424B4 1 zk2125762.htm 424B4


Filed Pursuant to Rule 424(b)(4)​
  Registration No. 333-253257

2,427,185 American Depositary Shares

 
 
MeaTech 3D Ltd.
Representing 24,271,850 Ordinary Shares
 
This is our initial public offering of American Depositary Shares, or ADSs. We are offering 2,427,185 ADSs. Each ADS represents 10 ordinary shares, no par value.
 
Our ordinary shares are listed on the Tel Aviv Stock Exchange Ltd., or the TASE, under the symbol “MEAT.” The last reported sale price of our ordinary shares on the TASE on March 14, 2021 was NIS 3.76, or $1.13, per share (based on the exchange rate reported by the Bank of Israel on March 12, 2021, which was NIS 3.316 = $1.00).
 
Our ADSs have been approved for listing on the Nasdaq Capital Market under the symbol “MITC.”
 
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, are eligible for reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer” for additional information.
 
Investing in the ADSs involves a high degree of risk. See “Risk Factors” beginning on page 16 of this prospectus for a discussion of information that should be considered in connection with an investment in our ADSs.
 
   
Per ADS
   
Total
 
Initial public offering price          
 
$
10.30
   
$
25,000,005
 
Underwriting discounts and commissions(1)          
 
$
0.721
   
$
1,750,000
 
Proceeds to us (before expenses)          
 
$
9.579
   
$
23,250,005
 

(1) See “Underwriting” for a description of the compensation payable to the underwriters.
 
None of the Securities and Exchange Commission, the Israel Securities Authority or any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
We have granted the underwriters an option for a period of 30 days after the date of this prospectus to purchase up to 364,077 additional ADSs at the initial public offering price, less underwriting discounts and commissions.
 
The underwriters expect to deliver the ADSs to purchasers in the ADS offering on or about March 16, 2021 through the book-entry facilities of The Depository Trust Company.
 
Sole Book-Running Manager
 
H.C. Wainwright & Co.
 
Prospectus dated March 12, 2021.  



Table of Contents
 


We have not, and the underwriters have not, authorized anyone to provide you with different or additional information from that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. We take no responsibility for, and can provide no assurance as to the reliability of, any information that others may give. Neither the delivery of this prospectus nor the sale of the ADSs means that information contained in this prospectus is correct after the date of this prospectus.
 
Until and including April 6, 2021, 25 days after the date of this prospectus, all dealers that buy, sell or trade the ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.
 
For investors outside of the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
 
We are incorporated under Israeli law and under the rules of the U.S. Securities and Exchange Commission, or the SEC, we are currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act. We will also be exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders will be exempt from the reporting and ‘‘short-swing’’ profit recovery provisions under Section 16 of the Exchange Act.


OUR HISTORY

We were incorporated in May 2018 in Israel as DocoMed Ltd., and in July 2019, changed our name to MeaTech Ltd., or MeaTech. On January 26, 2020, MeaTech completed a merger with Ophectra Real Estate and Investments Ltd., or Ophectra, a company incorporated in Israel whose shares were traded on the TASE, whereupon the name of Ophectra was changed to Meat-Tech 3D Ltd., and further changed to MeaTech 3D Ltd., or MeaTech 3D, in February 2021. Our shares are traded on the TASE under the symbol MEAT.

Upon completion of the merger in January 2020, all directors and officers of MeaTech became directors and officers of what is now called MeaTech 3D, in addition to some of the incumbent directors of Ophectra. For more information, see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Merger” herein. In September 2020, the name of MeaTech Ltd., now a fully-owned subsidiary of the TASE-listed parent company, was changed to Chicken Meat-Tech Ltd., and further changed to MeaTech MT Ltd. in February 2021. In February 2021, we completed a purchase of Peace of Meat BV, or Peace of Meat, a Belgian developer of cultured avian fat, which became a fully-owned indirect subsidiary of ours, through our fully-owned subsidiary MeaTech Europe BV.

For purposes of this Registration Statement on Form F-1, “Company”, “MeaTech”, “we” or “our” refers to MeaTech MT Ltd. (formerly MeaTech Ltd.) from its inception until the consummation of the January 2020 merger described herein, and MeaTech 3D Ltd. thereafter, unless otherwise required by the context.

INDUSTRY AND MARKET DATA
 
This prospectus includes statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Although we are responsible for all of the disclosures contained in this prospectus, including such statistical, market and industry data, we have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. In addition, while we believe the market opportunity information included in this prospectus is generally reliable and is based on reasonable assumptions, such data involves risks and uncertainties, including those discussed under the heading “Risk Factors.”

PRESENTATION OF FINANCIAL INFORMATION
 
The term “NIS” refers to New Israeli Shekels, the lawful currency of the State of Israel, the terms “dollar” or “$” refer to U.S. dollars, the lawful currency of the United States, and the terms “Euro” or “€” refer to the Euro, the lawful currency of the euro area. Unless derived from our consolidated financial statements or otherwise indicated, U.S. dollar translations of NIS amounts presented in this prospectus are translated using the rate of NIS 3.299 to $1.00, based on the representative exchange rate reported by the Bank of Israel on March 2, 2021. We report under International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. None of the financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.
 
On January 26, 2020, MeaTech 3D, (then called Ophectra), merged with MeaTech. In connection with the merger, MeaTech's shareholders transferred 100% of the MeaTech’s share capital to MeaTech 3D, and in return MeaTech 3D allotted such shareholders 60% of its issued and paid-up share capital. In addition, MeaTech's shareholders were allotted warrants exercisable for up to 8% of the share capital of MeaTech 3D at no exercise price, in accordance with the terms of exercise and subject to compliance with agreed development milestones. At the closing of the merger, MeaTech directors and officers were appointed to equivalent positions in MeaTech 3D.
 
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Although MeaTech 3D is the legal acquirer of MeaTech’s shares as described above, because (i) the shareholders of MeaTech received the majority of the voting rights in MeaTech 3D and the ability to determine its financial and operational policy, (ii) the management of MeaTech continues to serve as the management of MeaTech 3D and (iii) at the time of completion of the merger, MeaTech 3D was a company without significant business operations, the merger is not considered a business acquisition as defined in IFRS 3. As a result, it was determined that MeaTech is the acquirer of the business for accounting purposes and the transaction was treated as a reverse acquisition that does not constitute a business combination.
 
Therefore, our consolidated financial statements and financial data included herein for all periods through and including December 31, 2019 were adjusted retroactively to reflect the financial statements of MeaTech (now called MeaTech MT Ltd.), other than the information concerning earnings per share, which is presented according to the equity information of MeaTech 3D (then called Ophectra and later Meat-Tech 3D Ltd., before taking the name MeaTech 3D Ltd. in February 2021), and our consolidated financial statements and financial data included herein from January 1, 2020 onward relate to MeaTech 3D. These financial statements bear the company name of Meat-Tech 3D Ltd., which was our legal name at the time of their approval by our board of directors.
 
Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
 
TRADEMARKS AND TRADENAMES
 
We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.
 
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PROSPECTUS SUMMARY
 
This summary does not contain all of the information you should consider before investing in the ADSs. You should read this summary together with the more detailed information appearing in this prospectus, including “Risk Factors,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and our consolidated financial statements and the related notes included at the end of this prospectus, before making an investment in the ADSs. All references to “MeaTech,” “we,” “us,” “our,” the “Company” and similar designations refer to MeaTech MT Ltd. (formerly MeaTech Ltd.) from its inception until the consummation of the January 2020 merger described in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Merger,” and MeaTech 3D Ltd. together with its consolidated subsidiaries thereafter, unless otherwise required by the context.
 
Our Company

We are a technology company focused on developing and out-licensing our proprietary three-dimensional printing technology, biotechnology processes and customizable manufacturing processes to food processing and food retail companies seeking to manufacture proteins without the need for animal slaughter. We are developing a novel, proprietary three-dimensional bioprinter to deposit layers of differentiated stem cells, scaffolding, and cell nutrients in a three-dimensional form of structured cultured meat. We believe the cultured meat production processes we are developing, which are designed to offer our eventual customers an alternative to industrial slaughter, have the potential to improve the quality of the environment, shorten global food supply chains, and reduce the likelihood of health hazards such as zoonotic diseases transferred from animals to humans (including viruses, such as virulent avian influenza and COVID-19, and drug-resistant bacterial pathogens, such as some strains of salmonella).

We are initially focused on developing cultured meat steak technology.  While cultured meat companies have made some progress developing unstructured alternative meat products, such as minced meat and sausage, to date the industry has struggled in developing high-margin, high-value structured and cultured meat products such as steak. Unlike minced meat, a cultured meat steak product has to grow in fibers and contain connective tissues and fat. To be adopted by diners, we believe cultured steaks will need to be meticulously engineered to look and smell like conventional meat, both before and after cooking, and to taste and feel like meat to the diner. This is the test on which we have set our sights – a three-dimensional, printed steak based on animal cells, rather than plant-based alternatives. We believe we are the first company to be developing both a proprietary bioprinter and the related processes for growing cultured meat to focus on what we believe is a high value sector of the alternative protein market. In the third quarter of 2020, we announced that we had achieved a significant milestone with the successful printing of a uniform, thin, slaughter-free meat tissue produced from stem cells.

We intend to license our proprietary production technology as well as provide associated products, such as cell lines, printheads, bioreactors and incubators, and services, such as technology implementation, training, and engineering support, both directly and through contractors, to food processing and food retail companies.  We intend to charge our customers a production license fee, based upon the amount of meat printed. We expect that each production facility will periodically require us to provide them with our proprietary materials, such as fresh sets of starter cells. We intend to charge a fee for such restocking, employing a cost-plus pricing model.  In addition, other materials used in the production process, such as cell-culture media and additives in our bio-inks may be sourced from third parties. Whether these materials are customized for the specifics of our production processes, ‘white-labelled’ generic materials, or proprietary materials that we have developed, we may charge a fee for restocking such materials with a cost-plus pricing model, however we have not yet reached the stage where it would be possible to estimate to what extent this would contribute to any future revenue stream. Finally, we intend to provide paid product implementation and guidance services to our customers looking to establish cultured meat manufacturing facilities. We expect that each facility licensing our technologies will need to deal with novel challenges and, as a result, will require our expertise to set up and implement the licensed technology and processes.


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We are led by our Chief Executive Officer, Sharon Fima, who previously founded and served as Chief Technology Officer of Nano Dimension Ltd. (TASE/Nasdaq: NNDM), which developed a complete desktop three-dimensional printing system for multilayer printed circuit boards, working on proprietary conductive nano-silver inks along with novel insulating and substrate inks.  We have carefully selected personnel for the rest of our executive management team who possess substantial industry experience and share our core values, from fields as diverse as tissue engineering, industrial stem cell growth, and printer and print materials development.  We are further guided by world-renowned consultants, including Professor Tal Dvir, Ph.D., Professor Shlomo Magdassi, Ph.D. and Professor Peter Frankenberg, Ph.D. Professor Dvir is the Head of the Laboratory for Tissue Engineering and Regenerative Medicine in Tel Aviv University. He is affiliated with the Department of Biotechnology and the Department of Materials Science and Engineering. Prof. Dvir is the Director of Tel Aviv University’s Center for Nanoscience and Nanotechnology and the Founding Director of the University's Center for Regenerative Biotechnology. Professor Magdassi is a professor of chemistry at the Casali Center for Applied Chemistry, the Institute of Chemistry and the Center for Nanoscience and Nanotechnology at the Hebrew University of Jerusalem, Israel. He is the head of the Center for 3D and Functional Printing at the Hebrew University, where he holds the Enrique Berman Chair in Solar Energy. Prof. Frankenberg was the Minister of Research and Higher Education in the German state of Baden-Württemberg, whose articles have been published in over 100 scientific journals. Among his numerous public positions, he was a member of the Mannheim Deutsche Bank advisory board, Vice President of the Higher Education Committee of the State of Saxony, and Chairman, Professor and Rector of Mannheim University.

We have experienced net losses in every period since the inception of MeaTech. We anticipate that we will continue to incur significant losses for the foreseeable future as our operating expenses and capital expenditures increase substantially due to our continued investment in our research and development activities and as we hire additional employees over the coming years. Even if this offering is successful, we will require substantial additional funds to complete our research and development activities.

Our Competitive Strengths

We believe we will benefit from the following competitive strengths as we work to develop and out-license our three-dimensional bioprinting technology and tissue development processes:
 

We are developing technologies and processes with the potential to allow food processing and food retail companies to create products that are healthier for the consumer. We are dedicated to developing technologies and processes that are designed to create cuts of meat that require substantially less antibiotic and growth-hormone treatments than conventionally-farmed meat. The proprietary technologies and processes we are developing are designed to allow food companies to manufacture meat under laboratory conditions on an industrial scale. We believe the use of meat manufactured under laboratory conditions minimizes or eliminates a number of hygiene-related risks to the consumer, such as the risk of transmission of pathogens from animals to humans, as happened at the outset of the COVID-19 pandemic and numerous other human health crises.
 

Our technologies and processes have the potential to be sustainable. We are developing a meat production process that is designed to provide sustainability in an industry that is not otherwise expected to be able to meet the growing demand for protein caused by rising population numbers and global affluence, due to inefficiencies inherent in conventional meat farming. These include the large amount of land and water use needed for raising livestock, causing precious natural resources to be squandered.
 

Our mission is aligned with consumer sentiment and demand. We believe that our technologies and processes have the potential to capitalize on growing consumer preferences for real meat proteins that do not involve animal suffering or slaughter, and do not entail significant negative environmental consequences including, but not limited to, those that exacerbate climate change, such as the release of methane and effluent run-off.
 

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We are focused on providing customers with industrial scale-up capability. Much of the work in the development of alternative proteins has been focused on developing individual proof-of-concept products which may not feasibly scale up to the industrial quantities needed for a profitable business.  We are designing our technology and processes with large-scale cultured meat production in mind to be measurable in tons of meat produced daily.
 

We have experienced and accomplished leadership with strong backgrounds in a variety of fields. The research and development of cultured meat products requires personnel with up-to-date professional knowledge and interdisciplinary expertise, as well as the ability to combine different areas of knowledge for the development of different products. Our CEO previously founded and was CTO of Nano Dimension Ltd. (TASE/Nasdaq: NNDM), which developed a complete desktop three-dimensional printing system for multilayer printed circuit boards. Previously, he held research and development leadership positions at XJET and HP Indigo Division. We have carefully selected personnel for the rest of our executive management team who possess substantial industry experience and share our core values, from diverse fields including bioprinting, tissue engineering, industrial stem cell growth, and bioprinter and print materials development. We believe this blend of talent and experience gives us the requisite insights and capabilities to execute our plan to develop technologies designed to meet demand in a scalable, profitable and sustainable way.
 
Our Strategy
 
To achieve our mission, we intend to:
 
Perfect the development of our cultured steak manufacturing technology and processes.  We intend to continue developing and refining our processes, procedures and equipment until we are in a position to initiate out-licensing of our technology.  We currently aim to print 100 grams of structured, edible, cultured meat, similar in taste, appearance, smell and texture to steak, consisting of cells bred in our laboratory and developed into fat, muscle and connective tissue using our three-dimensional printing technology, by the end of 2021.  Upon satisfaction of this milestone, we plan to tackle the technological challenges involved in scaling up the printing process to industrial-scale levels before seeking potential licensees.
 
Launch our B2B product solution for companies in the food industry.  We intend to license our production technology as well as provide associated products, such as cell lines, printheads, bioreactors and incubators, and services, such as technology implementation, training, and engineering support,  whether directly or through contractors, to food processing and food retail companies.  We intend to charge our customers a production license fee, based upon the amount of meat printed. We expect that each production facility will periodically require us to provide them with our proprietary materials, such as fresh sets of starter cells. We intend to charge a fee for such restocking, employing a cost-plus pricing model. In addition, other materials used in the production process, such as cell-culture media and additives in our bio-inks may be sourced from third parties. Whether these materials are customized for the specifics of our production processes, or ‘white-labelled’ generic materials, or proprietary materials that we have developed, we may charge a fee for restocking such materials with a cost-plus pricing model, however we have not yet reached the stage where it would be possible to estimate to what extent this would contribute to any future revenue stream. Finally, we intend to provide paid product implementation and guidance services to our customers looking to establish cultured meat manufacturing facilities. We expect that each facility licensing our technologies will need to deal with novel challenges and, as a result, will require the assistance of our expert knowledge in order to set up and implement the licensed technologies.
 

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Develop additional alternative proteins, such as poultry, to meet growing industry demand. There are substantial technological challenges inherent in expanding our offering beyond cultured beef technologies to additional alternative proteins, such as cultured poultry or cultured fish.  However, we believe that our experience, know-how and intellectual property portfolio form an excellent basis from which to surmount such challenges. In February 2021, we completed the acquisition of Peace of Meat, with the aim of developing avian meat for the alternative meat industry, applying proprietary technology to mimic the cellular composition of conventional poultry.
 
Acquire synergistic and complementary technologies and assets.  We intend to optimize our processes and diversify our product range to expand the cultured meat technologies upon which marketable products can be based, through a combination of internal development, acquisitions and collaborations, with a view to complementing our own processes and diversifying our product range along the cultured meat production value chain in order to introduce cultured products to the global market as quickly as possible.
 
Recent Developments
 
Acquisition of Peace of Meat BV
 
On February 10, 2021, we consummated an agreement with all of the shareholders of Peace of Meat BV, a private limited liability company incorporated, organized and existing under the Laws of Belgium, or Peace of Meat, to acquire all of the outstanding share capital of Peace of Meat not yet owned by us for total consideration of up to €15.4 million ($17.2 million). The total consideration payable by us in the acquisition consists of €7.7 million ($8.6 million), comprised of €4.1 million ($4.6 million) in cash paid to Peace of Meat shareholders and in legal and finder’s fees, and 4,070,766 of our ordinary shares, with a fair value of €3.6 million ($4.0 million), paid on the closing date, or the Closing Consideration, and up to an additional €7.5 million ($8.3 million) payable in a combination of €3.9 million ($4.4 million) in cash and 4,070,766 of our ordinary shares in the amount of €3.6 million ($3.9 million) with a fair value of €2.4 million ($2.7 million), upon the achievement of four defined milestones related to Peace of Meat’s biomass and bioreactor size, density, capacity and production. The acquisition agreement specified that each milestone must be reached within a six-month period, over a total of two years, which can be extended by up to nine additional months under circumstances set forth in the acquisition agreement. The agreement also includes acceleration events, such as breach of the acquisition agreement by us; certain merger, consolidation or acquisition transactions involving us; our delisting; and the termination of employment of two or more of the founders of Peace of Meat during the milestone period under circumstances set forth in the acquisition agreement.
 
Peace of Meat was established in Belgium in 2019 and is developing cultured avian fat directly from animal cells without the need to grow or kill animals. We believe that its innovative technology has the potential to support an industrial process for the production of cultured avian fat. Peace of Meat has entered into a number of scientific and commercial collaborations, is in the process of positioning itself as a future B2B provider with the potential to cover the entire value chain and to accelerate research and production processes in the industry, and has conducted taste tests for hybrid products it has developed.
 
Change of Corporate Name
 
On February 21, 2021, we changed our name from Meat-Tech 3D Ltd. to MeaTech 3D Ltd. and our fully-owned subsidiary, Chicken Meat-Tech Ltd., changed its name to MeaTech MT Ltd.
 
COVID-19 Pandemic
 
The novel coronavirus disease, or COVID-19, pandemic has negatively impacted the global economy and disrupted financial markets. The global spread and unprecedented impact of COVID-19 continues to create significant volatility, uncertainty and economic disruption. Many countries around the world, including in Israel, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business.  To date, the impact of the pandemic on our operations has been mainly limited to a temporary closure of our facility in 2020, in the context of a government-mandated general lockdown, which temporary delayed certain of our development activities. We have implemented remote working and workplace protocols for our employees in accordance with government requirements. The extent of the impact of the COVID-19 pandemic on our business and financial performance, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and severity of the pandemic and the impacts of reopening, including possible additional waves, which are uncertain and cannot be predicted. At this point in time, we cannot reasonably estimate the full extent of the COVID-19 pandemic’s impact on our business, financial condition, results of operations and cash flow.


