F-1 1 v443727_f1.htm F-1

As filed with the Securities and Exchange Commission on July 7, 2016

Registration No. 333-      

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



 

Cellect Biomed Ltd.

(Exact name of Registrant as specified in its charter)



 

   
State of Israel   2836   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary standard industrial
classification code number)
  (I.R.S. employer
identification number)


 

23 Hata’as Street
Kfar Saba, Israel 44425
(+972) (9) 974 1444

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)



 

Vcorp Services, LLC
25 Robert Pitt Drive, Suite 204
Monsey, New York 10952
888-528-2677

(Name, address, including zip code, and telephone number, including area code, of agent for service)



 

   
Oded Har-Even, Esq.
Howard E. Berkenblit, Esq.
Shy S. Baranov, Esq.
Zysman, Aharoni, Gayer and
Sullivan & Worcester LLP
1633 Broadway
New York, NY 10019
Telephone: (212) 660-3000
Facsimilie: (212) 660-3001
  Ronen Kantor, Esq.
Giora Gutman, Esq.
Doron Tikotzky Kantor
Gutman Cederboum & Co
12 Abba Hillel Silver Rd.
Ramat Gan, Israel 52506
(+972) (3) 613-3371
(+972) (3) 613-3372
(facsimile)
  Robert F. Charron, Esq.
Ellenoff Grossman & Schole, LLP
1345 Avenue of the Americas
New York, NY 10105
(212) 370-1300
  
  
  
  


 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, please check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

   
Title of each class of securities to be registered   Proposed maximum
aggregate offering price
  Amount of
registration fee
Ordinary shares, no par value(1)(2)   $ 10,000,000 (3)    $ 1,007 (4) 
Placement agent warrants to purchase American Depositary Shares                  
Ordinary shares underlying the American Depositary Shares issuable upon exercise of placement agent warrants(5)   $ 810,000     $ 81.57  
Total Registration Fee   $ 10,810,000     $ 1,088.57  

(1) The ordinary shares will be represented by American Depositary Shares, or ADSs, each of which represents      ordinary shares. We intend to file a separate registration statement on Form F-6 to register the ADSs issuable upon deposit of the ordinary shares.
(2) Pursuant to Rule 416 under the Securities Act of 1933, as amended, or the Securities Act, the ordinary shares registered hereby also include an indeterminate number of additional ordinary shares as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions.
(3) Estimated solely for purposes of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act. Includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any. Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
(4) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
(5) Represents ordinary shares underlying ADSs issuable upon exercise of warrants to purchase a number of ADSs equal to 6.0% of the number of ADSs sold in this offering, assuming a per share exercise price equal to 135% of the price of the ADSs sold in this offering.


 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 


 
 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS        SUBJECT TO COMPLETION        DATED JULY 7, 2016

American Depositary Shares

Each Representing     Ordinary Shares

[GRAPHIC MISSING]

We are offering      American Depositary Shares, or ADSs. Each ADS represents      of our ordinary shares, no par value, or the ordinary shares. This is our initial public offering in the United States.

Our ordinary shares are currently traded on the Tel Aviv Stock Exchange, or the TASE, under the symbol “CLBD.” The last reported sale price of our ordinary shares on the TASE on July 5, 2016 was NIS 1.57, or $0.40, per share (based on the exchange rate reported by the Bank of Israel on that date, which was NIS 3.869 = $1.00). There currently is no public market for the ADSs or ordinary shares in the United States. We intend to apply to list the ADSs on the NASDAQ Capital Market under the symbol “    .” No assurance can be given that our application will be approved.

The expected public offering price of the ADSs is between $     and $     per ADS.

We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, we have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings.

Investing in the ADSs involves certain significant risks. See “Risk Factors” beginning on page 10 of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before you invest.

None of the U.S. Securities and Exchange Commission, or the SEC, the Israeli Securities Authority, or the ISA, or any other state or foreign regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

   
  Per ADS   Total
Public offering price   $          $       
Underwriting discounts and commissions(1)   $     $  
Proceeds, before expenses, to us   $     $  

(1) In addition, we have agreed to reimburse the representative of the underwriters for certain expenses and to issue to the representative of the underwriters warrants to purchase a number of ADSs equal to 6% of the ADSs sold in this offering. See “Underwriting” beginning on page 129 for a complete description of compensation payable to the underwriters.

We have granted a   -day option to the underwriters to purchase up to an additional      ADSs from us at the public offering price, less underwriting discount, to cover over-allotments, if any.

The underwriters expect to deliver the ADSs to purchasers in the offering on or about [           ], 2016.

[GRAPHIC MISSING]

Lead Underwriter and Sole Book Runner
Rodman & Renshaw
a unit of H.C. Wainwright & Co.

[GRAPHIC MISSING]

Co-Manager
Chardan Capital Markets, LLC

Prospectus dated            , 2016.


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS

 
PROSPECTUS SUMMARY     1  
SUMMARY FINANCIAL DATA     8  
RISK FACTORS     10  
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS     33  
EXCHANGE RATE INFORMATION     35  
PRICE RANGE OF OUR ORDINARY SHARES     36  
USE OF PROCEEDS     37  
DIVIDENDS AND DIVIDEND POLICY     38  
CAPITALIZATION     39  
DILUTION     40  
SELECTED FINANCIAL DATA     42  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     44  
BUSINESS     55  
MANAGEMENT     79  
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT     102  
RELATED PARTY TRANSACTIONS     104  
DESCRIPTION OF SHARE CAPITAL     106  
DESCRIPTION OF AMERICAN DEPOSITARY SHARES     112  
SHARES ELIGIBLE FOR FUTURE SALE     119  
TAXATION     121  
UNDERWRITING     129  
ENFORCEMENT OF FOREIGN JUDGMENTS     133  
EXPENSES RELATING TO THIS OFFERING     134  
LEGAL MATTERS     134  
EXPERTS     134  
WHERE YOU CAN FIND MORE INFORMATION     134  
INDEX TO FINANCIAL STATEMENTS     F-1  

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About This Prospectus

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by, or on behalf of, us or to which we have referred you. Neither we nor the underwriters have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the underwriters are offering to sell these securities in any jurisdiction where their offer or sale is not permitted. This prospectus is not an offer to sell or the solicitation of an offer to buy the ADSs in any circumstances under which such offer or solicitation is unlawful. This document may only be used where it is legal to sell these securities. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or when any sale of the ADSs occurs. Our business, financial condition, results of operations and prospects may have changed since that date. Neither we nor the underwriters take any responsibility for, nor do we provide any assurance as to the reliability of, any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf. 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.



 

Before you invest in the ADSs, you should read the registration statement (including the exhibits thereto) of which this prospectus forms a part.



 

Throughout this prospectus, unless otherwise designated, the terms “we”, “us”, “our”, “Cellect”, “the Company” and “our Company” refer to Cellect Biomed Ltd. and its wholly-owned subsidiaries. References to “ordinary shares”, “ADSs” and “share capital” refer to the ordinary shares, ADSs and share capital, respectively, of Cellect.

Market data and certain industry data and forecasts used throughout this prospectus were obtained from sources we believe to be reliable, including market research databases, publicly available information, reports of governmental agencies and industry publications and surveys. We have relied on certain data from third-party sources, including internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the third-party forecasts we cite. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Our financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our historical results do not necessarily indicate our expected results for any future periods.

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.

Unless derived from our financial statements or otherwise noted, the terms “shekels,” “Israeli shekels” and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “U.S. dollar,” “US$,” “USD” or “$” refer to U.S. dollars, the lawful currency of the United States.

Powered by Cellect, Apotainer and ApoGraft are our registered trademarks.

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We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of this prospectus outside of the United States.

Until           , 2016 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

This summary highlights selected information presented in greater detail elsewhere in this prospectus. This summary does not include all the information you should consider before investing in the ADSs. Before investing in the ADSs, you should read this entire prospectus carefully for a more complete understanding of our business and this offering, including our audited and unaudited financial statements and related notes and the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Business Overview

Cellect is an emerging biotechnology company that is developing a novel technology platform known as Powered by CellectTM that functionally selects stem cells from a mixed population of cells in order to improve the safety and efficacy of regenerative medicine stem cell therapies. We aim to become the standard enabling technology for the enrichment of the stem cell population for companies developing stem cell therapies, physicians practicing regenerative medicine, and for researchers and academia engaged in stem cell research.

We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection of stem cells. Efficient selection enables retention of most of the stem cells with few mature cells resulting in the near elimination of toxicity provoking cells coupled with the enrichment of the stem cell population.

Our Powered by Cellect technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process of programmed cell death and is a vital part of physiological development and maintenance. Stem cells flourish in an environment where normal cells die. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activity and apoptotic-inducing agents. Our research has demonstrated that stem cells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to self-destruct. We have chosen this functional characteristic of stem cells to use apoptosis-inducing proteins to more efficiently select stem cells while neutralizing harmful cells and their associated medical complications.

We are currently developing our first product based on our Powered by Cellect technology platform, the ApotainerTM selection kit. The Apotainer selection kit is an easy to use, cost effective, off the shelf stem cell selection kit. The kit is designed for clinical use with the aim of improving the results of human allogeneic (using stem cells from a donor) hematopoietic stem cell transplantation, or HSCT, for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT, also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that that HSCT can also be used for other indications but is rarely used due to high toxicity. However, application of allogeneic HSCT is limited by graft-versus-host-disease, or GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells) recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is the major cause of transplant-related morbidity and mortality. Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reduced toxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients with life threatening diseases. Due to non-efficient selection of stem cells for HSCT, the complex and expensive laboratory process, performed using technologies currently available, is able to reduce toxicity only at a significant tradeoff — graft rejection, cancer reoccurrence and high costs of treatment.

We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our Powered by Cellect technology platform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complications. We believe that if we are able to demonstrate the clinical utility of our technology for this indication, it will open up the opportunity for the use of our Powered by Cellect technology platform for the treatment of other indications (e.g., solid organ transplantation and auto-immune diseases) and for the adoption of our Powered by Cellect technology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population.

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We plan to bring our Apotainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the U.S. Food and Drug Administration’s, or FDA, Center for Devices and Radiological Health, or CDRH, which is likely to result in the regulatory path usually followed for medical devices. The term “combination product” when used to describe our Apotainer selection kits, refers to a product, governed by the FDA, which is comprised of a biological product and a device. We believe that this will result in cost savings and reduce time to market and further believe that such proof of concept will open up the opportunity for the licensing of our Powered by Cellect technology platform to allow for earlier revenues.

All of our research efforts to date have culminated in clinical trials that we plan to commence in the third quarter of 2016 related to a process we call ApoGraft. The ApoGraft process begins with the donor’s white blood cells being collected into a standard infusion bag using specialized equipment in a process called cell apheresis. The collected cells (the untreated sample - ‘standard of care’) undergo quality control tests, and upon confirmation of their quality, are then washed in an incubation medium and centrifuged. The white blood cells are counted and resuspended in the incubation medium in the appropriate concentration. These cells are introduced with FaSL and incubated. Following incubation, the cells are again centrifuged and washed and subsequently resuspended in Plasma-Lyte added with 5% Human Serum Albumin (HSA) or equivalent. A few cell samples are then taken for a second quality control test that includes sub-population characterization in the same manner as described above. The graft that contains stem and progenitor cells and graft-supporting T-cells is transfused to the patient within approximately 4 hours via filter.

We plan to initiate the clinical development of ApoGraft with an open-label Phase I/II pilot study. The primary objective of this study is to evaluate the safety and tolerability of ApoGraft administered to subjects with hematological malignancies undergoing allogeneic HSCT. The secondary objective of this trial is to assess ApoGraft engraftment, the donor cells populating patients’ hematological systems and prevention of GvHD. In addition, we plan on holding a pre-investigational new drug, or pre-IND, meeting with the FDA in the second half of 2016 using the Apotainer selection kit.

Our Strategy

We have developed a novel technology platform, the Powered by Cellect technology platform, for the functional selection of adult stem cells. This technology is expected to improve the safety and efficacy of regenerative medicine stem cell therapies and we aim to become the standard enabling technology for the enrichment of the stem cell population for companies developing stem cell therapies and for researchers and academia engaged in stem cell research.

Key elements of our strategy to accomplish this objective include the following:

Achieve relatively quick validation of the use of our Powered by Cellect technology platform in a clinical setting.  We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our Powered by Cellect technology platform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complications caused by GvHD. While over one million HSCT procedures have been performed by the end of 2012, according to a study published in the Lancet, we believe hematopoietic cells administered to patients undergoing allogeneic HSCT can be therapeutically optimized. Based on our Powered by Cellect technology platform, we are currently developing the Apotainer, an off the shelf stem cell selection kit which we believe may significantly improve the curative potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity and mortality of the procedure resulting from GvHD. We believe that the concomitant reduction of toxicity and increasing efficacy of allogeneic HSCT will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol. Typically, combination products obtain relatively quick validation from the FDA and the European Medicines Agency, or EMA, when compared to pharmaceutical products and drugs. Based on our initial consultations with our U.S. and European regulatory consultants, we believe that we might only need to successfully complete a single pivotal study with a small number of patients (not exceeding one hundred in total) in order to obtain marketing approval of our ApoGraft product. We believe such a study can be completed in approximately four to five years. However, there is no guarantee that the proposed

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pathway will be approved by the FDA or EMA, or that validation will occur as quickly as we hope, if at all. In addition, we believe that our product may achieve either “breakthrough” or orphan drug designation with the FDA, enabling a fast track review and approval process by the FDA. Typically, the validation process for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validation process timeline, we believe our technology platform may complete the validation process relatively quickly.
Leverage our scientific, clinical and regulatory expertise to build and advance our Powered by Cellect technology platform beyond the allogeneic HSCT setting.  Based on the validation of our Apotainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for solid organ transplantation and auto-immune system disorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our Powered by Cellect technology platform for other sources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that by expanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of our Powered by Cellect technology platform.
Build a diversified product portfolio.  Beginning with the development of our Apotainer selection kit as a combined product or medical device, which we believe will shorten the time to market, we intend to expand our product development and build a diversified product portfolio of Powered by Cellect products for a broad spectrum of market segments, up to and including all production and research processes for stem cell based products.
Selectively engage in strategic partnerships that establish our Powered by Cellect technology platform as the standard enabling technology for the enrichment of the stem cell population.  We ultimately seek to collaborate with other companies engaged in developing stem cell therapies and research by licensing our Powered by Cellect technology platform to improve their own stem cell expansion and purification processes. As we believe our Powered by Cellect technology platform will significantly increase the starting amount of stem cells, we believe stem cell therapy companies, as well as physicians, academics, researchers and others that are focused on stem cells, will have a major advantage if our selection process is integrated into their work protocol as the first step in their expansion process.

In the short term, we are currently focused on achieving the following critical milestones:

Pathway to first-in-human clinical trial:  We concluded preclinical studies in murines, including safety/toxicity tests as well as calibration and optimization of the materials and the process with a view to commencing a Phase I/II clinical trial in Israel and holding a pre-IND meeting with the FDA during the second half of 2016.
Pathway to product prototype:  We are engaged in developing prototypes of our Apotainer selection kit. Recently we demonstrated a proof of concept for the binding of the apoptotic protein to a polymer without impairing the protein's apoptotic activity. We tested a number of polymers and binding methods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the prototype Apotainer selection kit by the end of 2016, subject to sufficient funding, including in this offering.
Patent portfolio enhancement:  We are currently expanding our patent coverage from five to eight patent families.

Our Competitive Strengths

We believe we are well positioned to achieve our corporate and strategic goals based on the following key strengths:

Efficient, rapid and relatively cheap stem cell selection;
Enriched stem cell population without depleting engraftment-enhancing and tumor-eradicating T-cells, thus reducing the risk of serious complications while not interfering with engraftment and anti-tumor activity;

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Lower costs per procedure, together with expected reduction in post-transplant treatment and simplified infrastructure needed, which is expected to support significant growth of HSCTs and expanded use in new indications;
Regulatory strategy utilizing the FDA’s medical device regulatory pathway for our initial product is expected to result in shorter development timelines and significantly less cash needed for development;
Positioned as an enabling technology in the fast growing stem cell therapies market;
Management team with significant drug development and commercial experience; and
Strong company-owned IP portfolio.

