insightec ltd. - tase · 2016. 4. 11. · the accompanying notes are an integral part of the...

INSIGHTEC LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

INSIGHTEC LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents

Page

Report of Independent Registered Public Accounting Firm 1

Consolidated Balance Sheets 2

Consolidated Statements of Operations 3

Statements of Shareholders’ Equity 4

Consolidated Statements of Cash Flows 5

Notes to the Consolidated Financial Statements 6-21

The accompanying notes are an integral part of the consolidated financial statements.

2

INSIGHTEC LTD. CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)

December 31,

Note 2 0 1 5 2 0 1 4

ASSETS

Current assets

Cash and cash equivalents

$ 15,215 $ 5,104

Deposits 36,546 47,046

Trade accounts receivables

4,131 4,350

Inventories 3 5,303 3,054

Other receivables and current assets 4 2,417 1,697

63,612 61,251

Fixed assets, net 5 743 583

Other long-term assets

Long term deposits and prepaid expenses

3,598 1,086

Total Assets

$ 67,953 $ 62,920

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current liabilities

Trade accounts payables

$ 2,837 $ 2,942

Other payables and current liabilities 6 10,985 11,340

13,822 14,282

Long-term liabilities

872 825

Total Liabilities

$ 14,694 $ 15,107

Shareholders' equity

Ordinary shares, NIS 0.01 par value; authorized 163,000,000; shares

issued and outstanding 14,056,212 at December 31, 2015 and 2014. 9 35 35

Preferred B shares, NIS 0.01 par value; Authorized 15,000,000; shares

issued and outstanding 14,037,888 at December 31, 2015 and 2014.

34 34

Preferred B1 shares, NIS 0.01 par value; Authorized 33,000,000; shares

issued and outstanding 32,201,524 at December 31, 2015 and 2014. 85 85

Preferred C shares, NIS 0.01 par value; Authorized 29,000,000; shares

issued and outstanding 27,519,391 at December 31, 2015 and 2014.

72 72

Preferred D shares, NIS 0.01 par value; Authorized 51,000,000; shares

issued and outstanding 43,564,280 at December 31, 2015.and

30,417,587 at December 31, 2014. 120 88

Additional paid-in capital

325,279 295,621

Accumulated deficit

(272,366) (248,122)

53,259 47,813

$ 67,953 $ 62,920


3

INSIGHTEC LTD. CONSOLIDATED STATEMENTS OF OPERATIONS


Year ended December 31,

Note 2 0 1 5 2 0 1 4 2 0 1 3

Revenues

$ 16,146 $ 22,574 $ 20,672

Cost of revenues

9,854 12,320 9,590

Gross profit

6,292 10,254 11,082

Research and development expenses, net of participations of

$2,159, $1,758 and $1,294, at December 31, 2015, 2014

and 2013, respectively

14,291 14,973 12,074

Sales and marketing expenses

9,417 8,769 7,590

General and administrative expenses

6,710 3,375 4,322

Operating loss

24,126 16,863 12,904

Financing (income) expenses, net

70 143 93

Loss before taxes on income

24,196 17,006 12,997

Taxes on income

48 47 10

Loss for the year

$ 24,244 $ 17,053 $ 13,007


4

INSIGHTEC LTD.STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)

Dollars in thousands, except share and per share data

Number of

Ordinary Shares

Number of

Preferred B

Shares

Number of

Preferred B1

Shares

Number of

Preferred C

Shares

Number of

Preferred D

Shares

Ordinary

Shares

Preferred

B Shares

Preferred

B1 Shares

Preferred

C Shares

Preferred

D Shares

Accumulated

deficit

Additional

paid-in capitalTotal

Balance – January 1, 2013 14,016,462 14,037,888 32,201,524 27,519,391 - $35 $34 $85 $72 - $ (218,062) $233,033 $ $15,197

Stock-based compensation - - - - - - - - - - - 1,144 1,144

Loss for the period - - - - - - - - - - (13,007) - (13,007)

Balance - December 31, 2013 14,016,462 14,037,888 32,201,524 27,519,391 - $35 $34 $85 $72 - $ (231,069) 234,177 $ 3,334

Issuance of Preferred Shares D (Note 7) - - - - 30,417,587 - - - - 88 - 58,261 58,349

Exercise of share options 39,750 - - - - -)*( - - - - - -)*( 0

-Stock-based compensation - - - - - - - - - - - 3,183 3,183


Balance - December 31, 2014 14,056,212 14,037,888 32,201,524 27,519,391 30,417,587 $35 $34 $85 $72 $88 $ (248,122) $295,621 $ $47,813

Issuance of Preferred Shares D (Note 7) - - - - 13,146,693 - - - - 32 - 25,407 25,439

Stock-based compensation - - - - - - - - - - - 4,251 4,251


Balance - December 31, 2015 14,056,212 14,037,888 32,201,524 27,519,391 43,564,280 $35 $34 $85 $72 $120 $ (272,366) $325,279 $ $53,259

(*) Less than $1.

5

INSIGHTEC LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS



2 0 1 5 2 0 1 4 2 0 1 3

Cash flows - Operating Activities:

Loss for the year $ (24,244) $ (17,053) $ (13,007)

Adjustments to reconcile loss to net cash used in operating

activities:

Depreciation and amortization 391 170 188

Stock-based compensation 4,251 3,183 1,144

Decrease (Increase) in trade accounts receivable 219 (129) (2,298)

Decrease (Increase) in other receivables and Prepaid expenses (732) (447) 883

Decrease (increase) in inventories (2,249) 610 (815)

Increase (Decrease) in trade accounts payable, other payables ,current

liabilities and other long term liabilities (413) 2,084 (1,018)

Net cash used in operating activities (22,777) (11,582) (14,923)

Cash flows - Investing Activities:

Restricted cash - (690) -

Purchase of fixed assets (551) (442) (117)

Bank Deposit 8,000 (42,327) (5,002)

Net cash used in investing activities 7,449 (43,459) (5,119)

Cash flows - Financing Activities:

Issuance of Preferred Shares, net 25,439 58,349 -

Net cash provided by financing activities 25,439 58,349 -

Increase (decrease) in cash and cash equivalents 10,111 3,308 (20,042)

Cash and cash equivalents at beginning of the year 5,104 1,796 21,838

Cash and cash equivalents at end of the year $ 15,215 $5,104 $1,796

Supplemental information:

Income tax paid 77 20 3

Interest received (paid) in cash 279 17 1

INSIGHTEC LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


6

NOTE 1 - GENERAL

Business Description:

A. Insightec Ltd. )the “Company”( was incorporated in the State of Israel in March 1999 and

commenced operations in the development, production and marketing of magnetic resonance

imaging guided focused ultrasound treatment equipment shortly thereafter. The Company

operates in one operating segment.

The current main shareholders of the Company are as follows: Elbit Medical Technologies Ltd.

)“EMT”(; York Global Finance II S.à r.l., )“York”(; Exigen - Focused Holding )“Exigen”(;

Shanghai GEOC Hengtong Investment Limited Partnership )“GEOC"); General Electric

Company (through its Healthcare division( )“GE Company” or “GE” ( and MediTech Advisors

LLC )”MTA”(.

The Company has wholly owned subsidiaries as follows: (i) in the United States of America,

InSightec Inc. (formerly InSightec- TxSonics Inc.) which was incorporated in the State of

Delaware, U.S.A. in November 1998; (ii) a wholly owned subsidiary in Japan, Insightec Japan

Y.K., which was incorporated in Tokyo, Japan, in March 2005; and (iii) a wholly owned

subsidiary in China, InSightec Trading (Shanghai) Co., Ltd., which was incorporated in

Shanghai on December 2014 )together: the “Subsidiaries”(. The Subsidiaries engaged in pre-

sale activities, in managing clinical trials and in providing technical support to the Company’s

customers.

