Item 7. Management’s Discussion and Analysis
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the
notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed
in any forward-looking statement because of various factors, including those described in the sections titled “Cautionary Note
Regarding Forward-Looking Statements” and “Risk Factors” in this Annual Report.
We are a biotechnology company,
leveraging our proprietary cell expansion platform to develop scalable, cell-based solutions across the healthcare, food, and agriculture
sectors. Through a collaborative network of ventures, the Company is advancing a diverse pipeline of products and services, including
cultivated food, regenerative medicine, and cell-based ingredients. We have developed a unique 3D, technology platform for cell expansion
with an industrial-scale cell manufacturing facility operated in accordance with GMP standards, currently on a self-declared basis. We
are utilizing our technology across the field of regenerative medicine, immunotherapy, food tech, CDMO, and AgTech, and plan to utilize
it in industries and verticals that have a need for our mass scale and cost-effective cell expansion platform via partnerships, joint
ventures, licensing agreements and other types of collaborations.
Our operations are dedicated
to the research, development, and manufacturing of cell-based products, as well as the commercialization of cell therapeutics and related
technologies aimed at delivering innovative solutions across a range of industries, as described in detail under Item 1. “Business”
and as set forth below:
Cell Therapy
We use our advanced cell-based
technology platform in the field of regenerative medicine to develop placenta-based cell therapy product candidates for the treatment
of inflammatory, muscle injuries, hematologic conditions and, most recently, we have also launched a novel immunotherapy platform.
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PLX cells
In July 2023, we announced
that we signed a three-year $4.2 million contract with the NIAID, under which we were to collaborate with the AFRRI and the USUHS, in
Maryland, U.S.A., to further advance the development of our PLX-R18 cell therapy as a potential novel treatment for H-ARS, a deadly disease
that can result from nuclear disasters and radiation exposure. On April 15, 2025, we received formal notice from NIAID that the contract
was being terminated for the Government’s convenience, effective immediately. The termination was not related to any performance
issues on our part, and we received funding for activities conducted up to the effective date. As of the date of this Annual Report,
we received a total of $2.3 million under the contract.
In March 2025, we announced
that we entered into an exclusive collaboration agreement with Hemafund, aiming to establish a strategic initiative for stockpiling,
local distribution, and potential clinical advancement of our PLX-R18 cell therapy as a countermeasure for H-ARS, in Ukraine. The collaboration
aims to build capacity for up to 12,000 doses of PLX-R18, which will be stored and managed by Hemafund to ensure rapid deployment in
the event of a radiation-related emergency. The parties also intend to pursue external funding to support manufacturing, stockpiling,
and potential clinical trials of PLX-R18 for regulatory registration in Ukraine. If successful, the collaboration could potentially generate
over $100 million in value for the parties, based on projected demand and dose estimates.
Immunotherapy MAIT cells:
In May 2024, we launched a novel immunotherapy platform utilizing MAIT cells specifically designed to address solid tumors.
In April 2024, we unveiled
a novel method for expansion of immune cells using proprietary technology and announced we were granted a new U.S. patent titled, “System
and Methods for Immune Cells Expansion and Activation in Large Scale.”
In October 2024, we announced
that the IIA approved funding for our collaboration with BIRAD, the commercial arm of Bar-Ilan University, to support the continued development
of placental-derived MAIT cells for the treatment of solid tumors. As part of this collaboration, novel Siglec-based Chimeric Switch
Receptors (“CCR”), developed by Professor Cyrille Cohen, Head of the laboratory of tumor immunology and immunotherapy at
Bar-Ilan University, will be integrated into our CAR-MAIT cell therapy platform to enhance tumor specificity and therapeutic efficacy.
The collaboration leverages our proprietary MAIT cell technology alongside BIRAD’s expertise in engineering clinically optimized
T-cell modification vectors. The IIA has committed to fund the collaboration for an initial term of one year, with an option to extend
for an additional year, subject to IIA approval. The total approved budget for the first year is NIS 549,067 (approximately $163,000).
As of the date of this Annual Report, we have received approximately $29,000 from the IIA for this project.
In April 2025, we announced
that the USPTO has issued a patent covering our immune cell expansion technologies. Additionally, we announced that we were issued a
patent in Israel, which mirrors a previously granted U.S. patent. Following these recent patent grants, our intellectual property
estate includes over 250 patents pending, allowed, and granted.
