2019 ANNUAL REPORT
Matam Park, Building #5, Haifa, 3508409, Israel | Tel: +972-74-7108600 | Fax: +972-74-7108765
www.pluristem.com info@pluristem.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]
OF 1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the fiscal year ended June 30, 2019
[ ]
ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
For the transition period from [ ] to [ ]
Commission file number 001-31392
(Exact name of registrant as specified in its charter)
PLURISTEM THERAPEUTICS INC.
Nevada
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
98-0351734
MATAM Advanced Technology Park,
Building No. 5, Haifa, Israel
3508409
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number 011-972-74-7108600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.00001
Trading Symbol
PSTI
Name of each exchange on which
registered
Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No
2
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.
Yes No
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). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer Accelerated filer Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, 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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was last sold, or the average bid and asked prices of such
common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.
$85,199,084
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest
practicable date.
15,547,621 as of September 4, 2019
TABLE OF CONTENTS
Page
PART I .......................................................................................................................................................................... 3
Item 1. Business. ...................................................................................................................................................... 3
Item 1A. Risk Factors................................................................................................................................................ 20
Item 1B. Unresolved Staff Comments. ..................................................................................................................... 36
Properties. .................................................................................................................................................. 37
Item 2.
Item 3. Legal Proceedings. ..................................................................................................................................... 37
Item 4. Mine Safety Disclosures. ........................................................................................................................... 37
PART II ....................................................................................................................................................................... 37
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
……………………………………………………………………………………………………….……37
Item 6. Selected financial data. ............................................................................................................................... 37
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. .................... 37
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. .................................................................. 44
Financial Statements and Supplementary Data. ......................................................................................... 46
Item 8.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. ................... 47
Item 9A. Controls and Procedures ............................................................................................................................ 47
Item 9B. Other Information ...................................................................................................................................... 48
PART III ...................................................................................................................................................................... 48
Item 10. Directors, Executive Officers and Corporate Governance. ........................................................................ 48
Item 11. Executive Compensation. ........................................................................................................................... 53
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters. 66
Item 13. Certain Relationships and Related Transactions and Director Independence. ........................................... 68
Item 14. Principal Accounting Fees and Services .................................................................................................... 68
PART IV ...................................................................................................................................................................... 70
Item 15. Exhibits. ..................................................................................................................................................... 70
Item 16. Form 10-K Summary. ................................................................................................................................ 72
i
Our financial statements are stated in thousands United States Dollars, or US$, and are prepared in
accordance with United States Generally Accepted Accounting Principles, or U.S. GAAP.
In this annual report, unless otherwise specified, all dollar amounts are expressed in U.S. dollars.
As used in this annual report, the terms "we", "us", "our", the "Company", and "Pluristem" mean Pluristem
Therapeutics Inc. and our wholly owned Israeli subsidiary, unless otherwise indicated or required by the
context.
All information in this Annual Report on Form 10-K or Annual Report, relating to shares or price per share
reflects the 1-for-10 reverse stock split effected by us on July 25, 2019.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report that are not historical facts are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal
securities laws. Such forward-looking statements may be identified by, among other things, the use of
forward-looking terminology such as "believes," "intends," "plans," "expects," "may," "will," "should," or
"anticipates" or the negative thereof or other variations thereon or comparable terminology, and similar
expressions are intended to identify forward-looking statements. We remind readers that forward-looking
statements are merely predictions and therefore inherently subject to uncertainties and other factors and
involve known and unknown risks that could cause the actual results, performance, levels of activity, or our
achievements, or industry results, to be materially different from any future results, performance, levels of
activity, or our achievements, or industry results, expressed or implied by such forward-looking statements.
Such forward-looking statements appear in Item 1 – "Business" and Item 7 – "Management's discussion
and Analysis of Financial Condition and Results of Operations," (especially in the section titled "Outlook")
as well as elsewhere in this Annual Report and include, among other statements, statements regarding the
following:
the expected development and potential benefits from our products in treating various medical
conditions;
our plan to execute our strategy independently, using our own personnel, and through relationships
with research and clinical institutions or in collaboration with other companies;
our entering into certain contracts with third parties;
the prospects of entering into additional license agreements, or other forms of cooperation with
other companies and medical institutions;
our pre-clinical and clinical trials plans, including timing of initiation, enrollment and conclusion
of trials;
the expected timing of the release of data from our various studies;
achieving regulatory approvals, including under accelerated paths;
receipt of future funding from the Israel Innovation Authority, or IIA, the European Union's
Horizon 2020 program, the Biomedical Advanced Research and Development Authority, or
BARDA, as well as grants from other independent third parties;
3
our marketing plans, including timing of marketing our product candidates, PLX-PAD and PLX-
R18, and the filing of any requests for marketing authorization;
developing capabilities for new clinical indications of placenta expanded (PLX) cells and new
products;
the timing and development of our PLX-Immune product candidate;
the potential manufacturing of cannabinoid-producing cells in our 3D bioreactors systems;
our estimations regarding the size of the global market for our product candidates;
our expectations regarding our production capacity, including the use of our serum-free
formulation;
our expectation to demonstrate a real-world impact and value from our pipeline, technology
platform and commercial-scale manufacturing capacity;
our expectations regarding our short- and long-term capital requirements;
our outlook for the coming months and future periods, including but not limited to our
expectations regarding future revenue and expenses; and
information with respect to any other plans and strategies for our business.
The factors discussed herein, including those risks described in Item 1A. "Risk Factors", and
expressed from time to time in our filings with the Securities and Exchange Commission, or SEC, could
cause actual results and developments to be materially different from those expressed in or implied by such
statements. In addition, historic results of scientific research, clinical and preclinical trials do not guarantee
that the conclusions of future research or trials would not suggest different conclusions. Also, historic
results referred to in this Annual Report would be interpreted differently in light of additional research,
clinical and preclinical trials results. The forward-looking statements are made only as of the date of this
filing, and except as required by law we undertake no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
PART I
Item 1. Business.
Our Current Business
Pluristem Therapeutics Inc. is a leading developer of placenta-based cell therapy product
candidates for the treatment of multiple ischemic, inflammatory and hematologic conditions. Our lead
indications are critical limb ischemia, or CLI, muscle recovery following surgery for hip fracture, and acute
radiation syndrome, or ARS. Each of these indications is a severe unmet medical need. We were
incorporated in Nevada in 2001, and have a wholly owned subsidiary in Israel called Pluristem Ltd. We
operate in one segment and our operations are focused on the research, development, clinical trials and
manufacturing of cell therapeutics and related technologies.
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PLX cells are derived from a class of placental cells that are harvested from donated placenta at
the time of full term healthy delivery of a baby. PLX cell products require no tissue matching prior to
administration. They are produced using our proprietary three-dimensional expansion technology. Our
manufacturing facility complies with the European, Japanese, Israeli, South Korean and U.S. Food and
Drug Administration, or FDA’s, current Good Manufacturing Practice requirements and has been approved
by the European and Israeli regulators for production of PLX-PAD for late stage trials. In December 2017,
after an audit of our facilities, we were granted manufacturer/importer authorization and Good
Manufacturing Practice Certification by Israel’s Ministry of Health. If we obtain FDA and other regulatory
approvals to market PLX cells, we expect to have in-house production capacity to grow clinical-grade PLX
cells in commercial quantities.
Our goal is to make significant progress with our clinical pipeline and our clinical pivotal trials in
order to ultimately bring innovative, potent therapies to patients who need new treatment options. We
expect to demonstrate a real-world impact and value from our pipeline, technology platform and
commercial-scale manufacturing capacity. Our business model for commercialization and revenue
generation includes, but is not limited to, direct sale of our products, partnerships, licensing deals, and joint
ventures with pharmaceutical companies.
We aim to shorten the time to commercialization of our product candidates by leveraging unique
accelerated regulatory pathways that exist in the United States, Europe and other territories to bring
innovative products that address life-threatening diseases to the market efficiently. We believe that these
accelerated pathways create substantial opportunities for us and for the cell therapy industry as a whole.
We have determined to invest our resources primarily on the PLX-PAD Phase III clinical trials
relating to CLI and muscle recovery following surgery for hip fracture, and focus on finalizing the clinical
trials in the United States, Europe and Israel while we prepare for the marketing phase, with the initiation
of such marketing phase subject to regulatory approval, in these territories.
Two pivotal, Phase III multinational clinical trials are currently being conducted with our PLX-
PAD product candidate: one in CLI, and the other in muscle recovery following surgery for hip fracture. In
April 2019, we successfully enrolled over 50% of patients in our Phase III study in CLI, which allows for
an interim analysis of efficacy after a one-year follow-up period under the European Medicines Agency’s,
or EMA, Adaptive Pathways pilot project, or the Adaptive Pathways Project, in which PLX-PAD was
selected to participate. Based on our current patient enrollment progress, we expect to complete the follow
up of our Phase III study in CLI in the first half of 2020 with respect to Europe, and in the first half of 2021
with respect to the United States. In addition, based on our current patient enrollment progress, we expect
to complete the efficacy follow up of our Phase III study in muscle recovery following surgery for hip
fracture in the second half of 2020. We expect to release the clinical trial results shortly after the conclusion
of the follow ups.
Our PLX-PAD cell program in CLI had been selected for the EMA’s Adaptive Pathways Project,
Japan’s Pharmaceuticals and Medical Devices Agency, or PMDA, accelerated pathway, the FDA Fast
Track Designation and FDA Expanded Access Program, or EAP, in the United States. The CLI program in
the European Union was awarded a Euro 7,600,000 (approximately $8,700,000) grant as part of the
European Union’s Horizon 2020 program and to date we have received a portion of such grant.
Our PLX-PAD cell program in muscle recovery following surgery for hip fracture was also
selected for the EMA’s Adaptive Pathways Project and was awarded a Euro 7,400,000 (approximately
$8,400,000) grant as part of the European Union’s Horizon 2020 program and to date we have received a
portion of such grant.
Our second product candidate, PLX-R18, is under development in the United States for ARS via
the FDA Animal Rule regulatory pathway, and, based on our assessment, is expected to advance to a
pivotal trial, which may also result in approval without the prior performance of human efficacy trials. The
National Institutes of Health’s National Institute of Allergy and Infectious Diseases has completed a dose
selection trial with our PLX-R18 product candidate in the hematologic component of ARS.
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We are targeting to submit a proposal for a contract with the U.S. government in the second half of 2019 to
fund an additional non-human primates, or NHPs study. We are also targeting to receive funding from
BARDA for the full cost of the ARS pivotal trial during 2020.
PLX-R18 is also under development in the United States and Israel for the treatment of incomplete
hematopoietic recovery following hematopoietic cell transplantation, or HCT. In March 2019, we
announced that we had fully enrolled the second cohort of six patients in our ongoing Phase I clinical trial
in HCT, and received data and safety monitoring board approval to continue to the final cohort of the trial.
In September 2018, we announced that the FDA granted orphan drug designation to our PLX cell therapy
for the treatment of graft failure and incomplete hematopoietic recovery following HCT.
Scientific Background
Cell therapy is an emerging field within the regenerative medicine area. The characteristics and
properties of cells vary as a function of tissue source and growth conditions. The human placenta from
which our PLX cells are derived provides an uncontroversial source of non-embryonic, adult cells and
represents an innovative approach in the cell therapy field. The different factors that PLX cells release
suggest that the cells can be used therapeutically for a variety of ischemic, inflammatory, autoimmune and
hematological disorders.
PLX cells do not require tissue matching prior to administration. This allows for the development
of ready-to-use / "off-the-shelf" allogeneic products.
Our Technology
We develop, and intend to commercialize, cell therapy production technologies and products that
are derived from the human placenta. Our PLX cells are adherent stromal cells, or ASCs, that are expanded
using a proprietary 3D process. This system utilizes a synthetic scaffold to create an artificial 3D
environment where placental-derived stromal cells can grow. Our 3D process enables the large-scale
monitored and controlled production of reproducible, high quality cell products and is capable of
manufacturing a large number of PLX doses originating from different placentas. Additionally, our
manufacturing process has demonstrated batch-to-batch consistency, an important manufacturing challenge
for biological products.
Product Candidates
Our primary objective is to be the leading provider of allogeneic placenta based cell therapy
products that are true off-the-shelf products that do not require any matching or additional manipulation
prior to administration. From the physician’s and patient’s perspective, we believe that our PLX products
are comparable to any other product delivered in a vial. Our PLX products are administered using a
standard needle and syringe. Our PLX products are in clinical stage development for multiple indications.
Our first product candidate, PLX-PAD, is currently in a Phase III multinational clinical trial in
CLI, and in a Phase III multinational clinical trial in recovery following surgery for hip fracture. We have
also completed Phase II multinational clinical trial in intermittent claudication, or IC, and a Phase I/II is
currently conducted with our PLX-PAD by Tel Aviv Sourasky Medical Center (Ichilov Hospital) for the
treatment of Steroid-Refractory Chronic Graft-Versus-Host-Disease.
Our second product candidate, PLX-R18, is under development in the United States for ARS via
the FDA Animal Rule regulatory pathway, as well as in a Phase I trial in the United States and Israel for
incomplete hematopoietic recovery following HCT.
Our third product candidate, PLX-Immune is under pre-clinical development for treatment of
certain types of human cancer.
6
We believe that using the placenta as a unique cell source, combined with our innovative research,
development and high-quality manufacturing capabilities, will be the "engine" that drives this platform
technology towards the successful development of additional PLX cell therapy products and indications.
Our Clinical Development Product Candidates
Peripheral and Cardiovascular Diseases – We are investigating the use of PLX-PAD cells for
the treatment of various stages of peripheral arterial disease, or PAD, from early stage IC to advanced CLI.
In May 2015, our CLI clinical development program was selected for the EMA’s Adaptive
Pathways Project. The goal of the project is to improve timely access for patients to new medicines. During
our fiscal year ended June 30, 2017, the FDA and several EU regulatory agencies cleared our application to
begin the pivotal Phase III trial of PLX-PAD cells in the treatment of CLI for patients with minor tissue
loss (Rutherford Category 5) who are unsuitable for revascularization. This multinational Phase III trial is
being conducted in the United States, Europe and Israel. In September 2017, we announced that the FDA
granted a fast track designation to our ongoing Phase III study of PLX-PAD for the treatment of CLI. The
FDA’s fast track designation is a process designed to facilitate the development and expedite the review of
drug to treat serious conditions and unmet medical needs. With fast track designation, there is an increased
possibility for a priority review by the FDA of PLX-PAD cells for the treatment of CLI.
Our intention is to file a request for marketing authorization in the United States and in Europe
following a successful completion of this 246-patient trial. In April 2019, we successfully enrolled over
50% of patients in our Phase III study in CLI, which allows for an interim analysis of efficacy after a one-
year follow-up period. If the interim analysis yields positive results, it could lead to early conditional
marketing approval in Europe.
In January 2018, we announced that the FDA cleared our EAP for the use of our PLX-PAD cell
treatment in patients with CLI. In October 2018, we announced that the FDA approved cost recovery for
our PLX-PAD under an EAP held by Wide Trial, Inc., or Wide Trial, a privately-held third-party sponsor.
In April 2019, we announced the initiation of our FDA approved EAP, with several site initiations in the
United States. Under the terms of the EAP, an initial cohort of 100 Rutherford-5 CLI patients who are
ineligible for inclusion under our ongoing Phase III study protocol can be enrolled and treated.
We have completed two Phase I safety/dose-escalating clinical trials for CLI, one in the United
States and one in Germany. These CLI trials demonstrated that no blood type or human leukocyte antigen
matching is required, and that the administration of PLX-PAD cells is safe, even if two doses are
administered to a patient on two different occasions. In addition, PLX-PAD cells are potentially effective in
reducing the frequency of amputations in CLI patients. Generally, the FDA and the EMA require the
primary endpoint for pivotal CLI clinical trials to be Amputation Free Survival, or AFS, at one year. The
pooled data from the two studies we conducted suggest an AFS rate at one year of 86% in PLX-treated
patients versus an AFS ranging between 48% to 66% in patients from placebo arms in other CLI trials.
In June 2018, we announced the results from our 172 patients, randomized, double blind, placebo
controlled, and multinational Phase II clinical trial in IC. Analysis of the Phase II IC data, which was
announced on November 2018, confirmed the optimal dosing regimen of PLX-PAD in the treatment of
PAD - two administrations of 300 million cells, each originating from a different donor. This is also the
treatment regimen being administered to patients in the Company’s ongoing multinational Phase III study
in CLI, a more severe stage of PAD. PLX-PAD treated patients showed a good safety profile in the study.
In April 2015, Japan’s PMDA approved our large-scale manufacturing methods and quality for
PLX-PAD cells for use in clinical trials. In August 2015, the PMDA granted safety clearance to PLX-PAD
cells for use in clinical trials in Japan, and in December 2015 we reached an agreement with the PMDA on
the design of the final trial needed to apply for conditional marketing approval of PLX-PAD cells in the
treatment of CLI. Currently, as part of our strategy to focus on our active clinical trials and marketing
readiness, we have not initiated clinical trial activities in Japan.
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Orthopedic Diseases – In April 2018, we announced that the FDA cleared our Investigational
New Drug, or IND, for our Phase III trial for recovery following surgery for hip fracture. This
multinational Phase III trial is being conducted in the United States, Europe and Israel. The EMA
confirmed that recovery following surgery for hip fracture is eligible for the Adaptive Pathways Project as
well.
Our Phase III trial protocol and design was based on our phase I/II, randomized, double-blind,
placebo-controlled study (n=20) to assess the safety and efficacy of intramuscular injections of allogeneic
PLX-PAD cells for the regeneration of injured gluteal musculature after total hip replacement has been
conducted in Germany under the approval of PEI. In this study, PLX-PAD cells or placebo were
administered into the traumatized gluteal muscle during total hip replacement surgery. The study results
met its primary efficacy endpoint, change in maximal voluntary isometric contraction force of the gluteal
muscle at six months after total hip replacement. Patients treated with PLX-PAD had a significantly greater
improvement of maximal voluntary muscle contraction force than the placebo group (p=0.0067). In
addition, the study demonstrated that PLX-PAD was safe and well tolerated by the patients.
Recovery Following HCT – In March 2015, we reported positive data from three independent
preclinical trials of PLX-R18. Results from these trials, as well as those from nineteen prior studies
conducted by the NIAID, Case Western University, Cleveland, Ohio, and Hadassah Medical Center,
Jerusalem, Israel, collectively suggest that PLX-R18 is safe and may improve outcomes after bone marrow
failure and/or support hematopoietic cell transplantation. Data collected on the mechanism of action show
that PLX-R18 acts by enhancing production of platelets and white and red blood cells in cases of severely
damaged bone marrow, and may also accelerate engraftment of transplanted hematopoietic cells. In
February 2018, we announced that a peer-reviewed journal published key animal findings from a study of
PLX-R18 that demonstrate the cells’ efficacy in improving human hematopoietic engraftment. With these
capabilities, PLX-R18 could potentially treat a broad range of indications related to bone marrow function
which, taken together, constitute a substantial global market.
PLX-R18 is under development in a Phase I clinical trial in the United States and Israel for
incomplete hematopoietic recovery following HCT, which was initiated in fiscal year 2017.
ARS – We have conducted several animal studies for the evaluation of PLX-R18 for the treatment
of ARS, in collaboration with the NIAID. The U.S. National Institutes of Health, or NIH, funded and
conducted a pilot study in NHPs to evaluate the therapeutic effect of PLX-R18 on hematological aspects of
ARS. In May 2017, we announced results of the NHPs pilot study for PLX-R18 as a treatment for ARS.
Although study size was not designed to show significance, results showed a trend toward improved
survival of PLX-R18 treated animals compared to control, placebo treated animals. The study, conducted
and funded by the NIAID, was designed to assess the safety and efficacy of PLX-R18 following
intramuscular injection into irradiated and non-irradiated NHPs. Efficacy measures included survival as
well as hematological parameters which are affected by exposure to high levels of radiation as may occur in
a nuclear accident or attack. These data will help the design of a pivotal study to fulfill the requirements for
a Biologics License Application submission under the FDA’s Animal Rule regulatory pathway.
We plan to continue the discussions with the different government agencies with the goal of
receiving their support for pivotal studies in large animals as well as conducting the safety studies required
in order to file BLA for this indication.
In October 2017, we announced that the FDA granted us an orphan drug designation for our PLX-
R18 cell therapy for the prevention and treatment of ARS.
In April 2018, we announced that the FDA approved our IND application for PLX-R18 cell
therapy in the treatment of ARS. The IND allows us to treat victims who may have been acutely exposed to
high dose radiation due to nuclear attack or accident.
8
In December 2015, we also signed a Memorandum of Understanding for a collaboration with
Fukushima Medical University, Fukushima Global Medical Science Center. The purpose of the
collaboration is to develop our PLX-R18 cells for the treatment of ARS, and for morbidities following
radiotherapy in cancer patients. In June 2018, we reported positive animal data from studies conducted in
collaboration with Fukushima Medical University evaluating PLX-R18 cells as a treatment for radiation
damage to the gastrointestinal, or GI, tract and bone marrow. Data from these studies showed that PLX-
R18 cells significantly increased survival rates, preserved GI stem cells activity that enhance the recovery
of the GI system and prevented severe damage to the intestinal lining, suggesting PLX-R18 potential as a
multi-organ therapy for ARS.
In July 2019, we presented positive results from a series of studies of our PLX-R18 cell therapy
product conducted by the U.S. Department of Defense’s, or DoD, Armed Forces Radiobiology Research
Institute, part of the Uniformed Services University of Health Sciences. The studies were designed to
evaluate PLX-R18 as a potential prophylactic countermeasure against ARS administered prior to radiation
exposure. These animal studies demonstrate that PLX-R18, administered 24 hours before radiation
exposure, and again 72 hours after exposure, resulted in a significant increase in survival rates, from 4%
survival rate in the placebo group to 74% in the treated group. In addition, the data show an increase in
recovery of blood lineages and a favorable safety profile. Furthermore, histopathological analysis and
hematopoietic progenitor clonogenic assay of tissues collected show a significant increase in bone marrow
cell numbers and improved regenerative capability into all blood lineages.
Other Indications – In September 2017, we signed an agreement with Tel Aviv Sourasky
Medical Center (Ichilov Hospital) to conduct a clinical Phase I/II trial of PLX-PAD cell therapy for the
treatment of Steroid-Refractory Chronic Graft-Versus-Host-Disease. This trial is an investigator initiated
study. As such, Tel Aviv Sourasky Medical Center supports the study and is responsible for its design and
implementation.
In January 2018, we announced the publication of a peer-reviewed article in a journal which
examined the effect of PLX-Immune cells on the proliferation of over 50 lines of human cancerous cells.
Data showed that the PLX-Immune cells exhibited an anti-proliferative effect on a wide range of human
cancer cell types, with a strong inhibitory effect on various lines of breast, colorectal, kidney, liver, lung,
muscle and skin cancers. We have also conducted a pre-clinical trial of female mice harboring human triple
negative breast cancer. In this study, the results showed a statistically significant reduction in tumor size as
well as complete tumor remission in 30% of treated recipients.
In June 2018, we announced that we entered into collaboration with the U.S. DoD and its United
States Army Medical Research Institute of Chemical Defense to study PLX-R18 in the treatment of long
term lung injuries following exposure to mustard gas. These non-clinical trials will be funded by the NIH.
In January 2019, we announced a successful one-year follow up of a compassionate use treatment
in a Buerger’s disease patient treated with our PLX-PAD cell therapy.
Regulatory and Clinical Affairs Strategy
Our cell therapy development strategy is to hold open and frequent discussions with regulators at
all stages of development from preclinical trials to more advanced regulatory stages. We utilize this
strategy in working with the FDA, the EMA, Germany’s PEI as well as other European national competent
authorities, the Israeli Minister of Health, or MOH and Japan’s PMDA, and we are also working with the
Ministry of Food and Drug Safety, or MFDS, of South Korea authority via our collaborator, CHA.
The Adaptive Pathways Project is part of the EMA’s efforts to improve timely access for patients
to new therapies. It targets treatments with the potential to heal serious conditions with an unmet medical
need, and may reduce the time to a medicine's approval or to its reimbursement for targeted patient groups.
The pilot is open to clinical programs in early stages of development only.
9
After a therapy is selected for the program, the Adaptive Pathways Project’s discussion group provides
detailed guidance to the applicant regarding the formal regulatory processes that precede a trial targeting
early approval and further expansion of the indications. We have applied early to this program and have
been selected for it.
In September 2017, we announced that the FDA granted “Fast Track” designation for PLX-PAD
in CLI. The FDA’s Fast Track designation is a process designed to facilitate the development and expedite
the review of drugs to treat serious conditions and unmet medical needs. With Fast Track designation, there
is an increased possibility for a priority review by the FDA of PLX-PAD cells for the treatment of CLI.
In January 2018, we announced that the FDA cleared our EAP for the use of our PLX-PAD cell
treatment in patients with CLI. In October 2018, we announced that the FDA approved cost recovery for
our PLX-PAD under an EAP held by Wide Trial, a privately-held third-party sponsor. EAP allows the use
of an investigational medical product outside of clinical trials and is usually granted in cases where patients
are unsuitable for inclusion under the study protocol and the patient’s condition is life-threatening with an
unmet medical need. As part of the EAP, our PLX-PAD cell therapy is available to a limited number of
CLI patients in the United States who are unsuitable for revascularization and cannot take part in the our
ongoing Phase III clinical trial.
Intellectual Property
We understand that our success will depend, in part, on maintaining our intellectual property, and
therefore we are committed to protecting our technology and product candidates with patents and other
methods described below.
We are the sole owner of 139 issued patents and 89 pending patent applications in the United
States, Europe, China and Japan, as well as in additional countries worldwide, including Israel, countries in
the Far East and South America (in calculating the number of issued patents, each European patent
validated in multiple jurisdictions was counted as a single patent).
In April 2016, the Subsidiary entered into a licensing agreement with TES Holdings Co., Ltd., a
venture company derived from the University of Tokyo, to obtain a key patent in Japan to cover the
treatment of ischemic diseases with placental cell therapy. This license is subject to future single low-digit
royalties from sales of our product for treatment in the field of ischemic diseases in Japan, until expiry of
the patent in 2023. This license follows the grant of two key patents to us by the Japanese Patent Office,
which address three dimensional methods for expanding placental and adipose cells, and specified cell
therapies produced from placental tissue using these methods.
In February 2017, the Subsidiary signed an agreement with founders of a certain patent for a five
year option to purchase the certain patent for an amount of 1 million Euro. The agreement includes yearly
payments of Euro 75,000, 75,000 and 100,000 in February 2017, 2018 and 2019, respectively, which have
been paid. We are entitled to terminate the agreement for convenience upon providing the founders 30 days
prior notice.
In May 2019, we filed a U.S. provisional patent application titled “Methods and Compositions for
Producing Cannabinoids,” which covers the use of our state-of-the-art, proprietary 3-D cell culturing
technology for the potential manufacturing of cannabinoid-producing cells.
Based on the well-established understanding that the characteristics and therapeutic potential of a
cell product are largely determined by the source of the cells and by the methods and conditions used
during their culturing, our patent portfolio includes different types of claims that protect the various unique
aspects of our technology.
Our multi-national portfolio of patent and patent applications includes the following claims:
10
Our proprietary expansion methods for 3D stromal cells;
Composition of matter claims covering the cells;
The therapeutic use of PLX cells for the treatment of a variety of medical conditions; and
Cell-culture, harvest, and thawing devices.
Through our experience with ASC-based product development, we have developed expertise and
know-how in this field and have established procedures for manufacturing clinical-grade PLX cells in our
facilities. Certain aspects of our manufacturing process are covered by patents and patent applications. In
addition, specific aspects of our technology are retained as know-how and trade secrets that are protected
by our confidentiality agreements with our employees, consultants, contractors, manufacturers and
advisors. These agreements generally provide for protection of confidential information, restrictions on the
use of materials, and an obligation to assign to us inventions conceived during the course of performing
services for us.
The following table provides a description of our key patents and patent applications and is not
intended to represent an assessment of claims, limitations or scope. In some cases, a jurisdiction is listed as
both pending and granted for a single patent family. This is due to pending continuation or divisional
applications of the granted case.
There is a risk that our patents will be invalidated, and that our pending patent applications will
not result in issued patents. We also cannot be certain that we will not infringe on any patents that may be
issued to others. See "Risk Factors - We must further protect and develop our technology and products in
order to become a profitable company". The expiration dates of these patents, based on filing dates, range
from 2020 to 2036.
Actual expiration dates will be determined according to extensions received based on the Drug
Price Competition and Patent Term Restoration Act of 1984 (P.L. 98-417), commonly known as the
"Hatch-Waxman" Act, that permits extensions of pharmaceutical patents to reflect regulatory delays
encountered in obtaining FDA market approval. The Hatch-Waxman Act is based on a U.S. federal law
and therefore only relevant to U.S. patents.
Our Patent Portfolio
Patent Name/ Int. App.
No.
METHOD AND
APPARATUS FOR
MAINTENANCE AND
EXPANSION OF
HAEMATOPOIETIC STEM
CELLS AND/OR
PROGENITOR CELLS
PCT/US2000/02688
METHODS FOR CELL
EXPANSION AND USES OF
CELLS AND CONDITIONED
MEDIA PRODUCED
THEREBY FOR THERAPY
PCT/IL2007/000380
ADHERENT CELLS FROM
PLACENTA TISSUE AND
USE THEREOF IN THERAPY
Pending
Jurisdictions
Granted
Jurisdictions
United States,
Mexico, New
Zealand
Expiry Date
February 4,
2020
United States,
China, Hong Kong,
Canada, Brazil
United States,
Europe, Israel,
China, Hong Kong,
Japan, Europe, Israel,
Singapore, Russia,
South Africa,
Australia, India,
South Korea, Mexico,
Hong Kong, China
United States,
Europe, Singapore,
Australia, Hong
March 23, 2027
September 2,
2028
11
PCT/IL2008/001185
Brazil, Russia
United States
Hong Kong, China
Kong, South Africa,
India, Mexico, Japan,
South Korea,
Canada, China, Israel
United States, Israel,
Russia, South Africa
Europe, Israel
United States,
Russia, Australia,
South Africa, Mexico,
Europe, Canada,
Singapore, Hong
Kong, Israel, India
United States,
Europe, Israel
May 26, 2029
September 1,
2029
September 1,
2029
September 1,
2029
United States
Israel, Europe, Hong
Kong
April 21, 2031
United States,
China, Israel, India
United States,
China, Europe,
Hong Kong, Israel,
India
United States, Hong
Kong, Israel
United States,
Europe, China,
Canada, Australia,
New Zealand, South
Africa, Hong-Kong,
Mexico, Israel
United States,
Canada, Israel,
Australia, Mexico,
Singapore, South
Africa, South Korea
Europe, Japan, South
Korea, Israel, Hong
Kong, Israel
United States,
Europe, Israel, Hong
Kong
November 29,
2030
April 15, 2032
March 22, 2032
May 27, 2031
METHODS OF TREATING
INFLAMMATORY COLON
DISEASES
PCT/IL2009/000527
METHODS OF SELECTION
OF CELLS FOR
TRANSPLANTATION
PCT/IL2009/000844
ADHERENT CELLS FROM
PLACENTA TISSUE AND
USE THEREOF IN THERAPY
PCT/IL2009/000846
ADHERENT CELLS FROM
PLACENTA TISSUE AND
USE THEREOF IN THERAPY
PCT/IL2009/000845
ADHERENT STROMAL
CELLS DERIVED FROM
PLANCENTAS OF
MULTIPLE DONORS AND
USES THEREOF
PCT/IB2011/001413
ADHERENT CELLS FROM
PLACENTA AND USE OF
SAME IN DISEASE
TREATMENT
PCT/IB2010/003219
METHODS AND SYSTEMS
FOR HARVESTING
ADHERENT STROMAL
CELLS
PCT/IB2012/000933
METHODS FOR TREATING
RADIATION OR CHEMICAL
INJURY
PCT/IB2012/000664
SKELETAL MUSCLE
REGENERATION USING
MESENCHYMAL STEM
CELLS
PCT/EP2011/058730
GENE AND PROTEIN
EXPRESSION PROPERTIES
OF ADHERENT STROMAL
CELLS CULTURED IN 3D
PCT/IB2014/059114
DEVICES AND METHODS
FOR CULTURE OF CELLS
PCT/IB2013/058184
METHODS FOR
PREVENTION AND
TREATMENT OF
PREECLAMPSIA
PCT/IB2013/058186
METHOD AND DEVICE
FOR THAWING
BIOLOGICAL MATERIAL
PCT/IB2013/059808
SYSTEMS AND
METHODS FOR
GROWING AND
HARVESTING CELLS
PCT/IB2015/051559
METHODS AND
COMPOSITIONS FOR
TREATING AND
PREVENTING MUSCLE
WASTING DISORDERS
PCT/IB2015/059763
USE OF ADHERENT
STROMAL CELLS FOR
ENHANCING
HEMATOPOIESIS IN A
SUBJECT IN NEED
THEREOF
PCT/IB2016/051585
ALTERED ADHERENT
STROMAL CELLS AND
METHODS OF
PRODUCING AND USING
SAME
PCT/IB2016/053310
METHODS AND
COMPOSITIONS FOR
12
United States
Israel
India
Israel, Singapore,
Hong Kong
United States,
Canada, China,
Israel, Japan,
Singapore, Australia,
Hong Kong, South
Korea, Russia,
Mexico
United States,
Europe, China,
Australia, South
Africa, Japan, Korea,
February 20,
2034
August 31,
2033
August 31,
2033
Europe, China,
South Korea,
Canada, Israel,
Hong Kong
Europe, Israel
United States,
Australia, Singapore,
Japan, India, Russia
October 31,
2033
United States
March 3, 2035
Israel
United States
December 18,
2035
United States,
China, Israel
March 21, 2036
United States,
Europe, China,
Israel
United States,
Europe, Japan,
June 6, 2036
February 16,
2037
13
Canada, Australia,
Israel
Patent Cooperation
Treaty
United States, Israel
Patent Cooperation
Treaty
United States,
Israel, Germany
Japan
March 28, 2023
United States
(provisional)
(Not yet
determined)
TREATING CANCERS AND
NEOPLASMS
PCT/IB2017/050868
METHODS AND
COMPOSITIONS FOR
TREATING
NEUROLOGICAL
DISORDERS
PCT/IB2018/052806
METHODS AND
COMPOSITIONS FOR
TUMOR ASSESSMENT
PCT/IB2018/050984
METHODS AND
COMPOSITIONS FOR
TREATING ADDICTIONS
PCT/IB2018/055473
METHODS AND
COMPOSITIONS FOR
DETACHING ADHERENT
CELLS
US 16/026,199
DRUG CONTAINING
HUMAN PLACENTA-
ORIGIN
MESENCHYMAL CELLS
AND PROCESS FOR
PRODUCING VEGF
USING THE CELLS
JP20030579842
METHODS AND
COMPOSITIONS FOR
PRODUCING
CANNABINOIDS
Research and Development
Foundational Research
Our initial technology, the PluriX™ Bioreactor system, was invented at the Technion - Israel
Institute of Technology's Rappaport Faculty of Medicine, in collaboration with researchers from the
Weizmann Institute of Science. This technology has been further significantly developed by our research
and development teams over the ensuing years.
