Shareholders’ Deficit

12 Months Ended

Dec. 31, 2023

NOTE 11:-

SHAREHOLDERS’ DEFICIT

Ordinary shares:

Subject to the Company’s amended and restated Articles of Association, the holders of the Company’s ordinary shares have the right to receive notices to attend and vote in general meetings of the Company’s shareholders, and the right to share in dividends and other distributions upon liquidation.

On September 27, 2022, the Company issued and sold, in an underwritten public offering, an aggregate of 12,905,000 of its Ordinary shares at a public offering price of $1.55 per share, for gross proceeds of approximately $20,000, before deducting underwriting discounts and commissions and offering expenses.

On April 19, 2023, the Company issued and sold 17,500,000 of its Ordinary shares at a public offering price of $1.30 per ordinary share and accompanying warrants to purchase 17,500,000 Ordinary shares, for gross proceeds of approximately $22,750, before deducting underwriting discounts and commissions and offering expenses of $1,900.

During 2023, the Company had raised $43,120 in net proceeds by issuing 40,515,620 shares via an ATM offering, at an average public offering price of $1.10 per share.

Warrants to investors:

As part of its April 2023 underwritten public offering of its securities, the Company granted certain investors 17,500,000 warrants to purchase the Company’s Ordinary shares that will expire on April 21, 2028. The warrants were classified as a liability on the balance sheet initially, and subsequently measured at fair value through earnings, as the warrants are not considered indexed to the Company’s own equity pursuant to ASC 815-40. The change in fair value of the warrants liability is recognized in financial expenses, net, in the consolidated statements of operation. During the twelve months ended December 31, 2023, 33,270 of such warrants were exercised in exchange for 33,270 of the Company’s Ordinary shares.

Treasury shares:

During the year ended December 31, 2023, the Company cancelled 32,477 outstanding restricted shares, whereby the restricted shares became treasury shares.

Option plans:

On January 23, 2017, the Company’s Board of Directors approved the Company’s 2017 Share Incentive Plan (the “2017 Plan” and together with the 2014 Plan, the “Option Plans”), and the subsequent grant of options to the Company’s employees, officers and directors. Pursuant to the 2017 Plan, the Company initially reserved for issuance 312,867 ordinary shares, nominal value NIS 0.01 each. On February 28, 2017, the Company’s shareholders approved the 2017 Plan.

The 2017 Plan provides for the grant of awards, including options, restricted shares and restricted share units to the Company’s directors, employees, officers, consultants and advisors.

On February 25, 2021 and November 17, 2021, the board of directors and shareholders, respectively, approved an amendment and restatement of the 2017 Plan. The 2017 Plan, as amended, also contains an “evergreen” provision, which provides for an automatic allotment of ordinary shares to be added every year to the pool of ordinary shares available for grant under the 2017 Plan. Under the evergreen provision, on January 1 of each year (beginning January 1, 2022), the number of ordinary shares available under the 2017 Plan automatically increases by the lesser of the following: (i) 4% of our outstanding ordinary shares on the last day of the immediately preceding year; and (ii) an amount determined in advance of January 1 by the board of directors. As of December 31, 2023, 2,455,978 shares were reserved for issuance under the 2017 Plan.

The Company estimates the fair value of stock options granted using the binominal option-pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term.

Expected volatility was calculated based upon the Company’s historical share price and historical volatilities of similar entities in the related sector index. The expected term of the options granted is derived from output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

The following table lists the inputs to the binomial option-pricing model used for the fair value measurement of equity-settled share options for the above Options Plans for the years 2023 and 2022:

	December 31,
	2023		2022

Dividend yield		0%		0%
Expected volatility of the share prices		69%-74%		66%-67%
Risk-free interest rate		3.5%-4.44%		1.8%-3.8%
Expected term (in years)		8		8

Based on the above inputs, the fair value of the options was determined to be $0.24 - $1.59 per option at the grant date.

The following table summarizes the number of options granted to employees under the Option Plans for the year ended December 31, 2023 and related information:

	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value

Outstanding at the beginning of the year		6,133,903			4.62		7.51		8,939
Granted		2,167,234			1.51		-		-
Exercised		(1,066	)		0.25		-		-
Forfeited		(657,309	)		2.58		-		-
Expired		(533,500	)		5.57		-		-
Outstanding at the end of the year		7,109,262			3.83		7.16		2,259
Exercisable at the end of the year		4,280,279			4.62		6.25		683

The weighted average exercise price of the Company’s options granted during the years ended December 31, 2023 and 2022 was $1.51 and $2.55, respectively.

The weighted-average grant date fair value of options granted during the years ended December 31, 2023 and 2022, was $0.95 and $1.58, respectively.

The following table summarizes information about the Company’s outstanding and exercisable options granted to employees as of December 31, 2023:

Exercise price	Options outstanding as of December 31, 2023		Weighted average remaining contractual term (years)		Options exercisable as of December 31, 2023		Weighted average remaining contractual term (years)

$ 0.25- 3.80		4,213,394		8.54		1,725,760		8.43
$ 4.15- 4.95		1,782,094		4.61		1,656,858		5.06
$ 5.21- 7.56		350,934		6.33		275,479		6.05
$ 8.00-11.01		762,840		5.66		622,182		6.29
		7,109,262				4,280,279

A summary of restricted shares and restricted share units activity for the year ended December 31, 2023 is as follows:

	Number of restricted shares and restricted share units			Weighted average grant date fair value

Unvested at the beginning of the year		1,126,743		$	3.29
Granted		1,056,406			1.51
Vested		(706,619	)		2.85
Forfeited		(339,727	)		2.28
Unvested at the end of the year		1,136,803		$	2.22

The total fair value of shares vested during the years ended December 31, 2023 and 2022, was $1,734 and $1,462, respectively.

The total share-based compensation expense related to all of the Company’s equity-based awards, recognized for the years ended December 31, 2023 and 2022 is comprised as follows:

	Year ended December 31,
	2023		2022

Cost of sales	$	9	$	-
Excess Capacity		120		-
Research and development expenses, net		1,199		1,890
Selling, general and administrative		4,183		3,151
Total share-based compensation	$	5,511	$	5,041

As of December 31, 2023, there are $5,734 of total unrecognized costs related to share-based compensation that is expected to be recognized over a weighted average period of approximately 1.77 years.

Gamida Cell Ltd. 10-K