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Summary of Risks Associated with our Business
 
Our business is subject to a number of risks of which you should be aware before a decision to invest in the ADSs. You should carefully consider all the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth in the sections titled “Risk Factors” before deciding whether to invest in the ADSs. Among these important risks are, but not limited to, the following:
 

We have experienced net losses in every period since the inception of MeaTech and we expect to continue incurring significant losses for the foreseeable future and may never become profitable;
 

We have a limited operating history to date and our prospects will be dependent on our ability to meet a number of challenges;
 

Our business and market potential are unproven, and we have limited insight into trends that may emerge and affect our business;
 

We are wholly dependent on the success of our cultured meat manufacturing technologies, including our cultured steak technologies, and we have limited data on the performance of our technologies to date;
 

The research and development associated with technologies for cultured meat manufacturing, including three-dimensional meat production, is a lengthy and complex process;
 

Business or economic disruptions or global health concerns, including the novel coronavirus disease, or COVID-19, pandemic, may have an adverse impact on our business and results of operations;
 

We may not be able to compete successfully in our highly competitive market;
 

We may suffer reputational harm due to real or perceived quality or health issues with products manufactured by our licensees using our technology;
 

Consumer preferences for alternative proteins in general, and more specifically cultured meats, are difficult to predict and may change, and, if we are unable to respond quickly to new trends, our business may be adversely affected;
 

We have no manufacturing experience or resources and we expect we will incur significant costs to develop this expertise or need to rely on third parties for manufacturing;
 

We expect that a small number of customers will account for a significant portion of our revenues, and the loss of one or more of these customers could adversely affect our financial condition and results of operations;
 

We expect that products utilizing our technologies will be subject to regulations that could adversely affect our business and results of operations;
 

Regulatory authorities may impose new regulations on manufacturers of alternative proteins;
 

Any changes in, or changes in the interpretation of, applicable laws, regulations or policies of the U.S. Department of Agriculture, state regulators or similar foreign regulatory authorities that relate to the use of the word “meat” or other similar words in connection with cultured meat products could adversely affect our business, prospects, results of operations or financial condition;


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If we are unable to obtain and maintain effective intellectual property rights for our technologies, we may not be able to compete effectively in our markets;
 

If there are significant shifts in the political, economic and military conditions in Israel, it could have an adverse impact on our operations; and
 

If we encounter delays or challenges, such as operational challenges inherent in managing a foreign business, we may not fully realize the anticipated benefits of the acquisition of Peace of Meat.
 
Corporate Information
 
We were incorporated in May 2018 in Israel as DocoMed Ltd., and in September 2019, changed our name to MeaTech Ltd., or MeaTech. In January 2020, MeaTech completed a merger, or the Merger, by way of an exchange of shares between MeaTech’s shareholders and Ophectra Real Estate and Investments Ltd., or Ophectra, a company incorporated in Israel on July 22, 1992 as a private company limited by shares in accordance with the Companies Ordinance, 1983 that became a public company on August 29, 1994 when its shares were listed for trade on the Tel Aviv Stock Exchange.  Under a merger agreement between MeaTech and Ophectra, Ophectra allotted to MeaTech’s shareholders 30,525,506 ordinary shares of Ophectra, in exchange for the transfer of their entire holdings in MeaTech, so that at the time the Merger was closed, MeaTech shareholders held approximately 60% of the issued and paid-up share capital of Ophectra. Upon completion of the Merger, MeaTech became a wholly-owned subsidiary of Ophectra, the name of Ophectra was changed to Meat-Tech 3D Ltd. (and later further changed to MeaTech 3D Ltd., or MeaTech 3D), and all directors and officers of MeaTech became directors and officers of MeaTech 3D, in addition to some of the incumbent directors of Ophectra.
 
Our principal executive office is located at 18 Einstein St., Ness Ziona 7414001 Israel and our phone number is +972-77-541-2206. We maintain a corporate website at www.meatech3d.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
 
Implications of Being an Emerging Growth Company and a Foreign Private Issuer
 
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
 

a requirement to present only two years of audited financial statements in addition to any required interim financial statements and correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure;
 

to the extent that we no longer qualify as a foreign private issuer, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation;
 

an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and
 

an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Emerging Growth Company Status.”
 
We may take advantage of these exemptions for up to five years or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; (iii) the date on which we are deemed to be a large accelerated filer under the rules of the SEC; or (iv) the last day of the fiscal year following the fifth anniversary of this offering. We may choose to take advantage of some but not all of these exemptions.


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In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.
 
We are also considered a “foreign private issuer.” Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to United States, or U.S., domestic public companies, including:
 

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations with respect to a security registered under the Exchange Act;
 

the requirement to comply with Regulation FD, which restricts selective disclosure of material information;
 

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
 

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events.
 
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States.
 
Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer. As a result, we do not know if some investors will find the ADSs less attractive, which may result in a less active trading market for the ADSs or more volatility in the price of the ADSs.


10


THE OFFERING

ADSs we are offering
2,427,185 ADSs, representing 24,271,850 ordinary shares (or 2,791,262 ADSs, representing 27,912,620 ordinary shares, if the underwriters exercise their option to purchase additional ADSs in full).
 
Ordinary shares to be outstanding after this offering
109,569,956 ordinary shares, including ordinary shares represented by outstanding ADSs (or 113,210,726 ordinary shares if the underwriters exercise their option to purchase additional ADSs in full).
 
The ADSs
Each ADS represents 10 of our ordinary shares, no par value.

The depositary will hold ordinary shares underlying the ADSs. You will have rights as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time.

To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.
 
Option to purchase additional
ADSs
We have granted the underwriters an option to purchase up to 364,077 additional ADSs from us for a period of 30 days after the date of this prospectus at the public offering price, less underwriting discounts and commissions.
 
Use of proceeds
We estimate that we will receive net proceeds from this offering of approximately $21.9 million, or approximately $25.4 million if the underwriters exercise their option to purchase additional ADSs in full, from the sale by us of ADSs in this offering, based on the initial public offering price of $10.30 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering to advance our program to develop commercial technologies to manufacture alternative foods, including potential acquisitions of other companies whose technologies are complementary or synergistic to our own, and for general corporate purposes, including working capital requirements. See “Use of Proceeds” for more information.
 
Risk factors
See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the ADSs.
 
Depositary
The Bank of New York Mellon
 
Nasdaq Capital Market symbol
 
“MITC”
Tel Aviv Stock Exchange symbol
“MEAT”
 

11

 
The number of ordinary shares to be outstanding after this offering is based on 85,298,106 ordinary shares outstanding as of March 2, 2021. The number of ordinary shares referred to above to be outstanding after this offering and, unless otherwise indicated, the other information in this prospectus, excludes:
 

8,261,087 ordinary shares issuable upon exercise of options outstanding as of March 2, 2021 at a weighted average exercise price of $0.90 per share;
 

25,189,573 ordinary shares issuable upon exercise of investor warrants outstanding as of March 2, 2021 at a weighted average exercise price of $1.23 per share;
 

1,169,068 ordinary shares issuable upon the vesting of restricted share units, or RSUs, outstanding as of March 2, 2021, in return for which recipients are required to pay a weighted average of $0.09 per share;
 

6,359,480 ordinary shares issuable upon vesting of merger warrants that had been granted and remained outstanding as of March 2, 2021 with no exercise price;
 

5,445,764 ordinary shares issuable upon exercise of rights to investors that had been granted and remained outstanding as of March 2, 2021 at a weighted average exercise price of $0.23 per share;
 

1,925,000 ordinary shares issuable upon exercise of warrants underlying rights to investors that had been granted and remained outstanding as of March 2, 2021 at a weighted average exercise price of $1.20 per share; and
 

193,343 ordinary shares issuable as a result of the full ratchet anti-dilution price protection granted in connection with our December 2020 private placement.

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:


the initial public offering price of $10.30 per ADS;
 

no exercise of the outstanding options described above;
 

no issuance of ordinary shares upon vesting of the RSUs described above;
 

no exercise of rights upon vesting of the share rights described above;
 

no exercise of the warrants to purchase ordinary shares described above; and
 

no exercise by the underwriters of their option to purchase up to 364,077 additional ADSs from us.



12

 
SUMMARY CONSOLIDATED FINANCIAL DATA
 
The tables below set forth the following summary consolidated financial data:
 
• Our summary consolidated statements of comprehensive loss for the eight-month period from the inception of MeaTech ended December 31, 2018 and the year ended December 31, 2019 and our summary consolidated statement of financial position as of December 31, 2019, which have been derived from our audited financial statements included elsewhere in this prospectus.
 
• Our summary consolidated statements of comprehensive loss for the six-month periods ended June 30, 2020 and 2019 and our summary condensed consolidated statement of financial position as of June 30, 2020, which have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus.
 
• Summary statement of comprehensive loss of Peace of Meat for the six-month period from its inception ended February 29, 2020, which has been derived from Peace of Meat’s audited financial statements included elsewhere in this prospectus.
 
• Summary statement of comprehensive loss of Peace of Meat for the six months ended August 31, 2020 and a summary consolidated statement of financial position of Peace of Meat as of August 31, 2020, which have been derived from Peace of Meat’s unaudited interim financial statements included elsewhere in this prospectus.
 
You should read the following summary consolidated financial data in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. These financial statements bear the company name of Meat-Tech 3D Ltd., which was our legal name at the time of their approval by our board of directors.
 
The unaudited consolidated interim financial statements were prepared on a basis consistent with the audited consolidated financial statements and include, in the opinion of each company’s management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of the results that may be expected in the future. Our financial statements, and those of Peace of Meat, have been prepared in accordance with IFRS, as issued by the IASB, which differ in certain significant respects from U.S. GAAP.
 
Although our functional currency is the NIS, we report our financial results in U.S. dollars. Peace of Meat reports its financial results in its functional currency of Euros.
 
Our summary consolidated financial statements are derived from the financial statements of MeaTech 3D. Although legally MeaTech 3D is the acquirer of all of the outstanding shares of MeaTech, pursuant to the Merger described elsewhere in this prospectus, the shareholders of MeaTech received the majority of the voting rights in MeaTech 3D and the ability to determine its financial and operational policy; the management of MeaTech continues to serve as the management of MeaTech 3D; and at the time of completing the Merger, MeaTech 3D (then Ophectra) was a company without significant business operations. The Merger therefore did not constitute a business acquisition as defined in IFRS 3, but it was determined that MeaTech is the acquirer of the business for accounting purposes. Therefore, the Merger was treated as a reverse acquisition that does not constitute a business combination. Accordingly, the consolidated financial statements and financial data included herein for all periods through and including December 31, 2019 were adjusted retroactively to reflect the financial statements of MeaTech (now called MeaTech MT Ltd.), other than information concerning earnings per share, which is presented according to the equity information of MeaTech 3D (then called Ophectra), and our consolidated financial statements and financial data included herein from January 1, 2020 onward relate to MeaTech 3D.


13

 
Summary Consolidated Financial Data of MeaTech 3D
 

 
Six Months Ended June 30,
   
Year Ended December 31,
   
Eight-Month Period Ended December 31,
 

 
2020
   
2019
   
2019
   
2018
 
Consolidated Statement of Income:
 
(USD, in thousands, except per share data)
 
Revenues          
 
$
-
   
$
-
   
$
-
   
$
51
 
 Operating expenses:
                               
Research and development expenses
   
850
     
14
     
166
     
-
 
General and administrative expenses          
   
2,006
     
38
     
256
     
53
 
Public listing expenses
   
10,164
     
-
     
-
     
-
 
Operating loss
   
13,020
     
52
     
422
     
2
 
Financing expense (income), net
   
(56
)
   
-
     
1
     
-
 
Net loss
 
$
12,964
   
$
52
   
$
423
   
$
2
 
Net loss per ordinary share, basic and diluted(1)
 
$
0.262
   
$
0.003
   
$
0.022
   
$
0
 
Weighted average number of ordinary shares
outstanding, basic and diluted
   
49,476,813
     
14,919,810
     
19,484,478
     
14,919,810
 
 

(1)
Net loss per share for periods prior to the closing date of the Merger were calculated by dividing the weighted average of MeaTech 3D’s ordinary shares that were outstanding during the corresponding periods, into the loss or earnings of MeaTech in the corresponding periods, multiplied by the exchange ratio according to which ordinary shares of MeaTech 3D were issued in return for ordinary shares of MeaTech. Subsequent to the Merger date, the weighted average of the ordinary shares used in calculating the net loss per share is that of MeaTech 3D.
 

 
As of June 30, 2020
 

 
Actual
   
Pro Forma(1)
   
Pro Forma As
Adjusted (2)
 
Consolidated Statements of Financial Position Data:
 
(USD, in thousands)
 
Cash and cash equivalents
 
$
5,201
   
$
13,026
   
$
34,930
 
Total assets
   
7,064
     
24,741
     
46,645
 
Total liabilities
   
608
     
2,273
     
2,273
 
Total shareholders’ equity
 
$
6,456
   
$
22,468
   
$
44,372
 


(1)
The pro forma consolidated statements of financial position data give effect to (i) private placements of our securities in August 2020 and December 2020, in which we received $5.6 million and $6.4 million, respectively, in immediate aggregate net proceeds and (ii) our acquisition of the outstanding securities of Peace of Meat in return for net cash consideration (i.e., closing cash consideration paid to Peace of Meat shareholders and in legal and finder’s fees, less the cash and cash equivalents owned by Peace of Meat) of €3.8 million ($4.3 million).


(2)
The pro forma as adjusted consolidated statements of financial position data give further effect to the issuance and sale of 2,427,185 ADSs by us in this offering at the initial public offering price of $10.30 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
 

14


Preliminary Cash Estimate

We estimate that we had cash and cash equivalents of approximately $13.6 million as of December 31, 2020. Our actual consolidated financial results as of and for the year ended December 31, 2020 are not yet available. Our financial closing procedures for the year ended December 31, 2020 are not yet complete and, as a result, our final results upon completion of those procedures may differ materially from our preliminary estimates. The preliminary consolidated financial data presented above as of December 31, 2020 is not a comprehensive statement of our financial position or operating results, reflects our preliminary and unaudited estimates based on information available as of the date of this prospectus, and is subject to change. As such changes may be material, you should not place undue reliance upon these preliminary estimates. Our preliminary cash estimate as of December 31, 2020 does not reflect cash flow in 2021, including the reduction of $5 million in cash that occurred as a result of our acquisition of Peace of Meat on February 10, 2021.

Summary Financial Data of Peace of Meat BV


 
Six Months Ended August 31, 2020
   
Period Ended
February 29, 2020
 
Statement of Loss:
 
(EUR in thousands, except per share data)
 
 Operating expenses:
           
Research and development expenses
   
548
     
138
 
Selling, general and administrative expenses
   
174
     
163
 
Operating loss
   
722
     
301
 
Financing expense (income), net
   
138
     
215
 
Net loss
   
860
     
516
 


 
As of August 31, 2020
 
Statement of Financial Position Data:
 
(EUR in thousands)
 
Cash and cash equivalents
   
312
 
Total assets
   
550
 
Total liabilities
   
1,395
 
Total shareholders’ equity
   
(845
)

15


Risk Factors
 
Investment in the ADSs involves a high degree of risk. You should carefully consider the risks described below and all other information contained in this prospectus, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before you decide to purchase the ADSs. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely impacted. In that event, the trading price of the ADSs would likely decline and you might lose all or part of your investment.
 
RISKS RELATED TO OUR FINANCIAL CONDITION AND LIQUIDITY REQUIREMENTS
 
We expect to continue incurring significant losses for the foreseeable future and may never become profitable.
 
We have experienced net losses in every period since the inception of MeaTech. We anticipate that we will continue to incur significant losses for the foreseeable future as our operating expenses and capital expenditures increase substantially due to our continued investment in our research and development activities and as we hire additional employees over the coming years. These activities may prove more expensive than we anticipate. We incur significant expenses in developing our technologies. Accordingly, we may not be able to achieve or sustain profitability, and we expect to incur significant losses for the foreseeable future.
 
Our predecessor entity, MeaTech Ltd., commenced cultured meat development operations in September 2019, and we continue to be in the early stages of development of our technologies. As a result, we have not generated any revenues since inception of our cultured meat operations, and we do not expect to generate any revenue from operations in the near term. We may not be able to develop the technology for manufacturing cultured meat at all, or meet the additional technological challenges to scaling such technology up to an industrial scale from our research and development efforts or successfully market and license our technologies, once approved. In addition, there is no certainty that there will be sufficient demand to justify the production and marketing of cultured meat products. The market for alternative proteins in general, and cultured meats specifically, may be small or may not develop.
 
If cultured meats produced using our industrial-scale cultured meat manufacturing processes do not gain wide market acceptance, we will not be able to achieve our anticipated growth, revenues or profitability and we may not be able to continue our business operations.
 
Even if this offering is successful, we will require substantial additional funds to complete our research and development activities and, if additional funds are not available on acceptable terms or at all, we may need to significantly scale back or cease our operations.
 
A significant portion of our research and development activities has been financed by the issuance of equity securities. We believe that we will continue to expend substantial resources for the foreseeable future as we work to develop our technologies. These expenditures are expected to include costs associated with research and development, and manufacturing and supply, as well as general operating expenses. In addition, other unanticipated costs may arise.
 
There is no certainty that we will be able to obtain funding for our research and development activities when we need it, on acceptable terms or at all. A lack of adequate funding may force us to reduce or cease all or part of our research and development activities and business operations. Our operating plan may change because of factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations. Such financing may result in dilution to shareholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
 
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Our future capital requirements depend on many factors, including:
 

Our progress with current research and development activities;
 

the number and characteristics of any products or manufacturing processes we develop or acquire;
 

the expenses associated with our marketing initiatives;
 

the timing, receipt and amount of milestone, royalty and other payments from future customers and collaborators, if any;
 

the scope, progress, results and costs of researching and developing future products or improvements to existing products or manufacturing processes;
 

any lawsuits related to our products or commenced against us;
 

the expenses needed to attract, hire and retain skilled personnel;
 

the costs associated with being a public company in both Israel and the United States; and
 

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property claims, including litigation costs and the outcome of such litigation.
 
If our estimates and predictions relating to any of these factors are incorrect, we may need to modify our operating plan. Additional funds may not be available to us when needed on acceptable terms, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate our manufacturing, research and development activities or other activities that may be necessary to generate revenue and achieve profitability.
 
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies.
 
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through equity offerings, debt financings, government contracts, government and/or other third-party grants or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We will require substantial funding to fund our anticipated commercialization efforts and fund our operating expenses and other activities. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail our research or development program, or a part thereof, which would adversely impact our potential revenues, results of operations and financial condition.
 
RISKS RELATED TO OUR BUSINESS AND STRATEGY
 
We have a limited operating history to date and our prospects will be dependent on our ability to meet a number of challenges.
 
Our business prospects are difficult to predict due to a lack of operational history, and our success will be dependent on our ability to meet a number of challenges. Because we have a limited operating history and we are in the early stages of development, you may not be able to evaluate our future prospects accurately. Our prospects will be primarily dependent on our ability to successfully develop industrial-scale cultured meat manufacturing technologies and processes, and market these to our customers. If we are not able to successfully meet these challenges, our prospects, business, financial condition and results of operations could be adversely impacted.
 
17

We are wholly dependent on the success of our cultured meat manufacturing technologies, including our cultured steak technologies, and we have limited data on the performance of our technologies to date.
 
We do not currently have any products or technologies approved for sale and we are still in the early stages of development. To date, we have limited data on the ability of our technologies to successfully manufacture cultured meat, towards which we have devoted substantial resources to date. We may not be successful in developing our technologies in a manner sufficient to support our expected scale-ups and future growth, or at all.  We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to the development of technologies designed to enable us to market industrial-scale cultured meat manufacturing processes.  We cannot guarantee that we will be successful in developing these technologies on the timeline we expect or at all. If we are able to successfully develop our cultured meat technologies, we cannot ensure that we will obtain regulatory approval or that, following approval, upon commercialization our technologies will achieve market acceptance.  Any such delay or failure would materially and adversely affect our financial condition, results of operations and prospects.
 
The research and development associated with technologies for cultured meat manufacturing, including three-dimensional meat production, is a lengthy and complex process.
 
We are focused on developing commercial technologies that companies can license to manufacture alternative foods without the need for animal butchery, based on rapid growing cycles. To develop our cultured meat steak technology, we are developing cellular agriculture technology, such as cell lines and approaches to working with plant-based cell-growth media in a scalable process. We are currently aiming to have printed 100 grams of edible, cultured meat tissue, consisting of cells bred in our laboratory and developed into a tissue using our three-dimensional printing technology, by the end of 2021, following which we would plan to scale up the printing process to provide us with industrial-scale capabilities. If we are unable to successfully develop our cultured meat manufacturing technologies, we may not be able to achieve our anticipated growth, revenues or profitability and we may not be able to continue our business operations.
 
We intend to engage in future acquisitions, joint ventures or collaborations, similar to our acquisition of Peace of Meat, which may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks. We may not realize the benefits of these acquisitions, joint ventures or collaborations.
 