Collaborations and Ongoing Research and Development Plans
Charité Agreement
In July 2007, we entered into a five-year collaborative research agreement with the Berlin-
Brandenburg Center for Regenerative Therapies at Charité - University Medicine Berlin, or Charité.
14
In August 2012, we extended our collaborative research agreement with Charité for a period of five years
through 2017. In June 2017, we extended our collaborative research agreement with Charité for a period of
additional five 5 years, through June 2022. We and Charité are collaborating on a variety of indications
utilizing PLX cells. According to the agreement, we will be the exclusive owner of the technology and any
products produced as a result of the collaboration. Charité will receive between 1% to 2% royalties from
new developments that have been achieved during the joint development.
Fukushima Medical University
We signed an MOU for a collaboration with Fukushima Medical University, Fukushima Global
Medical Science Center. The purpose of the collaboration is to develop Pluristem's PLX-R18 cells for the
treatment of ARS, and for morbidities following radiotherapy in cancer patients. The collaboration will
proceed alongside research supported by the NIH, which is studying PLX-R18 as a potential treatment for
the hematologic component of ARS. The MOU for a collaboration with Fukushima will be renewed
automatically on a yearly basis. Each party is entitled to terminate the agreement for convenience upon
providing the other party 30 days prior notice.
CHA Agreement
On June 26, 2013, we entered into an exclusive out-licensing and commercialization agreement, or
the CHA Agreement, with CHA Biotech Co. Ltd., or CHA, for conducting clinical trials and
commercialization of our PLX-PAD product in South Korea in connection with two indications: the
treatment of CLI and IC. We will continue to retain rights to our proprietary manufacturing technology and
cell-related intellectual property.
The first clinical trial that was performed as part of the CHA Agreement was a Phase II trial in IC.
Upon the first regulatory approval for a PLX product in South Korea, if granted, for the specified
indications, we and CHA will establish an equally owned joint venture with the purpose of
commercializing PLX cell products in South Korea. Additionally, we will be able to use the data generated
by CHA to pursue the development of PLX product candidates outside of South Korea.
The term of the CHA Agreement extends from June 24, 2013 until the later of the expiration,
lapse, cancellation, abandonment or invalidation of the last valid patent claim covering the development of
the product indications. The CHA Agreement contains customary termination provisions, including in the
event that the parties do not reach an agreement upon a development plan for conducting the clinical trials.
Upon termination of the CHA Agreement, the license granted thereunder will terminate, and all
rights included therein will revert to us, whereupon we will be free to enter into agreements with any other
third parties for the granting of a license in or outside South Korea or to deal in any other manner with such
rights as it shall see fit in our sole discretion.
Horizon 2020
The Phase III study of PLX-PAD in CLI will be a collaborative project carried out by an
international consortium led by the Berlin-Brandenburg Center for Regenerative Therapies, together with
the Company and with the participation of additional third parties.
Our Phase III study of PLX-PAD cell therapy in the treatment of muscle recovery following
surgery for hip fracture will be a collaborative project carried out by an international consortium led by
Charité, together with us and with the participation of additional third parties.
In October 2017, we entered into a collaborative project, the nTRACK, carried out by an
international consortium led by Leitat. The aim of this project is to examine gold nano particles labeling of
stem cells to enable assessment of cells’ in vivo persistence and distribution in correlation to biological
efficacy. Under the project, PLX cells, labeled and non-labeled will be characterized and examined in
animal models for muscle injury.
15
Indiana University
In April 2018, NIAID awarded a $2.5 million grant to Indiana University to conduct, together with
us, studies of our PLX-R18 cell therapy in the treatment of ARS. The goal of this project is to extend the
PLX-R18 ARS studies to include examination of survival in pediatric and geriatric populations as well as
the ability of PLX-R18 to alleviate delayed effects of radiation in survivors.
Thermo Fisher
In July 2018, we entered into a strategic collaboration agreement with Thermo Fisher Scientific
Inc., or Thermo Fisher, with the aim of advancing the fundamental knowledge of cell therapy
industrialization and to improve quality control of the end-to-end supply chain. The collaboration will
combine Thermo Fisher’s experience in cell therapy development and bioproduction scaleup with our
expertise in cell therapy manufacturing, clinical development and quality control.
Chart Industries
In November 2018, we entered into a license agreement with a subsidiary of Chart Industries, Inc.,
or Chart, regarding our thawing device for cell-based therapies. Pursuant to the terms of the agreement,
Chart obtained the exclusive rights to manufacture and market the thawing device in all territories
worldwide, excluding Greater China, and we are to receive royalties from sales of the product and supply
of an agreed upon number of thawing devices. Royalties shall commence on the date of Chart’s first
commercial sale of the thawing device.
Burn injuries joint grant
In January 2019, we announced the receipt of a joint grant awarded by the Israeli Ministry of
Defense and the IIA for the pre-clinical development of our PLX cells for the treatment of burn injuries.
We have decided to suspend this current collaboration in the near term, as we focus our attention on our on-
going Phase III clinical trials.
NASA
In February 2019, we entered into a collaboration with NASA’s Ames Research Center to evaluate
the potential of our PLX cell therapies in preventing and treating medical conditions caused during space
missions.
U.S. DoD
In August 2017, we announced that a pilot study of our PLX-R18 cell therapy was initiated by the
U.S. DoD. The study is examining the effectiveness of PLX-R18 as a treatment for ARS prior to, and
within the first 24 hours of exposure to radiation. In July 2019, we presented positive results from a series
of studies of our PLX-R18 cell therapy product conducted by the U.S. DoD.
Israeli Duchenne Association
We have performed proof of concept studies from April 2015 to December 2016 in conjunction
with the Israeli Duchenne Association to assess the utility of PLX-PAD in alleviating symptoms of
Duchenne muscular dystrophy.
16
RESTORE
In February 2019, we announced that the large-scale research initiative, the RESTORE project, of
which we are a member, has received funding of Euro 1,000,000 (approximately $1,100,000) from the
European Union’s Horizon 2020 research and innovation program, to submit a full grant application for the
development and advancement of transformative therapeutics. We expect the members of the RESTORE
project to collectively submit the grant application in the first quarter of the 2020 calendar year.
We plan to continue to collaborate with universities and academic institutions and corporate
partners worldwide to fully leverage our expertise and explore the use of our cells in other indications.
In-House Clinical Manufacturing
We have the in-house capability to perform clinical cell manufacturing. Our state-of-the-art GMP
grade manufacturing facility in Haifa has been in use since February 2013 for the main purpose of clinical
grade, large-scale manufacturing. The facility’s new automated manufacturing process and products were
approved for production of PLX-PAD for clinical use by the FDA, EMA, Korean MFDS, PMDA and the
Israeli MOH. Our second product, PLX R18, was cleared by the FDA and the Israeli Ministry of Health for
clinical use. Furthermore, the site was inspected and approved by an EU qualified person (European
accreditation body), approving that the site and production processes meet the current GMP for the purpose
of manufacturing clinical grade products.
The site was also inspected and approved by Israel’s Ministry of Health and we received a GMP
certification and manufacturer-importer authorization. Following the clinical approval of the facility, we
are moving forward with our planned clinical trials based on cells manufactured in the new, efficient and
improved manufacturing processes.
We obtain the human placentas used for our research and manufacturing activities from various
hospitals in Israel after receiving a written informed consent by the mother and pathogen clearance. Any
medical waste related to the use of placentas is treated in compliance with local environmental laws and
standards.
In June 2019, we announced that we developed a serum-free formulation to support the
manufacturing of cell therapy products. This serum-free formulation was developed using our deep
understanding in cell therapy industrial scale production standards, and the quality methods designed to
support implementation in Phase III development and marketing. Achieving this significant technological
challenge is expected to provide us with large-scale, highly-consistent production capacity with operational
independency from third party suppliers for standard serum, an expensive and quantity limited product.
PLX-R18 is the first product candidate that we intend to manufacture using the serum-free media, which is
expected to be followed by PLX-PAD.
Government Regulation
The development, manufacturing, and marketing of our cell therapy product candidates are subject
to the laws and regulations of governmental authorities in the United States and the European Union as well
as other countries in which our products will be marketed in the future like Japan, Israel and South Korea.
In addition, the manufacturing conditions are specifically inspected by the Israeli Ministry of Health.
The FDA in the United States and the EMA in Europe must approve the product for marketing.
Furthermore, various governmental statutes and regulations also govern or influence testing,
manufacturing, safety, labeling, storage and record keeping related to such products and their marketing.
Governments in other countries have similar requirements for testing and marketing.
The process of obtaining these approvals and the subsequent compliance with appropriate statutes
and regulations require the expenditure of substantial time, resources and money.
17
There can be no assurance that our product candidates will ultimately receive marketing approval, or, if
approved, will be reimbursed by public and private health insurance.
There are several stages every drug has to go through during its development process. Among
these are:
Performance of nonclinical laboratory and animal studies to assess a drug's biological activity and
to identify potential safety problems, and to characterize and document the product's chemistry,
manufacturing controls, formulation, and stability. In accordance with regulatory requirements,
nonclinical safety and toxicity studies are conducted under Good Laboratory Practice
requirements to ensure their quality and reliability;
Conducting adequate and well-controlled human clinical trials in compliance with Good Clinical
Practice, or GCP, to establish the safety and efficacy of the product for its intended indication;
The manufacture of the product according to GMP regulations and standards; and
Potential post-marketing clinical testing and surveillance of the product after marketing approval,
which can result in additional conditions on the approvals or suspension of clinical use.
Approval of a drug for clinical trials in humans and approval of marketing are sovereign decisions
of states, made by national, or, in case of the European Union, international regulatory competent
authorities.
The Regulatory Process in the United States
In the United States, our product candidates are subject to regulation as a biological product under
the Public Health Service Act and the Federal Food, Drug and Cosmetic Act. The FDA, regulating the
approval of clinical trials and marketing applications in the United States, generally requires the following
steps prior to approving a new biological product either for clinical trials or for commercial sale:
•
Submission of an Investigational New Drug Application, which must become effective before clinical
testing in humans can begin;
• Obtaining approval of Institutional Review Boards, or IRBs, of research institutions or other clinical
sites to introduce the drug candidate into humans in clinical trials;
•
•
•
•
•
•
FDA may grant approval for EAP prior to the completion of clinical trials, in order to allow access for
the investigational drug, for patients that are excluded from the study.
FDA may grant priority review status, in order to expedite the Biologics License Application, or BLA,
review process. Obtaining of a Fast Track designation allows access for the request of priority review.
Submission to the FDA of a BLA for marketing authorization of the product, which must include
adequate results of pre-clinical testing and clinical trials;
Submission of BLA with a proof of efficacy that is based only on animal studies, where human
efficacy studies cannot be conducted because the conduct of such trials is unethical and field trials after
an accidental or deliberate exposure are not feasible.
FDA review of the BLA in order to determine, among other things, whether the product is safe and
effective for its intended uses; and
FDA inspection and approval of the product manufacturing facility at which the product will be
manufactured.
18
The Regulatory Process in Europe
In the European Union, our investigational cellular products are regulated under the Advanced
Therapy Medicinal Product regulation, a regulation specific to cell and tissue products. This European
Union regulation requires:
•
Filing a Clinical Trial Application via a centralized procedure, which makes it possible to obtain a
coordinated assessment of an application for a clinical trial that is to take place in several European
countries;
• Obtaining approval of affiliated ethics committees of clinical sites to test the investigational product
into humans in clinical trials;
• Adequate and well-controlled clinical trials to establish the safety and efficacy of the investigational
product for its intended use; and
•
Since our investigational cellular products are regulated under the Advanced Therapy Medicinal
Product regulation, the application for marketing authorization to the EMA is mandatory within the 28
member states of the EU. The EMA is expected to review and approve the marketing authorization
application.
In April 2015, the EMA designated PLX-PAD as a tissue-engineered product.
In April 2015, the Pediatric Committee of the EMA granted PLX-PAD a waiver for the
requirement to submit a pediatric investigational plan for all indications falling under "treatment of
peripheral atherosclerosis", including IC and CLI.
In May 2015, we were selected by EMA for development of PLX-PAD cells via the EMA
Adaptive Pathways Project, with the potential to reach the market several years faster than the traditional
regulatory approval pathway. Representatives of the Adaptive Pathways Project at the EMA are advising us
with respect to the clinical development of PLX-PAD in CLI and in recovery following surgery for hip
fracture.
Other Regulations
In general, the approval procedure varies among countries, and may involve additional preclinical
testing and clinical trials. The requirements and time required may differ from those required for FDA or
EMA approval. Each country may impose certain procedures and requirements of its own. Most countries
other than the United States, the European Union and Japan are willing to consider requests for marketing
approval only after the product had been approved for marketing by either the FDA, the EMA or the
PMDA. The decision regarding marketing approval is made following the submission of a dossier that is
thoroughly assessed and critically addressed.
In Japan, we have completed the required regulatory interactions with the PMDA, prior to the
submission of clinical trial notification, in the framework of the new regulations for regenerative therapy
effective in November 2014, which promote expedited approval for regenerative therapies that are being
developed for seriously debilitating/life-threatening indications.
Clinical Trials
Typically, in the United States, as well as in the European Union, clinical testing involves a three-
phase process, although the phases may overlap. In Phase I, clinical trials are conducted with a small
number of healthy volunteers, or patients in cases of ethical issues with using healthy volunteers, and are
designed to provide information about product safety and to evaluate the pattern of drug distribution and
metabolism within the body.
19
In Phase II, clinical trials are conducted with a homogenous group of patients afflicted with the
specific target disease, in order to determine preliminary efficacy, optimal dosages and expanded evidence
of safety. In some cases, an initial trial is conducted in diseased patients to assess both preliminary efficacy
and preliminary safety and patterns of drug metabolism and distribution, in which case it is referred to as a
Phase I/II trial. Phase III clinical trials are generally large-scale, multi-center, controlled trials conducted
with a heterogeneous group of patients afflicted with the target disease, in order to provide statistically
valid proof of efficacy, as well as safety and potency. The Phase III trials represent the trials that are
considered for confirmation of efficacy and safety and are the most important ones for the approval. In
some circumstances, a regulatory agency may require Phase IV, or post-marketing trials if it feels that
additional information needs to be collected about the drug after it is on the market.
During all phases of clinical development, regulatory agencies require extensive monitoring and
auditing of all clinical activities, clinical data and clinical trial investigators to minimize risks. The sponsor
of a clinical trial is required to submit an annual safety report to the relevant regulatory agencies, in which
serious adverse events must be reported, and also to submit in an expedited manner any individual serious
adverse events that are suspected to be related to the tested drug. An agency may, at its discretion, re-
evaluate, alter, suspend, or terminate the clinical trial based upon the data that have been accumulated to
that point and its assessment of the risk/benefit ratio to the patient.
Employees
We presently employ a total of 160 full-time employees and 5 part-time employees, of whom 131
full-time employees and 5 part-time employees are engaged in research and development, manufacturing
and clinical trials.
Competition
The regenerative medicine field is characterized by intense competition, as global pharma players
are becoming more engaged in the cell therapy field based on the advancements made in clinical trials and
due to the new favorable regenerative medicine legislation in certain regions. We face competition from
both allogeneic and autologous cell therapy companies, academic, commercial and research institutions,
pharmaceutical companies, biopharmaceutical companies, and governmental agencies. Some of the clinical
indications we currently have under development are also being investigated in preclinical and clinical
programs by others.
While there are hundreds of companies in the regenerative medicine space globally, there are
multiple participants in the cell therapy field based in the United States, Europe, Japan, Korea, and
Australia such as Athersys, Inc., Capricor Therapeutics, Inc., Celularity – a spin-off of Celgene
Corporation, Tigenix NV (acquired by Takeda), SanBio Inc., Healios K.K., Cytori Therapeutics, Cesca.
and Mesoblast LTD. Among other things, we expect to compete based upon our intellectual property
portfolio, our in-house manufacturing efficiencies and capabilities, and the efficacy of our products. Our
ability to compete successfully will depend on our continued ability to attract and retain experienced and
skilled executives, scientific and clinical development personnel, to identify and develop viable cellular
therapeutic candidates, and exploit these products commercially. Given the magnitude of the potential
opportunity for cell therapy, we expect competition in this area to intensify.
Available Information
Additional information about us is contained on our Internet website at www.pluristem.com.
Information on our website is not incorporated by reference into this report. Under the "SEC Filings" and
“Financial Information” sections, under the "Investors & Media" section of our website, we make available
free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended (Exchange Act), as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC. Our reports filed with the SEC are also
made available on the SEC’s website at www.sec.gov.
20
The following Corporate Governance documents are also posted on our website: Code of Business Conduct
and Ethics, and the Charters for each of the Committees of our Board of Directors.
Item 1A. Risk Factors.
The following risk factors, among others, could affect our actual results of operations and could
cause our actual results to differ materially from those expressed in forward-looking statements made by
us. These forward-looking statements are based on current expectations and except as required by law we
assume no obligation to update this information. You should carefully consider the risks described below
and elsewhere in this Annual Report before making an investment decision. Our business, financial
condition or results of operations could be materially adversely affected by any of these risks. Our common
stock is considered speculative and the trading price of our common stock could decline due to any of these
risks, and you may lose all or part of your investment. The following risk factors are not the only risk
factors facing our Company. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our business.
Our independent registered public accounting firm’s report states that there is a substantial doubt that
we will be able to continue as a going concern.
We anticipate that our principal sources of liquidity as of June 30, 2019, together with the funds
received under the Open Market Sales AgreementSM, or the Sales Agreement, with Jefferies LLC, or
Jefferies, as agent, during July and August 2019, will only be sufficient to fund our activities into the first
quarter of the Company's fiscal year 2021. As of June 30, 2019, we had cash and cash equivalents, short-
term bank deposits and restricted cash and long-term bank deposits of $24.8 million.
We need to obtain additional funding by the first quarter of our fiscal year 2021 in order to
continue to fund our operations, and we cannot provide any assurance that we will be successful in doing
so. Our independent registered public accounting firm, Kost Forer, Gabbay & Kassierer, a Member of
Ernst & Young Global, has included an explanatory paragraph in their opinion that accompanies our
audited consolidated financial statements as of and for the year ended June 30, 2019, indicating that our
current liquidity position raises substantial doubt about our ability to continue as a going concern.
We may need to raise additional financing to support the research, development and manufacturing of
our cell therapy products and our products in the future but we cannot be sure we will be able to obtain
additional financing on terms favorable to us when needed. If we are unable to obtain additional
financing to meet our needs, our operations may be adversely affected or terminated.
It is highly likely that we will need to raise significant additional capital in the future. Although
we were successful in raising capital in the past, our current financial resources are limited and may not be
sufficient to finance our operations until we become profitable, if that ever happens.
It is likely that we will need to raise additional funds in the near future in order to satisfy our working
capital and capital expenditure requirements. Therefore, we are dependent on our ability to sell our
common stock for funds, receive grants, enter into collaborations and licensing deals or to otherwise raise
capital. There can be no assurance that we will be able to obtain financing. Any sale of our common stock
in the future will result in dilution to existing stockholders and could adversely affect the market price of
our common stock.
Also, we may not be able to borrow or raise additional capital in the future to meet our needs or to
otherwise provide the capital necessary to conduct the development and commercialization of our potential
cell therapy products, which could result in the loss of some or all of one's investment in our common
stock.
21
Our likelihood of profitability depends on our ability to license and/or develop and commercialize
products based on our cell production technology, which is currently in the development stage. If we are
unable to complete the development and commercialization of our cell therapy products successfully, our
likelihood of profitability will be limited severely.
We are engaged in the business of developing cell therapy products. We have not realized a profit
from our operations to date and there is little likelihood that we will realize any profits in the short or
medium term. Any profitability in the future from our business will be dependent upon successful
commercialization of our potential cell therapy products and/or licensing of our products, which will
require additional research and development.
If we are not able to successfully license and/or develop and commercialize our cell therapy product
candidates and obtain the necessary regulatory approvals, we may not generate sufficient revenues to
continue our business operations.
So far, the products we are developing have completed one Phase I/II clinical trial of Gluteal
Musculature rehabilitation after total hip arthroplasty (efficacy, ongoing for safety), two Phase I clinical
trials for CLI, and one Phase II clinical trial in IC. Our early stage cell therapy product candidates may fail
to perform as we expect. Moreover, even if our cell therapy product candidates successfully perform as
expected, in later stages of development they may fail to show the desired safety and efficacy traits despite
having progressed successfully through pre-clinical or initial clinical testing. We will need to devote
significant additional research and development, financial resources and personnel to develop
commercially viable products and obtain the necessary regulatory approvals.
If our cell therapy product candidates do not prove to be safe and effective in clinical trials, we
will not obtain the required regulatory approvals. If we fail to obtain such approvals, we may not generate
sufficient revenues to continue our business operations.
Even if we obtain regulatory approval of a product, that approval may be subject to limitations on
the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA, the
EMA, and regulatory agencies in other countries continue to regulate marketed products, manufacturers
and manufacturing facilities, which may create additional regulatory barriers and burdens. Later discovery
of previously unknown problems with a product, manufacturer or facility, may result in restrictions on the
product or manufacturer, including a withdrawal of the product from the market. Further, regulatory
agencies may establish additional regulations that could prevent or delay regulatory approval of our
products.
We cannot market and sell our cell therapy product candidates in the United States, Europe, or in other
countries if we fail to obtain the necessary regulatory approvals or licensure.
We cannot sell our cell therapy product candidates until regulatory agencies grant marketing
approval, or licensure. The process of obtaining regulatory approval is lengthy, expensive and uncertain. It
is likely to take at least several years to obtain the required regulatory approvals for our cell therapy
product candidates, or we may never gain the necessary approvals.
Any difficulties that we encounter in obtaining regulatory approval may have a substantial adverse
impact on our operations and cause our stock price to decline significantly.
To obtain marketing approvals in the United States and Europe for cell therapy product candidates
we must, among other requirements, complete carefully controlled and well-designed clinical trials
sufficient to demonstrate to the FDA, the EMA and the PMDA that the cell therapy product candidates is
safe and effective for each disease for which we seek approval. So far, we have successfully conducted
Phase I/II and Phase I clinical trials for our PLX-PAD product.
22
Several factors could prevent completion or cause significant delay of these trials, including an inability to
enroll the required number of patients or failure to demonstrate adequately that cell therapy product
candidates are safe and effective for use in humans. Negative or inconclusive results from or adverse
medical events during a clinical trial could cause the clinical trial to be repeated or a program to be
terminated, even if other studies or trials relating to the program are successful. The FDA or the EMA (or,
if we seek to conduct development efforts in Japan, the PMDA) can place a clinical trial on hold if, among
other reasons, it finds that patients enrolled in the trial are or would be exposed to an unreasonable and
significant risk of illness or injury. If safety concerns develop, we, the FDA, the EMA or other regulatory
bodies could stop our trials before completion.
If we are not able to conduct our clinical trials properly and on schedule, marketing approval by FDA,
EMA, MOH and other regulatory authorities may be delayed or denied.
The completion of our clinical trials may be delayed or terminated for many reasons, such as:
• The FDA, the EMA or the MOH does not grant permission to proceed or places additional trials
on clinical hold;
•
Subjects do not enroll in our trials at the rate we expect;
• The regulators may ask to increase subject’s population in the clinical trials;
•
Subjects experience an unacceptable rate or severity of adverse side effects;
• Third-party clinical investigators do not perform our clinical trials on our anticipated schedule or
consistent with the clinical trial protocol, GCP and regulatory requirements, or other third parties
do not perform data collection and analysis in a timely or accurate manner;
•
Inspections of clinical trial sites by the FDA, EMA, MOH and other regulatory authorities find
regulatory violations that require us to undertake corrective action, suspend or terminate one or
more sites, or prohibit us from using some or all of the data in support of our marketing
applications; or
• One or more IRBs suspends or terminates the trial at an investigational site, precludes enrollment
of additional subjects, or withdraws its approval of the trial.
Our development costs will increase if we have material delays in our clinical trials, or if we are
required to modify, suspend, terminate or repeat a clinical trial. If we are unable to conduct our clinical
trials properly and on schedule, marketing approval may be delayed or denied by the FDA, EMA, MOH
and other regulatory authorities.
The results of our clinical trials may not support our product candidates claims or any additional claims
we may seek for our product candidates and our clinical trials may result in the discovery of adverse side
effects.
Even if any clinical trial that we need to undertake is completed as planned, or if interim results
from existing clinical trials are released, we cannot be certain that such results will support our product
candidates claims or any new indications that we may seek for our products or that the FDA or foreign
authorities will agree with our conclusions regarding the results of those trials. The clinical trial process
may fail to demonstrate that our products or a product candidate is safe and effective for the proposed
indicated use, which could cause us to stop seeking additional clearances or approvals for our product
candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions
and, ultimately, our ability to commercialize a product candidate. It is also possible that patients enrolled in
clinical trials will experience adverse side effects that are not currently part of the product candidate’s
profile.
23
If our processing and storage facility or our clinical manufacturing facilities are damaged or destroyed,
our business and prospects would be adversely affected.
If our processing and storage facility, our clinical manufacturing facilities or the equipment in
such facilities were to be damaged or destroyed, the loss of some or all of the stored units of our cell
therapy drug candidates would force us to delay or halt our clinical trial processes. We have one clinical
manufacturing facilities located in Haifa, Israel. If these facilities or the equipment in them are significantly
damaged or destroyed, we may not be able to quickly or inexpensively replace our manufacturing capacity.
If we encounter problems or delays in the research and development of our potential cell therapy
products, we may not be able to raise sufficient capital to finance our operations during the period
required to resolve such problems or delays.
Our cell therapy products are currently in the development stage and we anticipate that we will
continue to incur substantial operating expenses and incur net losses until we have successfully completed
all necessary research and clinical trials. We, and any of our potential collaborators, may encounter
problems and delays relating to research and development, regulatory approval and intellectual property
rights of our technology. Our research and development programs may not be successful, and our cell
culture technology may not facilitate the production of cells outside the human body with the expected
result. Our cell therapy products may not prove to be safe and efficacious in clinical trials. If any of these
events occur, we may not have adequate resources to continue operations for the period required to resolve
the issue delaying commercialization and we may not be able to raise capital to finance our continued
operation during the period required for resolution of that issue. Accordingly, we may be forced to
discontinue or suspend our operations.
We may not be able to secure and maintain research institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical trials. Specifically, the limited number of
centers experienced with cell therapy product candidates heightens our dependence on such research
institutions. Our reliance upon research institutions, including hospitals and clinics, provides us with less
control over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach
agreements with suitable research institutions on acceptable terms, or if any resulting agreement is
terminated, we may be unable to quickly replace the research institution with another qualified institution
on acceptable terms. We may not be able to secure and maintain suitable research institutions to conduct
our clinical trials.
Our product development programs are based on novel technologies and are inherently risky.
We are subject to the risks of failure inherent in the development of products based on new
technologies. The novel nature of our therapeutics creates significant challenges in regards to product
development and optimization, manufacturing, government regulation, third-party reimbursement and
market acceptance. For example, the FDA, the EMA and other countries’ regulatory authorities have
relatively limited experience with cell therapies. Very few cell therapy products have been approved by
regulatory authorities to date for commercial sale, and the pathway to regulatory approval for our cell
therapy product candidates may accordingly be more complex and lengthy. As a result, the development
and commercialization pathway for our therapies may be subject to increased uncertainty, as compared to
the pathway for new conventional drugs.
There are very few drugs and limited therapies that the FDA or EMA and other regulatory authorities
have approved as treatments for some of the disease indications we are pursuing. This could complicate
and delay FDA, EMA or other countries’ regulatory authorities approval of our biologic drug
candidates.
24
There are very few drugs and limited therapies currently approved for treatment of CLI, IC, ARS, muscle
recovery following surgery for hip fracture or HCT.
As a result, the clinical efficacy endpoints, or the criteria to measure the intended results of
treatment may be difficult to determine. Despite our eligibility for certain accelerated pathways, this could
increase the difficulty of our obtaining FDA, EMA or other countries’ regulatory authorities approval to
market our products.
Our cell therapy drug candidates represent new classes of therapy that the marketplace may not
understand or accept.
Even if we successfully develop and obtain regulatory approval for our cell therapy candidates, the
market may not understand or accept them. We are developing cell therapy product candidates that
represent novel treatments and will compete with a number of more conventional products and therapies
manufactured and marketed by others, including major pharmaceutical companies. The degree of market
acceptance of any of our developed and potential products will depend on a number of factors, including:
•
•
•
the clinical safety and effectiveness of our cell therapy drug candidates and their perceived
advantage over alternative treatment methods, if any;
adverse events involving our cell therapy product candidates or the products or product candidates
of others that are cell-based; and
the cost of our products and the reimbursement policies of government and private third-party
payers.
If the health care community does not accept our potential products for any of the foregoing
reasons, or for any other reason, it could affect our sales, having a material adverse effect on our business,
financial condition and results of operations.
The clinical manufacturing process for cell therapy products is complex and requires meeting high
regulatory standards. Any delay or problem in the clinical manufacturing of PLX may result in a
material adverse effect on our business.