PluriCDMO™
In January 2024, we
announced that we are launching a new business division offering cell therapy manufacturing services as a CDMO: PluriCDMO™, as
well as other services. We have signed several agreements with clients and generating revenues from PluriCDMO™.
AgTech
We are actively involved
in several initiatives leveraged by Pluri’s 3D cell expansion in the AgTech field, which include:
(a) an innovative POC collaboration
with ICL, a leading global specialty minerals company, through its Open Innovation program, to revolutionize bio stimulant delivery and
enhance yield sustainably; and
(b) a strategic POC agreement
with a leading international agriculture corporation aimed at boosting the global vegetable product supply, streamlining supply chains,
and promoting a more sustainable future for agriculture.
(c) the development of cell-cultured
coffee and cacao through business activities operated via our subsidiaries, Coffeesai and Kokomodo, respectively:
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Coffeesai
In 2024, we established Coffeesai
Ltd., an Israeli company focused on developing cultivated, cell-cultured coffee.
Coffeesai has successfully
demonstrated a proof-of-concept coffee beverage, validating the potential of its technology. Ongoing efforts are focused on enhancing
flavor and aroma profiles through bioprocess optimization and downstream refinement. In parallel, Coffeesai is exploring research and
development collaborations aimed at accelerating development and commercialization with leading global coffee suppliers. A third-party
techno-economic assessment has confirmed the cost-competitiveness of the platform at scale, supporting its commercial viability.
Kokomodo
On January 23, 2025, the
Company entered into a binding term sheet (“Term Sheet”) for the purchase of certain shares representing approximately 79%
of the equity of Kokomodo, for an aggregate purchase price of $4.5 million, payable in common shares of the Company. Following the execution
of the Term Sheet, on March 13, 2025, the Company and our wholly owned subsidiary, Pluri Biotech, (collectively, the “Purchaser”),
entered into a Share Purchase Agreement (the “Share Purchase Agreement”), effective as of March 12, 2025, with Chutzpah Holdings
Limited (“Chutzpah”), a company wholly owned by Mr. Alejandro Weinstein, and Plantae Bioscience Ltd. (“Plantae”),
a corporation controlled by Mr. Weinstein (collectively, the “Seller”), pursuant to which, on April 28, 2025, the Seller
sold to the Purchaser 400,000 ordinary shares and 175,000 preferred seed-1 shares (the “Purchased Shares”), representing
approximately 79% of the equity of Kokomodo, for an aggregate purchase price of $4.5 million, payable in 976,139 of our common shares
(the “Consideration Shares”). Pursuant to the Share Purchase Agreement, the Seller also transferred, assigned and conveyed
in favor of the Purchaser a convertible loan, pursuant to an assignment and assumption agreement (the “Assignment Agreement”),
reflecting a principal aggregate amount of $0.5 million (together with the Purchased Shares, the “Purchased Interests” and
such transactions are referred to as the “Kokomodo Transaction”).
Kokomodo is an innovative
startup, pioneering the sustainable production of cacao using cellular agriculture technology. Instead of relying on traditional tropical
farming, Kokomodo cultivates real cacao directly from plant cells in controlled environments, such as bioreactors, making climate-resilient
cacao accessible year-round on a global scale. Founded in 2024, Kokomodo aims to transform the cacao industry, reducing environmental
impact while ensuring a steady, high-quality supply for chocolate and related products.
In March 2024, we announced
an important expansion to our IP portfolio with a new patent approval from the IPO, that is designed to reshape the agricultural technology
landscape and represents a major breakthrough in our proprietary 3D bioreactor technology, enabling efficient cultivation of plant cells
across various applications, from sustainable agriculture to critical healthcare solutions.
Food Tech
In 2022, we announced the
establishment of a joint venture with Tnuva - Ever After Foods, with a purpose to develop and commercialize scalable production technologies
for cultivated meat, supporting the development of a wide range of cultivated meat products by industry partners.
In June 2024, we entered
into the Agreement, by and among Ever After Foods, Tnuva, and certain other international investors, pursuant to which Ever After Foods
issued and sold ordinary shares in a private placement offering, or the Offering, for aggregate gross proceeds of $10 million. As part
of the Offering, we invested $1.25 million. In addition, our wholly owned subsidiary, Pluri Biotech, and Ever After Foods executed the Amended
and Restated Technology License Agreement, expanding the scope of the license to include fish and seafood.
