
INFORMATION ON THE COMPANY |
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., or MeaTech, and commenced our cultured meat technology development
operations. In January 2020, MeaTech 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., and later further changed
to MeaTech 3D Ltd., or MeaTech 3D.
According to the terms of the merger, MeaTech 3D acquired all outstanding shares
of MeaTech from MeaTech’s shareholders, in return for the issuance of ordinary shares to the shareholders of MeaTech, 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. MeaTech become MeaTech 3D’s wholly-owned subsidiary, and later changed its name to Chicken Meat-Tech Ltd. and then to MeaTech
MT Ltd.
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.
Upon completion of the merger, all directors and officers of MeaTech became directors
and officers of MeaTech 3D, in addition to some of the independent directors of Ophectra.
Although MeaTech 3D was the legal acquirer of MeaTech’s shares as described
above, because (i) the shareholders of MeaTech received the majority of the voting rights in MeaTech 3D and the ability to determine its
financial and operational policy, (ii) the management of MeaTech continues to serve as the management of MeaTech 3D and (iii) at the time
of completion of the merger, MeaTech 3D was a company without significant business operations, the merger is not considered a business
acquisition as defined in IFRS 3. As a result, it was determined that MeaTech 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 MeaTech (now
called MeaTech MT Ltd.), other than the information concerning earnings per share, which is presented according to the equity information
of MeaTech 3D (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 MeaTech 3D.
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) 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.
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Peace of Meat Acquisition
On February 10, 2021, we consummated an agreement with all of the shareholders of Peace
of Meat, a private limited liability company incorporated, organized and existing under the laws of Belgium, or Peace of Meat, to acquire
all of the outstanding share capital of Peace of Meat not yet owned by us, through our wholly-owned subsidiary, MeaTech Europe BV, for
total consideration of up to €16.3 million ($19.9 million). The total consideration payable by us in the acquisition consists of
€7.7 million ($8.6 million), comprised of €4.1 million ($5.1 million) in cash and 4,070,766 of our ordinary shares, with a
fair value of €3.6 million ($4.4 million), paid on the closing date, and up to an additional €7.6 million ($8.3 million) payable
in a combination of €4.0 million ($4.4 million) in cash and 4,070,766 of our ordinary shares in the amount of €3.6 million
($3.9 million), upon the achievement of four defined milestones related to Peace of Meat’s biomass and bioreactor size, density,
capacity and production. The acquisition agreement specified that each milestone must be reached within a six-month period, over a total
of two years, which can be extended by up to nine additional months under circumstances set forth in the acquisition agreement. The agreement
also includes acceleration events, such as breach of the acquisition agreement by us; certain merger, consolidation or acquisition transactions
involving us; our delisting; and the termination of employment of two or more of the founders of Peace of Meat during the milestone period
under circumstances set forth in the acquisition agreement. As of the date hereof, Peace of Meat had fully achieved the first two such
milestones. We do not provision liabilities for future milestones before their achievement.
Peace of Meat was established in Belgium in 2019 and is developing cultured avian fat
directly from animal cells without the need to grow or kill animals. In 2020, Peace of Meat was awarded a subsidy of approximately $1.33
million from the Flemish government, of which $0.5 million has been received, and has received approximately $1 million in private
investments. We bought Peace of Meat for approximately $20 million in a cash- and equity-based milestone deal. We believe that the innovative
technology of Peace of Meat has the potential to support an industrial process for the production of cultured avian fat. Peace of Meat
has entered into a number of scientific and commercial collaborations, is in the process of positioning itself as a future B2B provider
with the potential to cover the entire value chain and to accelerate research and production processes in the industry, and has conducted
taste tests for hybrid products that it has developed. It intends to open a pilot plant in Belgium in 2023.
B. Business Overview
Overview
We are an international deep-tech food company that initiated activities in 2019 and
is listed on the Nasdaq Capital Market under the ticker “MITC”. We maintain facilities in Rehovot, Israel and Antwerp, Belgium
and are in the process of expanding activities to California, USA. We believe that cultivated meat technologies hold significant potential
to improve meat production, simplify the meat supply chain, and offer consumers a range of new product offerings.
We aim to provide an alternative to industrialized animal farming that reduces carbon
footprint, minimizes water and land usage, and prevents the slaughtering of animals. By adopting a modular factory design, we expect to
be able to offer a sustainable solution for producing a variety of beef, chicken and pork products, both as raw materials and whole
cuts.
We are developing cultivated meat technologies, including three-dimensional printing
technology, together with biotechnology processes and customizable manufacturing processes in order to manufacture cultivated meat that
does not require animal slaughter. We are developing a novel, proprietary three-dimensional bioprinter to deposit layers of differentiated
stem cells, scaffolding, and cell nutrients in a three-dimensional form of structured cultured meat. We believe the cultured 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 December 2021, we announced that we had successfully three-dimensionally printed
a 3.67 oz cultivated steak, primarily composed of cultivated real fat and muscle tissues. While cultivated meat companies have made
some progress developing unstructured 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 cultured meat products such as steak. Unlike minced meat, a cultured
meat steak product has to grow in fibers and contain connective tissues and fat. To be adopted by diners, we believe cultured 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.
We are led by our Chief Executive Officer, Arik Kaufman, who 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 MeaTech to assist in
attempting to accelerate the Company’s growth. Mr. Kaufman holds extensive personal experience in the fields of food-tech and bio-tech
law, and has led and managed numerous complex commercial negotiations, as part of local and international fundraising, M&A transactions
and licensing agreements. We have carefully selected personnel for the rest of our executive management team who possess substantial industry
experience and share our core values, from fields as diverse as tissue engineering, industrial stem cell growth, and printer and print
materials development.
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Cultivated Meat Industry and Market Opportunity
Protein is a necessary staple for healthy nutrition. The growth in recent years of both
the human population and global wealth is driving a decades-long trend of accelerating demand for meat. The demand for protein products
has consistently risen in recent decades and is expected to continue to do so. The rising growth of demand for farm animals for the food
industry has created significant environmental, health, financial and ethical challenges.
According to Statista the value of the global meat sector was estimated at $838 billion
in 2020, and was forecast to increase to $1,157 billion by 2025. According to market research firm Fortune Business Insights, the global
meat substitute market was estimated at $5.4 billion in 2021 and is expected to grow to $10.8 billion by 2028. According to Facts and
Factors Market Research, the cultivated meat category alone is expected to reach $248 million by 2026, with an annual growth rate of approximately
16%. 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.
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.
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, approximately 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 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, beyond
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, derived from fungi. They are high in
protein, high in 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 is high in protein. Its texture is somewhat similar to shredded meat, although its taste is
similar to other fruits, such as apples and mangoes, so while it is a good source of protein, it is not generally viewed as an alternative
to meat for consumers used to animal proteins.
Insects: Insects are
an environmentally-friendly source of protein, requiring significantly less land and water, and emitting 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 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.
26
RECENT DEVELOPMENTS
Acquisition of Peace of Meat
In February 2021, we finalized our acquisition of Peace of Meat, a Belgian producer
of cultured avian products, for up to $19.9 million in cash and equity, depending on milestone achievements. We intend to leverage Peace
of Meat’s cultured avian technologies to diversify our own bovine-oriented technologies and expedite our entry into the market for
plant-based meat alternatives and cultured products.
$28 million Nasdaq listing and voluntary delisting from the Tel
Aviv Stock Exchange
In March 2021, we raised $28 million in an initial public offering of American Depository
Shares (ADSs) on the Nasdaq Capital Market, making us the first cultured meat company to be publicly traded in the US. In August
2021, we completed the process of voluntarily delisting our ordinary shares from the Tel Aviv Stock Exchange (TASE), with our ADSs continuing
to trade on the Nasdaq Capital Market. The decision was made in order to internationalize our investor and public relations efforts into
the United States and globally.
Initiation of food technology development activities in Europe
In April 2021, we commenced food technology development activities through our European
subsidiary, MeaTech Europe, with an initial focus on hybrid foods using Peace of Meat’s cultured fat. Hybrid foods are products
composed of both plant and cultured meat ingredients that have the potential to offer a meatier experience than purely plant-based meat
alternatives.
Letter of intent with Tiv Ta'am Holdings to develop and distribute
cultured meat products
In July 2021, as part of our strategy, we signed a non-binding letter of intent with
Tiv Ta'am, a leading food retailer and meat producer in Israel, to examine options to commercialize our products. We are unable to determine
whether a binding cooperation agreement will result from negotiations, however such an agreement would be expected to include cooperation
on research and the establishment of a production facility for cultivated meat products, as well as a grant of distribution and marketing
rights to Tiv Ta’am (including possible exclusive rights on jointly developed products), in Israel and/or elsewhere in the world.
We have also agreed to discuss expanding cooperation regarding the production and marketing of cultivated meat products in the future,
with an emphasis on cultivated pork. We intend to publicize information regarding such an agreement, should it eventuate.
Manufacturing of 700g (25 oz) of cultivated fat biomass
In July 2021, Peace of Meat cultivated just over 700 grams of pure chicken fat biomass
in a single production run. We believe that producing this quantity of pure cultured material in one run is a breakthrough toward potentially
manufacturing cultivated chicken fat at an industrial scale.
Partnering with Ashton Kutcher and Guy Oseary of BlueSoundWaves
In October 2021, the BlueSoundWaves collective, led by Ashton Kutcher, Guy Oseary and
Effie Epstein, partnered with us with the goal of accelerating our growth and development toward commercializing our proprietary cultured
meat production technologies. BlueSoundWaves works closely with our management to advance our strategy, go-to-market activities and brand
by leveraging the collective’s marketing and strategic expertise and network.
Cultivation of World’s Largest Bioprinted Steak
In December 2021, we announced that we had successfully three-dimensionally printed
a 3.67 oz cultivated steak, primarily composed of cultivated real 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 starts 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.
Promising results with muscle stem cell differentiation
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.
Based on these improvements, we have filed a provisional patent application with the USPTO.
Expansion of cultivated meat operation into the US to accelerate
go-to-market strategy
In March 2022, we announced
that we will be opening a US office. The new space will include activities in research and development, investor relations, and business
development.
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THE CULTIVATED MEAT SOLUTION
We believe 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 avoiding
the negative impacts of conventional meat production. Cellular agriculture is an efficient, closely-controlled indoor agricultural
process, utilizing advanced technologies with conceptual similarities to hydroponics, but used for growing meat cells, rather than fruit.
Cultivated meat is grown in cell culture, rather than inside animals, applying tissue engineering practices for fat and muscle production
for the purpose of human consumption. In place of animal slaughter, stem cells are removed from an animal, such as from an umbilical cord
following birth, and then cultivated in vitro to form muscle fibers and fat cells. Also
known as cultured meat, clean meat, in vitro meat, lab-grown meat, green meat, cell-based meat, and motherless meat, the term “cultivated
meat” is the term believed to best appeal to consumers.
Cultivated meat production is an advanced technology operating as part of the wider
field of cellular agriculture (growing animal cells in bioreactors), which 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 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 on scaling-up cellular
agriculture has the potential to offer a solution to the scale and environmental challenges confronting conventional meat production.
Other alternative protein competitors 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 with no pea or soy ingredients.
We are engaged with experimentation to develop optimal and cost-effective cell culture
media. In so doing, we are also exploring a range of types of and sources for growth factors suited to cell culture. These sources are
expected to be sustainable and ethical, providing a route to enabling efficient and cost-effective processes. While many challenges remain,
surveys are consistently showing consumer openness toward, and enthusiasm for, cultivated meat. According to ‘Consumer Acceptance
of Cultured Meat: An Updated Review (2018–2020)’, published by researchers at the University of Bath, “the evidence
suggests that, while most people see more societal benefits than personal benefits of eating cultured meat, there is a large potential
market for cultured meat products in many countries around the world. Cultured meat is generally seen as more acceptable than other food
technologies like GMOs, 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:
| • |
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, 99% less land use, 82% to 96% 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. |
| • |
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. |
| • |
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. |
| • |
Controlled Growing Environment: Another potential benefit of cultivated meat is that
its growth environment is designed to be less susceptible to biological risk and disease, through standardized, tailored production methods
consistent with good manufacturing practices, or GMP, that are controls to contribute to improved nutrition, health and wellbeing.
|
| • |
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. |
| • |
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 making real meat through advanced biotechnology
and engineering solutions for a more sustainable world. We are committed to making the right choice of meat for end consumers simple by
developing high-quality real meat that is slaughter-free, delicious, nutritious, and safer than farm-raised meat, by adopting a factory
design intended to offer a sustainable solution for producing a variety of beef, chicken, 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 is not otherwise expected to be able to meet
the growing demand for protein caused by rising population numbers and global affluence, due to inefficiencies inherent in conventional
meat farming. These include the large amount of land and water use needed for raising livestock, causing precious natural resources to
be squandered.
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 cultivated fat or 3D-printed steak, each facility can be adapted to scale-out
product capabilities and production volumes.
We are developing a fully automated, clean, proprietary process for cultivated meat
manufacturing in a controlled, sterile environment, which is expected to significantly increase food safety. Our production facilities
will not house a single animal and will contain robust integrated monitoring systems and minimal human interaction, which will greatly
reduce the risk of pathogen contamination of the type claimed to have caused the COVID-19 pandemic and numerous other human health crises.
We have carefully selected personnel for our management team who possess substantial
industry experience, from diverse fields including the food industry, bioprinting, tissue engineering, industrial stem cell growth, and
bioprinter and print materials development. We believe 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:
Perfect the development of our cultivated
meat manufacturing technology and processes. We intend to continue developing and refining our processes, procedures and
equipment until we are in a position to commercialize our technologies, whether by manufacturing final products for consumers (B2C and
B2B2C models) or ingredients for industrial use, as well as in outlicensing (B2B models). We are continuing to tackle the technological
challenges involved in scaling up both our biological and printing processes to industrial-scale levels.
Commercialize our technologies for
use in consumer and business markets. We intend to provide ingredients to business customers for use in consumer products,
in order to help meet the growing demand for sustainable, slaughter-free cultivated meat products. For example, manufacturers of meat
alternatives, such as vegetarian sausages, may choose to include our cultivated fat biomass in their products, in order to deliver the
signature meaty flavors, aromas, and textures of the meat otherwise provided by the conventional meat of species such as chicken, beef
and pork. We believe that this combination has the potential to unlock a new level of meat experience.