Risk Factors

Our business is subject to numerous risks, as more fully described in the section titled “Risk Factors” immediately following this prospectus summary. You should read and carefully consider these risks and all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in the ADSs. In particular, such risks include, but are not limited to, the following:

We have a history of losses and can provide no assurance of our future operating results;
We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts;
Our product development program is based on a novel functional stem cell selection technology platform and is inherently risky;
Our Powered by Cellect technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitable products;
If the FDA classifies our Apotainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the FDA’s Center for Drug Evaluation and Research or the FDA’s Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market our Apotainer selection kits or other products based on our Powered by Cellect technology platform in a timely manner or at all. Even if we do obtain approval, the cost and delay could materially adversely affect our financial condition, results of operations and cash flows;
Clinical trials necessary to support approval for our Apotainer selection kits or any future products based on Powered by Cellect technology platform would be expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays or failures in any necessary clinical trials would prevent us from commercializing our Apotainer selection kits or any future product and could adversely affect our business, operating results and prospects;
We might be unable to develop product candidates that will achieve commercial success in a timely and cost-effective manner, or ever;
Disruptions in our supply chain could delay the commercial launch of our product candidates;
We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results of operations and financial condition;
Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company, or PFIC.

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Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company,” as defined in the JOBS Act. 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 of 2002, or 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.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, or the Securities Act, which such fifth anniversary will occur in           , 202 . However, if certain events occur prior to the end of such five year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

In addition, Section 107 of the JOBS Act also 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. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Implications of being a Foreign Private Issuer

Upon completion of this offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are applicable to “foreign private issuers,” and under those requirements we will file reports with the SEC. As a foreign private issuer, we will not be subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, although we intend to report our financial results on a quarterly basis, we will not be required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. We may also present financial statements pursuant to IFRS instead of pursuant to U.S. generally accepted accounting principles. Furthermore, although the members of our management and supervisory boards will be required to notify the ISA of certain transactions they may undertake, including with respect to our ordinary shares, our officers, directors and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. As a foreign private issuer, we will also not be subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, as a foreign private issuer, we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the listing rules of NASDAQ Capital Market, or NASDAQ, for domestic U.S. issuers (See “Risk Factors — Risks Related to the ADSs and the Offering.”) These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison

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to those applicable to a U.S. domestic reporting companies. We intend to take advantage of the exemptions available to us as a foreign private issuer during and after the period we qualify as an emerging growth company.

Our Corporate Information

Cellect Biomed Ltd. was incorporated in Israel in 1986 under the name Montiger Ltd. Between 1986 and 2013, we underwent several name changes, most recently on August 28, 2013, when we changed our name to our current name. Since 1990, our shares have been traded on the TASE. On May 16, 2016, we obtained shareholder approval to change our name to Cellect Biotechnology Ltd. We anticipate that we will formally change our name to Cellect Biotechnology Ltd. in the near future, subject to regulatory approval.

From October 25, 2012 until July 1, 2013, we did not have any business operations, excluding administrative management. On June 30, 2013, a general meeting of our shareholders approved our merger by way of share exchange with Cellect Biotherapeutics Ltd. (renamed from Cellect Biotechnology Ltd. during 2016, or Cellect Biotherapeutics). As a result of the merger, which closed on July 1, 2013, Cellect Biotherapeutics became our fully owned subsidiary and we issued to shareholders of Cellect Biotherapeutics 44,887,373 ordinary shares, options (Series 1) exercisable for 227,358 ordinary shares until April 30, 2018 and options (Series 2) exercisable for 341,037 ordinary share (all of such 341,037 options were subsequently exercised into ordinary shares), which constituted 85% of our then outstanding share capital on a fully diluted basis.

Cellect Biotherapeutics was incorporated in Israel in 2011 for the purpose of developing novel and unique technologies that allow the functional selection of stem cells through the substantial reduction of the complications that exist today in acceptable selection methods and increasing the chances of success of stem cell therapies.

Our principal executive offices are located at 23 Hata’as Street, Kfar Saba, Israel 44425, and our telephone number is (+972) (9) 974-1444. Our website is www.cellectbio.com. Information contained on, or accessible through, our website is not incorporated by reference herein and shall not be considered part of this prospectus. Our agent for service of process in the United States is Vcorp Services, LLC, Monsey, New York 10952, and whose telephone number is 888-528-2677.

THE OFFERING

Offering price    
    We currently estimate that the initial public offering price in this offering will be between $     and $     per ADS.
ADSs offered by us    
    Up to      ordinary shares, represented by      ADSs.
Option to purchase additional ADSs    
    We have granted to the underwriters an option, exercisable within      days from the date of this prospectus, to purchase up to an aggregate of [    ] additional ADSs at the public offering price set forth on the cover page hereto, less underwriting discount, solely to cover over-allotments, if any.
Ordinary shares outstanding immediately after this offering    
         ordinary shares (or      ordinary shares if the underwriters exercise their option to purchase      additional ADSs in full).
Listing    
    We intend to apply to list the ADSs on NASDAQ under the symbol “     ”. No assurance can be given that our application will be approved. Our ordinary shares are listed on the TASE under the symbol “CLBD”.
Depositary    
    The Bank of New York Mellon, Depositary
The ADSs    
    Each ADS represents      ordinary shares.

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    The depositary will hold the ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement.
   
    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.
Use of proceeds    
    We expect that we will receive net proceeds of approximately $     million from this offering, assuming an initial public offering price of $     per ADS, which is the midpoint of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
   
    We intend to use the net proceeds from this offering to fund our Phase I/II single arm, open label clinical trial, develop our Apotainer selection kit product, advance the development of our Powered by Cellect technology platform for additional indications and for general research activities as well as for working capital and other general corporate purposes. See “Use of Proceeds”.
Lock-up    
    We, our directors and our executive officers and certain shareholders will agree with the underwriters for this offering that we and they will not sell, transfer or otherwise dispose of any ADSs, ordinary shares or similar Company’s securities for a period of 90 days after the date of the closing of this offering. See “Shares Eligible for Future Sale” and “Underwriting.”
Risk Factors    
    You should read the “Risk Factors” section starting on page 10 of this prospectus for a discussion of factors to consider before deciding to invest in our securities.

The number of ordinary shares that will be outstanding immediately after this offering is based on 81,737,325 ordinary shares outstanding as of July 5, 2016. This number excludes, as of such date:

2,686,693 ordinary shares held in treasury;
5,910,008 ordinary shares issuable upon the exercise of 5,910,008 options at a weighted average exercise price of NIS 1.46 ($0.38) per share issuable under the Cellect Biomed Ltd. 2014 Global Incentive Option Scheme, or the 2014 Cellect Option Plan, and an additional 1,496,242 ordinary shares reserved for future issuance under our 2014 Cellect Option Plan;
227,358 ordinary shares issuable upon the exercise of 227,358 options at exercise price of NIS 1.00 ($0.26) per share issued to a consultant;
4,719,500 ordinary shares issuable upon the exercise of 4,719,500 options (Series 1) at an exercise price of NIS 1.85 ($0.48) per share; and
1,927,801 ordinary shares issuable upon the exercise of 1,927,801 options (Series A) at an exercise price of NIS 2.1 ($0.54) per share.

Unless otherwise indicated, all information in this prospectus assumes or gives effect to no exercise of outstanding options or warrants described above and the underwriters’ over-allotment option.

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SUMMARY FINANCIAL DATA

The following tables summarize our financial data. We have derived the summary statements of comprehensive loss data for the years ended 2015, 2014 and 2013 and the statement of financial position as of December 31, 2015 and 2014 from our audited financial statements included elsewhere in this prospectus. The summary financial statement data as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are derived from our unaudited interim financial statements that are included elsewhere in this prospectus. In the opinion of management, these unaudited interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial position and operating results for these periods. Results from interim periods are not necessarily indicative of results that may be expected for the entire year.

Our historical results are not necessarily indicative of the results that may be expected in the future.

Our consolidated financial statements included in this prospectus were prepared in accordance with IFRS, as issued by the International Accounting Standards Board.

The following summary financial data should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

Statement of comprehensive loss data(1)

             
  Year ended December 31   Three months ended March 31
     2013   2014   2015   2015   2015   2016   2016
     NIS in thousands   Convenience
translation into USD
in thousands(2)
  NIS in thousands   Convenience
translation into USD
in thousands(2)
Research and development
expenses
    1,062       3,058       5,893       1,510       1,184       1,831       486  
General and administrative
expenses
    2,425       2,491       4,204       1,077       592       1,930       512  
Operating loss     3,487       5,549       10,097       2,587       1,776       3,761       998  
Financial income     (11 )      (37 )      (4 )      (1 )      (4 )      (12 )      (3 ) 
Financial expenses     202       39       79       20       55       40       11  
Financial expenses, net     191       2       75       19       51       28       8  
Net loss     3,678       5,551       10,172       2,606       1,827       3,789       1,006  
Comprehensive loss     3,678       5,551       10,172       2,606       1,827       3,789       1,006  
Loss per ordinary share – basic and diluted     0.075       0.084       0.137       0.035       0.026       0.049       0.013  
Weighted average number of shares outstanding used to compute basic and diluted loss per share     49,152,886       65,968,768       74,475,109       74,475,109       71,085,351       76,743,707       76,743,707  

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Statement of financial position

           
  Year ended December 31   Three months ended March 31
     2014   2015   2015   2015   2016   2016
     NIS in thousands   Convenience
translation
into USD
in thousands(2)
  NIS in thousands   Convenience
translation
into USD
in thousands(2)
Cash and cash equivalents     2,122       3,913       1,003       1,134       8,715       2,314  
Marketable securities – short term     11,257       7,829       2,006       10,661       6,149       1,633  
Other receivables     161       412       106       118       881       234  
Restricted cash     20       20       5       20       20       5  
Property, plant and equipment     234       1,187       304       228       1,465       389  
Total assets     13,794       13,361       3,424       12,161       17,230       4,575  
Trade payable     107       466       119       331       600       159  
Other payables     728       2,394       614       404       1,699       452  
Total liabilities     835       2,860       733       735       2,299       611  
Total shareholders’ equity     12,959       10,501       2,691       11,426       14,931       3,964  

(1) Data on diluted loss per share were not presented in the financial statements because the effect of the exercise of the options and warrants is anti-dilutive.
(2) Calculated using the exchange rate reported by the Bank of Israel for December 31, 2015 at the rate of one U.S. dollar per NIS 3.902 and for March 31, 2016 at the rate of one U.S. dollar per NIS 3.766.

We prepare our financial statements in NIS. This prospectus contains conversions of NIS amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, for the purposes of the presentation of financial data for the period ended on March 31, 2016, all conversions from NIS to U.S. dollars and from U.S. dollars to NIS were made at a rate of 3.766 NIS to $1.00 U.S. dollar, the daily representative rate in effect as of March 31, 2016. In addition, unless otherwise noted, for the purposes of annual financial data for the period ended on December 31, 2015, all conversions from NIS to U.S. dollars and from U.S. dollars to NIS were made at a rate of NIS 3.902 to $1.00 U.S. dollar, the daily representative rate in effect as of December 31, 2015. No representation is made that the NIS amounts referred to in this prospectus could have been or could be converted into U.S. dollars at any particular rate or at all.

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RISK FACTORS

An investment in our ordinary shares and ADSs involves a high degree of risk. We operate in a dynamic industry that involves numerous risks and uncertainties. You should carefully consider the factors described below, together with all of the other information contained in this prospectus, including the audited financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in the ADSs. The following risks may adversely affect our business, financial condition, operating results and cash flows and cause the trading price of the ADSs to decline, and you could lose all or part of your investment. The following risk factors are not the only risk factors facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

Risks Related to Our Financial Position and Capital Requirements

We are an early stage company with a limited operating history.

Our wholly-owned subsidiary commenced operations developing our functional stem cell selection technology, which we refer to as Powered by Cellect, in 2011. As such, we have a limited operating history and our operations are subject to all of the risks inherent in the establishment of a new business enterprise, including a lack of operating history. We cannot be certain that our business strategy will be successful or that we will be solvent at any particular time. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the establishment of any company. If we fail to address any of these risks or difficulties adequately, our business will likely suffer. Because of the numerous risks and uncertainties associated with developing and commercializing our Powered by Cellect technology platform, we are unable to predict the extent of any future losses or when we will become profitable, if ever. We may never become profitable and you may never receive a return on an investment in our securities. An investor in our securities must carefully consider the substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of procedures and products in the medical, cell therapy, biotechnology and biopharmaceutical industries. We may never successfully commercialize Powered by Cellect, and our business may fail.

We have a history of losses and can provide no assurance of our future operating results.

Since 2011, we have been focused on research and development activities with a view to developing our Powered by Cellect technology platform. We have financed our operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE) and have incurred losses in each year since our inception. We have historically incurred substantial net losses, including net losses of approximately NIS 10,172,000 ($2,606,000) in 2015, NIS 5,551,000 ($1,427,000) in 2014, and NIS 3,678,000 ($1,060,000) in 2013 and NIS 3,789,000 ($1,006,000) for the three month period ended March 31, 2016. As of December 31, 2015 and March 31, 2016, we had an accumulated deficit of approximately NIS 20,402,000 ($5,229,000) and NIS 24,191,000 ($6,424,000), respectively. We do not know whether or when we will become profitable. To date, we have not commercialized our technology or generated any revenues and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs incurred in development and discovery activities. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2015 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We expect to continue to incur losses for the foreseeable future, and these losses will likely increase as we:

initiate and manage preclinical development and clinical trials for our Apotainer kits;
implement internal systems and infrastructures;
seek to license additional technologies to develop;
hire management and other personnel; and
move towards commercialization.

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We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

As of March 31, 2016, we had approximately NIS 14,864,000 ($3,947,000) in cash and cash equivalents including Marketable securities, a working capital of NIS 13,446,000 ($3,571,000) and an accumulated deficit of NIS 24,191,000 ($6,424,000). As of June 23, 2016, we had sufficient cash and cash deposits to fund operations through July 2017 if we do not raise additional capital including through this offering. Since our inception, most of our resources have been dedicated to the development of Powered by Cellect. In particular, we have expended and believe that we will continue to expend significant operating and capital expenditures for the foreseeable future developing our Powered by Cellect technology platform and our Apotainer collection kits. These expenditures will include, but are not limited to, costs associated with research and development, manufacturing, conducting preclinical experiments and clinical trials, contracting manufacturing organizations, hiring additional management and other personnel and obtaining regulatory approvals, as well as commercializing any products approved for sale. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company in the United States. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our Powered by Cellect technology platform, our Apotainer collection kits and any other future product. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown to us, upon closing of this offering, we will require additional funds through public or private equity or debt financings or other sources, such as strategic partnerships and alliances and licensing arrangements. 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. A failure to fund these activities may harm our growth strategy, competitive position, quality compliance and financial condition.

Our future capital requirements depend on many factors, including:

the number and characteristics of products we develop from our Powered by Cellect technology platform;
the scope, progress, results and costs of researching and developing our Powered by Cellect technology platform and any future products, and conducting preclinical and clinical trials;
the timing of, and the costs involved in, obtaining regulatory approvals;
the cost of commercialization activities if any products are approved for sale, including marketing, sales and distribution costs;
the cost of manufacturing any future product we successfully commercialize;
our ability to establish and maintain strategic partnerships, licensing, supply or other arrangements and the financial terms of such agreements;
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
the costs of in-licensing further patents and technologies;
the cost of development of in-licensed technologies;
the timing, receipt and amount of sales of, or royalties on, any future products;
the expenses needed to attract and retain skilled personnel; and
any product liability or other lawsuits related to any future products.

Additional funds may not be available when we need them, on terms that are acceptable to us, 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 preclinical studies, clinical trials or other research and development activities for our Powered by Cellect technology platform or delay, limit, reduce or terminate our establishment of sales and marketing

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capabilities or other activities that may be necessary to commercialize our Powered by Cellect technology platform, our Apotainer collection kits or any future products.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights and may cause the market price of our shares to decline. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or any products, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.

Risks Related to Product Development and Regulatory Approval

Our product development program is based on a novel functional stem cell selection technology platform and is inherently risky.

We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our Powered by Cellect technology platform creates significant challenges in regard to product development and optimization, manufacturing, government regulation, third-party reimbursement, and market acceptance, which makes it difficult to predict the time and cost of any product development and subsequently obtaining regulatory approval. These challenges may prevent us from developing and commercializing products on a timely or profitable basis or at all.

Our Powered by Cellect technology platform is in an early stage of discovery and development, and we may fail to develop any commercially acceptable or profitable products.