Our manufacturing process, controls, equipment and quality system for PLX-PAD have received
approval from the FDA, EMA, Germany’s PEI, the Korean MFDS and the PMDA. However, the clinical
manufacturing process is complex and we have no experience in manufacturing our product candidates at a
commercial level. There can be no guarantee that we will be able to successfully develop and manufacture
our product candidates in a manner that is cost-effective or commercially viable, or that our development
and manufacturing capabilities might not take much longer than currently anticipated to be ready for the
market. In addition, if we fail to maintain regulatory approvals for our manufacturing facilities, we may
suffer delays in our ability to manufacture our product candidates. This may result in a material adverse
effect on our business.
Because we received grants from the IIA we are subject to on-going restrictions.
We have received royalty-bearing grants from the IIA, for research and development programs
that meet specified criteria. The terms of the IIA’s grants limit our ability to transfer know-how developed
under an approved research and development program outside of Israel, regardless of whether the royalties
are fully paid. Any non-Israeli citizen, resident or entity that, among other things, becomes a holder of 5%
or more of our share capital or voting rights, is entitled to appoint one or more of our directors or our Chief
Executive Officer, or CEO, serves as a director of our Company or as our CEO is generally required to
notify the same to the IIA and to undertake to observe the law governing the grant programs of the IIA, the
principal restrictions of which are the transferability limits described above. For more information, see
“Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources”.
25
We have limited operating history, which raises doubts with respect to our ability to generate revenues in
the future.
We have a limited operating history in our business of commercializing cell production
technology. Until we entered into the United Agreement, which was terminated in December 2015, we did
not generate any revenues. While we generated minimal revenue for the year ended June 30, 2018 and
2019, it is not clear when we will generate additional revenues or whether we will experience further delays
in recognizing revenues such as if we experienced a clinical hold. Our primary source of funds has been
the sale of our common stock and government grants. We cannot give assurances that we will be able to
generate any significant revenues or income in the future. There is no assurance that we will ever be
profitable.
If we do not keep pace with our competitors and with technological and market changes, our technology
and products may become obsolete and our business may suffer.
The cellular therapeutics industry, of which we are a part, is very competitive and is subject to
technological changes that can be rapid and intense. We have faced, and will continue to face, intense
competition from biotechnology, pharmaceutical and biopharmaceutical companies, academic and research
institutions and governmental agencies engaged in cellular therapeutic and drug discovery activities or
funding, both in the United States and internationally. Some of these competitors are pursuing the
development of cellular therapeutics, drugs and other therapies that target the same diseases and conditions
that we target in our clinical and pre-clinical programs.
Some of our competitors have greater resources, more product candidates and have developed
product candidates and processes that directly compete with our products. Our competitors may have
developed, or could develop in the future, new products that compete with our products or even render our
products obsolete.
We depend to a significant extent on certain key personnel, the loss of any of whom may materially and
adversely affect our Company.
Our success depends to a significant extent on the continued services of certain highly qualified
scientific and management personnel, in particular, Zami Aberman, our Executive Chairman, and Yaky
Yanay, our CEO and President. We face competition for qualified personnel from numerous industry
sources, and there can be no assurance that we will be able to attract and retain qualified personnel on
acceptable terms. The loss of service of any of our key personnel could have a material adverse effect on
our operations or financial condition. In the event of the loss of services of such personnel, no assurance
can be given that we will be able to obtain the services of adequate replacement personnel. We do not
maintain key person insurance on the lives of any of our officers or employees.
The market for our products will be heavily dependent on third party reimbursement policies.
Our ability to successfully commercialize our product candidates will depend on the extent to
which government healthcare programs, as well as private health insurers, health maintenance
organizations and other third party payers will pay for our products and related treatments.
Reimbursement by third party payers depends on a number of factors, including the payer’s
determination that use of the product is safe and effective, not experimental or investigational, medically
necessary, appropriate for the specific patient and cost-effective. Reimbursement in the United States or
foreign countries may not be available or maintained for any of our product candidates. If we do not obtain
approvals for adequate third party reimbursements, we may not be able to establish or maintain price levels
sufficient to realize an appropriate return on our investment in product development. Any limits on
reimbursement from third party payers may reduce the demand for, or negatively affect the price of, our
products. The lack of reimbursement for these procedures by insurance payers has negatively affected the
market for our products in this indication in the past.
26
Managing and reducing health care costs has been a general concern of federal and state
governments in the United States and of foreign governments. In addition, third party payers are
increasingly challenging the price and cost-effectiveness of medical products and services, and many limit
reimbursement for newly approved health care products. In particular, third party payers may limit the
indications for which they will reimburse patients who use any products that we may develop. Cost control
initiatives could decrease the price for products that we may develop, which would result in lower product
revenues to us.
Our success depends in large part on our ability to develop and protect our technology and our cell
therapy products. If our patents and proprietary rights agreements do not provide sufficient protection
for our technology and our cell therapy products, our business and competitive position will suffer.
Our success will also depend in part on our ability to develop our technology and commercialize
cell therapy products without infringing the proprietary rights of others. We have not conducted full
freedom of use patent searches and no assurance can be given that patents do not exist or could not be filed
which would have an adverse effect on our ability to develop our technology or maintain our competitive
position with respect to our potential cell therapy products. If our technology components, devices,
designs, products, processes or other subject matter are claimed under other existing United States or
foreign patents or are otherwise protected by third party proprietary rights, we may be subject to
infringement actions. In such event, we may challenge the validity of such patents or other proprietary
rights or we may be required to obtain licenses from such companies in order to develop, manufacture or
market our technology or products. There can be no assurances that we would be able to obtain such
licenses or that such licenses, if available, could be obtained on commercially reasonable terms.
Furthermore, the failure to either develop a commercially viable alternative or obtain such licenses could
result in delays in marketing our proposed products or the inability to proceed with the development,
manufacture or sale of products requiring such licenses, which could have a material adverse effect on our
business, financial condition and results of operations. If we are required to defend ourselves against
charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will
be incurred regardless of whether we are successful. Such proceedings are typically protracted with no
certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force
us to curtail or cease our development of our technology and the commercialization our potential cell
therapy products.
We have built the ability to manufacture clinical grade ASCs in-house. Through our experience
with ASC-based product development, we have developed expertise and know-how in this field. To protect
these expertise and know-how, our policies require confidentiality agreements with our employees,
consultants, contractors, manufacturers and advisors. These agreements generally provide for protection of
confidential information, restrictions on the use of materials and assignment of inventions conceived during
the course of performance for us. These agreements might not effectively prevent disclosure of our
confidential information.
The price of our common stock may fluctuate significantly.
The market for our shares of common stock may fluctuate significantly. A number of events and factors
may have an adverse impact on the market price of our common stock, such as:
•
•
•
•
•
results of our clinical trials or adverse events associated with our products;
the amount of our cash resources and our ability to obtain additional funding;
changes in our revenues, expense levels or operating results;
entering into or terminating strategic relationships;
announcements of technical or product developments by us or our competitors;
27
• market conditions for pharmaceutical and biotechnology stocks in particular;
•
•
•
•
•
•
•
•
changes in laws and governmental regulations, including changes in tax, healthcare, competition
and patent laws;
disputes concerning patents or proprietary rights;
new accounting pronouncements or regulatory rulings;
public announcements regarding medical advances in the treatment of the disease states that we
are targeting;
patent or proprietary rights developments;
regulatory actions that may impact our products;
disruptions in our manufacturing processes; and
competition.
In addition, a market downturn in general and/or in the biopharmaceutical sector in particular, may
adversely affect the market price of our securities, which may not necessarily reflect the actual or perceived
value of our Company.
Future sales of our shares may cause the prevailing market price of our shares to decrease.
Future sales of our common stock, or the perception that such sales may occur, could cause
immediate dilution and adversely affect the market price of our common stock.
We are exposed to fluctuations in currency exchange rates.
A significant portion of our business is conducted outside the United States. Therefore, we are
exposed to currency exchange fluctuations in other currencies such as the New Israeli Shekel, or NIS, and
the Euro, because a portion of our expenses in Israel and Europe are paid in NIS and Euros, respectively,
which subjects us to the risks of foreign currency fluctuations. Our primary expenses paid in NIS are
employee salaries, subcontractors and material suppliers, fees for consultants and lease payments on our
facilities. During the year ended June 30, 2019, or fiscal year 2019, we entered into options contracts to
hedge against some of the risk of changes in future cash flows from payments of payroll and related
expenses and costs of operations denominated in NIS.
The dollar cost of our operations in Israel will increase to the extent increases in the rate of inflation in
Israel are not offset by a devaluation of the NIS in relation to the dollar, which would harm our results
of operations.
Since a considerable portion of our expenses such as employees' salaries are linked to an extent to
the rate of inflation in Israel, the dollar cost of our operations is influenced by the extent to which any
increase in the rate of inflation in Israel is or is not offset by the devaluation of the NIS in relation to the
dollar. As a result, we are exposed to the risk that the NIS, after adjustment for inflation in Israel, will
appreciate in relation to the dollar. In that event, the dollar cost of our operations in Israel will increase and
our dollar-measured results of operations will be adversely affected. We cannot predict whether the NIS
will appreciate against the dollar or vice versa in the future. Any increase in the rate of inflation in Israel,
unless the increase is offset on a timely basis by a devaluation of the NIS in relation to the dollar, will
increase labor and other costs, which will increase the dollar cost of our operations in Israel and harm our
results of operations.
Potential product liability claims could adversely affect our future earnings and financial condition.
28
We face an inherent business risk of exposure to product liability claims in the event that the use
of our products results in adverse effects. We may not be able to maintain adequate levels of insurance for
these liabilities at reasonable cost and/or reasonable terms. Excessive insurance costs or uninsured claims
would add to our future operating expenses and adversely affect our financial condition.
Our principal research and development and manufacturing facilities are located in Israel and the
unstable military and political conditions of Israel may cause interruption or suspension of our business
operations without warning.
Our principal research and development and manufacturing facilities are located in Israel. As a
result, we are directly influenced by the political, economic and military conditions affecting Israel. Since
the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between
Israel and its Arab neighbors. During July and August 2014 and November 2012, Israel was engaged in an
armed conflict with a militia group and political party which controls the Gaza Strip, and during the
summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia
group and political party. These conflicts involved missile strikes against civilian targets in various parts of
Israel, including areas in which our employees and some of our consultants are located, and negatively
affected business conditions in Israel.
In addition, Israeli-based companies and companies doing business with Israel, have been the
subject of an economic boycott by members of the Arab League and certain other predominantly Muslim
countries since Israel's establishment. Although Israel has entered into various agreements with certain
Arab countries and the Palestinian Authority, and various declarations have been signed in connection with
efforts to resolve some of the economic and political problems in the Middle East, we cannot predict
whether or in what manner these problems will be resolved. Wars and acts of terrorism have resulted in
significant damage to the Israeli economy, including reducing the level of foreign and local investment.
Furthermore, certain of our employees may be obligated to perform annual reserve duty in the
Israel Defense Forces and are subject to being called up for active military duty at any time. All Israeli
male citizens who have served in the army are subject to an obligation to perform reserve duty until they
are between 40 and 49 years old, depending upon the nature of their military service.
The trend towards consolidation in the pharmaceutical and biotechnology industries may adversely
affect us.
There is a trend towards consolidation in the pharmaceutical and biotechnology industries. This
consolidation trend may result in the remaining companies having greater financial resources and technical
discovery capabilities, thus intensifying competition in these industries. This trend may also result in fewer
potential collaborators or licensees for our therapeutic product candidates. Also, if a consolidating company
is already doing business with our competitors, we may lose existing licensees or collaborators as a result
of such consolidation. This trend may adversely affect our ability to enter into license agreements or
agreements for the development and commercialization of our product candidates, and as a result may
materially harm our business.
Our cash may be subject to a risk of loss and we may be exposed to fluctuations in the market values of
our portfolio investments and in interest rates.
Our assets include a significant component of cash and cash equivalents and bank deposits. We
adhere to an investment policy set by our investment committee which aims to preserve our financial
assets, maintain adequate liquidity and maximize returns. We believe that our cash is held in institutions
whose credit risk is minimal and that the value and liquidity of our deposits are accurately reflected in our
consolidated financial statements as of June 30, 2019. Currently, we hold part of our current assets in bank
deposits. However, nearly all of our cash and bank deposits are not insured by the Federal Deposit
Insurance Corporation, or the FDIC, or similar governmental deposit insurance outside the United States.
29
Therefore, our cash and any bank deposits that we now hold or may acquire in the future may be subject to
risks, including the risk of loss or of reduced value or liquidity, particularly in light of the increased
volatility and worldwide pressures in the financial and banking sectors.
Although our internal control over financial reporting was considered effective as of June 30, 2019,
there is no assurance that our internal control over financial reporting will continue to be effective in
the future, which could result in our financial statements being unreliable, government investigations or
loss of investor confidence in our financial reports.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish an annual
report by our management assessing the effectiveness of our internal control over financial reporting. This
assessment must include disclosure of any material weaknesses in our internal control over financial
reporting identified by management. In addition, our independent registered public accounting firm must
annually provide an opinion on the effectiveness of our internal control over financial reporting.
Management's report as of the end of fiscal year 2019 concluded that our internal control over financial
reporting was effective. In addition, our registered independent public accounting firm provided an opinion
that our internal control over financial reporting was effective as of the end of fiscal year 2019. There is,
however, no assurance that we will be able to maintain such effective internal control over financial
reporting in the future. Ineffective internal control over financial reporting can result in errors or other
problems in our financial statements. In the future, if we or our registered independent public accounting
firm are unable to assert that our internal controls are effective, our investors could lose confidence in the
accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.
Failure to maintain effective internal control over financial reporting could also result in investigation or
sanctions by regulatory authorities.
Because most of our officers and directors are located in non-U.S. jurisdictions, you may have no
effective recourse against the management for misconduct and may not be able to enforce judgment and
civil liabilities against our officers, directors, experts and agents.
Most of our directors and officers are nationals and/or residents of countries other than the United
States, and all or a substantial portion of their assets are located outside the United States. As a result, it
may be difficult to enforce within the United States any judgments obtained against our officers or
directors, including judgments predicated upon the civil liability provisions of the securities laws of the
United States or any U.S. state.
Because we do not intend to pay any dividends on our common stock, investors seeking dividend income
should not purchase shares of our common stock.
We have not declared or paid any dividends on our common stock since our inception, and we do
not anticipate paying any such dividends for the foreseeable future. Investors seeking dividend income
should not invest in our common stock.
We are dependent upon third-party suppliers for raw materials needed to manufacture PLX; if any of
these third parties fails or is unable to perform in a timely manner, our ability to manufacture and
deliver will be compromised.
In addition to the placenta used in the clinical manufacturing process of PLX we require certain
raw materials. These items must be manufactured and supplied to us in sufficient quantities and in
compliance with current GMP. To meet these requirements, we have entered into supply agreements with
firms that manufacture these raw materials to current GMP standards. Our requirements for these items are
expected to increase if and when we transition to the manufacture of commercial quantities of our cell-
based drug candidates.
30
In addition, as we proceed with our clinical trial efforts, we must be able to continuously
demonstrate to the FDA, EMA and other regulatory authorities that we can manufacture our cell therapy
product candidates with consistent characteristics. Accordingly, we are materially dependent on these
suppliers for supply of current GMP-grade materials of consistent quality. Our ability to complete ongoing
clinical trials may be negatively affected in the event that we are forced to seek and validate a replacement
source for any of these critical materials.
We intend to decrease our dependency in third-party suppliers for raw materials. To that effect we
have developed a serum-free formulation which is expected to support the manufacturing of cell therapy
products. This serum-free formulation was developed using our deep understanding in cell therapy
industrial scale production standards, and the quality methods designed to support implementation in Phase
III development and marketing. Achieving this significant technological challenge is expected to provide us
with large-scale, highly consistent production with operational independency from third party suppliers for
standard serum, an expensive and quantity limited product. There can be no guarantee that we will
successfully implement the use of our serum-free formulation to support the manufacturing of cell therapy
products or any other future product candidates, if any, that we seek to produce using such formulation, or
that such implementation of the serum-free formulation will decrease our dependency on third-party
suppliers for raw materials.
We rely and will rely on third parties to conduct our clinical trials. If these third parties do not
successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain
regulatory approval of or commercialize our product candidates.
We depend and will depend upon independent investigators and collaborators, such as
universities, medical institutions, CROs, vendors and strategic partners to conduct our pre-clinical and
clinical trials under agreements with us. We negotiate budgets and contracts with CROs, vendors and study
sites which may result in delays to our development timelines and increased costs. We rely heavily on these
third parties over the course of our clinical trials, and we control only certain aspects of their activities.
Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with
applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not
relieve us of our regulatory responsibilities. We and these third parties are required to comply with current
good clinical practices, or cGCPs, which are regulations and guidelines enforced by the FDA and
comparable foreign regulatory authorities for product candidates in clinical development. Regulatory
authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and
trial sites. If we or any of these third parties fail to comply with applicable cGCP regulations, the clinical
data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign
regulatory authorities may require us to perform additional clinical trials before approving our marketing
applications. We cannot assure that, upon inspection, such regulatory authorities will determine that any of
our clinical trials comply with the cGCP regulations. In addition, any Phase III clinical trials which we may
conduct must be conducted with biologic product produced under cGMP and may require a large number
of test patients. Biologic products for commercial purposes must also be produced under cGMP. Our failure
or any failure by these third parties to comply with these regulations or to recruit a sufficient number of
patients may require us to repeat clinical trials, which would delay the regulatory approval process.
Moreover, our business may be implicated if any of these third parties violates federal or state fraud and
abuse or false claims laws and regulations or healthcare privacy and security laws and regulations.
Any third parties conducting our clinical trials are not and will not be our employees and, except
for remedies available to us under our agreements with such third parties, which in some instances may be
limited, we cannot control whether or not they devote sufficient time and resources to our ongoing pre-
clinical, clinical and nonclinical programs. These third parties may also have relationships with other
commercial entities, including our competitors, for whom they may also be conducting clinical trials or
other drug development activities, which could affect their performance on our behalf.
31
If these third parties do not successfully carry out their contractual duties or obligations or meet expected
deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is
compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other
reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete
development of, obtain regulatory approval of or successfully commercialize our product candidates. As a
result, our financial results and the commercial prospects for our product candidates would be harmed, our
costs could increase and our ability to generate revenue could be delayed. Switching or adding third parties
to conduct our clinical trials involves substantial cost and requires extensive management time and focus.
In addition, there is a natural transition period when a new third party commences work. As a result, delays
occur, which can materially impact our ability to meet our desired clinical development timelines.
We may not be able to take advantage of the new regulatory pathways in the United States, Europe and
Japan to shorten our time to market our products.
Recent regulatory pathways in United States, Europe and Japan may allow for early
commercialization of our products and reducing the time to market our products.
The FDA’s Fast Track designation is a process designed to facilitate the development and expedite
the review of drugs to treat serious conditions and unmet medical needs. The FDA granted PLX-PAD with
“Fast Track” designation for the treatment of CLI.
The EAP allows the use of an investigational medical product outside of clinical trials and is
usually granted in cases where patients are unsuitable for inclusion under the study protocol and the
patient’s condition is life-threatening with an unmet medical need. The FDA has cleared PLX-PAD EAP,
for the treatment of patients with CLI. As part of the EAP, our PLX-PAD cell therapy will be made
available to a limited number of CLI patients in the United States who are unsuitable for revascularization
and cannot take part in the our ongoing Phase III clinical trial.
The purpose of the EMA’s Adaptive Pathways Project is to shorten the time it takes for innovative
medicines to reach patients with serious conditions that lack adequate treatment options. After a therapy is
selected for the program, the discussion group that oversees a given project entering into the EMA’s
Adaptive Pathways Project conducts high level discussions and provides guidance to the applicant
regarding the formal regulatory processes that precede a trial targeting early approval and further expansion
of the indications. In Japan, a new law regarding regenerative therapies, including cell therapies, came into
effect. The new law allows for conditional, time-limited approval of products for marketing after limited
proof of efficacy. The EMA selected our PLX-PAD cell program in CLI and in recovery following surgery
for hip fracture for its Adaptive Pathways Project.
In addition, the PMDA approved the proposed quality and large-scale manufacturing methods for
PLX-PAD and has cleared our PLX-PAD cells for use in clinical trials in Japan.
However, since these new regulatory pathways are relatively new, we may not be able to meet the
regulatory requirements and as a result would not benefit from early access to the market.
Favorable results from compassionate use treatment or initial interim results from a clinical trial do not
ensure that later clinical trials will be successful and success in early stage clinical trials does not ensure
success in later-stage clinical trials.
PLX cells have been administered as part of compassionate use treatments, which permit the
administration of the PLX cells outside of clinical trials. No assurance can be given that any positive results
are attributable to the PLX cells, or that administration of PLX cells to other patients will have positive
results. Compassionate use is a term that is used to refer to the use of an investigational drug outside of a
clinical trial to treat a patient with a serious or immediately life-threatening disease or condition who has no
comparable or satisfactory alternative treatment options. Regulators often allow compassionate use on a
case-by-case basis for an individual patient or for defined groups of patients with similar treatment needs.
32
There is no assurance that we will obtain regulatory approval for PLX cells. We will only obtain
regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the
FDA, the EMA or other applicable regulatory authorities, in well-designed and conducted clinical trials,
that the product candidate is safe and effective and that the product candidate, including the cell production
methodology, otherwise meets the appropriate standards required for approval. Clinical trials can be
lengthy, complex and extremely expensive processes with uncertain results. A failure of one or more
clinical trials may occur at any stage of testing.
Success in early clinical trials does not ensure that later clinical trials will be successful, and initial
results from a clinical trial do not necessarily predict final results. While results from treating patients
through compassionate use have in certain cases been successful, we cannot be assured that further trials
will ultimately be successful. Results of further clinical trials may be disappointing.
Even if early stage clinical trials are successful, we may need to conduct additional clinical trials
for product candidates with patients receiving the drug for longer periods before we are able to seek
approvals to market and sell these product candidates from the FDA and regulatory authorities outside the
United States. Even if we are able to obtain approval for our product candidates through an accelerated
approval review program, we may still be required to conduct clinical trials after such an approval. If we
are not successful in commercializing any of our lead product candidates, or are significantly delayed in
doing so, our business will be materially harmed.
We may not successfully maintain our existing exclusive out-licensing agreement with CHA, or establish
new collaborative and licensing arrangements, which could adversely affect our ability to develop and
commercialize our product candidates.
One of the elements of our business strategy is to license our technology to other companies. Our
business strategy includes establishing collaborations and licensing agreements with one or more
pharmaceutical or biotechnology companies. To date, we have a strategic partnership with CHA for both
the IC and CLI indications in Korea. CHA will conduct PLX clinical trials in South Korea, and, following
approval, a joint venture equally owned by both parties will be established to market PLX products in
South Korea. Our PLX cells are also being used in South Korean sites participating to our International IC
study through our partnership with CHA. Notwithstanding, we may not be able to further establish or
maintain such licensing and collaboration arrangements necessary to develop and commercialize our
product candidates. Even if we are able to maintain or establish licensing or collaboration arrangements,
these arrangements may not be on favorable terms and may contain provisions that will restrict our ability
to develop, test and market our product candidates. Any failure to maintain or establish licensing or
collaboration arrangements on favorable terms could adversely affect our business prospects, financial
condition or ability to develop and commercialize our product candidates.
Our agreements with our collaborators and licensees may have provisions that give rise to disputes
regarding the rights and obligations of the parties. These and other possible disagreements could lead to
termination of the agreement or delays in collaborative research, development, supply, or
commercialization of certain product candidates, or could require or result in litigation or arbitration.
Moreover, disagreements could arise with our collaborators over rights to intellectual property or our rights
to share in any of the future revenues of products developed by our collaborators. These kinds of
disagreements could result in costly and time-consuming litigation. Any such conflicts with our
collaborators could reduce our ability to obtain future collaboration agreements and could have a negative
impact on our relationship with existing collaborators.
Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail
or suffer security breaches.
We rely on and utilize services provided by third parties in connection with our clinical trials,
which services involve the collection, use, storage and analysis of personal health information.
33
While we receive assurances from these vendors that their services are compliant with the Health Insurance
Portability and Accountability Act, or HIPAA, and other applicable privacy laws, there can be no assurance
that such third parties will comply with applicable laws or regulations. Non-compliance by such vendors
may result in liability for us which would have a material adverse effect on our business, financial
conditions and results of operations.
Despite the implementation of security measures, our internal computer systems and those of our
current and future CROs and other contractors and consultants are vulnerable to damage from computer
viruses and unauthorized access. While, to our knowledge, we have not experienced any such material
system failure or security breach to date, if such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our development programs and our business
operations. For example, the loss of clinical trial data from completed or future clinical trials could result in
delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the
data. 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 and commercialization of our product candidates could be delayed.
Unsuccessful compliance with certain European privacy regulations could have an adverse effect on our
business and reputation.
The collection and use of personal health data in the European Union is governed by the
provisions of the General Data Protection Regulation, or GDPR. This directive imposes several
requirements relating to the consent of the individuals to whom the personal data relates, the information
provided to the individuals, notification of data processing obligations to the competent national data
protection authorities and the security and confidentiality of the personal data. The GPDR also extends the
geographical scope of European Union data protection law to non-European Union entities under certain
conditions, tightens existing European Union data protection principles and creates new obligations for
companies and new rights for individuals. Failure to comply with the requirements of the GDPR and the
related national data protection laws of the European Union Member States may result in fines and other
administrative penalties. There may be circumstances under which a failure to comply with GDPR, or the
exercise of individual rights under the GDPR, would limit our ability to utilize clinical trial data collected
on certain subjects. The GDPR regulations impose additional responsibility and liability in relation to
personal data that we process and we intend to put in place additional mechanisms ensuring compliance
with these and/or new data protection rules. Changes to these European privacy regulations and
unsuccessful compliance may be onerous and adversely affect our business, financial condition, prospects,
results of operations and reputation.
We have limited experience in conducting Phase III trials. If we fail in the conduct of such trials, our
business will be materially harmed.
Even though we conducted Phase I and Phase II trials and we are currently conducting Phase III
for our PLX-PAD product, and Phase I for our PLX-R18 product, and have recruited employees who are
experienced in managing and conducting clinical trials, we have limited experience in this area.
We will need to expand our experience and rely on consultants in order to obtain regulatory approvals for
our therapeutic product candidates. The failure to successfully conduct clinical trials could materially harm
our business.
Existing government programs and tax benefits may be terminated.
We have received certain Israeli government approvals under certain programs and may in the
future utilize certain tax benefits in Israel by virtue of these programs. To remain eligible for such tax
benefits, we must continue to meet certain conditions. If we fail to comply with these conditions in the
future, the benefits we receive could be canceled and have to pay additional taxes. We cannot guarantee
that these programs and tax benefits will be continued in the future, at their current levels or at all.
34
If these programs and tax benefits are ended, our business, financial condition and results of operations
could be materially adversely affected.
If we fail to obtain or maintain orphan drug exclusivity for our products, our competitors may sell
products to treat the same conditions and our revenue will be reduced.
Our business strategy focuses on the development of drugs that are eligible for FDA and European
Union orphan drug designation. Under the Orphan Drug Act, the FDA may designate a product as an
orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer
than 200,000 in the United States, or a patient population greater than 200,000 in the United States where
there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the
United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products, or COMP,
grants orphan drug designation to promote the development of products that are intended for the diagnosis,
prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than
five in 10,000 persons in the European Union Community. Additionally, designation is granted for products
intended for the diagnosis, prevention, or treatment of a life threatening, seriously debilitating or serious
and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European
Union would be sufficient to justify the necessary investment in developing the drug or biological product.
In the United States, orphan drug designation entitles a party to financial incentives such as
opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. In
addition, if a product receives the first FDA approval for the indication for which it has orphan designation,
the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other
application to market the same drug for the same indication for a period of seven years, except in limited
circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where
the manufacturer is unable to assure sufficient product quantity. In the European Union, orphan drug
designation also entitles a party to financial incentives such as reduction of fees or fee waivers and ten
years of market exclusivity is granted following drug or biological product approval. This period may be
reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown
that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively
protect the product from competition because different drugs with different active moieties can be approved
for the same condition. Even with orphan drug exclusivity, if a third party were to prepare or market a
product which infringes upon our intellectual property, we may need to initiate litigation, which may be
costly, to enforce our rights against such party. After an orphan drug is approved, the FDA can
subsequently approve the same drug with the same active moiety for the same condition if the FDA
concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan
drug designation on its own neither shortens the development time or regulatory review time for a drug.
While orphan drug products are typically sold at a high price relative to other medications, the market
may not be receptive to high pricing of our products.
We develop our product candidates to treat rare and ultra-rare diseases, a space where medications
are usually sold at high prices compared with other medications.
Accordingly, even if regulatory authorities approve our product candidates, the market may not be
receptive to, and it may be difficult for us to achieve, a per-patient per-year price high enough to allow us
to realize a return on our investment.
The patent approval process is complex and we cannot be sure that our pending patent applications or
future patent applications will be approved.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain,
involves complex legal and factual questions and has in recent years been the subject of much litigation. As
a result, the issuance, scope, validity, enforceability and commercial value of our and any future licensors'
patent rights are highly uncertain.
35
Our pending and future patent applications may not result in patents being issued which protect our
technology or products or which effectively prevent others from commercializing competitive technologies
and products. Changes in either the patent laws or interpretation of the patent laws in the United States and
other countries may diminish the value of our patents 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 and
we may not be able to obtain meaningful patent protection for any of our commercial products either in or
outside the United States.
No assurance can be given that the scope of any patent protection granted will exclude competitors
or provide us with competitive advantages, that any of the patents that have been or may be issued to us
will be held valid if subsequently challenged, or that other parties will not claim rights to or ownership of
our patents or other proprietary rights that we hold. Furthermore, there can be no assurance that others
have not developed or will not develop similar products, duplicate any of our technology or products or
design around any patents that have been or may be issued to us or any future licensors. Since patent
applications in the United States and in Europe are not publicly disclosed until patents are issued, there can
be no assurance that others did not first file applications for products covered by our pending patent
applications, nor can we be certain that we will not infringe any patents that may be issued to others.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property
rights, the outcome of which would be uncertain and could have a material adverse effect on our
business.
Our commercial success depends upon our ability and the ability of our collaborators to develop,
manufacture, market and sell our product candidates and use our proprietary technologies without
infringing the proprietary rights of third parties. We have yet to conduct comprehensive freedom-to-operate
searches to determine whether our proposed business activities or use of certain of the patent rights owned
by us would infringe patents issued to third parties. We may become party to, or threatened with, future
adversarial proceedings or litigation regarding intellectual property rights with respect to our products and
technology, including interference proceedings before the U.S. Patent and Trademark Office. Third parties
may assert infringement claims against us based on existing patents or patents that may be granted in the
future. If we are found to infringe a third party's intellectual property rights, we could be required to obtain
a license from such third party to continue developing and marketing our products and technology.
However, we may not be able to obtain any required license on commercially reasonable terms or at all.
Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access
to the same technologies licensed to us. We could be forced, including by court order, to cease
commercializing the infringing technology or product. In addition, we could be found liable for monetary
damages. A finding of infringement could prevent us from commercializing our product candidates or force
us to cease some of our business operations, which could materially harm our business. For example, we
are aware of issued third party patents directed to placental stem cells and their use for therapy and in
treating various diseases. We may need to seek a license for one or more of these patents. No assurances
can be given that such a license will be available on commercially reasonable terms, if at all. Claims that
we have misappropriated the confidential information or trade secrets of third parties could have a similar
negative impact on our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property
claims may cause us to incur significant expenses, and could distract our technical and management
personnel from their normal responsibilities. In addition, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments and if securities analysts or
investors perceive these results to be negative, it could have a substantial adverse effect on the price of our
common stock. Such litigation or proceedings could substantially increase our operating losses and reduce
the resources available for development activities or any future sales, marketing or distribution activities.
We may not have sufficient financial or other resources to adequately conduct such litigation or
proceedings. Some of our competitors are able to sustain the costs of such litigation or proceedings more
effectively than we can because of their greater financial resources. Uncertainties resulting from the
initiation and continuation of patent litigation or other proceedings could have a material adverse effect on
our ability to compete in the marketplace.