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The $10 million funding round
was intended to support Ever After Foods’ B2B technology platform, positioning it as a sustainable technology enabler. Following
the closing of the Offering, our wholly owned subsidiary, Pluri Biotech, holds approximately 69% of Ever After Foods.
In February 2025, Ever After
Foods announced a strategic collaboration with Bühler, to jointly advance scalable cultivated meat production systems specifically
designed for the food industry. The parties intend to develop and deploy manufacturing equipment that enables food producers to efficiently
produce cultivated meat at significantly reduced costs and at volumes suitable for market entry.
RESULTS OF OPERATIONS – YEAR ENDED JUNE 30, 2025 COMPARED
TO YEAR ENDED JUNE 30, 2024
Revenues
Revenues for the year ended
June 30, 2025 were $1,336,000, compared to $326,000 for the year ended June 30, 2024. The revenues for the years ended June 30, 2025
and 2024, were primarily generated from services provided to CDMO clients for process and product development, as well as income from
fees in the AgTech sector. The increase in revenues is mainly attributed to higher services provided to CDMO clients and additional revenues
from POC collaboration in the AgTech field.
Cost of Revenues
Cost
of revenues for the year ended June 30, 2025 were $682,000, compared to $4,000 for the year ended June 30, 2024. Cost of revenues for
the year ended June 30, 2025 includes manufacturing costs related to our CDMO and AgTech fields, which primary consist of materials,
personnel-related and overhead costs. Cost of revenues for the year ended June 30, 2024, includes royalties which we are obligated to
pay to the IIA.
Research and Development, Net
Research and development,
net (costs less participation by the IIA, Horizon Europe and the NIAID) increased by 3% from $12,446,000 for the year ended June 30,
2024, to $12,851,000 for the year ended June 30, 2025. The increase is mainly attributed to (1) an increase related to subcontractors
in immunotherapy and AgTech projects and an increase due to write off provisions in clinical studies following its completion, partially
offset by (2) a decrease in materials costs related to a supplier credit and a decrease due to material purchases in line with our manufacturing
needs and plans, (3) a decrease in participation by NIAID, and (4) a decrease in R&D expenses due to classification of expenses into
cost of revenues.
General and Administrative
General and administrative
expenses decreased by 0.5% from $10,034,000 for the year ended June 30, 2024, to $9,979,000 for the year ended June 30, 2025. This decrease
was primarily driven by a reduction in share-based compensation expenses, mainly attributed to employee terminations and amortization
of restricted stock units (“RSUs”) expenses over time. This reduction was partially offset by: (1) an increase in salaries
and related expenses due to the reinstatement of the salary of Mr. Yaky Yanay, our CEO (following his salary reduction from January 2023
through December 2023, whereby he waived 75% of his salary and converted it to RSUs, and options), (2) an increase in salaries and related
expenses due to reinstatement of temporary reduction in employees’ regular working hours for a limited period in December 2023,
(3) an increase in bonus expenses for certain employees, including our CEO and Mrs. Chen Franco-Yehuda, our former Chief Financial Officer
(“CFO”), related to performance-based bonuses pursuant to their respective employment agreements, and (4) increased share-based
compensation expenses related to RSUs and options granted during the prior year to employees, officers, directors and consultants.
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Financial Income (expenses), Net
Financial income (expenses),
net, decreased from $1,680,000 in financial income for the year ended 2024 to $206,000 in financial expenses for the year ended June
30, 2025. This decrease is mainly attributed to (1) exchange rate differences expenses related to the EIB Loan pursuant to the EIB Finance
Agreement, following fluctuation between the U.S. dollar against the Euro, (2) a decrease in interest income from deposits, resulting
from lower interest rates and reduced deposit levels due to withdrawals, and (3) a decrease due to exchange rate expenses on a lease
liability due to the strength of the NIS against the U.S Dollar, partially offset by (4) an increase in income from hedging transactions,
and (5) an increase in income from change in fair value of warrant and pre-funded warrant liabilities. Our primary expenses paid in NIS
are employee salaries, and lease payments on our facilities. From time to time, we may apply a hedging strategy by using options and
forward contracts to protect ourselves against some of the risks of currency exchange fluctuations and we are actively monitoring the
exchange rate differences of the NIS, Euro and U.S. Dollar.