We are concentrating our efforts on developing our first line of products, our Apotainer collection kits, which is based on our Powered by Cellect technology platform, to improve the safety and efficacy of allogeneic HSCT. To date, we have conducted only in vitro and animal studies. As such, we have yet to develop any products that have been approved for marketing, and our future success depends on the successful development of our Apotainer selection kits for HSCT. There can be no assurance that any development problems we experience in the future related to our technology platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical trials or commercializing our Apotainer selection kits on a timely or profitable basis, if at all. Our Apotainer selection kits are not expected to be commercially available for several years, if at all.

If the FDA classifies our Apotainer selection kits as a drug, biologic or a combination product subject to the primary jurisdiction of the Center for Drug Evaluation and Research or Center for Biologics Evaluation and Research, we may not be able to obtain the necessary approval to market our Apotainer selection kits or other products based on our Powered by Cellect technology platform in a timely manner or at all. Even if we do obtain approval, the cost and delay could materially adversely affect our financial condition, results of operations and cash flows.

We plan to bring our Apotainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the CDRH, which is likely to result in the regulatory path usually followed for medical devices, which generally has less burdensome and costly requirements than the requirements for approval of a drug or biologic. The classification of our Apotainer selection kits by the FDA as a drug, a

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medical device or a combination product depends upon, among other things, the regulatory definition of a drug and a device, their primary mode of action and the indications for use or product claims. While we have had informal discussions with the FDA concerning our regulatory plans, we cannot assure you that the FDA would classify our Apotainer selection kits as a combination product subject to the primary jurisdiction of the CDRH that may qualify for the medical devices approval pathway. If the FDA were to classify our Apotainer selection kits as drug, biologic or a combination product subject to the primary jurisdiction of the Center for Drug Evaluation and Research or Center for Biologics Evaluation and Research jurisdiction, or were to prospectively alter the requirements for obtaining approval, the FDA could require us to meet more burdensome and lengthy approval requirements. Even if such approval could be obtained, we would be subject to more stringent level of post-market regulation as well. If any of these events were to occur, our financial condition and results of operations and cash flows could be materially and adversely affected.

Clinical trials necessary to support approval for our Apotainer selection kits or any future products based on Powered by Cellect technology platform would be expensive and could require the enrollment of large numbers of suitable patients, who could be difficult to identify and recruit. Delays or failures in any necessary clinical trials would prevent us from commercializing our Apotainer selection kits or any future product and could adversely affect our business, operating results and prospects.

Initiating and completing clinical trials necessary to support approval for our Apotainer selection kits or any future products based on our Powered by Cellect technology platform that we may develop, or additional safety and efficacy data that the FDA may require for any new specific indications of our technology that we may seek, would be time consuming and expensive with an uncertain outcome. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product candidate we advance into clinical trials may not have favorable results in later clinical trials.

Conducting successful clinical trials could require the enrollment of large numbers of patients, and suitable patients could be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators and support staff, the proximity to clinical sites of patients that are able to comply with the eligibility and exclusion criteria for participation in the clinical trial, and patient compliance. For example, patients could be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our product candidates or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to our product candidates.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy will be required and we may not adequately develop such protocols to support clearance or approval. Further, the FDA could require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to our clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial could cause an increase in costs and delays in the approval and attempted commercialization of our product candidates or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.

The results of our clinical trials may not support our product candidate claims or any additional claims we may seek for our products and our clinical trials may result in the discovery of adverse side effects.

Even if any clinical trial that we need to undertake is completed as planned, we cannot be certain that its results will support our product candidate claims or any new indications that we may seek for our products or that the FDA or foreign authorities will agree with our conclusions regarding the results of those trials. The clinical trial process may fail to demonstrate that our products or a product candidate is safe and effective for the proposed indicated use, which could cause us to stop seeking additional clearances or approvals for our Apotainer selection kits, abandon our Powered by Cellect technology platform or delay development of other product candidates. Any delay or termination of our clinical trials will delay the filing of our regulatory

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submissions and, ultimately, our ability to commercialize a product candidate. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

We might be unable to develop product candidates that will achieve commercial success in a timely and cost-effective manner, or ever.

Even if regulatory authorities approve our Apotainer selection kits, they may not be commercially successful. Our Apotainer selection kits may not be commercially successful because government agencies and other third-party payors may not cover the product or the coverage may be too limited to be commercially successful; physicians, researchers and others may not use or recommend our products, even following regulatory approval. A product approval, assuming one issues, may limit the uses for which the product may be distributed thereby adversely affecting the commercial viability of the product. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency, or the EMA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types of studies in addition to those that we currently anticipate. Third parties may develop superior products or have proprietary rights that preclude us from marketing our products. We also expect that at least some of our product candidates will be expensive, if approved. Demand for any Apotainer selection kits for which we obtain regulatory approval or license will depend largely on many factors, including but not limited to the extent, if any, of reimbursement of costs by government agencies and other third-party payors, pricing, the effectiveness of our marketing and distribution efforts, the safety and effectiveness of alternative products, and the prevalence and severity of side effects associated with our products. If physicians, government agencies and other third-party payors do not accept our products, we will not be able to generate significant revenue.

If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.

We intend to seek regulatory approval for our Apotainer selection kits in a number of countries outside of the United States and expect that these countries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures vary from country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any foreign market.

If we fail to obtain or maintain orphan exclusivity for our products we will have to rely on our data and marketing exclusivity, if any, and on our intellectual property rights, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.

We may seek to obtain an orphan designation for our Cellect lead product in the U.S. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S.

In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application, including a full NDA, to market the same drug for the same orphan indication, except in very limited circumstances. A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

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The EMA grants orphan drug designation to promote the development of products that may offer therapeutic benefits for life-threatening or chronically debilitating conditions affecting not more than five in 10,000 people in the E.U. Orphan drug designation from the EMA provides ten years of marketing exclusivity following drug approval, subject to reduction to six years if the designation criteria are no longer met.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Although we believe that our Powered by Cellect technology platform has broad application, because we have limited financial and managerial resources, we are currently focused on development of our Apotainer selection kits for HSCT in order to demonstrate commercial viability of our technology platform. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We will need to outsource and rely on third parties for the clinical development and manufacture, sales and marketing of our current product candidates or any future product candidates that we may develop, and our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.

We do not have the required financial and human resources to carry out on our own all the preclinical and clinical development for our Apotainer selection kits or any other or future product candidates that we may develop, and do not have the capability and resources to manufacture, market or sell our Apotainer selection kits or any future product candidates that we may develop. Our business model calls for the partial or full outsourcing of the clinical and other development and manufacturing, sales and marketing of our product candidates in order to reduce our capital and infrastructure costs as a means of potentially improving our financial position. Our success will depend on the performance of these outsourced providers. If such providers fail to perform adequately, our development of product candidates may be delayed and any delay in the development of our product candidates would have a material and adverse effect on our business prospects.

If we or our contractors or service providers fail to comply with regulatory laws and regulations, we or they could be subject to regulatory actions, which could affect our ability to develop, market and sell our product candidates and any other or future product candidates that we may develop and may harm our reputation.

If we or our manufacturers or other third-party contractors fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to regulatory actions, which could affect our ability to develop, market and sell our Apotainer selection kits or any future product candidates under development successfully and could harm our reputation and lead to reduced demand for or non-acceptance of our proposed product candidates by the market. Even technical recommendations or evidence by the FDA through letters, site visits, and overall recommendations to academia or biotechnology companies may make the manufacturing of a product extremely labor intensive or expensive, making the product candidate no longer viable to manufacture in a cost efficient manner. The mode of administration may make the product candidate not commercially viable. The required testing of the product candidate may make that candidate no longer commercially viable. The conduct of clinical trials may be critiqued by the FDA, or a clinical trial site’s Institutional Review Board or Institutional Biosafety Committee, which may delay or make impossible clinical

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testing of a product candidate. The Institutional Review Board for a clinical trial may stop a trial or deem a product candidate unsafe to continue testing. This may have a material adverse effect on the value of the product candidate and our business prospects.

Disruptions in our supply chain could delay any preclinical or clinical trials and the commercial launch of our product candidates.

Any significant disruption in our supplier relationships could harm our business. We currently rely on a single source supplier for the apoptotis inducing signal, Fas ligand, or FasL, that we use, and we may rely on a limited number of suppliers for other raw material we use. We believe that we will be able to obtain a sufficient supply of FasL for our needs in the foreseeable future, although we do not have a supply agreement in place. If our current supplier or any other supplier suffers a major natural or man-made disaster at its manufacturing facility, or if they otherwise cease to supply to us, then we would not be able to manufacture our product candidates until a qualified alternative supplier is identified. Although alternative sources of supply exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers. Any significant delay in the supply of a product candidate or its key materials for a preclinical or clinical trial could considerably delay completion of our clinical studies, product testing and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these key materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.

Should our products be approved for commercialization, adverse changes in reimbursement policies and procedures by payors may impact our ability to market and sell our products.

Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and third-party payors to decrease costs. Third-party payors are increasingly challenging the prices charged for medical products and services and instituting cost containment measures to control or significantly influence the purchase of medical products and services. For example, in the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, among other things, reduced and/or limited Medicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments to providers by 2% through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase new technologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the future that limits payments for our products from governmental payors. In addition, commercial payors, such as insurance companies, could adopt similar policies that limit reimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that our products or the procedures or patient care performed using our products will be reimbursed at a cost-effective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countries where we may market our products. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtain international reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell our products and have a material adverse effect on our business and financial condition.

Should our products be approved for commercialization, our financial performance may be adversely affected by medical device tax provisions in the healthcare reform laws.

PPACA currently imposes, among other things, an excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be $38 billion over the next decade. The Internal Revenue Service issued final regulations implementing the tax in December 2012, which requires, among other things, bi-monthly payments and quarterly reporting. Once we market products, we will

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be subject to this or any future excise tax on our sales of certain medical devices in the United States. To the extent our products are considered medical devices, we anticipate that primarily all of our sales, once commenced, of medical devices in the United States will be subject to this 2.3% excise tax.

Public perception of ethical and social issues surrounding the use of stem cell technology may limit or discourage the use of our technologies.

For social, ethical, or other reasons, governmental authorities in the United States and other countries may call for limits on, or regulation of the use of, stem cell technologies. Although our platform technology is designed to enrich the stem cell population as an enabling technology rather than manufacture stem cells, claims that stem cell technologies are ineffective, unethical or pose a danger to the environment may influence public attitudes. The subject of stem cell technologies in general has received negative publicity and aroused public debate in the United States and some other countries. Ethical and other concerns about our stem cell technology could materially hurt the market acceptance of our technologies.

The members of our management team and certain consultants are important to the efficient and effective operation of our business. Failure to retain our management and consulting team could have a material adverse effect on our business, financial condition or results of operations.

Our executive officers, our management team and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business, particularly Dr. Shai Yarkoni, our Chief Executive Officer, and Dr. Nadir Askenasy, our Chief Technology Officer. Our failure to retain the personnel that have developed much of the technology we utilize today, or any other key management and technical personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability to attract, retain and motivate highly trained technical and management personnel, among others, to continue the development and commercialization of our current and future products. As of the date of this prospectus, we do not have key-man insurance on any of our officers or consultants.

As such, our future success highly depends on our ability to attract, retain and motivate personnel, including contractors, required for the development, maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified employees or consultants. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition and results of operation.

We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.

The field of regenerative medicine is expanding rapidly, mainly in uses of stem cells but also in the development of cell-based therapies and/or devices designed to isolate stem and progenitor cells from human tissues. As the field grows, we face, and will continue to face, increased competition from pharmaceutical, biopharmaceutical, medical device and biotechnology companies, as well as academic and research institutions and governmental agencies in the United States and abroad. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than we do, and have substantially greater financial resources than we do, as well as significantly greater experience in:

developing stem cell selection technology;
undertaking preclinical testing and human clinical trials;
obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals;
manufacturing medical devices; and
launching, marketing and selling medical devices.

We are aware of two companies that lead the stem cell selection market with whom we directly compete. The first is Miltenyi Biotec, or Miltenyi, which dominates the stem cell selection market, using biomarkers to either enrich stem cells (positive selection by CD34) or deplete mature hematopoietic cells such as T cells from the biological sample (negative selection by monoclonal activity against T-cell receptor), resulting in the

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enrichment of stem and progenitor cells. The second is Cytori Therapeutics, or Cytori, which sells a medical device known as the Celution® System that enables bedside access to adult adipose-derived stem and regenerative cells, or ADRCs, by automating and standardizing the extraction, washing, and concentration of a patient’s own ADRCs for present and future clinical use. We believe that both technologies result in less than optimal cell population both in terms of quantity and quality (purity) of the selected population of cells.

In addition, since we are developing our Apotainer selection kits to improve the safety and efficacy of allogeneic HSCT, we also compete with companies developing treatments for GvHD, a life-threatening condition associated with allogeneic HSCT.

In the general area of cell-based therapies, we may now or in the future compete on an indirect basis with a variety of companies, most of whom are specialty medical products or biotechnology companies that provide a finished stem cell product that has already undergone stem cell selection. We believe, however, that many of these companies have the potential to become customers in the future of our Powered by Cellect technology platform in order to improve and enhance their in-house processes.

If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our Powered by Cellect technology platform or Apotainer selection kits, our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing and commercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors may also develop products or technologies that are superior to those we are developing, and render our product candidate obsolete or non-competitive. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.

The extent to which our product candidate achieves market acceptance will depend on competitive factors, many of which are beyond our control. Competition in the field of regenerative medicine is intense and has been accentuated by the rapid pace of technology development. Our competitors also compete with us to:

attract parties for acquisitions, joint ventures or other collaboration;
license proprietary technology that is competitive with Powered by Cellect technology platform or Apotainer selection kits;
attract funding; and
attract and hire scientific talent and other qualified personnel.

Product liability and other claims against us may in the future reduce demand for our products or result in substantial damages. We anticipate that we will need to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commercially reasonable terms, if at all.

A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could have a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from any future clinical testing of our product candidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims or class actions brought against us, with or without merit, could result in:

liabilities that substantially exceed any clinical trial liability or product liability insurance that we may obtain in the future, which we would then be required to pay from other sources, if available;
an increase in the premiums we may pay for any clinical trial liability or product liability insurance we may obtain in the future or the inability to renew or obtain clinical trial liability or product liability insurance coverage in the future on acceptable terms, or at all;
withdrawal of clinical trial volunteers or patients;

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damage to our reputation and the reputation of our products, including loss of any future market share;
regulatory investigations that could require costly recalls or product modifications;
litigation costs; and
diversion of management’s attention from managing our business.

We do not currently have clinical trial liability insurance or product liability insurance because we have not commenced clinical trials and none of our product candidates has yet been approved for commercialization. While we plan to seek clinical trial insurance and, if any of our product candidates are sold commercially, product liability insurance coverage, we cannot assure you that we will be able to obtain clinical trial and product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or in sufficient amounts to protect against potential losses.

If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our business may experience serious adverse consequences.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state health-care fraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

Our board of directors intends to adopt a Code of Ethics to be effective upon the listing of our ADSs on NASDAQ (subject to submission and approval of our listing application). However, it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding our business, our results of operations or potential transactions we are considering. If a director, executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and the market price of the ADSs. Such a claim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.

We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results of operations and financial condition.

We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, including potentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human and capital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls to expand, train and manage our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhance our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable to scale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, then we will

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not be able to successfully commercialize our Powered by Cellect technology platform, our Apotainer selection kits or any future product candidate. Failure to attract and retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, the management, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps we have taken to hire personnel and to improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results of operations and financial condition.

If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.

Our business will expose us to potential liability that results from risks associated with conducting any future clinical trials of our Apotainer selection kits or any future product candidate. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects, financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. Our planned insurance coverage may only mitigate a small portion of a substantial claim against us. In addition, we may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage us.

Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.

In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and related financial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. The United States and certain foreign governments have taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken by these governments are not successful, the return of adverse economic conditions may cause a significant impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms or at all.

Our current management team has no experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results of operations and financial condition.

Although our ordinary shares trade on the TASE and we file reports in Israel, our current management team has no experience managing and operating a publicly traded U.S. company. Failure to comply or adequately comply with any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation or financial condition, and could result in delays in achieving the development of an active and liquid trading market for the ADSs.

Risks Related to Our Intellectual Property

We rely upon patents to protect our technology.

The patent position of biotechnology firms is generally uncertain and involves complex legal and factual questions. We do not know whether any of our current or future patent applications will result in the issuance of any patents. Even issued patents may be challenged, invalidated or circumvented. Patents may not provide a competitive advantage or afford protection against competitors with similar technology. Competitors or potential competitors may have filed applications for, or may have received patents and may obtain additional and proprietary rights to compounds or processes used by or competitive with ours.