36
We must further protect and develop our technology and products in order to become a profitable
company.
If we do not complete the development of our technology and products in development by the
time our patents expire, create additional sufficient layers of patents or other intellectual property rights,
other companies may use the technology to develop competing products. If this happens, we may lose our
competitive position and our business would likely suffer.
Furthermore, the scope of our patents may not be sufficiently broad to offer meaningful protection.
In addition, our patents could be successfully challenged, invalidated or circumvented so that our patent
rights would not create an effective competitive barrier. We also intend to seek patent protection for any of
our potential cell therapy products once we have completed their development. We also rely on trade
secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements with our
employees, consultants, suppliers and licensees. These agreements may be breached, and we might not
have adequate remedies for any breach. If this were to occur, our business and competitive position would
suffer.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we
violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit U.S.
companies or their agents and employees from providing anything of value to a foreign official or political
party for the purposes of influencing any act or decision of these individuals in their official capacity to
help obtain or retain business, direct business to any person or corporate entity or obtain any unfair
advantage. We have operations and agreements with third parties. Our international activities create the risk
of unauthorized and illegal payments or offers of payments by our employees or consultants, even though
they may not always be subject to our control. We discourage these practices by our employees and
consultants. However, our existing safeguards and any future improvements may prove to be less than
effective, and our employees or consultants, may engage in conduct for which we might be held
responsible for. Any failure by us to adopt appropriate compliance procedures and ensure that our
employees and consultants comply with the FCPA and applicable laws and regulations in foreign
jurisdictions could result in substantial penalties or restrictions on our ability to conduct business in certain
foreign jurisdictions.
Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to
other liabilities, which could negatively affect our business, operating results and financial condition. In
addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations
committed by companies in which we invest or that we acquire.
Item 1B. Unresolved Staff Comments.
Not Applicable.
37
Item 2. Properties.
Our principal executive, manufacturing and research and development offices are located at
MATAM Advanced Technology Park, Building No. 5, Haifa, Israel, where we occupy approximately 4,389
square meters. Our monthly rent payment for these leased facilities as of July 2019 was 258,000 NIS
(approximately $71,000), excluding MTM - Scientific Industries Center Haifa, Ltd., or MTM, participation
as described at Item 7. For the fiscal year ended June 30, 2019, we recognized an expense of $854,000, net,
for rent of Building No. 5, which was offset by MATAM participation of $239,000 due to renovations
made in Building No. 5.
We believe that the current space we have is adequate to meet our current and near future needs.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Our shares trade on the Nasdaq Capital Market under the symbol PSTI and in the Tel Aviv Stock
Exchange under the ticker symbol PLTR.
As of September 4, 2019, there were 111 holders of record, and 15,547,621 of our common shares
were issued and outstanding.
American Stock Transfer and Trust Company, LLC is the registrar and transfer agent for our
common shares. Their address is 6201 15th Avenue, 2nd Floor, Brooklyn, NY 11219, telephone: (718)
921-8300, (800) 937-5449.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
We are a leading developer of placenta-based cell therapy product candidates for the treatment of
multiple ischemic, inflammatory and hematologic conditions. Our lead indications are CLI, recovery
following surgery for hip fracture and ARS. Each of these indications is a severe unmet medical need.
PLX cells are derived from a class of placental cells that are harvested from donated placenta at
the time of full term healthy delivery of a baby. PLX cell products require no tissue matching prior to
administration. They are produced using our proprietary three-dimensional expansion technology. Our
manufacturing facility complies with the European, Japanese, Israeli and FDA’s current Good
Manufacturing Practice requirements and has been approved by the European and Israeli regulators for
production of PLX-PAD for late stage trials and marketing. In December 2017, after an audit of our
facilities, we were granted manufacturer/importer authorization and Good Manufacturing Practice
Certification by Israel’s Ministry of Health. If we obtain FDA and other regulatory approvals to market
PLX cells, we expect to have in-house production capacity to grow clinical-grade PLX cells in commercial
quantities.
38
Our goal is to make significant progress with our clinical pipeline and our clinical pivotal trials in
order to ultimately bring innovative, potent therapies to patients who need new treatment options. We
expect to demonstrate a real-world impact and value from our clinical pipeline, technology platform and
commercial-scale manufacturing capacity. Our business model for commercialization and revenue
generation includes, but is not limited to, direct sale of our products, partnerships, licensing deals, and joint
ventures with pharmaceutical companies.
We aim to shorten the time to commercialization of our product candidates, by leveraging unique
accelerated regulatory pathways that exist in the United States, Europe and other territories to bring
innovative products that address life-threatening diseases to the market efficiently.
We have determined to invest our resources primarily on the PLX-PAD Phase III clinical trials
relating to CLI and muscle recovery following surgery for hip fracture, and focus on finalizing the clinical
trials in the United States, Europe and Israel while we prepare for the marketing phase, with the initiation
of such marketing phase subject to regulatory approval, in these territories.
Two pivotal, Phase III multinational clinical trials are currently conducted with our PLX-PAD
product candidate: one in CLI, and the other in recovery following surgery for hip fracture.
Our second product candidate, PLX-R18, is under development in the United States for ARS via
the FDA Animal Rule regulatory pathway, which may result in approval under the Animal Rule, without
the performance of human efficacy trials.
RESULTS OF OPERATIONS – YEAR ENDED JUNE 30, 2019 COMPARED TO YEAR ENDED JUNE 30,
2018.
Revenues
Revenues for the year ended June 30, 2019 were $54,000 and revenues for the year ended June 30,
2018 were $50,000. All revenues in the years ended June 30, 2019 and June 30, 2018 were related to the
sale of our PLX cells for research use.
Cost of revenues
Cost of revenues for the year ended June 30, 2019 and June 30, 2018 were $2,000. All cost of
revenues are related to the royalties we are obligated to pay to the IIA.
Research and Development net
Research and development net costs (costs less participation and grants by the IIA, Horizon 2020
and other parties) for the year ended June 30, 2019 increased by 17% to $26,427,000 from $22,629,000 for
the year ended June 30, 2018. The increase is mainly attributed to: (1) an increase in subcontractor
expenses related to some of our clinical trials, (2) an increase in materials consumption due to high volume
of production of our products for clinical trials, (3) a decrease in IIA participation (approximately $900,000
was approved in calendar year 2018 compared to approximately $500,000 that was approved in calendar
year 2019), and (4) an increase in stock-based compensation expenses due to the amount of restricted stock
units, or RSUs, and options granted. The increase was partially offset due to grants received from the
Israel-United States Binational Industrial Research and Development Foundation, or BIRD, and from
Indiana University, and due to a decrease in payroll expenses related to differences in exchange rates.
General and Administrative
General and administrative expenses decreased by 18% from $11,193,000 for the year ended June
30, 2018 to $9,157,000 for the year ended June 30, 2019.
39
This decrease is attributed to a decrease in stock-based compensation expenses related to the amount of
RSUs granted and their vesting schedules, a decrease in corporate activities expenses and a decrease in
payroll expenses related to differences in exchange rates.
Financial Income, net
Financial income decreased from $7,605,000 for the year ended June 30, 2018 to $225 for the year
ended June 30, 2019. This decrease is mainly due to the sale of our investments in marketable securities
which occurred in the year ended June 30, 2018 that resulted a net gain of $7,606,000.
Net Loss
Net loss for the year ended June 30, 2019 was $35,307,000 as compared to a net loss of
$26,126,000 for the year ended June 30, 2018. The changes were mainly due to a decrease in financial
income, net, and increases in research and development expenses for the reasons mentioned above. Net loss
per share for the year ended June 30, 2019 was $2.90, as compared to $2.50 for the year ended June 30,
2018. The net loss per share increased mainly as a result of an increase in the net loss, offset by an increase
in our weighted average number of shares due to the issuance of additional shares during fiscal year 2019.
Liquidity and Capital Resources
As of June 30, 2019, our total current assets were $26,371,000 and our total current liabilities were
$8,158,000. On June 30, 2019, we had a working capital surplus of $18,213,000 and an accumulated deficit
of $251,004,000.
As of June 30, 2018, our total current assets were $32,036,000 and our total current liabilities were
$8,548,000. On June 30, 2018, we had a working capital surplus of $23,488,000 and an accumulated deficit
of $215,697,000.
Our cash and cash equivalents and restricted cash as of June 30, 2019 amounted to $5,186,000.
This is a decrease of $4,701,000 from the $9,887,000 reported as of June 30, 2018. Cash balances
decreased in the year ended June 30, 2019 for the reasons presented below.
Operating activities used cash of $29,453,000 in the year ended June 30, 2019. Cash used by
operating activities in the year ended June 30, 2019 primarily consisted of payments to subcontractors,
suppliers, and professional services providers primarily related to our ongoing Phase III clinical trials and
payments of salaries to our employees, offset by participation of the IIA, Horizon 2020 and other grants.
Investing activities provided cash of $1,170,000 in the year ended June 30, 2019. The investing
activities in the year ended June 30, 2019 consisted primarily of cash provided from repayment of short
term deposits of $1,415,000, offset by payments of $239,000 related to investments in property and
equipment and Investment in restricted bank deposits of $6,000.
Financing activities generated cash in the amount of $23,582,000 during the year ended June 30,
2019. The cash generated in the year ended June 30, 2019 from financing activities is related to net
proceeds of $19,464,000 from issuing shares of our common stock in a public offering we conducted in
April 2019, net proceeds of $4,003,000 from issuing shares of our common stock under our At Market
Sales Agreement, or the ATM Agreement, with FBR Capital Markets & Co., MLV & Co. LLC and
Oppenheimer & Co. Inc., and the Sales Agreement, proceeds of $107,000 related to a grant received from
BIRD and net proceeds of $8,000 from the exercise of options.
In July 2017, we entered into the ATM Agreement with FBR Capital Markets & Co., MLV & Co.
LLC and Oppenheimer & Co. Inc., each an Agent, which provided that, upon the terms and subject to the
conditions and limitations set forth in the ATM Agreement, we could elect, from time to time, to issue and
sell shares of common stock having an aggregate offering price of up to $80,000,000 through any of the
Agents.
40
We were not obligated to make any sales of common stock under the ATM Agreement. From July 2017
through February 4, 2019, we sold an aggregate of 530,541 shares of common stock pursuant to the ATM
Agreement at an average price of $13.70 per share. On February 4, 2019, we notified the Agents of the
termination of the ATM Agreement.
On February 6, 2019, we entered into a Sales Agreement with Jefferies LLC, pursuant to which
we may issue and sell shares of our common stock having an aggregate offering price of up to $50,000,000
from time to time through Jefferies. We are not obligated to make any sales of common stock under the
Sales Agreement. From February 6, 2019 through June 30, 2019, we sold an aggregate of 236,800 shares of
common stock pursuant to the Sales Agreement at an average price of $9.70 per share.
On April 8, 2019, we sold, pursuant to an underwriting agreement relating to a firm commitment
public offering, or the Public Offering, an aggregate of 2,857,143 shares of common stock and warrants to
purchase up to 2,857,143 shares of common stock, inclusive of the underwriter’s over-allotment option
which was exercised in full, for aggregate gross proceeds of $20,000,000. The warrants issued in the Public
Offering are exercisable for a period of five years from issuance and have an exercise price of $7.00 per
share. In addition, on April 8, 2019, we sold, pursuant to a subscription agreement with a certain investor in
a registered direct offering, or the Registered Direct Offering, 142,857 shares of common stock, for
aggregate gross proceeds of $1,000,000. The net proceeds from the Public Offering and the Registered
Direct Offering, after deducting underwriting commissions and discounts, and other offering expenses,
were $19,464,000.
During the year ended June 30, 2019, we received cash of approximately $54,000 from third
parties from the sale of our PLX cells for research use.
Our cash and cash equivalents as of June 30, 2018 amounted to $8,821,000. This is an increase of
$4,114,000 from the $4,707,000 reported as of June 30, 2017. Cash balances increased in the year ended
June 30, 2018 for the reasons presented below.
Operating activities used cash of $21,380,000 in the year ended June 30, 2018. Cash used by
operating activities in the year ended June 30, 2018 primarily consisted of payments of salaries to our
employees, and payments of fees to our consultants, suppliers, subcontractors, and professional services
providers including the costs of clinical trials, offset by IIA and Horizon 2020 grants.
Investing activities provided cash of $5,573,000 in the year ended June 30, 2018. The investing
activities in the year ended June 30, 2018 consisted primarily of cash provided from the sale and the
redemption of marketable securities of $21,890,000, offset by investments in short term deposits of
$14,829,000, investment of $1,146,000 in marketable securities and payments of $342,000 related to
investments in property and equipment.
Financing activities generated cash in the amount of $19,921,000 during the year ended June 30,
2018. The financing activities are primarily attributable to net proceeds of $13,646,000 from issuing shares
of our common stock in a public offering we conducted in Israel in October 2017, net proceeds of
$1,202,000 from issuing shares of our common stock from the exercise of warrants and options, net
proceeds of $4,985,000 from issuing shares of our common stock under the ATM Agreement and proceeds
of $88,000 related to a grant received from BIRD.
As of June 30, 2018, we had sold 359,941 shares of common stock under the ATM Agreement, at
an average price of $14.30 per share.
On October 31, 2017, we completed a public offering in Israel, pursuant to our existing shelf
registration statement in the United States and a shelf registration statement filed in Israel, pursuant to
which we raised aggregate gross proceeds of $15,051,000 through the sale of 900,000 shares of our
common stock at a purchase price of NIS 59 (approximately $16.70 per share). The net proceeds, after
deducting fees and expenses related to the offering, were $13,646,000.
41
During the year ended June 30, 2018, we received cash of approximately $50,000 from a third
party from the sale of our PLX cells for research use.
During the year ended June 30, 2018, we were awarded approximately $43,000 (NIS 150,000) by
the Israeli Ministry of Labor, Social Affairs and Social Services related to an “Equal Employment”
program which aims to reward and honor Israeli employers who demonstrate and promote gender equality
in employment.
During the years ended June 30, 2019 and 2018, we received approximately $550,000 and
$2,328,000, respectively, in cash from the IIA towards our research and development expenses.
According to the IIA grant terms, we are required to pay royalties at a rate of 3% on sales of
products and services derived from technology developed using this and other IIA grants until 100% of the
dollar-linked grants amount plus interest are repaid. In the absence of such sales, no payment is required.
During the year ended June 30, 2019, we paid $2,000 of royalties to the IIA. The IIA may impose certain
conditions on any arrangement under which the IIA permits the Company to transfer technology or
development out of Israel or outsource manufacturing out of Israel. While the grant is given to the
Company over a certain period of time (usually a year), the requirements and restrictions under the Israeli
Law for the Encouragement of Industrial Research and Development, 1984 continue and do not have a set
expiration period, except for the royalties, which requirement to pay them expires after payment in full.
During the years ended June 30, 2019 and 2018, we received total cash grants of approximately
$1,374,000 and $2,265,000, respectively, from the European Union research and development consortiums
relating to the Horizon 2020 program.
In accordance with the CHA Agreement, in December 2013, we issued to CHA 250,000 shares of
our common stock in consideration for the issuance to us of 1,011,504 common shares of CHA, which
reflected total consideration of approximately $10,414,000 to each of us and CHA. The parties also agreed
to give an irrevocable proxy to the other party’s management with respect to the shares issued.
During March 2015, we sold a portion of the CHA shares received in December 2013, resulting in
net proceeds of $5,717,000. The net gain was $282,000 and was presented as “Financial income, net” in
fiscal 2015.
During January 2018, we sold the remainder of our holdings in CHA, consisting of 400,368 shares
of CHA, on the open market for aggregate net proceeds of approximately $10,500,000, representing a net
gain of $6,200,000 presented in “Financial income, net”.
Non-dilutive grants
The IIA has supported our activity in the past fourteen years. Our last program, for the fourteenth
year, was approved by the IIA in 2019 and relates to a grant of approximately $500,000. The grant will be
used to cover research and development expenses for the period January 1, 2019 to December 31, 2019.
In July 2018, we were awarded a marketing grant of approximately $52,000 under the "Shalav"
program of the Israeli Ministry of Economy and Industry. The grant is intended to facilitate certain
marketing and business development activities with respect to our advanced cell therapy products in the
U.S. market.
In July 2017, we were awarded an additional Smart Money grant of approximately $229,000
from Israel’s Ministry of Economy. The Israeli government granted us budget resources that we intend to
use to advance our product candidate towards marketing in China-Hong Kong markets. We will also
receive close support from Israel’s trade representatives stationed in China, including Hong Kong, along
with experts appointed by the Smart Money program.
42
In August 2016, our CLI program in the European Union was awarded a Euro 7,600,000
(approximately $8,700,000) grant. The grant is part of the European Union’s Horizon 2020 program. The
Phase III study of PLX-PAD in CLI will be a collaborative project carried out by an international
consortium led by the Berlin-Brandenburg Center for Regenerative Therapies together with the Company
and with participation of additional third parties. The grant will cover a significant portion of the CLI
program costs. An amount of Euro 1,900,000 (approximately $2,200,000) is a direct grant allocated to us,
and the Company also expects to benefit from cost savings resulting from grant amounts allocated to the
other consortium members. In July 2017, the consortium amended the consortium agreement, pursuant to
which the original grant allocation was amended such that we will receive an additional direct grant of
Euro 1,000,000 (approximately $1,100,000). The additional direct grant was allocated to us from the total
amount of the original grant.
In September 2017, our Phase III study of PLX-PAD cell therapy in the treatment of muscle
injury following surgery for hip fracture was awarded a Euro 7,400,000 (approximately $8,400,000)
grant, as part of the European Union’s Horizon 2020 program. This Phase III study will be a collaborative
project carried out by an international consortium led by Charité, together with us, and with participation
of additional third parties. The grant will cover a significant portion of the project costs. An amount of
Euro 2,550,000 (approximately $2,900,000) is a direct grant allocated to us for manufacturing and other
costs, and we also expect to have a direct benefit from cost savings resulting from grant amounts allocated
to the other consortium members.
In October 2017, the nTRACK, a collaborative project carried out by an international consortium
led by Leitat was awarded a Euro 6,800,000 (approximately $7,700,000) non-royalty bearing grant. An
amount of Euro 500,000 (approximately $570,000) is a direct grant allocated to us. We also expect to
benefit from cost savings resulting from grant amounts allocated to the other consortium members.
We adhere to an investment policy set by our investment committee which aims to preserve our
financial assets, maintain adequate liquidity and maximize return while minimizing exposure to the NIS.
Such policy further provides that we should hold most of our current assets in bank deposits and the
remainder of our current assets is to be invested in other low risk instruments. As of today, the currency of
our financial portfolio is mainly in U.S. dollars and we use options contracts in order to hedge our
exposures to NIS.
Outlook
We have accumulated a deficit of $251,004,000 since our inception in May 2001. We do not
expect to generate any significant revenues from sales of products in the next twelve months. It is possible
that our cash needs will increase in the foreseeable future. We expect to generate revenues, which in the
short and medium terms will unlikely exceed our costs of operations, from the sale of licenses to use our
technology or products. We will be required to obtain additional liquidity resources in order to support the
commercialization of our products and maintain our research and development and clinical trials
activities.
As of June 30, 2019, our cash position (cash and cash equivalents, short-term bank deposits and
restricted cash and long-term bank deposits) totaled approximately $24,795,000. We are addressing our
liquidity issues by implementing initiatives to allow the continuation of our activities. Our current
operating plan includes various assumptions concerning the level and timing of cash outflows for
operating activities and capital expenditures.
Our ability to successfully carry out our business plan, which includes a cost-reduction plan
should we be unable to raise sufficient additional capital, is primarily dependent upon our ability to (1)
obtain sufficient additional capital, (2) entering into license agreements to use or commercialize our
products and (3) receive other sources of funding, including non-diluting sources such as the IIA grants,
the Horizon 2020 grants and other grants. There are no assurances, however, that we will be successful in
obtaining an adequate level of financing needed for the long-term development and commercialization of
our products.
43
According to our management’s estimates, liquidity resources as of June 30, 2019, together with
the funds received under the Sales Agreement during July and August 2019, will be sufficient to maintain
our operations into the first quarter of fiscal year 2021. Our inability to raise funds to carry out our
business plan will have a severe negative impact on its ability to remain a viable company. These
conditions raise substantial doubt about our ability to continue as a going concern.
Application of Critical Accounting Policies
Our significant accounting policies are more fully described in Note 2 to our consolidated
financial statements appearing in this Annual Report. We believe that the accounting policies below are
critical for one to fully understand and evaluate our financial condition and results of operations.
The discussion and analysis of our financial condition and results of operations is based on our
financial statements, which we prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, as well as the reported revenues and expenses
during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including
those described in greater detail below. We base our estimates on historical experience and on various
other factors that we believe are reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
Stock-based compensation
Stock-based compensation is considered critical accounting policy due to the significant
expenses of RSUs which were granted to our employees, directors and consultants. In fiscal year 2019,
we recorded stock-based compensation expenses related to options, restricted stock and RSUs in the
amount of $5,146,000.
In accordance with ASC 718, "Compensation-Stock Compensation", or ASC 718, restricted
share units granted to employees and directors are measured at their fair value on the grant date. All
restricted shares units granted in 2019 and 2018 were granted for no consideration; therefore their fair
value was equal to the share price at the date of grant, based on the close trading price of our shares
known at the grant date. The restricted shares units to non-employees consultants are remeasured in any
future vesting period for the unvested portion of the grants.
The value of the portion of the award that is ultimately expected to vest is recognized as an
expense over the requisite service periods in our consolidated statements of operations. We have graded
vesting based on the accelerated method over the requisite service period of each of the awards. The
expected pre-vesting forfeiture rate affects the number of the shares. Based on our historical experience,
the pre-vesting forfeiture rate per grant is 7% for the shares granted to employees and 0% for the shares
granted to our directors, CEO, Executive Chairman and non-employees consultants.
Research and Development Expenses, Net
We expect our research and development expenses to remain our primary expense in the near
future as we continue to develop our product candidates. Our research and development expenses consist
primarily of clinical trials expenses, consultant and subcontractor expenses, payroll and related expenses,
lab material expenses, stock based compensation expenses, rent and maintenance expenses and patent
expenses. The following table provides a breakdown of the related costs for fiscal years 2017 through
2019 (in thousands of dollars):
44
Year ended June 30,
Payroll and related expenses
Materials expenses
Clinical trials expenses
Depreciation expenses
Consultants and subcontractor expenses
Rent and maintenance expenses
Stock-based compensation expenses
Patent expenses
Other Research and Development expenses
Total expenses
2019
$9,752
5,871
5,774
1,841
2,028
1,473
1,616
824
1,045
29,882
Less: Research and Development participation grants
(3,455)
2018
$9,915
4,521
4,370
1,893
1, 694
1,429
1,423
426
925
26,371
(3,742)
2017
$8,341
3,145
4,461
2,029
1,485
1,567
1,584
461
928
24,001
(2,909)
Research and Development Expenses, Net
$26,427
$22,629
$21,092
We invest heavily in research and development. Research and development expenses, net, were
our major operating expenses, representing 74%, 67% and 75% of the total operating expenses for each of
our fiscal years 2019, 2018 and 2017, respectively. We expect that in the upcoming years our research and
development expenses, net, will continue to be our major operating expense.
Contractual Obligations
The following summarizes our contractual obligations and other commitments on June 30, 2019,
and the effect such obligations could have on our liquidity and cash flow in future periods:
Contractual Obligations
Operating lease obligations
Minimum purchase requirements
Accrued severance pay, net
Total
Total
$2,641,000
$312,200
$257,000
$3,210,200
$1,110,000
$312,200
-
$1,422,200
Payments due by period
Less than 1
year
1-3 years
$1,531,000
-
-
$1,531,000
3-5
years
-
-
-
-
More than
5 years
-
-
$257,000
$257,000
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to a variety of risks, including changes in interest rates, foreign currency
exchange rates and inflation.
45
As of June 30, 2019, we had $4.1 million in cash and cash equivalents and $20.7 million in short-
term bank deposits and restricted deposits.
We adhere to an investment policy set by our investment committee, which aims to preserve our
financial assets, maintain adequate liquidity and maximize return while minimizing exposure to the NIS.
Such policy further provides that we should hold most of our current assets in bank deposits and the
remainder of our current assets should be invested in low risk instruments. As of today, the currency of our
financial portfolio is mainly in U.S. dollars and we use options contracts in order to hedge our exposures to
currencies other than the U.S. dollar.
Interest Rate Risk
We invest a major portion of our cash surplus in bank deposits in banks in Israel. Since the bank
deposits typically carry fixed interest rates, financial income over the holding period is not sensitive to
changes in interest rates. However, our interest gains from future deposits may decline in the future as a
result of changes in the financial markets. In any event, given the historic low levels of the interest rate, we
estimate that a further decline in the interest rate we are receiving will not result in a material adverse effect
to our business.
Foreign Currency Exchange Risk and Inflation
A significant portion of our expenditures, including salaries, materials, consultants’ fees and
facility expenses relate to our operations in Israel. The cost of those Israeli operations, as expressed in U.S.
dollars, is influenced by the extent to which any increase in the rate of inflation in Israel is not offset (or is
offset on a lagging basis) by a devaluation of the NIS in relation to the U.S. dollar. If the U.S. dollar
declines in value in relation to the NIS, it will become more expensive for us to fund our operations in
Israel. In addition, as of June 30, 2019, we own net financial balances in NIS of approximately
($2,569,000).
Assuming a 10% appreciation of the NIS against the U.S. dollar, we would experience exchange
rate loss of approximately $234,000, while assuming a 10% devaluation of the NIS against the U.S. dollars,
we would experience an exchange rate gain of approximately $285,000, in both cases excluding the effect
of our hedging transactions (as described below).
The exchange rate of the U.S. dollar to the NIS, based on exchange rates published by the Bank of
Israel, was as follows:
Average rate for period
Rate at period-end
Year Ended June 30,
2017
3.741
3.496
2018
3.529
3.650
2019
3.647
3.566
We use currency transactions of options and forward contracts to decrease the risk of financial
exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS.
For the year ended June 30, 2019, our net realized loss from hedging transactions that are non-
designated and consist primarily of options strategies and also forward contracts to minimize the risk
associated with the foreign exchange effects of monetary assets and liabilities denominated in NIS was
$373,000.
46
Item 8. Financial Statements and Supplementary Data.
Our financial statements are stated in thousands United States dollars (US$) and are prepared in
accordance with U.S. GAAP.
The following audited consolidated financial statements are filed as part of this Annual Report:
Reports of Independent Registered Public Accounting Firm, dated September 12, 2019.
Consolidated Balance Sheets.
Consolidated Statements of Operations.
Consolidated Statements of Comprehensive Loss.
Statements of Changes in Equity.
Consolidated Statements of Cash Flows.
Notes to the Consolidated Financial Statements.
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2019
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2019
U.S. DOLLARS IN THOUSANDS
INDEX
Page
Reports of Independent Registered Public Accounting Firm
F-2 - F-5
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
F-6 - F-7
F-8
F-9
Statements of Changes in Stockholders' Equity
F-10 - F-12
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-13 - F-14
F-15 - F-39
Kost Forer Gabbay & Kasierer
2 Pal-Yam Ave.
Haifa 330905, Israel
Tel: 972 (4)8654021
39
Fax: 972(3)
www.ey.com
56334
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders Of
PLURISTEM THERAPEUTICS INC.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pluristem Therapeutics Inc. and its subsidiary
(the “Company”) as of June 30, 2019 and 2018, the related consolidated statements of operations, comprehensive loss,
changes in stockholders' equity and cash flows for each of the three years in the period ended June 30, 2019 and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at June 30, 2019 and 2018, and
the results of its operations and its cash flows for each of the three years in the period ended June 30, 2019, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2019, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated September 12, 2019 expressed an unqualified opinion
thereon.
The Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 1b to the consolidated financial statements, the Company has suffered recurring
losses from operations, has limited liquidity resources and has stated that substantial doubt exists about its ability to
continue as a going concern. Management's evaluation of the events and conditions and management's plans in regard to
these matters are also described in Note 1b. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
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.
F-2
Kost Forer Gabbay & Kasierer
2 Pal-Yam Ave.
Haifa 330905, Israel
Tel: 972 (4)8654021
39
Fax: 972(3)
www.ey.com
56334
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 financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the 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 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 financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company‘s auditor since 2003.
Haifa, Israel
September 12, 2019
F-3
Kost Forer Gabbay & Kasierer
2 Pal-Yam Ave.
Haifa 330905, Israel
Tel: 972 (4)8654021
39
Fax: 972(3)
www.ey.com
56334
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders Of
PLURISTEM THERAPEUTICS INC.
Opinion on Internal Control over Financial Reporting
We have audited Pluristem Therapeutics Inc. and its subsidiary’s (the "Company") internal control over
financial reporting as of June 30, 2019, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO
criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of June 30, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of Pluristem Therapeutics Inc. and its subsidiary as of June
30, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, changes in stockholders'
equity and cash flows for each of the three years in the period ended June 30, 2019, and the related notes and our
report dated September 12, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
F-4
Kost Forer Gabbay & Kasierer
2 Pal-Yam Ave.
Haifa 330905, Israel
Tel: 972 (4)8654021
39
Fax: 972(3)
www.ey.com
56334
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting 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 the policies
or procedures may deteriorate.
/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Haifa, Israel
September 12, 2019
F-5
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands (except share and per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term bank deposits
Restricted cash and short-term bank deposits
Other current assets
Total current assets
LONG-TERM ASSETS:
Long-term deposits and restricted bank deposits
Severance pay fund
Property and equipment, net
Other long-term assets
Total long-term assets
Note
2019
2018
June 30,
2f
5,2n
2g
6
$ 4,106
19,599
692
1,974
26,371
$ 8,821
21,079
687
1,449
32,036
398
693
3,838
10
4,939
383
846
5,678
17
6,924
Total assets
$ 31,310
$ 38,960
The accompanying notes are an integral part of the consolidated financial statements.
F-6
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands (except share and per share data)
Note
2019
2018
June 30,
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES
Trade payables
Accrued expenses
Other accounts payable
Total current liabilities
LONG-TERM LIABILITIES
Accrued severance pay
Other long-term liabilities
Total long-term liabilities
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Share capital:
Common stock $0.00001 par value per share:
Authorized: 30,000,000 shares
Issued and outstanding: 15,082,852 shares as of
June 30, 2019; 11,356,579 shares as of June 30,
2018
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
7
8
9
$ 2,281
3,744
2,133
8,158
$ 3,261
2,266
3,021
8,548
950
381
1,331
1,127
778
1,905
1
272,824
(251,004)
21,821
1
244,203
(215,697)
28,507
Total liabilities and stockholders' equity
$ 31,310
$ 38,960
The accompanying notes are an integral part of the consolidated financial statements.
F-7
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. Dollars in thousands (except share and per share data)
Note
2019
Year ended June 30,
2018
2017
Revenues
Cost of revenues
Gross profit
Operating Expenses:
Research and development
expenses
Less: participation grants by the
IIA, Horizon 2020 and other
parties
Research and development
expenses, net
General and administrative
expenses, net
Other income
Total operating loss
Financial income, net
2i
10
11
54
(2)
52
50
(2)
48
-
-
-
(29,882)
(26,371)
(24,001)
3,455
3,742
2,909
(26,427)
(22,629)
(21,092)
(9,157)
(11,193)
(6,927)
-
43
-
(35,532)
(33,731)
(28,019)
225
7,605
205
Net loss for the period
$ (35,307)
$ (26,126)
$ (27,814)
Loss per share:
Basic and diluted net loss per
share
Weighted average number of
shares used in computing basic
and diluted net loss per share
$ (2.90)
$ (2.50)
$ (3.20)
12,332,912
10,587,677
8,742,621
The accompanying notes are an integral part of the consolidated financial statements.
F-8
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. Dollars in thousands (except share and per share data)
Year ended June 30,
2018
2019
2017
Net loss
$ (35,307)
$ (26,126)
$ (27,814)
Other comprehensive income (loss), net:
Unrealized gain (loss) on available-for-sale
marketable securities, net
Reclassification adjustment of available-
for-sale marketable securities losses (gains)
realized in net loss, net
Other comprehensive income (loss)
-
-
-
6,441
924
(8,440)
(1,999)
(405)
519
Total comprehensive loss
$ (35,307)
$ (28,125)
$ (27,295)
The accompanying notes are an integral part of the consolidated financial statements.