We may evaluate various acquisitions and collaborations, including licensing or acquiring complementary technologies, intellectual property rights, or businesses. Any potential acquisition, joint venture or collaboration, including our acquisition of Peace of Meat, will entail numerous potential risks, including:
 

increased operating expenses and cash requirements;
 

the assumption of additional indebtedness or contingent liabilities;
 

assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;
 

the diversion of our management’s attention from our existing programs and initiatives in pursuing such a strategic merger or acquisition;
 
18


retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
 

risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing technologies; and
 

our inability to generate revenue from acquired technologies or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
 
In addition, if we undertake acquisitions, we may utilize our cash, issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
 
Moreover, we may not be able to locate suitable acquisition or collaboration opportunities and this inability could impair our ability to grow or obtain access to technologies that may be important to the development of our business.
 
We may not be able to successfully manage our planned growth.
 
We expect to continue to make investments in our cultured meat manufacturing technologies. We expect that our annual operating expenses will continue to increase as we invest in further research and development activities and, ultimately, sales and marketing efforts and customer service and support resources for future customers. Our failure to expand operational and financial systems in a timely or efficient manner could result in operating inefficiencies, which could increase our costs and expenses more than we had planned and prevent us from successfully executing our business plan. We may not be able to offset the costs of operation expansion by leveraging the economies of scale from our growth in negotiations with our suppliers and contract manufacturers. Additionally, if we increase our operating expenses in anticipation of the growth of our business and this growth does not meet our expectations, our financial results will be negatively impacted.
 
If our business grows, we will have to manage additional product design projects, materials procurement processes, and sales efforts and marketing for an increasing number of products, as well as expand the number and scope of our relationships with suppliers, distributors and end customers. If we fail to manage these additional responsibilities and relationships successfully, we may incur significant costs, which may negatively impact our operating results. Additionally, in our efforts to be first to market with new products with innovative functionality and features, we may devote significant research and development resources to products and product features for which a market does not develop quickly, or at all. If we are not able to predict market trends accurately, we may not benefit from such research and development activities, and our results of operations may suffer.
 
As our future development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, failure to deliver and timely deliver our products to customers, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional new products. If our management is unable to manage our growth effectively, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.
 
19

If the market does not grow as we expect, our revenues may stagnate or decline.
 
The marketplace for alternative protein manufacturing plants, which we expect to be our primary market, is dominated by methods that do not involve three-dimensional printing technology. If the market does not broadly accept three-dimensional printing of cultured meats as an alternative for conventional meat harvesting, or if it adopts three-dimensional printing based on a technology other than our proprietary bio-ink technology, we may not be able to achieve a sustainable level of revenues, and our results of operations would be adversely affected as a result. Additionally, cultivated meat is significantly more expensive than conventional meat. If the price of cultivated meat remains high, this may limit the consumer demand for, and market acceptance of, products manufactured using our technologies, and we may never be able to compete successfully or generate sufficient revenue or sustained profitability.
 
Business or economic disruptions or global health concerns, including the novel coronavirus disease, or COVID-19, pandemic, may have an adverse impact on our business and results of operations.
 
The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. Many countries around the world, including in Israel, have significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. To date, the impact of the pandemic on our operations has been mainly limited to a temporary closure of our facility earlier in the year, in the context of a government-mandated general lockdown, which temporary delayed certain of our development activities. We have implemented remote working and workplace protocols for our employees in accordance with government requirements. The extent of the impact of the COVID-19 pandemic on our business and financial performance, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and severity of the pandemic and the impacts of reopening, including possible additional waves, which are uncertain and cannot be predicted.
 
The COVID-19 pandemic has the potential to significantly impact our supply chain if the factories that manufacture our supplies or the operations of other service providers are disrupted, temporarily closed or experience worker shortages. We may also see disruptions or delays in shipments and increased prices of the supplies on which we rely for our operations.
 
As a result of the COVID-19 pandemic, including related governmental guidance or requirements, we may need to close our facilities, at least temporarily, or implement more restrictive policies to comply with social distancing rules and other requirements. As much of our research and development work requires on-site performance, such steps may negatively impact productivity and cause other disruptions to our business.
 
The full extent of the COVID-19 pandemic’s impact on our business and results of operations depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its lasting impact on capital and financial markets, including any economic recession, and any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, among others. At this point in time, we cannot reasonably estimate the full extent of the COVID-19 pandemic’s impact on our business, financial condition, results of operations and cash flow.
 
20


RISKS RELATED TO OUR ACQUISITION OF PEACE OF MEAT
 
We may not fully realize the anticipated benefits of the acquisition or realize such benefits within the timing anticipated.
 
We acquired Peace of Meat because we believe that the acquisition will be beneficial to us and to our shareholders. However, we may not be able to achieve the anticipated long-term strategic benefits of the acquisition within the timing anticipated or at all. For example, the benefits from the acquisition will be partially offset by the significant costs incurred in completing the transaction. Any delays and challenges that may be encountered in the post-acquisition process of consolidation could have an adverse effect on our business and results of operations, and may affect the value of the ADSs and our ordinary shares after the completion of the acquisition.
 
We may have failed to discover undisclosed liabilities of Peace of Meat.
 
Our investigations and due diligence review of Peace of Meat may have failed to discover undisclosed liabilities of Peace of Meat. Such undisclosed liabilities may affect the results of operations of Peace of Meat, and as a result, could have an adverse effect our business and results of operations and may adversely affect the value of the ADSs and ordinary shares.
 
We may have operational challenges in managing Peace of Meat’s business and staff following the acquisition.
 
Acquisitions inherently have risks including misjudging key elements of an acquisition or failing to integrate it in an efficient and timely manner that would disrupt operations. In addition, as Peace of Meat is located in a different country, which also brings inherent management challenges. Our agreement to acquire Peace of Meat provides that Peace of Meat will continue to be managed independently within our business for approximately two years, adding to the operational complexity of the integration. We may further face operational challenges in managing Peace of Meat’s business following the acquisition, which could have an adverse effect on our business and results of our operations, and may affect the value of the ADSs and ordinary shares.
 
The unaudited pro forma condensed consolidated financial information included in this prospectus may not be representative of our results and financial condition after the acquisition of Peace of Meat.
 
The unaudited pro forma condensed consolidated financial information included in this prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position, cash flows or results of operations that we actually would have experienced had the acquisition of Peace of Meat been completed as of the dates indicated, nor is such information indicative of our future operating results or financial condition following the acquisition of Peace of Meat. Such unaudited pro forma condensed consolidated financial information, therefore, does not reflect future events that may occur after the acquisition of Peace of Meat. The unaudited pro forma condensed consolidated financial information is based on numerous variables, assumptions and estimates regarding the acquisition of Peace of Meat that we believe are reasonable under the circumstances, but we cannot assure you that the variables, assumptions and estimates will prove to be accurate over time. Moreover, other factors may affect our actual results and financial condition after the acquisition of Peace of Meat, which may cause our actual results and financial condition to differ materially from the results and financial condition contemplated in the unaudited pro forma condensed consolidated financial information.
 
If intangible assets that we recorded in connection with the Peace of Meat acquisition become impaired, we may have to take significant charges against earnings.
 
In connection with the accounting for the Peace of Meat acquisition, we have recorded intangible assets. Under IFRS, we must assess, at least annually and potentially more frequently, whether the value of indefinite-lived intangible assets has been impaired. Amortizing intangible assets will be assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.
 
21


RISKS RELATED TO COMPETITION AND COMMERCIALIZATION OF OUR TECHNOLOGIES
 
We are an early-stage company with an unproven business model, which makes it difficult to evaluate our current business and future prospects.
 
We have no established basis to assure investors that our business strategies will be successful. We are dependent on unproven technologies and we have no basis to predict acceptance of our technologies by potential licensees and their customers. The market for cultured meat is new and as yet untested. As a result, the revenue and income potential of our business and our market are unproven. Further, because of our limited operating history and early stage of development, and because the market for cultured meat is relatively new and rapidly evolving, we have limited insight into trends that may emerge and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business.
 
 Before investing, you should consider an investment in the ADSs in light of the risks, uncertainties and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets such as ours. We may not be able to successfully address any or all of these risks. Failure to adequately do so could cause our business, results of operations and financial condition to suffer.
 
We may not be able to compete successfully in our highly competitive market.
 
The alternative protein market is expected to be highly competitive, with numerous brands and products competing for limited retailer shelf space, foodservice and restaurant customers and consumers. For us to compete successfully, we expect that the cultured meats printed using our technologies will need to be competitive in taste, ingredients, texture, ease of integration into the consumer diet, nutritional claims, convenience, brand recognition and loyalty, product variety, product packaging and package design, shelf space, reputation, price, advertising and access to restaurant and foodservice customers.
 
Generally, the food industry is dominated by multinational corporations with substantially greater resources and operations than us. We cannot be certain that we will successfully compete with larger competitors that have greater financial, marketing, sales, manufacturing, distributing and technical resources than we do. Conventional food companies may acquire our competitors or launch their own competing products, and they may be able to use their resources and scale to respond to competitive pressures and changes in consumer preferences by introducing new products, reducing prices or increasing promotional activities, among other things. Competitive pressures or other factors could prevent us from acquiring market share or cause us to lose market share, which may require us to lower prices, or increase marketing and advertising expenditures, either of which would adversely affect our margins and could result in a decrease in our operating results and profitability. We cannot assure you that we will be able to maintain a competitive position or compete successfully against such sources of competition.
 
We may suffer reputational harm due to real or perceived quality or health issues with products manufactured by our licensees using our technology.
 
Any real or perceived quality or food safety concerns or failures to comply with applicable food regulations and requirements, whether or not ultimately based on fact and whether or not involving us, or even merely involving unrelated manufacturers, could cause negative publicity and reduced confidence in our company, or the industry as a whole, which could in turn harm our reputation and sales, and could adversely impact our business, financial condition and operating results. There can be no assurance that products manufactured by our licensees will always comply with regulatory standards. Although we expect that our licensees will strive to manufacture products free of pathogenic organisms, these may not be easily detected and cross-contamination can occur. We cannot assure you that this health risk will always be preempted by quality control processes.
 
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We will have no control over the products manufactured by our licensees, especially once they are purchased by consumers, who may prepare these products in a manner that is inconsistent with directions or store them for excessive periods of time, which may adversely affect their quality and safety. If the products manufactured by our licensees are not perceived as safe or of high quality, then our business, results of operations and financial condition could be adversely affected.
 
The growing use of social and digital media increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about cultured meats produced using our technologies could seriously damage our reputation.
 
Failure to improve our technologies may adversely affect our ability to continue to grow.
 
In order to continue to grow, we expect we will need to continue to innovate by developing new technologies or improving existing ones, in ways that meet our standards for quality and will enable our eventual licensees to manufacture products that appeal to consumer preferences. Such innovation will depend on the technical capability of our staff in developing and testing product prototypes, including complying with applicable governmental regulations, and the success of our management and sales and marketing teams in introducing and marketing new technologies. Failure to develop and market new technologies may cause a negative impact on our business and results of operations.
 
Additionally, the development and introduction of new technologies requires substantial research, development and marketing expenditures, which we may be unable to recoup if the new technologies do not lead to products that gain widespread market acceptance. If we are unsuccessful in meeting our objectives with respect to new or improved technologies, our business could be harmed.
 
We may face difficulties if we expand our operations into new geographic regions, in which we have no prior operating experience.
 
We intend to license our technologies in numerous geographical markets. International operations involve a number of risks, including foreign regulatory compliance, tariffs, taxes and exchange controls, economic downturns, inflation, foreign currency fluctuations and political and social instability in the countries in which we will operate. Expansion may involve expanding into less developed countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. It is costly to establish, develop and maintain international operations and develop and promote our brands in international markets. As we expand our business into other countries, we may encounter regulatory, legal, personnel, technological and other difficulties that increase our expenses and/or delay our ability to become profitable in such countries, which may have an adverse impact on our business and brand.
 
Consumer preferences for alternative proteins in general, and more specifically cultured meats, are difficult to predict and may change, and, if we are unable to respond quickly to new trends, our business may be adversely affected.
 
Our business is focused on the development and marketing of licensable cultured meat manufacturing technologies. Consumer demand for the cultured meats manufactured using these technologies could change based on a number of possible factors, including dietary habits and nutritional values, concerns regarding the health effects of ingredients and shifts in preference for various product attributes. If consumer demand for our products decreases, our business and financial condition would suffer. Consumer trends that we believe favor sales of products manufactured using our licensed technologies could change based on a number of possible factors, including a shift in preference from animal-based protein products, economic factors and social trends. A significant shift in consumer demand away from products manufactured using our technologies could reduce our sales or our market share and the prestige of our brand, which would harm our business and financial condition.
 
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We have no manufacturing experience or resources and we expect we will incur significant costs to develop this expertise or need to rely on third parties for manufacturing.
 
We have no manufacturing experience. In order to develop and license our technologies, we will need to develop, contract for or otherwise arrange for the necessary manufacturing capabilities. We may experience difficulty in obtaining adequate and timely manufacturing capacity for our proprietary cultured meat printers and bio-inks. We do not own or lease facilities currently that could be used to manufacture any products that we might develop on an industrial scale, nor do we have the resources at this time to acquire or lease suitable facilities. If we are unable to build the necessary internal manufacturing capability or obtain this capability through third parties we will not be able to commercialize our technologies.  Even if we develop or obtain the necessary manufacturing capacity, if we fail to comply with regulations, to obtain the necessary licenses and knowhow or to obtain the requisite financing in order to comply with all applicable regulations and to own or lease the required facilities in order to manufacture products, we could be forced to cease operations, which would cause you to lose all of your investment.
 
Litigation or legal proceedings, government investigations or other regulatory enforcement actions could subject us to civil and criminal penalties or otherwise expose us to significant liabilities and have a negative impact on our reputation or business.
 
We operate in a constantly evolving legal and regulatory framework. Consequently, we are subject to heightened risk of legal claims, government investigations or other regulatory enforcement actions. Although we have implemented policies and procedures designed to ensure compliance with existing laws and regulations, we cannot assure you that our employees, temporary workers, contractors or agents will not violate our policies and procedures. Moreover, a failure to maintain effective control processes could lead to violations, unintentional or otherwise, of laws and regulations. Legal claims, government investigations or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws and regulations could subject us to civil and criminal penalties that could materially and adversely affect our product sales, reputation, financial condition and operating results. For example, in November 2020, the Israel Securities Authority initiated an administrative proceeding against us claiming negligent misstatement regarding certain immediate and periodic reports published by our predecessor (Ophectra) during the years 2017 and 2018, prior to the merger with MeaTech. These reports relate to Ophectra’s activities prior to establishment of the settlement fund in connection with the merger. This proceeding is of an administrative nature and carries a potential penalty in the form of a monetary fine which, under applicable Israeli law, could be as high as NIS 5 million.  While there can be no assurance as to the amount of the ultimate penalty, we have received the advice of our Israeli counsel stating such counsel’s assessment that the maximum fine likely to be imposed, if any, is $0.26 million (NIS 0.85 million).
 
RISKS RELATED TO OUR OPERATIONS
 
We expect that a small number of customers will account for a significant portion of our revenues, and the loss of one or more of these customers could adversely affect our financial condition and results of operations.
 
We do not expect to generate revenue in the short or medium term.  If we are able to generate revenue, we believe that we will do so through three primary streams: (i) licensing our proprietary intellectual property to customers for the purpose of setting up and operating cultured meat production factories; (ii) brokering the supply of materials needed in the manufacturing process; and (iii) providing consulting and implementation services to customers. Under this model, we initially expect to derive a significant portion of our revenues from a few customers. Our financial condition and results of operations could be adversely impacted if any one of these customers interrupt or curtail their activities, fail to pay for the services that have been performed, terminate their cultured meat operations, or if we are unable to enter into agreements with new customers on favorable terms. The loss of customers could adversely affect our financial condition and results of operations.
 
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We may be exposed to the credit risks of our customers, and nonpayment by these customers and other parties could adversely affect our financial position, results of operations and cash flows.
 
We may be subject to risks of loss resulting from nonpayment by our customers. Any material nonpayment by these entities could adversely affect our financial position, results of operations and cash flows. If customers default on their obligations to us, our financial results and condition could be adversely affected. Some of these customers may be highly leveraged and subject to their own operating and regulatory risks.
 
If we are unable to attract and retain qualified employees, our ability to implement our business plan may be adversely affected.
 
The loss of the service of employees, such as Mr. Sharon Fima, our Chief Executive Officer and Chief Technological Officer, would likely delay our achievement of product development and other business objectives, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause the price of our ordinary shares to decline. Although we have employment agreements with our key employees, these employees could terminate their employment with us at any time on relatively short notice. We do not carry key man life insurance on any of our executive officers.
 
Recruiting and retaining qualified scientific, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among high technology and life sciences companies for similar personnel. We also experience competition from universities and research institutions in attracting and retaining scientific personnel. In addition, we rely on consultants and advisors, including scientific advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
 
Under applicable employment laws, we may not be able to enforce covenants not to compete.
 
Our employment agreements generally include covenants not to compete. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work. For example, Israeli courts have required employers seeking to enforce covenants not to compete to demonstrate that the competitive activities of a former employee will harm one of a limited number of material interests of the employer, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such an interest will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our competitiveness may be diminished.
 
We are exposed to a risk of substantial loss due to claims that may be filed against us in the future because our insurance policies may not fully cover the risk of loss to which we are exposed.
 
We are exposed to the risk of having claims seeking monetary damages being filed against us, for example with regard to securities-related claims. In the event that we are required to pay damages for any such claim, we may be forced to seek bankruptcy or to liquidate because our asset base and revenue base may be insufficient to satisfy the payment of damages and any insurance that we have obtained may not provide sufficient coverage against potential liabilities.
 
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Our business and operations would suffer in the event of information technology system failures, including security breaches.
 
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, causing our business to suffer. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product could be delayed.
 
A cybersecurity incident, other technology disruptions or failure to comply with laws and regulations relating to privacy and the protection of data relating to individuals could negatively impact our business, our reputation and our relationships with customers.
 
We use computers in substantially all aspects of our business operations. We also use mobile devices, social networking and other online activities to connect with our employees, suppliers and co-manufacturers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including suppliers’ information, private information about employees and financial and strategic information about us and our business partners. Further, as we pursue new initiatives that improve our operations and cost structure, potentially including acquisitions, we may also be expand and improve our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with new initiatives or acquisitions, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.
 
In addition, we are subject to laws, rules and regulations in the United States, the European Union and other jurisdictions relating to the collection, use and security of personal information and data. Such data privacy laws, regulations and other obligations may require us to change our business practices and may negatively impact our ability to expand our business and pursue business opportunities. We may incur significant expenses to comply with the laws, regulations and other obligations that apply to us. Additionally, the privacy- and data protection-related laws, rules and regulations applicable to us are subject to significant change. Several jurisdictions have passed new laws and regulations in this area, and other jurisdictions are considering imposing additional restrictions. Privacy- and data protection-related laws and regulations also may be interpreted and enforced inconsistently over time and from jurisdiction to jurisdiction. Any actual or perceived inability to comply with applicable privacy or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental investigations, damage our reputation, and adversely affect our business.
 
Disruptions in the worldwide economy may adversely affect our business, results of operations and financial condition.
 
The global economy can be negatively impacted by a variety of factors such as the spread or fear of spread of contagious diseases (such as the COVID-19 pandemic), man-made or natural disasters, actual or threatened war, terrorist activity, political unrest, civil strife and other geopolitical uncertainty. Such adverse and uncertain economic conditions may impact consumer demand for alternative proteins in general, and clean meats specifically, which may in turn impact manufacturer and retailer demand for our technologies. In addition, our ability to manage normal commercial relationships with suppliers may suffer. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns as a result of various factors, including job losses, inflation, higher taxes, reduced access to credit, change in government economic policy and international trade disputes. In particular, consumers may reduce the amount of cultured meat that they purchase in favor of conventional meat or other alternative proteins, which may have lower retail prices, which could indirectly affect our results of operations. Manufacturer and retailers may become more conservative in response to these conditions and seek to delay commencing cultured market manufacturing operations or reduce existing operations. Our results of operations will depend upon, among other things, the financial condition of our business customers and our ability to supply them with the means to manufacture products that appeal to consumers at the right price. Decreases in demand for the products manufactured by our customers would put downward pressure on margins and would negatively impact our financial results. Prolonged unfavorable economic conditions or uncertainty may result in end consumers making long-lasting changes to their discretionary spending behavior on a more permanent basis, which may likewise have an indirect adverse effect on our sales and profitability.
 