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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent and Trademark Office, or USPTO, and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to office actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and ultimately unsuccessful.

Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could adversely affect us.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability to develop, manufacture, market and sell our platform technology without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the medical device and pharmaceutical industries. While no such litigation has been brought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology or use of our technology does not infringe third-party patents. It is also possible that we have failed to identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain 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 approximately 18 months after the earliest filing, which is referred to as the priority date. Therefore, patent applications covering our 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 technology.

We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our technology, including inter parties review, interference, or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assert infringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology. In

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addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technology or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States and Israel can be less extensive than those in the United States and Israel. In addition, the laws of some foreign countries do not protect intellectual property to the same extent as laws in the United States and Israel. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States and Israel, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents to develop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that in the United States and Israel.

Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems of certain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to medical devices and biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreign jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our 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. The requirements for patentability may differ in certain countries, particularly developing countries. Certain countries in Europe and developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to 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.

We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual property to compete against us.

Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek to enter into these types of agreements with our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with our Powered by Cellect technology platform, our Apotainer selection kits or any future product candidate. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:

these agreements may be breached;
these agreements may not provide adequate remedies for the applicable type of breach;

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our proprietary know-how will otherwise become known; or
our competitors will independently develop similar technology or proprietary information.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

others may be able to develop technology that is similar to our Powered by Cellect technology platform, our Apotainer selection kits or any future product candidate, but that is not covered by the claims of the patents that we own;
we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;
we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable; and
the patents of others may have an adverse effect on our business.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest in our 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 product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. 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. In addition, the Israeli Supreme Court ruled in 2012 that an employee who receives a patent or contributes to an invention during his employment may be allowed to seek compensation for such contributions from his or her employer, even if the employee’s contract of employment specifically states otherwise and the employee has transferred all intellectual property rights to the employer. The Israeli Supreme Court ruled that the fact that a contract revokes an employee’s right for royalties and compensation does not rule out the right of the employee to claim their right for royalties. As a result, it is unclear whether and, if so, to what extent our employees may be able to claim compensation with respect to our future revenue. We may receive less revenue from future products if any of our employees successfully claim for compensation for their work in developing our intellectual property, which in turn could impact our future profitability.

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Risks Related to Our Operations in Israel

Potential political, economic and military instability in the State of Israel, where our senior management, our head executive office, and research and development facilities are located, may adversely affect our results of operations.

Our head executive office, our research and development facilities, as well as some of our planned clinical sites, are or will be located in Israel. Our officers and most of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. During the summer of 2006 and the fall of 2012, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In December 2008, January 2009, November 2012 and July 2014, there were escalations in violence between Israel, on the one hand, and Hamas, the Palestinian Authority and/or other groups, on the other hand, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missiles being fired from the Gaza Strip into Southern and central Israel, including near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Our offices and laboratory, located in Kfar Saba, Israel, are within the range of the missiles and rockets that have been fired at Israeli cities and towns from Gaza sporadically since 2006, with escalations in violence (such as the recent escalation in July 2014) during which there were a substantially larger number of rocket and missile attacks aimed at Israel. In addition, since February 2011, Egypt has experienced political turbulence and an increase in terrorist activity in the Sinai Peninsula following the resignation of Hosni Mubarak as president. This turbulence included protests throughout Egypt, and the appointment of a military regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previously outlawed by Egypt), and the subsequent overthrow of this elected government by a military regime. Such political turbulence and violence may damage peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countries in the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflict in Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any outside intervention may lead to deterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for causing additional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. Additionally, a violent jihadist group named Islamic State of Iraq and Levant (ISIL) is involved in hostilities in Iraq and Syria and have been growing in influence. Although ISIL’s activities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.

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Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws, against us or our executive officers and directors, or asserting U.S. securities laws claims in Israel.

None of our directors or officers are residents of the United States. Most of our directors’ and officers’ assets and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.

Moreover, among other reasons, including but not limited to fraud or absence of due process, or the existence of a judgment which is at variance with another judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.

Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective of their agreements with us, which in turn could impact our future profitability.

We generally enter into non-competition agreements with our employees and key consultants. These agreements prohibit our employees and key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

In addition, Chapter 8 to the Israeli Patents Law, 5727-1967, or the Patents Law, deals with inventions made in the course of an employee’s service and during his or her term of employment, whether or not the invention is patentable, or service inventions. Section 134 of the Patents Law sets forth that if there is no agreement which explicitly determines whether the employee is entitled to compensation for the service inventions and the extent and terms of such compensation, such determination will be made by the Compensation and Rewards Committee, a statutory committee of the Israeli Patents Office. The Israeli Supreme Court ruled in 2012 that an employee who contributes to a service invention during his or her employment may be allowed to seek compensation for such contributions from his employer, even if the employee’s contract of employment specifically states otherwise and the employee has assigned all intellectual property rights to the employer. The Israeli Supreme Court ruled that the fact that a contract revokes the employee’s right for royalties and compensation in connection with service inventions does not rule out the right of the employee to claim a right for royalties. Following such ruling, the Israeli Supreme Court remanded the proceedings to the District Court for further discussion and therefore the ultimate outcome has

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yet to be resolved. As a result, it is unclear if, and to what extent, our research and development employees may be able to claim compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims are successful, which in turn could impact our future profitability.

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.-based corporations. In particular, a shareholder of an Israeli company, such as us, has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us and other shareholders and to refrain from abusing its power in us, including, among other things, in voting at the general meeting of shareholders 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 of ours or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “Management — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, the parameters and implications of the provisions that govern shareholder behavior have not been clearly determined. 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 law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

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 these types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the Israel Registrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, the holder of a majority of each class of securities of the target company must approve a merger. Moreover, a full tender offer can only be completed if the acquirer receives at least 95% of the issued share capital (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, except that if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer), and 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, petition the court to alter the consideration for the acquisition (unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights).

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to those of 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 numerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are restricted. 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 actual disposition of the shares has occurred.

These and other similar 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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Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuations and inflation.

Our reporting and functional currency is the NIS, but some portion of our clinical trials and operations expenses are in the U.S. dollar and Euro. As a result, we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect us from adverse effects.

Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.

Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, financial condition and results of operations.

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. Although we intend to apply to list the ADSs on NASDAQ, such application may not be approved and, even if it is approved, 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.

We will incur significant additional increased costs as a result of the listing of the ADSs for trading on 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 our ADSs on 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 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 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, our board committees, if any, or as executive officers.

If we were to be characterized as a PFIC for U.S. tax purposes, U.S. holders of our ADSs could have adverse U.S. income tax consequences.

If we were to be characterized as a PFIC under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S. taxpayer owns ADSs, such U.S. holder could be liable for additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale,

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exchange or other disposition, including a pledge, of the ADSs, whether or not we continue to be a PFIC. Based on the nature of our business, the projected composition of our income and the projected composition and estimated fair market values of our assets, we believe that we may be deemed a PFIC. In particular, in light of the complexity of PFIC rules, we cannot assure you that we have not been a PFIC in prior years or are not a PFIC or will avoid becoming a PFIC in the future. Were we to be classified as a PFIC, a U.S. investor may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning the ADSs for our taxable year ending December 31, 2016, provided that such U.S. investor is eligible to make, and successfully makes, a “mark-to-market” election. U.S. investors could also mitigate some of the adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund” election, provided that we provide the information necessary for a U.S. investor to make such an election. We intend to make available to U.S. investors upon request the information necessary for U.S. holders to make qualified electing fund elections. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a “qualified electing fund” or “mark-to-market” election with respect to our ADSs in the event we that qualify as a PFIC. For more information see “Taxation — U.S. Federal Income Tax Considerations.”

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect 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 a material adverse effect 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 control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, 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. Disclosing deficiencies or weaknesses in our internal control, 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 a material adverse effect on the price of the ADSs. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.

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 control over financial reporting required by Section 404 of the Sarbanes-Oxley Act; and
an exemption from compliance with any new requirements adopted by 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.

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 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the ADSs pursuant to an effective registration statement, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated issuer” as defined in Regulation S-K under the Securities Act.

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.

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We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.

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. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulations promulgated under the Israeli Companies Law, as amended, or the Companies Law, as an Israeli public company listed overseas we will be required to disclose the compensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli public companies listed overseas prior to such amendment), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions and short-swing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting companies.

As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

As a “foreign private issuer,” we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the listing rules of NASDAQ for domestic U.S. issuers. For instance, we intend to follow home country practice in Israel with regard to, among other things, board of directors independence requirements, director nomination procedures and quorum requirements. In addition, we may follow our home country law instead of the listing rules of NASDAQ that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and certain acquisitions of the stock or assets of another company. We also intend to follow our home country rules regarding the periodic approval of and changes to the formal charter for our compensation committee instead of the listing rules of NASDAQ. We may in the future elect to follow home country corporate governance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on NASDAQ may provide less protection to you than what is accorded to investors under the listing rules of NASDAQ applicable to domestic U.S. issuers. See “Management — NASDAQ listing rules and Home Country Practices.”

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our traded securities, our securities price and trading volume could be negatively impacted.

The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding the ADSs, or provide more favorable relative recommendations about our competitors, the price of the ADSs would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could negatively impact the price of the ADSs or their trading volume.

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The market price for the ADSs may be volatile.

The market price for the ADSs is likely to be highly volatile and subject to wide fluctuations in response to numerous factors including the following:

our failure to obtain the approvals necessary to commence clinical trials;
results of clinical and preclinical studies;
announcements of regulatory approval or the failure to obtain it, or changes or delays in the regulatory review process;
announcements of technological innovations, new products or product enhancements by us or others;
adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;
changes or developments in laws, regulations or decisions applicable to our product candidates or patents;
any adverse changes to our relationship with manufacturers or suppliers;
announcements concerning our competitors or the regenerative medicine or healthcare industries in general;
achievement of expected product sales and profitability or our failure to meet expectations;
our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual property infringement actions;
any major changes in our board of directors, management or other key personnel;
announcements by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;
expiration or terminations of licenses, research contracts or other collaboration agreements;
public concern as to the safety of our products that we, our licensees or others develop;
success of research and development projects;
developments concerning intellectual property rights or regulatory approvals;
variations in our and our competitors’ results of operations;
changes in earnings estimates or recommendations by securities analysts, if our ordinary shares or the ADSs are covered by analysts;
future issuances of ordinary shares, ADSs or other securities;
general market conditions, including the volatility of market prices for shares of healthcare companies generally, and other factors, including factors unrelated to our operating performance; and
the other factors described in this “Risk Factors” section.

These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs, which would result in substantial losses by our investors. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of any particular company. These market fluctuations may also have a material adverse effect on the market price of the ADSs.

Our ordinary shares and the ADSs will be traded on different markets and this may result in price variations.

Our ordinary shares have been traded on the TASE since 1990. If our application is approved, we expect that the ADSs will be traded on NASDAQ following the completion of this offering. Trading in these securities on these markets will take place in different currencies (dollars on NASDAQ and NIS on the

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TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our securities on these two markets may differ due to these and other factors.

Substantial future sales or perceived potential sales of our ordinary shares or ADSs in the public market could cause the price of our ordinary shares or the ADSs to decline.

Substantial sales of our ordinary shares or the ADSs, either on the TASE or on NASDAQ, as applicable, including in this offering, may cause the market price of our ordinary shares and ADSs to decline. Almost all of our outstanding ordinary shares are registered and available for sale in Israel. Sales by us or our security holders of substantial amounts of our ordinary shares or ADSs, or the perception that these sales may occur in the future, could cause a reduction in the market price of our ordinary shares or ADSs. The issuance of any additional ordinary shares or any additional ADSs, or any securities that are exercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market price of our ordinary shares or the ADSs and will have a dilutive effect on our existing shareholders and holders of ADSs.

Furthermore,      ordinary shares outstanding after this offering will be available for sale, upon the expiration of the      day lock-up period applicable to our directors and executive officers (as described under “Underwriting-Lock-Up Agreements” below) beginning from the date of the final prospectus relating to this offering, subject to any other restrictions as applicable under Israeli Law. Any or all of these shares may be released prior to the expiration of the lock-up period at the discretion of the underwriter of this offering. To the extent shares are released before the expiration of the lock-up period and sold into the market, the market price of the ADSs could decline.

We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our traded securities appreciate in value, our investors may not benefit from holding our securities.

We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. Moreover, the Companies Law imposes certain restrictions on our ability to declare and pay dividends. See “Description of Share Capital —  Dividends” for additional information. As a result, investors in the ADSs or ordinary shares will not be able to benefit from owning these securities unless their market price becomes greater than the price paid by such investors and they are able to sell such securities. We cannot assure you that you will ever be able to resell our securities at a price in excess of the price paid.

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, if any, 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, 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 effect 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 withhold from such dividends or distributions its fees and an amount on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. This

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means that 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 any value for such distributions or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.

Holders of ADSs must act through the depositary to exercise their rights as our shareholders.

Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholders meeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient notice of a shareholders meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders meeting.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are 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 deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.

Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholders vote.

Following the completion of this offering, our board of directors will have the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissued shares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence over matters on which our shareholders vote.

You will experience immediate dilution in book value of any ADSs you purchase.

Because the price per ADS being offered is substantially higher than our net tangible book value per ADS, you will suffer substantial dilution in the net tangible book value of any ADS you purchase in this offering. If the underwriters exercise their over-allotment option, you may experience additional dilution. See “Dilution”.

Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that you do not agree with or that do not improve our results of operations or enhance the value of ADSs (see “Use of Proceeds”). Our failure to apply these funds effectively could have a material adverse effect on our business and cause the price of the ADSs to decline.

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains express or implied “forward-looking statements” within the meaning of U.S. Federal securities laws. These forward-looking statements include, but are not limited to:

our expectations regarding the timing of commencing clinical trials with respect to our ApoGraft process and our Apotainer selection kit;
our expectations regarding the progress of our clinical trials, including the duration, cost and whether such trials will be conducted at all;
our intention to hold meetings with regulators and apply for regulatory approval for our product candidates, and the costs and timing of such regulatory approvals;
the likelihood of regulatory approvals for our product candidates;
the timing and cost of the developments of our prototype Apotainer selection kit;
our expectation to obtain a sufficient supply of FasL for our needs in the foreseeable future;
the market size and future sales of our product candidates or any other future products or product candidates;
that our technology may potentially improve the safety and efficacy of regenerative medicine stem cell therapy and other potential advantages of our selection process for physicians, academics, researchers and others;
our intention to expand our product development and build a diversified product portfolio of Powered by Cellect products for a broad spectrum of market segments; and
our estimates regarding anticipated expenses, capital requirements and our needs for substantial additional financing.

In some cases, forward-looking statements are identified by terminology such as “believes”, “estimates”, “expects”, “intends”, “plans”, “potential”, “may”, “should”, “could”, “might”, “seeks”, “targets”, “will”, “would”, “projects”, “forecasts”, “continues” or “anticipates” or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements may be included in, among other things, various filings made by us with the SEC, press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

This prospectus identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly those set forth under the heading “Risk Factors.” In addition, historic results of scientific research and clinical and preclinical trials do not guarantee that the conclusions of future research or trials would not suggest different conclusions or that historic results referred to in this prospectus would not be interpreted differently in light of additional research and clinical and preclinical trials results.

We believe these forward-looking statements are reasonable; however, these statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” and elsewhere in this prospectus. Given these uncertainties, you should not rely upon forward-looking statements as predictions of future events.

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All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, except as required by applicable law. In evaluating forward-looking statements, you should consider these risks and uncertainties.

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EXCHANGE RATE INFORMATION

As of July 5, 2016, the daily representative exchange rate of NIS per U.S. dollars was 3.869. The following table sets forth information regarding the exchange rates of NIS per U.S. dollars for the periods indicated. Average rates are calculated by using the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.