Interest Expenses
Interest
expenses related to our outstanding balance of the EIB Loan and all changes during the year ended June 30, 2025, compared to the year
ended June 30, 2024, are attributable solely to currency rate differences of the Euro compared to the U.S. dollar.
Net Loss for the Year
Net loss increased from $21,344,000
for the year ended June 30, 2024, to $23,250,000 for the year ended June 30, 2025. The increase in net loss was mainly due to exchange
rate differences expenses as mentioned above. We had a net loss attributed to our non-controlling interest in Ever After Foods for the
year ended June 30, 2024 of $456,000, and $667,000 for the year ended June 30, 2025 with respect to Ever After Foods and Kokomodo.
Loss per share for the year
ended June 30, 2025, was $3.56, compared to $3.99 loss per share for the year ended June 30, 2024. The change in the loss per share was
primarily due to an increase in the loss for the year, as well as an increase in our weighted average number of shares outstanding resulting
from the issuance of additional shares due to the Offering (as defined below), the Second Offering (as defined below) and the investment
in Kokomodo during fiscal year 2025.
Liquidity and Capital Resources
As of June 30, 2025, our
total current assets were $22,095,000 and our total current liabilities were $32,328,000. On June 30, 2025, we had a working capital
deficit of $10,233,000 and an accumulated deficit of $443,055,000.
As of June 30, 2024, our
total current assets were $31,107,000 and our total current liabilities were $4,454,000. On June 30, 2024, we had a working capital surplus
of $26,653,000 and an accumulated deficit of $420,472,000.
Our cash, cash equivalents
and restricted cash as of June 30, 2025, amounted to $6,317,000, which reflects a decrease of $720,000 from the $7,037,000 reported as
of June 30, 2024. Our cash equivalents and restricted cash decreased in the year ended June 30, 2025. Our bank deposits and restricted
bank deposits as of June 30, 2025, amounted to $15,597,000 compared to $23,836,000 as of June 30, 2024. Our bank deposits and restricted
bank deposits as of June 30, 2025 decreased for the year ended June 30, 2025. The cash, cash equivalents, restricted cash, bank deposits
and restricted bank deposits decreased for the reasons presented below.
Cash used in operating activities
increased to $18,211,000 for the year ended June 30, 2025, from $18,021,000 in the prior year, primarily due to a reduction in grants
received from the IIA, Horizon Europe, and NIAID contract funding, effect of exchange rate, continued payments to suppliers, subcontractors,
professional service providers, and employees, partially offset by an increase in customer receivable and in income from hedging transactions.
Cash provided by investing
activities was $8,026,000 during the year ended June 30, 2025, and cash provided by investing activities during the year ended June 30,
2024 was $10,584,000. Cash provided by investing activities in the year ended June 30, 2025 consisted primarily of the withdrawal of
$9,271,000 of short-term deposits, net and cash related to the Kokomodo Transaction of $373, partially offset by payments of $1,618,000
related to investments in property and equipment. Cash provided by investing activities in the year ended June 30, 2024 consisted primarily
of the withdrawal of $10,907,000 of short-term deposits, partially offset by payments of $323,000 related to investments in property
and equipment.
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Financing activities provided
cash in the amount of $9,533,000 during the year ended June 30, 2025, and $8,841,000 during the year ended June 30, 2024. The financing
activities during the year ended June 30, 2025 related primarily to net proceeds received from the Offering (as defined below) and
the Second Offering (as defined below). The financing activities during the year ended June 30, 2024 related primarily to the investment
in Ever After Foods by external investors.