B. The industry in which the Company operates is characterized by rapid technological

development. Substantially all of the Company's current sales are derived from a few

applications of the Company’s product line. Many of the Company's development applications

are in the early stages and there can be no assurance that these applications will be successful.

The Company is continuing research and development for additional applications for such

products.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with generally accepted accounting

principles )“GAAP”( in the United States of America.

A. Functional currency and translation of foreign currencies:

The currency of the primary economic environment in which the Company and its Subsidiary

operate is the U.S. dollar )also “dollar”, “$US” or $(. Accordingly, the Company and its

Subsidiary use the dollar as their functional and reporting currency.

Transactions and balances denominated in dollars are presented at their dollar amounts. Non-

dollar transactions and balances are re-measured into dollars in accordance with the principles

set forth in ACS 830-10 "Foreign Currency Translation” of the Financial Accounting Standards

Board )“FASB”(.

All exchange gains and losses from re-measurement of monetary balance sheet items resulting

from transactions in non-dollar currencies are included in net financing income (expense) as

they arise.

INSIGHTEC LTD.



7

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

B. Principles of Consolidation:

The Company’s financial statements include the financial statements of the Company and its

Subsidiaries )the “Group”( after elimination of material inter-company transactions and

balances.

C. Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities as

of the date of the financial statements, and the reported amounts of revenues and expenses

during the reporting period. Actual results may differ from those estimates

D. Cash and cash equivalents:

Cash and cash equivalents are comprised of cash and demand deposits in banks with maturity

dates not exceeding three months from the date of deposit.

E. Allowance for doubtful accounts:

The allowance for doubtful accounts is computed for specific accounts, which, in management

opinion are doubtful of collection.

F. Inventories:

Inventories are stated at the lower of cost or net realizable value. Inventory write–offs are

provided for slow–moving items or technological obsolescence for which recoverability is not

probable. Cost is determined for raw materials on the basis of moving average cost per unit.

Cost is determined for finished products on the basis of standard cost, which approximates

actual production cost (materials, labor and indirect manufacturing costs).

G. Unites under Demo:

Units assembled that are used for demonstration are classified out of inventory to fixed assets

and depreciated over the estimated useful life of 2 years.

H. Fixed assets:

Fixed assets are presented at cost less accumulated depreciation. Depreciation is calculated

based on the straight-line method over the estimated economic lives of the assets, as follows:

Years

Electronic (including medical) equipment 3-7

Demo systems 2

Office furniture and equipment 7-14

Motor vehicles 7

Leasehold improvements 5

Leasehold improvements are amortized on a straight-line basis over the shorter of the

estimated useful lives of the assets or the remaining term of the lease (including the period of

renewal options that the Company intends to exercise).

INSIGHTEC LTD.



8


I. Impairment of long–lived assets:

The Company's long-lived assets are reviewed for impairment in accordance with ACS 360-10

"Accounting for the Impairment or Disposal of Long-Lived Assets", whenever events or changes

in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying

amount of an asset to the future undiscounted cash flows expected to be generated by the

assets. If such assets are considered to be impaired, the impairment to be recognized is

measured by the amount by which the carrying amount of the assets exceeds the fair value of

the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair

value less costs to sell. As of December 31, 2015, no impairment losses have been identified.

J. Revenue Recognition:

In accordance with ASC Topic 605 “Revenue Recognition”, the Company recognizes revenues

from sale of products when the following fundamental criteria are met: (i) persuasive evidence

of an arrangement exists; (ii) delivery has occurred or services have been rendered, (iii) the

price to the customer is fixed or determinable; and (iv) collection of the resulting receivable is

reasonably assured. These criteria are usually met at the time of product shipment.

In instances in which the Company enters into transactions that represent multiple deliverables

arrangements, with elements including system sales, installation at the customer’s site and

technical service, the Company apply ASC 605-25 Multiple Elements Arrangements. The ASC

requires allocation of arrangement consideration among the separate units of accounting based

on their relative selling prices. The selling price for each unit of accounting is determined based

on a selling price hierarchy using either vendor specific objective evidence )“VSOE”( of selling

price, third party evidence of selling price )“TPE”( or the vendor’s best estimate of estimated

selling price )“ESP”( for that deliverable. Use of the residual method is prohibited. The objective

of ESP is to determine the price at which the Company would transact a sale if the product or

service were sold on a stand-alone basis.

Products are typically considered delivered upon shipment. In instances where final acceptance

of the system is specified by the customer, revenue is deferred until all acceptance criteria have

been met. Technical support services revenue is deferred and recognized ratably over the

period during which the services are performed, which is typically from one to two years. The

Company’s arrangements generally do not include any provisions for cancellation, termination,

or refunds that would significantly impact recognized revenue.

In most instances, the Company is not able to establish VSOE for all deliverables in an

arrangement with multiple elements, due to the Company’s history of infrequent sales in which

each element is separately sold. When VSOE cannot be established, the Company attempts to

establish selling price of each element based on BESP. BESP is generally used for services

and it applies to a small proportion of the Company’s arrangements with multiple deliverables.

BESP for services is based on technical support services, which are sold separately through

renewals of annual contracts.

INSIGHTEC LTD.



9


J. Revenue Recognition: (Cont.)

The Company determines ESP for a product or service by considering multiple factors

including, but not limited to, geographies, market conditions, competitive landscape, internal

costs, gross margin objectives, and pricing practices. The determination of ESP is made

through consultation with and formal approval by the Company’s management.

The Company regularly reviews VSOE and ESP and maintains internal controls over the

establishment and updates of these estimates

K. Research and Development:

Research and development costs are charged to operations as incurred. Grants received

(mainly royalty-bearing) from the Government of Israel through the Office of the Chief Scientist

)“OCS”( and from other sources, as participation in certain research and development projects.

The accrual for grant receivable is determined based on the terms of the projects, provided that

the criteria for entitlement have been met.

The grants are not to be repaid, but instead the Company is obliged to pay royalties as a

percentage of future sales if and when sales from the funded projects will be generated. These

grants are recognized as a deduction from research and development costs at the time the

applicable entity is entitled to such grants on the basis of the research and development costs

incurred. Since the payment of royalties is not probable when the grants are received, the

Company records a liability in the amount of the estimated royalties for each individual contract,

when the related revenues are recognized, as part of cost of revenues. For more information

regarding OCS royalties’ commitment, see Note 8A.

L Severance Pay:

Israeli law and labor agreements determine the obligations of the Company to make severance

payments to retiring employees and to employees leaving employment under certain other

circumstances. The Company reached an agreement with its employees, according to which

they would accept the provisions of Section No.14 of the Severance Compensation Law, 1963

("Section 14"). Section 14 allows the Company to make deposits in severance pay funds

according to the employees' current salary. Such deposits release the Company from any

further obligation with this regard. The deposits made are available to the employee at the time

when the employer-employee relationship ends, regardless of cause of termination.

Severance expenses for the years ended December 31, 2013, 2014 and 2015 amounted to

approximately $571, $585 and $660 respectively.

M. Income taxes:

The Company accounts for income taxes utilizing the asset and liability method in accordance

with ACS 740-10, “Accounting for Income Taxes” of the FASB. Accordingly current tax liabilities

are recognized for the estimated taxes payable on tax returns for the current year. Deferred tax

liabilities or assets are recognized for the estimated future tax effects attributable to temporary

differences between the income tax bases of assets and liabilities and their reported amounts in

the financial statements and for tax loss carry forwards. Measurement of current and deferred

tax liabilities and assets is based on provisions of enacted tax laws, and deferred tax assets are

reduced, if necessary, by a valuation allowance for the amount of tax benefits, the realization of

which is not considered more-likely-then-not based on available evidence.