       
Year Ended December 31,   NIS per U.S. $
  High   Low   Average   Period End
2015     4.053       3.761       3.887       3.902  
2014     3.994       3.402       3.578       3.889  
2013     3.791       3.471       3.611       3.471  
2012     4.084       3.700       3.856       3.733  
2011     3.821       3.363       3.578       3.821  

       
  NIS per U.S. $
Month Ended   High   Low   Average   Period End
July 2016 (through July 5, 2016)     3.895       3.844       3.866       3.895  
June 2016     3.900       3.818       3.857       3.846  
May 2016     3.879       3.746       3.813       3.850  
April 2016     3.819       3.758       3.778       3.761  
March 2016     3.912       3.766       3.868       3.766  
February 2016     3.964       3.871       3.908       3.910  
January 2016     3.983       3.913       3.951       3.951  

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PRICE RANGE OF OUR ORDINARY SHARES

Our ordinary shares have been trading on the TASE under the symbol “CLBD” since September 13, 2013, before then our ordinary shares were traded on the TASE under the name TRF Capital Ltd. No trading market currently exists for our ordinary shares in the United States. We intend to apply to list the ADSs on NASDAQ under the symbol “    .” No assurance can be given that our application will be approved.

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and U.S. dollars.

       
  NIS   U.S. dollar ($)
     Price Per Ordinary Share   Price Per Ordinary Share(1)
     High   Low   High   Low
Annual:
                                   
2015     1.626       0.989       0.417       0.253  
2014     1.531       0.705       0.392       0.181  
2013     2.020       0.182       0.518       0.047  
2012     1.706       0.169       0.437       0.043  
2011     3.543       1.417       0.908       0.437  
Quarterly:
                                   
Third Quarter 2016 (through July 5, 2016)     1.579       1.506       0.404       0.385  
Second Quarter 2016     1.998       1.338       0.512       0.342  
First Quarter 2016     1.499       1.207       0.384       0.309  
Fourth Quarter 2015     1.472       1.040       0.377       0.267  
Third Quarter 2015     1.381       1.143       0.354       0.293  
Second Quarter 2015     1.626       1.267       0.417       0.325  
First Quarter 2015     1.501       0.989       0.385       0.253  
Fourth Quarter 2014     1.102       0.961       0.282       0.246  
Third Quarter 2014     1.531       1.008       0.392       0.258  
Second Quarter 2014     1.481       0.970       0.380       0.249  
First Quarter 2014     1.240       0.705       0.318       0.181  
Most Recent Six Months:
                                   
July 2016 (through July 5, 2016)     1.579       1.506       0.404       0.385  
June 2016     1.998       1.542       0.512       0.395  
May 2016     1.998       1.599       0.512       0.409  
April 2016     1.659       1.338       0.425       0.342  
March 2016     1.480       1.308       0.379       0.335  
February 2016     1.499       1.241       0.384       0.318  
January 2016     1.364       1.207       0.350       0.309  

(1) Calculated using the exchange rate reported by the Bank of Israel for December 31, 2015 at the rate of one U.S. dollar per NIS 3.902.

As of July 5, 2016, there were 5 shareholders of record of our ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, as the shares of most our shareholders who hold ordinary shares that are traded on the TASE are recorded in the name of our Israeli share registrar, Bank Leumi Registration Company Ltd. As of July 5, 2016, there were no record holders of our ordinary shares in the United States.

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $     million (after deducting underwriting discounts and commissions and estimated offering expenses payable by us) or approximately $     million if the underwriters exercise their over-allotment option in full, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of $     per ADS, which was the last reported price of our ordinary shares on the TASE on           , 2016 (based on the exchange rate reported by the Bank of Israel on that date). Each $1.00 increase (decrease) in the assumed initial public offering price of $     per ADS would increase (decrease) the net proceeds to us from this offering by approximately $     million, or approximately $     million if the underwriter exercise their over-allotment option in full, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We currently estimate that we will use the net proceeds as follows:

$         for our Phase I/II single arm, open label clinical trial;
$         to fund the development of our Apotainer selection kit product;
$         for our pivotal study;
$         to advance the development of our Powered by Cellect technology platform for additional indications and for general research activities; and
the balance for working capital and for general corporate purposes including establishing an office in the United States.

The amounts and schedule of our actual expenditures will depend on multiple factors including the progress of our clinical development and regulatory efforts, the status and results of the clinical trials, the pace of our partnering efforts in regards to manufacturing and commercialization and the overall regulatory environment. Therefore, our management will retain broad discretion over the use of the proceeds from this offering. We may ultimately use the proceeds for different purposes than what we currently intend. Pending any ultimate use of any portion of the proceeds from this offering, if the anticipated proceeds will not be sufficient to fund all the proposed purposes, our management will determine the order of priority for using the proceeds, as well as the amount and sources of other funds needed.

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DIVIDENDS AND DIVIDEND POLICY

We have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our board of directors may deem relevant. In addition, the distribution of dividends is limited by Israeli law, which permits the distribution of dividends only out of distributable profits. See “Description of Share Capital — Articles of Association — Dividends.” See “Taxation — Israeli Tax Considerations and Government Programs.”

If we pay any dividends, we will also pay such dividends to the ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid to ADS holders in U.S. dollars.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents, total debt and capitalization as of March 31, 2016:

on an actual basis; and
on a pro forma, as adjusted, basis to also give effect to: our sale of      ADSs in this offering at an assumed initial public offering price of $     per ADS, which was the last reported sale price of our ordinary shares on TASE on           , 2016 (based on the exchange rate reported by the Bank of Israel on that date). You should read this table in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

The data below is based on the March 31, 2016 exchange rate of 3.766 = $1.00.

   
  As of March 31, 2016
     Actual   As Adjusted
     In thousands, in $
Cash and cash equivalents, and marketable securities     3,947           
Shareholders’ equity:
                 
Ordinary shares               
Share Premium     11,603           
Options     1,288           
Treasury shares     (2,503 )          
Accumulated deficit     (6,424 )            
Total shareholders’ equity     3,964           
Total capitalization     3,964           

A $1.00 increase (decrease) in the assumed public offering price of $     per ADS, would increase (decrease) the as adjusted amount of each of cash and cash equivalents and total shareholders' equity by approximately $     million, assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A        ADS increase in the number of ADSs offered by us together with a concomitant $1.00 increase in the assumed public offering price of $     per ADS would increase our as adjusted cash and cash equivalents by approximately $     million after deducting estimated underwriting discounts and estimated offering expenses payable by us. Conversely, a        ADS decrease in the number of ADSs offered by us together with a concomitant $1.00 decrease in the assumed public offering price of $     per ADS would decrease our as adjusted cash and cash equivalents by approximately $     million after deducting estimated underwriting discounts and estimated offering expenses payable by us.

The number of ordinary shares that will be outstanding immediately after this offering is based on 81,737,325 ordinary shares outstanding as of July 5, 2016. This number excludes, as of such date:

2,686,693 ordinary shares held in treasury;
5,910,008 ordinary shares issuable upon the exercise of 5,910,008 options at a weighted average exercise price of NIS 1.46 ($0.38) per share issuable under the Cellect Biomed Ltd. 2014 Global Incentive Option Scheme, or the 2014 Cellect Option Plan, and an additional 1,496,242 ordinary shares reserved for future issuance under our 2014 Cellect Option Plan;
227,358 ordinary shares issuable upon the exercise of 227,358 options at exercise price of NIS 1.00 ($0.26) per share issued to a consultant;
4,719,500 ordinary shares issuable upon the exercise of 4,719,500 options (Series 1) at an exercise price of NIS 1.85 ($0.48) per share; and
1,927,801 ordinary shares issuable upon the exercise of 1,927,801 options (Series A) at an exercise price of NIS 2.1 ($0.54) per share.

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DILUTION

If you purchase ADSs in this offering, your ownership interest in us will be diluted to the extent of the difference between the public offering price per ADSs you will pay in this offering and the pro forma net tangible book value per ADS after this offering. Dilution results from the fact that the per initial public offering price per ordinary shares is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

Our historical net tangible book value as of March 31, 2016, was approximately NIS 14.9 million, or $3.9 million, corresponding to a net tangible book value of NIS 0.18 or $0.049 per ordinary share or $     per ADS (using the ratio of      ordinary shares to one ADS), as of such date. We calculate our historical net tangible book value per share or per ADS by taking the amount of our total tangible assets, subtracting the amount of our total liabilities, and then dividing the difference by the actual total number of ordinary shares or ADSs outstanding, as applicable.

The pro forma as adjusted net tangible book value per share as of March 31, 2016 was NIS      or $     per ordinary share or $     per ADS (using the ratio of      ordinary shares to one ADS). The pro forma as adjusted net tangible book value per share gives effect to the sale and issuance of the ADSs in this offering at an offering price of $     per ADS, which reflects the last reported sale price of      of our ordinary shares on the TASE on March 31, 2016, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted net tangible book value per share after the offering is calculated by dividing the pro forma net tangible book value of NIS      or $    , by     ], which is equal to our pro forma issued and outstanding ordinary shares. The difference between the public offering price and the pro forma net tangible book value per share represents an immediate increase in the net tangible book value of NIS     , or $     per ordinary share or $     per ADS to existing shareholders and immediate dilution of NIS     , $    , per share to new investors purchasing the ADSs in this offering.

The following table illustrates this dilution on a per share basis:

   
Assumed public offering price per ADS     NIS     $       
Actual net tangible book value per ADS as of March 31, 2016                  
Increase in net tangible book value per share attributable to purchasers purchasing ADSs in this offering                  
Pro forma net tangible book value per share of ADSs, as adjusted to give effect to this offering                  
Dilution per ADS to purchasers in this offering     NIS     $       

A $1.00 increase (decrease) in the assumed initial public offering price of $     per ADS would increase (decrease) our pro forma net tangible book value per ADS after this offering by $     and the dilution per ADS to new investors by $    , assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering.

The following table summarizes, on a pro forma as adjusted basis as of March 31, 2016, the differences between the number of ordinary shares purchased from us (treating each ADS as      ordinary shares), the total consideration paid to us and the average price per ordinary share paid by existing holders of our ordinary shares and by investors in this offering (treating each ADS as      ordinary shares) in purchases of the ADSs from us and by purchasers in this offering. As the table shows, new purchasers purchasing ADSs in this offering will pay an average price per ordinary share substantially higher than our existing shareholders paid. The table below is based on      ordinary shares outstanding immediately after the consummation of this offering (including those represented by the ADSs) and does not give effect to the ordinary shares reserved for future issuance under our 2014 Cellect Option Plan, or outstanding warrants. A total of      ordinary shares have been reserved for future issuance under our 2014 Cellect Option Plan, by which we have granted options to purchase      shares thereunder as of March 31, 2016. We have also reserved for issuance      ordinary shares for issuance upon the exercise of all outstanding options. The table below is based upon a public offering price of NIS      or $    , per ordinary share purchased in this offering (treating each ADS as     

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ordinary shares), the last reported sales price of our ordinary shares on TASE, after excluding underwriting discounts and commissions and estimated offering expenses payable by us, and assuming no exercise of the underwriter’s over-allotment option:

             
  Shares Purchased   Total Consideration   Average
Price Per
Share
(NIS)
  Average
Price Per
Share
(USD)
  Number   Percent   Amount   Amount   Percent
               (thousands
in NIS)
  (thousands
in USD)
              
Existing shareholders                   %             $                 %             $       
Purchasers in this offering                                                               
Total                         $                  $  

To the extent that new options are granted under our 2014 Cellect Option Plan and/or that any options are exercised, there will be further dilution to investors purchasing ordinary shares represented by the ADSs in this offering.

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SELECTED FINANCIAL DATA

The following tables summarize our financial data. We have derived the selected statements of comprehensive loss data for the years ended December 31, 2015, 2014 and 2013 and the balance sheet data as of December 31, 2015 and 2014 from our audited financial statements included elsewhere in this prospectus. The selected financial statement data as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are derived from our unaudited interim financial statements that are included elsewhere in this prospectus. In the opinion of management, these unaudited interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial position and operating results for these periods. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. Our historical results are not necessarily indicative of the results that may be expected in the future. The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

Our financial statements included in this prospectus were prepared in accordance with IFRS, as issued by the IASB, and reported in NIS.

Statements of comprehensive loss data(1)

             
  Year ended December 31   Three months ended March 31
     2013   2014   2015   2015   2015   2016   2016
     NIS in thousands   Convenience
translation
into USD
in thousands(2)
  NIS in thousands   Convenience
translation
into USD
in thousands(2)
Research and development expenses     1,062       3,058       5,893       1,510       1,184       1,831       486  
General and administrative
expenses
    2,425       2,491       4,204       1,077       592       1,930       512  
Operating loss     3,487       5,549       10,097       2,587       1,776       3,761       998  
Financial income     (11 )      (37 )      (4 )      (1 )      (4 )      (12 )      (3 ) 
Financial expenses     202       39       79       20       55       40       11  
Financial expenses, net     191       2       75       19       51       28       8  
Net loss     3,678       5,551       10,172       2,606       1,827       3,789       1,006  
Comprehensive loss     3,678       5,551       10,172       2,606       1,827       3,789       1,006  
Loss per ordinary share – basic and
diluted
    0.075       0.084       0.137       0.035       0.026       0.049       0.013  
Weighted average number of shares outstanding used to compute basic and diluted loss per
share
    49,152,886       65,968,768       74,475,109       74,475,109       71,085,351       76,743,707       76,743,707  

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Statement of financial position

           
  Year ended December 31   Three months ended March 31
     2014   2015   2015   2015   2016   2016
     NIS in thousands   Convenience
translation
into USD
in thousands(2)
  NIS in thousands   Convenience
translation
into USD
in thousands(2)
Cash and cash equivalents     2,122       3,913       1,003       1,134       8,715       2,314  
Marketable securities – short term     11,257       7,829       2,006       10,661       6,149       1,633  
Other receivables     161       412       106       118       881       234  
Restricted cash     20       20       5       20       20       5  
Property, plant and equipment     234       1,187       304       228       1,465       389  
Total assets     13,794       13,361       3,424       12,161       17,230       4,575  
Trade payables     107       466       119       331       600       159  
Other payables     728       2,394       614       404       1,699       452  
Total liabilities     835       2,860       733       735       2,299       611  
Total shareholders’ equity     12,959       10,501       2,691       11,426       14,931       3,964  

(1) Data on diluted loss per share were not presented in the financial statements because the effect of the exercise of the options and warrants is anti-dilutive.
(2) Calculated using the exchange rate reported by the Bank of Israel for December 31, 2015 at the rate of one U.S. dollar per NIS 3.902 and for March 31, 2016 at the rate of one U.S. dollar per NIS 3.766.

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

You should read the following discussion along with our financial statements and the related notes included in this prospectus. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions, including those discussed under “Risk Factors.” U.S. dollar amounts herein have been translated for the convenience of the reader from the original NIS amounts at the representative rate of exchange as of March 31, 2016 (NIS 3.766 = $1.00) and as of December 31, 2015 (NIS 3.902 = $1.00), as applicable. Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forward-looking statements. See “Special Note About Forward-Looking Statements.” We have prepared our financial statements in accordance with IFRS, as issued by the IASB.

Overview

We are an emerging biotechnology company that is developing a novel technology platform known as Powered by Cellect that functionally selects stem cells in order to improve the safety and efficacy of regenerative medicine stem cell therapies. We aim to become the standard enabling technology for the enrichment of the stem cell population for companies developing stem cell therapies, physicians practicing regenerative medicine, and for researchers and academia engaged in stem cell research.

We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine by using functional selection of stem cells. Efficient selection enables retention of most of the stem cells with few mature cells resulting in the near elimination of toxicity provoking cells coupled with the enrichment of the stem cell population.

Our Powered by Cellect technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process of programmed cell death and is a vital part of physiological development and maintenance. Stem cells flourish in an environment where normal cells die. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activity and apoptotic-inducing agents. Our research has demonstrated that stem cells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to self-destruct. We have chosen this functional characteristic of stem cells to use apoptosis-inducing proteins to more efficiently select stem cells while neutralizing harmful cells and their associated medical complications.

We are currently developing our first product based on our Powered by Cellect technology platform, the Apotainer selection kit. The Apotainer selection kit is an easy to use, cost effective, off the shelf stem cell selection kit. The kit is designed for clinical use with the aim of improving the results of human allogeneic (using stem cells from a donor) HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT, also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that that HSCT can also be used for other indications but is rarely used due to high toxicity. However, application of allogeneic HSCT is limited by GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells) recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is the major cause of transplant-related morbidity and mortality. Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reduced toxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD and as such HSCT is restricted to patients with life threatening diseases. Due to non-efficient selection of stem cells for HSCT, the complex and expansive laboratory process performed using technologies currently available is able to reduce toxicity only at a significant tradeoff —  graft rejection, cancer reoccurrence and high costs of treatment.