In addition, we intend to license our production technology as well as provide
associated products, such as cell lines, printheads, bioreactors and incubators, and services, such as technology implementation, training,
and engineering support, whether directly or through contractors, to food processing and food retail companies. We intend to
charge our customers a production license fee, based upon the amount of meat printed. We expect that each production facility will periodically
require us to provide them with our proprietary materials, such as fresh sets of starter cells, for a fee. In addition, other materials
used in the production process, such as cell-culture media and additives in our bio-inks may be sourced from third parties. Whether these
materials are customized for the specifics of our production processes, or ‘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 the licensed technologies.
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In addition, we envisage demand for our ingredients in industrial applications other
than human consumption, including cosmetics, which involve the extensive use of fat, and pet food. However, our current focus remains
the development of cultivated meat and its ingredients for human consumption.
Develop additional alternative proteins,
such as cultivated fish, to meet growing industry demand. There are substantial technological challenges inherent in expanding
our offering beyond cultivated beef, pork and avian technologies to additional alternative proteins, such as cultivated fish. However,
we believe that our experience, know-how and intellectual property portfolio form an excellent basis from which to surmount such challenges.
Our first step in this direction was the 2021 acquisition of Peace of Meat, with the aim of developing avian fat for the alternative meat
industry, applying proprietary technology to mimic the cellular composition of conventional poultry.
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, through a combination of internal development, acquisitions and collaborations,
with a view to complementing our own processes and diversifying our product range along the cultivated meat production value chain in
order to introduce cultivated products to the global market as quickly as possible. See also “- Additional Technologies” below.
The Commercialization Roadmap
The following table sets forth a road map for the expected commercialization of substitutes
for conventionally-farmed meat, commencing with fully-plant-based meat-like offerings that are already commercially available but lack
the organoleptic properties of meat (primarily flavor, aroma, texture and color), to be followed by hybrid meat products of the type that
we are developing, combining real cultivated fat with plant-based protein to offer meatier products with enhanced organoleptic properties,
prior to the commercialization of fully-cultivated unstructured meat products, such as hamburgers and minced meat, and lastly fully-cultivated
structured meat products, such as 3D-printed steaks.
We are focusing on developing cultivated fat biomass, primarily for the purpose of commercializing
hybrid meat products in the shorter term, and developing the technologies needed for both unstructured and 3D-printed, structured, cultivated
meat products.
Meat Ingredients for Hybrid and Unstructured Cultivated Products
Both we and our Belgian subsidiary, Peace of Meat, continue to develop novel, proprietary,
stem-cell-based technologies to produce fat, muscle and connective tissue biomass from multiple species, such as chicken, beef and pork,
without harming any animals. We are leveraging this technology, including through novel hybrid food products, to expedite market entry
while we develop an industrial process for cultivating and producing real meat, including using three-dimensional bioprinting technology.
The first expected application of the technology is in hybrid food products, combining plant-based protein with cultivated animal fat
biomass, designed to provide meat analogues with qualities of “meatiness” (taste and texture) closer to that of conventional
meat products than currently available. 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, can provide enhanced fatty acid profiles, and can be tailored to provide personalized nutritional
profiles.
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Our fat biomass production technology relies on the use of cells derived from proprietary
cell lines. These cells grow naturally in suspension, 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 cultured fat, so we have used
them to build a robust cell line, free of genetic modifications, which we are now attempting to upscale towards industrial production
volumes. Our most advanced cell line is being built with non-GMO 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, which is
why 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.
Single production run of chicken fat biomass.
Some of the steps which we are taking in order to keep the growth media cost low include:
| • |
Replacing expensive, animal-derived components in cell growth media with chemical replacements, including through in-house production;
|
| • |
Cell line optimizations, e.g. through high-throughput analyses of evolved isolates; |
| • |
Bioprocess optimization and media recycling; |
| • |
Upscaled growth factor production, e.g. through hollow fiber bioreactors; and |
| • |
Long-term market optimization as a result of expected increased demand. |
Structured Fully-Cultivated Meat
In addition to meat ingredients for use in hybrid meats and unstructured, cultivated
meat, we are developing the technology and processes to produce cultivated meat steak at an industrial scale. We are working to achieve
this by creating an end-to-end technology that combines cellular agriculture with bioprinting to produce complex meat structures. We are
developing cellular agriculture technology, such as cell lines, and approaches to working with growth media to support the growth of cells
such as fat and muscle cells in a scalable process, and have demonstrated an ability to differentiate stem cells into fat and muscle cells.
The media will be composed of food-grade ingredients and we expect their growth factors to be similar to those produced naturally in the
bodies of cattle, albeit free of fetal bovine serum, traditionally a significant component of cellular growth media that is harvested
from animals. We are engaged with experimentation to develop optimal and cost-effective cell culture media, and are exploring a range
of types of, and sources for, growth factors suited to cell culture. These sources are expected to be sustainable and ethical, providing
a route to enabling effective and cost-effective processes. The processes we are developing are designed to allow cells of interest, following
humane tissue extraction from the umbilical cord or biopsy, to be isolated, replicated, grown and maintained in
vitro under controlled, laboratory conditions.
We are developing proprietary bioprinting and tissue engineering technologies to enable
the design and bioprinting of three-dimensional tissues. Our goal is for the meat produced using these technologies to have an authentic
texture, flavor, appearance and aroma without being limited to the precise combinations of existing meat tissue (so that fat content of
the meat, for example, can be adjusted to amounts other than those occurring naturally in animals, to meet varied consumer preferences
for fattier or leaner cuts of meat). We believe the novel processes 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 we are developing that we believe, upon completion, will allow
us and our customers to develop and manufacture cultivated steaks at industrial scale.
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We are working on slaughter-free meat development processes, including cell proliferation
and differentiation, including 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, allowing the building of fat tissue and muscle fibers, following on from an isolation process of specific stem cells from
sources such as bovine umbilical cords or muscle tissue. While preparing our 3.67 oz. steak, these cells were nourished with nutritional
compounds that we developed as a growth medium to direct their differentiation into fat tissue or muscle tissue as needed.
Cell source for cultured 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 harboring
these properties, for example embryonic stem cells (stem cells isolated from embryos at a very early development stage), adult stem cells
isolated from various adult tissues (e.g., fat and muscle tissues) and stem cells isolated from the umbilical cord immediately following
birth. Each of these cells has advantages and disadvantages and their adaptation to our robust meat production process is currently being
evaluated.
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 undergo
differentiation into multiple cell types, such as muscle and fat, as well as cell maturation, where cells continue to proliferate, spread
and, for printed cells, produce the extra-cellular matrix which transforms the dispersed printed cells into a whole tissue.
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 bio-inks, which are
printable biological materials produced from the biomass developed in our bioreactors, as well as scaffolding inks that may be non-biological
in origin. 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, providing creative control over the steak design, in a process that maintains the
ongoing viability of the bio-ink cells. As the printed layers are composed of viable cells, they are then able to join together in an
incubator with the help of bonding agents that serve as a scaffold, forming 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.
To date, we have produced and manufactured bio-inks designed to create fat and muscle
cells and tissues. We have also built and successfully tested a three-dimensional prototype digital bio-ink printer for printing
cultivated meat cells, as well as supporting systems, with a view to developing industrial bio-print heads for the purpose of large-scale
printing.
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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 using an inkjet-style
printer with drop-on-demand capabilities, where inks are dispensed only where needed.
The image below depicts a potential laboratory model that we could use for the development
and production of cultivated meat steaks.
Once the tissue is bioprinted, the culture
is transferred to an incubator, where, in addition to providing nutrients and other chemical and biological agents, the systems provided
may physically manipulate the tissues to increase differentiation (the process by which a cell changes from one type to
another) and adjust the physical properties of the extracellular matrix, or ECM. The ECM is a three-dimensional network of very large
molecules, such as collagen, that provide structural and biochemical support to surrounding cells. Collagen is the ECM of a scaffold that
contains nutrients, adherents, and essential growth factors for the surrounding cells, supporting the development growth of complex muscle
tissues in living animal bodies. Building muscle tissues in vitro requires the development of artificial scaffolds. Plants are an obvious
candidate for artificial scaffolding, as plant fiber is similar in composition to collagen fiber.
To date, we have printed several cell types,
which coalesced into fat and muscle tissue grown in our laboratory. To the best of our knowledge, this is the first digital bio-ink printing
of food (using a bioprinter developed in-house for industrial use) to coalesce living tissue made up of several different cells that can
be derived from a live cow. We observed that the digital printer arranged the cells in space as planned, with coalescence observed both
between different cells and between cells and their environment, both of which are essential for tissue formation.
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 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, which mimics the environment
of the natural extracellular material, or ECM, provides short-term mechanical support for the tissue culture, and provides an increased
surface area for cell adhesion, proliferation, migration, and differentiation, eventually leading to accelerated tissue formation. 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, in that they can work using different sizes of factory.
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, allowing places like the United Arab
Emirates, Hong Kong or Singapore to potentially become more agriculturally independent, thus 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.
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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, starting with 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, intended to produce meat in a clean environment with minimal environmental impact. We envision factories utilizing
our technologies that exist in greater harmony with their environment than typical current factories, 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,
thus realizing the great potential in the market. We are developing cultivated meat, both unstructured hybrid products and structured,
three-dimensional printed products, with an initial emphasis on bovine and porcine cells, while our subsidiary Peace of Meat is developing
cultivated avian fat, initially for use in hybrid products. We estimate that the first hybrid products based on Peace of Meat technology
may enter the market as early as 2025. Beyond hybrid products, cultivated fat is expected to be a component in other fat-based products
(edible and otherwise), and an integrated component in MeaTech’s printing technology. We are working to create synergy and added
value to the cultivated meat market, while sustaining animal welfare and meeting the growing global demand for meat.
Sales and Distribution
We do not yet have any sales, marketing or
distribution infrastructure or capabilities. In the event that we complete development of our technologies and secure adequate funding,
we intend to consider commercialization collaborations, where appropriate.
We have engaged in a consulting agreement
with the Adom Group, or Adom, under which Adom serves as a consultant for the development of our operations in the cultivated meat production
industry, and will assist us in penetrating the markets in which Adom operates in Europe and South America. Under the agreement with Adom,
we granted Adom first refusal rights for establishing a production plant using the technology that we are developing, in any or all of
Israel, Poland, Argentina and Brazil. According to the terms of the agreement, should Adom induce a leading producer in the local meat
industry in the target country to invest in us at least $1 million and engage with the producer to establish a production plant franchise
based on our technologies, we will grant Adom and the franchisee first refusal rights for production in that target country, subject to
the completion of certain fundraising milestones, by or in conjunction with Adom.
Apart from end consumers in B2C and B2B2C
models of branded products, we believe that our ideal business customers will be value-added food processors and retailers that wish to
benefit from cultivated meat manufacturing capabilities. We intend to provide our corporate customers with a solution to these needs in
the form of highly-automated, cleaner, ‘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.
We have a growing portfolio of 14 provisional
and non-provisional patent applications with the USPTO and WIPO filed through the PCT. A provisional patent application is a preliminary
application, and establishes a priority date for the patenting process of inventions disclosed therein.
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Our existing patent portfolio can currently
be divided into two main areas:
Mechanical:
covering printer components and peripherals used in the fabrication of the tissue cultures with two PCT applications filed:
The first is 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. The provisional
application was filed in March 2020. Research, development and engineering of the technology is ongoing. A Go/No-go decision regarding
entry to national stage is expected in September 2022.
The second is a PCT application 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 PCT Application was filed in September 2020, with entry to national stage in March 2022. Research, development
and engineering of the technology is ongoing.
Biological:
covering initial materials used in the process and the methods for their use in the bioprinted tissues with two PCT applications and two
provisional applications filed.
One PCT application is directed to methods
for harvesting ICM from bovine blastocysts, the systems used to implement the methods with the disclosed compositions, are used to culture
the harvested inner cell mass (ICM) for embryonic stem cells (ESC) for the formation of tissue cultivated to emulate tissues and/or organs
for (non-vegan) food consumption. The PCT application was filed in January 2021 under the PCT, with publication due in July 2022.
Another pending provisional is directed to
methods and compositions for the xeno-free propagation of bESC on bovine umbilical stem cells (bUCSC), derived from a bovine umbilical
cord. The provisional application was filed in January 2021, and the PCT application in January 2022.
The second pending provisional application
is directed to the use of plant-based lecithins and/or their components as a differentiation drivers for use in selectively promoting
adipocytes differentiation by exposing MSCs post spontaneous immortalization, to the plant lecithins and/or their components for production
of cultured fat ex-vivo. The Application was filed in August 2021. A Go/No Go decision concerning filing of the non-provisional application
is expected in the second quarter of 2022.
Additional provisional applications are directed
to spherified substrate layer, for bioprinting and myogenic differentiation enhancers.
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 name
and logo as registered trademarks in the United States, and maintain ongoing rights to our domain name.
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 plants will be driven by consumer demand for alternative proteins and, more specifically, consumer acceptance of cultivated
meat as the alternative protein of choice. We believe we will compete with other cultivated meat manufacturers, alternative protein
manufacturers, and the conventional meat industry as a whole. We expect to directly compete with companies licensing know-how or
otherwise enabling the establishment of cultivated meat manufacturing plants. We are aware of certain companies that have announced plans
to provide their cultivated meat technology on a B2B basis, however we are not currently aware of a potential competitor focusing on complex,
industrial-scale, bioprinted, high-value real meats, such as steak.
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Companies such as Upside Foods and Mosa Meat
are focused on producing red meats, BluNalu, Inc. on fish and Shiok Meats 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 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, based wholly on ingredients of plant origin.
In addition, we are aware of several companies developing insect-protein production capabilities, employing among other insects, flies,
larvae and grasshoppers.
Companies Developing Cultivated
Meat
The cellular agriculture meat sector is in
early stages of development. The sector is currently primarily comprised of companies developing a full technology stack from developing
cell lines to scaling up cellular cultivation, developing media, and researching the food technology aspects of the final product. Market
dynamics have led to a large number of companies operating in this manner. We are aware of approximately 80 companies operating in the
cell-based field, several of whom are developing cellular agriculture for ground-meat alternatives and appear to be progressing with their
technological development. Some have indicated readiness to bring cell-based
meat products to market as early as 2022 through 2023. We do not believe that any companies in this space have already developed
the capability to produce industrial quantities at prices low enough to compete on a dollar-per-pound basis against conventionally-harvested
meat.