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RISKS RELATED TO GOVERNMENT REGULATION
 
We expect that products utilizing our technologies will be subject to regulations that could adversely affect our business and results of operations.
 
The manufacture and marketing of food products is highly regulated. We, our suppliers and licensees, may be subject to a variety of laws and regulations. These laws and regulations apply to many aspects of our business, including the manufacture, composition and ingredients, packaging, labeling, distribution, advertising, sale, quality and safety of food products, as well as the health and safety of our employees and the protection of the environment.
 
We are focused on developing a novel, proprietary three-dimensional bioprinter to deposit layers of cells (including stem cells and differentiated stem cells), scaffolding, and cell nutrients in a three-dimensional form of structured cultured meat. The cultured meat, in turn, will be produced by our customers.  Peace of Meat intends to produce cultured avian fat that is anticipated to be used as an ingredient, inter alia, in the production of finished cultured poultry. Neither we nor Peace of Meat intend to manufacture, distribute and sell branded cultured-meat end products for consumer consumption.
 
Peace of Meat is a Business-To-Business, or B2B, ingredient producer and will be subject to regulation by the U.S. Food and Drug Administration, or FDA, to the extent its products are introduced to the United States for use by a manufacturer to produce cultured meat or other food in the United States, and analogous foreign regulatory bodies elsewhere. In the US, the FDA and the U.S. Department of Agriculture’s, or USDA's, Food Safety and Inspection Service, or FSIS share an ingredient approval process. FDA determines the safety of substances and prescribes safe conditions of use.  USDA-FSIS determines the efficacy and suitability of food ingredients in meat, poultry, and egg products. Thus, the USDA’s efficacy and suitability requirements will also apply to the extent the ingredients are destined for use in USDA-regulated meat and poultry products.
 
For the reasons discussed below, we ourselves do not expect to be directly regulated by the FDA for United States compliance purposes but will apply FDA’s food contact substance standards or analogous foreign regulations when developing our three-dimensional bioprinter. Specifically, we intend to license our production technology, as well as provide associated products and services to food processing and food retail companies through a B2B model. From a regulatory perspective, in the United States, we expect companies manufacturing finished cultured meat products to be subject to regulation by various government agencies, including the FDA U.S. Department of Agriculture, U.S. Federal Trade Commission, or FTC, Occupational Safety and Health Administration and the Environmental Protection Agency, as well as the requirements of various state and local agencies, such as the California Safe Drinking Water and Toxic Enforcement Act of 1986. We likewise expect these products to be regulated by equivalent agencies outside the United States by various international regulatory bodies.
 
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As the manufacturer of technology used to produce cultured meat, and consistent with the Federal Food, Drug and Cosmetic Act, Federal Meat Inspection Act, and Poultry Products Inspection Act, we believe we will not directly be regulated by the FDA or USDA. Rather, we believe the regulatory obligation falls on our customers — cultured meat producers — to ensure that all food produced using our technology is wholesome and not adulterated. Consistent with food industry norms, we expect that our customers will therefore request assurances from us that our products are suitable for their intended use from an FDA regulatory perspective. Therefore, we plan to apply FDA food safety standards when developing our three-dimensional bioprinter as a means of assuring our customers that our bioprinter is safe for its intended use and will not result in the production of adulterated food. In particular, we plan to apply applicable food contact substance requirements, such as those of the FDA, when developing its three-dimensional bioprinter as a means of assuring customers using the Company's technology that our bioprinter is safe for its intended use and will not result in the production of adulterated food. If we are unable to provide regulatory compliance assurance to our customers, we expect that our ability to license our production technology would be adversely impacted.
 
The manufacturing of cultured meat is expected to be subject to extensive regulations internationally, with products subject to numerous food safety and other laws and regulations relating to the sourcing, manufacturing, composition and ingredients, storing, labeling, marketing, advertising and distribution of these products. In addition, enforcement of existing laws and regulations, changes in legal requirements and/or evolving interpretations of existing regulatory requirements may result in increased compliance costs and create other obligations, financial or otherwise, that could adversely affect our business, financial condition or operating results. In addition, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, or FCPA, and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to officials or other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance with anti-bribery laws, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees, contractors or agents. Violations of these laws, or allegations of such violations, could disrupt our business and adversely impact our results of operations, cash flows and financial condition.
 
Any changes in, or changes in the interpretation of, applicable laws, regulations or policies of the USDA, state regulators or similar foreign regulatory authorities that relate to the use of the word “meat” or other similar words in connection with cultured meat products could adversely affect our business, prospects, results of operations or financial condition.
 
The USDA, state regulators or similar foreign regulatory authorities, such as Health Canada or the Canadian Food Inspection Agency, or CFIA, or authorities of the European Union (EU) or the EU member states (e.g., European Food Safety Authority, or EFSA), could take action to impact our ability to use the term “meat” or similar words, such as “beef”, to describe the product our bioprinters will produce. In addition, a food may be deemed misbranded if its labeling is false or misleading in any particular way, and the USDA, CFIA, EFSA or other regulators could interpret the use of the term “meat” or any similar phrase(s) to describe our cultured meat products as false or misleading or likely to create an erroneous impression regarding their composition.
 
For example, in 2018, the State of Missouri passed a law that prohibits any person engaged in advertising, offering for sale, or sale of food products from representing products as meat that are not derived from harvested production of livestock or poultry. This law has been challenged in court as a violation of free speech by the Good Food Institute, the Animal Legal Defense Fund and American Civil Liberties Union, however additional states subsequently passed similar laws. Similar regulatory developments are taking place in foreign jurisdictions. For example, the Agriculture Committee of the European Parliament proposed in May 2019 to reserve the use of “meat” and meat-related terms and names for products that are manufactured from the edible parts of animals. If such measures are adopted, they may affect our customers’ ability to label and advertise cultured meat products as they see fit. Further, in 2018, the USDA received a petition from the cattle industry requesting that the USDA exclude products not derived from slaughtered animals from being labeled and marketed as “meat,” and exclude products not derived from cattle born, raised and harvested in the traditional manner from being labeled and marketed as “beef.” On June 9, 2020, the Harvard Law School Animal Law & Policy Clinic petitioned USDA to urge it to adopt a labeling approach for cell-based meat and poultry products that does not overly restrict speech, asserting that USDA should wait until it has a better understanding of the compositional and safety characteristics of finished cell-based meat products, and until USDA has the opportunity to review proposed labels, before establishing any speech restrictions. The USDA has not yet responded substantively to these petitions but has indicated that these petitions are being considered as petitions for policy changes under the USDA’s regulations. On July 31, 2020, the USDA announced that its FSIS, an agency within the USDA, will be developing new regulatory requirements with regard to the labeling of human food produced using animal cell culture technology, derived from cell lines of USDA-amenable species, otherwise referred to as cultured meat by many in the sector. The USDA has not yet asserted whether it will authorize the use of the term “meat” and similar terms for cultured meat.  Should regulatory authorities take action to enforce a definition of the term “meat” or similar terms limited to slaughtered animals, such that we are unable to use those terms with respect to our technologies, our customers could be subject to enforcement action, and therefore we, as a manufacturer focused on developing commercial technologies that food processing and food retail companies can license to manufacture alternative foods without the need for animal slaughter may be required to modify our business strategy, and our prospects and results of our operations or financial condition could be adversely affected.
 
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Failure by our raw materials suppliers to comply with food safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products and adversely affect our business.
 
If our suppliers fail to comply with food safety, environmental or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. In the event of actual or even alleged non-compliance, we might be forced to find an alternative supplier and we may be subject to lawsuits related to such non-compliance by our suppliers. As a result, our supply of raw materials could be disrupted or our costs could increase, which would adversely affect our business, results of operations and financial condition. The failure of any supplier to produce products that conform to our standards could adversely affect our reputation in the marketplace and result in economic loss. Additionally, actions we may take to mitigate the impact of any disruption or potential disruption in our supply of raw materials, including increasing inventory in anticipation of a potential supply or production interruption, may adversely affect our business, results of operations and financial condition.
 
RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND POTENTIAL LITIGATION
 
If we are unable to obtain and maintain effective patent rights for our products, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.
 
Since September 2019, we have sought patent protection for certain of our products, systems, processes, designs and applications. Our success depends in large part on our ability to obtain, maintain, monitor and enforce patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and new products.
 
We seek to protect our proprietary position and sustain our competitive advantage by filing patent applications in the United States and in other countries. Patent prosecution in the United States and the rest of the world is uncertain, expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner in all the necessary locations. It is also possible that we will fail to identify Patentable aspects of our research and development output before it is too late to obtain patent protection.
 
We have a growing portfolio of six provisional and non-provisional pending patent applications, with a robust pipeline. These are filed with the U.S. Patent and Trademark Office, or USPTO, the World Intellectual Property Organization, or WIPO, and when the time comes, in various patent offices around the world, such as Israel, China, Japan, Europe, Canada, and South Korea. Three of the pending patent applications were filed through the Paris Convention Treaty, or PCT. We cannot offer any assurances about which, if any of the pending patent applications will issue, the scope of protection of any such patent or whether any issued patents will be found invalid and/or unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any new products that we may develop.
 
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 Further, there is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our products, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide exclusivity for our new products, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
 
If we cannot obtain and maintain effective patent rights for our products, we may not be able to compete effectively, and our business and results of operations would potentially be harmed.
 
If we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets.
 
In addition to the protection afforded by any patents currently owned and that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes and helpful devices (jigs) that are not easily known, knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product development processes, that involve proprietary know-how, as well as information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of our information technology systems, as well as implementing various standard operating procedures designed to maintain that integrity. Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.
 
We cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.
 
Intellectual property rights of third parties could adversely affect our ability to successfully commercialize our products, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.
 
At this stage, and in the future it is inherently difficult to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected if existing patents or patents resulting from Patent applications issued to third parties or other third party intellectual property rights are held to cover our products, systems and processes or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may be limited, or not be in a position to develop or commercialize products or our product candidates unless we successfully pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the intellectual property rights’ holder, if available on commercially reasonable terms. There may also be pending patent applications that should they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, royalties, be forced to abandon our new products or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.
 
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It is also possible that we have failed to identify relevant third party patents or applications. For example, U.S. patent applications filed before July 8, 2019 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our new products or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our new products or the use of our new products. Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing our new products. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new products that are held to be infringing. We might, if possible, also be forced to redesign our new products so that we no longer infringe the third party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
 
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
 
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing new products. As our industries expand and more patents are issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties.
 
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, designs or methods of manufacture related to the use or manufacture of our products. There may be currently pending patent applications that may later result in issued patents that our products may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. 
 
If any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for designs, or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.
 
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our products. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
 
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Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.
 
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming all other requirements for patentability are met, in the United States prior to March 15, 2013, the first to make the claimed invention without undue delay in filing, is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted on September 16, 2011, the United States has moved to a first to file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.
 
We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.
 
Competitors may infringe our intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our new products, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Under the Leahy-Smith Act, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
 
Derivation proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our new products to market. 
 
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Ordinary Shares.
 
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We may, in the future, be subject to claims that our employees, consultants, or independent contractors have wrongfully or unavoidably used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
 
We continue to employ individuals who were previously employed at our competitors or potential competitors. We have established standard operating procedures to try and ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, but we may nevertheless be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employees’ former employers or other third parties. Litigation may result and be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
 
We may be subject to claims challenging the inventorship of our intellectual property.
 
We may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our products. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
 
We may not be able to protect our intellectual property rights throughout the world.
 
Filing, prosecuting, and defending patents on products, as well as monitoring their infringement in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. 
 
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
 
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to monitor and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
 
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RISKS RELATED TO OUR OPERATIONS IN ISRAEL
 
If there are significant shifts in the political, economic and military conditions in Israel, it could have an adverse impact on our operations.
 
Our corporate headquarters and research and development facilities are located in Israel. In addition, most of our employees, officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. In recent years, these have included hostilities from Hezbollah in Lebanon and between Israel and Hamas in the Gaza Strip, which resulted in rockets being fired into Israel, causing casualties and disruption of economic activities. In addition, Israel faces threats from the civil war in Syria and from Iran. Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although we expect that the Israeli government will cover the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that such government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies, whether as a result of hostilities in the region or otherwise. Any such matters could adversely affect our operations and results of operations, and any losses or damages incurred by us as the result of such a conflict could have an adverse impact on our business.
 
Furthermore, our operations could be disrupted by the obligations of our personnel to perform military service. Some of our employees based in Israel may be called upon to perform military reserve duty and, in emergency circumstances, may be called to immediate and unlimited active duty. Our operations could be disrupted by the absence of a significant number of employees due to military service, which could adversely impact our business and results of operations.
 
Because a substantial portion of our revenues is expected to be generated in currencies other than our functional currency, we will be exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition.
 
In the future, we expect that a substantial portion of our revenues will be generated in currencies other than our functional currency. Our functional currency, in which we currently maintain our financial records, is NIS, and our presentation currency, in which we report our financial results, is USD. The functional currency of Peace of Meat, in which it currently maintains its financial records, is Euros. As a result, our revenues for financial statement purposes might be negatively affected by fluctuations in the exchange rates of currencies in the countries in which our technologies may be licensed, and supplementary services provided and products sold.
 
Currency exchange controls may restrict our ability to utilize our cash flows.
 
We expect to receive proceeds from sales of any product we may develop, and also to pay a portion of our operational costs and expenses, in U.S. dollars, Euros and other foreign currencies. However, we may be subject to existing or future rules and regulations on currency conversion. In 1998, the Israeli currency control regulations were liberalized significantly, and there are currently no currency controls in place. Legislation remains in effect, however, pursuant to which such currency controls could be imposed in Israel by administrative action at any time. We cannot assure that such controls will not be reinstated, or if reinstated, that they would not have an adverse effect on our operations.
 
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Enforcing a U.S. judgment against us and our executive officers and directors, or asserting U.S. securities law claims in Israel, may be difficult.
 
We are incorporated in Israel. Most of our executive officers and directors reside in Israel and most of our assets and the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us or any of these persons in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It may also be difficult to affect service of process on these persons in the United States or to assert U.S. securities laws claims in original actions instituted in Israel.
 
Even if an Israeli court agrees to hear such a claim, it may determine that Israeli, and not U.S., law is applicable to the claim. Under Israeli law, if U.S. law is found to be applicable to such a claim, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would be governed by Israeli law. There is little binding case law in Israel addressing these matters.
 
Subject to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel, Israeli courts may enforce a final U.S. judgment in a civil matter, including judgments based upon the civil liability provisions of the U.S. securities laws and including a monetary or compensatory judgment in a non-civil matter, provided that:
 

the judgment is enforceable in the state in which it was given;
 

the judgment was rendered by a court of competent jurisdiction under the rules of private international law prevailing in Israel;
 

the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts;
 

adequate service of process has been effected and the defendant has had a reasonable opportunity to be heard;
 

the judgment and the enforcement of the judgment are not contrary to the law, public policy, security or sovereignty of the State of Israel;
 

the judgment was not obtained by fraudulent means and does not conflict with any other valid judgment in the same matter between the same parties; and
 

an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in the foreign court.
 
There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court. Please see the section entitled “Enforceability of Civil Liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this prospectus.
 
If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli CPI plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rate fluctuations.
 
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Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
 
Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S. corporations. In particular, each of our shareholders has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations toward us and other shareholders and to refrain from abusing its power in, among other things, voting at shareholder meetings on certain matters, such as an amendment to our articles of association, an increase of our authorized share capital, a merger and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder has a duty to act in fairness toward us. Israeli law does not clearly define the substance of these duties, but these provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.
 
Provisions of Israeli corporate and tax law may deter acquisition transactions.
 
        Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company's issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company's outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer's response date.
 
Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.
 
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As a foreign private issuer whose ADSs are listed on the Nasdaq Capital Market, we intend to follow certain home country corporate governance practices instead of certain Nasdaq requirements, we are not subject to U.S. proxy rules and are exempt from certain Exchange Act reporting requirements. If we were to lose our foreign private issuer status, our costs to modify our practices and maintain compliance under U.S. securities laws and Nasdaq rules would be significantly higher.
 
We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. While the ADSs are listed on Nasdaq, we are permitted to follow certain home country corporate governance practices instead of certain requirements of the rules of Nasdaq. As permitted under the Israeli Companies Law 1999, or Companies Law, pursuant to our articles of association to be effective upon closing of this offering, the quorum for an ordinary meeting of shareholders shall be the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting power of our shares (and in an adjourned meeting, with some exceptions, a minimum of one shareholder) instead of 33 1⁄3% of our issued share capital as required under the Nasdaq corporate governance rules. We may also adopt and approve material changes to equity incentive plans in accordance with the Companies Law, which does not impose a requirement of shareholder approval for such actions. In addition, we will follow Israeli corporate governance practice instead of the Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as issuances that will result in a change of control, certain transactions other than a public offering involving issuances of a 20% or greater interest in us and certain acquisitions of the stock or assets of another company). Additionally, we intend to follow Israeli corporate governance practices instead of Nasdaq requirements with regard to, among other things, the composition of our board of directors and nominating committee, and director nomination procedures. For example, our board of directors currently comprises six directors, three of whom we have determined are independent, in compliance with our home-country requirements. Accordingly, our shareholders may be afforded less protection that what is provided under the Nasdaq corporate governance rules to investors in U.S. domestic issuers. See “Management — Corporate Governance Practices.”
 
Additionally, we will be exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, although under regulations promulgated under the Companies Law, as an Israeli public company listed on the Nasdaq, we will be required to disclose the compensation of our five most highly compensated officers on an individual basis, this disclosure will not be as extensive as that required of U.S. domestic reporting companies. In addition, we will not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC, as frequently or as promptly as U.S. domestic reporting companies whose securities are registered under the Exchange Act. Moreover, we will not be required to comply with Regulation FD, which restricts the selective disclosure of material information. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer. These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable to U.S. domestic reporting companies.
 
If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We would lose our foreign private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers and we would lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers. Such modifications and subsequent compliance would cause us to incur significant legal, accounting and other expenses that we would not incur as a foreign private issuer.
 
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If we are a “passive foreign investment company” for U.S. federal income tax purposes, there may be adverse U.S. federal income tax consequences to U.S. investors.
 
Based on our income and assets, we believe that we should be treated as a PFIC for the preceding taxable year. However, the determination of our PFIC status is made annually based on the factual tests described below. Consequently, while we may be a PFIC in future years, we cannot estimate with certainty at this stage whether or not we are likely to be treated as a PFIC in the current taxable year or any future taxable years. Generally, if, for any taxable year, at least 75 percent of our gross income is “passive income” or at least 50 percent of our gross assets during the taxable year (based on the average of the fair market values of the assets determined at the end of each quarterly period) are assets that produce or are held for the production of passive income, we will be characterized as a PFIC for U.S. federal income tax purposes. Passive income for this purpose generally includes, among other things, dividends, interest, rents, royalties, gains from commodities and securities transactions, and gains from assets that produce passive income. However, rents and royalties received from unrelated parties in connection with the active conduct of a trade or business should not be considered passive income for purposes of the PFIC test. For example, if we were to be characterized as a PFIC for U.S. federal income tax purposes in any taxable year during which a U.S. Holder (as defined in “Taxation — Material United States federal income tax considerations”) holds ordinary shares or ADSs, such U.S. Holder could be subject to additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other disposition of our shares, whether or not we continue to be characterized as a PFIC. Certain adverse consequences of PFIC status can be mitigated if a U.S. Holder makes a “mark to market” election or an election to treat us as a qualified electing fund, or QEF. Upon request, we expect to provide the information necessary for U.S. Holders to make “qualified electing fund elections” if we are classified as a PFIC. See “Taxation — Material United States federal income tax considerations — Passive foreign investment company considerations.”
 
Whether we are a PFIC for any taxable year will depend on the composition of our income and the composition and value of our assets from time to time. Each U.S. Holder is strongly urged to consult its tax advisor regarding these issues and any available elections to mitigate such tax consequences.
 
If we are a controlled foreign corporation, there could be adverse U.S. federal income tax consequences to certain U.S. Holders.
 
