Pluri (PLUR) - 2022 Q4 - Annual Report

PART I Item 1. Business Pluri Inc. is a biotechnology company utilizing a 3D cell expansion technology platform for regenerative medicine and food tech. The company develops placenta-based cell therapy candidates (PLX cells) and operates a GMP manufacturing facility. It recently changed its name from Pluristem Therapeutics Inc. to reflect a broader strategy beyond medicine - Company Name Change: Pluristem Therapeutics Inc. to Pluri Inc. (effective July 26, 2022), Nasdaq ticker changed to "PLUR"[23] - Core Business: Biotechnology company with an advanced 3D cell expansion technology platform for regenerative medicine and food tech, with plans for other industries[17][18][19] - Business Model: Includes licensing deals, joint ventures, partnerships, joint development agreements, and direct sales of products[20] Overview Scientific Background Our Technology Product Candidates Pluri Health PLX-PAD PLX-R18 Modified PLX cells Our Clinical Development Product Candidates Orthopedic Indications COVID-19 Complicated by ARDS Recovery Following HCT Peripheral and Cardiovascular Diseases ARS Steroid-Refractory cGVHD Regulatory and Clinical Affairs Strategy Our Activities in the Food Tech Sector Intellectual Property Research and Development Foundational Research Collaborations and Ongoing Research and Development Plans In-House Clinical Manufacturing Government Regulation The Regulatory Process in the United States The Regulatory Process in Europe Other Regulations Clinical Studies Employees Competition Impact of COVID-19 Available Information Item 1A. Risk Factors An investment in Pluri Inc. carries a high degree of risk, including potential adverse effects from the COVID-19 pandemic, a history of financial losses, and the ongoing need for significant capital. The company faces risks related to intellectual property, manufacturing, international operations, stock price volatility, and the unproven nature of its food-tech business. Regulatory hurdles, dependence on third parties, and cybersecurity threats also pose substantial challenges - Key Risks: COVID-19 impact, history of losses, need for additional capital (dilution risk), intellectual property disputes, manufacturing risks, international business exposure (currency fluctuations, Israeli political conditions), stock price volatility, EIB Finance Agreement restrictions, IIA grant limitations, cybersecurity incidents, global inflation, and unproven food-tech business[120][121] - Financial Risks: Company has a history of losses and limited revenue, requiring significant future capital. Inability to secure financing or successfully commercialize products/obtain regulatory approvals could severely limit profitability[123][124][125][126][127][131] - Operational Risks: Clinical trial delays/terminations, inherent risks in novel technology development, uncertain market acceptance for cell therapies, and potential changes in interim data[136][137][143][144][146] Summary of Risk Factors Risk Related to Our Business Risks Related to Development, Clinical studies, and Regulatory Approval of Our Product Candidates Risks Related to Our Food-Tech Business Risk Related to Commercialization of Our Product Candidates Risk Related to Intellectual Property Risk Related to Our Common Shares Risks Related to Foreign Exchange Rates Other Risks Risk Related to Our Industry Risk Related to Our Dependence on Third Parties Cybersecurity and Data Privacy Risks Foreign Corrupt Practices Act Item 1B. Unresolved Staff Comments This section indicates that there are no unresolved staff comments from the SEC Item 2. Properties Pluri's principal executive, manufacturing, and research and development offices are located in Haifa, Israel, occupying approximately 4,389 square meters. The monthly rent as of July 2022 was approximately $89,000, with a net expense of $921,000 for Fiscal Year 2022. The company believes its current space is adequate for present and foreseeable future needs - Principal Facilities: Located at MATAM Advanced Technology Park, Building No. 5, Haifa, Israel, occupying approximately 4,389 square meters[215] Property Expenses (FY2022) | Metric | Amount | | :------------------ | :------- | | Monthly Rent (July 2022) | ~$89,000 | | Net Expense (FY2022) | $921,000 | Item 3. Legal Proceedings The company reported no legal proceedings Item 4. Mine Safety Disclosures This item is not applicable to Pluri Inc PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Pluri Inc.'s common shares are traded on the Nasdaq Global Market and the Tel Aviv Stock Exchange under the symbol "PLUR". As of September 15, 2022, there were 32,620,343 common shares issued and outstanding, held by 50 record holders - Trading Information: Common shares traded on Nasdaq Global Market and Tel Aviv Stock Exchange under symbol "PLUR"[220] Common Shares Outstanding (as of Sept 15, 2022) | Metric | Value | | :--------------------- | :------------ | | Shares Outstanding | 32,620,343 | | Holders of Record | 50 | Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Pluri's business, a detailed comparison of financial results for fiscal years 2022 and 2021, and an analysis of the company's liquidity and capital resources. It highlights a decrease in net loss driven by reduced R&D and G&A expenses, despite minimal revenue. The company continues to rely on grants and financing to support its operations and R&D activities - Business Overview: Reiterates focus on 3D cell expansion technology for regenerative medicine and food tech, with ongoing clinical studies and a commercialization model including licensing and partnerships[222][223][224][225][226] - Financial Outlook: Accumulated deficit of $371,263,000 as of June 30, 2022. No significant product sales revenue expected in the next twelve months, with licensing revenues unlikely to exceed operational costs in the short to medium term. Company believes current cash is sufficient for at least the next twelve months[258][260] Overview Results of Operations – Year Ended June 30, 2022 Compared to Year Ended June 30, 2021 Revenues Revenues (USD thousands) | Metric | FY2022 | FY2021 | Change ($) | Change (%) | | :------- | :----- | :----- | :--------- | :--------- | | Revenues | 234 | 0 | 234 | N/A | - The revenues in FY2022 were primarily from a license agreement with Takeda and sales of PLX cells for research use[229] Research and Development, Net Research and Development, Net (USD thousands) | Metric | FY2022 | FY2021 | Change ($) | Change (%) | | :-------------------- | :------- | :------- | :--------- | :--------- | | R&D Expenses, Net | 24,377 | 30,066 | (5,689) | (19%) | - The decrease was mainly due to reduced clinical study expenses (following CLI study termination, end of enrollment for ARDS and hip studies) and lower share-based compensation expenses. This was partially offset by increased materials, payroll, and building lease costs[230] General and Administrative General and Administrative Expenses (USD thousands) | Metric | FY2022 | FY2021 | Change ($) | Change (%) | | :-------------------- | :------- | :------- | :--------- | :--------- | | G&A Expenses | 17,450 | 20,557 | (3,107) | (15%) | - The decrease was primarily attributed to lower share-based compensation expenses for the CEO and Chairman, partially offset by increased share-based compensation related to Plurinuva shares and higher payroll expenses[231] Total Financial Income, Net Total Financial Income, Net (USD thousands) | Metric | FY2022 | FY2021 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Financial Income, Net | 219 | 758 | (539) | (71%) | - The decrease was mainly due to increased interest expenses from the EIB loan and losses from hedging transactions, partially offset by exchange rate income on lease liability and EIB loan adjustments[232] Net Loss for the Year Net Loss (USD thousands) | Metric | FY2022 | FY2021 | Change ($) | Change (%) | | :------- | :------- | :------- | :--------- | :--------- | | Net Loss | (41,374) | (49,865) | 8,491 | (17%) | - The decrease in net loss was primarily due to lower research and development expenses, net, and reduced general and administrative expenses[233] - Net loss attributed to non-controlling interest in Plurinuva for FY2022 was $132,000[233] Loss per share Loss per Share | Metric | FY2022 | FY2021 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Basic and Diluted Loss per Share | (1.28) | (1.77) | 0.49 | (28%) | | Weighted Average Shares Outstanding | 32,192,074 | 28,113,636 | 4,078,438 | 14.5% | - The change in loss per share was