A number of larger companies have begun engaging
in this sector. For example, companies such as Merck & Co., Inc. and Lonza Group AG are currently investing in capabilities to accommodate
the market’s desire for change in the cell culture media market. Additionally, a number of bioreactor companies are rumored to be
interested in the cellular agriculture market opportunity. Over time, we expect that larger players will continue to increase their exposure
to cellular meat production either by selling to, or collaborating with, the many start-ups in the space.
Currently cellular agriculture companies are
for the most part paving their own path, with a goal of producing meat cells suitable as a replacement for ground meat. The ground meat
type of cellular product may also be suitable as an ingredient in a hybrid plant-based food product. The cell-types relevant to this effort
are primarily muscle and fat cells. What exactly these cell-based companies will offer is likely to be affected by consumer expectations
and underlying cost structures. We believe these companies may have to mix their cellular meat product with plant-based ingredients in
the interests of cost or appearance.
Companies Developing Structured
Cultivated Meat Products
To our knowledge, there is currently no
other company focused on the scaling up of three-dimensional bioprinting. However, there are companies attempting to produce steaks by
means of other approaches, such as growing bovine cells including fat, muscle and connective tissue on a pre-prepared scaffold, in order
to create a contiguous piece of meat, which has so far yielded steaks.
Government Regulation
Regulators around the world are in the process
of developing a regulatory approval process for cultured meat. Cultured meat is not yet generally commercially available, but technologies
like ours are anticipated to facilitate the imminent scaling up of cultured meat production. In general, cultured 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 FDA and USDA pursuant to a Memorandum of Understanding, or MOU, published by the
FDA and USDA on March 7, 2019 entitled “Formal Agreement to Regulate Cell-Cultured Food Products from Cell Lines of Livestock and
Poultry.” For example, FDA anticipates publishing Draft Guidance
on premarket safety oversight by December 31, 2022, and in September 2021 USDA published an Advance Notice of Proposed Rulemaking (ANPR),
indicating that 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 cultured meat — the two agencies will operate under a joint regulatory framework wherein 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 cultured 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
our cultured meat production customers are expected to face and their expectations of us, in the form of customer assurances, regarding
our product.
36
At this time, our business is limited to developing
cultured meat production technology (i.e., bioprinters) that will be marketed to cultured meat producers, and that of Peace of Meat is
limited to developing cultured meat ingredients (such as cultured avian fat). In the United States, and consistent with the Federal Food,
Drug and Cosmetic Act, Federal Meat Inspection Act, and Poultry Products Inspection Act, food ingredient manufacturers (like Peace of
Meat) must comply with the FDA’s food production requirements under the FDCA, as amended by the Food Safety Modernization Act, or
the FSMA, to ensure that the food is safe, and the USDA's requirements that the ingredients, when used in USDA-regulated meat and poultry
products, are effective and suitable for their intended use.
In addition, production equipment manufacturers
must ensure that their products do not contribute to the production of adulterated food. The regulatory obligation falls on the food manufacturer
to ensure that all food produced — including cultured meat — is wholesome and not adulterated. Therefore, when sourcing food
processing equipment, such as the three-dimensional bioprinter 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 aforementioned FDA-USDA MOU to determine whether any specific requirements or recommendations are published
with specific regard to cultured meat equipment manufacturers.
In the United States, we expect companies
manufacturing cultured meat products to be subject to regulation by various government agencies, including the FDA, USDA, and the FTC.
Equivalent foreign regulatory authorities include the Canadian Food Inspection Agency, the Japanese Food Safety Commission, the European
Food Safety Authority and authorities of the EU member states, the State Food and Drug Administration of China and the Singapore Food
Agency. 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.
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 be truthful and non-misleading and that 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 U.S., USDA will be developing new labeling requirements for foods
under its jurisdiction produced through cell culture technology as noted in an Advance Notice of Proposed Rulemaking (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.
37
C. Organizational Structure
Our subsidiaries and the countries of their incorporation are as follows:
|
Name |
|
Jurisdiction of Incorporation |
|
|
Parent |
|
% Ownership |
| ||
|
MeaTech U.S., Inc. |
Delaware, U.S. |
MeaTech 3D Ltd. |
100 |
% | ||||||
|
MeaTech MT Ltd. |
Israel |
MeaTech 3D Ltd. |
100 |
% | ||||||
|
MeaTech Europe BV |
|
|
Belgium |
|
|
MeaTech 3D Ltd. |
|
|
100 |
% |
|
Peace of Meat BV |
|
|
Belgium |
|
|
MeaTech Europe BV |
|
|
100 |
% |
D. Property, Plant and Equipment
Our office 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.
|
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, 2020,
including a comparison between 2020 and 2019, refer to “Management’s Discussion and Analysis of Financial Condition and Results
of Operations—Results of Operations—Year Ended December 31, 2020 Compared to Year Ended December 31, 2019” in our annual
report on Form 20-F filed on April 21, 2021.
38
A. Operating Results
Revenues
To date, we have not generated any revenue
since we commenced our cultured meat operations. We do not expect to receive any revenue unless and until we complete development
of and successfully commence out-licensing our technologies, or until we receive revenue from a collaboration or other partnership such
as a co-development agreement, or the acquisition of a company that generates revenues. There can be no assurance that we will be
successful in developing or ultimately commercializing our technologies, in establishing revenue-generating collaborations or acquiring
revenue-generating companies.
Research and Development Expenses
Research and development activities are our primary focus. We do not believe that it
is possible at this time to accurately project total expenses required for us to reach the point at which we will be ready to out-license
our technologies. Development timelines, the probability of success and development costs can differ materially from expectations. In
addition, we cannot forecast whether and when collaboration arrangements will be entered into, if at all, and to what degree such arrangements
would affect our development plans and capital requirements. We expect our research and development expenses to increase over the next
several years as our development program progresses. We would also expect to incur increased research and development expenses if we were
to identify and develop additional technologies.
Research and development expenses include the following:
| • |
employee-related expenses, such as salaries and share-based compensation; |
| • |
expenses relating to outsourced and contracted services, such as external laboratories and consulting, research and advisory services;
|
| • |
supply and development costs; |
| • |
expenses, such as materials, incurred in operating our laboratories and equipment; and |
| • |
costs associated with regulatory compliance. |
We recognize research and development expenses
as we incur them.
Marketing Expenses
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.
Public Listing Expenses
Based on the reverse acquisition method, the assets and liabilities of MeaTech (the
acquirer for accounting purposes) were recognized in our financial statements at their book value at the date of closing of the merger
in January, 2020. The acquisition consideration, in the amount of $11.4 million, was set based on the closing price of Ophectra's shares
on the Tel Aviv Stock Exchange on the date of closing of the Merger, while any surplus proceeds of the acquisition over the fair value
of Ophectra’s net assets (excluding its net assets that were transferred to a settlement fund as described in “- Merger”
above) were recognized in profit or loss as public listing expenses in the amount of $10.2 million, that did not affect cash flow.
Finance Expenses (income), Net
Finance expenses (income), net, consisted primarily of a change in the fair value of
financial instruments mandatorily measured at fair value through profit or loss, and exchange rate fluctuations.
Income Taxes
We have yet to generate taxable income. As of December 31, 2021, our operating tax loss
carryforwards were approximately $18.2 million.
39
Results of Operations
Our results of operations have varied in the past and can be expected to vary in the
future due to numerous factors. We believe that period-to-period comparisons of our operating results are not necessarily meaningful
and should not be relied upon as indications of future performance.
Below is a summary of our results of operations for the periods indicated (in thousands):
|
Year Ended December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Operating expenses: |
||||||||
|
Research and development expenses
|
$ |
7,594 |
$ |
2,491 |
||||
|
Marketing expenses
|
1,628 |
506 |
||||||
|
General and administrative expenses
|
8,010 |
5,380 |
||||||
|
Public listing expenses
|
- |
10,164 |
||||||
|
Loss from operations
|
$ |
17,232 |
$ |
18,541 |
||||
|
Finance income
|
509 |
110 |
||||||
|
Finance expense
|
1,299 |
93 |
||||||
|
Finance expense (income), net |
790 |
(17 |
) | |||||
|
Net loss
|
$ |
18,022 |
$ |
18,524 |
||||
Year Ended December 31, 2021 Compared to Year Ended December 31,
2020
Research and development expenses
Research and development expenses increased by approximately $5.1 million, or 205%,
to approximately $7.6 million for the year ended December 31, 2021, compared to $2.5 million for year ended December 31, 2020. The increase
resulted mainly from payroll expenses, materials and professional services expenditures related to our cultured meat research and development
operations.
The increase reflects MeaTech’s growing investment in research and development as it achieves its milestones and expands its cultured meat technology capabilities.
The increase reflects MeaTech’s growing investment in research and development as it achieves its milestones and expands its cultured meat technology capabilities.
Marketing expenses
Marketing expenses increased by approximately $1.1 million, or 222%, to approximately
$1.6 million for the year ended December 31, 2021, compared to $0.5 million for year ended December 31, 2020. 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 increased by approximately $2.7 million, or 49%,
to approximately $8.0 million for the year ended December 31, 2021, compared to approximately $5.4 million for the year ended December
31, 2020. The increase resulted mainly from personnel costs, corporate expenses, professional services (such as legal and audit fees)
and operating expenditures.
Net loss
Net loss decreased by approximately $0.5 million to approximately $18.0 million for
the year ended December 31, 2021, compared to $18.5 million for the year ended December 31, 2020. Net of the $10.2 million non-cash public
listing expense that the Company recorded in 2020 in connection with its reverse merger into a TASE-traded shell company, the net loss
increased by approximately $9.7 million, or 116%, driven mainly by increased research and development and general and administrative expenses.
Critical Accounting Policies
We describe our significant accounting policies and
estimates in Note 3 to our annual 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.
40
Recently-Issued Accounting Pronouncements
Certain recently-issued accounting pronouncements are
discussed in Note 3, Summary of Significant Accounting Policies, to the consolidated financial statements included in elsewhere in this
registration statement, regarding the impact of the IFRS standards as issued by the IASB that we will adopt in future periods in our consolidated
financial statements.
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 $1.07 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 MeaTech through December 31, 2021, we raised an aggregate of $42.3 million in four rounds
of private placements of our securities and our initial public offering of securities on Nasdaq, and $6.0 million in proceeds from option
exercises. As of December 31, 2021, we had $19.2 million in cash and cash equivalents.
The table below shows a summary of our cash flows for the periods indicated:
|
Year Ended December 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Net cash used in operating activities
|
$ |
(13,960 |
) |
$ |
(3,832 |
) | ||
|
Net cash used in investing activities
|
(9,340 |
) |
(1,875 |
) | ||||
|
Net cash provided by financing activities
|
29,023 |
17,345 |
||||||
|
Net increase in cash and cash equivalents
|
$ |
5,723 |
$ |
11,638 |
||||
41
Year Ended December 31, 2021 Compared to Year
Ended December 31, 2020
Net cash used in operating activities
Net cash used in operating activities increased by $10.1 million, or 264%, to approximately
$14.0 million for the year ended December 31, 2021 compared to approximately $3.8 million for the year ended December 31, 2020. This increase
was due to the increase in net loss.
Net cash used in investing activities
Net cash used in investing activities increased by $7.5 million, or 398%, to approximately
$9.3 million for the year ended December 31, 2021 compared to $1.9 million for the year ended December 31, 2020. This increase was
driven mainly by our investment in Peace of Meat and our acquisition of laboratory equipment and other fixed assets.
Net cash provided by financing activities
Net cash provided by financing activities increased by $11.7 million,
or 67%, to approximately $29.0 million for the year ended December 31, 2021 compared to $17.3 million for the year ended December 31,
2020. This increase was driven mainly from the Company’s initial Nasdaq public offering and issuance of shares and warrants, and
receipt of proceeds from the exercise of share options.
We have incurred losses and cash flow deficits from operations since the inception of
MeaTech, resulting in an accumulated deficit as of December 31, 2021 of approximately $37 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 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. 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.
42
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 37 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, including as a result of material expenses such as leasing expenses (see “Item 4. —D.
Property, Plant and Equipment”). Based on the projected cash flows and cash balances as of December 31, 2021, our management is
of the opinion that our existing cash will be sufficient to fund operations until the fourth quarter of 2022. 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
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
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.
Equity price risk
As we have not invested in securities riskier than short-term bank deposits, we do not
believe that changes in equity prices pose a material risk to our holdings. However, decreases in the market price of our ordinary shares
or ADSs could make it more difficult for us to raise additional funds in the future or require us to raise funds at terms unfavorable
to us.
Foreign Currency Exchange Risk
Currency fluctuations could affect us primarily through increased or decreased foreign
currency-denominated expenses. Currency fluctuations had a material effect on our results of operations during the year ended December
31, 2021, although not in the year ended December 31, 2020.
43
C. Research and development, patents and licenses, etc.
For a description of the Company’s 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.
44
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 MeaTech 3D Ltd., 5 David Fikes St., Rehovot 7638205, Israel.
|
Name |
Age |
Position | ||
|
Executive Officers: |
||||
|
Arik Kaufman |
41 |
Chief Executive Officer | ||
|
Omri Schanin |
32 |
Deputy Chief Executive Officer | ||
|
Guy Hefer |
40 |
Chief Financial Officer | ||
|
Dan Kozlovski |
37 |
Chief Technologies Officer | ||
|
Non-Employee Directors: |
||||
|
Yaron Kaiser |
44 |
Chairman of the Board of Directors | ||
|
David Gerbi(1)(2)(3) |
42 |
Director | ||
|
Eli Arad(1)(2)(3) |
49 |
Director | ||
|
Sari Singer(1)(2)(3) |
42 |
Director |
| (1) |
Member of the Audit Committee |
| (2) |
Member of the Compensation Committee |
| (3) |
Independent director as defined under Nasdaq Marketplace Rule 5605(a)(2) and SEC Rule 10A-3(b)(1). |
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 MeaTech 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).