Each “Ten Percent Shareholder” (as defined below) in a non-U.S. corporation that is classified as a “controlled foreign corporation,” or a CFC, for U.S. federal income tax purposes generally is required to include in income for U.S. federal tax purposes such Ten Percent Shareholder’s pro rata share of the CFC’s “Subpart F income,” “tested income” and investment of earnings in U.S. property, even if the CFC has made no distributions to its shareholders. Subpart F income generally includes dividends, interest, rents, royalties, gains from the sale of securities and income from certain transactions with related parties. In addition, a Ten Percent Shareholder that realizes gain from the sale or exchange of shares in a CFC may be required to classify a portion of such gain as dividend income rather than capital gain. A non-U.S. corporation generally will be classified as a CFC for U.S. federal income tax purposes if Ten Percent Shareholders own, directly or indirectly, more than 50% of either the total combined voting power of all classes of stock of such corporation entitled to vote or of the total value of the stock of such corporation. A “Ten Percent Shareholder” is a United States person (as defined by the Internal Revenue Code of 1986, as amended, or the Code) who owns or is considered to own 10% or more of the value or total combined voting power of all classes of stock entitled to vote of such corporation.
 
The determination of CFC status is complex and includes complex attribution rules. A non-corporate Ten Percent Shareholder with respect to a CFC generally will not be allowed certain tax deductions or foreign tax credits generally available to a corporate Ten Percent Shareholder. Failure to comply with CFC reporting obligations may subject a Ten Percent Shareholder to significant monetary penalties. We cannot provide any assurances that we will furnish to any Ten Percent Shareholder information that may be necessary to comply with the reporting and tax paying obligations applicable under the CFC rules of the Code. U.S. Holders should consult their own tax advisors with respect to the potential adverse U.S. tax consequences of becoming a Ten Percent Shareholder in a CFC.
 
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RISKS RELATED TO THE ADSS AND THE OFFERING
 
The ADSs have no prior trading history in the United States, and an active market may not develop, which may limit the ability of our investors to sell the ADSs in the United States.
 
There is no public market for the ADSs or our ordinary shares in the United States. An active trading market for the ADSs may never develop or may not be sustained if one develops. If an active market for the ADSs does not develop, it may be difficult for you to sell your ADSs, as the market value of your ADSs may decline.
 
You will experience immediate and substantial dilution in the net tangible book value of the ADSs you purchase in this offering.
 
The initial public offering price of the ADSs will substantially exceed the net tangible book value per share of our ordinary shares immediately after this offering. Therefore, if you purchase the ADSs in this offering, you would suffer, as of March 2, 2021, immediate dilution of $6.85 per ADS, or $6.64 if the underwriters exercise their option to purchase additional ADSs in full, in net tangible book value after giving effect to the sale of 2,427,185 ADSs in this offering at the initial public offering price of $10.30. In addition, if outstanding options to purchase our ordinary shares are exercised in the future, you will experience additional dilution. For example, if the (i) 8,261,087 ordinary shares issuable upon exercise of options at a weighted average exercise price of $0.90 per share, (ii) 25,189,573 ordinary shares issuable upon exercise of investor warrants at a weighted average exercise price of $1.23 per share, (iii) 1,169,068 ordinary shares issuable upon the vesting of RSUs in return for which recipients are required to pay a weighted average of $0.09 per share, (iv) 6,359,480 ordinary shares issuable upon vesting of merger warrants with no exercise price, (v) 5,445,764 ordinary shares issuable upon the exercise of rights granted to investors at a weighted average exercise price of $0.23 per share and (vi) 1,925,000 ordinary shares issuable upon exercise of warrants underlying rights granted to investors at a weighted average exercise price of $1.20 per share, each outstanding as of March 2, 2021, are all exercised and/or issued in full, you would suffer, as of March 2, 2021, immediate dilution of $4.72 per ADS in net tangible book value after giving effect to the sale of 2,427,185 ADSs in this offering at the initial public offering price of $10.30.
 
The ADS price may be volatile, and you may lose all or part of your investment.
 
The initial public offering price for the ADSs sold in this offering will be determined by negotiation between us and the representative of the underwriters. This price may not reflect the market price of the ADSs following this offering and the price of the ADSs may decline. In addition, the market price of the ADSs could be highly volatile and may fluctuate substantially as a result of many factors, including:
 

changes in the prices of our raw materials or the products manufactured in factories using our technologies;
 

the trading volume of the ADSs;
 

the effects of the COVID-19 pandemic;
 

general economic, market and political conditions, including negative effects on consumer confidence and spending levels that could indirectly affect our results of operations;
 
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actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results;
 

announcements by us or our competitors of innovations, other significant business developments, changes in distributor relationships, acquisitions or expansion plans;
 

announcement by competitors or new market entrants of their entry into or exit from the alternative protein market;
 

overall conditions in our industry and the markets in which we intend to operate;
 

market conditions or trends in the packaged food sales industry that could indirectly affect our results of operations;
 

addition or loss of significant customers or other developments with respect to significant customers;
 

adverse developments concerning our manufacturers and suppliers;
 

changes in laws or regulations applicable to our products or business;
 

our ability to effectively manage our growth and market expectations with respect to our growth, including relative to our competitors;
 

changes in the estimation of the future size and growth rate of our markets;
 

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
 

additions or departures of key personnel;
 

competition from existing products or new products that may emerge;
 

issuance of new or updated research or reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
 

variance in our financial performance from the expectations of market analysts;
 

our failure to meet or exceed the estimates and projections of the investment community or that we may otherwise provide to the public;
 

fluctuations in the valuation of companies perceived by investors to be comparable to us;
 

disputes or other developments related to proprietary rights, including patents, and our ability to obtain intellectual property protection for our products;
 

litigation or regulatory matters;
 

announcement or expectation of additional financing efforts;
 
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our cash position;
 

sales and short-selling of the ADSs;
 

our issuance of equity or debt;
 

changes in accounting practices;
 

ineffectiveness of our internal controls;
 

negative media or marketing campaigns undertaken by our competitors or lobbyists supporting the conventional meat industry;
 

the public’s response to publicity relating to the health aspects or nutritional value of products to be manufactured in factories using our technologies; and
 

other events or factors, many of which are beyond our control.
 
In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of the ADSs, regardless of our operating performance. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes, tariffs, international currency fluctuations, or the effects of disease outbreaks or pandemics (such as the COVID-19 pandemic), may negatively impact the market price of the ADSs. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted.
 
Our shares will be listed for trading on more than one stock exchange, and this may result in price variations.
 
Our ordinary shares are currently traded on the TASE and following the offering, the ADSs, representing our ordinary shares, will be listed for trading on the Nasdaq Capital Market, or Nasdaq. This may result in price variations. The ADSs and ordinary shares will be traded on these markets in different currencies, U.S. dollars on Nasdaq and NIS on the TASE. These markets have different opening and closing times and close on different days. Different trading times and differences in exchange rates, among other factors, may result in our shares being traded at a price differential on these two markets. In addition, market influences in one market may influence the price at which our shares are traded on the other.
 
We have broad discretion as to the use of the net proceeds from our U.S. initial public offering and may not use such proceeds effectively.
 
We currently intend to use the net proceeds from this offering to develop commercial technologies to manufacture alternative foods, including potential acquisitions of other companies whose technologies are complementary or synergistic to our own, such as our purchase of Peace of Meat, as described herein in “Business”, and for general corporate purposes, including working capital requirements. For more information, see “Use of Proceeds.” However, our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with the manner in which our management chooses to allocate the net proceeds from this offering. The failure by our management to apply these funds effectively could have an adverse impact on our business, financial condition and results of operation. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income.
 
41

If equity research analysts do not publish research or reports about our business or if they issue inaccurate or unfavorable commentary or downgrade the ADSs, the price of the ADSs and trading volume could decline.
 
The trading market for the ADSs depends in part on the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price of the ADSs or their trading volume to decline. Moreover, if any of the analysts who cover us downgrade the ADSs or issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our operating results fail to meet the expectations of the investor community, the price of the ADSs could decline.
 
The market price of the ADSs could be negatively affected by future sales of the ADSs.
 
Immediately after this offering, there will be 115,929,436 ordinary shares, including 6,359,480 ordinary shares underlying merger warrants with no exercise price issued to MeaTech shareholders in connection with the Merger, and vesting, inter alia, upon completion of all the conditions required for listing our securities on a stock exchange outside Israel (for further details, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Merger”) and 2,427,185 ADSs representing 24,271,850 ordinary shares outstanding offered hereby, or 119,570,206 ordinary shares if the underwriters exercise their option to purchase additional ADSs in full. Sales by us or our shareholders of a substantial number of our ordinary shares or ADSs in the public markets following this offering, or the perception that these sales might occur, could cause the market price of the ADSs to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities. Of our issued and outstanding shares, all of the ADSs sold in this offering will be freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended, or Rule 144.
 
Following the closing of this offering, 15,514,664 of our outstanding ordinary shares, currently exercisable or exercisable within 60 days of the date of this registration statement will be beneficially owned by shareholders, including members of management and our board of directors, that have agreed with the underwriters that, subject to limited exceptions, for a period of 180 days after the date of this prospectus, they will not directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase or otherwise dispose of any ordinary shares, ADSs or any securities convertible into or exercisable or exchangeable for ordinary shares or ADSs, or in any manner transfer all or a portion of the economic consequences associated with the ownership of ordinary shares or ADSs, or cause a registration statement covering any ADSs to be filed, without the prior written consent of the underwriters, which may, in their sole discretion and at any time without notice, release all or any portion of the shares subject to the corresponding lock-up agreements. After the expiration of the lock-up period, these shares can be resold into the public markets in accordance with the requirements of Rule 144, subject to certain volume and manner of sale limitations.
 
Following the expiration of the lock-up restrictions described above, the number of ordinary shares and ADSs that are potentially available for sale in the open market will increase materially, which could make it harder for the value of our ordinary shares and ADSs to appreciate unless there is a corresponding increase in demand for our ordinary shares and ADSs. This increase in available shares could cause the value of your investment in the ADSs to decline.
 
In addition, a sale by the company of additional ordinary shares, ADSs or similar securities, or securities convertible or exchangeable into ordinary shares or ADSs, in order to raise capital might have a similar negative impact on the share price of our ordinary shares. A decline in the price of our ordinary shares or ADSs might impede our ability to raise capital through the issuance of additional ordinary shares, ADSs or other equity securities, and may cause you to lose part or all of your investment in our ordinary shares or ADSs.
 
42

We have never paid dividends on our share capital and we do not intend to pay dividends for the foreseeable future.
 
We have never declared or paid any dividends on our share capital and do not intend to pay any dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development and growth of our business and for general corporate purposes. Accordingly, any gains from an investment in the ADSs will depend on price appreciation of the ADSs, which may never occur. In addition, Israeli law limits our ability to declare and pay dividends, and may subject our dividends to certain Israeli withholding taxes.
 
You may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.
 
The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as amended, or the Securities Act, but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to affect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositary may deduct from such dividends or distributions its fees and may withhold an amount on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. These restrictions may cause a material decline in the value of the ADSs.
 
The deposit agreement may be amended or terminated without your consent.
 
We and the depositary may amend or terminate the deposit agreement without your consent. Holders of the ADSs are entitled to a prior notice in the event of a materially prejudicial amendment or termination thereof or if the amendment adds or increases fees or charges. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.

The deposit agreement may be terminated at any time upon prior written notice to holders of the ADSs. Upon the termination of the deposit agreement, our company will be discharged from all obligations under the deposit agreement except for its obligations to the depositary thereunder. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. After the termination date and before the depositary sells all of the securities, the depositary may refuse to accept a surrender of ADSs by a holder for the purpose of withdrawing deposited securities if it would interfere with the selling process. During this time, the depositary will not be required to register any transfer or ADSs or distribute any dividends or other distributions, give any notices or perform any other duties under the deposit agreement.

43

Holders or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit agreement or if they wish us or the depositary to participate in legal proceedings.
 
The deposit agreement expressly limits our obligations and liability and those of the depositary. We and the depositary:
 

are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
 

are not liable if we are or it is prevented or delayed by law or circumstances beyond our or its control from performing our or its obligations under the deposit agreement;
 

are not liable if we exercise or it exercises discretion permitted under the deposit agreement;
 

are not liable for the inability of any holder of the ADSs to benefit from any distribution on deposited securities that is not made available to holders of the ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
 

have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on behalf of the holders of the ADSs or any other person;
 

are not liable for the acts or omissions of any securities depositary, clearing agency or settlement system; and
 

may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person.
 
These provisions of the deposit agreement limit the ability of holders of the ADSs to obtain recourse if we or the depositary fail to meet our respective obligations under the deposit agreement or if they wish us or the depositary to participate in a legal proceeding.
 
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could augur less favorable results to the plaintiff(s) in any such action.
 
The deposit agreement governing the ADSs representing our ordinary shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court, and holders of the ADSs are not able to waive our or the depositary’s compliance with U.S. federal securities laws or the rules and regulations promulgated thereunder. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one that is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may augur different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.
 
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As the jury trial waiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that the waiver would likely continue to apply to ADS holders or beneficial owners who withdraw the ordinary shares from the ADS facility with respect to claims arising before the cancellation of the ADSs and the withdrawal of the ordinary shares, and the waiver would likely not apply to ADS holders or beneficial owners who subsequently withdraw the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the jury trial waiver to ADS holders or beneficial owners who withdraw the ordinary shares represented by the ADSs from the ADS facility.
 
ADS holders do not have the same rights as our shareholders.
 
ADS holders do not have the same rights as our shareholders.  For example, ADS holders may not attend shareholders’ meetings or directly exercise the voting rights attaching to the ordinary shares underlying their ADSs.  ADS holders may vote only by instructing the depositary to vote on their behalf.  If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you.  Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote.  For instructions to be valid, they must reach the depositary by a date set by the depositary.   The depositary will try, as far as practical, subject to the laws of Israel and the provisions of our articles of association or similar documents, to vote or to have its agents vote the deposited ordinary shares as instructed by ADS holders.  If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.  Except by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw the ordinary shares.  However, you may not know about the meeting enough in advance to withdraw the ordinary shares.  We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares.  In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions.  This means that you may not be able to exercise voting rights and there may be nothing you can do if your ordinary shares are not voted as you requested.  In addition, ADS holders have no right to call a shareholders’ meeting.
 
You may be subject to limitations on transfer of your ADSs.
 
Your ADSs will be transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.
 
45

RISKS RELATED TO BEING A PUBLICLY-TRADED COMPANY
 
We will incur significant additional increased costs as a result of the listing of the ADSs for trading on the Nasdaq and thereby becoming a public company in the United States as well as in Israel, and our management will be required to devote substantial additional time to new compliance initiatives as well as to compliance with ongoing U.S. and Israeli reporting requirements.
 
Upon the successful completion of this offering and the listing of the ADSs on the Nasdaq, we will become a publicly traded company in the United States. As a public company in the United States, we will incur additional significant accounting, legal and other expenses that we did not incur before the offering. We also anticipate that we will incur costs associated with corporate governance requirements of the SEC and the Nasdaq, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs such as investor relations, stock exchange listing fees and shareholder reporting, and to make some activities more time consuming and costly. The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant costs. Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and other provisions of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC and the Nasdaq, for so long as they apply to us, will result in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
 
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have an adverse impact on our business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting, which could have an adverse impact on the price of the ADSs.
 
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. In addition, if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Disclosing deficiencies or weaknesses in our internal controls, failing to remediate these deficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which could have an adverse impact on the price of the ADSs and subject us to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal controls over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
 
As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements, which could make the ADSs less attractive to investors.
 
For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies, including:
 

an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act; and


an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.
 
In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Given that we currently report and expect to continue to report under IFRS as issued by the IASB, we have elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required by the IASB.
 
We will be an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more, (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt, (iii) the last day of the fiscal year following the fifth anniversary of this offering or (iv) the date on which we are deemed to be a large accelerated filer as defined in SEC rules.
 
We cannot predict if investors will find the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the market price of the ADSs may be more volatile.

46


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
We make expressed and implied forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Forward-looking statements contained in this prospectus include, but are not limited to:
 

our estimates regarding our expenses, future revenue, capital requirements and needs for additional financing;
 

our expectations regarding the success of our cultured meat manufacturing technologies we are developing, which will require significant additional work before we can potentially launch commercial sales;
 

our research and development activities associated with technologies for cultured meat manufacturing, including three-dimensional meat production, which involves a lengthy and complex process;
 

our expectations regarding the timing for the potential commercial launch of our cultured meat technologies;
 

our ability to successfully manage our planned growth, including with respect to our recent acquisition of Peace of Meat, and any future acquisitions, joint ventures, collaborations or similar transactions;
 

the potential business or economic disruptions caused by the COVID-19 pandemic;
 

the competitiveness of the market for our cultured meat technologies;
 
47


our ability to enforce our intellectual property rights and to operate our business without infringing, misappropriating, or otherwise violating the intellectual property rights and proprietary technology of third parties;
 

our ability to predict and timely respond to preferences for alternative proteins and cultured meats and new trends;
 

our ability to attract, hire and retain qualified employees and key personnel; and
 

other risks and uncertainties, including those listed in the section titled “Risk Factors.”
 
The preceding list is not intended to be an exhaustive list of any forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results to differ materially from the results expressed or implied by the forward-looking statements. In particular, you should consider the risks and uncertainties described under “Risk Factors” in this prospectus.
 
The forward-looking statements contained in this prospectus are based upon information available to our management as of the date of this prospectus and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. The forward-looking statements contained in this prospectus are expressly qualified in their entirety by this cautionary statement. Except as required by law, we undertake no obligation to update publicly any forward-looking statements after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

48

 
USE OF PROCEEDS
 
We estimate that our net proceeds from this offering will be approximately $21.9 million, or approximately $25.4 million if the underwriters exercise in full their option to purchase additional ADSs, based on the initial public offering price of $10.30 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds from this offering to advance our program to develop commercial technologies to manufacture alternative foods, including potential acquisitions of other companies whose technologies are complementary or synergistic to our own, such as our purchase of Peace of Meat, as described herein in “Business”, and for working capital and general corporate purposes.
 
Our expected use of net proceeds from this offering represents our current intentions based on our present plans and business condition, which could change in the future as our plans and business conditions evolve. As of the date of this prospectus, we cannot predict with certainty any or all of the particular uses for the net proceeds to be received upon the closing of this offering, or the amounts, if any, that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds may vary depending on numerous factors, including our ability to obtain additional financing and changes we may make to our development plan. As a result, our management will have broad discretion in the application of the net proceeds, which may include uses not set forth above, and investors will be relying on our judgment regarding the application of the net proceeds from this offering.
 
Pending our use of proceeds from this offering, we plan to invest the net proceeds from this offering in a variety of investment-grade instruments and/or to hold such proceeds as cash or interest-bearing deposits, in the currencies in which we expect to make payment.
 
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DIVIDEND POLICY
 
We have never declared or paid any cash dividends on our shares and we anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years.
 
The distribution of dividends may also be limited by the Companies Law, which permits the distribution of dividends only out of retained earnings or earnings derived over the two most recent fiscal years, whichever is higher, provided that there is no reasonable concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become due. As of June 30, 2020, we did not have distributable earnings pursuant to the Companies Law. Dividend distributions may be determined by our board of directors, as our articles of association do not provide that such distributions require shareholder approval.
 
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CAPITALIZATION
 
The following table sets forth our total capitalization as of June 30, 2020, as follows:
 

on an actual basis;
 

on a pro forma basis to give effect to (i) private placements of our securities in August 2020 and December 2020, in which we received $5.6 million and $6.4 million, respectively, in immediate aggregate net proceeds and (ii) our acquisition of the outstanding securities of Peace of Meat, in return for net cash consideration (i.e., closing cash consideration less the cash and cash equivalents owned by Peace of Meat) of €3.8 million ($4.3 million) and closing equity consideration of 4,070,766 ordinary shares; and
 

on a pro forma as adjusted basis to give further effect to the issuance and sale of 2,427,185 ADSs in this offering at the initial public offering price of $10.30 per ADS, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.
 
You should read this information in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this prospectus, as well as the sections of this prospectus titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 

 
As of June 30, 2020
 
    Actual     Pro Forma    
Pro Forma As
Adjusted
 
   
(USD, in thousands, except share data)
 
Shareholders’ equity:
                 
Ordinary shares, no par value: 1,000,000,000 shares authorized, 60,071,351 shares issued and outstanding (actual); 76,225,877 shares issued and outstanding (pro forma); 100,497,727 shares issued and outstanding (pro forma as adjusted)
 
$
   
$
   
$
 
Share capital and premium
   
18,497
     
34,566
     
56,470
 
Capital reserves
   
1,348
     
1,348
     
1,348
 
Currency translation differences reserve
   
-
     
(57
)
   
(57
)
Accumulated deficit
   
(13,389
)
   
(13,389
)
   
(13,389
)
                         
Total shareholders’ capital equity
 
$
6,456
   
$
22,468
   
$
44,372
 

The outstanding share information in the table above as of June 30, 2020 excludes:
 

5,481,111 ordinary shares issuable upon exercise of options outstanding as of June 30, 2020 at a weighted average exercise price of $0.74 per share;
 

12,491,144 ordinary shares issuable upon exercise of investor warrants outstanding as of June 30, 2020 at a weighted average exercise price of $0.93 per share;
 

1,527,743 ordinary shares issuable upon the vesting of RSUs outstanding as of June 30, 2020, in return for which recipients are required to pay a weighted average of $0.09 per share; and
 

12,718,960 ordinary shares issuable upon vesting of merger warrants that had been granted and remained outstanding as of June 30, 2020 with no exercise price.