INSIGHTEC LTD.



10


N. Concentration of credit risk:

Financial instruments that potentially subject the Company’s to concentrations of credit risk

consist principally of cash and cash equivalents, short and long-term deposits. Cash and cash

equivalents, short and long-term deposits are invested in major banks in Israel and in the United

States. Management believes that the financial institutions that hold the Company’s investments

are financially sound and, accordingly, minimal credit risk exists with respect to these

investments.

The Company has no significant off-balance sheet concentration of financial instruments subject

to credit risk such as foreign exchange contracts, option contracts or other hedging

arrangements.

O. Stock-based compensation:

The Company applies the provisions of ASC Topic 718 under which, share-based

compensation cost is measured at the grant date, based on the estimated fair value of the

award, and is recognized as expense over the employee’s requisite service period.

Fair value is determined on the basis of private placements or other transactions in the

Company's equity securities and on the basis of other available evidence and management's

estimates, with the following weighted-average assumptions (annualized percentages):


2 0 1 5 2 0 1 4 2 0 1 3

Risk-free interest rate 1.73% 1.63% 0.86%

Expected life of options 5 5 6

Forfeiture rate 9% 3.5% 3.5%

Expected volatility 60% 64% 70%

Expected dividend yield None None None

P. Fair value of financial instruments:

The financial instruments of the Company consist mainly of cash and cash equivalents, short

and long-term interest-bearing bank deposits, current and non-current accounts receivable and

trade accounts payable. In view of their nature, the fair value of the financial instruments is

usually identical or close to their carrying amounts.

NOTE 3 - INVENTORIES

Composition:

December 31,

2 0 1 5 2 0 1 4

Raw materials $ 2,574 $ 2,430

Finished products 2,729 624

$ 5,303 $ 3,054

INSIGHTEC LTD.



11

NOTE 4 - OTHER RECEIVABLES AND CURRENT ASSETS

Composition:

December 31,

2 0 1 5 2 0 1 4

Office of the Chief Scientist $ 1,320 $ 575

Prepaid expenses 612 610

Governmental authorities (Mainly V.A.T) 182 191

Others 303 321

$ 2,417 $ 1,697

NOTE 5 - FIXED ASSETS, NET

Composition:

December 31,

2 0 1 5 2 0 1 4

Cost:

Electronic and medical equipment $ 6,869 $ 6,338

Demo systems 555 555

Office furniture and equipment 445 429

Leasehold improvements 1,753 1,749

$ 9,622 $ 9,071

Accumulated depreciation:

Electronic and medical equipment $ 6,212 $ 5,841

Demo systems 555 555

Office furniture and equipment 370 354

Leasehold improvements 1,742 1,738

$ 8,879 $ 8,488

Net book value $ 743 $ 583

Depreciation expense amounted to$188 and $170 and $391 for the years ended December 31, 2013,

2014 and 2015, respectively.

NOTE 6 - OTHER PAYABLES AND CURRENT LIABILITIES

Composition:

December 31,

2 0 1 5 2 0 1 4

Payroll and related amounts $ 2,708 $ 1,908

Advances and deferred income 4,201 3,607

Accrued expenses to clinical researches 2,391 2,904

Accrued for royalties 426 999

Accrued commission 345 391

Other accrued expenses 914 1,531

Net book value $ 10,985 $ 11,340

INSIGHTEC LTD.



12

NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES

A. As of December 31, 2015, the Company has received or was entitled to receive, grants in the

aggregate amount of $28,066 from the OCS. In consideration for such grants, the Company has

undertaken to pay royalties amounting to 3.5% of the revenues until the entire amount is repaid.

The royalties will be paid up to the amount of the grants provided by the OCS, linked to the

dollar and for grants received after January 1, 1999, also bearing annual interest at a rate based

on LIBOR. Refund of the grants thereon is contingent on future revenues and the Company has

no obligation to refund grants if sufficient revenues are not generated. The Company provides

for such royalties based on its total revenues. The technology developed with OCS funding is

subject to transfer restrictions.

These restrictions may impair the Company’s ability to sell its technology assets or to outsource

manufacturing and the restrictions continue to apply even after the Company has paid the full

amount of royalties, payable for the grants. In addition, the restrictions may impair the

Company’s ability to consummate a merger or similar transaction in which the surviving entity is

not an Israeli company.

The total amounts of grants received or were entitled to receive net of royalties paid or accrued

including interest as of December 31, 2015 was approximately $33,650.

Royalty expenses to the OCS in the year ended December 31, 2013, 2014 and 2015, amounted

to $720, $790 and $565, respectively and included in cost of revenues.

B. The Company rents its facilities under various operating lease agreements, which expire on

various dates. In March 2005 the Company signed an operating lease agreement for its main

facility in Israel. This lease agreement expires in August 2010 and has two option periods for 30

months each commencing August 2010. In December 2007, the Company signed an

amendment to that agreement, according to which the Company leased an additional space in

the same building for a period of 5 years until September 2013 this lease has been extended in

2.5 years until March 2016, together with extension of the original lease to the same date.

In December 2015, the Company signed an amendment to that agreement, according to which

the Company extended the leased in the same building for a period of 3 years until March 2019.

The minimum rental payments (assuming no exercise of extension options in the agreements)

are as follows:

Year 2016 $ 1,565

2017

2018

2019

$ 1,419

$ 1,395

$ 485

Rental expense for the facilities amounted to $1,385, $1,278 and $1,272 for the years ended

December 31, 2013, 2014 and 2015, respectively.

The Company leases vehicles under various operating lease agreements, which expire on

various dates. The minimum rental payment is $115 which was already paid, and included as

part of short-term and long-term prepaid expenses in the balance sheet.

Vehicle lease expense amounted to $743, $739 and $766 for the years ended December 31,

2013, 2014 and 2015, respectively.

INSIGHTEC LTD.



13

C. In October 17, 2012 Technology, Co-operation, and Distribution Agreement, between the

Company and GE (the "2012 Distribution Agreement") was signed in which GE Company was

awarded world-wide distribution rights for marketing and sales of the Company's products.

At the first closing of the Series D Transaction (June 26, 2014), the Company and GE executed

a first amendment to the 2012 Distribution Agreement, pursuant to which the exclusivity granted

to GE was terminated, and in exchange, the Company agreed to pay to GE a quarterly royalty

on a going-forward basis equal to 15% of the net selling price of the first 250 products directly or

indirectly sold to customers other than GE for use with MRI or other scanners manufactured by

companies other than GE or any GE affiliates.

At a subsequent closing of the Series D Transaction (December 30, 2015), the Company and

GE executed a third amendment to the 2012 Distribution Agreement, pursuant to which the

Company was appointed as a non-exclusive distributer for GEHC's MR Scanners in order for

the Company to sell the scanners as an Integrated Therapy Platform (ITP) together with the

Company's products. In addition, the last remaining rights granted to GE to receive royaltyies'

payments from the Company was revoked and the term of the 2012 Distribution Agreement was

extended for a period of five years from December 30, 2015.

D. In April 2007, the Company undertook to support the FUS Foundation )“FUSF”(, a non-profit

organization, whose mission is to develop new applications and accelerate the worldwide

adoption of MRgFUS through among other things, fellowship programs )“the Fellowship

programs”( which are aimed to help doctors acquire skills and expertise in working with

MRgFUS systems, and also through research programs with leading research institutions.

On October 2012 the Company agreed to pay during 2012 $1,000 and during 2013 $700.

The FUSF agreed to finance the stage 1 Neuro research treatments during these years.

Expenses related to the FUSF support for the years ended December 31 2013, 2014 and 2015,

amounted to $276, $424 and $ 247 respectively.