Omri Schanin, Deputy Chief Executive Officer
Omri
Schanin has served as our Chief Operating Officer and later Deputy Chief Executive Officer since October 2020, after co-founding
and joining us in September 2019, and as a director between March 2021 and January 2022. Between 2018 and 2019, he was founder and CEO
of Docomed, a digital health company offering better treatment through continuous pain monitoring and data collection, and co-founder
and CEO of Cannova, a developer of sublingual alginate strips to supply active ingredients of the cannabis plant through the tongue into
the bloodstream, between 2018 and 2019. He was previously a Merage Fellow at the University of California, Irvine. Between 2013 and 2016,
he attained the rank of Major (Res.) while serving as a deputy commander of an Israeli Navy ship. He was included in the Forbes Israel
30 Under 30 list for 2021. Mr. Schanin holds B.Sc. degrees in Life Sciences and Biotechnology from the Hebrew University of Jerusalem,
Israel, and Business Management and Political Science from the University of Haifa, and an MBA in Entrepreneurship and Innovation from
the College of Management Academic Studies.
45
Guy Hefer, Chief Financial Officer
Guy
Hefer has served as our Chief Financial Officer since October 2020. He has over ten years of experience in investment banking and
corporate finance roles. Most recently he was the CFO of Prytek Holdings, a private holding group investing in technology companies globally.
Prior to that, Mr. Hefer was an investment banker at Leumi Partners between 2018 and 2019 and GCA investment banking 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
Grant Thornton 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 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.
Non-Executive Directors
Yaron Kaiser, Chairman of the Board of Directors
Yaron
Kaiser has founded various Nasdaq- or TASE-traded foodtech companies,
and currently serves as Chairperson of Wilk Technologies Ltd. Mr. Kaiser is a founding partner of the BlueSoundWaves collective, and practices
law in the fields of securities, commercial and corporate law, representing numerous public companies on fundraising, IPOs, M&A, Israel
Securities Authority and corporate governance. 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 CEO of real-estate and life science investors Merchavia Holdings
and Investments (TASE:MRHL) since 2010. Mr. Arad has served as a director of Cleveland Diagnostics, a clinical-stage biotechnology company
developing technology to improve cancer diagnostics since 2016, as well as B.G.I. Investments (1961) (TASE:BGI), since 2016. 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 B.A. in Accounting from Ramat Gan College and an M.B.A. 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 of consulting
firm Do Finance Consulting, and serves as Chief Financial Officer of B.G.I. Investments (1961) (TASE:BGI). 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 serves as
General Counsel and Executive Vice President at Delek Drilling LP, the oil and gas arm of the Delek Group in Israel, and a partner in
the Tamar and Leviathan offshore gas fields, as well as other petroleum assets offshore Israel and Cyprus, 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, 2021, was approximately $1.2 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 annual report, options to purchase 2,639,200 ordinary shares granted to our
officers and directors were outstanding under our share option plan at a weighted average exercise price of $0.71 per share, in addition
to 287,600 restricted share units.
46
Individual Compensation of Office Holders
The table and summary below outlines the compensation
granted to our Chief Executive Officer and Chief Technology Officer, the Chairman of our board of directors, our Deputy Chief Executive
Officer, our Chief Financial Officer and our then-Vice President of Research and Development (now Chief Technologies Officer), with respect
to the year ended December 31, 2021. 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. Steven H. Lavin |
||||||||||||||||||||
|
Chairman of the Board of Directors(5)
|
$ |
180 |
$ |
- |
$ |
281 |
- |
$ |
461 |
|||||||||||
|
Mr. Sharon Fima |
||||||||||||||||||||
|
Chief Executive Officer & Chief Technology Officer(6)
|
240 |
- |
83 |
- |
323 |
|||||||||||||||
|
Mr. Omri Schanin |
||||||||||||||||||||
|
Deputy Chief Executive Officer
|
190 |
46 |
121 |
- |
357 |
|||||||||||||||
|
Mr. Guy Hefer |
||||||||||||||||||||
|
Chief Financial Officer
|
193 |
39 |
116 |
- |
348 |
|||||||||||||||
|
Mr. Dan Kozlovski |
||||||||||||||||||||
|
Vice-President, Research & Development (later Chief Technologies Officer)
|
$ |
170 |
$ |
48 |
$ |
24 |
- |
$ |
242 |
|||||||||||
| (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 with respect to 2021. |
| (3) |
Represents the equity-based compensation expenses recorded in our consolidated financial statements for the year ended December 31,
2021, 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 in this Annual Report on Form 20-F. |
| (4) |
Represents benefits and perquisites such as car, phone and social benefits. |
| (5) |
Mr. Levin resigned his position as Chairman on January 24, 2022. |
| (6) |
Mr. Fima resigned as Chief Executive Officer & Chief Technology Officer 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 “Item 3. — Key Information —
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.
47
The material employment terms for Mr. Kaufman, our
Chief Executive Officer, are as follows: (1) a gross annual salary of NIS 564,000 ($176,000); (2) reimbursement of annual travel expenses
of up to NIS 60,000 ($19,000); (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 ($87,000), subject to
his meeting certain performance milestones as determined by our Board of Directors on an annual basis; (5) termination of the employment
relationship upon provision of six months’ advance notice by either party; (6) severance pay equal to 25% of the gross annual salary
upon termination of Mr. Kaufman’s employment by us, not for cause, following three to twelve months of service, or 50% following
twelve or more months of service (or 50% of these amounts upon Mr. Kaufman’s resignation); and (7) social benefits that we pay on
behalf of officers, such as payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance Policy),
pension, severance, risk insurance (e.g., life, or work disability insurance), payments for social security and tax gross-up payments,
vacation, medical insurance and benefits, convalescence or recreation pay and other benefits and perquisites consistent with our policies,
such as inclusion in our directors’ and officers’ liability insurance policy, and provision of indemnification, exculpation
and exemption undertakings to the fullest extent permitted by the Companies Law.
The material terms for Mr. Kaiser, the Chairman of
our Board of Directors, are as follows: (1) an annual fee of $150,000, to be paid in four equal quarterly installments in USD or in NIS
at the then-current exchange rate, which will automatically increase by an amount equal to seven percent at the end of each year of service;
(2) reimbursement of annual travel expenses of up to $18,000; (3) options to purchase 350,000 ordinary shares (currently equivalent to
35,000 ADSs), vesting over three years from the date of his appointment as Chairman, pursuant to which 1/12 will vest every quarter until
fully vested, expiring one year following Mr. Kaiser’s cessation of service in all then-applicable capacities, but in any case after
four years, with an exercise price of $0.519 per ordinary share (currently equivalent to $5.19 per ADS) and subject to acceleration upon
termination pursuant to our sale or change in control; (4) an annual bonus equal to 50% of the bonus awarded to the Chief Executive Officer
in the applicable year; (5) severance pay equal to 12.5% of Mr. Kaiser’s annual fee upon the involuntary termination of his directorship,
not for cause, following three to twelve months of service, or 25% following twelve or more months of service (or 50% of these amounts
upon Mr. Kaiser’s resignation); and (6) other benefits and perquisites consistent with our policies, such as inclusion in our directors’
and officers’ liability insurance policy, and provision of indemnification, exculpation and exemption undertakings to the fullest
extent permitted by the Companies Law.
In addition, we pay fees to our non-executive directors
in return for their service on our board of directors, in accordance with our compensation policy.
Our other employees are employed under the terms prescribed in their respective employment
contracts. The employees are entitled to the social benefits prescribed by law and as otherwise provided in their agreements. These agreements
each contain provisions standard for a company in our industry regarding non-competition, confidentiality of information and assignment
of inventions. Under currently applicable labor laws, we may not be able to enforce covenants not to compete and therefore may be unable
to prevent our competitors from benefiting from the expertise of some of our former employees. See “Item 3.—Key Information—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 “Item 3.—Key
Information—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.”
Equity Incentive 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 or a committee that was designated by the
Board 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).
48
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 MeaTech 3D 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.
As of December 31, 2021, our Board of Directors
had approved the issuance, under our incentive plans, of options and RSUs to purchase 9,444,145 ordinary shares at an average exercise
price of $0.78 per share.
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 11 directors. Pursuant to our articles of association, the vote required
to appoint a director is a simple majority vote of holders of our voting shares participating and voting at the relevant meeting.
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. The appointment of a director by the
board shall be in effect until the following annual general meeting of the shareholders or until the end of his tenure in accordance with
our articles of association. 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.
49
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. See “—
External directors — Qualifications of external directors.” 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.
Alternate Directors
Our articles of association provide, as allowed by the Companies Law, that any director
may, by written notice to us, appoint another person who is qualified to serve as a director to serve as an alternate director. An alternate
director has the same rights and responsibilities as a director, except for the right to appoint an alternate director. The appointment
of an alternate director does not negate the responsibilities of the appointing director, who will continue to bear responsibility for
the actions of the alternate, giving consideration to the circumstances of the appointment. The Companies Law specifies certain qualifications
for alternate directors, and provides that one director may not serve as an alternate on the board of directors for another director,
nor as an alternate on a committee of which he or she is already a member. As of the date of this Annual Report on Form 20-F, no director
has appointed any other person as an alternate director.
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.
50
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.
51
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:
| • |
the office holder’s relatives (spouse, siblings, parents, grandparents, descendants, spouse’s
descendants and the spouses of any of these people); or |
| • |
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. |
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:
| • |
a transaction other than in the ordinary course of business; |
| • |
a transaction that is not on market terms; or |
| • |
a transaction that may have a material impact on the company’s profitability, assets or liabilities.
|
52
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:
| • |
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 |
| • |
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. |
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.
53
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.
Duties of Shareholders
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:
| • |
an amendment to the articles of association; |
| • |
an increase in the company’s authorized share capital; |
| • |
a merger; and |
| • |
the approval of related party transactions and acts of office holders that require shareholder approval.
|
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.
54
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:
| • |
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; |
| • |
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; |
| • |
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; |
| • |
a financial obligation imposed on the officeholder for the benefit of all of the parties damaged by the
violation of an administrative proceeding; |
| • |
expenses incurred by an officeholder in connection with an Administrative Proceeding conducted in his regard,
including reasonable litigation expenses, and including attorneys’ fees; |
| • |
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 |
| • |
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:
| • |
Breach of the duty of care to the Company or to any other person; |
| • |
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; |
| • |
financial liability imposed upon him in favor of another person; |
| • |
financial liability imposed on the officeholder for the benefit of all of the parties damaged by the violation
of an administrative proceeding; |
| • |
expenses incurred or to be incurred by an officer in connection with an Administrative Proceeding, including
reasonable litigation expenses, and including attorneys’ fees; |
| • |
Expenses incurred or to be incurred in connection with a proceeding under the Antitrust Law, including
reasonable litigation expenses, and including attorneys’ fees; and |
| • |
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; |
| • |
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent
conduct of the office holder; |
55
| • |
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, 2021, we had 38 employees
based at our office and laboratory, then in Ness Ziona, Israel, while our Belgium-based subsidiaries had 14 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.
56
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 MeaTech 3D
Ltd., 5 David Fikes St., Rehovot 7638205, Israel.
|
Shares Beneficially Owned |
||||||||
|
Name of Beneficial Owner |
Number |
Percentage |
||||||
|
Directors and executive officers |
||||||||
|
Arik Kaufman(1)
|
129,170 |
* |
||||||
|
Omri Schanin(2)
|
3,626,900 |
2.9 |
% | |||||
|
Guy Hefer(3)
|
104,170 |
* |
||||||
|
Dan Kozlovski(4)
|
83,342 |
* |
||||||
|
Yaron Kaiser(5)
|
1,454,230 |
1.2 |
% | |||||
|
David Gerbi(6)
|
12,500 |
* |
||||||
|
Eli Arad(7)
|
12,500 |
* |
||||||
|
Sari Singer |
— |
— |
||||||
|
All directors and executive officers as a group
(8 persons) |
5,422,812 |
4.3 |
% | |||||
* Less than one percent (1%).
| (1) |
Consists of 87,510 ordinary shares and options to purchase 41,660 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. |
| (2) |
Consists of 3,522,730 ordinary shares and options to purchase 104,170 ordinary shares exercisable within 60 days of the date of this
annual report, with an exercise price of NIS 3.49 ($1.07). These options expire on March 24, 2025. |
| (3) |
Consists of options to purchase 104,170 ordinary shares exercisable within 60 days of the date of this annual report, with an exercise
price of NIS 3.49 ($1.07). These options expire on March 24, 2025. |
| (4) |
Consists of options to purchase 83,342 ordinary shares exercisable within 60 days of the date of this annual report, with an exercise
price of NIS 1.90 ($0.58). These options expire on August 5, 2024. |
| (5) |
Consists of 1,425,070 ordinary shares and options to purchase 29,160 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. |
| (6) |
Consists of 10,000 ordinary shares and RSUs vesting into 2,500 ordinary shares within 60 days of the date of this annual report.
|
| (7) |
Consists of 10,000 ordinary shares and RSUs vesting into 2,500 ordinary shares within 60 days of the date of this annual report.
|
57
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. The percentage of shares beneficially owned is based on 126,529,867 ordinary shares outstanding
as of the date of this Annual Report on Form 20-F.
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, 2022, there were 28 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.
|
Ordinary Shares Beneficially Owned |
||||||||
|
Name of Beneficial Owner |
Number |
Percentage |
||||||
|
5% or greater shareholders |
||||||||
|
Shimon Cohen |
9,859,120 |
(1) |
7.8 |
% | ||||
(1) Based on information provided to the Company on January 20, 2022 by Mr. Cohen regarding his holdings
and those of companies through which he claims share ownership.
B. Related Party Transactions
The following is a description
of the material transactions we entered into with related parties since the beginning of 2019. 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 MeaTech warrants to receive ordinary shares, including to the
following 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, our Depuy Chief Executive Officer; and (2) warrants to receive 1,291,158 ordinary shares to
Liran Damati, then a substantial shareholder. The warrants have no exercise price and vest upon the achievement of certain milestones
(for further details, see “Item 4.—Information on the Company—History and Development of the Company”).
58
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 $1.03) 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 $0.76)
per share and options to purchase 1,967,328 ordinary shares at an exercise price of NIS 3.486 (approximately $1.07) 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.
59
|
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.