F-9
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. Dollars in thousands (except share and per share data)
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
Common Stock
Additional
Paid-in
Shares (**)
Amount
Capital
Accumulated
Other
Comprehensive Accumulated
Income (Loss)
Deficit
Total
Stockholders’
Equity
8,026,900 $
(*)
$
198,433
$
1,480
$ (161,757)
$ 38,156
1,790
257,026
1,408,163
-
-
(*)
(*)
(*)
-
-
10
3,662
15,718
-
-
-
-
-
519
-
-
-
-
-
10
3,662
15,718
519
(27,814)
(27,814)
9,693,879
$
(*)
$ 217,823
$
1,999 $ (189,571)
$ 30,251
Balance as of July 1, 2016
Exercise of options by employees and non-
employee consultants
Stock-based compensation to employees,
directors and non-employee consultants
Issuance of common stock and warrants
related to January 2017 offering, net of
issuance costs of $1,532 (Note 9b)
Other comprehensive income, net
Net loss
Balance as of June 30, 2017
(*) Less than $1
(**) See note 1c for reverse stock split
The accompanying notes are an integral part of the consolidated financial statements.
F-10
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. Dollars in thousands (except share and per share data)
Balance as of July 1, 2017
Exercise of options by employees
Stock-based compensation to employees, directors and non-
employee consultants
Issuance of common stock under At-The Market (“ATM”)
Agreement, net of issuance costs of $174 (Note 9d)
Issuance of common stock, net of issuance costs of $1,405
(Note 9e)
Exercise of warrants by investors (Note 9c)
Other comprehensive loss, net
Net loss
Balance as of June 30, 2018
(*) Less than $1
(**) See note 1c for reverse stock split
Common Stock
Shares (**)
Amount
9,693,879 $
5,050
314,838
359,941
900,000
82,871
-
-
(*)
(*)
(*)
(*)
(*)
(*)
-
-
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
$
217,823
42
$
1,999
-
$ (189,571)
-
$ 30,251
42
6,548
4,985
13,646
1,160
-
-
-
-
-
-
(1,999)
-
-
-
-
-
-
(26,126)
6,548
4,985
13,646
1,160
(1,999)
(26,126)
$ 28,507
11,356,579
$
(*)
$
244,204
$
-
$ (215,697)
The accompanying notes are an integral part of the consolidated financial statements.
F-11
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. Dollars in thousands (except share and per share data)
Balance as of July 1, 2018
Stock-based compensation to employees, directors and non-employee
consultants
Issuance of common stock under At Market Issuance Sales Agreement,
and Open Market Sales Agreement, net of aggregate issuance costs of
$403 (Note 9d, 9f)
Issuance of common stock and warrants related to April 2019 offering,
net of issuance costs of $1,536 (Note 9g)
Exercise of options by employees and non-employee consultants
Net loss
Balance as of June 30, 2019
(*) Less than $1
(**) See note 1c for reverse stock split
Common Stock
Shares (**)
11,356,579
Amount
$
(*)
Additional Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
$
244,204
$ (215,697)
$ 28,507
317,023
407,400
3,000,000
1,850
-
15,082,852
$
(*)
(*)
(*)
(*)
-
(*)
5,146
4,003
19,464
8
-
-
-
-
-
(35,307)
$
272,825
$ (251,004)
5,146
4,003
19,464
8
(35,307)
$ 21,821
The accompanying notes are an integral part of the consolidated financial statements.
F-12
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands (except share and per share data)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (35,307)
$ (26,126)
$ (27,814)
2019
Year ended June 30,
2018
2017
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation
Loss from sale of property and equipment, net
Accretion of discount, amortization of premium and
changes in accrued interest of marketable securities
Gain from sale of investments of available-for-sale
marketable securities
Other-than-temporary loss of available-for-sale marketable
securities
Stock-based compensation to employees, directors and non-
employees consultants
Decrease (increase) in accounts receivable from the IIA
Increase in other current and other long-term assets
Increase (decrease) in trade payables
Increase in other accounts payable, accrued expenses, other
long-term liabilities and other current liabilities
Decrease (increase) in interest receivable on short-term
deposits
Linkage differences and interest on short and long-term
deposits and restricted bank deposits
Accrued severance pay, net
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Proceeds from sale of property and equipment
Proceeds from (investment in) short-term deposits
Investment in Long-term deposits and restricted bank
deposits
Proceeds from sale of available-for-sale marketable
securities
Proceeds from redemption of available-for-sale marketable
securities
Investment in available-for-sale marketable securities
Net cash provided by investing activities
1,962
-
2,018
6
2,177
72
-
11
35
-
-
(8,440)
850
(362)
767
5,146
(121)
(397)
(863)
6,548
978
(59)
1,212
3,662
1,192
(731)
(701)
86
68
1,600
138
(128)
(24)
(3)
(24)
$ (29,453)
5
145
$ (21,380)
(14)
(8)
$ (21,611)
$ (239)
-
1,415
$ (342)
-
(14,721)
$ (378)
30
2,373
(6)
-
-
-
$ 1,170
-
21,881
9
(1,146)
$ 5,681
-
5,527
410
(3,607)
$ 4,355
The accompanying notes are an integral part of the consolidated financial statements.
F-13
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds related to issuance of common stock and warrants,
net of issuance costs
Proceeds with respect to Israel-United States Binational
Industrial Research and Development Foundation
Exercise of options and warrants
Net cash provided by financing activities
Increase (decrease) in cash, cash equivalents and restricted
cash
Cash, cash equivalents and restricted cash at the beginning
of the period
Cash, cash equivalents and restricted cash at the end of the
period
(a) Supplemental disclosure of cash flow activities:
Cash paid during the period for:
Taxes paid due to non-deductible expenses
2019
Year ended June 30,
2018
2017
$ 23,467
$ 18,631
$ 15,718
107
8
$ 23,582
88
1,202
$ 19,921
69
10
$ 15,797
(4,701)
9,887
4,222
5,665
(1,459)
7,124
$ 5,186
$ 9,887
$ 5,665
$ 10
$ 27
$ 28
(b) Supplemental disclosure of non-cash activities:
Purchase of property and equipment on credit
$ 54
$ 171
$ 88
The accompanying notes are an integral part of the consolidated financial statements.
F-14
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 1:-GENERAL
a. Pluristem Therapeutics Inc., a Nevada corporation (“Pluristem Therapeutics”), was incorporated on May 11,
2001. Pluristem Therapeutics has a wholly owned subsidiary, Pluristem Ltd. (the “Subsidiary”), which is
incorporated under the laws of the State of Israel. Pluristem Therapeutics and the Subsidiary are referred to as the
“Company” or “Pluristem”.
The Company’s shares of common stock are traded on the Nasdaq Capital Market under the symbol “PSTI” and
on the Tel-Aviv Stock Exchange under the symbol “PLTR”.
b. The Company is a bio-therapeutics company developing placenta-based cell therapy product candidates for the
treatment of multiple ischemic, inflammatory and hematologic conditions. The Company has incurred an
accumulated deficit of approximately $251,004 and incurred recurring operating losses and negative cash flows
from operating activities since inception. As of June 30, 2019, the Company’s total stockholders' equity
amounted to $21,821.
During the year ended June 30, 2019, the Company incurred operating losses of $35,532 and its negative cash
flow from operating activities was $29,453. The Company will be required to identify additional liquidity
resources in the near term in order to support the commercialization of its products and maintain its research and
development and clinical trials activities.
As of June 30, 2019, the Company's cash position (cash and cash equivalents, short-term bank deposits and
restricted cash and long-term bank deposits) totaled approximately $24,795. The Company is addressing its
liquidity issues by implementing initiatives to allow the continuation of its activities. The Company's current
operating plan includes various assumptions concerning the level and timing of cash outflows for operating
activities and capital expenditures. The Company's ability to successfully carry out its business plan, which
includes a cost-reduction plan should it be unable to raise sufficient additional capital, is primarily dependent
upon its ability to (1) obtain sufficient additional capital, (2) enter into license agreements to use or
commercialize the Company’s products and (3) receive other sources of funding, including non-diluting sources
such as the Israeli Innovation Authority (the “IIA”) grants, the European Union's Horizon 2020 program
(“Horizon 2020”) grants and other grants. There are no assurances, however, that the Company will be
successful in obtaining an adequate level of financing needed for the long-term development and
commercialization of its products.
According to management estimates, liquidity resources as of June 30, 2019, together with the funds received
under the Open Market Sales AgreementSM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”), as agent,
during July and August 2019, will be sufficient to maintain the Company's operations into the first quarter of the
Company's fiscal year 2021. The Company's inability to raise funds to carry out its business plan will have a
severe negative impact on its ability to remain a viable company.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The audited
consolidated financial statements do not include any adjustments relating to the recoverability and classification
of assets or liabilities that might be necessary should the Company be unable to continue as a going concern.
CHA Agreement
On June 26, 2013, Pluristem entered into an exclusive license and commercialization agreement (the “CHA
Agreement”) with CHA Biotech Co. Ltd. (“CHA”), for conducting clinical trials and commercialization of
Pluristem's PLX-PAD product in South Korea in connection with two indications: the treatment of Critical Limb
Ischemia (“CLI”), and Intermediate Claudication (collectively with CLI, the “Indications”). Under the terms of
the CHA Agreement, CHA will receive exclusive rights in South Korea for conducting clinical trials with respect
to the Indications and the Company will continue to retain rights to its proprietary manufacturing technology and
cell-related intellectual property.
F-15
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 1:-GENERAL (CONT.)
The first clinical study as part of the CHA Agreement was a Phase II trial in Intermittent Claudication.
Upon the first regulatory approval for a PLX product in South Korea, for the specified Indications, Pluristem and
CHA will establish an equally owned joint venture to commercialize PLX cell products in South Korea.
The CHA Agreement contains customary termination provisions, including in the event the parties do not reach
an agreement upon development plan for conducting the clinical trials. Upon termination of the CHA
Agreement, the license granted thereunder will terminate and all rights included therein will revert to the
Company, and the Company will be free to enter into agreements with any other third parties for the granting of
a license in or outside South Korea or to deal in any other manner with such rights as it shall see fit at its sole
discretion.
In addition, and as contemplated by the CHA Agreement, in December 2013, Pluristem and CHA executed the
mutual investment pursuant to which Pluristem issued 250,000 shares of its common stock in consideration for
1,011,504 shares of CHA, which reflects total consideration to each of Pluristem and CHA of approximately
$10,414. The parties also agreed to give an irrevocable proxy to the other party’s management with respect to the
voting power of the shares issued.
In March 2015, the Company sold a portion of the CHA shares received in December 2013.
In January 2018, the Company sold its remaining investment in the CHA shares, for aggregate net proceeds of
approximately $10,500, representing a net gain of $6,200, which is recorded in “Financial income, net” for the
year ended June 30, 2018, and reclassified from other comprehensive income (loss).
Chart Industries Agreement
In November 2018, the Company entered into a license agreement with a subsidiary of Chart Industries, Inc.
(“Chart”), regarding the Company’s thawing device for cell-based therapies. Pursuant to the terms of the
agreement, Chart obtained the exclusive rights to manufacture and market the thawing device in all territories
worldwide, excluding Greater China, and the Company is entitled to receive royalties from sales of the product
and supply of an agreed upon number of thawing devices. Royalties shall commence on the date of Chart’s first
commercial sale of the thawing device. As of June 30, 2019, commercial sale of the thawing device by Chart has
not yet begun.
c. Reverse stock split
In July 2019, subsequent to the balance sheet date, the Board of Directors approved a 1-for-10 reverse stock split
of the Company's (a) authorized shares of common stock; (b) issued and outstanding shares of common stock
and (c) authorized shares of preferred stock. The reverse stock split became effective on July 25, 2019. All shares
of common stock, options, warrants and securities convertible or exercisable into shares of common stock, as
well as loss per share, have been adjusted to give retroactive effect to this reverse stock split for all periods
presented.
F-16
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP") applied on consistent basis.
a. Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates, judgments, and assumptions that are reasonable based upon information
available at the time they are made. These estimates, judgments and assumptions can affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
b.
Functional currency
Most of Pluristem Therapeutics’ costs and assets are denominated in United States dollars (“dollar”). The
Company's management believes that the dollar is the primary currency of the economic environment in which
the Company operates. Thus, the dollar is the Company’s functional and reporting currency. Accordingly, non-
dollar denominated transactions and balances have been re-measured into the functional currency in accordance
with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters”. All transaction gains and
losses from the re-measured monetary balance sheet items are reflected in the statements of income as financial
income or expenses, as appropriate.
c.
Principles of consolidation
The consolidated financial statements include the accounts of Pluristem Therapeutics and the Subsidiary.
Intercompany transactions and balances have been eliminated upon consolidation.
d. Cash and cash equivalents
e.
f.
g.
h.
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of
three months or less at the date acquired.
Short-term bank deposit
Bank deposits with original maturities of more than three months but less than one year are presented as part of
short-term investments. Deposits are presented at their cost which approximates market values including
accrued interest. Interest on deposits is recorded as financial income.
Restricted cash and short-term bank deposits
Short-term restricted bank deposits and restricted cash used to secure derivative and hedging transactions and
the Company’s credit line. The restricted cash and short-term bank deposits are presented at cost which
approximates market values including accrued interest.
Long-term restricted bank deposits
Long-term restricted bank deposits with maturities of more than one year used to secure operating lease
agreement are presented at cost which approximates market values including accrued interest.
Investment in marketable securities
The Company accounts for its investments in marketable securities in accordance with ASC 320, "Investments
– Debt and Equity Securities". The Company determines the classification of marketable securities at the time
of purchase and re-evaluates such designations as of each balance sheet date. The Company classifies all of its
marketable securities as available-for-sale. Available-for-sale marketable securities are carried at fair value,
with the unrealized gain and loss reported at "accumulated other comprehensive income (loss)" in the statement
of changes in stockholders' equity.
F-17
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Realized gain and loss on sales of marketable securities are included in the Company's "Financial income, net"
and are derived using the specific identification basis for determining the cost of marketable securities sold. The
amortized cost of available for sale debt marketable securities is adjusted for amortization of premiums and
accretion of discount to maturity. Such amortization, together with coupon interest on available for sale
marketable securities, is included in the "Financial income, net".
The Company recognizes an impairment charge when a decline in the fair value of its available-for-sale
marketable securities below the cost basis is judged to be other than temporary.
The Company considers various factors in determining whether to recognize an impairment charge, including
the length of time the investment has been in a loss position, the extent to which the fair value has been less
than the Company's cost basis, the reason for the decline in value, the potential recovery period and the
Company's intent to sell, including whether it is more likely than not that the Company will be required to sell
the investment before recovery of cost basis. ASC 320-10-35, “Investments - Debt and Equity Securities”,
requires other-than-temporary impairment for debt securities to be separated into (a) the amount representing
the credit loss and (b) the amount related to all other factors (provided that the Company does not intend to sell
the security and it is not more likely than not that it will be required to sell it before recovery). For securities
that are deemed other-than-temporarily impaired, the amount of impairment is recognized in "financial income,
net", in the statement of operations and is limited to the amount related to credit loss, while impairment related
to other factors is recognized in "other comprehensive income (loss)".
During the years ended June 30, 2018 and 2017, the Company recognized other-than-temporary impairment
loss of $850 and $767, respectively (see Note 3). During the year ended June 30, 2019, the Company did not
recognize any other-than-temporary impairment loss.
i.
Revenue Recognition
On July 1, 2017, the Company adopted ASC 606, “Revenue from Contracts with Customers” using the modified
retrospective method. Results for reporting periods beginning after July 1, 2017 are presented under ASC 606,
while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s
historic accounting under ASC 605.
Revenue Recognition from sales of products:
Revenues are recognized when control of the promised goods is transferred to the customer, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods.
The Company determines revenue recognition through the following steps:
●
●
●
●
●
identification of the contract with a customer;
identification of the performance obligations in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
recognition of revenue when, or as, the Company satisfies a performance obligation.
F-18
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
The Company's contracts with its customers are expected to include one type of product and thus have only one
performance obligation, which is the transfer of control of the product. The Company's PLX cells have an
alternative use and, as such, the performance obligation is considered to be satisfied at a point in time where the
customer obtains control over the product.
The Company's contract with Chart includes variable consideration for which the Company estimates the most
likely amount that should be included in the transaction price subject to constraints based on the specific facts
and circumstances. Pursuant to the terms of the agreement, the Company is entitled to receive royalties from
sales of the product and supply of an agreed upon number of thawing devices. Royalties shall commence on the
date of Chart’s first commercial sale of the thawing device.
As of June 30, 2019, commercial sales of the thawing device by Chart have not begun. Based on the Company’s
assessment, it is not probable that a significant reversal in the amount of cumulative revenue recognized will not
occur, and therefore the Company is unable to recognize revenues with respect to the Chart agreement before
the uncertainty associated with the variable consideration is subsequently resolved.
j.
Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the
straight-line method over the estimated useful lives of the assets, at the following annual rates:
Laboratory equipment
Computers and peripheral equipment
Office furniture and equipment
Vehicles
Leasehold improvements
%
10-40
33
15
15
The shorter of the expected useful life or the
reasonable assumed term of the lease.
k.
l.
Impairment of long-lived assets
The Company's long-lived assets are reviewed for impairment in accordance with ASC 360, "Property, Plant
and Equipment", whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. During fiscal years 2019, 2018 and 2017, no
impairment losses have been identified.
Accounting for stock-based compensation
The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock
Compensation" (“ASC 718”) and ASC 505-50, "Equity-Based Payments to Non-Employees" (“ASC 505-50”).
ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant
using an option-pricing model. The Company estimates the fair value of stock options granted using the Black-
Scholes-Merton option-pricing model. The Company accounts for employee’s share-based payment awards
classified as equity awards (restricted stocks (“RS”) or restricted stock units (“RSUs”)) using the grant-date fair
value method. The fair value of share-based payment transactions is recognized as an expense over the requisite
service period, net of estimated forfeitures. The Company estimates forfeitures based on historical experience
and anticipated future conditions. The Company elected to recognize compensation cost for an award with
service conditions and goals achievement that has a graded vesting schedule using the accelerated method based
on the multiple-option award approach.
F-19
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
The assumptions below are relevant to RS and RSUs granted in 2019, 2018 and 2017:
In accordance with ASC 718, RS and RSUs are measured at their fair value. All RS and RSUs to employees and
directors granted in 2019, 2018 and 2017, were granted for no consideration; therefore, their fair value was
equal to the share price at the date of grant.
The fair value of all RS and RSUs was determined based on the close trading price of the Company's shares
known at the grant date. The weighted average grant date fair value of shares granted during 2019, 2018 and
2017, was $8.70, $14.00 and $14.10 per share, respectively.
During fiscal years 2019, 2018 and 2017, there were no options granted to employees or directors.
m. Research and Development expenses and royalty bearing grants
Research and development expenses, net of participations grants, are charged to the statement of operations as
incurred. Pluristem receives grants from the IIA in the Ministry of Economy and Industry (formerly the Office
of Chief Scientist's) for the purpose of partially funding approved research and development projects. The
grants are not to be repaid, but instead Pluristem is obliged to pay royalties as a percentage of future sales if and
when sales from the funded projects are generated. These grants are recognized as a deduction from research
and development costs at the time the Company is entitled to such grants on the basis of the research and
development costs incurred. Since the payment of royalties is not probable when the grants are received, the
Company records a liability in the amount of the estimated royalties for each individual contract, when the
related revenues are recognized, as part of Cost of revenues. For more information regarding such royalties
commitments and regarding grants and participation received, see Note 8.
n.
Non-royalty bearing grant
The Company participates in European Union research and development consortiums under Horizon 2020. In
August 2016, the CLI program consortium was awarded a Euro 7,600 thousands (approximately $8,700) non-
royalty bearing grant, of which, an amount of Euro 1,900 thousands (approximately $2,200) is a direct grant
allocated to the Company. In July 2017, the consortium amended the consortium agreement, pursuant to which
the original grant allocation was amended such that the Company received an additional direct grant of Euro
1,000 thousands (approximately $1,100). The additional direct grant was allocated to the Company from the
total amount of the original grant. In September 2017, the Company’s Phase III study of PLX-PAD cell therapy
in the treatment of muscle injury following surgery for hip fracture was awarded a Euro 7,400 thousands
(approximately $8,400) grant, of which, an amount of Euro 2,550 thousands (approximately $2,900) is a direct
grant allocated to the Company. In October 2017, the "nTRACK", a collaborative project carried out by an
international consortium led by LEITAT, was awarded a Euro 6,800 thousands (approximately $7,700) non-
royalty bearing grant, of which, an amount of Euro 500 thousands (approximately $570) is a direct grant
allocated to the Company.
The non-royalty bearing grants for funding the projects are recognized at the time the Company is entitled to
each such grant on the basis of the related costs incurred and recorded as a deduction from research and
development expenses.
o.
Loss per share
Basic and diluted net loss per share is computed based on the weighted average number of shares of common
stock outstanding during each year. All outstanding stock options and unvested RSUs have been excluded from
the calculation of the diluted loss per common share because all such securities are anti-dilutive for each of the
periods presented.
F-20
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
p.
Income taxes
The Company accounts for income taxes in accordance with ASC 740, "Income Taxes" (“ASC 740”). This
Topic prescribes the use of the liability method, whereby deferred tax assets and liability account balances are
determined based on differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated
realizable value.
ASC 740 establishes a single model to address accounting for uncertain tax positions. ASC 740 clarified the
accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements.
q.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of
cash and cash equivalents, restricted cash, short-term deposits, long-term deposits and restricted deposits.
The majority of the Company’s cash and cash equivalents, restricted cash and short-term and long-term deposits
are mainly invested in dollar instruments of major banks in Israel and in the United States. Deposits in the
United States may be in excess of insured limits and are not insured in other jurisdictions. Generally, these
deposits may be redeemed upon demand and therefore bear minimal risk. The Company invests its surplus cash
in cash deposits in financial institutions and has established guidelines, approved by the Company’s Investment
Committee, relating to diversification and maturities to maintain safety and liquidity of the investments.
The Company utilizes options and forward contracts to protect against the risk of overall changes in exchange
rates. The derivative instruments hedge a portion of the Company’s non-dollar currency exposure.
Counterparties to the Company’s derivative instruments are all major financial institutions.
r.
Severance pay
A majority of the Company’s agreements with employees in Israel are subject to Section 14 of the Israeli
Severance Pay Law, 1963 (“Severance Pay Law”). The Company’s contributions for severance pay have
replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for
each year of employment, no additional calculations are conducted between the parties regarding the matter of
severance pay and no additional payments are made by the Company to the employee. Further, the related
obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance
sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been
paid.
For some employees, which their agreement is not subject to Section 14 of the Severance Pay Law, the
Subsidiary's liability for severance pay is calculated pursuant to Israeli Severance Pay Law, based on the most
recent salary of the employees multiplied by the number of years of employment, as of the balance sheet date.
Employees are entitled to one month's salary for each year of employment or a portion thereof.
The Company’s liability for all of its employees is fully provided by monthly deposits with insurance policies
and by an accrual. The value of these policies is recorded as an asset in the Company's balance sheet. The
deposited funds include profits or losses accumulated up to the balance sheet date. The deposited funds may be
withdrawn only upon the fulfillment of the obligation pursuant to the Severance Pay Law or labor agreements.
The value of the deposited funds is based on the cash surrendered value of these policies, and includes
immaterial profits or losses.
Severance expenses for the years ended June 30, 2019, 2018 and 2017 were $632, $822 and $524, respectively.
F-21
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
s.
t.
Fair value of financial instruments
The carrying amounts of the Company's financial instruments, including cash and cash equivalents, restricted
cash, short-term and restricted bank deposits, accounts receivable and other current assets, trade payable and
other accounts payable and accrued liabilities, approximate fair value because of their generally short term
maturities.
The Company measures its investments in marketable securities and derivative instruments at fair value under
ASC 820. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined based on assumptions that market
participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820
establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in
measuring fair value:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 - Unobservable inputs for the asset or liability.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. The Company categorized each of its fair value
measurements in one of these three levels of hierarchy (see Note 4).
Derivative financial instruments
The Company accounts for derivatives and hedging based on ASC 815, “Derivatives and hedging”, as amended
and related interpretations. ASC 815 requires the Company to recognize all derivatives on the balance sheet at
fair value. If a derivative meets the definition of a hedge and is so designated, depending on the nature of the
hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through earnings (for fair value hedge transactions) or
recognized in other comprehensive income (loss) until the hedged item is recognized in earnings (for cash flow
hedge transactions).
The ineffective portion of a derivative's change in fair value is recognized in earnings. If a derivative does not
meet the definition of a hedge, the changes in the fair value are included in earnings. Cash flows related to such
hedges are classified as operating activities. The Company enters into option contracts in order to limit the
exposure to exchange rate fluctuation associated with expenses mainly incurred in New Israeli Shekels (“NIS”).
Since the derivative instruments that the Company holds do not meet the definition of hedging instruments
under ASC 815, any gain or loss derived from such instruments is recognized immediately as "financial income,
net".
The Company measured the fair value of the contracts in accordance with ASC 820. Foreign currency
derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market
observable data of similar instruments. As of June 30, 2019, the fair value of the options contracts was
approximately $21 and is presented in “other current assets” (see Note 4). The net gains (losses) recognized in
“Financial income, net” during the years ended June 30, 2019, 2018 and 2017, were $(105), ($264) and $481,
respectively.
u.
Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC 220, “Comprehensive
Income”.
F-22
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Comprehensive income generally represents all changes in stockholders’ equity during the period except those
resulting from investments by, or distributions to, stockholders’. The Company determined that its items of
other comprehensive income (loss) relate to unrealized gains and losses on available for sale marketable
securities.
v.
Reclassifications:
Certain financial statement data for prior years have been reclassified to conform to current year financial
statement presentation.
w. Recently Adopted Accounting Pronouncement
ASU No. 2016-18 – "Statement of Cash Flows" (Topic 230) (“ASU No. 2016-18”):
In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2016-18. ASU 2016-18 requires that the consolidated statement of cash flows include the change in
total cash and cash equivalents and amounts generally described as restricted cash or restricted cash
equivalents when reconciling the beginning-of-period and end-of-period total amounts. ASU No. 2016-18 also
requires a reconciliation between the total of cash and cash equivalents and restricted cash presented on the
consolidated statement of cash flows and the cash and cash equivalents balance presented on the consolidated
balance sheet. ASU No. 2016-18 was effective for fiscal years beginning after December 15, 2017 and interim
periods within those fiscal years. The standard requires application using a retrospective transition method.
The Company adopted this standard effective July 1, 2018 using the retrospective transition method, as
required by ASU 2016-18.
The following table provides a reconciliation of cash and cash equivalents, and long term restricted cash
reported within the consolidated balance sheets that sum to the total of such amounts in the consolidated
statements of cash flows:
Cash and cash equivalents
Restricted cash included in restricted cash and short-term
bank deposits
Cash, cash equivalents and restricted cash shown in the
consolidated statement of cash flows
Recently Issued Accounting Pronouncements
Year ended June 30,
2019
2018
2017
$ 4,106
$ 8,821
$ 4,707
1,080
1,066
958
$ 5,186
$ 9,887
$ 5,665
ASU No. 2016-02 - “Leases” (Topic 842) (“ASU No. 2016-02”):
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize
assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP,
the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee
primarily will depend on its classification as a finance or operating lease. However, unlike current U.S. GAAP,
which requires only capital leases to be recognized on the balance sheet, the new guidance will require both
types of leases to be recognized on the balance sheet. ASU No. 2016-02 is effective for interim and annual
periods beginning after December 15, 2018, with early adoption permitted.
F-23
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (CONT.)
A modified retrospective transition approach is required, applying the new standard to all leases existing at the
date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the
earliest comparative period presented in the financial statements as its date of initial application. If an entity
chooses the second option, the entity must recast its comparative period financial statements and provide
disclosures required by the new standard for the comparative periods. The Company adopted the new standard
on July 1, 2019 using the effective date as its date of initial application. Consequently, financial information will
not be updated and disclosures required under the new standard will not be provided for dates and periods
before July 1, 2019. ASU No. 2016-02 provides a number of optional practical expedients in transition. The
Company elected to adopt the ‘package of practical expedients’, which, under the new standard, permits it not to
reassess its prior conclusions about lease identification, lease
classification and initial direct costs. The adoption of this new standard will materially affect the Company's
consolidated balance sheets by recognizing new right-of-use ("ROU") assets and lease liabilities for operating
leases. The impact on the Company's results of operations and cash flows is not expected to be material.
Adoption of the standard will result in the recognition of additional lease liabilities for operating leases of
approximately $2,250 - $2,450 and additional ROU which will be adjusted for the remaining balance of the
deferred participation payments in the amounts of approximately $1,650 - $1,850. As of July 1, 2019, the ROU
and lease liabilities estimate includes non-cancelable operating lease agreements (see Note 8a and 8b).
ASU No. 2018-07 - Compensation—Stock Compensation (Topic 718) (“ASU No. 2018-07”):
In June 2018, the FASB issued ASU 2018-07. The ASU expands the scope of ASU No. 2018-07 to include
share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply
the requirements of ASU No. 2018-07 to nonemployee awards except for specific guidance on inputs to an
option pricing model and the attribution of cost (that is, the period of time over which share-based payment
awards vest and the pattern of cost recognition over that period). The amendments specify that ASU No. 2018-
07 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or
consumed in a grantor’s own operations by issuing share-based payment awards. ASU No. 2018-07 is effective
for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early
adoption permitted. While the Company continues to assess the potential impact of ASU No. 2018-07, the
Company does not expect the adoption of this standard to have a material impact on its consolidated financial
statements.
ASU No. 2018-18 - “Collaborative Arrangements (Topic 808) - Clarifying the Interaction between Topic 808
and Topic 606” (“ASU No. 2018-18”):
In November 2018, the FASB issued ASU No. 2018-18, which clarifies the interaction between Topic 808 and
Topic 606 by (1) clarifying that certain transactions between collaborative arrangement participants should be
accounted for under Topic 606, (2) adding unit-of-account guidance in Topic 808 to align with the guidance in
Topic 606 and (3) clarifying presentation guidance for transactions with a collaborative arrangement participant
that are not accounted for under Topic 606. ASU 2018-18 is effective for fiscal years beginning after December
15, 2019, or July 1, 2020 for the Company. The Company is currently evaluating the impact of adopting the
ASU on its consolidated financial statements.
F-24
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 3:- MARKETABLE SECURITIES
As of June 30, 2019 and 2018, all of the Company’s marketable securities were classified as available-for-
sale.
Year ended June 30,
2019
Other-than-
temporary
impairment
Amortized
cost
Fair
value
Amortized
cost
2018
Other-than-
temporary
impairment
Fair
value
Available-for-sale - matures
within one year:
Stock and index linked notes $ 850
$ 850
Total
$ (850) $ -
$ (850) $ -
$ 850
$ 850
$ (850) $ -
$ (850) $ -
The Company typically invests in highly-rated securities. When evaluating the investments for other-than-temporary
impairment, the Company reviews factors such as the length of time and extent to which fair value has been below
cost basis, the financial condition of the issuer and any changes thereto, and the Company's intent to sell, or whether it
is more likely than not it will be required to sell the investment before recovery of the investment's amortized cost
basis.
The Company recognized other-than-temporary impairment loss on outstanding securities during the year ended June
30, 2018 and 2017, of $850 and $767, respectively. The Company did not recognize any other-than-temporary
impairment loss on outstanding securities during the year ended June 30, 2019.
During the year ended June 30, 2018, the Company sold marketable securities for aggregate net proceeds (including
redemptions) of approximately $21,890, representing a net gain of $8,440. The proceeds from the sale of such
marketable securities are included in “Financial income, net”, for the year ended June 30, 2018.