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DILUTION
 
If you invest in the ADSs in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per ADS and the pro forma net tangible book value per ADS after this offering. Dilution results from the fact that the attributed initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares. Our consolidated net tangible book value as of June 30, 2020 was $6.3 million, or $0.11 per ordinary share or $1.05 per ADS (using the ratio of 10 ordinary shares to one ADS).
 
Consolidated net tangible book value per ordinary share or ADS was calculated by:
 

subtracting our consolidated liabilities from our consolidated tangible assets; and
 

dividing the difference by the number of ordinary shares or ADSs outstanding, as applicable.
 
      After giving effect to (i) an aggregate 12,083,760 ordinary shares issued to certain investors in August, 2020 and December, 2020 in private placements, and (ii) our acquisition of the outstanding securities of Peace of Meat, in return for net cash consideration (i.e., closing cash consideration less the cash and cash equivalents owned by Peace of Meat) of €3.8 million ($4.3 million) and closing equity consideration of 4,070,766 ordinary shares, our consolidated pro forma net tangible book value as of June 30, 2020 was $12.7 million, or $0.17 per ordinary share or $1.67 per ADS (using the ratio of 10 ordinary shares to one ADS). The adjustments made to determine our consolidated pro forma net tangible book value were calculated based on an increase in consolidated tangible assets to reflect the net proceeds of such pro forma adjustments and an associated pro forma increase in ordinary shares outstanding.

After giving further effect to adjustments relating to this offering, our consolidated pro forma as adjusted net tangible book value on June 30, 2020, would have been approximately $34.6 million, equivalent to $0.34 per ordinary share or $3.45 per ADS. The adjustments made to determine our consolidated pro forma adjusted net tangible book value are as follows:
 

an increase in consolidated tangible assets to reflect the net proceeds of this offering received by us as described under “Use of Proceeds”; and
 

the issuance of the ADSs in this offering, based on an initial public offering price of $10.30 per ADS.
 
The following table illustrates the immediate increase in our consolidated net tangible book value of $1.05 per ADS and the immediate dilution to new investors:

Initial public offering price per ADS          
 
$
10.30
 
Consolidated net tangible book value per ADS as of June 30, 2020          
 
$
1.05
 
Increase in consolidated net tangible book value per ADS attributable to the pro forma adjustments described above
 
$
0.62
 
Pro forma net tangible book value per ADS          
 
$
1.67
 
Increase in consolidated net tangible book value per ADS attributable to this offering
 
$
1.78
 
Pro forma as adjusted net tangible book value per ADS after this offering          
 
$
3.45
 
Dilution per ADS to new investors          
 
$
6.85
 
Percentage of dilution per ADS to new investors          
   
67
%

52

 
If the underwriters’ option to purchase additional ADSs from us is exercised in full, and based on the initial public offering price of $10.30 per ADS, our pro forma as adjusted consolidated net tangible book value would be $3.66 per ADS and the dilution to new investors in this offering would be $6.64 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
 
If the (i) 8,261,087 ordinary shares issuable upon exercise of options at a weighted average exercise price of $0.90 per share, (ii) 25,189,573 ordinary shares issuable upon exercise of investor warrants at a weighted average exercise price of $1.23 per share, (iii) 1,169,068 ordinary shares issuable upon the vesting of RSUs in return for which recipients are required to pay a weighted average of $0.09 per share, (iv) 6,359,480 ordinary shares issuable upon vesting of merger warrants with no exercise price, (v) 5,445,764 ordinary shares issuable upon the exercise of rights granted to investors at a weighted average exercise price of $0.23 per share and (vi) 1,925,000 ordinary shares issuable upon exercise of warrants underlying rights granted to investors at a weighted average exercise price of $1.20 per share, each outstanding as of March 2, 2021, are all exercised and/or issued in full, and based on the initial public offering price of $10.30 per ADS, our pro forma as adjusted net tangible book value would be $5.58 per ADS and the dilution to new investors in this offering would be $4.72 per ADS, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
 
The table below summarizes, on a pro forma as adjusted basis giving effect to (i) an aggregate 12,083,760 ordinary shares issued to certain investors in August 2020 and December 2020 in private placements and (ii) our acquisition of the outstanding securities of Peace of Meat, in return for net cash consideration (i.e., closing cash consideration less the cash and cash equivalents owned by Peace of Meat) of €3.8 million ($4.3 million) and closing equity consideration of 4,070,766 ordinary shares, the differences for our existing shareholders and new investors in this offering, with respect to the number of ADSs purchased from us, the total consideration paid to us and the average per ADS price paid in this offering in the purchase of the ADSs from us, before deducting underwriting discounts and commissions and estimated offering expenses payable by us, and assuming all ordinary shares are represented by ADSs. The total number of ADSs does not include ADSs issuable upon the exercise of the option granted to the underwriters.
 
   
ADSs purchased
   
Total consideration
   
Average price per ADS
 
   
Number
   
%
   
Amount
   
%
       
Existing shareholders          
   
7,622,588
     
75.8
%
 
$
35,093,779
     
58.4
%
 
$
4.60
 
New investors          
   
2,427,185
     
24.2
%
 
$
25,000,006
     
41.6
%
 
$
10.30
 
Total          
   
10,049,773
     
100.0
%
 
$
60,093,785
     
100.0
%
 
$
5.98
 
 
53


If the underwriters exercise their option to purchase additional ADSs in full, the total consideration paid by new investors would be $28,749,999.

The table below summarizes, on a pro forma as adjusted basis (i) giving effect to an aggregate 12,083,760 ordinary shares issued to certain investors in August 2020 and December 2020 in private placements, (ii) our acquisition of the outstanding securities of Peace of Meat, in return for net cash consideration (i.e., closing cash consideration less the cash and cash equivalents owned by Peace of Meat) of €3.8 million ($4.3 million) and closing equity consideration of 4,070,766 ordinary shares and (iii) assuming the exercise and/or issuance in full of (a) 8,261,087 ordinary shares issuable upon exercise of options at a weighted average exercise price of $0.90 per share, (b) 25,189,573 ordinary shares issuable upon exercise of investor warrants at a weighted average exercise price of $1.23 per share, (c) 1,169,068 ordinary shares issuable upon the vesting of RSUs in return for which recipients are required to pay a weighted average of $0.09 per share, (d) 6,359,480 ordinary shares issuable upon vesting of merger warrants with no exercise price, (e) 5,445,764 ordinary shares issuable upon the exercise of rights granted to investors at a weighted average exercise price of $0.23 per share and (f) 1,925,000 ordinary shares issuable upon exercise of warrants underlying rights granted to investors at a weighted average exercise price of $1.20 per share, each outstanding as of March 2, 2021, the differences for our existing shareholders and new investors in this offering, with respect to the number of ADSs purchased from us, the total consideration paid to us and the average per ADS price paid in this offering in the purchase of the ADSs from us, before deducting underwriting discounts and commissions and estimated offering expenses payable by us. The total number of ADSs does not include ADSs issuable upon the exercise of the option granted to the underwriters.

   
ADSs purchased
   
Total consideration
   
Average price per share
 
   
Number
   
%
   
Amount
   
%
       
Existing shareholders          
   
12,457,585
     
83.7
%
 
$
83,443,755
     
76.9
%
 
$
6.70
 
New investors          
   
2,427,185
     
16.3
%
 
$
25,000,006
     
23.1
%
 
$
10.30
 
Total          
   
14,884,770
     
100.0
%
 
$
108,443,760
     
100.0
%
 
$
7.29
 

If the underwriters exercise their option to purchase additional ADSs in full, the total consideration paid by new investors would be $28,749,999.
 
The as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of the ADSs and other terms of this offering determined at pricing.

54

SELECTED CONSOLIDATED FINANCIAL DATA
 
The following tables set forth the following summary consolidated financial data:
 
• Our selected consolidated statements of comprehensive loss for the eight-month period from the inception of MeaTech ended December 31, 2018 and the year ended December 31, 2019 and our selected consolidated statement of financial position as of December 31, 2019, which have been derived from our audited consolidated financial statements included elsewhere in this prospectus.
 
• Our selected consolidated statements of comprehensive loss for the six-month periods ended June 30, 2020 and 2019 and our selected consolidated statement of financial position as of June 30, 2020, which have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus.
 
• Selected statement of comprehensive loss of Peace of Meat for the six-month period from its inception ended February 29, 2020, which has been derived from Peace of Meat’s audited financial statements included elsewhere in this prospectus.
 
• Selected statement of comprehensive loss of Peace of Meat for the six months ended August 31, 2020 and a selected consolidated statement of financial position of Peace of Meat as of August 31, 2020, which have been derived from Peace of Meat’s unaudited interim financial statements included elsewhere in this prospectus.
 
You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. These financial statements bear the company name of Meat-Tech 3D Ltd., which was our legal name at the time of their approval by our board of directors.
 
The unaudited interim financial statements were prepared on a basis consistent with the audited financial statements and include, in the opinion of each company’s respective management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of the results that may be expected in the future. Our financial statements, and those of Peace of Meat, have been prepared in accordance with IFRS, as issued by the IASB, which differ in certain significant respects from U.S. GAAP.

Although our functional currency is the NIS, we report our financial results in U.S. dollars. Peace of Meat reports its financial results in its functional currency of Euros.
 
Our summary consolidated financial statements are derived from the financial statements of MeaTech 3D. Although legally MeaTech 3D is the acquirer of all of the outstanding shares of MeaTech, pursuant to the Merger described elsewhere in this prospectus, the shareholders of MeaTech received the majority of the voting rights in MeaTech 3D and the ability to determine its financial and operational policy; the management of MeaTech continues to serve as the management of MeaTech 3D; and at the time of completing the Merger, MeaTech 3D (then Ophectra) was a company without significant business operations. The Merger therefore did not constitute a business acquisition as defined in IFRS 3, but it was determined that MeaTech is the acquirer of the business for accounting purposes. Therefore, the Merger was treated as a reverse acquisition that does not constitute a business combination. Accordingly, our consolidated financial statements and financial data included herein for all periods through and including December 31, 2019 were adjusted retroactively to reflect the financial statements of MeaTech (now called MeaTech MT Ltd.), other than the information concerning earnings per share, which is presented according to the equity information of MeaTech 3D (then called Ophectra), and  our consolidated financial statements and financial data included herein from January 1, 2020 onward relate to MeaTech 3D.
 
55


 
Six Months Ended June 30,
   
Year Ended December 31,
   
Eight-Month Period Ended December 31,
 

 
2020
   
2019
   
2019
   
2018
 
Consolidated Statement of Income:
 
(USD, in thousands, except per share data)
 
Revenues          
   
-
     
-
     
-
     
51
 
Expenses:
                               
Research and development expenses
   
850
     
14
     
166
     
-
 
General and administrative expenses          
   
2,006
     
38
     
256
     
53
 
Public listing expenses
   
10,164
     
-
     
-
     
-
 
Operating loss
   
13,020
     
52
     
422
     
2
 
Financing expense (income), net
   
(56
)
   
-
     
1
     
-
 
Loss for the period
   
12,964
     
52
     
423
     
2
 
Loss per ordinary share without par value
   
0.262
     
0.003
     
0.022
     
0
 
Weighted average number of ordinary shares
outstanding, basic and diluted
   
49,476,813
     
14,919,810
     
19,484,478
     
14,919,810
 
 
Earnings or loss per share for periods prior to the closing date of the Merger were calculated by dividing the weighted average of MeaTech 3D’s ordinary shares that were outstanding during the corresponding periods, into the loss or earnings of MeaTech in the corresponding periods, multiplied by the exchange ratio according to which ordinary shares of MeaTech 3D were issued in return for ordinary shares of MeaTech. Subsequent to the Merger date, the weighted average of the ordinary shares used in calculating the earnings or loss per share is that of MeaTech 3D.
 

 
As of
June 30,
   
As of
December 31,
 

 
2020
   
2019
   
2019
   
2018
 
Consolidated Statements of Financial Position Data:
       
(USD, in thousands)
       
Cash and cash equivalents
 
$
5,201
   
$
5
   
$
1,274
   
$
31
 
Total assets
   
7,064
     
8
     
1,987
     
35
 
Total liabilities
   
608
     
49
     
496
     
37
 
Total shareholders’ equity
 
$
6,456
   
$
(41
)
 
$
1,491
   
$
(2
)

56


UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial information is based upon our historical financial statements after giving effect to the acquisition of Peace of Meat. The unaudited pro forma condensed consolidated statements of financial position as of June 30, 2020, combine the historical statement of our financial position, giving effect to the acquisition of Peace of Meat, as if it had been completed on June 30, 2020. Since the acquisition of Peace of Meat occurred subsequent to June 30, 2020, our historical statement of financial position does not yet include the effects of that acquisition and, therefore, certain pro forma adjustments are necessary to present the unaudited pro forma condensed consolidated statement of financial position.
 
The unaudited pro forma condensed consolidated statements of loss and comprehensive loss for the six months ended June 30, 2020 and the year ended December 31, 2019 give effect to the acquisition of Peace of Meat as if it had occurred on January 1, 2019.
 
Peace of Meat previously had a fiscal year end of February 28 (February 29 in leap years), which differed from our fiscal year end of December 31. Accordingly, for purposes of the unaudited pro forma condensed consolidated statement of loss and comprehensive loss for the year ended December 31, 2019, the historical Peace of Meat amounts combine Peace of Meat’s historical statement of income for the period ended February 29, 2020. Likewise, for purposes of the unaudited pro forma condensed consolidated statement of loss and comprehensive loss for the six months ended June 30, 2020, the historical Peace of Meat amounts combine Peace of Meat’s historical unaudited interim statement of income for the six months ended August 31, 2020.
 
The following unaudited pro forma condensed consolidated financial information and related notes present our historical financial information and that of Peace of Meat, adjusted to give pro forma effect to events that are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed consolidated statements of income, expected to have a continuing impact on the consolidated results. The unaudited pro forma condensed consolidated financial information should be read in conjunction with our separate audited consolidated financial statements, and our separate unaudited condensed interim consolidated financial statements and the related respective notes, included elsewhere in this prospectus.
 
The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the dates indicated, nor is it indicative of future operating results or financial position or intended to project future financial position or results of the consolidated company. The pro forma adjustments represent our management’s best estimates, and are based upon information currently available and certain assumptions that we believe are reasonable under the circumstances. Future results of the consolidated company may vary significantly from the results reflected because of various factors, including those discussed in “Risk Factors.” Please refer to the footnotes to the unaudited pro forma condensed consolidated financial information for more information on the basis of preparation.
 
Description of the Transaction

The aggregate consideration of the transaction wherein we acquired all of the outstanding shares of Peace of Meat, or the Transaction, is comprised of the following components:


-
Closing consideration, or the Closing Consideration, comprised of €4.1 million ($4.6 million) in cash (including the closing finder’s cash fee of €0.1 million ($0.1 million) and legal fees of $0.1 million); 4,070,766 ordinary shares at an aggregate value of €4.4 million valued at a fair value of €3.6 million ($4.0 million) after discount for lack of marketability, or DLOM, in our ordinary shares, stemming from recipient agreement not to re-sell these shares for a period of 12 months from the date we complete the acquisition;  and


-
Earnout consideration contingent on the achievement of technological milestones, comprised of up to €3.9 million ($4.4 million) in cash; a finder’s fee comprised of €0.1 million ($0.1 million) in cash; and rights to receive up to 4,070,766 ordinary shares with a fair value of €2.4 million ($2.7 million).

57


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
AS OF JUNE 30, 2020

 
                   
Pro Forma Adjustment
 
(thousands)
 
MeaTech 3D Ltd. Historical
USD
   
Peace of Meat BV
Historical
EUR
   
Peace of Meat BV
Historical
USD(1)
   
Pro Forma
Adjustments
USD
   
Pro Forma
Combined
USD
 
Current assets
                             
Cash and cash equivalents
 
$
5,201
     
312
   
$
372
   
$
(4,628
)
 
$
945
 
Receivables
   
73
     
64
     
76
     
-
     
149
 
Other current assets
   
134
     
11
     
13
     
-
     
147
 
 
                                       
Total current assets
   
5,408
     
387
     
461
     
(4,628
)
   
1,241
 
                                         
Non-current assets
                                       
Fixed assets, net
   
277
     
144
     
172
     
-
     
449
 
Restricted deposits
   
72
     
-
     
-
     
-
     
72
 
Other investments
   
1,164
     
-
     
-
     
-
     
1,164
 
Right-of-use assets
   
143
     
14
     
17
     
-
     
160
 
IP R&D Technology
   
-
     
-
     
-
     
9,568
     
9,568
 
Intangible assets
   
-
     
5
     
6
     
-
     
6
 
 
                                       
Total non-current assets
   
1,656
     
163
     
195
     
9,568
     
11,419
 
 
                                       
Total assets
   
7,064
     
550
     
656
     
4,940
     
12,660
 
 
                                       
Liabilities and shareholders’ equity
                                       
Current liabilities
                                       
Convertible debentures
   
-
     
1,182
     
1,411
     
-
     
1,411
 
Other payables
   
398
     
25
     
30
     
-
     
428
 
Trade payables
   
61
     
104
     
124
     
-
     
185
 
Lease liabilities
   
109
     
3
     
4
     
-
     
113
 
Derivative instruments
   
3
     
-
     
-
     
-
     
3
 
Grants received in advance
   
-
     
69
     
82
     
-
     
82
 
 
   
5
                                 
Total current liabilities
   
571
     
1,383
     
1,651
     
-
     
2,222
 
                                         
Non-current liabilities
                                       
Long-term lease liabilities
   
37
     
12
     
14
     
-
     
51
 
 
                                       
Total non-current liabilities
   
37
     
12
     
14
     
-
     
51
 
                                         
Commitments
                                       
Share capital and premium on shares
   
18,497
     
5
     
6
     
3,982
     
22,485
 
Capital reserve
   
1,348
     
526
     
593
     
(593
)
   
1,348
 
Currency translation differences reserve
   
-
     
-
     
(72
)
   
15
     
(57
)
Accumulated deficit
   
(13,389
)
   
(1,376
)
   
(1,536
)
   
1,536
     
(13,389
)
 
                                       
Total shareholders’ deficit/equity
   
6,456
     
(845
)
   
(1,009
)
   
4,940
     
10,387
 
Total liabilities and shareholders’ deficit/equity
 
$
7,064
     
550
   
$
656
   
$
4,940
   
$
12,660
 


(1)
See Note 3 – Foreign Currency Adjustments

See accompanying Notes to Unaudited Pro Forma Consolidated Statement of Financial Position
58


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF LOSS
FOR THE YEAR ENDED DECEMBER 31, 2019

 
                   
Pro Forma Adjustment
 
(thousands,
except share and per share data)
 
MeaTech 3D Ltd. Historical
USD
   
Peace of Meat BV
Historical
EUR
   
Peace of Meat BV
Historical
USD(1)
   
Pro Forma
Adjustments
USD
   
Pro Forma
Combined
USD
 
 
                             
Research and development expenses
 
$
166
     
138
   
$
151
   
$
-
   
$
317
 
General and administrative expenses
   
256
     
163
     
181
     
-
     
437
 
 
                                       
Operating result
   
422
     
301
     
332
     
-
     
754
 
                                         
Financial income
   
(1
)
   
-
     
-
             
(1
)
Financial expenses
   
2
     
215
     
238
     
-
     
240
 
 
                                       
Financial result
   
1
     
215
     
238
             
239
 
 
                                       
Loss before taxes
   
423
     
516
     
570
     
-
     
993
 
Taxes on income
   
-
     
-
     
-
             
-
 
 
                                       
Net loss
   
423
     
516
     
570
     
-
     
993
 
 
                                       
Foreign currency translation adjustments
   
(22
)
   
-
     
-
     
-
     
(22
)
 
                                       
Net loss
 
$
401
     
516
   
$
570
   
$
-
   
$
971
 
                                         
Basic and diluted loss per share
 
$
0.022
                           
$
0.042
 
Weighted average number of shares outstanding – basic and diluted
   
19,484,478
                     
4,070,766
     
23,555,244
 


(1)
See Note 3 – Foreign Currency Adjustments

See accompanying Notes to Unaudited Pro Forma Consolidated Statement of Financial Position

59

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF LOSS
FOR SIX MONTHS ENDED JUNE 30, 2020

 
                   
Pro Forma Adjustment
 
(thousands, except
share and per share data)
 
MeaTech 3D Ltd. Historical
USD
   
Peace of Meat BV
Historical
EUR
   
Peace of Meat BV
Historical
USD(1)
   
Pro Forma
Adjustments
USD
   
Pro Forma
Combined
USD
 
 
                             
Research and development expenses
 
$
850
     
548
   
$
616
   
$
-
   
$
1,466
 
General and administrative expenses
   
2,006
     
174
     
196
     
-
     
2,202
 
Public listing expenses
   
10,164
             
-
     
-
     
10,164
 
 
                                       
Operating result
   
13,020
     
722
     
812
             
13,832
 
                                         
Financial income
   
(56
)
   
(1
)
   
(-
)
   
-
     
(56
)
Financial expenses
   
-
     
139
     
155
     
-
     
155
 
 
                                       
Financial result
   
(56
)
   
138
     
155
     
-
     
99
 
 
                                       
Loss before taxes
   
12,964
     
860
     
967
     
-
     
13,931
 
Taxes on income
   
-
     
-
             
-
     
-
 
 
                                       
Net loss
   
12,964
     
860
     
967
     
-
     
13,931
 
Attributable to:
                                       
Foreign currency translation adjustments
   
(51
)
   
-
     
-
     
-
     
(51
)
Net change in fair value of financial assets
   
334
     
-
     
-
     
-
     
334
 
 
                                       
Net loss
 
$
13,247
     
860
   
$
967
   
$
-
   
$
14,214
 
                                         
Basic and diluted loss per share
 
$
0.262
                           
$
0.260
 
Weighted average number of shares outstanding – basic and diluted
   
49,476,813
                     
4,070,766
     
53,547,579
 


(1)
 See Note 3 – Foreign Currency Adjustments

See accompanying Notes to Unaudited Pro Forma Consolidated Statement of Financial Position

60


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
1 Basis of preparation
 
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Transaction and has been prepared for informational purposes only.
 