INSIGHTEC LTD.



14

NOTE 9 - SHAREHOLDERS’ EQUITY

1. Registered Share Capital:

The registered share capital of the Company is NIS 2,910,000 divided into (a) 163,000,000

Ordinary Shares, having a par value of NIS 0.01 each; (b) 51,000,000 Series D Preferred

Shares, having a par value of NIS 0.01 each, (b) 29,000,000 Series C Preferred Shares, having

a par value of NIS 0.01 each, (c) 15,000,000 Series B Preferred Shares, having a par value of

NIS 0.01 each, and (d) 33,000,000 Series B-1 Preferred Shares, having a par value of NIS 0.01

each.

2. A. Issuance of Shares via Investments in the Company:

1. Series D Transaction:

On June 26, 2014 the Company entered into a Series D Preferred Share Purchase

Agreement with York, as amended on September 7, 2014, on December 15, 2014, on

February 10, 2015, on June 10, 2015 and on December 30, 2015 pursuant to which York

and subsequent investors invested a total sum of $84.5 million in the Company, at a price

per share equals to $1.94 (the "Series D Transaction") in consideration for 43,564,282

Series D Preferred Shares.

In addition, Mr. Ferré was granted the right to invest an additional $2 million, at the same

terms of the Series D Transaction, for the purchase of Series D preferred shares of the

Company (in addition to the amounts invested under the Series D Transaction described

above). Such right shall expire on the earlier of: (i) June 15, 2016; (ii) the date of

consummation of an initial public offering (IPO) of the Company; or (iii) sale of the

Company or its assets.

The Series D Transaction reflected a pre money valuation (prior to the first Series D

investment consummated on June 2014) of the Company of $200 million (on a fully

diluted, as-converted basis).

In the event the Company's aggregate revenues for 2014 and 2015 as reflected in its

annual audited financial statements for such years are less than $60,000,000, the Series

D price per share will be adjusted proportionately and the investors in the Series D

Transaction shall be issued additional Series D Preferred Shares, provided, however, that

the price per share shall not be reduced by more than 8%.

INSIGHTEC LTD.



15

NOTE 9 - SHAREHOLDERS’ EQUITY (Cont.)

Issuance of Shares via Investments in the Company: (Cont.)

Series D Transaction: (Cont.)

Under the Series D Transaction, the parties have agreed to amend the Securityholders

Agreement among the Company's securityholders, pursuant to which the maximum

number of directors increased to 11, of which York and Elbit Medical (collectively, the

"Major Securityholders"), will be entitled to appoint two persons as long as they hold in

the aggregate 12.5% or more of the outstanding capital stock of the Company on an as-

converted basis, and one person so long as such Major Securityholder, beneficially holds

less than 12.5% but 5% or more of the outstanding capital stock of the Company on an

as-converted basis. In addition, the Major Securityholders will be entitled to jointly appoint

three additional directors. GEOC will be entitled to appoint one director as long as it holds

3% or more of the outstanding capital stock of the Company on an as-converted basis.

Focused Holdings LP will be entitled to appoint one director as long as Focused Holdings

LP and Focused Holding Canada hold, together with their respective Affiliates, 5% or

more of the outstanding capital stock of the Company on an as-converted basis.

Company's CEO shall also serve as a director. For so long as Elbit and York hold

together an aggregate of at least 50.01% of the Shares then issued and outstanding, the

Designated Directors they have appointed will have the right to jointly and unanimously

appoint the Company’s Chief Executive Officer subject to any additional requirements

provided by Law.

3. General Provisions:

(1) Series D Preferred Shares are senior to all other outstanding shares of the Company.

Secondary to Series D Preferred Shares are Series C Preferred Shares. Following Series

C Preferred Shares are Series B and Series B-1 Preferred Shares. The rights provided to

the holders of Series B-1 Preferred and Series B Preferred Shares are similar, mutatis

mutandis (other than the original purchase price thereof).

(2) Each Ordinary Share and each Preferred Share shall confer upon its holder the right to

receive notices of, and to attend and vote in General Meetings. Each holder of Ordinary

Shares shall have one vote for each Ordinary Share held by him. Each holder of

Preferred Shares shall have one vote for each Ordinary Share into which the Preferred

Shares held by such holder may be converted.

(3) The Company's Amended and Restated Articles of Association (the "AOA") provides,

inter alia, for (i) special majority requirements with respect to certain resolutions, e.g.

dividend distribution, issuance of shares ranking equal or senior to the Preferred Shares,

material change in the line of business; and (ii) restrictions on certain transfers of

Company's shares and bring along and tag along rights.

(4) According to the AOA, the holders of the Preferred Shares are entitled, inter alia, to a

'dividend preference', to the extent such dividend is declared by the Board of Directors of

the Company, and a 'liquidation preference' in the events stipulated thereunder.

(5) The AOA further provides that the holders of the Preferred Shares have the right, at any

time, to convert all or any of the shares held by them into Ordinary Shares and that

automatic conversion shall apply in certain circumstances.

INSIGHTEC LTD.



16

NOTE 10 - STOCK OPTION PLANS

As of December 31, 2015, 23,803,919 options are outstanding under all the Company's options plans.

A. 2007 Option Plan (“2007 Plan”):

On May 1, 2007 the Company's Board of Directors approved and adopted a new option plan

named "2007 Plan". The total number of options under the 2007 Plan are 2,000,000 (1,000,000

options originally followed by an increase of 1,000,000 options as approved by the Board of

directors on February 13, 2008). The vesting of the options granted under 2007 Plan would start

at the earlier of the Company’s IPO or Material Change of the Company such as liquidation or

merger )the “Commencement Date”( and would be two years from the commencement date for

50% of the options granted, three years from commencement date for additional 25% of the

options

granted and four years from commencement date for the remaining 25% of the options granted.

On October 30, 2007 the Company's Board of Directors approved that all the options which will

be granted starting October 30, 2007 under 2007 Plan, shall become fully vested and

exercisable on the second anniversary of the Commencement Date and shall remain

exercisable until the end of the term of the options, as defined in 2007 Plan.

B. 2006 Option Plan (“2006 Original Plan”) and 2006 Revised Option Plan ("2006 Revised

Plan"):

On January 30, 2006 the Company's Board of directors approved and adopted an option plan to

employees, officers, directors and consultants )“2006 Original Plan”(.

On December 3, 2012 the Company's Shareholders approved, following the Board's approval,

to amend 2006 Plan ("2006 Revised Plan") and to adopt US Annex. The total number of options

reserved for issuance under the 2006 Revised Plan is 15,500,000 and under the US Annex is

7,500,000 options.

The vesting period of the options granted prior to December 11, 2014, under 2006 Revised Plan

and US Annex is as follows: 25% of the Options shall become vested each year on the

anniversary of the Grant Date (such that the Options shall be fully vested on the fourth

anniversary of the Grant Date). The options granted under this plan expire after seven years

from the Grant Date.

On December 11, 2014 the Company's Shareholders approved, following the Board's approval,

to amend the 2006 Revised Plan and the US Annex in order to include a cashless exercise

mechanism. In addition, according to such amendment the vesting period of the options granted

under 2006 Revised Plan and US Annex is as follows: 50% of the Options shall become vested

on the second anniversary of the Grant Date, additional 25% of the Options shall be exercisable

on the third anniversary of the Grant Date, and additional 25% of the Options shall be

exercisable on the fourth anniversary of the Grant Date (such that the Options shall be fully

vested on the fourth anniversary of the Grant Date).

C. Grant of Options:

During the first quarter of 2013, and following the consummation of Series C Investment as

specified above, the outstanding options granted under 2003 Option Plans, 2006 Option Plan

INSIGHTEC LTD.