On December 14, 2022,
Mr. Yanay, our CEO, agreed to forgo, starting January 1, 2023, $375,000 of his annual cash salary for the next twelve months in return
for equity grants issuable under our existing equity compensation plans. In that regard, we granted Mr. Yanay (i) 41,853 RSUs, vesting
ratably each month, and (ii) options to purchase 41,853 common shares, vesting ratably each month, with a term of 3 years, at an exercise
price of $8.96 per share. In addition, the Board agreed to grant Mr. Yanay options to purchase 187,500 common shares, with a term of
3 years, with the following terms: (i) options to purchase 62,500 common shares at an exercise price of $12.48 per share, 50% vested
on June 30, 2023 and 50% vested on December 31, 2023, (ii) options to purchase 62,500 common shares at an exercise price of $16.64 per
share, 50% vested on June 30, 2023 and 50% vested on December 31, 2023, and (iii) options to purchase 62,500 common shares at an exercise
price of $20.8 per share, 50% vested on June 30, 2023 and 50% vested on December 31, 2023. All options that were granted in January 2023
will expire on April 27, 2026.
In July 2025, Mr. Yanay agreed
to forgo 25% percent of his monthly cash salary for a period of six months commencing July 2025.
On February 13, 2024, we
entered into a sales agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P”), as agent,
pursuant to which we may issue and sell our common shares having an aggregate offering price of up to $10 million, from time to time
through A.G.P. As of September 17, 2025, we have sold an aggregate of 42,729 common shares pursuant to the Sales Agreement at an average
price of $5.93 per share.
We have an effective Form
S-3 registration statement (File No. 333-273347), filed under the Securities Act of 1933, as amended, with the SEC using a “shelf”
registration process. Under this shelf registration process, we may, from time to time, sell our common shares, preferred stock and warrants
to purchase common shares, and of two or more of such securities, in one or more offerings for an aggregate initial offering price of
$200 million (including amounts sold under the Sales Agreement).
In April 2020, we and our
subsidiaries, Pluri Biotech and Pluristem GmbH, executed the EIB Finance Agreement for non-dilutive funding of up to €50 million
in the aggregate, payable in three tranches. The proceeds from the EIB Finance Agreement were intended to support our R&D in the
European Union to further advance our regenerative cell therapy platform, and to bring the products in our pipeline to market. The initial
funding period under the EIB Finance Agreement was three years commencing on January 1, 2020.
During June 2021, we received
the first tranche in the amount of €20 million pursuant to the EIB Finance Agreement. The amount received is due to be repaid on
June 1, 2026, and bears annual interest of 4% to be paid together with the principal of the loan. We are currently in advanced discussions
with the EIB regarding a potential restructuring of the EIB Loan terms, which are currently focused on the new terms of the EIB Loan,
including an extension of the current maturity date of the EIB Loan. However, there is no certainty as to the outcome of these discussions.
As of June 30, 2025, the interest accrued was in the amount of approximately €3.27 million. In addition to the interest payable,
the EIB is also entitled to royalty payments, pro-rated to the amount disbursed from the EIB Loan, on our consolidated revenues beginning
in the fiscal year 2024 up to and including its fiscal year 2030, in an amount equal to up to 2.3% of our consolidated revenues below
$350 million, 1.2% of our consolidated revenues between $350 million and $500 million and 0.2% of our consolidated revenues exceeding
$500 million. As of June 30, 2025, we had an accrued royalty in the amount of $12 thousand. Since the initial funding period under the
EIB Finance Agreement ended on December 31, 2022, we do not expect to receive additional funds pursuant to the EIB Finance Agreement.
44
On
January 23, 2025, we entered into the Securities Purchase Agreement with a company wholly owned by Mr. Alexandre Weinstein (the “Investor”)
relating to a private placement offering (the “Offering”) of: (i) 1,383,948 of our common shares, par value $0.00001 per
share, (ii) pre-funded warrants (the “Pre-Funded Warrants”), to purchase up to 26,030 common shares, and (iii) warrants (the
“Common Warrants”), to purchase up to 84,599 common shares. On April 25, 2025, we entered into an amendment to the Securities
Purchase Agreement, pursuant to which we and the Investor agreed to exchange 976,139 of the common shares for additional Pre-Funded Warrants
to purchase up to 976,139 common shares. The Offering price per share and accompanying warrant was $4.61. The Pre-Funded Warrants have
an exercise price of $0.0001 per share, are exercisable at any time following the receipt of certain approvals from our shareholders,
which is required by the applicable rules of the Nasdaq Capital Market, and until exercised in full. The Common Warrants have an exercise
price of $5.568 per share, are exercisable following the receipt of approval from our shareholders, and will be exercisable for three
years following the date of receipt of such approval. Such approval for the exercise of Pre-Funded Warrants and Common Warrants was sought
and obtained at our 2025 Annual Meeting on June 30, 2025. The Pre-Funded Warrants and Common Warrants contain customary anti-dilution
provisions and were subject to a 19.99% beneficial ownership limitation until the approval from our shareholders was obtained. The Securities
Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investor and customary indemnification
rights and obligations of the parties.