In November 2020, the ISA initiated an administrative
proceeding claiming negligent misstatement regarding certain immediate and periodic reports published by our predecessor (Ophectra) during
the years 2017 and 2018, prior to the merger with MeaTech. These reports relate to Ophectra’s activities prior to establishment
of the settlement fund in connection with the merger. In February 2021, the trustee of the settlement fund informed us that the ISA views
us as a party to this proceeding, notwithstanding the settlement and establishment of the settlement fund. This proceeding is of an administrative
nature and carries a potential penalty in the form of a monetary fine which, under applicable Israeli law, could be as high as NIS 5 million.
We were advised that the maximum fine likely to be imposed in this case, if any, is $0.26 million (NIS 0.85 million). In April 2021, following
negotiations with the ISA, we agreed to settle the matter for $0.21 million (NIS 0.7 million). The settlement is subject to approval of
the ISA’s Enforcement Committee.
In February 2021, a civil claim was lodged
for which the settlement fund is a respondent, relating to Ophectra's activities prior to establishment of the settlement fund, in an
amount of USD 0.8 million (NIS 2.5 million). We believe that there is a low probability of a final judgment against the settlement fund,
relating to Ophectra's activities prior to establishment of the settlement fund, in an amount of $0.75 million (NIS 2.5 million). As described
in “Item 4.—Information on the Company—History and Development of the Company” above, we do not bear any liability
for such claims beyond the exercise value of the Therapin asset, which was the sole asset we retained from Ophectra in the merger.
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, 2021, the following significant changes have occurred:
Changes in Executive Roles
In January 2022, Mr. Sharon Fima stepped down from the positions of Chief Executive
Officer, Chief Technology Officer and later Director, citing the Company’s current stage of development. Messrs. Steven H. Lavin
(Chairman) and Danny Ayalon also stepped down from the Board of Directors, citing the Company’s current stage of development and
to pursue other ventures, and Mr. Omri Schanin stepped down from the Board of Directors and continues to serve as MeaTech’s Deputy
CEO.
The Company’s Board of Directors appointed Mr. Arik Kaufman to the position of Chief Executive Officer and Mr. Yaron Kaiser to the position of Chairman of the Board of Directors.
The Company’s Board of Directors appointed Mr. Arik Kaufman to the position of Chief Executive Officer and Mr. Yaron Kaiser to the position of Chairman of the Board of Directors.
|
ITEM 9. |
THE OFFER AND LISTING |
A. Offer and Listing Details
ADSs
The ADSs, representing our ordinary shares, have been trading on Nasdaq under the symbol
“MITC” since March 12, 2021. Prior to that date, there was no public trading market for the ADSs.
60
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 March 12, 2021, 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.”
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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-resident of Israel 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%. In addition, capital gains generated by an individual claiming deduction of financing expenses
in respect of 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 2021, 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 2021 exceeded NIS 647,640.
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 own, 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.
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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 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 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 resident, and, in the absence
of such declarations or exemptions, may require the purchaser of the shares to withhold tax.
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. 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 647,640 for 2021 (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.
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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:
| • |
an individual who is a citizen or resident of the United States, |
| • |
a domestic corporation (or other entity taxable as a corporation); |
| • |
an estate the income of which is subject to United States federal income taxation regardless of its source; or |
| • |
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. |
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.
Dividends
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 will 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.
Because we are not a United States corporation, the dividend will not be eligible for the dividends-received deduction generally allowed
to United States corporations in respect of dividends received from other United States corporations. 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.
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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:
| • |
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 |
| • |
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. |
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
should be treated as a PFIC for the preceding taxable year. However, the determination of our PFIC status is made annually based on the
factual tests described below. Consequently, while we may be 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 our gross 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.
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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. While we intend to provide to U.S. Holders the information required to make
a valid QEF election, we cannot provide any assurances that we will in fact provide such information.
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.
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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.
Medicare tax
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.
67
We maintain a corporate website at www.meatech3d.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 MeaTech, 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.
|
ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURE ON MARKET RISK |
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 22 to our financial statements.
|
ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
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.
68
Fees and Expenses
Pursuant to the terms of the deposit agreement, the holders of the ADSs will be required
to pay the following fees:
|
Persons depositing or withdrawing ordinary shares or ADS holders must pay |
|
For: |
|
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) |
|
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 |
|
|
|
|
|
$.05 (or less) per ADS |
|
Any cash distribution to ADS holders |
|
|
|
|
|
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 |
|
Distribution of securities distributed to holders of deposited securities (including rights) that are distributed
by the depositary to ADS holders |
|
|
|
|
|
$.05 (or less) per ADS per calendar year |
|
Depositary services |
|
|
|
|
|
Registration or transfer fees |
|
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 |
|
|
|
|
|
Expenses of the depositary |
|
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) Converting foreign currency to U.S. dollars |
|
|
|
|
|
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 |
|
As necessary |
|
|
|
|
|
Any charges incurred by the depositary or its agents for servicing the deposited securities |
|
As necessary |
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.
69
PART II
|
ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not applicable.
|
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS |
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.
|
ITEM 15. |
CONTROLS AND PROCEDURES |
A. Disclosure Controls and Procedures
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.
B. Management’s Annual Report on Internal Control over Financial Reporting
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, 2020, 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.
C. Attestation Report of the Registered Public Accounting Firm
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.
D. Changes in Internal Control over Financing Reporting
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.
|
ITEM 16. |
[RESERVED] |
|
ITEM 16A. |
AUDIT COMMITTEE FINANCIAL EXPERT |
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.
70
|
ITEM 16B. |
CODE OF ETHICS |
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.meatech3d.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.
On April 18, 2021, in
conjunction with the adoption of the Code of Ethics, we granted a waiver to Mr. Steven H. Lavin, at the time the Chairman of our Board
of Directors, from provisions of the Code of Ethics where and to the extent that these conflict with the provisions of agreements to which
Mr. Lavin and we are parties.
|
ITEM 16C. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Fees Paid to Independent Registered Public Accounting Firm
Somekh Chaikin, Tel Aviv, Israel (PCAOB ID 1057), a member firm of KPMG International,
has served as our independent registered public accounting firm for 2021 and 2020. Following are Somekh Chaikin fees for professional
services in each of the respective fiscal years:
|
|
|
Year ended December 31, |
| |||||
|
|
|
2021 |
|
|
2020 |
| ||
|
|
|
USD, in thousands |
| |||||
|
|
|
|
| |||||
|
Audit fees(1) |
|
|
176 |
145 |
| |||
|
Tax fees(2) |
|
|
3 |
10 |
| |||
|
Total |
|
|
179 |
155 |
| |||
|
(1) |
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.
|
|
|
|
|
(2) |
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. |
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.
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
71
ITEM 16G.
CORPORATE GOVERNANCE
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:
| • |
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). |
| • |
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. |
| • |
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. |
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
72
PART III
ITEM 17.
FINANCIAL STATEMENTS
The Registrant has responded to Item 18 in lieu of responding to this Item.
ITEM 18.
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.
73
MeaTech 3D Ltd.
Index to Consolidated Financial Statements
|
Financial Information of MeaTech 3D Ltd.
|
Page
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID No.
|
F-2
|
|
Consolidated Financial Statements:
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
F-1
To the Shareholders and Board of Directors
MeaTech 3D Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of MeaTech 3D Ltd. (“the Company”) as of December 31, 2021 and 2020, the related consolidated statements of income and comprehensive loss, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1c to the consolidated financial statements, the Company has incurred recurring losses from operations that, together with other matters described in the aforesaid note, raise substantial doubt about its ability to continue as a going concern Management’s plans in regard to these matters are also described in Note 1c. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Somekh Chaikin
Member Firm of KPMG International
We have served as the Company’s auditor since 2020.
March 24, 2022
F - 2
|
December 31
|
December 31
|
||||||||||
|
2021
|
2020
|
||||||||||
|
|
USD thousands
|
USD thousands
|
|||||||||
|
Current assets
|
|||||||||||
|
Cash and cash equivalents
|
4
|
|
|
||||||||
|
Other investment
|
6
|
|
|
||||||||
|
Receivables and prepaid expenses
|
5
|
|
|
||||||||
|
Total current assets
|
|
|
|||||||||
|
Non-current assets
|
|||||||||||
|
Restricted deposits
|
|
|
|
||||||||
|
Other investment
|
6
|
|
|||||||||
|
Right-of-use asset
|
19
|
|
|
||||||||
| Intangible assets | 16 | ||||||||||
|
Fixed assets, net
|
7
|
|
|
||||||||
|
Total non-current assets
|
|
|
|||||||||
|
Total Assets
|
|
|
|||||||||
|
Current liabilities
|
|||||||||||
|
Trade payables
|
|
|
|||||||||
|
Other payables
|
8
|
|
|
||||||||
|
Current maturities of lease liabilities
|
19
|
|
|
||||||||
|
Derivative instrument
|
|
|
|
|
|||||||
|
Total current liabilities
|
|
|
|||||||||
|
Non-current liabilities
|
|||||||||||
|
Long-term lease liabilities
|
19
|
|
|
||||||||
|
Total non-current liabilities
|
|
|
|||||||||
|
Equity
|
|
||||||||||
|
Share capital and premium on shares
|
|
|
|||||||||
|
Capital reserves
|
|
|
|||||||||
|
Currency translation differences reserve
|
|
|
|||||||||
|
Accumulated deficit
|
(
|
)
|
(
|
)
|
|||||||
|
Total Equity
|
|
|
|||||||||
|
Total liabilities and Equity
|
|
|
|||||||||
F - 3
MeaTech 3D Ltd.
|
Year ended
December 31,
|
Year ended
December 31,
|
Year ended
December 31,
|
|||||||||||||
|
2021
|
2020
|
2019
|
|||||||||||||
|
|
USD thousands,
except share
data
|
USD thousands,
except share
data
|
USD thousands,
except share
data
|
||||||||||||
|
Research and development expenses
|
11
|
|
|
||||||||||||
|
Marketing expenses
|
12
|
|
|
||||||||||||
|
General and administrative expenses
|
13
|
|
|
|
|||||||||||
|
Public listing expenses
|
|
|
|
|
|||||||||||
|
Operating loss
|
|
|
|
||||||||||||
|
Financing income |
14 | ||||||||||||||
|
Financing expenses
|
14
|
|
|
|
|
||||||||||
|
Loss for the year
|
|
|
|
||||||||||||
|
Capital reserve for financial assets at fair value that will not be transferred to profit or loss
|
|
|
|
|
|||||||||||
|
Currency translation differences loss (income) that will not be transferred to profit or loss over ILS
|
(
|
)
|
(
|
)
|
(
|
) | |||||||||
|
Currency translation differences loss (income) that might be transferred to profit or loss over EUR |
|||||||||||||||
|
Total comprehensive loss for the year
|
|
|
|
||||||||||||
|
Loss per ordinary share, no par value (USD)
|
|||||||||||||||
|
Basic and diluted loss per share (USD)
|
|
|
|
||||||||||||
|
Weighted-average number of shares outstanding - basic and diluted (shares)
|
|
|
|
|
|||||||||||
F - 4
MeaTech 3D Ltd.
|
Share
capital and capital premium |
Fair value of
financial assets
reserve
|
Transactions
with related
parties reserve
|
Currency
translation
differences
reserve
|
Share-based
payments
reserve
|
Accumulated
deficit
|
Total
|
||||||||||||||||||||||
|
USD thousands
|
||||||||||||||||||||||||||||
|
Balance as at January 1, 2021
|
|
(
|
) |
|
|
|
(
|
)
|
|
|||||||||||||||||||
|
Share-based payments
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Issuance of shares and warrants, net
|
|
|
|
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|
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|
Exercise of options
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Loss for the year
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Balance as at December 31, 2021
|
|
(
|
)
|
|
|
|
(
|
)
|
|
|||||||||||||||||||
|
Balance as at January 1, 2020
|
|
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||||
| Share-Based Payment |
|
|
|
|
|
|||||||||||||||||||||||
| Reverse acquisition |
|
|
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|
|
|||||||||||||||||||||||
|
Issuance of shares and warrants, net
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exercise of options – Investors |
|
|
|
|
|
|||||||||||||||||||||||
|
Exercise of options – Share-Based Payment |
|
|
|
( |
) |
|
||||||||||||||||||||||
|
Other comprehensive income (loss)
|
|
(
|
) |
|
|
|
|
|
||||||||||||||||||||
|
Loss for the year
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Balance as at December 31, 2020
|
|
(
|
) |
|
|
|
(
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)
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|
|||||||||||||||||||
| Balance as at January 1, 2019 |
|
|
|
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( |
) | ( |
) | |||||||||||||||||||
|
Issuance of shares and warrants, net |
|
|
|
|
|
|||||||||||||||||||||||
|
Other comprehensive income |
|
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|
|
|||||||||||||||||||||||
| Transaction with a related party |
|
|
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|
|||||||||||||||||||||||
|
Loss for the year
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Balance as at December 31, 2019
|
|
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||||
F - 5
MeaTech 3D Ltd.
|
Year ended
December 31,
2021
|
Year ended
December 31,
2020
|
Year ended
December 31,
2019
|
|||||||||||
|
USD
thousands
|
USD
thousands
|
USD
thousands
|
|||||||||||
|
Cash flows - operating activities
|
|||||||||||||
|
Net Loss for the period
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Adjustments:
|
|||||||||||||
|
Depreciation and amortization
|
|
|
|
||||||||||
|
Change in fair value of derivative
|
(
|
)
|
(
|
) |
|
||||||||
|
Change in fair value of other investment
|
6 |
(
|
)
|
(
|
) |
|
|||||||
|
Changes in net foreign exchange expenses |
|||||||||||||
|
Share-based payment expenses
|
|
|
|
||||||||||
|
Public listing expenses
|
|
|
|
||||||||||
|
Changes in asset and liability items:
|
|||||||||||||
|
Decrease (increase) in receivables
|
(
|
) |
|
|
(
|
)
|
|||||||
|
Increase (decrease) in trade payables
|
(
|
) |
|
|
|||||||||
|
Increase in other payables
|
|
|
|
||||||||||
|
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
(
|
) | |||||||
|
Cash flows - investment activities
|
|||||||||||||
|
Acquisition of fixed assets
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Increase in restricted deposit |
(
|
)
|
(
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)
|
(
|
) | |||||||
|
Loan provided |
(
|
)
|
|
(
|
) | ||||||||
|
Acquisition of other investments, net of cash acquired |
16 |
(
|
) |
(
|
)
|
|
|||||||
|
|
|||||||||||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Cash flows - financing activities
|
|||||||||||||
|
Proceeds from issuance of shares and warrants
|
|
|
|
||||||||||
|
Issuance costs
|
(
|
)
|
(
|
)
|
(
|
) | |||||||
|
Repayment of liability for lease
|
(
|
)
|
(
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)
|
(
|
) | |||||||
|
Proceeds on account of other investment
|
|
|
|
||||||||||
|
Proceeds on account of capital issuance
|
|
|
|
||||||||||
|
Proceeds with regard to derivative
|
|
|
|
||||||||||
|
Proceeds from exercise of share options
|
|
|
|
||||||||||
|
Net cash from financing activities
|
|
|
|
||||||||||
|
Increase in cash and cash equivalents
|
|
|
|
||||||||||
|
Effect of exchange differences on cash and cash equivalents
|
(
|
) |
|
|
|||||||||
|
Cash and cash equivalents at the beginning of the period
|
|
|
|
||||||||||
|
Cash balance and cash equivalents at end of period
|
|
|
|
||||||||||
|
Non cash activities
|
|||||||||||||
|
Purchase of fixed assets
|
|
|
|
||||||||||
|
Issue of shares and options against intangible asset
|
|
|
|
||||||||||
Note 1 – General
| A. |
Reporting entity
|
MeaTech 3D Ltd. (formerly Ophectra Real Estate and Investments Ltd. and Meat-Tech 3D Ltd.) (the “Company”) was incorporated in Israel on July 22, 1992 as a private company limited by shares in accordance with the Companies Ordinance, 1983, and later a publicly-traded company whose ordinary shares were listed for trade on the Tel Aviv Stock Exchange (TASE). The Company’s official address is 5 David Fikes St., Rehovot, Israel.