mainly a result of the decrease in net loss, partially offset by an increase in the weighted average number of shares outstanding due to additional share issuances[235][236] Liquidity and Capital Resources Cash Flow Activities Cash Flow Summary (USD thousands) | Activity | FY2022 | FY2021 | Change ($) | | :------------------------------------ | :------- | :------- | :--------- | | Net cash used in operating activities | (36,501) | (30,910) | (5,591) | | Net cash provided by (used for) investing activities | 11,783 | (7,265) | 19,048 | | Net cash provided by financing activities | 7,500 | 61,402 | (53,902) | | Cash, cash equivalents, and restricted cash (end of period) | 11,413 | 31,838 | (20,425) | - As of June 30, 2022, the company had a working capital surplus of $50,918,000 and an accumulated deficit of $371,263,000[237] Equity Offerings and Warrants - No common shares were sold under the ATM Agreement in FY2022, compared to $8,506,000 net proceeds in FY2021[242] - No warrants were exercised in FY2022, compared to $364,000 net proceeds from warrant exercises in FY2021[244] - A registered direct offering in February 2021 generated approximately $28,077,000 in net proceeds from the sale of 4,761,905 common shares[245] EIB Finance Agreement - Received the first tranche of €20 million from the European Investment Bank (EIB) in June 2021, part of a larger €50 million facility[246][247] - The loan is due on June 1, 2026, and bears an annual interest rate of 4%. The EIB is also entitled to royalty payments (0.2% to 2.3%) on consolidated revenues from FY2024 to FY2030[247] Non-dilutive grants - No cash grants were received from European Union Horizon 2020 programs in FY2022, compared to approximately $239,000 in FY2021[248] - IIA grants require 3% royalties on sales of products derived from funded technology until 100% repayment; no royalties were paid in FY2022[249] - Received an additional grant of approximately $583,000 from the IIA for the CRISPR-IL consortium program in October 2021, which does not include any royalty obligations[251] Outlook Application of Critical Accounting Policies and Estimates Share-Based Compensation Research and Development Expenses, Net Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section is marked as not applicable, indicating no quantitative or qualitative disclosures about market risk are provided Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements of Pluri Inc. and its subsidiaries for the fiscal years ended June 30, 2022, and 2021, prepared in accordance with U.S. GAAP. It includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Equity, Statements of Cash Flows, and comprehensive Notes to Consolidated Financial Statements - Financial statements are prepared in accordance with U.S. GAAP and stated in thousands of United States Dollars[269] - Kesselman & Kesselman (PwC) provided an unqualified opinion on the consolidated financial statements for FY2022 and FY2021[276] - The establishment of Plurinuva was identified as a critical audit matter due to the complexity of accounting for the transaction and the involvement of specialized valuation professionals[282][283] Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Balance Sheet Highlights (USD thousands) | Metric | June 30, 2022 | June 30, 2021 | Change ($) | | :-------------------------- | :------------ | :------------ | :--------- | | Total current assets | 57,747 | 67,371 | (9,624) | | Total current liabilities | 6,829 | 11,517 | (4,688) | | Working capital surplus | 50,918 | 55,854 | (4,936) | | Total assets | 68,065 | 93,538 | (25,473) | | Total liabilities | 29,050 | 24,870 | 4,180 | | Total shareholders' equity | 30,039 | 57,151 | (27,112) | | Non-controlling interests | 2,147 | - | 2,147 | | Accumulated deficit | (371,263) | (330,021) | (41,242) | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (USD thousands) | Metric | FY2022 | FY2021 | Change ($) | | :------------------------------------ | :----- | :----- | :--------- | | Revenues | 234 | 0 | 234 | | Research and development expenses, net | (24,377) | (30,066) | 5,689 | | General and administrative expenses | (17,450) | (20,557) | 3,107 | | Operating loss | (41,593) | (50,623) | 9,030 | | Total financial income, net | 219 | 758 | (539) | | Net loss | (41,374) | (49,865) | 8,491 | | Net loss attributed to non-controlling interests | (132) | - | (132) | | Net loss attributed to shareholders | (41,242) | (49,865) | 8,623 | | Basic and diluted loss per share | (1.28) | (1.77) | 0.49 | | Weighted average number of shares | 32,192,074 | 28,113,636 | 4,078,438 | Statements of Changes in Shareholders' Equity - Total Shareholders' Equity decreased from $57,151,000 as of July 1, 2021, to $30,039,000 as of June 30, 2022[293] - Share-based compensation to employees, directors, and non-employee consultants amounted to $8,909,000 in FY2022[293] - The establishment of Plurinuva resulted in a $7,500,000 investment, allocated between additional paid-in capital ($5,657,000) and non-controlling interests ($1,843,000)[293] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (USD thousands) | Activity | FY2022 | FY2021 | Change ($) | | :------------------------------------ | :------- | :------- | :--------- | | Net cash used for operating activities | (36,501) | (30,910) | (5,591) | | Net cash provided by (used for) investing activities | 11,783 | (7,265) | 19,048 | | Net cash provided by financing activities | 7,500 | 61,402 | (53,902) | | Increase (decrease) in cash, cash equivalents and restricted cash | (20,425) | 22,609 | (43,034) | | Cash, cash equivalents and restricted cash at end of period | 11,413 | 31,838 | (20,425) | Notes to Consolidated Financial Statements NOTE 1: - GENERAL NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES NOTE 3: - PREPAID EXPENSES AND OTHER CURRENT ASSETS NOTE 4: - PROPERTY AND EQUIPMENT, NET NOTE 5: - OTHER ACCOUNTS PAYABLE NOTE 6: - LEASES NOTE 7: - LOAN FROM THE EIB NOTE 8: - COMMITMENTS AND CONTINGENCIES NOTE 9: - SHAREHOLDERS' EQUITY NOTE 10: - FINANCIAL INCOME (EXPENSES), NET NOTE 11: - TAXES ON INCOME Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure Item 9A. Controls and Procedures Management, under the supervision of the CEO and CFO, concluded that Pluri's disclosure controls and procedures were effective as of June 30, 2022. The internal control over financial reporting was also deemed effective, with no material changes during the fourth quarter of Fiscal Year 2022 - Disclosure Controls and Procedures: Management concluded that disclosure controls and procedures were effective as of June 30, 2022[438] - Internal Control over Financial Reporting: Management assessed and determined that internal control over financial reporting was effective as of June 30, 2022[442] - Changes in Internal Control: No material changes in internal control over financial reporting occurred during the fourth quarter of Fiscal Year 2022[443] Item 9B. Other Information The company reported no other information Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Pluri Inc PART III Item 10. Directors, Executive Officers and Corporate Governance This section provides information on Pluri's directors and executive officers, including their business experience, and details the structure and responsibilities of the Audit, Compensation, and Nominating Committees. It also outlines the company's director nomination process and Code of Ethics, noting a minor delinquency in Section 16(a) reports - Key Personnel: Zami Aberman (Chairman), Yaky Yanay (CEO, President, Director), Chen Franco-Yehuda (CFO, Treasurer, Secretary)[448] - Board Committees: Audit Committee (Chairman: Doron Birger), Compensation Committee (Chairman: Maital Shemesh-Rasmussen), and Nominating Committee (Chairman: Rami Levi). All committee members are independent[467][469][471] - Code of Ethics: The Board adopted a Code of Business Conduct and Ethics applicable to directors, officers, and employees, available on the company website[477][478] Business Experience Audit Committee and Audit Committee Financial Expert Compensation Committee Nominating Committee Director Nominations Code of Ethics Delinquent Section 16(a) Reports Item 11. Executive Compensation This section details the compensation for Pluri's named executive officers and directors for fiscal years 2022 and 2021, including salaries, bonuses, and share-based awards. It also outlines employment agreements, potential payments upon termination or change-in-control, and outstanding equity awards Summary Compensation Table (USD) | Name and Principal