The historical consolidated financial statements of MeaTech 3D and the historical financial statements of Peace of Meat have been adjusted in the pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the Transaction, (2) factually supportable and (3) with respect to the pro forma condensed combined statement of loss, expected to have a continuing impact on the combined results following the Transaction. The adjustments presented in the unaudited pro forma condensed combined financial information are based on currently available information and certain information that management of MeaTech 3D and Peace of Meat believe are reasonable under the circumstances. The unaudited condensed pro forma adjustments may be revised as additional information becomes available.
 
MeaTech 3D and Peace of Meat did not have any historical relationship prior to the Transaction other than an initial purchase of 66,667 Peace of Meat shares, reflecting 5.65% of the outstanding shares of Peace of Meat by MeaTech 3D shortly prior to the Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

2 Accounting policy

MeaTech 3D determined that the transaction is an asset acquisition and not a business combination in accordance with IFRS 3 based on the concentration test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset, which is in-process research and development technology.

MeaTech 3D’s management has made an accounting policy election that earnout payments contingent on the achievement of technological milestones will be recognized at the time of the achievement of each milestone on the basis of the shares and cash that are actually paid. Therefore, the Closing Consideration of €7.7 million represents the value of Peace of Meat as of the valuation date.

The Closing Consideration was allocated to net assets, and the remainder of the consideration to in-process research and development technology.

3 Foreign currency adjustments

The historical financial statements of Peace of Meat are presented in Euros. The historical financial information was translated from Euro to U.S. dollars using the following historical exchange rates:

 
 
U.S. Dollars per Euro
 
Average exchange rate for six months ended August 31, 2020
   
1.12
 
Period-end exchange rate as of August 31, 2020
   
1.19
 
Average exchange rate for six months ended February 29, 2020
   
1.1
 
Period-end exchange rate as of February 29, 2020
   
1.1
 

4 Adjustments to unaudited pro forma condensed combined financial information

The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:


-
A decrease of $4.6 million (€4.1 million) in cash, representing the cash portion of the purchase price;
 

-
An increase of $4.0 million (€3.6 million) to share capital, representing the portion of the purchase price related to the issuance of 4,070,766 ordinary shares of MeaTech 3D;
 

-
An adjustment whereby $9.6 million (€8.5 million) was recorded in in-process research and development technology intangible assets; and
 
An adjustment to the weighted-average number of shares outstanding (basic and diluted) to reflect the addition of 4,070,766 ordinary shares of MeaTech 3D to the weighted average of 49,476,813 ordinary shares outstanding in the six months ended June 30, 2020 for a total of 53,547,579 ordinary shares, and to the weighted average of 19,484,478 ordinary shares outstanding in the year ended December 31, 2019 for a total of 23,555,244 ordinary shares.

61

 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

 You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this prospectus. The following discussion is based on our financial information prepared in accordance with the International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including U.S. generally accepted accounting principles, or GAAP.  Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.  You should read “Risk Factors” above for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
 
Overview
 
We are a technology company focused on developing and out-licensing our proprietary three-dimensional printing technology, biotechnology processes and customizable manufacturing processes to food processing and food retail companies seeking to manufacture proteins without the need for animal slaughter. We are developing a novel, proprietary three-dimensional bioprinter to deposit layers of differentiated stem cells, scaffolding, and cell nutrients in a three-dimensional form of structured cultured meat.  We are initially focused on developing cultured meat steak technology.  While cultured meat companies have made some progress developing unstructured alternative meat products, such as minced meat and sausage, to date the industry has struggled in developing high-margin, high-value structured and cultured meat products such as steak.
 
We intend to license our proprietary production technology as well as provide associated products, such as cell lines, printheads, bioreactors and incubators, and services, such as technology implementation, training, and engineering support, both directly and through contractors, to food processing and food retail companies.  We intend to charge our customers a production license fee, based upon the amount of meat printed. We expect that each production facility will periodically require us to provide them with our proprietary materials, such as fresh sets of starter cells. We intend to charge a fee for such restocking, employing a cost-plus pricing model.  In addition, other materials used in the production process, such as cell-culture media and additives in our bio-inks may be sourced from third parties. Whether these materials are customized for the specifics of our production processes, ‘white-labelled’ generic materials, or proprietary materials that we have developed, we may charge a fee for restocking such materials with a cost-plus pricing model, however we have not yet reached the stage where it would be possible to estimate to what extent this would contribute to any future revenue stream. Finally, we intend to provide paid product implementation and guidance services to our customers looking to establish cultured meat manufacturing facilities. We expect that each facility licensing our technologies will need to deal with novel challenges and, as a result, will require our expertise to set up and implement the licensed technology and processes.
 
We have experienced net losses in every period since the inception of MeaTech. We incurred net losses of $0.42 million and $0.002 million for the year ended December 31, 2019 and eight-month period from inception ended December 31, 2018, respectively, and $12.96 million and $0.05 million for the six months ended June 30, 2020 and 2019, respectively.  As of June 30, 2020, we had an accumulated deficit of $13.39 million. We anticipate that we will continue to incur significant losses for the foreseeable future as our operating expenses and capital expenditures increase substantially due to our continued investment in our research and development activities and as we hire additional employees over the coming years. Furthermore, upon closing of this offering, we expect to incur additional expenses associated with operating as a U.S. public company, including significant legal, accounting, investor relations and other expenses we did not incur as a TASE-listed company.
 
For further information regarding our business and operations, see “Business” below.
 
62

Merger
 
We were incorporated in May 2018 in Israel as DocoMed Ltd., and originally provided digital health services. In July 2019, we changed our name to MeaTech Ltd., or MeaTech, and commenced our cultured meat technology development operations. In January 2020, MeaTech completed a merger with Ophectra Real Estate and Investment Ltd., or Ophectra, a company incorporated in Israel whose shares were traded on the TASE, whereupon the name of Ophectra was changed to Meat-Tech 3D Ltd., and later further changed to MeaTech 3D Ltd., or MeaTech 3D.
 
According to the terms of the merger, MeaTech 3D acquired all outstanding shares of MeaTech from MeaTech’s shareholders, in return for the issuance of 30,525,506 ordinary shares with no par value to the shareholders of MeaTech. Following the issuance, these shares formed 60% of our outstanding capital, and MeaTech become MeaTech 3D’s wholly-owned subsidiary. In September 2020, MeaTech changed its name to Chicken Meat-Tech Ltd. and later further changed its name to MeaTech MT Ltd.
 
In connection with the merger, the Tel Aviv District Court for Economic Affairs approved an arrangement whereby all of Ophectra’s assets and liabilities, whether certain or contingent, at the time of the merger were irrevocably assigned to a trust account for the purpose of settling Ophectra’s pre-merger liabilities (except for Ophectra’s ownership of 14.74% of the outstanding shares of Therapin Ltd., or Therapin, a company incorporated in Israel, which we temporarily retained with the provision that should the trust account funds and assets not suffice to pay the aforesaid liabilities, we will be liable for a portion of them, up to the value of the Therapin asset). This includes all future liabilities arising from Ophectra’s activities prior to the merger (including tax liabilities, if any), and any commitments made by Ophectra prior to the merger. We also provided the trust account approximately NIS 1.3 million (approximately $0.4 million), which we include in our public listing expenses, for the purpose of settling any of Ophectra’s debts, and bear no additional liabilities to the settlement fund. Anyone who believed they had a claim to Ophectra’s assets were invited to lodge their claims to the trustees. The fund is expected to remain active until January 2022, after which we intend to ask the court to assign us the assets remaining in the trust account, if any.
 
In connection with the merger, MeaTech shareholders received non-tradable merger warrants to purchase 12,718,961 ordinary shares upon the achievement of pre-defined milestones, which would increase the holdings of MeaTech shareholders to 68% of our outstanding capital, as of the date of issuance. These warrants will expire if not exercised by January 2025. The merger warrants have no exercise price, but can be exercised into the equivalent number of our ordinary shares upon request, following the achievement of pre-defined milestones, such that 50% of the warrants vested in the third quarter of 2020, upon the development of a prototype to create a stem-cell layer using three-dimensional printing technology, while the remaining 50% will vest upon the creation of 100 grams of edible, cultured meat tissue, consisting of cells bred in our laboratory that are printed using our three-dimensional printing technology, or upon completion of all the conditions required for listing our securities on a stock exchange outside Israel.
 
Upon completion of the merger, all directors and officers of MeaTech became directors and officers of MeaTech 3D, in addition to some of the independent directors of Ophectra.
 
Although MeaTech 3D was the legal acquirer of MeaTech’s shares as described above, because (i) the shareholders of MeaTech received the majority of the voting rights in MeaTech 3D and the ability to determine its financial and operational policy, (ii) the management of MeaTech continues to serve as the management of MeaTech 3D and (iii) at the time of completion of the merger, MeaTech 3D was a company without significant business operations, the merger is not considered a business acquisition as defined in IFRS 3. As a result, it was determined that MeaTech is the acquirer of the business for accounting purposes and the transaction was treated as a reverse acquisition that does not constitute a business combination.
 
63

Therefore, the consolidated financial statements and financial data included herein for all periods through and including December 31, 2019 were adjusted retroactively to reflect the financial statements of MeaTech (now called MeaTech MT Ltd.), other than the information concerning earnings per share, which is presented according to the equity information of MeaTech 3D (then called Ophectra Real Estate and Investments Ltd.), and our consolidated financial statements and financial data included herein from January 1, 2020 onward relate to MeaTech 3D.
 
For details of the accounting treatment of the merger, see “- Public Listing Expenses” below.
 
We temporarily maintained ownership of 14.74% of the outstanding shares of Therapin Ltd., or Therapin, while considering a possible collaboration, however, in May 2020, we returned these holdings to Therapin, and agreed to convert our investment of NIS 7.25 million in Therapin into an interest-free loan, to be repaid by the latter at a rate of NIS 0.48 million per annum for ten years (NIS 4.8 million in total) plus NIS 2.45 million to be paid upon an exit event, including a public offering, or repayment of 14.74% of any distributable surplus or dividend distributed by Therapin, up to the amount of the outstanding balance, as detailed in our separation agreement with Therapin. As part of the agreement, Therapin gave us an option to convert the cash payment to equity of Therapin.
 
Peace of Meat Merger
 
On February 10, 2021, we consummated an agreement with all of the shareholders of Peace of Meat, a private limited liability company incorporated, organized and existing under the laws of Belgium, or Peace of Meat, to acquire all of the outstanding share capital of Peace of Meat not yet owned by us for total consideration of up to €15.4 million ($17.2 million). The total consideration payable by us in the acquisition consists of €7.7 million ($8.6 million), comprised of €4.1 million ($4.6 million) in cash and 4,070,766 of our ordinary shares, with a fair value of €3.6 million ($3.9 million), paid on the closing date, and up to an additional €7.5 million ($8.3 million) payable in a combination of €3.9 million ($4.4 million) in cash and 4,070,766 of our ordinary shares in the amount of €3.6 million ($3.9 million) with a fair value of €2.4 million ($2.7 million), upon the achievement of four defined milestones related to Peace of Meat’s biomass and bioreactor size, density, capacity and production. The acquisition agreement specified that each milestone must be reached within a six-month period, over a total of two years, which can be extended by up to nine additional months under circumstances set forth in the acquisition agreement. The agreement also includes acceleration events, such as breach of the acquisition agreement by us; certain merger, consolidation or acquisition transactions involving us; our delisting; and the termination of employment of two or more of the founders of Peace of Meat during the milestone period under circumstances set forth in the acquisition agreement.
 
Peace of Meat was established in Belgium in 2019 and is developing cultured avian fat directly from animal cells without the need to grow or kill animals. In 2020, Peace of Meat was awarded a subsidy of approximately $1.33 million from the Flemish government, and has received approximately $1 million in private investments. We believe that its innovative technology has the potential to support an industrial process for the production of cultured avian fat. Peace of Meat has entered into a number of scientific and commercial collaborations, is in the process of positioning itself as a future B2B provider with the potential to cover the entire value chain and to accelerate research and production processes in the industry, and has conducted taste tests for hybrid products it has developed.

Components of Operating Results
 
Revenues
 
To date, we have not generated any revenue since we commenced our cultured meat operations.  We do not expect to receive any revenue unless and until we complete development of and successfully commence out-licensing our technologies, or until we receive revenue from a collaboration or other partnership such as a co-development agreement, or the acquisition of a company that generates revenues.  There can be no assurance that we will be successful in developing or ultimately commercializing our technologies, in establishing revenue-generating collaborations or acquiring revenue-generating companies.
 
64

Research and Development Expenses
 
Research and development activities are our primary focus. We do not believe that it is possible at this time to accurately project total expenses required for us to reach the point at which we will be ready to out-license our technologies. Development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast whether and when collaboration arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expenses to increase over the next several years as our development program progresses. We would also expect to incur increased research and development expenses if we were to identify and develop additional technologies.
 
Research and development expenses include the following:
 

employee-related expenses, such as salaries and share-based compensation;
 

expenses relating to outsourced and contracted services, such as external laboratories and consulting, research and advisory services;
 

supply and development costs;
 

expenses incurred in operating our laboratories and small-scale equipment; and
 

costs associated with regulatory compliance.
 
We recognize research and development expenses as we incur them.
 
General and Administrative Expenses
 
General and administrative expenses consist primarily of personnel costs, including share-based compensation related to directors and employees, facility costs, patent application and maintenance expenses, and external professional service costs, including legal, accounting, audit, finance, business development, investor relations and human resource services, and other consulting fees.
 
Public Listing Expenses
 
Based on the reverse acquisition method, the assets and liabilities of MeaTech (the acquirer for accounting purposes) were recognized in our financial statements at their book value at the date of closing of the merger. The acquisition consideration, in the amount of $11.4 million, was set based on the closing price of Ophectra's shares on the Tel Aviv Stock Exchange on the date of closing of the Merger, while any surplus proceeds of the acquisition over the fair value of Ophectra’s net assets (excluding its net assets that were transferred to a settlement fund as described in “- Merger” above) were recognized in profit or loss as public listing expenses in the amount of $10.2 million, that did not affect cash flow.
 
Finance Expenses, Net
 
Finance expenses, net, consisted primarily of a change in the fair value of price protection rights provided to investors in a private placement round from May, 2020, as part of the terms of their investment.  In July 2020, we announced that, in light of our compliance with share price trading conditions, the price protection mechanism under the investment agreement had expired.
 
Income Taxes
 
We have yet to generate taxable income in Israel. As of June 30, 2020, our operating tax loss carryforwards were approximately $0.6 million (NIS 2.1 million).
 
65

Our wholly-owned subsidiary, MeaTech MT Ltd. (formerly MeaTech Ltd.), had operating tax loss carryforwards of approximately $0.5 million (NIS 1.8 million) as of June 30, 2020.
 
Results of Operations
 
Our results of operations have varied in the past and can be expected to vary in the future due to numerous factors.  We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indications of future performance.
 
Below is a summary of our results of operations for the periods indicated:
 
   
Six Months Ended June 30,
   
Year Ended December 31,
   
Eight-Month Period Ended December 31,
 
   
2020
   
2019
   
2019
   
2018
 
   
USD thousands
 
Revenues
   
-
     
-
     
-
   
$
51
 
Gross Profit
   
-
     
-
     
-
   
$
51
 
                                 
Operating expenses:
                               
Research and development expenses
 
$
850
   
$
14
   
$
166
   
$
-
 
General and administrative expenses
   
2,006
     
38
     
256
     
53
 
Public Listing expenses
   
10,164
     
-
     
-
     
-
 
Loss from operations          
 
$
13,020
   
$
52
   
$
422
   
$
2
 
Finance income          
   
(56
)
   
-
     
1
     
-
 
Finance expense          
   
-
     
-
     
-
     
-
 
Finance expense (income), net          
   
(56
)
   
-
     
1
     
-
 
Income tax          
   
-
     
-
     
-
     
-
 
Net loss          
 
$
12,964
   
$
52
   
$
423
   
$
2
 

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Research and development expenses
 
Research and development expenses increased by approximately $0.84 million, or 5,971%, to approximately $0.85 million for the six months ended June 30, 2020, compared to approximately $0.01 million for the six months ended June 30, 2019. This increase was mainly the result of scale-up development activities and share-based payment expenses.
 
General and administrative expenses
 
General and administrative expenses increased by approximately $1.97 million, or 5,179%, to approximately $2.01 million for the six months ended June 30, 2020, compared to approximately $0.04 million for the six months ended June 30, 2019. This increase was mainly the result of share-based payment expenses and professional services expenditures associated with being a publicly-traded company in Israel.
 
Financing expense (income), net
 
Financing expense (income), net increased by approximately $0.06 million to approximately $0.06 million for the six months ended June 30, 2020, compared to $0 for the six months ended June 30, 2019. The increase was mainly the result of a change in the fair value of anti-dilution protection provided to investors which we revalue at fair market value at the end of each reporting period.
 
66

Net loss
 
Net loss increased by approximately $12.9 million to approximately $13.0 million for the six months ended June 30, 2020, compared to $0.05 million for the six months ended June 30, 2019. The increase was mainly the result of public listing expenses recorded in connection with the Merger, that did not impact our cash flow.
 
Year Ended December 31, 2019 Compared to Eight-Month Period From Inception of MeaTech Ended December 31, 2018

Revenues
 
Prior to commencement of our cultured meat operations, MeaTech (then called DocoMed Ltd.)  recorded revenues of approximately $0.05 million in 2018, from the provision digital health services. These services terminated prior to the commencement of our cultured meat operations as of September 1, 2019, and we have not recorded any revenues subsequently.
 
Research and development expenses
 
Research and development expenses increased by approximately $0.17 million, to approximately $0.17 million for the year ended December 31, 2019, compared to $0 for the eight-month period from inception of MeaTech ended December 31, 2018. The increase resulted mainly from payroll expenses, materials and professional services expenditures related to our cultured meat research and development operations.
 
General and administrative expenses
 
General and administrative expenses increased by approximately $0.2 million, or 383%, to approximately $0.3 million for the year ended December 31, 2019, compared to approximately $0.05 million for the eight-month period from inception of MeaTech ended December 31, 2018. The increase resulted mainly from payroll expenses and professional services expenditures.
 
Net loss
 
Net loss increased by approximately $0.4 million to approximately $0.4 million for the year ended December 31, 2019, compared to $0.002 million for the eight-month period from inception of MeaTech ended December 31, 2018. The increase was mainly the result of increased operating expenses incurred as we commenced cultured meat technology development.
 