Pursuant
to the terms of the Securities Purchase Agreement, we appointed Mr. Weinstein to our Board, effective February 5, 2025, and agreed to
recommend his election to our shareholders provided that he continues to hold at least 10% of our issued and outstanding common shares.
The
gross proceeds from the Offering were $6.5 million and we intend to use the proceeds from the Offering for working capital and general
corporate purposes. The Offering closed on February 5, 2025, following the satisfaction of customary closing conditions.
On
March 13, 2025, we entered into a Share Purchase Agreement effective as of March 12, 2025 (the “Share Purchase Agreement”),
with Chutzpah, a company wholly owned by Mr. Alexandre Weinstein, and Plantae, a corporation controlled by Mr. Weinstein (collectively,
the “Seller”), pursuant to the terms of a term sheet entered into on January 23, 2025.Pursuant to the Share Purchase Agreement,
on April 28, 2025, the Seller (i) sold to us 400,000 ordinary shares and 175,000 preferred seed-1 shares, representing approximately
79% of the equity of Kokomodo. (the “Purchased Interest”), and (ii) transferred, assigned and conveyed in favor of the Purchaser
a convertible loan, pursuant to the Assignment Agreement, reflecting a principal aggregate amount of $0.5 million.
In
consideration of the sale, transfer and conveyance of the Purchased Interest, we paid the Seller an aggregate purchase price of $4.5
million, which was paid in 976,139 of our common shares.
On
April 28, 2025, we completed the Kokomodo Transaction. Kokomodo continues to operate as an independent company and is majority-owned
by our wholly owned subsidiary, Pluri Biotech.
On
February 3, 2025, we entered into an additional Securities Purchase Agreement, with Merchant Adventure Fund L.P., an existing investor
of the Company, relating to a private placement offering, (the “Second Offering”), of: (i) 759,219 of our common shares,
par value $0.00001 per share, and (ii) warrants, to purchase up to 45,553 common shares. The Second Offering price per share and accompanying
warrant is $4.61. The Second Offering warrants have an exercise price of $5.568 per share and a term of three years commencing on the
date of issuance. On March 19, 2025, the Second Offering closed, and the Company received gross proceeds in the amount of $3.5 million,
which it intends to use for working capital and general corporate purposes.
Non-dilutive grants
Israel Innovation Authority
(IIA)
According to the IIA grant
terms, we are required to pay royalties at a rate of 3% on sales of products and services derived from technology developed using this
and other IIA grants until 100% of the dollar-linked grants amount plus interest are repaid. In the absence of such sales, no payment
is required. Through June 30, 2025, total grants obtained from the IIA aggregated to approximately $28.2 million and total royalties
paid and accrued amounted to $179 thousand.
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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
In June 2020, we announced
that we were selected as a member of the CRISPR-IL consortium, a group funded by the IIA. CRISPR-IL brings together the leading experts
in life science and computer science from academia, medicine, and industry, to develop AI based end-to-end genome-editing solutions.
These next-generation, multi-species genome editing products for human, plant, and animal DNA, have applications in the pharmaceutical,
agriculture, and aquaculture industries. CRISPR-IL is funded by the IIA with a total budget of approximately $10 million of which, an
amount of approximately $480 thousand was a direct grant allocated to us, for the initial period of 18 months. During October 2021, we
received approval for an additional grant of approximately $583 thousand from the IIA pursuant to the CRISPR-IL consortium program, for
an additional period of eighteen months. During January 2023, we received approval for an extension of an additional 2 months to finish
the program until June 30, 2023. The CRISPR-IL consortium program does not include any obligation to pay royalties.
Through June 30, 2025, we received total grants
of approximately $1 million in cash from the IIA pursuant to the CRISPR-IL consortium program, and we do not expect to receive any additional
funds.