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We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our Powered by Cellect technology platform in order to clinically validate that our technology can efficiently select stem cells while neutralizing harmful cells and their associated medical complications. We believe that if we are able to demonstrate the clinical utility of our technology for this indication, it will open up the opportunity for the use of our Powered by Cellect technology platform for the treatment of other indications (e.g., solid organ transplantation and auto-immune diseases) and for the adoption of our Powered by Cellect technology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population.

We plan to bring our Apotainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the CDRH, which is likely to result in the regulatory path usually followed for medical devices. We believe that this will result in cost savings and reduce time to market and further believe that such proof of concept will open up the opportunity for the licensing of our Powered by Cellect technology platform to allow for earlier revenues.

All of our research efforts to date have culminated in clinical trials that we plan to begin in 2016. We are currently preparing for a Phase I/II, single arm, open label clinical trial in Israel to evaluate the safety and tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergo our ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. In addition, we plan on holding a pre-IND meeting with the FDA in the second half of 2016 using the Apotainer selection kit.

History of Losses

Since our inception, we have generated significant losses in connection with our research and development, including the development of our Powered by Cellect technology platform. As of March 31, 2016, we had an accumulated deficit of NIS 24.1 million (approximately $6.4 million). We expect that we will incur additional losses in the near future as a result of our research and development activities. Such research and development activities will require us to obtain and expend further resources if we are to be successful. As a result, we expect to continue to incur operating losses, and we will need to obtain additional funds to further develop our research and development programs.

As a result of, among other things, our research and development activities, as well as our failure to generate revenues since our inception, for the three months ended March 31, 2016 and for the year ended December 31, 2015, our net loss was approximately NIS 3.7 million (approximately $1.0 million) and NIS 10.2 million (approximately $2.6 million), respectively.

We have funded our operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE). From our inception until our first public offering in Israel in April 2015, we raised approximately NIS 20.0 million in various private placements. We received approximately NIS 6.3 million from our first public offering in Israel. Recently, we received approximately NIS 8.0 million from our private offering in Israel in February 2016.

Operating Expenses

Our current operating expenses consist of two components, research and development expenses and general and administrative expenses.

Research and Development Expenses

Our research and development expenses consist primarily of salaries and related personnel expenses, share-based compensation, fees paid to consultants, patent-related legal fees, costs of preclinical studies, and costs for facilities and equipment. We charge all research and development expenses to operations as they are incurred. We expect our research and development expense to remain our primary expense in the near future as we continue to develop our Powered by Cellect technology platform. Increases or decreases in research and development expenditures are attributable to the number and/or duration of the studies that we conduct.

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During the three months ended March 31, 2016 and March 31, 2015, we incurred NIS 1,831,000 ($468,000) and NIS 1,184,000 ($299,000), respectively, (based on the average of NIS/USD exchange rates reported by the Bank of Israel for each of the three months ended on these respective dates: March 31, 2016 – 3.908, March 31, 2015 – 3.945) in expenses on company-sponsored research and development activities.

During the years ended December 31, 2013, 2014 and 2015, we incurred NIS 1,062,000 ($295,000), NIS 3,058,000 ($855,000) and NIS 5,893,000 ($1.5 million), respectively, (based on the average of NIS/USD exchange rates reported by the Bank of Israel for each of the three years ended on these respective dates: 2013 – 3.611, 2014 – 3.578, 2015 – 3.887) in expenses on company-sponsored research and development activities.

We expect that a large percentage of our research and development expense in the future will be incurred in support of our future clinical development projects. Due to the inherently unpredictable nature of clinical development processes, we are unable to estimate with any certainty the costs we will incur in the continued development of Powered by Cellect technology platform for potential commercialization. Clinical development timelines, the probability of success and development costs can differ materially from expectations.

While we are currently focused on advancing our Powered by Cellect technology platform, our future research and development expenses will depend on the clinical success of our Apotainer selection kits and any future product candidates’ commercial potential. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for our Apotainer selection kits and any future product candidate in certain indications in order to focus our resources on more promising product candidates. Completion of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

We expect our research and development expenses to increase in the future from current levels as we continue the advancement of our Powered by Cellect technology platform. The lengthy process of completing clinical studies and seeking regulatory approval for Apotainer selection kits requires the expenditure of substantial resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Because of the factors set forth above, we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects.

General and Administrative Expenses

Our general and administrative expenses consist primarily of salaries and expenses related to employee benefits, including share-based compensation, for our general and administrative employees, which includes employees in executive and operational roles, including finance and human resources, as well as consulting, legal and professional services related to our general and administrative operations.

We expect our general and administrative expenses, such as accounting and legal fees, to increase after we become a public company in the United States.

Financial Income and Expenses

Financial income consists primarily of interest income on our cash and cash equivalents and foreign currency exchange income. Financial expenses consist primarily of expenses related to bank charges and foreign currency exchange expense.

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Results of Operations

The table below provides our results of operations for the year ended December 31, 2015 as compared to the years ended December 31, 2014 and 2013, and for the three months ended March 31, 2016 compared to the three months ended March 31, 2015.

Statements of comprehensive loss data(1)

             
  Year ended December 31   Three months ended March 31
     2013   2014   2015   2015   2015   2016   2016
     NIS in thousands   Convenience
translation
into USD
in thousands(2)
  NIS in thousands   Convenience
translation
into USD
in thousands(2)
Research and development expenses     1,062       3,058       5,893       1,510       1,184       1,831       486  
General and administrative
expenses
    2,425       2,491       4,204       1,077       592       1,930       512  
Operating loss     3,487       5,549       10,097       2,587       1,776       3,761       998  
Financial income     (11 )      (37 )      (4 )      (1 )      (4 )      (12 )      (3 ) 
Financial expenses     202       39       79       20       55       40       11  
Financial expenses, net     191       2       75       19       51       28       8  
Net loss     3,678       5,551       10,172       2,606       1,827       3,789       1,006  
Comprehensive loss     3,678       5,551       10,172       2,606       1,827       3,789       1,006  
Loss per ordinary share – basic and diluted     0.075       0.084       0.137       0.035       0.026       0.049       0.013  
Weighted average number of shares outstanding used to compute basic and diluted loss per share     49,152,886       65,968,768       74,475,109       74,475,109       71,085,351       76,743,707       76,743,707  

Research and Development Expenses

             
  Year ended December 31   Three months ended March 31
     2013   2014   2015   2015   2015   2016   2016
     NIS in thousands   Convenience
translation
into USD
in thousands(2)
  NIS in thousands   Convenience
translation
into USD
in thousands(2)
Salaries and related fees     729       1,555       2,739       702       518       807       214  
Professional services     147       400       746       191       162       221       59  
Patents     164       169       326       84             130       35  
Subcontractors*           354       1,308       335       308       421       112  
Share-based payments           512       523       134       170       107       28  
Other expenses     22       68       251       64       25       145       38  
Total Research and Development     1,062       3,058       5,893       1,510       1,184       1,831       486  

* Includes lab and clinical trial materials.
(1) Data on diluted loss per share were not presented in the financial statements because the effect of the exercise of the options and warrants is anti-dilutive.
(2) Calculated using the exchange rate reported by the Bank of Israel for December 31, 2015 at the rate of one U.S. dollar per NIS 3.902 and for March 31, 2016 at the rate of one U.S. dollar per NIS 3.766.

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Three months ended March 31, 2016 Compared to Three months ended March 31, 2015

Research and Development Expenses

Our research and development expenses for the three months ended March 31, 2016 amounted to NIS 1.8 million ($0.5 million) compared to NIS 1.2 million ($0.3 million) for the three months ended March 31, 2015. The increase was primarily attributable to an increase of expenses related to the preparation for the Phase 1-2 clinical study in an amount of $30,000, to an increase of salaries and related personnel expenses in an amount of $75,000 reflecting the growth in the company activities resulting by an increase in the number of employees engaged in research and development related activities, and to an increase in IP-related expenses in the amount of $33,000.

General and Administrative Expenses

Our general and administrative expenses for the three months ended March 31, 2016 amounted to NIS 1.9 million ($0.5 million) compared to NIS 0.6 million ($0.15 million) for the three months ended March 31, 2015. The increase resulted primarily from an increase of $166,000 in share-based compensation expenses, an increase of payroll and related personnel expenses in an amount of $81,000 reflecting the growth in the company activities resulting by an increase in the number of employees engaged in general and administrative related activities and an increase of $49,000 in professional services.

Financial Expense, Net

We recognized financial expenses, net of NIS 28,000 ($8,000) for the three months ended March 31, 2016 compared to financial expenses, net of NIS 51,000 ($13,000) for the three months ended March 31, 2015. Financial expenses, net in both periods were derived mainly from revaluations of foreign-currency-linked cash balances.

Net Loss

As a result of the foregoing research and development, general and administrative expenses, and as we did not yet generate revenues since our inception, our net loss for the three months ended March 31, 2016 was NIS 3.8 million ($1.0 million), compared to our net loss for the three months ended March 31, 2015 of NIS 1.8 million ($0.5 million).

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Research and Development Expenses

Our research and development expenses for the year ended December 31, 2015 amounted to NIS 5.9 million ($1.5 million) compared to NIS 3.1 million (approximately $900,000) for the year ended December 31, 2014. The increase was primarily attributable to an increase of expenses related to third-party preclinical consultants and other expenses related to conducting preclinical trials in an amount of $330,000 and to an increase of salaries and related personnel expenses in an amount of $270,000 reflecting the growth in the company activities resulting by an increase in the number of employees engaged in research and development related activities from five to nine.

General and Administrative Expenses

Our general and administrative expenses for the year ended December 31, 2015 amounted to NIS 4.2 million ($1.1 million) compared to NIS 2.5 million ($0.7 million) for the year ended December 31, 2014. The increase resulted primarily from an increase of $125,000 in share-based compensation expenses, an increase of payroll in an amount of $26,000 reflecting the growth in the company activities resulting by an increase of payroll to our employees, an increase of $140,000 in professional services and an increase of $52,000 in travel and conference expenses.

Financial Expense, Net

We recognized financial expenses, net of NIS 75,000 ($19,000) for the year ended December 31, 2015 compared to financial expenses, net of NIS 2,000 (less than $1,000) for the year ended December 31, 2014. Financial expenses, net in 2015 were derived mainly from revaluations of foreign-currency-linked cash balances.

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Net Loss

As a result of the foregoing research and development, general and administrative expenses, and as we did not yet generate revenues since our inception, our net loss for the year ended December 31, 2015 was NIS 10.2 million ($2.7 million), compared to our net loss for the year ended December 31, 2014 of NIS 5.6 million ($1.6 million).

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Research and Development Expenses

Our research and development expenses for the year ended December 31, 2014 amounted to NIS 3.1 million (approximately $900,000) compared to NIS 1.1 million ($300,000) for the year ended December 31, 2013. The increase was primarily attributable to an increase of expenses related to third-party preclinical consultants and other expenses related to conducting preclinical trials in an amount of $170,000 and to an increase of salaries and related personnel expenses in an amount of $200,000 reflecting the growth in the company activities resulting by an increase in the number of employees engaged in research and development related activities from one to five, in addition to an increase of share-based compensation expenses of $140,000.

General and Administrative Expenses

Our general and administrative expenses for the year ended December 31, 2014 amounted to NIS 2.5 million (approximately $700,000) compared to NIS 2.4 million ($670,000) for the year ended December 31, 2013. This slight increase resulted primarily from an increase of payroll in an amount of $145,000 reflecting the growth in the company activities resulting by an increase of payroll to our employees, offset mainly by a decrease of $82,000 in share-based compensation expenses, and a decrease of $77,000 in professional services.

Financial Expenses (Income), Net

We recognized financial expenses, net of $1,000 for the year ended December 31, 2014, compared to financial expenses, net of $53,000 for the year ended December 31, 2013. Financial expense in 2013 included interest accrued on loans received from a related party.

Net Loss

As a result of the foregoing research and development and general and administrative expenses, and as we have not yet generated revenues since our inception, our net loss for the year ended December 31, 2014 was NIS 5.6 million ($1.6 million), compared to our net loss for the year ended December 31, 2013 of NIS 3.7 million ($1.0 million).

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through public (in Israel) and private offerings of our equity securities in Israel.

As of December 31, 2015 and March 31, 2016, we had NIS 11.7 million ($3.0 million) and NIS 14.8 million ($3.9 million), respectively, in cash, cash equivalents and marketable securities. During the years ended December 31, 2015 and the three months ended March 31, 2016, we incurred a net loss of NIS 10.1 million ($2.6 million) and NIS 3.7 million ($1.0 million), respectively, and had negative cash flows from operating activities of NIS 7.7 million ($1.9 million) and NIS 3.3 million ($0.8 million), respectively. In addition, on December 31, 2015 and March 31, 2016, we had an accumulated deficit of NIS 20.4 million ($5.2 million) and NIS 24.1 million ($6.4 million), respectively. In the year ended December 31, 2015, we raised approximately NIS 6.3 million ($1.6 million) net of issuance costs through the sale of our ordinary shares and in the three months ended March 31, 2016, we raised approximately NIS 8.0 million ($2.0 million) net of issuance costs through the sale of our ordinary shares and exercise of options.

Our activities since inception have consisted principally of raising capital and performing research and development activities. We are considered to be in the development stage as of December 31, 2015, as our principal commercial operations have not commenced. Successful completion of our development programs

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and, ultimately, the attainment of profitable operations, if any, are dependent on future events, including, among other things, our ability to obtain marketing approval from regulatory authorities and access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel, and develop strategic alliances. Although management believes that we will be able to successfully fund our operations, there can be no assurance that we will be able to do so or that we will ever operate profitably. We expect to continue to incur substantial losses over the next several years during our development phase.

In the opinion of our management and based on our current business plans, our balances of cash and cash equivalents will enable us to fund our activities through the end of the second quarter of 2017 if we do not raise additional capital including through this offering. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2015 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We will require significant additional financing in the future to fund our operations. However, if we do not generate sufficient cash through this offering or otherwise, our cash on hand may not be sufficient to meet our anticipated cash needs.

Net cash used in operating activities was NIS 3.3 million ($0.8 million) for the three months ended March 31, 2016, compared with net cash used in operating activities of approximately NIS 1.6 million ($0.4 million) for the three months ended March 31, 2015. Net cash used in operating activities was NIS 7.7 million ($2.0 million) for the year ended December 31, 2015, compared with net cash used in operating activities of approximately NIS 4.4 million ($1.1 million) for the year ended December 31, 2014, compared with net cash used in operating activities of NIS 2.6 million ($700,000) for the year ended December 31, 2013. The increases in such periods are primarily due to increases in ongoing research costs.

Net cash provided by investing activities for the three months ended March 31, 2016 was NIS 0.6 million ($0.15 million), mainly from proceeds from marketable securities. Net cash provided by investing activities for the three months ended March 31, 2015 was NIS 0.6 million ($0.15 million), mainly from proceeds from marketable securities. Net cash provided by investing activities for the year ended December 31, 2015 was NIS 3.2 million ($0.82 million), mainly from the sale of marketable securities. Net cash used in investing activities for the year ended December 31, 2014 was NIS 11.5 million ($2.9 million) and primarily reflects net cash used for investments in marketable securities, in addition to purchases of fixed assets. Net cash used in investing activities for the year ended December 31, 2013 was NIS 100,000 ($30,000) and primarily reflects changes in restricted cash, as well as purchases of fixed assets.

We had positive cash flow from financing activities of NIS 7.5 million ($1.92 million) for the three months ended March 31, 2016 compared to no cash flow the three months ended March 31, 2015. The positive cash flow from financing activities for the three months ended March 31, 2016 was primarily due to private offerings in Israel led by foreign investors. We had positive cash flow from financing activities of NIS 6.4 million ($1.6 million) for the year ended December 31, 2015 as compared to positive cash flow of NIS 13.9 million ($3.6 million) for the year ended December 31, 2014 as compared to positive cash flow of NIS 6.5 million ($1.7 million) for the year ended December 31, 2013. The positive cash flow from financing activities for the years ended December 31, 2015, 2014 and 2013 was primarily due to public and private offerings in Israel.