Contractual Obligations
 
The following table summarizes our significant contractual obligations as at June 30, 2020, excluding expected interest payments:
 
   
Payment due by period
 
   
Total
   
Less than
1 year
   
1-3 years
   
3-5 years
   
More than
5 years
 
   
USD thousands
 
Operating Lease Obligations(1)
 
$
146
   
$
109
   
$
37
   
$
   
$
 
 

(1)
We are subject to operating lease obligations in connection with the lease of the property on which we maintain our laboratory and offices.
 
67


Off-Balance Sheet Arrangements
 
We have not entered into any off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
 
Critical Accounting Policies
 
We describe our significant accounting policies and estimates in Note 3 to our annual financial statements contained elsewhere in this prospectus. We believe that these accounting policies and estimates are critical in order to fully understand and evaluate our financial condition and results of operations.
 
We prepare our financial statements in accordance with IFRS as issued by the IASB.
 
In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of our accounting policies and the reported amounts recognized in the financial statements. On a periodic basis, we evaluate our estimates, including those related to share-based compensation and derivatives. We base our estimates on historical experience, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.
 
 Recently-Issued Accounting Pronouncements
 
Certain recently-issued accounting pronouncements are discussed in Note 3, Summary of Significant Accounting Policies, to the consolidated financial statements included in elsewhere in this registration statement, regarding the impact of the IFRS standards as issued by the IASB that we will adopt in future periods in our consolidated financial statements.
 
Emerging Growth Company Status
 
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
 

a requirement to present only two years of audited financial statements in addition to any required interim financial statements and correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure;
 

to the extent that we no longer qualify as a foreign private issuer, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation;
 

an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and
 

an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements.
 
We may take advantage of these exemptions for up to five years or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; (iii) the date on which we are deemed to be a large accelerated filer under the rules of the SEC; or (iv) the last day of the fiscal year following the fifth anniversary of this offering. We may choose to take advantage of some but not all of these exemptions. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Given that we currently report and expect to continue to report our financial results under IFRS as issued by the IASB, we will not be able to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required by the IASB.
 
68

Liquidity and Capital Resources
 
Since the commencement of our cultured meat operations, we have not generated any revenue and have incurred operating losses and negative cash flows from our operations. We have funded our operations primarily through the sale of equity securities. From the inception of MeaTech through June 30, 2020, we raised an aggregate of $5.29 million in three rounds of private placements of our securities, and $2.1 million in proceeds from option exercises. As of June 30, 2020, we had $5.2 million in cash and cash equivalents.
 
In August 2020 and December 2020, subsequent to the financial reporting date, we raised an additional $5.6 million and $6.4 million in immediate aggregate net proceeds in two rounds of private placements of securities.
 
The table below shows a summary of our cash flows for the periods indicated:
 
   
Six Months Ended June 30,
   
Year Ended December 31,
   
Eight-Month Period Ended December 31,
 
   
2020
   
2019
   
2019
   
2018
 
   
USD thousands
 
             
Net cash provided by (used in) operating activities          
 
$
(1,481
)
 
$
(26
)
 
$
(173
)
 
$
34
 
Net cash used in investing activities          
   
(198
)
   
(1
)
   
(253
)
   
(3
)
Net cash provided by financing activities          
   
5,545
     
-
     
1,648
     
-
 
Net increase (decrease) in cash and cash equivalents          
 
$
3,866
   
$
(27
)
 
$
1,222
   
$
31
 
 
Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net cash used in operating activities
 
Net cash used in operating activities increased by $1.5 million, to approximately $1.5 million for the six months ended June 30, 2020 compared to approximately $0.03 million for the six months ended June 30, 2019. This increase was mainly the result of scale-up development activities and professional services expenditures associated with being a publicly-traded company in Israel.
 
Net cash used in investing activities
 
Net cash used in investing activities increased by $0.2 million, to approximately $0.2 million for the six months ended June 30, 2020 compared to $0.001 million for the six months ended June 30, 2019.  This increase was mainly due to the acquisition of fixed assets in the course of initiating our operations.
 
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Net cash used in financing activities
 
Net cash provided by financing activities increased by $5.545 million, to approximately $5.5 million for the six months ended June 30, 2020 compared to $0 for the six months ended June 30, 2019.  This increase was mainly due to funds raised in an aggregate amount of $3.4 million in private placements of ordinary shares and warrants in the first half of 2020, and funds received in connection with the exercise of options.
 
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
 
Net cash provided by (used in) operating activities
 
Net cash used in operating activities increased by $0.2 million, to approximately $0.2 million for the year ended December 31, 2019 compared to approximately $0.03 million for the year ended December 31, 2018. This increase was mainly due to payroll expenses and professional services expenditures.
 
Net cash used in investing activities
 
Net cash used in investing activities increased by $0.3 million, to approximately $0.3 million for the year ended December 31, 2019 compared to $0.003 thousand for the year ended December 31, 2018.  This increase was mainly due to the acquisition of fixed assets and the provision of a loan by MeaTech to Ophectra, prior to the merger described above, which was later assigned to the settlement fund described above in lieu of repayment.
 
Net cash used in financing activities
 
Net cash provided by financing activities increased by $1.6 million, to approximately $1.6 million for the year ended December 31, 2019 compared to $0 for the year ended December 31, 2018. This increase was due to funds raised in a private placement of ordinary shares in 2019.
 
We have incurred losses and cash flow deficits from operations since the inception of MeaTech, resulting in an accumulated deficit at June 30, 2020 of approximately $13.4 million. We anticipate that we will continue to incur net losses for the foreseeable future. We believe that our existing cash and cash equivalents will be sufficient to fund our projected cash needs until March 2022, without giving effect to the proceeds from this offering. To meet future capital needs, we would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be on favorable terms or even available to us. Our failure to obtain sufficient funds on commercially acceptable terms when needed would have a material adverse effect on our business, results of operations and financial condition. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.
 
 Our future capital requirements will depend on many factors, including, but not limited to: 
 

the progress and costs of our research and development activities;
 

the costs of development and expansion of our operational infrastructure;
 

the costs and timing of developing technologies sufficient to allow food production equipment manufacturers and food manufacturers to product products compliant with applicable regulations;
 

our ability, or that of our collaborators, to achieve development milestones and other events or developments under potential future licensing agreements;
 

the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements with respect to our technologies;
 

the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
 
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the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves, once our technologies are developed and ready for commercialization;
 

the costs of acquiring or undertaking development and commercialization efforts for any future products or technology;
 

the magnitude of our general and administrative expenses; and
 

any additional costs that we may incur under future in- and out-licensing arrangements relating to our technologies and futures products.
 
Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through capital raising or by out-licensing and/or co-developing applications of one or more of our product candidates. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available on favorable terms, or at all, we may be required to delay, reduce the scope of or eliminate research or development efforts or plans for commercialization with respect to our technologies and make necessary change to our operations to reduce the level of our expenditures in line with available resources.
 
We are a development-stage technology company and it is not possible for us to predict with any degree of accuracy the outcome of our research and development efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources, or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are described herein.
 
Quantitative and Qualitative Disclosures About Market Risk

Liquidity Risk

Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled in cash. Cash flow forecasting is performed in our operating entities and aggregated at a consolidated level. We monitor forecasts of our liquidity requirements to ensure we have sufficient cash to meet operational needs. We may be reliant on our ability to raise additional investment capital from the issuance of both debt and equity securities to fund our business operating plans and future obligations.

Credit risk
Credit risk is the risk of financial loss to us if a debtor or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from our receivables.
 
As part of an agreement with Therapin from May 2020, we agreed to convert an NIS 7.25 million investment in Therapin made by Ophectra and assumed by us at the Merger, into an interest-free loan, to be repaid by the latter at a rate of NIS 0.48 million per annum for ten years (NIS 4.8 million in total) plus NIS 2.45 million to be paid upon an exit event, including a public offering, or repayment of 14.74% of any distributable surplus or dividend distributed by Therapin, up to the amount of the outstanding balance, as detailed in our separation agreement with Therapin. As part of the agreement, Therapin gave us an option to convert the cash payment to equity of Therapin. Therapin has not provided any guarantees in connection with its repayment of our loan.
 
We restrict exposure to credit risk in the course of our operations by investing only in bank deposits.
 
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Equity price risk

As we have not invested in securities riskier than short-term bank deposits, we do not believe that changes in equity prices pose a material risk to our holdings. However, decreases in the market price of our ordinary shares or ADSs could make it more difficult for us to raise additional funds in the future or require us to raise funds at terms unfavorable to us.

Inflation risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations in the reporting period. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through hedging transactions. Our inability or failure to do so could harm our business, financial condition and results of operations.

Foreign Currency Exchange Risk

Currency fluctuations could affect us through increased or decreased costs, mainly for goods and services acquired outside of Israel. Currency fluctuations did not have a material effect on our results of operations during the six months ended June 30, 2020, year ended December 31, 2019 and the eight-month period from inception of MeaTech ended December 31, 2018.
 
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BUSINESS

Overview

We are a technology company focused on developing and out-licensing our proprietary three-dimensional printing technology, biotechnology processes and customizable manufacturing processes to food processing and food retail companies seeking to manufacture proteins without the need for animal slaughter. We are developing a novel, proprietary three-dimensional bioprinter to deposit layers of differentiated stem cells, scaffolding, and cell nutrients in a three-dimensional form of structured cultured meat. We believe the cultured meat production processes we are developing, which are designed to offer our eventual customers an alternative to industrial slaughter, have the potential to improve the quality of the environment, shorten global food supply chains, and reduce the likelihood of health hazards such as zoonotic diseases transferred from animals to humans (including viruses, such as virulent avian influenza and COVID-19, and drug-resistant bacterial pathogens, such as some strains of salmonella).

We are initially focused on developing cultured meat steak technology.  While cultured meat companies have made some progress developing unstructured alternative meat products, such as minced meat and sausage, to date the industry has struggled in developing high-margin, high-value structured and cultured meat products such as steak. Unlike minced meat, a cultured meat steak product has to grow in fibers and contain connective tissues and fat. To be adopted by diners, we believe cultured steaks will need to be meticulously engineered to look and smell like conventional meat, both before and after cooking, and to taste and feel like meat to the diner. This is the test on which we have set our sights – a three-dimensional, printed steak based on animal cells, rather than plant-based alternatives. We believe we are the first company to be developing both a proprietary bioprinter and the related processes for growing cultured meat to focus on what we believe is a high value sector of the alternative protein market.

We intend to license our proprietary production technology as well as provide associated products, such as cell lines, printheads, bioreactors and incubators, and services, such as technology implementation, training, and engineering support, both directly and through contractors, to food processing and food retail companies.  We intend to charge our customers a production license fee, based upon the amount of meat printed. We expect that each production facility will periodically require us to provide them with our proprietary materials, such as fresh sets of starter cells. We intend to charge a fee for such restocking, employing a cost-plus pricing model.  In addition, other materials used in the production process, such as cell-culture media and additives in our bio-inks may be sourced from third parties. Whether these materials are customized for the specifics of our production processes, ‘white-labelled’ generic materials, or proprietary materials that we have developed, we may charge a fee for restocking such materials with a cost-plus pricing model, however we have not yet reached the stage where it would be possible to estimate to what extent this would contribute to any future revenue stream. Finally, we intend to provide paid product implementation and guidance services to our customers looking to establish cultured meat manufacturing facilities. We expect that each facility licensing our technologies will need to deal with novel challenges and, as a result, will require our expertise to set up and implement the licensed technology and processes.

We are led by our Chief Executive Officer, Sharon Fima, who previously founded and served as Chief Technology Officer of Nano Dimension Ltd. (TASE/Nasdaq: NNDM), which developed a complete desktop three-dimensional printing system for multilayer printed circuit boards, working on proprietary conductive nano-silver inks along with novel insulating and substrate inks.  We have carefully selected personnel for the rest of our executive management team who possess substantial industry experience and share our core values, from fields as diverse as tissue engineering, industrial stem cell growth, and printer and print materials development.  We are further guided by world-renowned consultants, including Professor Shlomo Magdassi, Ph.D. and Professor Tal Dvir, Ph.D. Professor Magdassi is a professor of chemistry at the Casali Center for Applied Chemistry, the Institute of Chemistry and the Center for Nanoscience and Nanotechnology at the Hebrew University of Jerusalem, Israel. He is the head of the Center for 3D and Functional Printing at the Hebrew University, where he holds the Enrique Berman Chair in Solar Energy. Professor Dvir is the Head of the Laboratory for Tissue Engineering and Regenerative Medicine in Tel Aviv University. He is affiliated with the Department of Biotechnology and the Department of Materials Science and Engineering. Prof. Dvir is the Director of Tel Aviv University’s Center for Nanoscience and Nanotechnology and the Founding Director of the University's Center for Regenerative Biotechnology.

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Cultured Meat Industry and Market Opportunity

Protein is a necessary staple for healthy nutrition. The growth in recent years of both the human population and global wealth is driving a decades-long trend of accelerating demand for meat. The demand for protein products has consistently risen in recent decades, and is expected to continue to do so. The rising growth of demand for farm animals for the food industry has created significant environmental, health, financial and ethical challenges.

The global processed meat market was valued by Zion Market Research at approximately $714 billion in 2016 and is expected to more than double in value by 2022, reflecting an average compound annual growth rate, orCAGR, of around 14%. According to market research firm Allied Market Research, the global meat substitute market was estimated at $4.5 billion in 2018 and is expected to grow to $7.55 billion by 2025. Of this, the cultured meat category alone is expected to reach $214 million by 2025, with an annual growth rate of approximately 16%. With regard to the longer term, AT Kearney predicted in 2019 that by 2040, just 40% of demand for the global meat market will be provided by conventional meat, with 35% provided by cultured meat and an additional 25% by plant-based meat replacements.

The meat industry is showing strong interest in the alternative protein space, both in plant-based and cell-based proteins. There are several drivers underlying the strong engagement with alternative proteins. We believe consumers are looking for less harmful protein sources, with approaches such as flexitarianism already an established middle path between vegetarian diets and those heavy in animal proteins, such as the paleo diet. Many meat processors have experienced the worst of the COVID-19 pandemic outbreaks, and are seeking to minimize human involvement in the manufacturing process. To that end, retailers such as Costco and Walmart are increasingly opening their own meat processing facilities on which they can rely exclusively.

Limitations of Conventional Meat Production

In addition to questions about whether conventional meat production can adequately provide for the growing global population, conventional meat production raises serious environmental issues.  According to the United Nations, 8% of the world's freshwater is used for raising livestock for meat and leather. At least 18% of the greenhouse gases entering the atmosphere are from the livestock industry. Twenty-six percent of the planet's ice-free land is used for livestock grazing and 33% of croplands are used for animal feed.  With regard to treatment of animals in conventional meat production, approximately 72 billion animals were slaughtered in 2018 alone.

Another common consumer concern with industrial-scale animal-rearing is the reliance on intensive use of added growth hormones and antibiotics. Hormonal substances and antibiotics are used in livestock to manage animal growth and health, and to treat or prophylactically prevent diseases such as avian flu and swine flu. The hormones used in livestock include estradiol-17β, progesterone, testosterone, zeranol, trenbolone, and melengestrol acetate, and their effects on human health continue to be disputed by researchers.

Existing Alternative Proteins and their Limitations

Negative consumer sentiment towards the perceived ethical, health and environmental effects of the global meat industry help explain the strong focus that has developed on creating methods of protein production that are more sustainable, nutritious and conscious of animal welfare. Recent years have seen a combination of increasing consumer awareness and advanced technological development that has led to substantially increased demand for proteins that do not involve animal slaughter, beyond traditional plant-based proteins, such as soy, peas and chickpeas. Some of the alternative proteins being developed for human consumption for this purpose include:

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Mycoproteins: Some of the most commercially successful novel alternative protein products are currently mycoproteins, derived from fungi. They are high in protein, high in fiber, low in saturated fat, and contain no cholesterol.  However, they have been associated with allergic and gastrointestinal reactions. They are fermented to become a dough, which can develop a texture similar to that of meat.

Jackfruit: Jackfruit is a tropical fruit, native to India, which is high in protein. Its texture is somewhat similar to shredded meat, although its taste is similar to other fruits, such as apples and mangoes, so while it is a good source of protein, it is not generally viewed as an alternative to meat for consumers used to animal proteins.

Insects: Insects are an environmentally-friendly source of protein, requiring significantly less land and water, and emitting significantly less greenhouse gases than large mammals raised for slaughter. In addition, they can be fed food unsuitable for livestock that would otherwise be wasted. While crickets are the most common source of edible insects, research is taking place on new insect species of value for food production, as well as methods to produce them economically at scale. Insects can be consumed in their natural state, however many cultures consider insect consumption to be taboo and many people are disgusted by the idea.  As a result, research is taking place into developing insect-based products in different forms not easily discernable as insect-based, including flour.
 
The Cultured Meat Solution

We believe cultured meat grown through cellular agriculture, which aims to produce cultured animal proteins without the need for large-scale slaughter, has the potential to satisfy consumer desire for meat while avoiding the negative impacts of conventional meat production.  Cellular agriculture is an efficient, closely-controlled indoor agricultural process, utilizing advanced technologies with conceptual similarities to hydroponics, but used for growing meat cells, rather than fruit. Cultured meat is grown in cell culture, rather than inside animals, applying tissue engineering practices for muscle production for the purpose of human consumption. In place of animal slaughter, stem cells are removed from an animal, such as from an umbilical cord following birth, and then cultivated in vitro to form muscle fibers. Also known as clean meat, in vitro meat, lab-grown meat, green meat, cell-based meat, and motherless meat, the term “cultured meat” has arguably gained the most traction in public discourse in describing slaughter-free real meat.

Cultured meat production is an advanced technology operating as part of the wider field of cellular agriculture (growing animal cells in bioreactors), which is an emerging solution to the growing demand for alternative proteins. We are aware of a few dozen companies and institutions actively working to develop technologies and other products to meet this demand, some of whom are focused on producing red meats, while others are focused on fish and crustaceans. Some of these companies are working on culturing various types of cells, such as chicken, pork, kangaroo and foie gras. We believe this push on scaling-up cellular agriculture has the potential to offer a solution to the scale and environmental challenges confronting conventional meat production. Other alternative protein competitors are already selling plant-based meat substitutes, but to our knowledge, these companies are not focused on the production of real meat products produced with animal cells.

We are engaged with experimentation to develop optimal and cost-effective cell culture media. In so doing, we are also exploring a range of types of and sources for growth factors suited to cell culture. These sources are expected to be sustainable and ethical, providing a route to enabling effective and cost-effective processes.

While many challenges remain, surveys are consistently showing consumer openness toward, and enthusiasm for, cultured meat. For example, a survey on perceptions of cultured meat among 3,030 consumers in the United States, India and China conducted by researchers from the University of Bath, the Good Food Institute and the Center for Long Term Priorities and published in 2019, showed overwhelming willingness to begin purchasing cultured meat regularly, albeit less so in the United States than in India and China.

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Consumer Attitudes Toward Regular Purchase of Cultured Meat

 
Unlikely to Purchase
Somewhat or Moderately Likely
Very or Extremely Likely
United States
23.6%
46.6%
29.8%
India
10.7%
37.7%
48.7%
China
6.7%
33.9%
59.3%

The top reasons for consumer demand for cultured meat, according to a survey from August 2018 performed by Mattson Co., were reduction of hormones and antibiotics in meat (39% of respondents), animal welfare concerns, together with a desire to reduce animal cruelty and slaughter (36%) and the beneficial impact expected on the environment (27%). Additional reasons included consumer health, food security and production hygiene.

We believe that cultured meat has several advantages over conventionally-harvested meat:


Environmental: At least 18% of the greenhouse gases entering the atmosphere today are from the livestock industry. Research shows that the expected environmental footprint of cultured meat includes approximately 78% to 96% fewer greenhouse gas emissions, 99% less land use, 82% to 96% less water use, and 7% to 45% less energy use than conventionally-produced beef, lamb, pork and poultry. This suggests that the environmental consequences of switching from large-scale, factory farming to lab-grown cultured meat could have a long-term positive impact on the environment.
 

Cost: While the precise economic value of harvested cells has yet to be determined, the potential to harvest large numbers of cells from a small number of live donor animals gives rise to the possibility of considerably higher returns than traditional agriculture, with production cycles potentially measured in months, rather than years. By comparison, raising a cow for slaughter generally takes an average of 18 months, over which period 15,400 liters of water and 7 kilograms of feed will be consumed for every kilogram of beef produced.