On October 28, 2024, we announced
that the IIA will fund our collaboration with the BIRAD, to support the continued development of MAIT cells for the treatment of solid
tumors. As part of this collaboration, novel CCR, developed by Prof. Cohen, will be integrated into our CAR-MAIT cell therapy platform
to enhance tumor specificity and therapeutic efficacy. The collaboration leverages our proprietary MAIT cell technology alongside BIRAD’s
expertise in engineering clinically optimized T-cell modification vectors. The IIA has committed to fund the collaboration for an initial
term of one year, with an option to extend for an additional year, subject to IIA approval. The total approved budget for the first year
is NIS 549,067 (approximately $163,000).
EU grants – Horizon 2020 and Horizon
Europe
On
September 6, 2022, we announced that a €7.5 million non-dilutive grant from the European Union’s Horizon program was awarded
to the PROTO, an international collaboration led by Charité. The goal of the PROTO project is to utilize our PLX-PAD cells in
a Phase I/II study for the treatment of mild to moderate knee osteoarthritis.
An
amount of approximately €500,000 (approximately $540,000) is a direct grant that will be allocated to us. As of the date of this
Annual Report, we have received a payment of approximately $330,000 in cash as part of the PROTO program.
In June 2025, the clinical
study was approved by the PEI. The study is conducted at Charité together with an international consortium and under the leadership
of Professor Tobias Winkler, Principal Investigator, at the Berlin Institute of Health Center of Regenerative Therapies, Julius Wolff
Institute and Center for Musculoskeletal Surgery.
Outlook
We have accumulated a deficit
of $443,055,000 since our inception in May 2001. We do not anticipate generating significant revenues from sales of products in the next
twelve months. While we have made meaningful progress in reducing our burn rate in recent years, it is unlikely that near-term revenues
will exceed our operating costs. We may need to secure additional sources of liquidity to support the commercialization of our products
and technologies, as well as to sustain our ongoing R&D activities.
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As of June 30, 2025, our
cash balances (cash and cash equivalents, short-term bank deposits, restricted cash and restricted bank deposits) totaled to $21,914,000.
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,
which includes a cost-reduction plan should it be unable to raise sufficient additional capital.
Our ability to successfully
carry out our business plan, is primarily dependent upon our ability to (1) obtain sufficient additional capital, (2) enter licensing
or other commercial, partnerships and collaboration agreements, (3) provide CDMO services to clients, (4) finalize discussions with the
EIB regarding loan restructuring and (5) receive other sources of funding, including non-diluting sources such as 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, or any financing at all. In the event that we unable to obtain the required level of financing, our
operations may need to be scaled down or discontinued.
According to management estimates,
we do not have sufficient resources to meet our operating obligations for at least twelve months from the issuance date of our consolidated
financial statements, which was September 17, 2025. These conditions raise substantial doubt about our ability to continue as a going
concern.
Application of Critical Accounting Policies and Estimates
Our accounting policies are
more fully described in Note 2 to our consolidated financial statements appearing in this Annual Report. We believe that the accounting
policy below is 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.
GAAP. 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. We evaluate such estimates and judgments
on an ongoing basis, 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.
Share-Based Compensation
Share-based compensation
is considered a critical accounting policy because of the significant expenses of RSUs which were granted to our employees,
directors and consultants. In fiscal year 2025, we recorded share-based compensation expenses related to options, restricted shares
(“RS”) and RSUs in the amount of $2,143,000.
In accordance with ASC 718,
RSUs granted to employees and directors are measured at their fair value on the grant date. All RSUs granted in fiscal years 2025 and
2024 were granted for no consideration. Therefore, their fair value was equal to the share price at the date of grant. The RSUs and RS
granted in fiscal year 2025 to non-employee consultants were measured at their fair value on the grant date in accordance with ASU No.
2018-07 - “Compensation Share Compensation”.
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 16% for the shares granted to employees and 0% for the shares granted to our directors and officers and non-employee consultants.
Business Combination
We allocate the fair value
of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated
fair value. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities
is recorded as goodwill. Such valuations require our management to make significant estimates and assumptions, especially with respect
to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash
flows from acquired technology and other intangible assets, their useful lives and discount rates. Our management’s estimates of
fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result,
actual results may differ from estimates. During the measurement period, which should not exceed one year from the acquisition date, we
may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion
of the measurement period, any subsequent adjustments are recorded to earnings.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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