17

and 2007 Option Plan (not including exceptions) were cancelled. In consideration, the Company

granted the same number of options to each grantee under 2006 Amended and Restated Stock

Option Plan, which was adopted on December 5, 2012, with an exercise price of $1.12 per each

option.

On December 11, 2014, the Company granted 6,771,612 and 1,354,322 options to Mr. Ferré

and Mr. Delevic, respectively, reflecting 5% and 1% of the Company's fully diluted share capital

on the date of the closing of the Subsequent Investment (as such term is defined in the Series D

Transaction), pursuant to a Service Agreement between the Company and Crandon Capital

Partners LLC ("Crandon"), dated December 15, 2014, under which Crandon will provide the

Company certain services ("Services"), including Chairman of the Board, through Mr. Maurice

R. Ferré and active director services, through Mr. Ivan Delevic (the "Services Agreement").

The exercise price per share shall be equal to the original issue price of the Series D Preferred

Shares ($1.94). Such options shall vest as follows: (i) 25% of the options shall vest on January

1, 2015; (ii) 25% shall vest on January 1, 2016; and (iii) 50% shall vest upon the achievement of

certain goals and milestones (as specified in the grant letter). The options shall be granted

under the 2006 Revised Plan and in accordance with the terms of the grant letter, which will

provide a cashless exercise mechanism. The value of the benefit calculated under the Black-

Scholes formula, is about $5.6 million.

On December 28, 2015, the Company granted an option to purchase 250,000 Ordinary Shares

of the Company to Dr. Kobi Vortman, the Company's CEO at that time and currently an

executive vice chairman of the Board. The grant date of the options shall be January 1, 2016.

The exercise price per share shall be $1.94 (subject to adjustments as specified in the Series D

Transaction). The options shall vest as follows: (i) 25% of the options shall have immediate

vesting upon allocation; (ii) 25% shall vest one year after the grant date; and (iii) 50% shall vest

upon the achievement of certain goals and milestones (as specified in the grant letter). Options

will be subject to cashless exercise. The options shall be granted under the 2006 Revised Plan

and in accordance with the terms of the grant letter, which will provide a cashless exercise

mechanism. The value of the benefit calculated under the Black-Scholes formula, is about $174.

In addition, during 2013, 2014 and 2015 additional options were granted to new and current

employees and officers. For further details in respect of the 2006 Amended and Restated Stock

Option Plan please see note 10B above.

INSIGHTEC LTD.



18

NOTE 10 - STOCK OPTION PLANS (Cont.)

D. The weighted average fair value (in dollars) of the options granted during 2013, 2014 and 2015 according to

Black-Scholes option-pricing model, amounted to $0.4, $0.62 and $0.7 per option, respectively. Fair value

was determined on the basis of private placements of the Company's equity securities and on the basis of

other available evidence and management's estimates.

E. A summary of the status of the Company’s share option plans as of December 31, 2013, 2014 and 2015, as

well as changes during each of the years and period then ended, is presented below:

2 0 1 5 2 0 1 4 2 0 1 3

Share

options

Weighted

average

exercise

price

Share

options

Weighted

average

exercise

price

Share

options

Weighted

average

exercise

price

(US dollars) (US dollars) (US dollars)

Outstanding - beginning

of year 23,533,919 1.49 11,998,500 1.26 2,814,750 4.82

Granted 500,000 1.94 12,706,718 1.67 11,691,500 1.12

Cancelled (230,000) 1.87 (1,131,549) 1.12 (2,507,750) 4.75

Exercised - (39,750) 1.12 -

Outstanding - year end 23,803,919 1.50 23,533,919 1.49 11,998,500 1.26

Options exercisable year

end 10,905,764 1.56 3,866,050 1.52 879,000 2.88

G. The following table summarizes information about share options outstanding as of December 31, 2014 and

2015:

Outstanding as of December 31, 2014

Exercisable as of December 31, 2014

Range of exercise prices

Number outstanding

Weighted average remaining contractual life

Weighted average exercise price

Number exercisable


(US dollars) (in years) (US dollars) (US dollars)

0.0025 25,000 2.2 0.0025 25,000 0.0025

1.12 14,520,985 6.9 1.12 3,549,050 1.12

1.92 8,695,934 3.5 1.92 0 1.92

6 42,000 1.5 6 42,000 6

6.6 250,000 2 6.6 250,000 6.6

25,533,919 3,866,050

INSIGHTEC LTD.



19

NOTE 10 - STOCK OPTION PLANS (Cont.)

G. (Cont.)

Outstanding as of December 31, 2015

Exercisable as of December 31, 2015

Range of exercise prices

Number outstanding

Weighted average remaining contractual life


Number exercisable


(US dollars) (in years) (US dollars) (US dollars)

0.0025 25,000 1.2 0.0025 25,000 0.0025

1.12 14,490,985 4.3 1.12 6,618,297 1.12

1.94 8,995,934 5.9 1.94 3,970,467 1.94

6 42,000 1.2 6 42,000 6

6.6 250,000 1 6.6 250,000 6.6

23,803,919 10,905,764

Total estimated share-based compensation expense, related to all of the Company’s share-based awards,

recognized in the year ended December 31, 2015 and 2014 was comprised as follows:


2 0 1 5 2 0 1 4

Cost of revenues $ 73 $ 66

Research and development 684 543

Sales and marketing 445 383

General and administrative 3,049 2,191

Total Share-based compensation expense $ 4,251 $ 3,183

NOTE 11 - INCOME TAXES

A. Law for the Encouragement of Capital Investments-1959:

In January 6, 2011 an amendment to the Law for the Encouragement of Capital Investment-

1959 (the "Law") was published. The amendment has a substantial effect on the current

provisions of the Law. The followings are the major changes in the amendment:

(1) A company located in Preferred Area A can file for both grants and tax benefits.

(2) The requisites for benefits were changed with most significant change is that the

minimum investment requirement was removed. In addition the definition of approved

entity was changed.

(3) The income attribution based on revenues was cancelled, the result is that approved

entity would be taxable on it entire income at a fixed rate.

INSIGHTEC LTD.



20

NOTE 11 - INCOME TAXES (Cont.)

A. Law for the Encouragement of Capital Investments-1959: (Cont.)

(4) Tax exemption was cancelled.

(5) Dividend payable to Israeli corporations from preferred income would be tax exempted.

(6) The Grant Rate out of the approved investment would be up to 24%.

The Tax rates applicable to Approved Industrial Enterprise would be 6% and 12% for those

located in Preferred Area A or elsewhere, respectively, with effectiveness for the taxable year 2

of 2015 and onwards. Prior to 2015 the following tax rates will be applicable:

For the years 2011-2012 10% and 15%, respectively and for the years 2013-2014 7% and

12.5%, respectively. The amendment to the law is not expected to have material impact on the

Company's consolidated financial statements.

B. Law for the Encouragement of Industry (Taxation), 1969:

The Company is an “Industrial Company” under the Law for the Encouragement of Industry

(Taxation), 1969 and, therefore, is entitled to certain tax benefits, mainly accelerated rates of

depreciation and the right to deduct public issuance expenses for tax purposes.

C. Deferred Taxes:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying

amount of assets and liabilities for financial reporting purposes and the amounts used for

income tax purposes.

The Company has accumulated losses for Israeli tax purposes as of December 31, 2015 in the

amount of approximately $210,000.

The Israeli tax loss carry forwards have no expiration date. The Company expects that during

the period these losses are utilized, its undistributed earnings will be tax exempt. Since the

Company has no intention to distribute such earnings, there will be no tax benefit available from

such tax losses and no deferred taxes have been included in these financial statements for

these losses.