Current Outlook

Developing medical devices, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. According to our estimates and based on our budget, we believe our existing cash resources and the net proceeds from the current offering will be sufficient to fund our projected cash requirements until the second quarter of 2017. Nevertheless, we will require significant additional financing in the future to fund our operations, including if and when we progress into clinical trials of our Apotainer selection kits, obtain regulatory approval, obtain commercial manufacturing capabilities and commercialize our Powered by Cellect technology platform. We currently anticipate that, assuming consummation of the current offering, we will utilize approximately $     million for clinical trial activities over the course of the next 12 months. Our future capital requirements will depend on many factors, including:

the progress and costs of our clinical trials and other research and development activities;

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the scope, prioritization and number of our clinical trials and other research and development programs;
the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements;
the costs of the development and expansion of our operational infrastructure;
the costs and timing of obtaining regulatory approval;
the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments;
the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
the costs and timing of securing manufacturing arrangements for clinical or commercial production;
the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;
the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms;
the magnitude of our general and administrative expenses; and
any cost that we may incur under future in- and out-licensing arrangements.

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through the net proceeds from the current offering, additional equity financings and, to the extent we are able to locate and utilize, non-dilutive resources. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to our Powered by Cellect technology platform, our Apotainer selection kits or any future product candidate. This may raise substantial doubts about our ability to continue as a going concern.

Contractual Obligations

Our significant contractual obligations as of December 31, 2015 included the following (in thousands):

         
  Total   Less than
1 Year
  1 – 3 Years   3 – 5 Years   More than
5 Years
Operating Lease Obligations in NIS     1,207       474       733              
Operating Lease Obligations in $     309       121       188              

We did not have any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment, as of December 31, 2015.

Off-Balance Sheet Arrangements

We have no 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.

Quantitative and Qualitative Disclosure of Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments. Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.

Interest Rate Risk

Following the date of this prospectus, we do not anticipate undertaking any significant long-term borrowings. At present, our investments consist primarily of cash and cash equivalents and financial assets

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at fair value. Following the date of this prospectus, we may invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities, if any, of our investments to date, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy to hold such investments to maturity in order to limit our exposure to interest rate fluctuations.

Foreign Currency Exchange Risk

Our foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainly against the U.S. dollar. Although the NIS is currently our functional currency, a small portion of our expenses are denominated in U.S. dollars. Our U.S. dollar expenses consist principally of payments made to sub-contractors and consultants for clinical trials and other research and development activities as well as payments made to purchase new equipment. We anticipate that our expenses in U.S. dollar will increase in the future. If the NIS fluctuates significantly against the U.S. dollar, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results of operations or financial condition.

To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.

Trend Information

We are a preclinical stage 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 in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Application of Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Share-based payment transactions

From time to time we grant to our employees and other service providers remuneration in the form of equity-settled share-based instruments, such as options to purchase ordinary shares.

The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an acceptable option pricing model.

As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or

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services received as consideration of equity instruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.

The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period in which the performance or service conditions are satisfied, and ending on the date on which the relevant employees become fully entitled to the award.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.

When we change the conditions of the award of equity-settled instruments, an additional expense is recognized beyond the original expense, calculated in respect of a change that increases the total fair value of the remuneration granted or benefits the other service provider according to the fair value on date of change.

Cancellation of the award of equity-settled instruments is accounted for as having vested at the cancellation date and the expense not yet recognized in respect of the award is recognized immediately. However, if the cancelled grant is replaced by a new grant, and is intended as an alternate grant at the date awarded, the cancelled and new awards will both be accounted for as a change to the original award, as described above.

Option Valuations

The determination of the grant date fair value of options using an option pricing model (we utilize the Black-Scholes model) is affected by estimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of the options, share option exercise and cancellation behaviors, risk-free interest rates and expected dividends, which are estimated as follows:

Volatility.  The expected share price volatility is based on the historical volatility in the trading price of our ordinary shares as well as comparable companies on the TASE and benchmarks of related companies.
Expected Term.  The expected term of options granted is based upon historical experience and represents the period of time that options granted are expected to be outstanding.
Risk-Free Rate.  The risk-free interest rate is based on the yield from Israeli government bonds with a term equivalent to the contractual life of the options.
Expected Dividend Yield.  We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero.

Jumpstart Our Business Startups Act of 2012

We qualify as an “emerging growth company,” as defined in the JOBS Act. 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 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.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which such fifth anniversary will occur in 2021. However, if certain events occur prior to the end of such five year period, including if we become a “large accelerated filer,” our annual

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gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

In addition, Section 107 of the JOBS Act also 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. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Government Policies and Factors

We believe certain governmental policies and factors could materially affect, directly or indirectly, our operations or your investment. Please see “Risk Factors — Risks Related to Product Development and Regulatory Approval.”

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BUSINESS

Business Overview

We are an emerging biotechnology company that has developed a novel technology platform known as Powered by Cellect that functionally selects stem cells in order to improve the safety and efficacy of regenerative medicine stem cell therapies. We aim to become the standard enabling technology for the enrichment of the stem cell population for companies developing stem cell therapies, physicians practicing regenerative medicine and for researchers and academia engaged in stem cell research.

We believe our innovative technology platform represents a potential breakthrough in the field of regenerative medicine through by using functional selection of stem cells. Efficient selection enables retention of most of the stem cells with few mature cells resulting in the near elimination of toxicity provoking cells coupled with the enrichment of the stem cell population.

Our Powered by Cellect technology platform takes advantage of a functional characteristic of stem cells relating to apoptosis. Apoptosis is the process of programmed cell death and is a vital part of physiological development and maintenance. Stem cells flourish in an environment where normal cells die. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to areas of cell death, areas typified by very high levels of apoptotic activity and apoptotic-inducing agents.

We are currently developing our first product based on our Powered by Cellect technology platform, the Apotainer selection kit. The Apotainer selection kit is an easy to use, cost effective, off the shelf stem cell selection kit. The kit is designed for clinical use with the aim of improving the results of human allogeneic (using stem cells from a donor) HSCT for the treatment of hematological malignancies (blood cancers such as leukemia and lymphoma). HSCT, also known as bone marrow transplantation, has for decades been curative for many patients with hematological malignancies. Clinical trials have shown that that HSCT can also be used for other indications but is rarely used due to high toxicity. However, application of allogeneic HSCT is limited by GvHD, a condition in which the transplanted immune cells (populating the graft in much higher numbers then the stem cells) recognize the host cells and organs as foreign and attack them. GvHD does not resolve by itself and is the major cause of transplant-related morbidity and mortality. Despite improvements in the outcome of HSCT over recent years through improved supportive care, infection control and use of reduced intensity and reduced toxicity conditioning regimens, HSCT is still associated with significant morbidity and mortality mainly due to GvHD, and as such HSCT is restricted to patients with life threatening diseases. Due to non-efficient selection of stem cells for HSCT, the complex and expansive laboratory process performed using technologies currently available is able to reduce toxicity only at a significant tradeoff —  graft rejection, cancer reoccurrence and high costs of treatment.

We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our Powered by Cellect technology platform in order to clinically validate that our technology can efficiently select stem cells while neutralizing harmful cells and their associated medical complications. We believe that if we are able to demonstrate the clinical utility of our technology for this indication, it will open up the opportunity for the use of our Powered by Cellect technology platform for the treatment of other indications (e.g., solid organ transplantation and auto-immune diseases) and for the adoption of our Powered by Cellect technology platform by stem cell therapeutic companies, academia, researchers and others seeking to enrich their stem cell population.

We plan to bring our Apotainer selection kits to market for HSCT as a combination product subject to the primary jurisdiction of the CDRH, which is likely to result in the regulatory path usually followed for medical devices. The term “combination product”, when used to describe our Apotainer selection kits, refers to a product, governed by the FDA, which is comprised of a biological device and a product. We believe that this will result in cost savings and reduce time to market and further believe that such proof of concept will open up the opportunity for the licensing of our Powered by Cellect technology platform to allow for earlier revenues.

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All of our research efforts to date have culminated in clinical trials that we plan to begin in 2016. We are currently preparing for a Phase I/II, single arm, open label clinical trial in Israel to evaluate the safety and tolerability and efficacy of functionally selected donor derived mobilized peripheral blood cells that undergo our ApoGraft process in the prevention of acute GvHD in patients suffering from hematological malignancies that are undergoing allogeneic HSCT. In addition, we plan on holding a pre-IND meeting with the FDA in the second half of 2016 using the Apotainer selection kit.

Our Strategy

We have developed a novel technology platform, the Powered by CellectTM technology platform, for the functional selection of adult stem cells. This technology is expected to improve the safety and efficacy of regenerative medicine stem cell therapies and we aim to become the standard enabling technology for the enrichment of the stem cell population for companies developing stem cell therapies and for researchers and academia engaged in stem cell research.

Key elements of our strategy to accomplish this objective include the following:

Achieve relatively quick validation of the use of our Powered by Cellect technology platform in a clinical setting.  We have chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our Powered by Cellect technology platform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complications caused by GvHD. While over one million HSCT procedures have been performed by the end of 2012, according to a study published in the Lancet, we believe hematopoietic cells administered to patients undergoing allogeneic HSCT can be therapeutically optimized. Based on our Powered by Cellect technology platform, we are currently developing the Apotainer selection kit, an off the shelf stem cell collection kit, which we believe may significantly improve the curative potential of allogeneic HSCT by addressing major complications that currently contribute to the high morbidity and mortality of the procedure resulting from GvHD. We believe that the concomitant reduction of toxicity and increasing efficacy of allogeneic HSCT will allow clinicians to undertake HSCT earlier in the blood cancer treatment protocol. Typically, combination products obtain relatively quick validation from the FDA and the EMA when compared to pharmaceutical products and drugs. Based on our initial consultations with our U.S. and European regulatory consultants, we believe that we might only need to successfully complete a single pivotal study with a small number of patients (not exceeding one hundred in total) in order to obtain marketing approval of our ApoGraft product. We believe such a study can be completed in approximately four to five years. However, there is no guarantee that the proposed pathway will be approved by the FDA or EMA, or that validation will occur as quickly as we hope, if at all. In addition, we believe that our product may achieve either “breakthrough” or orphan drug designation with the FDA, enabling a fast track review and approval process by the FDA. Typically, the validation process for regular clinical development for standard cell therapy can take between eight and ten years. In comparison to the typical validation process timeline, we believe our technology platform may complete the validation process relatively quickly.
Leverage our scientific, clinical and regulatory expertise to build and advance our Powered by Cellect technology platform beyond the allogeneic HSCT setting.  Based on the validation of our Apotainer selection kit for clinical use in the allogeneic HSCT setting, we intend to test the kit for solid organ transplantation and auto-immune system disorders (such as Type 1 diabetes, Crohn’s disease, psoriasis and lupus). We also intend to develop our Powered by Cellect technology platform for other sources of stem cells (e.g., cord blood and fat) and other types of stem cells — most notably mesenchymal and neural. We believe that by expanding the various applications, sources and types of stem cells that can be used with our technology, we will establish broad use of our Powered by Cellect technology platform.
Build a diversified product portfolio.  Beginning with the development of our Apotainer selection kit as a combined product or medical device, which we believe will shorten the time to market, we

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intend to expand our product development and build a diversified product portfolio of Powered by Cellect products for a broad spectrum of market segments, up to and including all production and research processes for stem cell based products.
Selectively engage in strategic partnerships that establish our Powered by Cellect technology platform as the standard enabling technology for the enrichment of the stem cell population.  We ultimately seek to collaborate with other companies engaged in developing stem cell therapies and research by licensing our Powered by Cellect technology platform to improve their own stem cell expansion and purification processes. As we believe our Powered by Cellect technology platform will significantly increase the starting amount of stem cells, we believe stem cell therapy companies, as well as physicians, academics, researchers and others that are focused on stem cells, will have a major advantage if our selection process is integrated into their work protocol as the first step in their expansion process.

In the short term, we are currently focused on achieving the following critical milestones:

Pathway to first-in-human clinical trial:  We are currently finalizing preclinical studies in murines, including safety/toxicity tests as well as calibration and optimization of the materials and the process with a view to commencing a clinical trial in Israel and holding a pre-IND meeting with the FDA during the second half of 2016.
Pathway to product prototype:  We are engaged in developing prototypes of our Apotainer selection kit. Recently, we demonstrated a proof of concept for the binding of the apoptotic protein to a polymer without impairing the protein's apoptotic activity. We tested a number of polymers and binding methods and selected the one best suited for manufacturing the stem cell selection kits. We aim to complete development of the prototype Apotainer selection kit by the end of 2016.
Patent portfolio enhancement:  We are currently expanding our patent coverage from five to eight patent families.

In the long term, we are focused on leveraging our key assets, including our intellectual property, our scientific team and our facilities, to advance our technologies and are pursuing strategic collaborations with members of academia and industry.

Regenerative Medicine and Cell Therapy

Our business focus is the development of technologies for the functional selection of stem cells in the field of regenerative medicine. According to Regenerative Medicine (2008, 3(1), 1-5 [47]), regenerative medicine is the “process of replacing or regenerating human cells, tissues or organs to restore or establish normal function”. Cell therapy as applied to regenerative medicine holds the promise of regenerating damaged tissues and organs in the body by rejuvenating damaged tissue and by stimulating the body's own repair mechanisms to heal previously irreparable tissues and organs.

Medical cell therapies are classified into two types: allogeneic (cells from a third-party donor) or autologous (cells from one’s own body), with each offering its own distinct advantages. Allogeneic cells are beneficial when the patient’s own cells, whether due to disease or degeneration, are not as viable as those from a healthy donor. The use of healthy donors' cells is severely limited by the immune system of the patient which rejects the transplanted cells. This rejection is limited to adult cells with stem cells generally evading such rejection. Separation of the immune rejection causing cells from the stem cells is therefore the bottle neck of all stem cell based therapies.

Regenerative medicine can be categorized into major subfields as follows:

Cell Therapy.  Cell therapy involves the use of cells, whether derived from adults, children or embryos, third-party donors or patients, from various parts of the body, for the treatment of diseases or injuries. Therapeutic applications may include cancer vaccines, cell based immune-therapy, arthritis, heart disease, diabetes, Parkinson’s and Alzheimer’s diseases, vision impairments, orthopedic diseases and brain or spinal cord injuries. This subfield also includes the development of growth factors and serums and natural reagents that promote and guide cell development.

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Tissue Engineering.  This subfield involves using a combination of cells with biomaterials (also called “scaffolds”) to generate partially or fully functional tissues and organs, or using a mixture of technology in a bioprinting process. Some natural materials, like collagen, can be used as biomaterial, but advances in materials science have resulted in a variety of synthetic polymers with attributes that would make them uniquely attractive for certain applications. Therapeutic applications may include heart patch, bone re-growth, wound repair, replacement neo-urinary conduits, saphenous arterial grafts, inter-vertebral disc and spinal cord repair.

Diagnostics and Lab Services.  This subfield involves the production and derivation of cell lines that may be used for the development of drugs and treatments for diseases or genetic defects. This sector also includes companies developing devices that are designed and optimized for regenerative medicine techniques, such as specialized catheters for the delivery of cells, tools for the extraction of stem cells and cell-based diagnostic tools.

All living complex organisms start as a single cell that replicates, differentiates (into various tissues and organs) and perpetuates in an adult through its lifetime. Cell therapy is aimed at tapping into the power of cells to treat disease, regenerate damaged or aged tissue and provide functional as well as cosmetic applications. The most common type of cell therapy has been the replacement of mature, functioning cells such as through blood and platelet transfusions. Since the 1970s, bone marrow and then blood and umbilical cord-derived stem cells have been used to restore immune system cells mainly after chemotherapy and radiation used to treat many cancers. These types of cell therapies have been approved for use world-wide and are typically reimbursed by insurance.

Over the past number of years, cell therapies have been in clinical development to attempt to treat an array of human diseases. The use of autologous (self-derived) cells to create vaccines directed against tumor cells in the body has been demonstrated to be effective and safe in clinical trials. Dendreon Corporation’s Provenge therapy for prostate cancer received FDA approval in early 2010. Researchers around the globe are evaluating the effectiveness of cell therapy as a form of replacement or regeneration of cells for the treatment of numerous organ diseases or injuries, including those of the brain and spinal cord. Cell therapies are also being evaluated for safety and effectiveness to treat heart disease, autoimmune diseases such as diabetes, inflammatory bowel disease and bone diseases. While no assurances can be given regarding future medical developments, we believe that the field of cell therapy is a subset of biotechnology that holds promise to improve human health, help eliminate disease and minimize or ameliorate the pain and suffering from many common degenerative diseases relating to aging.

Market for Cell-Based Therapies

According to a 2015 report by Visiongain, the world stem cell technologies market is expected to grow from $7.2 billion in 2014 to $12 billion in 2018, achieving high revenue growth from 2015 to 2025.