Position | Fiscal Year | Salary | Non-Equity Plan Compensation | Share-based Awards | All Other Compensation | Total | | :-------------------------- | :---------- | :------- | :--------------------------- | :----------------- | :--------------------- | :-------- | | Zami Aberman (Chairman) | 2022 | 432,043 | - | - | 751,472 | 1,183,515 | | | 2021 | 556,475 | - | 8,741,402 | 508,074 | 9,805,951 | | Yaky Yanay (CEO) | 2022 | 488,569 | 64,000 | - | 745,610 | 1,297,726 | | | 2021 | 459,016 | 126,000 | 8,741,402 | 27,588 | 9,354,006 | | Chen Franco-Yehuda (CFO) | 2022 | 310,253 | 44,000 | - | 253,953 | 607,915 | | | 2021 | 251,642 | 64,000 | 1,020,000 | 14,653 | 1,350,295 | - All Other Compensation in FY2022 for executive officers includes significant allocations of Plurinuva shares (e.g., $705,000 for Mr. Aberman and Mr. Yanay, $235,000 for Ms. Franco-Yehuda)[486][487] - Equity awards for executive officers and directors include acceleration of vesting (100% for involuntary termination/change-in-control, up to 50% for voluntary resignation) under specific conditions, excluding certain market-based RSUs[491][494][504] Employment and Consulting Agreements Potential Payments Upon Termination or Change-in-Control Pension, Retirement or Similar Benefit Plans Outstanding Equity Awards at the End of Fiscal Year 2022 Long-Term Incentive Plans-Awards in Last Fiscal Year Director Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details the beneficial ownership of Pluri's common shares as of September 15, 2022, for major shareholders, directors, and executive officers. It also provides information on the company's equity compensation plans, including outstanding options and shares available for future grants Beneficial Ownership of Common Shares (as of Sept 15, 2022) | Name | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | | :------------------------------------ | :---------------------------------- | :-------------------------------------- | | David M. Slager | 1,685,038 | 5.2% | | Zami Aberman (Chairman) | 839,747 | 2.6% | | Yaky Yanay (CEO, President and Director) | 685,973 | 2.1% | | Directors and Executive Officers as a group (7 persons) | 1,875,547 | 5.0% | - As of June 30, 2022, under the 2016 and 2019 Equity Compensation Plans, there were 91,045 options outstanding and 4,765,113 securities remaining available for future issuance[516] Equity Compensation Plan Information Item 13. Certain Relationships and Related Transactions and Director Independence The company reported no material related party transactions beyond executive compensation arrangements. The Board determined that Doron Birger, Rami Levi, Varda Shalev, and Maital Shemesh-Rasmussen are independent directors as per SEC and Nasdaq rules - No material related party transactions were reported, other than executive compensation arrangements[517] - Independent Directors: Doron Birger, Rami Levi, Varda Shalev, and Maital Shemesh-Rasmussen were determined to be independent directors[518] Item 14. Principal Accounting Fees and Services This section details the fees paid to Pluri's independent registered public accounting firm, Kesselman & Kesselman (PwC), for audit, audit-related, tax, and other services for fiscal years 2022 and 2021. All services were pre-approved by the Audit Committee Principal Accounting Fees and Services (USD) | Fee Type | FY2022 | FY2021 | | :----------------- | :------- | :------- | | Audit Fees | 114,532 | 105,000 | | Audit-Related Fees | 6,214 | None | | Tax Fees | 14,624 | 28,507 | | All Other Fees | 36,975 | None | | Total Fees | 172,345 | 133,507 | - All services provided by the independent registered public accounting firm were pre-approved by the Audit Committee[523] PART IV Item 15. Exhibits This section lists all documents filed as exhibits to the 10-K report, including corporate governance documents, equity compensation plans, and various agreements such as license agreements and financial contracts - Exhibits include corporate governance documents (Articles of Incorporation, By-laws), equity compensation plans (2016 and 2019 Plans), and various agreements (License, Employment, Finance Contract with EIB, Share Purchase Agreement for Plurinuva)[527][528] Item 16. Form 10-K Summary The company did not provide a Form 10-K Summary