D. Tax rates applicable to the Company:

The corporate tax rate in Israel is 26.5% in 2014 and 2015.

In January 2016, a legislation to amend the corporate income tax law as of January 1, 2016 to

25% (1.5% decrease).

E. Tax Assessments:

The Company and InSightec Inc. have not received final tax assessments since inception. The

Company and InSightec Inc. have tax assessments considered final through the year 2010 and

2011, respectively. InSightec Japan Y.K. had final tax assessment through the year 2010.

In light of losses for both financial reporting and tax purposes for all years presented, a

reconciliation of the effective income tax rate has not been presented.

INSIGHTEC LTD.



21

NOTE 12 - GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS

A. Geographic information:


2 0 1 5 2 0 1 4 2 0 1 3

% % %

Revenues:

America 23 21 14

Europe 38 35 49

ROW 39 44 37

B. Revenues by major customers:


2 0 1 5 2 0 1 4 2 0 1 3

% % %

Customer A 34 31 22

Customer B 12 10 14

C. Fixed assets: Substantially all fixed assets are located in Israel.

NOTE 13 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

A. Transactions:


2 0 1 5 2 0 1 4 2 0 1 3

Revenues $ 4,811 $ 7,083 $ 4,565

Cost of revenues $ 254 $ 302 $ 168

Research and development costs (14.C) $ 0 $ 30 $ 50

Sales and marketing $ 0 $ 0 $ 54

Balances:

December 31,

2 0 1 5 2 0 1 4

Trade accounts receivables $ 1,905 $ 783

Trade accounts payables $ 0 $ 100

GAMIDA CELL LTD.

FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

U.S. DOLLARS IN THOUSANDS

INDEX

Page

Auditors' Report 2

Statements of Financial Position 3 - 4

Statements of Comprehensive Income 5

Statements of Changes in Equity 6

Statements of Cash Flows 7

Notes to the Financial Statements 8 - 34

- - - - - - - - - - - - - - - - - - - - -

- 2 -

AUDITOR'S REPORT

To the Shareholders and Board of Directors of

GAMIDA CELL LTD.

We have audited the accompanying statements of financial position of Gamida Cell Ltd. ("the

Company") as of December 31, 2015 and 2014, and the related statements of comprehensive income,

changes in equity and cash flows for the years then ended. These financial statements are the responsibility

of the Company's board of directors and management. Our responsibility is to express an opinion on these

financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in Israel, including

those prescribed by the Auditor's Regulations (Auditor's Mode of Performance), 1973. Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by the board of directors and management, as well

as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, based on our audits, the financial statements referred to above present fairly, in all

material respects, the financial position of the Company as of December 31, 2015 and 2014, and the results

of its operations, changes in its equity and cash flows for each of the years then ended, in conformity with

International Financial Reporting Standards ("IFRS").

Tel-Aviv, Israel KOST FORER GABBAY & KASIERER

February XX, 2016 A Member of Ernst & Young Global

GAMIDA CELL LTD.

- 3 -

STATEMENTS OF FINANCIAL POSITION

U.S. dollars in thousands

December 31,

Note 2015 2014

ASSETS:

CURRENT ASSETS:

Cash and cash equivalents 5 $ 28,742 $ 9,308

Short-term bank deposits - 21,822

Other current assets 6 535 389

Related parties 15 148 145

Total current assets 29,425 31,664

NON-CURRENT ASSETS:

Investment in joint venture 9 641 718

Property and equipment, net 7 540 404

Other assets 34 46

Total non-current assets 1,215 1,168

Total assets $ 30,640 $ 32,832

The accompanying notes are an integral part of the financial statements.

GAMIDA CELL LTD.

4

STATEMENTS OF FINANCIAL POSITION

U.S. dollars thousands (except share and per share data)

December 31,

Note 2015 2014

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Trade payables $ 629 $ 641 Accrued expenses and other payables 8 841 588

1,470 1,229

NON-CURRENT LIABILITIES:

Warrants presented at fair value 10 1,266 5,299 Employee benefit liabilities, net 92 40

1,358 5,339

CONTINGENT LIABILITIES AND COMMITMENTS 11 SHAREHOLDERS' EQUITY: 12

Share capital - Common Shares of NIS 0.01 par value - Authorized: 18,400,073 shares at December 31, 2015 and 2014; Issued and outstanding: 689,898 shares at December 31, 2015 and 2014;

2 2 Preferred Shares of NIS 0.01 par value - Authorized: 12,418,837 shares at December 31, 2015 and 2014; Issued and outstanding: 9,880,380 and 9,542,313 shares at December 31, 2015 and 2014, respectively;

26 25 Share premium 102,408 88,480 Capital reserve due to actuarial (loss) gain (24) 16 Accumulated deficit (74,600) (62,259)

Total shareholders' equity 27,812 26,264

Total liabilities and shareholders' equity $ 30,640 $ 32,832


February XX, 2016

Date of approval of the Dr. Yael Margolin Naftali Brikashvili

financial statements Director and C.E.O. C.F.O.

GAMIDA CELL LTD.

5

STATEMENTS OF COMPREHENSIVE INCOME


Year ended

December 31,

Note 2015 2014

Operating expenses: Research and development expenses, net 14a $ 10,441 $ 5,150 General and administrative expenses 14b 5,267 2,384

Operating loss 15,708 7,534 Financial expenses 14c 522 4,145 Financial income 14c (3,966) (112) Loss before share of loss of joint venture 12,264 11,567 Share of loss of joint venture 77 1,137

Net loss 12,341 12,704 Other Comprehensive income: Items not to be reclassified to profit or loss in subsequent

periods:

Actuarial net loss (gain) of defined benefit plans 40 (4)

Total Comprehensive Loss $ 12,381 $ 12,700


GAMIDA CELL LTD.

6

STATEMENTS OF CHANGES IN EQUITY

U.S. dollars in thousands (except per share data)

Ordinary Shares Preferred Shares

Share

Capital reserve due to

Actuarial Accumulated Total

Number Amount Number Amount premium gains (losses) deficit Equity

Balance as of January 1, 2014 689,898 $ 2 7,564,781 $ 19 $ 51,614 $ 12 $ (49,555) $ 2,092

Net loss - - - - - - (12,704) (12,704) Other comprehensive income - - - - - 4 - 4

Total comprehensive loss - - - - - 4 (12,704) (12,700) Issuance of units consists of Series E Preferred

Shares and warrants, net of issuance cost - - 316,593 1 2,508

- - 2,509 Issuance of units consists of Series D Preferred

Shares and warrants, net of issuance cost - - 1,660,939 5 34,358

- - 34,363

Balance as of December 31, 2014 689,898 2 9,542,313 25 88,480 16 (62,259) 26,264 Net loss - - - - - - (12,341) (12,341) Other comprehensive loss - - - - - (40) - (40)

Total comprehensive loss - - - - - (40) (12,341) (12,381) Conversion of warrants into Series E2 Preferred

Shares - - 51,698 *) - 869

- - 869 Issuance of Series C Preferred Shares, net of

issuance cost - - 286,369 1 4,844

- - 4,845 Share-based compensation - - - - 8,215 - - 8,215

Balance as of December 31, 2015 689,898 $ 2 9,880,380 $ 26 $ 102,408 $ (24) $ (74,600) $ 27,812


GAMIDA CELL LTD.