The global population is aging.  According to the United Nations Department of Economic and Social Affairs, 2 billion people will be aged 60 and older by 2050, which means an increased prevalence of age-related disease in general and chronic disease in particular. Heavily burdened healthcare systems are looking to regenerative medicine to provide therapies that treat the root causes of chronic diseases rather than just their symptoms.
Expansion of stem cell therapies.  Stem cell therapies are being extended to new and prevalent indications such as cardiovascular diseases, neurodegenerative diseases, and autoimmune diseases. The number of cell therapy companies that are currently in Phase II and Phase III trials has been gathering momentum, and we anticipate that new cellular therapy products will appear on the market within the next several years.
Potential new source of stem cells.  The last decade has witnessed the emergence of umbilical cord cryopreservation for the storage of newborn blood for future medical use. This new market already affects the field of transplantations with a growing share of cord blood transplantations at the expense of autologous and allogeneic transplantations of hematopoietic cells. In addition, another source of stem cells is fat used for treatment of bone, cartilage and skeleton related diseases as well as for esthetic purposes.

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Increasing government, strategic partner, and investor support for stem cell research and development.  According to the Alliance for Regenerative Medicine, the stem cell and progenitor therapy market raised $2.6 billion in public and private funds in 2014, while according to the National Institutes of Health, or NIH, the level of annual support for stem cell research across the NIH is estimated to grow from $1.179 billion in 2011 to $1.436 billion in 2016.

The following table from the 2015 Report of the Alliance for Regenerative Medicine illustrates the wide range of indications being targeted by the stem cell product pipeline:

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Our Current Focus: Proof of Concept of our Powered by Cellect technology platform through the treatment of Haematological Malignancies

Haematological malignancies (blood cancers) comprise a variety of lymphomas and leukemias. A very important treatment protocol for these malignancies involves the use of HSCT. According to the Worldwide Network for Blood & Marrow Transplantation, more than 50,000 HSCTs are performed yearly worldwide, of which 53% are autologous (using stem cells from the patient) and 47% are allogeneic (using stem cells from a donor). In the treatment of leukemia, an allogeneic procedure is usually preferred over autologous due to a higher risk of recurrence of the underlying disease.

HSCT, also known as bone marrow transplantation, relies on the ability of infused hematopoietic stem cells to engraft in the patient’s bone marrow, multiply and differentiate into mature blood cells. However, the success of allogeneic HSCT strongly depends upon the degree of immune compatibility between the donor and the host cells. In the majority of cases, the unavailability of fully matching donors results in complications due to rejection by the host.

GvHD is a complication that often develops after a bone marrow or stem cell transplant. GvHD happens when transplanted cells in the donated bone marrow or stem cells (graft) regard the transplant patient's native cells (host) as foreign and attack and destroy them. According to Cancer Research UK, GvHD affects between 20 – 80% of all patients undergoing bone marrow or stem cell transplants. GvHD can be acute or chronic. Acute GvHD, which usually occurs up to three months post transplantation, is associated with diarrhea, rash,

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liver damage and, in severe cases, can be life-threatening. Chronic GvHD, which usually appears later than three months post transplantation, is associated with skin damage, oral and/or vaginal mucositis, and liver damage. GvHD is treated by repressing the immune system using steroids and chemotherapy. The treatment’s adverse effects include increased exposure to infections, recurrent hospital admissions, damage to vital organs and, in some cases, secondary cancers. Both quality of life and life expectancy are significantly decreased in these patients. Unfortunately, many patients are nonresponsive to steroids. The patients that do respond to steroids suffer from frequent infections leading to recurrent antibiotic treatments and hospitalizations. These complications are associated with high mortality and morbidity and are a meaningful limiting factor for what would otherwise be the most suitable therapy for cancer and autoimmune diseases.

GvHD can be prevented by depletion of the T-cell population from the donor graft prior to transplantation. Methods used to capture and purge T-cells out of the donor graft include using anti-thymogycte globulin or alemtuzmab, suicide gene therapy, cytotoxic agents and fusion proteins. However, T cells support HSCT engraftment and immune reconstitution and are potent initiators and mediators of graft versus tumor, or GvT, reactions. As such, purging T-cells can result in increased risks of graft failure or delayed immune reconstitution leading to life threatening infection and/or reduced GvT response, increasing the chances of cancer recurrence.

Due to these and other complications and due to the extremely aggressive pre-treatment chemotherapy and irradiation conditioning regimens, allogeneic HSCT is used only when the patient faces immediate life-threatening danger. If allogeneic HSCT could be made safer, it could be used far earlier and more frequently for even more effective treatment of blood cancers. There is widespread awareness of the need for improved immune-system management technologies for HSCT — both to improve outcomes of transplantations that have already taken place and to make transplantation safe enough to become appropriate for older patients and those with earlier-stage diseases.

The use of HSCT has been tested and found to be effective for autoimmune diseases such as juvenile diabetes, Crohn’s disease and lupus with the inherent toxicity of HSCT being the major drawback from further use. A safer HSCT could be used for these indications as well as creating immune tolerance for organ transplantation.

We have therefore chosen allogeneic HSCT for the treatment of hematological malignancies as our first target indication for our Powered by Cellect technology platform in order to clinically validate that our technology can efficiently select stem cells while eliminating harmful cells and their associated medical complications caused by GvHD. However, while GvHD has a sizeable market share with an unmet clinical need that we seek to address, we consider the validation of our technology as an important driver of a much broader utility of our platform technology.

An Unmet Need: Efficient Stem Cell Selection

Typically, there is a very small number of stem cells in the source tissue (1 in 10,000 cells in bone marrow, the tissue with the highest stem cell concentration) and, once removed from the body, these cells have the propensity to differentiate and lose their “stemness”. Generation of large quantities of stem cells is therefore very challenging. This scarcity of stem cells within the biological donor samples is a serious obstacle to regenerative medicine and stem cell companies, both in research and in production settings. In addition to stem cell scarcity, another critical problem is the presence in the donor sample of mature cells that trigger immune response and create the major adverse effects associated with transplantation.

There are currently two main methods for attaining a critical mass of stem cells:

Morphological stem cell selection:

Negative selection approach:  Elimination of the cells that contribute to engraftment failure, usually T cells. It uses T cell-specific antigens common to all T cells and therefore indiscriminately eliminates all T cells, including the ones responsible for engraftment support and combating tumors. The clinical outcome is reduced engraftment and reoccurrence of the tumor.

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Positive selection approach:  Retains the stem cells in the graft using only one of the determinants found on stem cells and progenitor cells and therefore a significant number of reconstituting capable cells are discarded. It has been clinically shown that the loss of reconstituting capable cells significantly reduces engraftment.

Both of these approaches have a poor efficacy/toxicity ratio.

Stem cells population expansion:  Most companies expand stem cell numbers in a culture. However, expansion of the reconstituting capable cells while maintaining their level of differentiation is a major challenge. A high number of cells is required initially, as well as a very long culturing time (weeks) during which sterility must be maintained and differentiation avoided. The methodology is very expensive and requires specialized equipment that is not widely available. Moreover, the regulatory demands related to long-term culturing create a significant challenge for these companies.

In short, we believe the prevailing methodologies for stem cell enrichment/expansion in the graft do not adequately meet the need to enrich and purify the biological sample prior to transplantation. We believe our novel Powered by Cellect technology platform that quickly and effectively enriches the stem cell population while eliminating the unwanted cells in a biological sample will contribute significantly to the growth of the stem cell therapy market.

Our first target market for our Powered by Cellect technology platform is allogeneic HSCT for hematological malignancies. According to the Center for International Blood & Marrow Transplant Research, over 6,000 allogeneic HSCTs were performed in the United States in 2012 for these two diseases. A 2013 survey conducted by the European Group for Bone Marrow Transplantation in 48 countries (39 European and 9 affiliated) showed that over 10,500 allogeneic HSCTs were performed for leukemias and for lymphoma. We believe that beyond the value of proving and validating our platform technology, these numbers represent a substantial market opportunity for us to prove the benefits of our Powered by Cellect technology platform.

Our Proprietary Stem Cell Technology Platform

We believe our innovative Powered by Cellect technology platform represents a potential breakthrough in the field of regenerative medicine through the functional selection of stem cells.

Our technology is based on a decade of research in the field of stem cells in general and hematopoietic stem cells in particular conducted by Dr. Nadir Askenasy, our Chief Technology Officer. The concept of functional selection suggests that by using functional assays, which are based on the physiological features of stem cells, one can achieve dual goals: (i) the elimination of non stem cells that are responsible for the immune triggering and most of the clinical adverse effects, and (ii) the achievement of a larger and better population of stem cells. We believe this dual effect will allow for safer and improved clinical outcome of transplantations and enable the whole regenerative (transplantation) segment to achieve its full potential.

Stem cells flourish in an environment where there are signals of apoptosis. Apoptosis is the process of programmed cell death and is a vital part of physiological development and maintenance. Because of their major role in the reconstitution of damaged tissue, stem cells are attracted to what are often characterized as disaster areas in which there are very high levels of apoptotic activity and apoptotic-inducing agents. Our research has demonstrated that stem cells are resistant to apoptotic stimulation by the physiological molecules that cause mature cells to self-destruct. We have chosen this functional characteristic of stem cells to use apoptosis-inducing proteins to more efficiently select stem cells while eliminating harmful cells and their associated medical complications.

Our preclinical studies to date have shown that the differential sensitivity to the apoptosis signals allows functional selection of the stem cells while at the same time eliminating apoptosis sensitive mature immune cells. We believe this will result in a reduction of GvHD, improved graft acceptance and a dramatic reduction in treatment cost.

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The ApoGraft Process

To achieve functional selection of stem cells utilizing our Powered by Cellect technology platform, we have developed the ApoGraft process, which is intended for the prevention of GvHD in patients with hematological malignancies receiving a transplant of allogeneic, mobilized peripheral blood hematopoietic stem and progenitor cells. Following collection of the cells from a matched related donor, the donor graft is immediately incubated for 2 – 6 hours in the presence of FasL, washed twice and transplanted via intravenous administration. FasL, also known as CD95L, is a type-II transmembrane protein that belongs to the tumor necrosis factor family. The binding of FasL with its receptor induces apoptosis (programmed cell death) that plays an important role in the development, homeostasis, and function of the immune system.

The apoptotic inducer used in Cellect’s ApoGraft process is based on a FasL protein known by its commercial name Apo010. Apo010 is a recombinant, soluble protein. This protein has been developed to mimic the natural occurring FasL clustering that activates its receptor and leads to apoptosis in susceptible cell populations.

The ApoGraft process is illustrated below:

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Apotainer Selection Kit

Our first product that we are developing, the Apotainer selection kit, is an easy to use, cost effective, off the shelf stem cell selection kit for clinical laboratories designed to improve the results of human allogeneic HSCT.

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The Apotainer selection kit is a specialized infusion bag which is coated on the inside with FasL. The Apotainer selection kit is designed to create a microenvironment intended to induce apoptosis by creating an ex-vivo microenvironment that resembles the normal physiological conditions where stem cells can migrate to areas of destruction (where apoptotic triggering molecules are abundant) and, once there, proliferate and differentiate into the needed tissue and organ.

Our preclinical research has shown that FasL only appears to activate when immobilized, as in the case of its binding to the plastic film of the Apotainer selection kit. This immobilization to the kit also creates another advantage by eliminating the need to discard the FasL from the graft before transplantation.

The Apotainer selection kit is currently being designed to be used for allogeneic HSCT procedures for patients suffering leukemia in which the donor graft of cells is incubated in the infusion bag for a number of hours and expected to cause the mature GvHD-causing cells expressing the Fas receptor to bind to the bag surface-bound FasL and undergo apoptosis while the hematopoietic stem cells remain active. The Apotainer selection kit thus is expected to harness the differential effect of the apoptotic microenvironment on mature cell and stem cell populations, producing an enriched population of stem cells that are then transfused to the patient.

Preliminary studies conducted by us have shown that selective polymers coated with specific materials in a specific process create an optimal container enabling positive biological activity of FasL while tightly bound. We believe that this polymer-binder-FasL complex is the basis not only for the Apotainer selection kit as currently in development, but also for a line of containers with different designs and sizes to be used for different applications.

Preclinical Studies

As part of our in-vitro studies, and prior to animal studies, we performed studies to determine which apoptotic molecules have the best differential effect on stem and non-stem cells. We have also conducted nine animal studies including murine to murine and human cells to murine transplantation models, using the various sources of human hematopoietic cells (mobilized peripheral blood, bone marrow and umbilical cord blood), the relevant donor type (self, family and unrelated) and measuring the relevant effects (GvHD, mortality, engraftment and anti tumor effect).

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Major preliminary findings include the following:

Resistance to receptor-mediated apoptosis is an inherent characteristic of stem and progenitor cells;
Apoptosis-insensitive progenitors are privileged for engraftment through competitive advantage over the apoptosis-sensitive differentiated cells; and
Using the most stringent conditions for GvHD, there was a statistically significant reduction in mortality rate.

We believe these preliminary findings support our product claim for:

Selection of stem and progenitor cells based on insensitivity to receptor-mediated apoptosis from all sources;
Ex vivo selective depletion of GvHD effector cells;
Accelerated engraftment by ex vivo treatment of umbilical cord blood; and
Induction of tolerance to grafts and suppression of autoimmunity.

During late 2014 and early 2015, we achieved an important milestone in the development of our stem cell selection kits: proof of feasibility that our apoptosis-inducing protein can be bound to plastic surfaces without compromising the biological activity of the protein. Trials that were conducted in cooperation with American and Israeli partners, including the University of Louisville, Bar-Ilan University and the Israel Center for Plastics and Rubber, showed that on some of the plastic surfaces tested, the bound protein induced apoptosis in the same manner as it had in previous experiments in which the protein was unbound.

In June 2015, we entered into a Joint Product Development Agreement with Entegris Inc., or Entegris (NASDAQ: ENTG), a provider of yield-enhancing materials and solutions for advanced manufacturing processes, or the Entegris Agreement. Under the Entegris Agreement, the parties are collaborating in the development of the polymer film that will be used for the manufacturing of the Apotainer selection kit. The Entegris Agreement contemplates that upon successful development of the polymer film, Entegris will supply the polymer film upon terms to be agreed to between the parties at such time. The parties agree that if Entegris defaults in this obligation, the Company may find an alternate party for manufacturing the polymer system, in which case Entegris would be entitled to 5% of final product sales up to the amount paid by Entegris. Pursuant to the terms of the Entegris Agreement, Entegris shall bear all costs relating to the development, design, engineering and manufacture of polymer systems relating to the development of the product and we will bear the costs relating to the pre-clinical development of the product. In addition, the parties have agreed to complete one or more statements of work, or a SOW, each of which may set forth the terms for the objectives, timelines and costs and time estimates for each milestone. The Entegris Agreement has a term of five years, unless earlier terminated, and automatically renews for successive one year terms. Either we or Entegris may terminate the Entegris Agreement for cause if either party materially breaches the agreement or a SOW thereunder and the breaching party fails to cure within ten days notice of a breach, in the event of a monetary breach, or thirty days from receipt of notice of a breach, in the event of a non-monetary breach. Additionally, either party may terminate the Entegris Agreement or any SOW immediately upon written notice of the non-terminating party if a petition for bankruptcy is filed, whether voluntarily or involuntarily, and such petition is not dismissed with prejudice within sixty days of its filing.

On June 14, 2016, we were awarded a $900,000 (approximately NIS 3.5 million) conditional grant by the BIRD Foundation in support of our Joint Product Development Agreement with Entegris. The BIRD Foundation promotes collaboration between U.S. and Israeli companies in various technological fields for the purpose of joint product development. Projects submitted to the BIRD Foundation are reviewed by evaluators appointed by the National Institute of Standards and Technology (NIST) and by the Israel Innovation Authority of the Israeli Ministry of Economy and Industry. The grant is dependent on the execution of a Cooperation and Project Funding Agreement, or CPFA, by and among the BIRD Foundation, Entegris and us, which we are required to execute by September 14, 2016. Pursuant to the terms of the negotiated CPFA, we may be required to repay all, or a portion, of the grant upon the completion of certain milestones as defined therein.

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In August 2015, we initiated a full preclinical Good Laboratory Practice safety study designed to test safety and engraftment outcome in a murine model ahead of our first planned clinical trial. Complete clinical, biochemical and histology evaluation is being performed by a contract research organization. In December 2015, we announced that results from this study showed that, while the control group had a 50% death rate, the group that was transplanted with bone marrow that underwent our ApoGraft process had no deaths. In addition, with respect to additional parameters, such as clinical signs, weight and histological analysis, no toxicity was found.