The Company’s foodtech activities were commenced in July 2019 by a company called MeaTech Ltd., which merged with the Company in January 2020 and became a fully-owned subsidiary, now called MeaTech MT Ltd. As the Company was the surviving entity of the merger, and continued the pre-merger business operations, utilizing the pre-merger management and employees, of MeaTech Ltd., the transaction was treated as a reverse acquisition that does not constitute a business combination.
The Company is developing a suite of advanced high-throughput manufacturing technologies to produce cell-based alternative protein products for cultivated, sustainable meat production, and focused on developing premium, center-of-plate meat products, including development of high-throughput bioprinting systems.
| B. |
Material events in the reporting period
|
| (1) |
Acquisition of subsidiary |
In February 2021, the Company acquired Belgian cultured fat developer Peace of Meat BV. For further details, see Note 16 below.
| (2) |
Initial public offering
|
On March 12, 2021, the Company completed its Initial Public Offering on the Nasdaq of
| (3) |
Effects of the spread of COVID-19 |
|
To date, the impact of the COVID-19 pandemic on the Company’s operations has been mainly limited to a temporary facility closure in the context of a government-mandated general lockdown, which temporary delayed certain development activities. The Company estimates that as of the date of approval of the financial statements, the COVID-19 pandemic is not expected to affect the Company's operations. However, the Company is unable to assess with certainty the extent of future impact, in part due to the uncertainty regarding the duration of the COVID-19 pandemic, its force and its effects on the markets in which the Company operates and the effects of possible government measures to prevent the spread of the virus. |
F - 7
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 1 – General (cont.)
| C. |
Going Concern
|
Since inception, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit of USD 37.0 million. The Company has financed its operations mainly through fundraising from various investors.
The Company’s management expects that the Company will continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash flows and cash balances as of December 31, 2021, management is of the opinion that its existing cash will be sufficient to fund operations until Q4 2022. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans include the continue securing sufficient financing through the sale of additional equity securities or capital inflows from strategic partnerships. Additional funds may not be available when the Company needs them on terms that are acceptable to it, or at all. If the Company is unsuccessful securing sufficient financing, it may need to cease operations.
The financial statements include no adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.
| D. |
Definitions:
|
In these financial statements:
(1) The Company - MeaTech 3D Ltd.
(2) The Group – The Company and its subsidiaries, MeaTech MT Ltd., formerly known as MeaTech Ltd, Meatech Europe BV and Peace of Meat B.V. (hereafter “Peace Of Meat” OR “POM”)
(3) Related Party - as defined in IAS 24 (revised).
(4) USD - United States Dollar
(5) NIS – New Israeli Shekel
(6) EUR – Euro
(7) ADS – American Depositary Shares
F - 8
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 2 - Basis of Preparation of the Financial Statements
| A. |
Statement of compliance with IFRS
|
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The financial statements were authorized for issue by the company’s board of directors on March 24, 2022.
| B. |
Functional currency and presentation currency
|
The NIS is the currency that represents the primary economic environment in which the Company and its Israeli subsidiary operate, and is therefore the functional currency of their operations. The Euro is the currency that represents the primary economic environment in which the Company’s European subsidiaries operate, and is therefore the functional currency of their operations. Nonetheless, for reporting purposes, the consolidated financial statements, which were prepared on the basis of the functional currencies, were translated into US Dollars, which the Company selected as its presentation currency, as its securities are traded on the Nasdaq Capital Markets, and in order to make the Company’s financial statements more accessible to U.S.- based investors.
Assets and liabilities were translated at the exchange rate of the end of the period; expenses and income were translated at the exchange rate at the time they were generated. Exchange rate differentials generated due to such translation are attributed to the Currency translation differences reserve.
|
Currency |
USD - ILS | USD - EUR | |||||||||||||
|
Period |
2021 | 2020 | 2019 | 2021 | |||||||||||
|
December 31 |
|||||||||||||||
|
Year Average |
|||||||||||||||
| C. |
Basis of Measurement
|
The financial statements have been prepared on the historical cost basis except for provisions.
For further information regarding the measurement of these liabilities, see Note 3 regarding significant accounting policies.
| D. |
Operating Cycle
|
The Company’s operating cycle is one year.
| E. |
Use of Estimates and Judgments
|
Use of estimates
The preparation of financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
F - 9
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 2 - Basis of Preparation of the Financial Statements (cont.)
| E. |
Use of Estimates and Judgments (cont.)
|
The preparation of accounting estimates used in the preparation of the Company’s financial statements requires that the Company’s management makes assumptions regarding circumstances and events that involve considerable uncertainty. The Company’s management prepares the estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Further information about the assumptions that were used to determine fair value is included in the following notes:
• Note 6, on other investments;
• Note 10, on share-based payments;
• Note 16, on intangible assets;
Determination of fair value
Preparation of the financial statements requires the Company to determine the fair value of certain assets and liabilities.
When determining the fair value of an asset or liability, the Company uses observable market data as much as possible. There are three levels of fair value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly
• Level 3: inputs that are not based on observable market data (unobservable inputs).
F - 10
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 3 - Significant Accounting Policies
| A. |
Financial Instruments:
|
| (1) |
Non-derivative financial assets
|
Initial recognition and measurement of financial assets
The Company initially recognizes trade receivables and debt instruments issued on the date that they are created. All other financial assets are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. A financial asset is initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset. A trade receivable without a significant financing component is initially measured at the transaction price. Receivables originating from contract assets are initially measured at the carrying amount of the contract assets on the date classification was changed from contract asset to receivables.
Derecognition of financial assets
Financial assets are derecognized when the contractual rights of the Company to the cash flows from the asset expire, or the Company transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset were transferred. When the Company retains substantially all of the risks and rewards of ownership of the financial asset, it continues to recognize the financial asset.
Classification of financial assets into categories and the accounting treatment of each category
Financial assets are classified at initial recognition to one of the following measurement categories: amortized cost; fair value through other comprehensive income – investments in debt instruments; fair value through other comprehensive income – investments in equity instruments; or fair value through profit or loss.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at fair value through profit or loss:
| - |
It is held within a business model whose objective is to hold assets so as to collect contractual cash flows; and
|
| - |
The contractual terms of the financial asset give rise to cash flows representing solely payments of principal and interest on the principal amount outstanding on specified dates.
|
| (2) |
Non-derivative financial liabilities
|
Non-derivative financial liabilities include finance lease liabilities, trade and other payables.
Initial recognition of financial liabilities
The Company initially recognizes financial liabilities on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
Subsequent measurement of financial liabilities
Financial liabilities (other than financial liabilities at fair value through profit or loss) are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognized when the obligation of the Company, as specified in the agreement, expires or when it is discharged or cancelled.
F - 11
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 3 – Significant Accounting Policies (cont.)
A. Financial Instruments (cont.)
| (3) |
Share capital
|
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
| (4) |
Issuance of securities
|
The consideration received from the issuance of securities is attributed initially to financial liabilities that are measured each period at fair value through profit or loss, and then to financial liabilities that are measured only upon initial recognition at fair value. The remaining amount is the value of the equity component.
Direct issuance costs are attributed to the specific securities in respect of which they were incurred, whereas joint issuance costs are attributed to the securities on a proportionate basis according to the allocation of the consideration from the issuance of the securities.
| B. |
Impairment
|
Non-financial assets
Timing of impairment testing
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
Once a year and on the same date, or more frequently if there are indications of impairment, the Group estimates the recoverable amount of each cash generating unit that contains goodwill, or intangible assets that have indefinite useful lives or are unavailable for use.
Measurement of recoverable amount
The recoverable amount of an asset is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the assessments of market participants regarding the time value of money and the risks specific to the asset, for which the estimated future cash flows from the asset were not adjusted.
Recognition of impairment loss
An impairment loss is recognized if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.
Non-derivative financial assets
See note 6.
| C. |
Financing income and expenses
|
Financing income derives from changes in fair value of financial instruments mandatorily measured at fair value through profit or loss.
Financing expenses comprise mainly from bank fee expenses and lease liabilities interest expenses, which are recognized in profit or loss.
F - 12
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 3 – Significant Accounting Policies (cont.)
| D. |
Loss per share
|
The Company presents basic and diluted earnings or loss per share data for its ordinary shares. Basic earnings or loss per share is calculated by dividing the earnings or loss attributable to ordinary shareholders of the Company by the weighted-average number of ordinary shares outstanding during the year. Diluted earnings or loss per share is determined by adjusting the profit or loss attributable to ordinary shareholders of the Company and the weighted average-number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which comprise share options.
| E. |
Intangible Assets |
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss when incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company has the intention and sufficient resources to complete development and to use or sell the asset. As the Company’s development activities do not meet the standards for capitalization, research and development expenditure is recognized through profit or loss.
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
Other intangible assets
Other intangible assets, that are acquired by the Company, are measured at cost less accumulated amortization and accumulated impairment losses. See Note 16.
| F. |
Provisions
|
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
| G. |
Fixed assets
|
| (1) |
Recognition and measurement
|
Fixed asset items are measured at cost less accumulated depreciation and accumulated impairment losses.
The cost of a fixed asset includes expenditures that are directly attributable to the acquisition of the asset.
| (2) |
Depreciation
|
Depreciation is a systematic allocation of the depreciable amount of an asset over its estimated useful life. The depreciable amount is the cost of the asset or other amount that replaces the cost, less its residual value.
F - 13
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 3 – Significant Accounting Policies (cont.)
| G. |
Fixed assets (cont.)
|
An asset is depreciated from the date it is ready for use, namely, the date on which it reaches the location and condition required for it to operate in the manner intended by Management.
Depreciation is recognized in the statement of income on a straight-line basis over the estimated useful lives of each part of the fixed-asset item, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
| ● | Computers | ||
| ● |
Leasehold improvements |
||
| ● |
Laboratory equipment |
||
|
● |
Machinery and Equipment |
|
|
|
● |
Office furniture, equipment and accessories |
|
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting year and adjusted if appropriate.
| H. |
Leases
|
Determining whether an arrangement contains a lease
On the inception date of the lease, the Company determines whether the arrangement is a lease or contains a lease, while examining if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In its assessment of whether an arrangement conveys the right to control the use of an identified asset, the Company assesses whether it has the following two rights throughout the lease term:
| (a) |
The right to obtain substantially all the economic benefits from use of the identified asset; and
|
| (b) |
The right to direct the identified asset’s use.
|
For lease contracts that contain non-lease components, such as services or maintenance, that are related to a lease component, the company elected to account for the contract as a single lease component without separating the components.
Leased assets and lease liabilities
Contracts that award the Company control over the use of a leased asset for a period of time in exchange for consideration, are accounted for as leases. Upon initial recognition, the Company recognizes a liability at the present value of the balance of future lease payments (these payments do not include certain variable lease payments), and concurrently recognizes a right-of-use asset at the same amount of the lease liability, adjusted for any prepaid or accrued lease payments.
Since the interest rate implicit in the Company's leases is not readily determinable, the incremental borrowing rate of the lessee is used. Subsequent to initial recognition, the right-of-use asset is accounted for using the cost model and depreciated over the shorter of the lease term or useful life of the asset.
F - 14
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 3 – Significant Accounting Policies (cont.)
| H. |
Leases (cont.)
|
The lease term
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it is reasonably certain that the lessee will or will not exercise the option, respectively.
Depreciation of right-of-use asset
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciation and accumulated impairment losses and is adjusted for re-measurements of the lease liability. Depreciation is calculated on a straight-line basis over the shorter of the useful life or contractual lease period. The Company’s lease of its office and laboratory space is depreciated over a period of two years.
| I. |
Employee benefits
|
| (1) |
Post-employment benefits
|
The Company has a post-employment benefit plan, financed by deposits with insurance companies or with funds managed by a trustee, and classified as a defined contribution plan, under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees.
| (2) |
Short-term benefits
|
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided or upon the actual absence of the employee when the benefit is not accumulated.
A liability is recognized for the amount expected to be paid under short-term cash bonus if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
The employee benefits are classified, for measurement purposes, as short-term benefits or as other long-term benefits depending on when the Company expects the benefits to be wholly settled.
| J. |
Share-based compensation
|
Share-based compensation expense related to share awards is recognized based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the binomial option pricing model. The option pricing model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of the Company’s ordinary shares and the expected dividend yield of ordinary shares. The assumptions used to determine the fair value of the option awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. The Company recognizes compensation costs for awards conditioned only on continued service that have a graded vesting schedule using the accelerated method based on the multiple-option award approach. Forfeitures are accounted for as they occur.