7

STATEMENTS OF CASH FLOWS



2015 2014 Cash flows from operating activities:

Net loss $ (12,341) $ (12,704) Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 112 68 Change in employee benefit liabilities, net 12 (9) Share-based compensation 8,215 - Revaluation of financial derivatives (3,638) 3,841 Decrease (increase) in other current and non-current assets (267) 377 Increase (decrease) in trade payables (12) 158 Increase (decrease) in accrued expenses and other payables 253 (407) Decrease (increase) in related parties (3) 307 Share of losses of joint venture 77 1,137 Financial expenses, net (253) (64)

Net cash used in operating activities (7,845) (7,296)

Cash paid and received during the year for: Interest received 66 14

(7,779) (7,282) Cash flows from investing activities:

Investment in short-term bank deposits - (21,877) Proceeds from maturity of short-term bank deposits 21,877 - Purchase of property and equipment (248) (223) Proceeds from maturity of other assets 12

Net cash provided by (used in) investing activities 21,641 (22,100) Cash flows from financing activities:

Issuance of units consists of Series E Preferred Shares and warrants, net

of issuance cost - 2,882 Issuance of units consists of Series D Preferred Shares and warrants, net

of issuance cost - 34,363 Issuance of Series C Preferred Shares, net of issuance cost 4,845 - Conversion of warrants into Series E2 Preferred Shares 474 -

Net cash provided by financing activities 5,319 37,245 Exchange differences on balances of cash and cash equivalents 253 64 Increase in cash and cash equivalents 19,434 7,927 Cash and cash equivalents at beginning of year 9,308 1,381 Cash and cash equivalents at end of year $ 28,742 $ 9,308

Non-cash financing activities: Exercise of liability related to warrants into Series E2 Preferred Shares $ 395 $ -


GAMIDA CELL LTD.

NOTES TO THE FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

8

NOTE 1:- GENERAL

a. Gamida Cell Ltd. (the "Company"), founded in 1998, is a clinical-stage

biopharmaceutical company that develops novel curative treatments for orphan

hematological diseases and malignancies using stem cells and NK cells.

b. The Company uses its proprietary platform NAM technology to expand, in culture, highly

functional cells derived from umbilical cord blood or peripheral blood, to enhance the

potential therapeutic efficacy of these cells.

The lead product candidate, NiCord®, is in clinical development (Phase I/II) for potential

use as a graft for hematopoietic (blood) stem cell (HSC) transplantation in patients with

hematological malignancies (blood cancer) such as leukemia and lymphoma. HSC

transplantation from bone marrow or peripheral blood (also called bone marrow

transplantation) is currently the standard of care treatment for many of these patients, but

there is a significant unmet need for patients who cannot find a fully matched donor.

Transplantation of a bone marrow graft requires full tissue matching between the donor

and the patient. Of more than 60,000 patients annually indicated for transplantation, only

around 25% have a matched bone marrow donor in their family. This graft option can be

rapidly available and is considered the optimal transplant solution. Many of the remaining

75% patients will start a search in the public registries for a matched unrelated donor.

This search typically takes several weeks to months, while the cancer of the patients may

progress. Eventually only around 25% of the patients will get a transplant from a matched

unrelated donor, while around 50% of the patients end up not getting a transplant.

NiCord® is derived from a unit of umbilical cord blood whose HSC have been expanded

in culture using our NAM platform technology. Based on clinical results obtained to date

Gamida Cell expects NiCord® to become the graft of choice not only to the patients who

are not getting a transplant, but also to many of the patients who are currently getting a

transplant from a matched unrelated bone marrow donor.

NiCord was granted an orphan drug designation in the US and in Europe.

On February 14, 2013, the Company announced the successful results of the Phase I/II

study of its product candidate NiCord®, in patients with hematological malignancies.

On September 9, 2013, the Company announced the successful transplantation of the first

patient in the Company's Phase I/II study of NiCord® using a single unit of cord blood.

On December 1, 2015, the Company reported positive top line results of international,

multi-center, phase I/II study of NiCord® for blood cancers demonstrating rapid and

durable hematopoietic recovery. These results were included in a report submitted to the

U.S. Food and Drug Administration (FDA) in preparation for an End-of-Phase II meeting,

and are comprise the basis for the initiation of a phase III, randomized controlled,

registration study of NiCord in hematological malignancies.NiCord is developed as a

cryo preserved (frozen) product, resulting in several potential benefits, including a

potential reduction in COGS.

GAMIDA CELL LTD.



9

NOTE 1:- GENERAL (Cont.)

The company second product is CordIn, in phase I/II clinical study as a graft for HSC

transplantation in patients with serious genetic blood diseases such as sickle cell disease

(SCD) and thalassemia. CordIn has potential as curative treatment for additional rare

genetic diseases such as genetic metabolic diseases, bone marrow failure syndromes and

refractory autoimmune diseases.

Another product based on manipulated Natural Killer (NK) cells is in preclinical

development. A phase I/II study will begin in 2016, to treat patients with refractory

lymphoma.

The Company's product candidate StemEx® completed a phase II/III clinical study in

hematological malignancies and was developed through the Gamida Cell-Teva Joint

Venture Ltd. (the "JV") between the Company and Teva Pharmaceutical Industries Ltd.

(the "Shareholder"). The JV decided not to continue developing StemEx®. The company

and Teva initiated a process to dissolve the JV.

b. Definitions:

In these financial statements:

The Company - Gamida Cell Ltd.

Joint Venture - A type of joint arrangement whereby the parties that have joint

control of the arrangement have rights to the net assets of the joint

venture as defined in IFRS 11 and is accounted for using the equity

method.

Related Parties - As defined in IAS 24

Dollar - U.S. dollar

GAMIDA CELL LTD.



10

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been applied consistently in the financial statements for

all periods presented, unless otherwise stated.

a. Basis of presentation of the financial statements:

These financial statements have been prepared in accordance with International Financial

Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

The Company's financial statements have been prepared on a cost basis, except for

financial liabilities which are measured at fair value through profit or loss and joint

venture accounted for using the equity method. The Company has elected to present

profit or loss items using the function of expense method.

The operating cycle of the Company is one year.

b. Functional currency, presentation currency and foreign currency:

1. Functional currency and presentation currency:

The presentation currency of the financial statements is the U.S. dollars.

The functional currency is the currency that best reflects the economic environment

in which the Company operates and conducts its transactions. Most of the

Company and its JV's costs are incurred in U.S. dollars. In addition, the Company

and its JV's financing activities are incurred in U.S. dollars. The Company's

management believes that the functional currency of the Company and its JV is the

U.S. dollar.

2. Transactions, assets and liabilities in foreign currency:

Transactions denominated in foreign currency are recorded upon initial recognition

at the exchange rate at the date of the transaction. After initial recognition,

monetary assets and liabilities denominated in foreign currency are translated at the

end of each reporting period into the functional currency at the exchange rate at

that date. Exchange rate differences are recognized in profit or loss. Non-monetary

assets and liabilities measured at cost in foreign currency are translated at the

exchange rate at the date of the transaction. Non-monetary assets and liabilities

denominated in foreign currency and measured at fair value are translated into the

functional currency using the exchange rate prevailing at the date when the fair

value was determined.

GAMIDA CELL LTD.



11

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

c. Cash equivalents:

Cash equivalents are considered as highly liquid investments, including unrestricted

short-term bank deposits with an original maturity of three months or less from the date

of acquisition.

d. Short-term bank deposits:

Short-term bank deposits are deposits with maturities of more than three months and up

to one year. The short-term bank deposits are presented at their cost, including accrued

interest.

e. Investment in joint venture:

The investment in joint venture is accounted for using the equity method.

Under the equity method, the investment in joint venture is presented at cost with the

addition of post-acquisition changes in the Company's share of net assets, including other

comprehensive income of the joint venture. The equity method is applied until the loss of

joint venture or classification as an asset held-for-sale.