NOTE 4:- FAIR VALUE OF FINANCIAL INSTRUMENTS
Foreign currency derivative instruments
not designated as hedge instruments
Total financial assets (liabilities)
June 30,
2019
Level 2
$21
$21
June 30,
2018
Level 2
($243)
($243)
F-25
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 5:-OTHER CURRENT ASSETS
Accounts receivable from the Horizon 2020 grants
Prepaid expenses
Accounts receivable from the IIA
VAT receivables
Accounts receivable from the Ministry of Economy and Industry
Derivatives not designated as hedge instruments
Other receivables
Total
NOTE 6:-PROPERTY AND EQUIPMENT, NET
June 30,
2019
2018
$ 991
532
179
125
73
21
53
$ 1,974
$ 626
602
58
150
6
-
7
$ 1,449
Cost:
Laboratory equipment
Computers and peripheral equipment
Office furniture and equipment
Leasehold improvements
Total Cost
Accumulated depreciation:
Laboratory equipment
Computers and peripheral equipment
Office furniture and equipment
Leasehold improvements
Total accumulated depreciation
Property and equipment, net
June 30,
2019
2018
$ 6,435
1,274
681
8,614
17,004
5,634
1,147
600
5,785
13,166
$ 3,838
$ 6,395
1,206
681
8,611
16,893
4,903
1,060
511
4,741
11,215
$ 5,678
Depreciation expenses amounted to $1,962, $2,018 and $2,177, for the years ended June 30, 2019, 2018 and
2017, respectively.
NOTE 7:-OTHER ACCOUNTS PAYABLE
Accrued vacation
Deferred income from the Horizon 2020 grant
Accrued payroll
Payroll institutions
Derivatives not designated as hedge instruments
Other payables
Total
June 30,
2019
$ 974
-
486
433
-
240
$ 2,133
2018
$ 911
640
524
463
243
240
$ 3,021
F-26
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 8:-COMMITMENTS AND CONTINGENCIES
a. In February 2015, the Company signed an addendum to its facility operating lease agreement (the
“Addendum”) with the lessor, which extended the lease period to December 2021.
The lessor paid a non-refundable leasehold improvement participation payment, of approximately
$947 in October 2015, in addition to the non-refundable payment of approximately $816 received in
January 2013.
The payments are deductible against lease expenses as they are incurred. The lessor upfront payment
is included in the balance sheet as advance payment and recognized as a deduction from lease
expenses over the lease term.
The Company recognizes lease expense, net of lessor participation, under such arrangements, on a
straight-line basis over the lease term.
As of June 30, 2019, aggregate minimum lease commitments under the active operating lease
agreements are as follows:
Fiscal year ending June 30,
2020
2021
2022
Total
$ 877
886
443
$ 2,206
Lease expenses, net of lessor participation, amounted to $615, $638 and $781, for the years ended
June 30, 2019, 2018 and 2017, respectively.
The Subsidiary issued a bank guarantee in favor of the lessors in the amount of approximately $388.
b. The Subsidiary leases several motor vehicles under operating lease agreements, which expire in
various dates during the years 2020 through 2022.
As of June 30, 2019, future aggregate minimum lease commitments under operating lease agreements
are as follows:
Fiscal year ending June 30,
2020
2021
2022
Total
$ 233
157
45
$ 435
Lease expenses amounted to $301, $294 and $233, for the years ended June 30, 2019, 2018 and 2017,
respectively.
c. An amount of $692 of cash and deposits was pledged by the Subsidiary to secure certain derivatives
and hedging transactions, a credit line and bank guarantees as of June 30, 2019.
F-27
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 8:-COMMITMENTS AND CONTINGENCIES (CONT.)
d. Under the Law for the Encouragement of Industrial Research and Development, 1984, (the “Research
Law”), research and development programs that meet specified criteria and are approved by the IIA
are eligible for grants of up to 50% of the project’s expenditures, as determined by the research
committee, in exchange for the payment of royalties from the sale of products developed under the
program. Regulations under the Research Law generally provide for the payment of royalties to the
IIA of 3% on sales of products and services derived from a technology developed using these grants
until 100% of the dollar-linked grant is repaid. The Company’s obligation to pay these royalties is
contingent on its actual sale of such products and services. In the absence of such sales, no payment is
required. Outstanding balance of the grants will be subject to interest at a rate equal to the 12 month
LIBOR applicable to dollar deposits that is published on the first business day of each calendar year.
Following the full repayment of the grant, there is no further liability for royalties.
Through June 30, 2019, total grants obtained aggregated to approximately $27,353 and total royalties
paid and accrued amounted to $169. As of June 30, 2019, the Company's liability in respect to
royalties to the IIA amounted to $27,184, not including LIBOR interest as described above.
e. The Company has been awarded a marketing grant under the "Smart Money" program of the Israeli
Ministry of Economy and Industry. The program’s aim is to assist companies to extend their activities
in international markets. The goal market that was chosen was Japan. The Israeli government granted
the Company budget resources that are intended to be used to advance the Company’s product
candidate towards marketing in Japan and for regulatory activities there. As part of the program, the
Company will repay royalties of 5% from the Company’s income in Japan during five years, starting
the year in which the Company will not be entitled to reimbursement of expenses under the program
and will be spread for a period of up to 5 years or until the amount of the grant is fully paid.
As of June 30, 2019, total grants obtained under this Smart Money program amounted to
approximately $112. As of June 30, 2019, the Company's contingent liability with respect to royalties
for this “Smart Money” program was $112 and no royalties were paid or accrued.
f. The Company was awarded an additional Smart Money grant of approximately $229 from Israel’s
Ministry of Economy and Industry to facilitate certain marketing and business development activities
with respect to its advanced cell therapy products in the Chinese market, including Hong Kong. The
Israeli government granted the Company budget resources that are intended to be used to advance the
Company’s product candidate towards marketing in the China-Hong Kong markets. The Company
will also receive close support from Israel’s trade representatives stationed in China, including Hong
Kong, along with experts appointed by the Smart Money program. As part of the program, the
Company will repay royalties of 5% from the Company’s revenues in the region for a five year
period, beginning the year in which the Company will not be entitled to reimbursement of expenses
under the program and will be spread for a period of up to 5 years or until the amount of the grant is
fully paid.
As of June 30, 2019, the aggregate amount of grant obtained from this Smart Money program was
approximately $26. As of June 30, 2019, the Company's contingent liability with respect to royalties
for this “Smart Money” program is $26 and no royalties were paid or accrued.
g. In December, 2016, the Company announced that it will collaborate with the New York Blood Center
(“NYBC”) on pre-clinical studies of its placental expanded R-18 cells (“PLX-R18”) to enhance the
efficacy of umbilical cord blood transplantation. The project has been selected to receive a conditional
award of $900 from Israel-United States Binational Industrial Research and Development Foundation
(“BIRD Foundation”), of which an amount of $585 is a direct grant allocated to the Company.
F-28
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 8:-COMMITMENTS AND CONTINGENCIES (CONT.)
Per the terms of the project, the Company provided the PLX-R18 cells and the NYBC were
responsible for conducting and supporting the studies. Amounts received in connection with this
award were presented in “Other long-term liabilities”.
As of June 30, 2019, the aggregate amount of grant obtained from the BIRD Foundation was
approximately $264. During the year ended June 30, 2019, the Company and NYBC mutually agreed
to terminate the project and therefore, pursuant to the terms of the agreement with the BIRD
Foundation and NYBC, the Company derecognized the BIRD Foundation liability. The total amounts
received in connection with this award were recognized as a deduction from research and
development costs, and an amount to be received of $14 is presented in “other current assets” as of
June 30, 2019.
h. In September 2017, the Company signed an agreement with the Tel-Aviv Sourasky Medical Center
(Ichilov Hospital) to conduct a Phase I/II trial of PLX-PAD cell therapy for the treatment of Steroid-
Refractory Chronic Graft-Versus-Host-Disease (“GvHD”).
As part of the agreement with the Tel-Aviv Sourasky Medical Center (Ichilov Hospital), the Company
will pay royalties of 1% from its net sales of the PLX-PAD product relating to GvHD, with a
maximum aggregate royalty amount of approximately $250.
i.
In July, 2018, the Company was awarded a marketing grant of approximately $52 under the "Shalav"
program of the Israeli Ministry of Economy and Industry. The grant is intended to facilitate certain
marketing and business development activities with respect to the Company’s advanced cell therapy
products in the U.S. market. As part of the program, the Company will repay royalties of 3%, but only
with respect to the Company’s revenues in the U.S. market in excess of $250 of its revenues in fiscal
year 2018, upon the earlier of the five year period beginning the year in which the Company will not
be entitled to reimbursement of expenses under the program and/or until the amount of the grant,
which is linked to the Consumer Price Index, is fully paid.
As of June 30, 2019, total grants obtained under the “Shalav” program amounted to approximately
$40. As of June 30, 2019, the Company's contingent liability with respect to royalties for the “Shalav”
program was $40 and no royalties were paid or accrued.
NOTE 9: - STOCKHOLDERS' EQUITY
The Company's authorized common stock consists of 30,000,000 shares with a par value of $0.00001 per
share. All shares have equal voting rights and are entitled to one vote per share in all matters to be voted upon
by stockholders. The shares have no pre-emptive, subscription, conversion or redemption rights and may be
issued only as fully paid and non-assessable shares. Holders of the common stock are entitled to equal ratable
rights to dividends and distributions with respect to the common stock, as may be declared by the Board of
Directors out of funds legally available. The Company's authorized preferred stock consists of 1,000,000
shares of preferred stock, par value $0.00001 per share, with series, rights, preferences, privileges and
restrictions as may be designated from time to time by the Company’s Board of Directors. No shares of
preferred stock have been issued.
a. Reverse stock split:
In July, 2019, subsequent to the balance sheet date, the Board of Directors approved a 1-for-10
reverse stock split of the Company's (a) authorized shares of common stock; (b) issued and
outstanding shares of common stock and (c) authorized shares of preferred stock. The reverse split
became effective on July 25, 2019.
F-29
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 9: - STOCKHOLDERS' EQUITY (CONT.)
The reverse stock split will not have any effect on the stated par value of the common stock. All
shares of common stock, options, warrants and securities convertible or exercisable into shares of
common stock, as well as loss per share, have been adjusted to give retroactive effect to this reverse
stock split for all periods presented.
b. On January 25, 2017, the Company issued, pursuant to an underwriting agreement relating to a firm
commitment public offering, an aggregate of 1,408,163 shares of common stock and warrants to
purchase up to an aggregate of 844,898 shares of common stock, inclusive of the underwriter’s over-
allotment option, which was exercised in full, for aggregate gross proceeds of $17,250. The net
proceeds, after deducting underwriting commissions, discounts and other expenses related to the
offering were approximately $15,718.
c. In the year ended June 30, 2018, a total of 828,703 warrants from the January 2017 offering were
exercised by investors at an exercise price of $14.00 per share, resulting in the issuance of 82,871
shares of common stock for net proceeds of approximately $1,160.
d. In July 2017, pursuant to a shelf registration statement on Form S-3, declared effective by the
Securities and Exchange Commission (the “SEC”) on June 23, 2017, the Company entered into an At
Market Issuance Sales Agreement (the “ATM Agreement”) with FBR Capital Markets & Co., MLV
& Co. LLC and Oppenheimer & Co. Inc. (collectively, the “Agents”), which provides that, upon the
terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect,
from time to time, to offer and sell shares of common stock having an aggregate offering price of up
to $80,000 through the Agents acting as sales agent. During the year ended June 30, 2018, the
Company sold 359,941 shares of common stock under the ATM Agreement at an average price of
$14.30 per share for aggregate proceeds of approximately $4,985, net of issuance expenses of $174.
During the year ended June 30, 2019, the Company sold 170,600 shares of common stock under the
ATM Agreement at an average price of $12.30 per share for aggregate proceeds of approximately
$1,952, net of issuance expenses of $148.
On February 4, 2019, the Company notified the Agents of the termination of the ATM Agreement.
e. On October 31, 2017, the Company completed a public offering in Israel, pursuant to the Company’s
existing shelf registration statement on Form S-3 in the United States and a shelf registration
statement filed in Israel, pursuant to which the Company raised aggregate gross proceeds of $15,051
through the sale of 900,000 shares of the Company’s common stock at a purchase price of NIS 59
(approximately $16.70) per share. The net proceeds, after deducting fees and expenses related to the
offering, were approximately $13,646.
f. Pursuant to a shelf registration on Form S-3 declared effective by the SEC on June 23, 2017, on
February 6, 2019, the Company entered into the Sales Agreement with Jefferies which provides that,
upon the terms and subject to the conditions and limitations in the sales agreement, the Company may
elect, from time to time, to offer and sell shares of common stock having an aggregate offering price
of up to $50,000 through Jefferies acting as sales agent. During the year ended June 30, 2019, the
Company sold 236,800 shares of common stock under the Sales Agreement at an average price of
$9.70 per share for aggregate net proceeds of approximately $2,051, net of issuance expenses of $255.
g. On April 8, 2019, the Company sold, pursuant to an underwriting agreement relating to a firm
commitment public offering (the “Public Offering”), an aggregate of 2,857,143 shares of common
stock and warrants to purchase 2,857,143 shares of common stock, inclusive of the underwriter’s
over-allotment option which was exercised in full, for aggregate gross proceeds of $20,000.
F-30
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 9: - STOCKHOLDERS' EQUITY (CONT.)
The warrants issued in the Public Offering are exercisable for a period of five years from issuance and
have an exercise price of $7.00 per share. In addition, on April 8, 2019, the Company sold, pursuant
to a subscription agreement with a certain investor in a registered direct offering (the “Registered
Direct Offering”), 142,857 shares of common stock, for aggregate gross proceeds of $1,000. The net
proceeds from the Public Offering and the Registered Direct Offering, after deducting underwriting
commissions and discounts and other expenses related to the offerings, were $19,464.
As of June 30, 2019, 2,857,143 warrants to purchase share of our common stock are outstanding.
h. Stock options, RS and RSUs to employees, directors and consultants:
The Company adopted, after receiving stockholder approval, the 2005 Stock Option Plan in 2005 (the
“2005 Plan”). Under the 2005 Plan, stock options, RS and RSUs were granted to the Company’s
officers, directors, employees and consultants. The 2005 Plan expired on December 31, 2018. The
Company adopted, after receiving stockholder approval, the 2016 Equity Incentive Plan in 2016 (the
“2016 Plan”). Under the 2016 Plan, stock options, RS and RSUs may be granted to the Company’s
officers, directors, employees and consultants or the officers, directors, employees and consultants of
our Subsidiary. In addition, at the Company’s annual meeting of its stockholders, held on June 13,
2019, the Company’s stockholders approved the 2019 Equity Compensation Plan (the “2019 Plan”).
Under the 2019 Plan, stock options, RS and RSUs may be granted to the Company’s officers,
directors, employees and consultants or the officers, directors, employees and consultants of the
Subsidiary.
As of June 30, 2019, the number of shares of common stock authorized for issuance under the 2016
Plan amounted to 383,400 for calendar year 2016, of which 363,400 are available for future grant
under the 2016 Plan. As of June 30, 2019, the number of shares of common stock authorized for
issuance under the 2019 Plan amounted to 3,204,055, all of which are available for future grant under
the 2019 Plan.
(1) Options to employees and directors:
The Company accounts for its stock options to employees and directors under the fair value method in
accordance with ASC 718, “Compensation—Stock Compensation”. A summary of the Company’s
activity for stock options granted to employees and directors under the 2005 Plan is as follows:
Year ended June 30, 2019
Weighted Average
Exercise Price
Number
$ 6.20
31,500
(30,750) $ 6.20
$ 6.20
(750)
-
-
Options outstanding at beginning of period
Options forfeited
Options exercised
Options outstanding at end of the period
F-31
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 9: - STOCKHOLDERS' EQUITY (CONT.)
(2) Options to non-employees:
A summary of the stock options to non-employee consultants under the 2005 Plan and 2016 Plan is as
follows:
Stock options outstanding at beginning of period
Stock options granted
Stock options exercised
Stock options forfeited
Stock options outstanding at end of the period
Stock options exercisable at the end of the period
Stock options vested and expected to vest at the end of
the period
Number
50,060
40,805
(1,100)
(185)
89,580
42,601
Year ended June 30, 2019
Weighted
Average
Remaining
Contractual
Terms (in years)
Weighted
Average
Exercise Price
Aggregate
Intrinsic
Value Price
$ 0.06
$
$
$
-
2.82
-
$
-
-
$
89,580
$
-
7.63
7.26
7.63
$555
$264
$555
Compensation expenses related to stock options granted to consultants were recorded as follows:
Research and development
expenses
General and administrative
expenses
Year ended June 30,
2019
2018
2017
$ 117
$ 107
$ 7
167
61
39
$ 284
$ 168
$ 46
(3) RS and RSUs to employees and directors:
The following table summarizes the activity related to unvested RS and RSUs granted to employees
and directors under the 2005 Plan and 2016 Plan for the year ended June 30, 2019:
Unvested at the beginning of period
Granted
Forfeited
Vested
Unvested at the end of the period
Expected to vest after June 30, 2019
Number
629,361
498,100
(45,830)
(285,998)
795,633
769,922
F-32
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 9: - STOCKHOLDERS' EQUITY (CONT.)
Compensation expenses related to RS and RSUs granted to employees and directors were recorded as
follows:
Research and development
expenses
General and administrative
expenses
Year ended June 30,
2019
$ 1,401
3,003
$ 4,404
2018
$ 1,273
4,577
$ 5,850
2017
$ 1,558
1,645
$ 3,203
Unamortized compensation expenses related to RS and RSUs granted to employees and directors to
be recognized over an average time of approximately 3.75 years are approximately $4,180.
(4) RS and RSUs to consultants:
The following table summarizes the activity related to unvested RS and RSUs granted to consultants
for the year ended June 30, 2019:
Unvested at the beginning of period
Granted
Vested
Unvested at the end of the period
Number
19,956
41,176
(31,025)
30,107
Compensation expenses related to RS and RSUs granted to consultants were recorded as follows:
Year ended June 30,
2019
2018
2017
Research and development expenses
General and administrative expenses
$ 48
$ 43
$ 19
410
487
394
$ 458
$ 530
$ 413
F-33
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 9: - STOCKHOLDERS' EQUITY (CONT.)
i. Summary of warrants and options:
Warrants / Options
Exercise Price per
Share
Warrants:
Total warrants
Options:
Total options
$ 7.00
$ 14.00
$ 28.50
$ 0.00
Options and
Warrants for
Common Stock
Options and
Warrants
Exercisable for
Common Stock
Weighted Average
Remaining Contractual
Terms (in years)
2,857,143
2,857,143
762,028
408,000
762,028
408,000
4,027,171
4,027,171
89,580
89,580
42,601
42,601
4.77
3.06
1.00
7.62
Total warrants and options
4,116,751
4,069,772
This summary does not include 825,740 RS and RSUs that are not vested as of June 30, 2019.
NOTE 10:-OTHER INCOME
In December 2017, the Subsidiary was awarded approximately $43 (NIS 150 thousand) by the Israeli
Ministry of Labor, Social Affairs and Social Services related to its “Equal Employment” program
which aims to reward and honor Israeli employers who demonstrate and promote gender equality in
employment.
NOTE 11:-FINANCIAL INCOME, NET
Foreign currency translation differences, net
Bank and broker commissions
Interest income on deposits
Gain (loss) related to marketable securities, net
Other than temporary impairment loss
Gain (loss) from derivatives and fair value hedge
derivatives
Other financial expense
Year ended June 30,
2019
2018
2017
($
)26
(27)
385
-
-
(105)
(2)
$ 52
(62)
276
8,478
(850)
(264)
(25)
$ 182
(67)
122
254
(767)
481
-
$ 225
$ 7,605
$ 205
F-34
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 12:-TAXES ON INCOME
A.
Tax assessments:
The Subsidiary has not received final tax assessments since its incorporation; however, the
assessments of the Subsidiary are deemed final through 2013.
B.
Tax rates applicable to the Company:
1. Pluristem Therapeutics:
The U.S. federal tax rate applicable to Pluristem Therapeutics is the corporate federal tax rate of
21%, which is the result of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). Such corporate tax
rate excludes state tax and local tax, if any, which rates depend on the state and city in which
Pluristem Therapeutics conducts its business.
On December 22, 2017, the Tax Act was signed into law in the United States, lowering the corporate
federal income tax rate from 35% to 21%, effective January 1, 2018.
The Tax Act provided for a one-time transition tax on certain foreign earnings for the tax year 2017,
and taxation of Global Intangible Low-Taxed Income (“GILTI”) earned by foreign subsidiaries
beginning after December 31, 2017. The GILTI tax imposes a tax on foreign income in excess of a
deemed return on tangible assets of foreign corporations. The Tax Act also makes certain changes to
the depreciation rules and implements new limits on the deductibility of certain executive
compensation paid by Pluristem Therapeutics. Finally, while the Tax Act removes the 20 year
limitation on net operating losses generated after December 31, 2017, all losses generated after
December 31, 2017 can only be used to offset 80% of net income in the year they will be utilized.
The Company recognized the income tax effects of the Tax Act in its 2018 annual consolidated
financial statements in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), which
provides SEC staff guidance for the application of ASC 740, "Income Taxes", in the reporting
period in which the 2017 Tax Act was enacted. In accordance with SAB 118, deferred tax assets and
liabilities were re-measured to reflect the revised corporate income tax rate of 21%. This re-
measurement was fully offset by a valuation allowance, resulting in no impact to the Company’s
income tax expense for the fiscal year ended June 30, 2019. As a result, the Company's financial
results reflect in the income tax effects of the Tax Act, for which the accounting under ASC 740 is
complete.
There was no one-time transition tax for the Company under the Tax Act, nor will there be GILTI
tax due for the current year, since the Subsidiary had losses for every year to date.
In January 2018, Pluristem Therapeutics registered as an Israeli resident with the Israel Tax
Authority (the “ITA”) and the Israeli Value Added Tax Authorities. As a result, as of such date,
Pluristem Therapeutics is classified as a dual resident for tax purposes, as a resident in both Israel
and the United States.
In June 2018, Pluristem Therapeutics and the Subsidiary submitted an election notice to the ITA to
file a consolidated tax return in Israel commencing with the 2018 tax year.
F-35
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 12:-TAXES ON INCOME (CONT.)
2. The Subsidiary:
Taxable income of Israeli companies is subject to tax at the rate of 23% in 2019, 23% in 2018 and
%24
in 2017.
The Subsidiary is filing its tax reports in dollars based on specific regulations of the ITA which
allow, in specific circumstances, filing tax reports in dollars ("Dollar Regulations"). Under the
Dollar Regulations, the Subsidiary calculates its tax liability in dollars according to certain orders.
The tax liability, as calculated in dollars, is translated into NIS according to the exchange rate as of
June 30 of each year.
The Law for the Encouragement of Capital Investments, 1959 (the "Law"):
The Subsidiary has programs which meet the criteria of a “Beneficiary Enterprise”, in accordance
with the Law, under the Alternative Benefit Track starting with 2007 as the election year (the "2007
Program") and 2012 as an election year to the expansion of its "Beneficiary Enterprise" program (the
"2012 Program").
Under the 2007 Program "Alternative Track", the Subsidiary, which was located in a National
Priority Zone "B" with respect to the year 2007, is tax exempt in the first six years of the benefit
period and subject to tax at the reduced rate of 10%-25% for a period of one to four years for the
remaining benefit period (dependent on the level of foreign investments).
Under the 2012 Program, the Subsidiary, which was located in the "Other National Priority Zone"
with respect to the year 2012, would be tax exempt in the first two years of the benefit period and
subject to tax at the reduced rate of 10%-25% for a period of five to eight years for the remaining
benefit period (dependent on the level of foreign investments).
In respect of expansion programs pursuant to Amendment No. 60 to the Encouragement Law, the
duration of the benefit period has been amended, such that it starts at the later of the election year
and the first year the Company earns taxable income provided that 12 years have not passed since
the beginning of the election year and for companies in National Priority Zone A - 14 years have not
passed since the beginning of the election year.
The benefit period for the Subsidiary's 2007 Program expired in 2018 (12 years since the beginning
of the election year– 2007) and the benefit period for the Subsidiary's 2012 Program is expected to
expire in 2023 (12 years since the beginning of the election year - 2012).
If a dividend is distributed out of tax exempt profits, as detailed above, the Subsidiary will become
liable for taxes at the rate applicable to its profits from the Beneficiary Enterprise in the year in
which the income was earned (tax at the rate of 10-25%, dependent on the level of foreign
investments) and to a withholding tax rate of 15% (or lower, under an applicable tax treaty).
Accelerated depreciation:
The Subsidiary is eligible for deduction of accelerated depreciation on buildings, machinery and
equipment used by the "Beneficiary Enterprise" at a rate of 200% (or 400% for buildings but not
more than 20% depreciation per year) from the first year of the assets operation.
F-36
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 12:-TAXES ON INCOME (CONT.)
Conditions for the entitlement to the benefits:
The above mentioned benefits are conditional upon the fulfillment of the conditions stipulated by the
Law, regulations promulgated thereunder, and the Ruling with respect to the beneficiary enterprise.
Non-compliance with the conditions may cancel all or part of the benefits and refund of the amount
of the benefits, including interest. The management believes that the Subsidiary is meeting the
aforementioned conditions.
Amendments to the Law:
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic Policy for 2011
and 2012 (Amended Legislation), 2011 (the "Amendment"), which prescribes, among others,
amendments in the Law for the Encouragement of Capital Investments, 1959 (the “Amendment No.
68”). Amendment No. 68 became effective as of January 1, 2011. According to Amendment No. 68,
the benefit tracks in the Law were modified and a flat tax rate became applicable to a company for
all preferred income under its status as a preferred company with a preferred enterprise.
On August 5, 2013, the Knesset issued the Law for Changing National Priorities (Legislative
Amendments for Achieving Budget Targets for 2013 and 2014), 2013 which consists of Amendment
No. 71 to the Law for the Encouragement of Capital Investments, 1959 (the “Amendment No. 71”).
According to Amendment No. 71, the tax rate on preferred income form a preferred enterprise in
2014 and thereafter will be 16% (in development area A it will be 9%).
Amendment No. 71 also prescribes that any dividends distributed to individuals or foreign residents
from the preferred enterprise's earnings as above will be subject to tax at a rate of 20%.
The Subsidiary did not apply Amendment No. 71 with respect to the preferred enterprise status, but
may choose to apply Amendment No. 71 in the future.
Innovation Box Regime "Technological Preferred Enterprise":
In December 2016, the Knesset approved amendments to the Law that introduce an innovation box
regime (the “Innovation Box Regime”) for intellectual property (IP)-based companies, enhance tax
incentives for certain industrial companies and reduce the standard corporate tax rate and certain
withholding rates starting in 2017.
The Innovation Box Regime was tailored by the Israeli government to a post-base erosion and profit
shifting (“BEPS”) world, encouraging multinationals to consolidate IP ownership and profits in
Israel along with existing Israeli research and development (“R&D”) functions. Tax benefits created
to achieve this goal include a reduced corporate income tax rate of 6% on IP-based income and on
capital gains from future sale of IP.
The 6% rate would apply to qualifying Israeli companies that are part of a group with global
consolidated revenue of over NIS 10 billion (approximately US $2.9 billion). Other qualifying
companies with global consolidated revenue below NIS 10 billion, would be subject to a 12% tax
rate. However, if the Israeli company is located in Jerusalem or in certain northern or southern parts
of Israel, the tax rate is further reduced to 7.5%. Additionally, withholding tax on dividends for
foreign investors would be subject to a reduced rate of 4% for all qualifying companies (unless
further reduced by a treaty).
F-37
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 12:-TAXES ON INCOME (CONT.)
Entering the regime is not conditioned on making additional investments in Israel, and a company
could qualify if it invested at least 7% of the last three years’ revenue in R&D (or incurred at least
NIS 75 million in R&D expenses per year) and met one of the following three conditions:
1. At least 20% of its employees are R&D employees engaged in R&D (or employs, in total, more
than 200 R&D employees);
2. Venture capital investments in the aggregate of NIS 8 million were previously made in the
company; or
3. Average annual growth over three years of 25% in sales or employees.
Companies not meeting the above conditions may still be considered as a qualified company at the
discretion of the Israeli Innovation Authority of the Ministry of Economy and Industry (formerly,
the “Office of the Chief Scientist”). Companies wishing to exit from the regime in the future will not
be subject to clawback of tax benefits. The Knesset also approved a stability clause in order to
encourage multinationals to invest in Israel. Accordingly, companies will be able to confirm the
applicability of tax incentives for a 10-year period under a pre-ruling process. Further, in line with
the new Organization for Economic Co-operation and Development Nexus Approach, the Israeli
Finance Minister will promulgate regulations to ensure companies are benefiting from the regime to
the extent qualifying R&D expenditures are incurred. The regulations were set to be finalized by
March 31, 2017, with new amendments to the Law coming into effect after the regulations have
been finalized.
Taxable income which is not produced as part of “Preferred Enterprise” income will be taxed at the
regular tax rate (24% in 2017).
As of December 31, 2018, the Company’s management believes that the Company meets the
conditions mentioned above to be considered as a Technological Preferred Enterprise.
C. Carryforward losses for tax purposes
As of June 30, 2019, Pluristem Therapeutics had U.S. federal net operating loss carryforward for
income tax purposes in the amount of approximately $34,836. Net operating loss carryforward
arising in taxable years, can be carried forward and offset against taxable income for 20 years and
expiring between 2023 and 2039.
Utilization of U.S. net operating losses may be subject to substantial annual limitations due to the
"change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of net operating losses before utilization.
The Subsidiary has accumulated losses, for tax purposes, as of June 30, 2019, in the amount of
approximately $155,515, which may be carried forward and offset against taxable business income
and business capital gain in the future for an indefinite period.
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax assets are as follows:
F-38
PLURISTEM THERAPEUTICS INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands (except share and per share amounts)
NOTE 12:-TAXES ON INCOME (CONT.)
Deferred tax assets:
U.S. net operating loss carryforward
Israeli net operating loss and research and
development expenses carryforward
Allowances and reserves
Total deferred
allowance
tax assets before valuation
Valuation allowance
Net deferred tax asset
June 30,
2019
2018
$ 7,316
$ 7,485
40,866
283
48,465
(48,465)
33,538
274
41,297
(41,297)
$ -
$ -
As of June 30, 2019 and 2018, the Company has provided full valuation allowances in respect of
deferred tax assets resulting from tax loss carryforward and other temporary differences, since they
have a history of operating losses and current uncertainty concerning its ability to realize these
deferred tax assets in the future.
The Company accounts for its income tax uncertainties in accordance with ASC 740 which clarifies
the accounting for uncertainties in income taxes recognized in a Company’s financial statements and
prescribes a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return.
As of June 30, 2019 and 2018, there were no unrecognized tax benefits that if recognized would
affect the annual effective tax rate.
Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit):
In 2019, 2018 and 2017, the main reconciling item of the statutory tax rate of the Company (21% to
35% in 2019, 2018 and 2017) to the effective tax rate (0%) is tax loss carryforwards, stock-based
compensation and other deferred tax assets for which a full valuation allowance was provided.
NOTE 13:-SUBSEQUENT EVENTS
a. As of September 12, 2019, the Company had sold 439,900 shares of common stock at an
average price of $4.95 per share under the Sales Agreement (see Note 9f).
F-39
47
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision of our CEO and CFO (our principal executive
officer and principal financial officer, respectively), regarding the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2019.
Based on the aforementioned evaluation, management has concluded that our disclosure controls and
procedures were effective as of June 30, 2019.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control over financial reporting has been designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles generally accepted in the
United States of America.
Our internal control over financial reporting includes policies and procedures that pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions
of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with accounting principles generally accepted in the United States of
America, and that receipts and expenditures are being made only in accordance with authorization of our
management and directors; and provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. 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 the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting on June 30,
2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission 2013 framework, or COSO, in Internal Control—Integrated
Framework. Based on that assessment under those criteria, management has determined that, as of June 30,
2019, our internal control over financial reporting was effective.
Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, an independent registered
public accounting firm, who audited our consolidated financial statements included elsewhere in this
Annual Report, has also issued an attestation report on our internal control over financial reporting, which
is included elsewhere in this Annual Report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of fiscal year
2019 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
48
Item 9B.
Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Our directors and executive officers, their ages, positions currently held, and duration of such, are
as follows:
Name
Position Held With Company
Age Date First Elected or
Zami Aberman
Yaky Yanay
Executive Chairman
President
Director
Chief Executive Officer
Chen Franco-Yehuda Chief Financial Officer, Treasurer and Secretary
Nachum Rosman
Doron Shorrer
Hava Meretzki
Isaac Braun
Israel Ben-Yoram
Mark Germain
Moria Kwiat
Director
Director
Director
Director
Director
Director
Director
65
48
Appointed
June 23, 2019
February 4, 2014
February 5, 2015
June 23, 2019
36 March 14, 2019
October 9, 2007
73
October 2, 2003
66
October 2, 2003
50
July 6, 2005
66
59
January 26, 2005
69 May 17, 2007
40 May 15, 2012
Business Experience
The following is a brief account of the education and business experience of each director and
executive officer during at least the past five years, indicating each person's principal occupation during the
period, and the name and principal business of the organization by which they were employed.
Zami Aberman
Mr. Aberman joined the Company in September 2005 and has served as our Executive Chairman
since June 2019, as our Co-Chief Executive Officer from March 2017 until June 2019, as our CEO from
November 2005 until March 2017, and as President of the Company from September 2005 until February
2014. He changed the Company’s strategy towards cellular therapeutics. Mr. Aberman’s vision to use the
maternal section of the Placenta (Decidua) as a source for cell therapy, combined with the Company’s 3D
culturing technology, led to the development of our products. Since November 2005, Mr. Aberman has
served as a director of the Company, and since April 2006, as Chairman of the Board. Since October 2015,
he has served as a Director of The Alliance for Regenerative Medicine. He has 25 years of experience in
marketing and management in the high technology industry. Mr. Aberman has held the CEO and Chairman
positions of various companies located in Israel, the United States, Europe, Japan and Korea.
Mr. Aberman has operated within high-tech global companies in the fields of automatic optical
inspection, network security, video over IP, software, chip design and robotics. He serves as the chairman
of Rose Hitech Ltd., a private investment company. He previously served as the chairman of VLScom Ltd.,
a private company specializing in video compression for HDTV and video over IP and as a director of Ori
Software Ltd., a company involved in data management.
49
Prior to holding those positions, Mr. Aberman served as the President and CEO of Elbit Vision System Ltd.
(EVSNF.OB), a company engaged in automatic optical inspection. Before joining the Company, Mr.
Aberman served as President and CEO of Netect Ltd., a company specializing in the field of internet
security software and was the co-founder, President and CEO of Associative Computing Ltd., which
developed an associative parallel processor for real-time video processing. He also served as Chairman of
Display Inspection Systems Inc., specializing in laser based inspection machines and as President and CEO
of Robomatix Technologies Ltd.
In 1992, Mr. Aberman was awarded the Rothschild Prize for excellence in his field from the
President of the State of Israel. Mr. Aberman holds a B.Sc. in Mechanical Engineering from Ben Gurion
University in Israel.
We believe that Mr. Aberman’s qualifications to sit on our Board include his unique
multidisciplinary innovative approach, years of experience in the financial markets in Israel and globally,
as well as his experience in serving as the CEO of publicly traded entities.
Yaky Yanay
Mr. Yanay became a director of the Company in February 2015. He has served as our President
from February 2014 and as our CEO from June 2019, previously serving as Co-CEO from March 2017.
Mr. Yanay has served in variety of executive positions in Pluristem since 2006 including as our Chief
Financial Officer from November 2006 until February 2014 and from February 2015 until March 2017. He
also served as our Chief Operating Officer from February 2014 until March 2017. From November 2006 to
February 2014, he served as our Secretary and served as our Executive Vice President from March 2013
until February 2014. From 2015 to 2018, Mr. Yanay served as the Co-Chairman of Israel Advanced
Technology Industries (IATI), the largest umbrella organization representing Israel’s high tech and life
science industries and since August 2012 has continually served as a Director of IATI, representing Israel’s
life sciences industry. Prior to joining the Company, Mr. Yanay founded and served as Chairman of “The
Israeli Life Science Forum” and also served as the Chief Financial Officer, or CFO, of Elbit Vision
Systems Ltd., a public company. In addition, from July 2010 to April 2018, he served on the Board of
Directors of Elbit Vision Systems Ltd. Prior to these positions, Mr. Yanay served as manager of audit
groups of the technology sector at Ernst & Young Israel.
Mr. Yanay holds a bachelor’s degree with honors in business administration and accounting from
the College of Management Academic Studies of Rishon LeZion and is a Certified Public Accountant in
Israel.
We believe that Mr. Yanay’s qualifications to sit on our Board include his years of experience in
the medical technology industry, his vast skill and expertise in accounting and economics, as well as his
knowledge and familiarity with corporate finance.
Nachum Rosman
Mr. Rosman became a director of the Company in October 2007. He provides management and
consulting services to startup companies in the financial, organizational and human resource aspects of
their operations. Mr. Rosman also serves as the CEO of Simba Ltd. and as a director at several privately
held companies. Throughout his career, Mr. Rosman has held CEO and Chief Financial Officer, or CFO,
positions in Israel, the United States and England. In these positions he was responsible for, among other
things, finance management, fund raising, acquisitions and technology sales.
Mr. Rosman holds a B.Sc. in Management Engineering and an M.Sc. in Operations Research from
the Technion in Haifa, Israel. Mr. Rosman also participated in a Ph.D. program in Investments and
Financing at the Tel Aviv University, Israel.
We believe that Mr. Rosman’s qualifications to sit on our Board include his years of experience in
the high-tech industry, as well as his knowledge and familiarity with corporate finance.
50
Doron Shorrer
Mr. Shorrer became a director of the Company in October 2003. Mr. Shorrer was one of the
Company’s founders and served as its first Chairman until 2006. Since 1998, Mr. Shorrer has served as the
Chairman and CEO of Shorrer International Ltd., an investment and financial consulting company. Mr.
Shorrer also serves as a director at each of Sigma Mutual Funds Ltd., Food Save Ltd. and G.D.M.
Investments Ltd.
Mr. Shorrer has served as a director of Provident Fund for employees of the Israel Electric
Company Ltd. and between 1999 and 2004 he was Chairman of the board of directors of Phoenix Insurance
Company, one of the largest insurance companies in Israel, and of Mivtachim Pension Funds Group, the
largest pension fund in Israel. Prior to serving in these positions, Mr. Shorrer held senior positions that
included Arbitrator at the Claims Resolution Tribunal for Dormant Accounts in Switzerland; Economic and
Financial Advisor, Commissioner of Insurance and Capital Markets for the State of Israel; Member of the
board of directors of “Nechasim” of the State of Israel; Member Committee for the Examination of
Structural Changes in the Capital Market (The Brodet Committee); General Director of the Ministry of
Transport; founder and managing partner of an accounting firm with offices in Jerusalem, Tel-Aviv and
Haifa; Member of the Lecture Staff of the Hebrew University Business Administration School; Chairman
of Amal School Chain; Chairman of a Public Committee for Telecommunications; and Economic
Consultant to the Ministry of Energy. In addition, Mr. Shorrer served as a director of Hebrew University
employees and Massad Bank from the International Bank group from 2009 to 2018.
Among his many areas of expertise, Mr. Shorrer formulates, implements and administers business
planning in the private and institutional sector, in addition to consulting on economic, accounting and
taxation issues to a diverse audience ranging from private concerns to government ministries.
Mr. Shorrer holds a B.A. in Economics and Accounting and an M.B.A. in Business
Administration (specialization in finance and banking) from the Hebrew University of Jerusalem and is a
Certified Public Accountant in Israel.
We believe that Mr. Shorrer’s qualifications to sit on our Board include his years of experience in
the high-tech industry, his vast skill and expertise in accounting and economics, as well as his knowledge
and familiarity with corporate finance.
Hava Meretzki
Ms. Meretzki became a director of the Company in October 2003. Ms. Meretzki is an attorney and
a partner at the Meretzki law firm in Haifa, Israel. Ms. Meretzki specializes in civil, trade and labor law,
and she is the Chairman of the National Council of the Israel Bar Association. Ms. Meretzki received a
Bachelor’s Degree in Law from the Hebrew University in 1991 and was admitted to the Israel Bar
Association in 1993.
We believe that Ms. Meretzki’s qualifications to sit on our Board include her years of experience
with legal and corporate governance matters.
Isaac Braun
Mr. Braun became a director of the Company in July 2005. Mr. Braun is a business veteran with
entrepreneurial, industrial and manufacturing experience. He has co-founded and served as a board
member of several high-tech start-ups in the areas of e-commerce, security, messaging, search engines and
biotechnology. Mr. Braun is involved with advising private companies in the areas of capital raising and
business development.
We believe that Mr. Braun’s qualifications to sit on our Board include his years of experience in the high-
tech industry, as well as his knowledge and familiarity with corporate finance.
51
Israel Ben-Yoram
Mr. Ben-Yoram became a director of the Company in January 2005. He has been a director and
partner in the Israeli accounting firm of Mor, Ben-Yoram and Partners since 1985. In addition, since 1992,
Mr. Ben-Yoram has been a shareholder and has served as the head director of Mor, Ben-Yoram Ltd., a
private company in Israel operating in parallel to Mor, Ben-Yoram and Partners. Mor, Ben-Yoram Ltd.
provides management services, economic consulting services and other professional services to businesses.
Furthermore, Mr. Ben-Yoram is the founder, owner and CEO of SBY Group (Eshed Dash Ltd., Zonbit Ltd.
and Eshed Yuvalim Ltd.). During 2003 to 2004, Mr. Ben-Yoram served as a director of Brainstorm Cell
Therapeutics Inc. (BCLI) and Smart Energy solutions, Inc. (SMGY), each of which were traded on the
Nasdaq Stock Market LLC, or Nasdaq. Mr. Ben-Yoram is a member of the Society of Trust and Estate
Practitioners.
Mr. Ben-Yoram received a B.A. in accounting from Tel Aviv University, an M.A. in Economics
from the Hebrew University of Jerusalem, an LL.B. and an MBA from Tel Aviv University and an LL.M.
from Bar Ilan University. In addition, Mr. Ben-Yoram is a Certified Public Accountant in Israel and is
qualified in arbitration and in mediation.
We believe that Mr. Ben-Yoram’s qualifications to sit on our Board include his years of
experience in the high-tech industry, his experience serving as a director of Nasdaq-listed companies, as
well as his knowledge and familiarity with corporate finance and accounting.
Mark Germain
Mr. Germain became a director of the Company in May 2007. Between May 2007 and February
2009, Mr. Germain served as Co-Chairman of our Board. Mr. Germain has been a merchant banker
serving primarily the biotech and life sciences industries for over five years. He has been involved as a
founder, director, chairman of the board of, and/or investor in, over twenty companies in the biotech field
and assisted many of them in arranging corporate partnerships, acquiring technology, entering into mergers
and acquisitions, and executing financings and going public transactions. He graduated from New York
University School of Law in 1975, Order of the Coif, and was a partner in a New York law firm practicing
corporate and securities law before leaving in 1986. Since then, and until he entered the biotech field in
1991, he served in senior executive capacities, including as president of a public company that was sold in
1991. In addition to being a director of the Company, Mr. Germain is a Managing Director at The ÆNTIB
Group, a boutique merchant bank. From June 2018, Mr. Germain also served as Vice Chairman of the
board of BiondVax Pharmaceuticals Ltd., a company based in Israel engaging in a Phase III clinical trials
for a universal flu vaccine, and, effective September 30, 2019 he will serve as the chairmen of the board of
BiondVax Pharmaceuticals Ltd.
Mr. Germain also serves or served as a director of the following companies that were reporting
companies in the past: ChromaDex Inc., Stem Cell Innovations, Inc., Omnimmune Corp. and Collexis
Holdings, Inc. He is also a co-founder and director of a number of private companies in and outside the
biotech field.
We believe that Mr. Germain’s qualifications to sit on our Board include his years of experience in
the biotech industry, his experience serving as a director of public companies, as well as his knowledge and
familiarity with corporate finance.
Moria Kwiat
Dr. Kwiat became a director of the Company in May 2012. Dr. Kwiat is an analyst at aMoon, a
leading Israeli life sciences venture fund. Previously she was a consultant and analyst at Frost & Sullivan,
producing equity research for public companies in the healthcare domain. Dr. Kwiat has a broad academic
background and scientific experience in inter-disciplinary fields, with specific expertise in the interface
between the biology and materials fields. She is the co-author of multiple scientific papers.
52
Dr. Kwiat holds a Post-Doctoral degree in nanotechnology and material sciences, a Ph.D. in Chemistry and
a M.Sc. and B.Sc. in Biotechnology, from Tel Aviv University.
We believe that Dr. Kwiat’s qualifications to sit on our Board include her knowledge and
experience as a scientist and a researcher in the fields of biotechnology and nanotechnology.
Chen Franco-Yehuda
Mrs. Franco-Yehuda was appointed as our CFO, effective as of March 17, 2019. Prior to being
appointed as our Chief Financial Officer, Mrs. Franco-Yehuda served as the Company’s Head of
Accounting and Financial Reporting since July 2016 and, prior to that, the Company’s Controller since
May 2013. Before joining the Company, from October 2008 to April 2013, Mrs. Franco-Yehuda served as
a manager of audit groups relating to public and private companies in various industries at
PricewaterhouseCoopers (PwC) and also as a lecturer of accounting classes at the Open University of Israel
from 2009 to 2014.
Mrs. Franco-Yehuda holds a bachelor's degree in economics and accounting from Haifa
University, and is a certified public accountant in Israel.
There are no family relationships between any of the directors or officers named above.
Audit Committee and Audit Committee Financial Expert
The members of our Audit Committee are Doron Shorrer, Nachum Rosman and Israel Ben-
Yoram. Doron Shorrer is the Chairman of the Audit Committee, and our Board of Directors has
determined that Israel Ben-Yoram is an "Audit Committee financial expert" and that all members of the
Audit Committee are "independent" as defined by the rules of the SEC and the Nasdaq rules and
regulations. The Audit Committee operates under a written charter that is posted on our website at
www.pluristem.com. The information on our website is not incorporated by reference into this Annual
Report. The primary responsibilities of our Audit Committee include:
• Appointing, compensating and retaining our registered independent public accounting firm;
• Overseeing the work performed by any outside accounting firm;
• Assisting the Board in fulfilling its responsibilities by reviewing: (i) the financial reports provided by
us to the SEC, our stockholders or to the general public, and (ii) our internal financial and accounting
controls; and
• Recommending, establishing and monitoring procedures designed to improve the quality and reliability
of the disclosure of our financial condition and results of operations.
Our Audit Committee held eight meetings from July 1, 2018 through June 30, 2019 (fiscal year 2019).
Compensation Committee
The members of our Compensation Committee are Doron Shorrer, Nachum Rosman and Israel
Ben-Yoram. The Board has determined that all of the members of the Compensation Committee are
"independent" as defined by the rules of the SEC and Nasdaq rules and regulations. The Compensation
Committee operates under a written charter that is posted on our website at www.pluristem.com. The
information on our website is not incorporated by reference into this Annual Report.
The primary responsibilities of our Compensation Committee include:
53
• Reviewing and recommending to our Board of the annual base compensation, the annual incentive
bonus, equity compensation, employment agreements and any other benefits of our executive officers;
• Administering our equity based plans and making recommendations to our Board with respect to our
incentive–compensation plans and equity–based plans; and
• Annually reviewing and making recommendations to our Board with respect to the compensation
policy for such other officers as directed by our Board.
Our Compensation Committee held five meetings during fiscal year 2019. The Compensation
Committee did not receive advice from or retain any consultants during fiscal year 2019.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 30, 2019, Mr. Shorrer, Mr. Rosman, and Mr. Ben-Yoram served
as the members of our Compensation Committee. None of the members of our Compensation Committee
is, or has been, an officer or employee of ours or of our subsidiary.
During the last year, none of our executive officers served as: (1) a member of the compensation
committee (or other committee of the board of directors performing equivalent functions or, in the absence
of any such committee, the entire board of directors) of another entity, one of whose executive officers
served on the Compensation Committee; (2) a director of another entity, one of whose executive officers
served on the Compensation Committee; or (3) a member of the compensation committee (or other
committee of the board of directors performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose executive officers served as a
director on our Board of Directors.
Nominating/Corporate Governance; Director Candidates.
The Company does not have a Nominating Committee or Corporate Governance Committee or
any committees of a similar nature, nor any charter governing the nomination process. Our existing
independent directors consider and recommend board nominees and address corporate governance matters
that may arise from time to time. Our Board does not believe that such committees are needed for a
company our size. However, our independent directors will consider stockholder suggestions for additions
to our Board.
Code of Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics that applies to, among
other persons, members of our Board of Directors, our officers including our CEO (being our principal
executive officer) and our CFO (being our principal financial and accounting officer) and our employees.
Our Code of Business Conduct and Ethics is posted on our Internet website at
www.pluristem.com. The information on our website is not incorporated by reference into this Annual
Report. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment
to, or waiver from, a provision of our Code of Conduct by posting such information on the website address
specified above.
Item 11. Executive Compensation.
Compensation Discussion and Analysis
The Compensation Committee of our Board of Directors is comprised solely of independent
directors as defined by Nasdaq and non-employee directors as defined by Rule 16b-3 under the Exchange
Act.
54
The Compensation Committee has the authority and responsibility to review and make recommendations to
the Board of Directors regarding the compensation of our CEO, Executive Chairman and CFO. Our named
executive officers for fiscal year 2019 are those four individuals listed in the 2019 "Summary
Compensation Table" below. Other information concerning the structure, roles and responsibilities of our
Compensation Committee is set forth in "Board Meetings and Committees—Compensation Committee"
section of this Annual Report.
At our 2019 shareholders meeting, we provided our shareholders with the opportunity to cast an
advisory vote on our then named executive officers’ compensation. Over 70% of the votes cast on this
"2019 say-on-pay vote" were voted in favor of the proposal. We have considered the 2019 say-on-pay vote
and we believe that the support from our shareholders for the 2019 say-on-pay vote proposal indicates that
our shareholders are supportive of our approach to executive compensation. At our 2019 shareholders
meeting, our shareholders voted in favor of the proposal to hold say-on-pay votes every two years. We will
continue to consider the outcome of our say-on-pay votes when making compensation decisions regarding
our named executive officers.
A discussion of the policies and decisions that shape our executive compensation program,
including the specific objectives and elements, is set forth below.
Executive Compensation Objectives and Philosophy
The objective of our executive compensation program is to attract, retain and motivate talented
executives who are critical for our continued growth and success and to align the interests of these
executives with those of our shareholders. To this end, our compensation programs for executive officers
are designed to achieve the following objectives:
attract, hire, and retain talented and experienced executives;
•
• motivate, reward and retain executives whose knowledge, skills and performance are critical
•
•
•
•
to our success;
ensure fairness among the executive management team by recognizing the contributions each
executive makes to our success and the tenure of each team member as a factor in achieving
such success;
focus executive behavior on achievement of our corporate objectives and strategy;
build a mechanism of "pay for performance"; and
align the interests of management and shareholders by providing management with longer-
term incentives through equity ownership.
The Compensation Committee reviews the allocation of compensation components regularly to
ensure alignment with strategic and operating goals, competitive market practices and legislative changes.
The Compensation Committee does not apply a specific formula to determine the allocation between cash
and non-cash forms of compensation. Certain compensation components, such as base salaries, benefits and
perquisites, are intended primarily to attract, hire, and retain well-qualified executives. Other compensation
elements, such as long-term incentive opportunities, are designed to motivate and reward performance.
Long-term incentives are intended to reward our long-term performance and executing our business
strategy, and to strongly align named executive officers' interests with those of shareholders.
With respect to equity compensation, the Compensation Committee makes awards to executives
under our equity compensation plans as approved by the Board of Directors. Executive compensation is
paid or granted based on such matters as the Compensation Committee deems appropriate, including our
financial and operating performance, the alignment of the interests of the executive officers and our
shareholders, the performance of our common stock and our ability to attract and retain qualified
individuals.
55
Elements of Executive Officer Compensation
Our executive officer compensation program is comprised of: (i) base salary or monthly
compensation; (ii) performance based bonus; (iii) long-term equity incentive compensation in the form of
RSU grants; and (iv) benefits and perquisites.
In establishing overall executive compensation levels and making specific compensation decisions
for our executive officers in 2019, the Compensation Committee considered a number of criteria, including
the executive's position, scope of responsibilities, prior base salary and annual incentive awards and
expected contribution. In that regard, our Compensation Committee has decided to provide our Executive
Chairman, Mr. Aberman, and our CEO, Mr. Yanay, with base salaries, RSU awards, acceleration of such
awards under certain circumstances, and performance based bonuses in their respective employment and/or
consulting agreement, as opposed to certain terms contained in our CFO’s employment agreement and
compensation package, based on their respective positions, seniority and scope of responsibilities.
Generally, our Compensation Committee reviews and, as appropriate, approves compensation
arrangements for our named executive officers, from time to time but not less than once a year. The
Compensation Committee also takes into consideration our CEO recommendations for the compensation of
our CFO. Our CEO generally presents these recommendations at the time of our Compensation
Committee's review of executive compensation arrangements.
Base Salary
The Compensation Committee performs a review of base salaries / monthly compensation for our
named executive officers from time to time as appropriate. In determining salaries, the Compensation
Committee members also take into consideration their understanding of the compensation practices of
comparable companies (based on size and stage of development), especially in Israel, where our named
executive officers reside; independent third party market data such as compensation surveys to industry,
including information relating to peer companies; individual experience and performance adjusted to reflect
individual roles; and contribution to our clinical, regulatory, commercial and operational performance.
None of the factors above has a dominant weight in determining the compensation of our executive
officers, and our Compensation Committee considers the factors as a whole when considering such
compensation. In addition, our Compensation Committee may, from time to time, use comparative data
regarding compensation paid by peer companies in order to obtain a general understanding of current trends
in compensation practices and ranges of amounts being awarded by other public companies, and not as part
of an analysis or a formula. We may also change the base salary / monthly compensation of an executive
officer at other times due to market conditions. We believe that a competitive base salary / monthly
compensation is a necessary element of any compensation program that is designed to attract and retain
talented and experienced executives. We also believe that attractive base salaries can motivate and reward
executives for their overall performance.
Base salaries / monthly compensation are established in part based on the individual experience,
skills and expected contributions of our executives and our executives' performance during the prior year.
Compensation adjustments are made occasionally based on changes in an executive's level of
responsibility, Company progress or on changed local and specific executive employment market
conditions.
On March 14, 2019, the Board of Directors approved the appointment of Mrs. Franco-Yehuda as
our CFO. On May 6, 2019, the Board of Directors, upon the recommendation of our Compensation
Committee, approved the new officer agreement with Mrs. Franco-Yehuda, our CFO, which provided for
an increase to her annual salary, in light of her new responsibilities and also, under certain circumstances,
for acceleration of awards issued to Mrs. Franco-Yehuda.
56
On June 30, 2019, the Board of Directors, upon the recommendation of our Compensation
Committee, approved, as part of a comprehensive plan to reduce expenses, the reduction of the annual
salary of our CEO and the annual compensation paid to our Executive Chairman, each by 25% from their
current levels until the earlier of closing market capitalization on the Nasdaq Capital Market reaching $170
million; or (2) June 30, 2020.
Performance Based Bonus
Given the nature of our business, the determination of incentives for our executives is generally
tied to success in promoting our Company's development. We are continually seeking non-dilutive sources
of funding. In addition, a key component of our strategy is to develop and manufacture cell therapy
products for the treatment of multiple disorders through collaboration with other companies and entering
into licensing agreements with such companies, such as our agreement with CHA. Therefore, in order to
reward our Executive Chairman and CEO, each of them is entitled to a bonus equal to 1.5% of amounts
received by us from non-dilutive funding received, among other things, from corporate partnering and
strategic deals. This is designed to support our business strategy to enter into multiple license agreements
with pharmaceutical companies.
In addition, our executives may be entitled, from time to time, to a discretionary bonus that is in
the Compensation Committee sole discretion. We paid no bonuses to our named executive officers in fiscal
year 2019.
Long-Term Equity Incentive Compensation
Long-term incentive compensation allows the executive officers to share in any appreciation in the
value of our common stock. The Compensation Committee believes that stock participation aligns
executive officers’ interests with those of our shareholders. The amounts of the awards are designed to
reward past performance and create incentives to meet long-term objectives. Awards are made at a level
expected to be competitive within the biotechnology industry, as well as with Israeli based companies. We
do not have a formula relating to, and did not conduct any analysis of, the level of awards that is
competitive within the biotechnology industry and Israeli based companies. In determining the amount of
each grant, the Compensation Committee also takes into account the number of shares held by the
executive prior to the grant. Awards are made on a discretionary basis and not pursuant to specific criteria
set out in advance.
RSU awards provide our executive officers with the right to purchase shares of our common stock
at a par value of $0.00001, subject to continued employment with our Company. In recent years, we
granted our executive officers RSU awards.
We chose to grant RSU awards and not options because RSU awards, once vested, always have an
immediate financial value to the holder thereof, unlike options where the exercise price might be below the
current market price of the shares and therefore not have any intrinsic value to the holder thereof. Our
Executive Chairman and CEO are entitled to acceleration of the vesting of their awards in the following
circumstances: (1) if we terminate their employment, they will be entitled to acceleration of 100% of any
unvested award and (2) if they resign, they will be entitled to acceleration of 50% of any unvested award.
In addition, our Executive Chairman, CEO and CFO are entitled to an acceleration of 100% of any
unvested RSUs in the event of a change in control as defined in their consulting or employment agreement.
All grants are approved, upon receipt of recommendation by our Compensation Committee, by our Board
of Directors.
Benefits and Perquisites
Generally, benefits available to Mr. Yanay and Mrs. Franco-Yehuda are available to all employees
on similar terms and include welfare benefits, paid time-off, life and disability insurance and other
customary or mandatory social benefits in Israel.
57
We provide our named executive officers with a phone and a Company car, or reimbursement for car or
phone expenses, which are customary benefits in Israel to managers and officers. Our Executive Chairman
and CEO are also entitled to receive, once a year, a fixed sum equal to the amount of the monthly
compensation to such Executive Chairman and CEO.
In addition, in the event of termination of Mr. Aberman’s consulting agreement, he will be entitled
to receive an adjustment fee that equals the monthly consulting fees multiplied by 9. Mr. Yanay is entitled
to a severance payment that equals a month’s compensation for each twelve-month period of employment
or otherwise providing services to the Company, and an additional adjustment fee that equals the monthly
salary amount multiplied by 6, plus the number of years the employment agreement remains in force from
September 12, 2018, but in any event no more than 9 years in the aggregate.
Mrs. Chen Franco-Yehuda is entitled to severance pay upon termination of employment for any
reason, including retirement, based on 8.333% of her monthly base salary, according to section 14 of the
Severance Pay Law, 1963.
We do not believe that the benefits and perquisites described above deviate materially from the
customary practice for compensation of executive officers by other companies similar in size and stage of
development in Israel. These benefits represent a relatively small portion of the executive officers' total
compensation.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the foregoing Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K with our management and, based on
such review and discussions, the Compensation Committee recommended to our Board of Directors that
the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K and in our
proxy statement relating to our next annual meeting of stockholders.
Compensation Committee Members:
Doron Shorrer
Nachum Rosman
Israel Ben-Yoram
Summary Compensation Table
The following table shows the particulars of compensation paid to our named executive officers
for the fiscal years ended June 30, 2019 and 2018. We do not currently have any other executive officers.
Name
and Principal
Position
Zami Aberman
Executive Chairman
(previously Co-CEO)
Yaky Yanay
Fiscal
Year
Salary
($) (1)
Stock-based
Awards
($)(2)
All
Other Compensation
($)(3)
Total
($)
2019(4)
551,137(5)
478,500
66,857 1,096,494
2018
524,450(5)
-
68,384
592,834
2019(6)
396,632(7)
461,100
29,253
886,985
58
Chief Executive
Officer (previously
Co-CEO)
2018
416,740(7)
-
26,619
443,359
Chen Franco-Yehuda
CFO
Erez Egozi
Former CFO
2019 (8)
78,889
112,329
13,599
204,817
2019 (9)
116,701
139,200
68,807
324,708
2018
163,212
142,197
20,304
325,713
Salary payments which were in NIS, were translated into US$ at the then current exchange rate for
(1)
each payment. The salaries of Mr. Yanay, Mrs. Franco-Yehuda and Mr. Egozi are comprised of base
salaries and additional payments and provisions such as welfare benefits, paid time-off, life and disability
insurance and other customary or mandatory social benefits to employees in Israel.
The fair value recognized for the stock-based awards was determined as of the grant date in
(2)
accordance with ASC 718. Assumptions used in the calculations for these amounts are included in Note
2(l) to our consolidated financial statements for fiscal year 2019 included elsewhere in this Annual Report.
Represents cost to us in connection with car or car expenses reimbursement and mobile phone
(3)
expenses. The Company also pays our CEO and Executive Chairman the tax associated with this benefit,
which is grossed up and included in the “all other compensation” column for Mr. Aberman. Mr. Yanay’s
gross up is part of the amount in the Salary column in the table above.
Mr. Aberman ceased to serve as our Co-CEO and commenced to serve solely in his capacity as
(4)
Executive Chairman on June 24, 2019. The compensation reflects amounts received during the entire fiscal
year.
Includes $23,068 and $21,151 paid to Mr. Aberman as compensation for services as a director in
(5)
fiscal year 2019 and 2018 respectively.
(6)
2019. The compensation reflects amounts received during the entire fiscal year.
Mr. Yanay ceased to serve as our Co-CEO and commenced to serve as the sole CEO on June 24,
(7)
fiscal year 2019 and 2018, respectively.
Includes $23,582 and $24,003 paid to Mr. Yanay as compensation for services as a director in
(8)
compensation reflects amounts received during the entire fiscal year.
Mrs. Franco-Yehuda was appointed as our Chief Financial Officer on March 14, 2019. The
Mr. Egozi ceased to be our Chief Financial Officer on March 14, 2019. The compensation reflects
(9)
amounts received during the entire fiscal year. Amounts received following March 14, 2019 are included in
all other compensation.
We have the following written agreements and other arrangements concerning compensation with
our named executive officers:
(a) Mr. Aberman is engaged with us as a consultant and received a monthly consulting fee of $31,250.
On September 12, 2018, our Board approved an increase of the monthly consulting fees payable to
Mr. Aberman, from $31,250 per month (at a U.S. dollar rate not less than 4.35 NIS) to 149,500
NIS (approximately $41,500 per month), effective as of September 1, 2018.
59
In addition, Mr. Aberman is entitled once a year to receive an additional amount that equals the
monthly consulting fee. All amounts above are paid plus value added tax. Mr. Aberman is also
entitled to a performance based bonus of one and a half percent (1.5%) from amounts received by
us from non-diluting funding and strategic deals. Mr. Aberman is entitled to car expenses
reimbursement. In addition, on September 12, 2018, Mr. Aberman’s annual director fees were
increased to $20,000 from $17,610 (set at a rate of 4.25 NIS per U.S. dollar). The reason for the
increases in Mr. Aberman’s consulting fees and director fees were due to the fact that Mr.
Aberman had not received an increase since May 2011, and the Board determined such an increase
was appropriate in light of his years of service to the Company. On June 30, 2019, our Board of
Directors, upon the recommendation of our Compensation Committee, approved the reduction of
the annual compensation paid to Mr. Aberman, and his annual fees paid to him as a director, by
25% from his current levels until the earlier of closing market capitalization on the Nasdaq Capital
Market reaching $170 million; or (2) June 30, 2020.
(b) During fiscal years 2019 and 2018, Mr. Yanay's monthly salary was 80,000 NIS, while in fiscal
year 2017 it was 53,125 NIS. In addition, Mr. Yanay is entitled once a year to receive an
additional amount that equals his monthly salary. Mr. Yanay is provided with a cellular phone and
a Company car pursuant to the terms of his agreement. Furthermore, Mr. Yanay was entitled to a
performance based bonus of one percent (1.0%) from amounts received by us from non-diluting
funding and strategic deals which, effective as of September 12, 2018, was increased to one and a
half percent (1.5%) due to his increased responsibilities. In addition, Mr. Yanay’s annual
compensation as a director was $20,000 (set at a rate of 4.25 NIS per U.S. dollar). On June 30,
2019, our Board of Directors, upon the recommendation of our Compensation Committee,
approved the reduction of the annual salary of Mr. Yanay, and the annual fees paid to him as a
director, by 25% from his current levels until the earlier of closing market capitalization on the
Nasdaq Capital Market reaching $170 million; or (2) June 30, 2020.