F - 15
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 3 – Significant Accounting Policies (cont.)
| K. |
Basis of Consolidation |
Acquisition of a subsidiary
Upon the acquisition of a subsidiary, the Company exercises discretion when examining whether the transaction constitutes the acquisition of a business or acquisition of an asset, for the purpose of determining the accounting treatment of the transaction. Transactions in which the acquired company is not considered a business are accounted for as the acquisition of a group of assets and liabilities. In such transactions, the cost of acquisition, which includes transaction costs, is allocated proportionately to the acquired identifiable assets and liabilities, based on their proportionate fair value on the acquisition date. Furthermore, no goodwill is recognized and no deferred taxes are recognized in respect of the temporary differences existing on the acquisition date.
Consideration paid partly in the form of equity instruments, based on the quoted share price. Any additional consideration will be capitalized upon the achievement of defined milestones, which constitutes the variable consideration.
When the variable consideration depends on performance conditions, the Company has elected not to recognize the contingent consideration at the time of purchase, but rather if and when the contingent conditions occur and when the consideration is transferred or obliged to be transferred.
IFRS 3 includes a distinction between a transaction to acquire an operation is the acquisition of a "business" and the acquisition of a group of assets that according to the standard is not considered the acquisition of a "business". The aforementioned standard offers the optional concentration test so that if substantially all of the fair value of the acquired assets is attributable to a group of similar identifiable assets or to a single identifiable asset, this will not be the acquisition of a business
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
| L. |
Transactions with controlling shareholder |
Assets and liabilities included in a transaction with a controlling shareholder are measured at fair value on the date of the transaction. As the transaction is on the equity level, the Company includes the difference between the fair value and the consideration from the transaction in its equity.
| M. |
Government grants |
Government grants are recognized initially at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Unconditional government grants are recognized when the Group is entitled to receive them. Grants that compensate the Group for expenses incurred are presented as a deduction from the corresponding expense. Grants that compensate the Group for the cost of an asset are presented as a deduction from the related assets and are recognized in profit or loss on a systematic basis over the useful life of the asset.
F - 16
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 4 – Cash and Cash Equivalents
|
December 31 |
December 31 |
|||||||
|
2021
|
2020
|
|||||||
|
USD thousands
|
USD thousands
|
|||||||
|
Cash in USD
|
|
|
||||||
|
Cash in NIS
|
|
|
||||||
|
Cash in Euro
|
|
|
||||||
|
Total cash and cash equivalents
|
|
|
||||||
Note 5 – Receivables and Prepaid Expenses
|
December 31 |
December 31 |
|||||||
|
2021
|
2020
|
|||||||
|
USD thousands
|
USD thousands
|
|||||||
|
Institutions
|
|
|
||||||
|
Prepaid expenses
|
|
|
||||||
|
Other
|
|
|
||||||
|
|
|
|||||||
Note 6 – Other Investments
|
December 31 |
December 31 |
|||||||
|
2021
|
2020
|
|||||||
|
USD thousands
|
USD thousands
|
|||||||
|
Separation Agreement from Therapin (A) (1) |
|
|
||||||
|
Investment in Peace of Meat (B)
|
|
|
||||||
|
Total Other Investments
|
|
|
||||||
|
Developments in Other Investment |
USD thousands | |||
|
|
||||
|
As at January 1, 2021 |
||||
|
Initial investment in POM transferred to intangible asset |
( |
) | ||
|
Proceeds from Therapin asset |
( |
) | ||
|
Profit from increase in fair value |
||||
|
Effect of changes in exchange rates |
||||
|
As at December 31, 2021(1) |
(1)
F - 17
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 6 – Other Investments (cont.)
| A. |
Separation Agreement from Therapin
|
On May 26, 2020, following the approval of the Company's Board of Directors, the Company engaged in a separation agreement with Therapin, in which the Company had held 14.74 % of the issued and paid-up share capital. Pursuant to the separation agreement, the investment agreement under which the Company invested in Therapin an amount of USD 2.1 million (NIS 7.25 million) in return for allotment of shares and warrants of Therapin (the “Payment Amount”) was canceled, and replaced with a debt arrangement as follows:
| 1. |
Therapin committed to pay to the Company an amount of USD
|
| 2. |
The rest of the Payment Amount will be paid to the Company if, during the Payment Period, Therapin or a subsidiary completes an exit event, including listing on a stock exchange pursuant to a merger or IPO, and the Company will be given the option to receive shares in such merged company/issue, or payment of the remaining balance in cash.
|
| 3. |
During the Payment Period, if Therapin has not completed one of the transactions as set out in Section 2, then in the event that Therapin generates a distributable surplus, Therapin will pay the Company an amount equivalent to
|
| 4. |
In the event that, during or subsequent to the end of the Payment Period, Therapin distributes a dividend to its shareholders, and on that date there is a remaining outstanding balance of the Payment Amount, Therapin will pay the Company an amount equivalent to
|
| 5. |
As a result of the separation agreement, the Company is no longer a shareholder in Therapin, but rather a debtholder.
|
The engagement in the separation agreement was decided in light of the Company’s change in direction to focus on the development of cultured meat technology, using three-dimensional printing.
The Company re-measured the asset using a fair value measurement at approximately USD
The revaluation was accounted for in other comprehensive income in the amount of USD
During 2021, the Company received USD 149 thousand based on the agreement detailed above and recorded USD 193 thousand as re-valuation financing income in profit and loss.
| B. |
Investment in Peace Of Meat (‘POM’)
|
In October 2020, the Company announced that it had made an initial investment in Peace of Meat BV (POM), a leading developer of cultured fat products, in the amount of EUR 1 million (approximately USD 1.2 million) in return for approximately 5.65 % of the outstanding equity of POM, post-allocation, as part of its planned full acquisition of POM, which was completed on February 10, 2021. Following the acquisition, POM was consolidated within the group, refer to Note 16.
F - 18
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 7 – Fixed Assets, net
|
|
Computers |
Leasehold improvements |
Laboratory equipment |
Machinery and equipment |
Office furniture, equipment and accessories |
Total |
||||||||||||||||||||||
|
USD thousands |
||||||||||||||||||||||||||||
|
Cost |
|
|
|
|
|
|
||||||||||||||||||||||
|
Balance as at January 1, 2020 |
||||||||||||||||||||||||||||
|
Additions during the year |
||||||||||||||||||||||||||||
|
Effect of changes in exchange rates |
||||||||||||||||||||||||||||
|
Dispositions in the year |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Cost as at December 31, 2020 |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Accumulated depreciation |
||||||||||||||||||||||||||||
|
Balance as at January 1, 2020 |
||||||||||||||||||||||||||||
|
Depreciation during the year |
||||||||||||||||||||||||||||
|
Dispositions in the year |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Accumulated depreciation as at December 31, 2020 |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Depreciated balance as at December 31, 2020 |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance as at January 1, 2021 |
||||||||||||||||||||||||||||
|
Additions through acquisition of a subsidiary |
||||||||||||||||||||||||||||
|
Additions during the year |
||||||||||||||||||||||||||||
|
Effect of changes in exchange rates |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Cost as at December 31, 2021 |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Accumulated depreciation |
||||||||||||||||||||||||||||
|
Balance as at January 1, 2021 |
||||||||||||||||||||||||||||
|
Depreciation during the year |
||||||||||||||||||||||||||||
|
Effect of changes in exchange rates |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Accumulated depreciation as at December 31, 2021 |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Depreciated balance as at December 31, 2021 |
||||||||||||||||||||||||||||
During the year ended December 31, 2021, the Company acquired fixed assets on credit in the amount of USD
F - 19
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 8 – Other Payables
|
December 31 |
December 31 |
||||||||||
|
2021 |
2020 |
||||||||||
|
USD thousands
|
USD thousands
|
||||||||||
|
Accrued expenses
|
|
|
|||||||||
|
Employee benefits
|
|
|
|||||||||
|
Contingent liability
|
|
|
|
||||||||
| Subsidiary government grant | |||||||||||
|
Others
|
|
|
|||||||||
|
|
|
||||||||||
Note 9 – Capital and Reserves
|
Number of Ordinary Shares (thousand)
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Issued and paid-in share capital as at January 1 |
|
|
|
|||||||||
|
Issued in reverse merger
|
|
|
|
|||||||||
|
Exercise of share options during the period – Investor-related
|
|
|
|
|||||||||
|
Exercise of share options during the period – Share-Based Payment-related
|
|
|
|
|||||||||
|
Issued not for cash during the period (1) |
|
|||||||||||
|
Issued for cash during the period (2)
|
|
|
|
|||||||||
|
Issued and paid-in share capital as at December 31, 2021 |
|
|
|
|||||||||
|
Authorized share capital
|
|
|
|
|||||||||
| (1) |
In February 2021, the Company completed a purchase of all of the outstanding share capital not yet owned by the Company, of Belgian cultured fat developer Peace of Meat BV. See Note 16 for information regarding the issuance of shares as part of the consideration. As part of the IPO, options and rights previously held by the Company's founders and Series A Investors were issued to |
| (2) |
On March 12, 2021, the Company completed its Initial Public Offering (IPO) at the Nasdaq of
|
F - 20
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 10 – Share-based payments
The terms and conditions related to the grants of the share option programs are as follows (All granted options and restricted stock units (RSU) are non-tradable and physically-settled):
|
Date of grant and eligible recipients |
Terms of the instrument
|
No. of
ordinary shares
(thousands) |
Vesting Conditions
|
Contractual duration of the instrument
(years) |
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
Total options/RSUs exercisable/vesting into shares granted in the year ended December 31, 2021
|
|
F - 21
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 10 – Share-based payments (cont.)
|
A.
|
Number and weighted average exercise prices of options and RSUs
|
The number and weighted average exercise prices of options and RSUs are as follows:
|
Number of options
and RSUs
2021
|
Weighted average
exercise price
2021 NIS |
|||||||
|
Outstanding at January 1
|
|
|
||||||
|
Granted during the year
|
|
|
||||||
|
Forfeited during the year |
|
|
||||||
|
Exercised during the year(1)
|
|
|
||||||
|
Outstanding at December 31
|
|
|
||||||
|
Exercisable at December 31
|
|
|
||||||
(1)
Besides incentive options and RSUs, as of the balance sheet date the Company has issued securities exercisable into
F - 22
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 10 – Share-based payments (cont.)
|
B.
|
Information on measurement of fair value of share-based payment plans
|
The fair value at the dates the options and RSUs were awarded was estimated using a binomial option pricing model.
Breakdown of the parameters used for measuring fair value at the date the share-based payment plans were awarded:
|
Options/RSUs
|
||
|
Fair value at date awarded
|
NIS
|
|
|
Parameters taken into account in the fair value calculation:
|
||
|
Share price (NIS at date awarded)
|
|
|
|
Exercise price (NIS unlinked)
|
|
|
| Expected volatility |
|
|
|
Expected useful life
|
|
|
|
Risk-free interest rate
|
|
|
|
Expected rate of dividend
|
|
The expected volatility was determined on the basis of share price volatility in similar companies, due to the Company’s limited share price performance history since the date of the merger in January 2020 described in Note 1A above. The simplified method was used for estimating the expected useful life of the employee stock options. The estimated useful life of the options for consultants and officers is the full contractual life of the option. The risk-free interest rate was based on NIS-linked Israeli Government bonds until the time of the Company’s Nasdaq listing, and US Treasury notes thereafter, with time to maturity equivalent to the expected useful life of the options. Share price was used based on share prices on the TASE until the time of the Company’s Nasdaq Capital Markets listing, and on Nasdaq thereafter.
The total non-cashflow expenses recorded during the years ended December 31, 2021, 2020 and 2019, amounted to approximately USD 4 .0 million (NIS 12.7 million), USD 4 .0 million (NIS 13.1 million) and USD 0 , respectively.
F - 23
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 11 – Research and Development Expenses
|
Year ended
December 31,
|
Year ended
December 31,
|
Year ended |
||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
USD thousands
|
USD thousands
|
USD thousands
|
||||||||||
|
Salaries, wages and related expenses(1)
|
|
|
|
|||||||||
|
Share-based payment(1)
|
|
|
|
|||||||||
|
Materials
|
|
|
|
|||||||||
|
Professional services
|
|
|
|
|||||||||
|
Registration, drafting and filing of patents
|
|
|
|
|||||||||
|
Maintenance, office and software fees
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Insurance |
||||||||||||
|
Others
|
|
|
|
|||||||||
|
Total Research and Development Expenses |
|
|
|
|||||||||
|
(1)
|
Including expenses in respect of related parties - see Note 18. |
Note 12 – Marketing Expenses
|
Year ended
December 31,
|
Year ended
December 31,
|
Year ended |
||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
USD thousands
|
USD thousands
|
USD thousands
|
||||||||||
|
Salaries, wages and related expenses
|
|
|
|
|||||||||
|
Share-based payment(1) |
|
|
|
|||||||||
|
PR, advertisement and professional services
|
|
|
|
|||||||||
|
Maintenance, office and software fees
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
Total Marketing Expenses |
|
|
|
|||||||||
F - 24
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 13 – General and Administrative Expenses
|
Year ended
December 31,
|
Year ended
December 31,
|
Year ended
December 31,
|
||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
USD thousands
|
USD thousands
|
USD thousands
|
||||||||||
|
Salaries, wages and related expenses(1)
|
|
|
|
|||||||||
|
Share-based payment(1)
|
|
|
|
|||||||||
|
Legal and professional services(1)
|
|
|
|
|||||||||
|
Contingent liability expenses
|
|
|
|
|||||||||
|
Insurance
|
||||||||||||
|
Corporate costs
|
|
|
|
|||||||||
|
Maintenance, office and software fees
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
Total General and Administrative Expenses |
|
|
|
|||||||||
| (1) |
|
Note 14 – Financing Income and Expenses
|
Year ended
December 31,
|
Year ended
December 31,
|
Year ended
December 31,
|
||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
USD thousands |
USD thousands |
USD thousands
|
||||||||||
|
Financing Income
|
||||||||||||
|
Net change in fair value of financial instruments mandatorily measured at fair value through profit or loss
|
|
|
|
|||||||||
|
Financing Expenses
|
|
|
||||||||||
|
Net foreign exchange loss
|
|
|
|
|||||||||
|
Interest expense on lease liabilities
|
|
|
|
|||||||||
|
Bank interest and commission expenses
|
|
|
|
|||||||||
|
Total Financial expenses
|
|
|
|
|||||||||
|
|
||||||||||||
|
Financing expenses (income), net
|
|
|
(
|
) |
|
|||||||
F - 25
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 15 – Income Tax
| A. |
Details regarding the tax environment of the Company
|
| (1) |
Corporate tax rate
|
The tax rates applicable to the companies operating in Israel for the years 2020-2021 are 23
The tax rates applicable to the companies operating in Belgium for the years 2020-2021 are25
The tax rates applicable to the companies operating in Belgium for the years 2020-2021 are
| B. |
Tax Assessments
|
The Company has final tax assessments through 2012.