(c) Mrs. Franco-Yehuda’s monthly salary is 36,000 NIS. Mrs. Franco-Yehuda receives car and
cellular phone expense reimbursements pursuant to the terms of her agreement.
(d) Starting December 1, 2017, Mr. Egozi’s monthly salary was 38,000 NIS. Mr. Egozi was provided
with a cellular phone and a Company car pursuant to the terms of his employment agreement with
the Company. Mr. Egozi ceased to be our Chief Financial Officer on March 14, 2019.
Potential Payments Upon Termination or Change-in-Control
We have no plans or arrangements in respect of remuneration received or that may be received by
our executive officers to compensate such officers in the event of termination of employment (as a result of
resignation, retirement, change-in-control) or a change of responsibilities following a change-in-control,
except for the following: (i) in the event of termination of Mr. Aberman’s Consulting Agreement, he will
be entitled to receive an adjustment fee that equals the monthly consulting fees multiplied by 9; (ii) in the
event of termination of Mr. Yanay employment, he is entitled to a severance payment, under Israeli law,
that equals a month’s compensation for each twelve-month period of employment or otherwise providing
services to the Company, and an additional adjustment fee that equals the monthly base salary multiplied
by 6, plus the number of years the employment agreement is in force from September 12, 2018, but in any
event no more than nine months in the aggregate; and (iii) in the event of termination of Mrs. Franco-
Yehuda’s employment, she is entitled to a severance payment, under Israeli law, that equals a month’s
compensation for each twelve-month period of employment or otherwise providing services to the
Company.
In addition, Mr. Aberman and Mr. Yanay are entitled to acceleration of the vesting of their stock
options and restricted stock in the following circumstances: (1) if we terminate their employment, they will
be entitled to acceleration of 100% of any unvested awards and (2) if they resign, they will be entitled to
acceleration of 50% of any unvested award. In addition, Mr. Aberman, Mr. Yanay and Mrs. Franco-Yehuda
are also entitled to acceleration of 100% of any unvested award in case of our change in control as defined
in their respective consulting and employment agreements.
60
The following table displays the value of what our CEO, Executive Chairman and CFO would
have received from us had their employment been terminated, or a change in control of us happened on
June 30, 2019.
Officer
Salary
Accelerated Vesting of
RSUs (1)
Total
Zami Aberman
Terminated due to officer
resignation
Terminated due to discharge of
$
$
officer
Change in control
377,314
377,314
-
$
$
$
457,250 (2)
$ 834,564
914,500 (3)
$ 1,291,814
914,500 (4)
$ 914,500
Yaky Yanay
Terminated due to officer
resignation
Terminated due to discharge of
officer
Change in control
Chen Franco Yehuda
Terminated due to officer
resignation
Terminated due to discharge of
officer
Change in control
$ 364,891 (5) $
452,600 (2)
$ 817,491
$ 364,891 (5) $
905,200 (3)
$ 1,270,091
-
$
905,200 (4)
$ 905,200
$
$
35,358
35,358
-
-
$
$
35,358
35,358
-
$
86,180 (4)
$ 86,180 (4)
(1)
(2)
(3)
(4)
Value shown represents the difference between the closing market price of our shares of
common stock on June 30, 2019 of $6.20 per share and the applicable exercise price of each
grant.
50% of all unvested RSUs issued under the applicable equity incentive plans vest upon a
termination without cause under the terms of those plans.
All unvested RSUs issued under the applicable equity incentive plans vest upon a termination
due to discharge.
All unvested RSUs issued under the applicable equity incentive plans vest upon a change of
control under the terms of those plans.
Pension, Retirement or Similar Benefit Plans
We have no arrangements or plans, except for those we are obligated to maintain pursuant to the
Israeli law, under which we provide pension, retirement or similar benefits for directors or executive
officers. Our directors and executive officers may receive stock options, RSUs or restricted shares at the
discretion of our Board in the future.
Grants of Plan-Based Awards
The following table shows grants of plan-based equity awards made to our named executive
officers during the fiscal year ended June 30, 2019:
61
Name
Zami Aberman
Yaky Yanay
Chen Franco-Yehuda
Erez Egozi (Former CFO)
Grant Date
December 19, 2018
December 19, 2018
December 19, 2018
March 28, 2019
December 19, 2018
All Other Stock
Awards:
Number of Shares of
Stock or Units #
55,000 (1)
53,000 (2)
2,600 (3)
10,000 (4)
16,000 (5)
Grant Date Fair
Value of Stock
Awards ($)
478,500
461,100
21,189
91,140
139,200
(1)
Grant of RSUs was made pursuant to our 2016 Equity Compensation Plan, or the 2016 Plan.
The grant vests as follows:
a. 30,000 RSUs vest over a two-year period from the date of grant, as follows: 25% after 6
months from date of grant and the remaining shares vest in 6 equal installments every 3
months thereafter, and
b. 25,000 RSUs vest as follows: 12.5% vest on March 19, 2021 and the remaining shares
vest in 7 equal installments every 3 months thereafter.
(2)
Grant of RSUs was made pursuant to our 2016 Plan. The grant vests as follows:
a.
28,000 RSUs vest over a two-year period from the date of grant, as follows: 25% after 6
months from date of grant and the remaining shares vest in 6 equal installments every 3
months thereafter, and
b. 25,000 RSUs vest as follows: 12.5% vest on March 19, 2021 and the remaining shares
vest in 7 equal installments every 3 months thereafter.
(3)
Grant of RSUs was made pursuant to our amended and restated 2005 Stock Option Plan, or
the 2005 Plan. The grant vests as follows:
a. 1,000 RSUs vest over a two-year period from the date of grant, as follows: 25% after 6
months from date of grant and the remaining shares vest in 6 equal installments every 3
months thereafter,
b. 1,000 RSUs vest as follows: 12.5% vest on March 19, 2021 and the remaining shares vest
in 7 equal installments every 3 months thereafter, and
c. 600 RSUs vest on December 19, 2020.
(4)
Grant of RSUs was made pursuant to our 2016 Plan. The grant vests as follows:
a. 6,000 RSUs vest over a two-year period from the date of grant, as follows: 25% after 6
months from date of grant and the remaining shares vest in 6 equal installments every 3
months thereafter, and
b. 4,000 RSUs vest as follows: 12.5% vest on June 28, 2021 and the remaining shares vest
in 7 equal installments every 3 months thereafter.
62
(5)
Grant of RSUs was made pursuant to our 2016 Plan. The grant vests as follows:
a. 8,000 RSUs vest over a two-year period from the date of grant, as follows: 25% after 6
months from date of grant and the remaining shares vest in 6 equal installments every 3
months thereafter,
b. 5,000 RSUs vest as follows: 12.5% vest on March 19, 2021 and the remaining shares vest
in 7 equal installments every 3 months thereafter, and.
c. 3,000 RSUs vest upon achievement of certain operational and financial goals.
In conjunction with Mr. Egozi’s departure as CFO, 172,500 out of 272,500 RSUs outstanding as
of June 30, 2019, vested in July 2019, while the remaining outstanding RSUs were forfeited.
Outstanding Equity Awards at the End of Fiscal Year 2019
The following table presents the outstanding equity awards held as of June 30, 2019 by our named
executive officers:
Name
Zami Aberman
Yaky Yanay
Erez Egozi (10)
Chen Franco-Yehuda
Number of Securities Underlying Unexercised
Stock Awards
Number of shares that
have not vested (#)
Market value of shares that have
not vested ($)
100,000 (1)
47,500 (2)
100,000 (1)
46,000 (3)
7,500 (4)
5,750 (5)
14,000 (6)
1,550 (7)
2,350 (8)
10,000 (9)
$620,000
$294,500
$620,000
$285,200
$46,500
$35,650
$86,800
$9,610
$14,570
$62,000
(1)
100,000 RSUs vest in 8 equal installments of 12,500 on September 22, 2019 and every 3
months thereafter.
(2)
47,500 RSUs vest as follows:
a. 22,500 RSUs vest in 6 equal installments of 3,750 on September 19, 2019 and every 3
months thereafter, and
b. 25,000 RSUs vest in 8 equal installments of 3,125 on March 19, 2021 and every 3
months thereafter.
(3)
46,000 RSUs vest as follows:
a. 21,000 RSUs vest in 6 equal installments of 3,500 on September 19, 2019 and every 3
months thereafter, and
63
b. 25,000 RSUs vest in 8 equal installments of 3,125 on March 19, 2021 and every 3
months thereafter.
(4)
7,500 RSUs vest in 8 equal installments of 937.5 on September 22, 2019 and every 3 months
thereafter.
(5)
5,750 RSUs vest as follows:
a. 750 RSUs vest in 2 equal installments of 375 on September 14, 2019 and December 14,
2019,
b. 5,000 RSUs vest as follows: 50% vest on June 14, 2020 and 50% vest on June 14, 2021,
and
(6)
14,000 RSUs vest as follows:
a. 6,000 RSUs vest in 6 equal installments of 375 on September 19, 2019 and every 3
months thereafter,
b. 5,000 RSUs vest in 8 equal installments of 3,125 on March 19, 2021 and every 3 months
thereafter, and
c. 3,000 RSUs vest upon achievement of certain operational and financial goals.
(7)
1,550 RSUs vest as follows:
a. 300 RSUs vest in 2 equal installments of 150 on September 14, 2019 and December 14,
2019, and
b. 1,250 RSUs vest as follows: 50% vest on June 14, 2020 and 50% vest on June 14, 2021.
(8)
2,350 RSUs vest as follows:
a. 750 RSUs vest in 6 equal installments of 125 on September 19, 2019 and every 3 months
thereafter,
b. 1,000 RSUs vest in 8 equal installments of 125 on March 19, 2021 and every 3 months
thereafter, and
c. 600 RSUs vest on December 19, 2022.
(9)
10,000 RSUs vest as follows:
a. 6,000 RSUs vest as follows: 25% after 6 months from date of grant and the remaining
shares vest in 6 equal installments every 3 months thereafter, and
b. 4,000 RSUs vest as follows: 12.5% vest on June 28, 2021 and the remaining shares vest
in 7 equal installments every 3 months thereafter.
(10)
In conjunction with Mr. Egozi’s departure as CFO, 17,250 out of 27,250 RSUs outstanding as
of June 30, 2019, vested in July 2019, while the remaining outstanding 10,000 RSUs were
forfeited on July 16, 2019.
64
Option Exercises and Stock Vested Table
The following table presents the named executive officers’ RSUs that vested during fiscal year
2019 by our named executive officers. No options were exercised by our named executive officers, and
11,000 and 5,500 options granted to our Executive Chairman and our CEO, respectively, expired in fiscal
year 2019.
Name
Zami Aberman
Yaky Yanay
Chen Yehuda-Franco
Erez Egozi
Stock Awards
Number of Shares
Acquired on Vesting
(#)
62,500
62,000
1,088
10,075
Value Realized on
Vesting ($)
547,750
544,900
10,103
86,050
Long-Term Incentive Plans-Awards in Last Fiscal Year
We have no long-term incentive plans, other than the 2016 Plan and the 2019 Equity
Compensation Plan, or the 2019 Plan, described in Item 12 below.
Compensation of Directors
The following table provides information regarding compensation earned by, awarded or paid to
each person for serving as a director who is not an executive officer during fiscal year 2019:
Name
Mark Germain
Nachum Rosman
Doron Shorrer
Hava Meretzki
Isaac Braun
Israel Ben-Yoram
Moria Kwiat
Fees Earned or Paid
in Cash ($)
Stock-based Awards
($) (1)
Total ($)
20,933
29,722
29,650
26,401
23,911
29,690
25,858
97,223
98,528
98,528
70,470
70,470
86,783
58,725
118,156
128,250
128,178
96,871
94,381
116,473
84,583
(1)
The fair value recognized for the stock-based awards was determined as of the grant date in
accordance with ASC 718. Assumptions used in the calculations for these amounts are included in
Note 2(l) to our consolidated financial statements for fiscal year 2019 included elsewhere in this
Annual Report.
We reimburse our directors for expenses incurred in connection with attending board meetings
according to a written and Board approved policy. We provide the following compensation for directors:
effective as of September 12, 2018, we increased the annual director compensation from $12,500 to
$15,000; meeting participation fees of $935 per in-person meeting; and for meeting participation by
telephone, $435 per meeting. The Board has determined that the dollar rate would be not less than 4.25 NIS
per dollar. On June 30, 2019, our Board of Directors, upon the recommendation of our Compensation
Committee, approved the reduction of the annual fees paid to each of our directors, by 25% from their
current levels until the earlier of closing market capitalization on the Nasdaq Capital Market reaching $170
million; or (2) June 30, 2020. The non-executive directors, as a group, are also entitled to two and a half
percent (2.5%) in cash based on amounts received by us from non-diluting funding and strategic deals, as
determined by the Board of Directors and/or the Compensation Committee.
65
During fiscal year 2019, we paid a total of $186,165 in cash to directors as compensation. This
amount does not include compensation to Mr. Aberman and Mr. Yanay in their capacity as directors, which
is reflected in the Summary Compensation Table for fiscal year 2019 above. As of June 30, 2019, we
granted our non-executive directors 492,576 options, restricted shares and RSUs (not including 74,392
options that expired by June 30, 2019) of which 327,485 were exercisable or vested, as the case may be, as
follows:
Name
Mark Germain
Nachum Rosman
Doron Shorrer
Hava Meretzki
Isaac Braun
Israel Ben-Yoram
Moria Kwiat
Total
Total of Options, restricted
shares and RSUs Granted
Total of restricted shares and
RSUs exercisable and vested
80,646(1)
83,596(2)
87,596(3)
58,621(4)
58,621(5)
87,746(6)
35,750
492,576
44,773
45,319
69,543
46,078
46,078
52,725
22,969
327,485
(1) Excludes 30,750 options that expired at or prior to June 30, 2019.
(2) Excludes 6,375 options that expired at or prior to June 30, 2019.
(3) Excludes 11,676 options that expired at or prior to June 30, 2019.
(4) Excludes 9,520 options that expired at or prior to June 30, 2019.
(5) Excludes 9,393 options that expired at or prior to June 30, 2019.
(6) Excludes 6,678 options that expired at or prior to June 30, 2019.
For all directors, the vesting of directors' stock options, RSUs and restricted stock accelerates in
the following circumstances: (1) termination of a director’s position by the stockholders will result in the
acceleration of 100% of any unvested award and (2) termination of a director’s position by resignation will
result in the acceleration of 50% of any unvested award.
Other than as described above, we have no present formal plan for compensating our directors for
their service in their capacity as directors. Directors are entitled to reimbursement for reasonable travel and
other out-of-pocket expenses incurred in connection with attendance at meetings of our Board as per policy
approved by our Compensation Committee. The Board may award special remuneration to any director
undertaking any special services on our behalf other than services ordinarily required of a director.
Other than indicated above, no director received and/or accrued any compensation for his or her
services as a director, including committee participation and/or special assignments during fiscal year 2019.
66
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholders Matters.
The following table sets forth certain information, to the best knowledge and belief of the
Company, as of September 4, 2019 (unless provided herein otherwise), with respect to holdings of our
common stock by (1) each person known by us to be the beneficial owner of more than 5% of the total
number of shares of our common stock outstanding as of such date; (2) each of our directors; (3) each of
our named executive officers; and (4) all of our directors and our executive officers as a group.
Name and Address of Beneficial Owner
Directors and Named Executive Officers
Zami Aberman
Executive Chairman of the Board of Directors
(and previously Co-CEO)
Yaky Yanay
CEO, President and Director
Beneficial Number of
Shares(1)
Percentage
381,006 (2)
2.5%
309,098 (2)
2.0%
Chen Franco-Yehuda
CFO
Erez Egozi
Former CFO
Israel Ben-Yoram
Director
Isaac Braun
Director
Mark Germain
Director
Moria Kwiat
Director
Hava Meretzki
Director
Nachum Rosman
Director
Doron Shorrer
Director
5,591
30,713
69,966 (2)
57,231 (3)
46,375
29,668 (4)
58,431 (5)
46,942
74,024 (6)
*
*
*
*
*
*
*
*
*
Directors and Executive Officers as a group (10 persons)
1,078,332 (7)
7.1%
_________________
* = less than 1%
67
(1) Based on 15,547,621 shares of common stock issued and outstanding as of September 4, 2019. Except
as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on
information furnished by such owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment power with respect to securities.
Shares of common stock subject to options, warrants or right to purchase or through the conversion of a
security currently exercisable or convertible, or exercisable or convertible within 60 days, are reflected in
the table above and are deemed outstanding for purposes of computing the percentage ownership of the
person holding such option or warrants, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Includes warrants to acquire up to 7,143 shares.
(3) Includes warrants to acquire up to 5,000 shares.
(4) Includes warrants to acquire up to 2,858 shares.
(5) Includes 11,200 shares owned by Mrs. Meretzki’s husband, Shai Meretzki.
(6) Includes warrants to acquire up to 1,429 shares.
(7) Includes warrants to acquire up to 30,716 shares.
Equity Compensation Plan Information
At our annual meeting of our stockholders held on May 31, 2016, our stockholders approved the
2016 Plan. Under the 2016 Plan, options, restricted stock and RSUs may be granted to our officers,
directors, employees and consultants or the officers, directors, employees and consultants of our subsidiary.
Under the 2016 Plan, the plan administrator is authorized to grant awards to acquire shares of Common
Stock, shares of restricted stock and RSUs, in each calendar year, in a number not exceeding two and three-
quarters percent (2.75%) of the number of shares of our Common Stock issued and outstanding on a fully
diluted basis on the immediately preceding December 31.
In addition, at our annual meeting of our stockholders held on June 13, 2019, our stockholders
approved the 2019 Plan. Under the 2019 Plan, options, restricted stock and RSUs may be granted to our
officers, directors, employees and consultants or the officers, directors, employees and consultants of our
subsidiary. Under the 2019 Plan, the plan administrator is authorized to grant options to acquire shares of
common stock, shares of Restricted Stock and RSUs in a number not exceeding 16% of the number of
shares of common stock issued and outstanding immediately prior to the grant of such awards on a fully
diluted basis.
The following table summarizes certain information regarding our equity compensation plans as of
June 30, 2019:
Number of securities to be
issued upon exercise of
outstanding options
Weighted-average exercise
price of outstanding options
Number of securities
remaining available for
future issuance under equity
compensation plans (2016
Plan and 2019 Plan)
89,580
$0
3,567,455
Plan Category
Equity compensation plan
approved by security holders
68
Item 13. Certain Relationships and Related Transactions and Director Independence.
Except for the arrangements described in Item 11 no director, executive officer, principal
shareholder holding at least 5% of our common shares, or any family member thereof, had any material
interest, direct or indirect, in any transaction, or proposed transaction, during fiscal year 2019, in which the
amount involved in the transaction exceeded or exceeds $120,000.
The Board of Directors has determined that Doron Shorrer, Nachum Rosman, Israel Ben-Yoram,
Isaac Braun and Mark Germain are "independent" directors, as defined by the rules of the SEC and the
Nasdaq rules and regulations.
Item 14. Principal Accounting Fees and Services
The fees for services provided by Kost Forer Gabbay & Kasierer, a member of Ernst & Young
Global, to the Company in the last two fiscal years were as follows:
Twelve months ended
on June 30, 2019
Twelve months ended
on June 30, 2018
Audit Fees.................................................................... $172,014
$126,747
Audit-Related Fees ...................................................... None
None
Tax Fees ...................................................................... $19,831
$40,829
All Other Fees ............................................................. $26,231
$21,134
Total Fees .................................................................... $218,076
$188,710
Audit Fees. These fees were comprised of (i) professional services rendered in connection with the audit of
our consolidated financial statements for our Annual Report on Form 10-K and internal control over
financial reporting, (ii) the review of our quarterly consolidated financial statements for our quarterly
reports on Form 10-Q, (iii) audit services provided in connection with other regulatory or statutory fillings
and (iv) fees related to the offering we closed in April 2019 and with respect to the Sales Agreement.
Tax Fees. These fees relate to our tax compliance and tax advisory projects.
All Other Fees. These fees were comprised of fees related to assistance in preparation of IIA as well as
other grant applications.
SEC rules require that before Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,
is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
1.
2.
pre-approved by our Audit Committee; or
entered into pursuant to pre-approval policies and procedures established by the Audit Committee,
provided the policies and procedures are detailed as to the particular service, the Audit Committee
is informed of each service, and such policies and procedures do not include delegation of the
Audit Committee's responsibilities to management.
The Audit Committee pre-approves all services provided by our independent registered public
accounting firm. All of the above services and fees were reviewed and approved by the Audit Committee
before the services were rendered.
69
The Audit Committee has considered the nature and amount of fees billed by Kost Forer Gabbay
& Kasierer, a member of Ernst & Young Global, and believes that the provision of services for activities
unrelated to the audit is compatible with maintaining Kost Forer Gabbay & Kasierer's independence.
70
PART IV
Item 15. Exhibits.
3.1*
Composite Copy of the Company’s Articles of Incorporation as amended on July 25, 2019.
3.2*
Composite Copy (marked) of the Company’s Articles of Incorporation as amended on July 25,
2019.
3.2
4.1
4.2
Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 of our current report on
Form 8-K filed on March 29, 2017).
Form of Common Stock Purchase Warrant dated January 25, 2017 (incorporated by reference to
Exhibit 4.1 of our current report on Form 8-K filed on January 20, 2017).
Form of Common Stock Purchase Warrant dated March 2019 (incorporated by reference to
Exhibit 4.1 of our current report on Form 8-K filed on April 5, 2019).
4.3*
Description of Securities.
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Summary of Lease Agreement dated January 22, 2003, by and between Pluristem Ltd. and MTM
– Scientific Industries Center Haifa Ltd., as supplemented on December 11, 2005, June 12, 2007
and July 19, 2011 (incorporated by reference to Exhibit 10.2 of our annual report on Form 10-K
filed September 12, 2011).
Summary of Supplement to the Lease Agreement by and between Pluristem Ltd. and MTM –
Scientific Industries Center Haifa Ltd dated July 31, 2012 (incorporated by reference to Exhibit
10.3 of our annual report on Form 10-K filed on September 11, 2013).
Summary of Supplement to the Lease Agreement by and between Pluristem Ltd. and MTM –
Scientific Industries Center Haifa Ltd dated December 31, 2012 (incorporated by reference to
Exhibit 10.4 of our annual report on Form 10-K filed on September 11, 2013).
Summary of Supplement to the Lease Agreement by and between Pluristem Ltd. and MTM –
Scientific Industries Center Haifa Ltd dated February 3, 2015 (incorporated by reference to
Exhibit 10.1 of our quarterly report on Form 10-Q filed on May 6, 2015).
Assignment Agreement dated May 15, 2007 between Pluristem Therapeutics Inc. and each of
Technion Research and Development Foundation Ltd., Shai Meretzki, Dr. Shoshana Merchav
(incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on May 24,
2007).
Assignment Agreement dated May 15, 2007 between Pluristem Therapeutics Inc. and Yeda
Research and Development Ltd. (incorporated by reference to Exhibit 10.2 of our current report on
Form 8-K filed on May 24, 2007).
Exclusive License and Commercialization Agreement dated June 26, 2013, between Pluristem
Ltd. and CHA (incorporated by reference to Exhibit 10.8 of our annual report on Form 10-K filed
on September 11, 2013).
10.8* Summary of Directors’ Ongoing Compensation. +
10.10
2016 Equity Compensation Plan (incorporated by reference to our Definitive Proxy Statement on
Schedule 14A filed on April 4, 2016). +
71
10.14 Form of Stock Option Agreement under the 2016 Equity Compensation Plan (incorporated by
reference to Exhibit 10.17 of our annual report on Form 10-K filed on September 7, 2016). +
10.15 Form of Restricted Stock Agreement under the 2016 Equity Compensation Plan (incorporated by
reference to Exhibit 10.18 of our annual report on Form 10-K filed on September 7, 2016). +
10.16 Form of Restricted Stock Agreement (Israeli directors and officers) under the 2016 Equity
Compensation Plan (incorporated by reference to Exhibit 10.19 of our annual report on Form 10-K
filed on September 7, 2016). +
10.17
2019 Equity Compensation Plan (incorporated by reference to our Definitive Proxy Statement on
Schedule 14A filed on April 25, 2019). +
10.18* Form of Stock Option Agreement under the 2019 Equity Compensation Plan. +
10.19* Form of Restricted Stock Agreement under the 2019 Equity Compensation Plan. +
10.20* Form of Restricted Stock Agreement (Israeli directors and officers) under the 2019 Equity
Compensation Plan. +
10.21 Consulting Agreement between Pluristem Ltd. and Rose High Tech Ltd. dated September 12,
2018 (incorporated by reference to Exhibit 10.20 of our annual report on Form 10-K filed on
September 12, 2018). +
10.22 Employment Agreement between Pluristem Ltd. and Yaky Yanay dated September 12, 2018
(incorporated by reference to Exhibit 10.20 of our annual report on Form 10-K filed on September
12, 2018). +
10.23 Employment Agreement between Pluristem Ltd. and Erez Egozi dated September 12, 2018
(incorporated by reference to Exhibit 10.20 of our annual report on Form 10-K filed on September
12, 2018). +
10.24 Employment Agreement between Pluristem Ltd. and Chen Franco-Yehuda dated September 12,
2018 (incorporated by reference to Exhibit 10.20 of our quarterly report on Form 10-Q filed on
May 6, 2019). +
10.25 Open Market Sales Agreement, dated February 6, 2019, between the Company and Jefferies LLC
(incorporated by reference to Exhibit 1.1 of our quarterly report on Form 10-Q filed on February
6, 2019).
21.1
List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 of our annual
report on Form 10-K filed on September 29, 2008).
23.1* Consent of Kost Forer Gabbay & Kasierer, A member of Ernst & Young Global.
31.1* Certification pursuant to Rule 13a-14(a)/15d-14(a) of Yaky Yanay.
31.2* Certification pursuant to Rule 13a-14(a)/15d-14(a) of Chen Franco-Yehuda.
32.1** Certification pursuant to 18 U.S.C. Section 1350 of Yaky Yanay.
32.2** Certification pursuant to 18 U.S.C. Section 1350 of Chen Franco-Yehuda.
72
101 * The following materials from our Annual Report on Form 10-K for the fiscal year ended June 30,
2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of
Comprehensive Loss, (iv) the Statements of Changes in Equity, (v) the Consolidated Statements of
Cash Flows, and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text
and in detail.
* Filed herewith.
** Furnished herewith.
+ Management contract or compensation plan.
Item 16. Form 10-K Summary.
None.
73
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pluristem Therapeutics Inc.
By: /s/ Yaky Yanay
Yaky Yanay, Chief Executive Officer and President
Dated: September 12, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Yaky Yanay
Yaky Yanay, Chief Executive Officer, President and Director
(Principal Executive Officer)
Dated: September 12, 2019
By: /s/ Chen Franco-Yehuda
Chen Franco-Yehuda, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Dated: September 12, 2019
By: /s/ Zami Aberman
Zami Aberman, Executive Chairman of the Board of Directors
Dated: September 12, 2019
By: /s/ Israel Ben-Yoram
Israel Ben-Yoram, Director
Dated: September 12, 2019
By: /s/ Isaac Braun
Isaac Braun, Director
Dated: September 12, 2019
By: /s/ Mark Germain
Mark Germain, Director
Dated: September 12, 2019
By: /s/ Moria Kwiat
Moria Kwiat, Director
Dated: September 12, 2019
By: /s/ Hava Meretzki
Hava Meretzki, Director
Dated: September 12, 2019
By: /s/ Nachum Rosman
Nachum Rosman, Director
Dated: September 12, 2019
By: /s/ Doron Shorrer
Doron Shorrer, Director
Dated: September 12, 2019
74
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form S-3 (Registration No.
333-218916) and in the Registration Statements on Form S-8 (Registration No. 333-229535, 333-222888,
333-217770, 333-212299, 333-206848, 333-196537, 333-173777 and 333-162577) pertaining to the
Amended and Restated 2005 Stock Option Plan and the 2016 Equity Compensation Plan of Pluristem
Therapeutics Inc. of our reports dated September 12, 2019, with respect to the consolidated financial
statements of Pluristem Therapeutics Inc., and the effectiveness of internal control over financial reporting
of Pluristem Therapeutics Inc., included in this Annual Report (Form 10-K) for the year ended June 30,
2019.
Haifa, Israel
September 12, 2019
/s/ Kost Forer Gabbay & Kasierer
Kost Forer Gabbay & Kasierer
A Member of Ernst & Young Global
CERTIFICATION
Exhibit 31.1
I, Yaky Yanay, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K for the year ended June 30, 2019, of Pluristem
Therapeutics Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Dated: September 12, 2019
/s/ Yaky Yanay
Yaky Yanay
Chief Executive Officer, President
(Principal Financial Officer)
76
CERTIFICATION
Exhibit 31.
2
I, Chen Franco-Yehuda, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K for the year ended June 30, 2019, of Pluristem
Therapeutics Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Dated: September 12, 2019
By: /s/ Chen Franco-Yehuda
——————————————
Chen Franco-Yehuda
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of Pluristem Therapeutics Inc. (the "Company") for the period
ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, as the Chief Executive Officer and President of the Company, hereby certifies pursuant to 18 U.S.C.
Section 1350 that, to my knowledge:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
result of operations of the Company.
Dated: September 12, 2019
/s/ Yaky Yanay
Yaky Yanay
Chief Executive Officer, President
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
Exhibit 32.
2
In connection with the Annual Report on Form 10-K of Pluristem Therapeutics Inc. (the "Company") for the period
ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350
that, to my knowledge:
1.
2.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: September 12, 2019
By: /s/ Chen Franco-Yehuda
——————————————
Chen Franco-Yehuda
Chief Financial Officer
CORPORATE INFORMATION
Executive Officers
Corporate Address
Zami Aberman
Executive Chairman of the Board
Yaky Yanay
Chief Executive Officer and President
Chen Franco-Yehuda
Chief Financial Officer, Treasurer and Secretary
Directors
Zami Aberman
Executive chairman of the Board
Yaky Yanay
Chief Executive Officer and President
Israel Ben-Yoram
Partner at Mor, Ben-Yoram and Partners
accounting firm
Isaac Braun
Active in several hi-tech start-up companies as
investor, co-founder and director
Mark Germain
Active in several biotech companies as investor,
founder, director and/or chairman of the board
Moria Kwiat
Analyst at a venture capital fund, holds Ph.D. in
Chemistry and Biotechnology from Tel Aviv
University
Hava Meretzki
Partner at Meretzki Law Firm
Nachum Rosman
Active in several hi-tech start-up companies as
director
Doron Shorrer
Active in several financial companies as a
consultant and director
Matam Advanced Technology Park
Building No. 5, Haifa 3508409
Israel
Independent Auditors
Kost Forer Gabbay & Kasierer,
A Member of Ernst & Young Global
Tel Aviv, Israel
Counsel
Zysman, Aharoni, Gayer & Sullivan &
Worcester LLP
1633 Broadway, 32nd Floor
New York, New York 10019
U.S.A.
Transfer Agent
American Stock Transfer & Trust Company
6201 15th Avenue
2nd Floor
Brooklyn, NY 11219
U.S.A.
Stock Market Information
Pluristem’s shares of common stock are traded
on the Nasdaq Capital Market under the
symbol ‘PSTI’, and on the Tel Aviv Stock
Exchange under the symbol ‘PLTR’.
Annual Meeting
The Annual Meeting of Stockholders will be
held at 4:00 p.m., local time, on June 29,
2020, at Pluristem’s offices in Haifa, Israel.
Annual Report on Form 10-K
Pluristem’s Annual Report on Form 10-K
(without exhibits) is available free of charge by
writing to Pluristem at the address set forth
above. You can also obtain a copy of the filing
by going to the following website:
http://www.sec.gov.
Website
http://www.pluristem.com
Matam Park, Building #5, Haifa, 3508409, Israel | Tel: +972-74-7108600 | Fax: +972-74-7108765
www.pluristem.com info@pluristem.com