| C. |
Unrecognized carryforward losses and deferred taxes
|
As at December 31, 2021, the Group has estimated business losses carried forward in the amount of USD
Note 16 - Subsidiaries
In February 2021, the Company completed a purchase of all of the outstanding share capital not yet owned by the Company of Belgian cultured fat developer Peace of Meat BV for total consideration of up to EUR
The following summarizes the major classes of consideration at the acquisition date:
Total consideration
|
USD thousands
|
||||
|
Cash consideration at closing date
|
|
|||
|
Initial cash investment in acquiree
|
|
|||
|
Equity instruments issued (
|
|
|||
|
Acquisition-related costs (2)
|
|
|||
|
Total consideration as of consolidation date
|
|
|||
|
Contingent consideration (3)
|
|
|||
|
Total consideration subject to achievement of all milestones
|
|
|||
F - 26
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 16 - Subsidiaries (cont.)
| (1) |
The fair value of the ordinary shares issued was based on the share price of the Company at the closing date (February 10, 2021) of NIS
|
| (2) |
Acquisition-related costs include legal expenses and finder’s fees
|
| (3) |
Contingent consideration
The Company agreed to pay the selling shareholders and the finder an additional |
Identifiable assets acquired and liabilities assumed:
|
Peace Of Meat condensed Balance Sheet
|
USD thousands
|
|||
|
Current assets
|
|
|||
|
Non-current assets
|
|
|||
|
Current liabilities
|
(
|
)
|
||
|
Non-current liabilities
|
(
|
)
|
||
|
Tangible assets net
|
|
|||
F - 27
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 16 - Subsidiaries (cont.)
IPR&D – Intangible asset
Intangible asset that was recognized as a result of the acquisition and additions made by December 31, 2021 as follows:
|
Peace Of Meat initial consolidation effect
|
USD thousands
|
|||
|
Closing cash consideration and related acquisition costs |
|
|||
|
Shares consideration
|
|
|||
|
Initial cash investment in acquiree |
|
|||
|
Tangible assets, net
|
(
|
)
|
||
|
|
|
|||
|
Additional contributions post acquisition date according to milestone achievement:
|
||||
|
Cash consideration
|
|
|||
|
Payment liabilities
|
|
|||
|
Shares consideration ( |
|
|||
|
Total
|
|
|||
|
FX rate effect
|
(
|
)
|
||
|
Period end intangible asset balance
|
|
|||
|
The aggregate cash flows for the Group as a result of the acquisition in the Year ended December 31,2021 |
USD thousands
|
|||
|
Cash and cash equivalents paid
|
(
|
)
|
||
|
Cash and cash equivalents of the subsidiary
|
|
|||
|
Cash consideration for milestone achievement during the period
|
(
|
)
|
||
|
Net reduction of cash flow as of acquisition date
|
(
|
)
|
||
As of December 31, 2021, the recoverable amount of the in-process IPR&D was based on its value in use and was determined by discounting the future cash flows to be generated from it by using the discounted cash flows method, on the annual year test. The recoverable amount of the IPR&D exceeds their carrying amount, thus no impairment loss was recognized. The discount rate used for calculating intangible assets recoverable amount is
F - 28
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 17 – Contingent Liabilities
From time to time, the Company may be party to litigation or other legal proceedings that it considers to be a part of the ordinary course of its business. The Company is not currently involved in any legal proceedings that could reasonably be expected to have a material adverse effect on its business, prospects, financial condition or results of operations.
| A. |
In November 2020, the Israeli Securities Authority, or ISA, initiated an administrative proceeding claiming negligent misstatement regarding certain immediate and periodic reports published by the Company’s predecessor (Ophectra) during the years 2017 and 2018, prior to the merger with MeaTech and prior to establishment of the settlement fund in connection with the Merger. In February 2021, the trustee of the settlement fund informed the Company that the ISA views the Company as a party to this proceeding, notwithstanding the settlement and establishment of the settlement fund. This proceeding is of an administrative nature and carries a potential penalty in the form of a monetary fine which, under applicable Israeli law, could be as high as NIS
|
| B. |
In February 2021, a civil claim was lodged against the settlement fund, relating to Ophectra's activities prior to establishment of the settlement fund, in an amount of USD $
|
F - 29
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 18 – Related and Interested Parties
| A. |
Balances with related parties
|
|
Year ended |
Year ended |
Year ended |
||||||||||
|
December 31,
|
December 31,
|
December 31, |
||||||||||
|
2021
|
2020
|
2019 |
||||||||||
|
USD thousands
|
USD thousands
|
USD thousands |
||||||||||
|
Related companies receivables
|
|
|
||||||||||
|
Trade and other payables
|
|
|
||||||||||
| B. |
Expense amounts with respect to related parties
|
|
Year ended
December 31,
|
Year ended
December 31,
|
Year ended
December 31,
|
||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
USD thousands
|
USD thousands
|
USD thousands
|
||||||||||
|
General and administrative expenses
|
||||||||||||
|
Salaries, wages and related expenses
|
|
|
|
|||||||||
|
Legal and professional services
|
|
|
|
|||||||||
|
Share-based payments
|
|
|
|
|||||||||
|
Research & Development expenses |
||||||||||||
|
Salaries, wages and related |
||||||||||||
|
Share-based payments |
||||||||||||
| 1. |
Key Management Personnel
The Company recognizes four key management personnel as related parties, namely Mr. Sharon Fima – former Chief Executive Officer (CEO), served as CEO un until January 24 2022, Mr. Omri Schanin - Deputy CEO, Mr. Guy Hefer – Chief Financial Officer (CFO) and Mr. Dan Kozlovski – Chief Technologies Officer (CTO), who served as Vice President of Research and Development (VP R&D) until February 2022.
Mr. Sharon Fima, the previous CEO and CTO, who also served as a director, was employed by the Company (including MeaTech Ltd. prior to the merger described in Note 1A above) between September 1, 2019 and January 24, 2022. Until July 2021, Mr. Fima was entitled to a gross annual salary of NIS |
F - 30
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 18 – Related and Interested Parties (cont.)
| B. |
Expense amounts with respect to related parties (cont.)
|
|
The Deputy CEO, who also served as a director until January 2022, has been employed by the Company (including MeaTech Ltd. prior to the merger described in Note 1A above) since September 1, 2019. Mr. Schanin was entitled to a gross annual salary of NIS
The CFO, has been employed by the Company since October 18, 2020. Mr. Hefer was entitled to a gross annual salary of NIS
The CTO (previously VP R&D), has been employed by the Company (including MeaTech Ltd. prior to the merger described in Note 1A above) since December 5, 2019. Mr. Kozlovski was entitled to a gross annual salary of NIS |
| 2. |
Directors
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Mr. Steve H. Lavin served as active chairman of the Company's Board of Directors between May 2020 and January 2022, and he was entitled to an annual compensation of USD
Mr. Danny Ayalon served as director between May 2020 and January 2022, and was entitled to an annual compensation of USD
Additional non-executive directors were compensated in accordance with the terms of the Israeli Companies Regulations (Rules Regarding Payment and Expenses for External Directors), 2000, as amended until July 31, 2021 and are since entitled to annual compensation of USD
F - 31
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 19 – Leases
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Leases in which the Group is the lessee |
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| 1. |
Under an office leasing agreement dated November 1, 2019, MeaTech leased office space and parking spaces, for a monthly fee of USD
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|
| 2. |
Under an office leasing agreement dated August 9, 2020, the Company leased office space and parking spaces, for a monthly fee of USD
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| 3. |
Under an office leasing agreements dated between March and October 2021 for periods of
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| 4. |
Right-of-Use Asset
|
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USD thousands
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||||
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Balance as at January 1, 2020
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|||
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Additions during the year
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|||
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Amortization during the year
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(
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)
|
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| Effect of changes in exchange rates | ||||
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Balance as at December 31, 2020
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|
|||
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Additions following the acquisition of POM |
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Additions during the year
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|
|||
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Amortization during the year
|
(
|
)
|
||
|
Effect of changes in exchange rates
|
(
|
) |
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Balance as at December 31, 2021
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|
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| 5. |
Maturity analysis of for the Company’s lease liabilities
|
|
December 31,
|
December 31,
|
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2021
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2020
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USD
thousands |
USD
thousands |
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Up to one year
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||||||
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1-5 years |
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||||||
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Total
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|
|
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F - 32
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 19 – Leases (cont.)
| 6. |
Amounts recognized in the statement of operation
|
|
Year ended
December 31,
|
Year ended
December 31,
|
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|
2021
|
2020
|
|||||||
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USD thousands
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USD thousands
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|||||||
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Amortization of ROU asset
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|
||||||
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Interest expenses on lease liability
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|
|
||||||
Total amounts paid for leasing of the offices in the year ended December 31, 2021 and December 31, 2020, was USD 346 thousand and USD 140 thousand, respectively.
Note 20 - Employee Benefits
Employee benefits include post-employment benefits and short-term benefits.
Regarding benefits to key management employees, see Note 18(B).
The Company has a defined contribution plan in respect of its liability to pay the savings component of provident funds and in relation to employee severance pay, which is subject to Section 14 of the Israeli Severance Pay Law – 1963, according to which the Company pays fixed contributions to pension funds and/or insurance companies that release the Company from any additional severance-related liability. Expenses recognized in respect of such defined contribution plans in the years ended December 31, 2021 and December 31, 2020, amounted to USD 225 thousand and USD 121 thousand, respectively.
F - 33
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 21 – Loss per Share
Weighted average number of ordinary shares
|
Year ended
December 31,
2021
|
Year ended
December 31,
2020
|
Year ended
December 31,
2019
|
||||||||||
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Issued and paid-in share capital as at January 1
|
|
|
|
|||||||||
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Weighted average of the number of ordinary shares of MeaTech 3D Ltd. issued during the year
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|
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Weighted average of the number of ordinary shares used to calculate basic earnings per share
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|
|
|
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In prior periods, the weighted average number of the ordinary shares of MeaTech (now known as MeaTech MT Ltd.) was multiplied by the exchange ratio according to which ordinary shares of MeaTech 3D Ltd. were issued in return for ordinary shares of MeaTech in the 2020 reverse acquisition.
At December 31, 2021,
F - 34
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 22 – Agreements, Guarantees and Liens
| A. |
To secure its undertakings in connection with its lease agreements as described in Note 19, MeaTech provided a bank guarantee in the amount of USD |
| B. |
To secure its undertakings in connection with its future lease agreement, MeaTech 3D Ltd. provided a bank guarantee in the amount of USD |
| C. | To secure its undertakings in connection with its lease agreements as described in Note 13, POM provided a bank guarantee in the amount of USD |
Note 23 – Financial Instruments
The Company has exposure to the following risks from its use of financial instruments: credit, liquidity and market risks.
| A. |
Framework for risk management
|
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company’s risk management policy was formulated to identify and analyze the risks that the Company faces, to set appropriate limits for the risks and controls, and to monitor the risks and their compliance with the limits. The risk policy and risk management methods are reviewed regularly to reflect changes in market conditions and in the Company’s operations. The Company acts to develop an effective control environment in which all employees understand their roles and commitment.
| B. |
Credit risk
|
Credit risk is the risk of financial loss to the Company if a debtor or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from the Company’s receivables.
The Company restricts exposure to credit risk by investing only in bank deposits.
| C. |
Liquidity risk
|
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
This does not take into account the potential effect of extreme circumstances that cannot reasonably be predicted.
| D. |
Market risk
|
Market risk is the risk that changes in market prices, such as foreign currency exchange rates, the CPI, interest rates and the prices of equity instruments, will influence the Company’s results or the value of its holdings in financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
F - 35
MeaTech 3D Ltd.
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2021
Note 23 – Financial Instruments (cont.)
| E. |
Fair value
|
The carrying amounts of financial assets and liabilities, including cash and cash equivalents, other receivables, trade payables and other payables are the same or proximate to their fair value.
In connection with the Company’s Nasdaq public offering, all existing price protection mechanisms were eliminated, as a result of which financing income was recorded.
Note 24 – Subsequent Events
| A. |
Management Updates
In January 2022, Mr. Sharon Fima stepped down from the positions of Chief Executive Officer, Chief Technology Officer and Director, citing the Company’s current stage of development. Messrs. Steven H. Lavin (Chairman) and Danny Ayalon also stepped down from the Board of Directors, citing the Company’s current stage of development and to pursue other ventures, and Mr. Omri Schanin stepped down from the Board of Directors and continues to serve as MeaTech’s Deputy CEO.
The Company’s Board of Directors appointed Mr. Arik Kaufman to the position of Chief Executive Officer and Mr. Yaron Kaiser to the position of Chairman of the Board of Directors. |
|
| B. |
Move to New Premises In March 2022, the Company moved to its new headquarters at 5 David Fikes St., Rehovot, Israel, and terminated the lease at its previous headquarters. The laboratory and office space total approximately 18,300 square feet. The lease for this facility will expire in January 2026, although the Company has an option to renew it for four years. The annual rent (including parking fees) is approximately USD |
F - 36
Exhibit No. | Description | |
* | * | Previously filed as an exhibit to our registration statement on Form F-1 (File No. 333-253257) as filed with the SEC on March 11, 2021 and incorporated by reference herein |
# | English translation of original Hebrew document. |
74
The Registrant hereby certifies that it meets all of the requirements for this filing and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf.
MEATECH 3D LTD. | ||
By: | /s/ Arik Kaufman | |
Arik Kaufman | ||
Chief Executive Officer | ||
Date: March 24, 2022
75