The financial statements of the Company and the joint venture are prepared as of the

same dates and periods. The accounting policies applied in the financial statements of the

joint venture are uniform and consistent with the policies applied in the financial

statements of the Company.

f. Property and equipment:

Property and equipment are measured at cost, including directly attributable costs, less

accumulated depreciation, accumulated impairment losses and excluding day-to-day

servicing expenses.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated

useful lives of each part of the fixed asset item, as this most closely reflects the expected

pattern of consumption of the future economic benefits embodied in the asset.

The estimated useful life is as follows:

%

Machinery 15 Office furniture and equipment 6 - 33 Leasehold improvements (*)

(*) Leasehold improvements are depreciated on a straight-line basis over the shorter of

the lease term (including the extension option held by the Company and intended

to be exercised) and the expected life of the improvement.

GAMIDA CELL LTD.



12


The useful life, depreciation method and residual value of an asset are reviewed at least

each year-end and any changes are accounted for prospectively as a change in accounting

estimate.

An item of property and equipment is derecognized upon disposal or when no future

economic benefits are expected from its use or disposal.

g. Research and development costs:

Research expenditures are recognized in profit or loss when incurred. An intangible asset

arising from a development project or from the development phase of an internal project

is recognized if the Company can demonstrate the technical feasibility of completing the

intangible asset so that it will be available for use or sale; the Company's intention to

complete the intangible asset and use or sell it; the Company's ability to use or sell the

intangible asset; how the intangible asset will generate future economic benefits; the

availability of adequate technical, financial and other resources to complete the intangible

asset; and the Company's ability to measure reliably the expenditure attributable to the

intangible asset during its development. Since the Company development projects are

often subject to regulatory approval procedures and other uncertainties, the conditions for

the capitalization of costs incurred before receipt of approvals are not normally satisfied

and, therefore, development expenditures are recognized in profit or loss when incurred.

h. Impairment of non-financial assets:

The Company evaluates the need to record an impairment of the carrying amount of non-

financial assets whenever events or changes in circumstances indicate that the carrying

amount is not recoverable. If the carrying amount of non-financial assets exceeds their

recoverable amount, the assets are reduced to their recoverable amount. The recoverable

amount is the higher of fair value less costs of sale and value in use. The recoverable

amount of an asset that does not generate independent cash flows is determined for the

cash-generating unit to which the asset belongs. Impairment losses are recognized in

profit or loss.

An impairment loss of an asset is reversed only if there have been changes in the

estimates used to determine the asset's recoverable amount since the last impairment loss

was recognized. Reversal of an impairment loss, as above, shall not be increased above

the lower of the carrying amount that would have been determined (net of depreciation or

amortization) had no impairment loss been recognized for the asset in prior years, and its

recoverable amount.

GAMIDA CELL LTD.



13


The following criteria are applied in assessing impairment in the investment in the joint

venture:

After application of the equity method, the Company determines whether it is necessary

to recognize any additional impairment loss with respect to the investment in joint

venture. The Company determines at the end of each reporting period whether there is

objective evidence that the carrying amount of the investment in the joint venture is

impaired. If there is objective evidence, an impairment loss is recognized in the amount

of the difference between the recoverable amount of the investment in the joint venture

and its carrying amount.

During the years ended December 31, 2015 and 2014, the Company did not recognize

any impairment of non-financial assets.

i. Government investment grants:

Government investment grants are recognized when there is reasonable assurance that the

grants will be received and the Company will comply with the related conditions.

Government investment grants received from the Office of the Chief Scientist in Israel

(the "OCS") are recognized upon receipt as a liability if future economic benefits are

expected from the project that will result in royalty-bearing sales.

A liability for the loan is first measured at fair value using a discount rate that reflects a

market rate of interest. The difference between the amount of the grant received and the

fair value of the liability is accounted for as a Government grant and recognized as a

reduction of research and development expenses. After initial recognition, the liability is

measured at amortized cost using the effective interest method. Royalty payments are

treated as a reduction of the liability. If no economic benefits are expected from the

research activity, the grant receipts are recognized as a reduction of the related research

and development expenses. In that event, the royalty obligation is treated as a contingent

liability in accordance with IAS 37.

At the end of each reporting period, the Company evaluates whether there is reasonable

assurance that the liability recognized, in whole or in part, will not be repaid based on the

best estimate of future sales and using the original effective interest method.

GAMIDA CELL LTD.



14


j. Financial instruments:

1. Financial Assets:

Financial assets are recognized initially at fair value plus, in the case of financial

assets not recorded at fair value through profit or loss, transaction costs that are

attributable to the acquisition of the financial asset. The subsequent measurement

of financial assets is as describe below:

a) Receivables

Short-term receivables are measured at their nominal amount, less provision

for impairment.

b) Derecognition

A financial asset is primarily derecognised when:

1) The right to receive cash flow from the asset have expired, or

2) The Company has transferred its rights to receive cash flow from the

asset or has assumed an obligation to pay the received cash flow in

full without material delay to a third party.

2. Financial Liabilities:

Financial liabilities are recognized initially at fair value and, in the case of loans

and borrowings and payables net of directly attribute transaction costs. The

Company's financial liabilities include trade and other payables and warrants to

shareholders.

The 'fixed for fixed' criteria is not applied for the aforementioned warrants to

shareholders and therefore such warrants are measured at each balance sheet date at

their fair value. Gains or losses are recognized in profit or loss.

a) Derecognition

A financial liability is derecognized when the obligation under the liability is

discharged or cancelled, or expires.

b) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is

reported in the statement of financial position if there is a currently

enforceable legal right to offset the recognized amounts and there is an

intention to settle on a net basis, to realize the assets and settle the liabilities

simultaneously.

GAMIDA CELL LTD.



15


3. Fair value:

Fair value is the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement

date. The fair value of an asset or a liability is measured using the assumptions that

market participants would use when pricing the asset or liability, assuming that

market participants act in their economic best interest.

The Company uses valuation techniques that are appropriate in the circumstances

and for which sufficient data are available to measure fair value, maximizing the

use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the

financial statements are categorized within the fair value hierarchy, described as

follows, based on the lowest level input that is significant to the fair value

measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical

assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is

significant to the fair value measurement is directly or indirectly

observable

Level 3 - Valuation techniques for which the lowest level input that is

significant to the fair value measurement is unobservable

The carrying amounts of cash and cash equivalents, short-term bank deposits, other

current assets, trade payables and accrued expenses and other payables

approximate their fair value due to the short-term maturity of such instruments.

4. Issue of a unit of securities:

The issue of a unit of securities involves the allocation of the proceeds received

(before issuance expenses) to the components of the securities issued in the unit

based on the following order: financial derivatives and other financial instruments

measured at fair value in each period. Then fair value is determined for financial

liabilities and compound instruments that are presented at amortized cost. The

proceeds allocated to equity instruments are the residual amount. Issue costs are

allocated to each component pro rata to the amounts determined for each

component in the unit.

GAMIDA CELL LTD.



16


k. Provisions:

A provision in accordance with IAS 37 is recognized when the Company has a present

obligation (legal or constructive) as a result of a past event, it is probable that an outflow

of resources embodying economic benefits will be required to settle the obligation and a

reliable estimate can be made of the amount of the obligation.

l. Operating leases:

Lease agreements are classified as an operating lease if they do not transfer substantially

all the risks and benefits incidental to ownership of the leased asset. Operating lease

payments are recognized as an expense in profit or loss on a straight-line basis over the

lease term.

m. Share-based payment transactions:

The Company's employees and other service providers are entitled to remuneration in the

form of equity-settled share-based payment transactions.

Equity-settled transactions:

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.

With respect to 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 services received as consideration of equity

instruments cannot be measured, it is 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 which the performance and/or service

conditions are to be satisfied, ending on the date on which the relevant employees become

fully entitled to the award (the "Vesting Period").

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 are

satisfied.

GAMIDA CELL LTD.



17


n. Deferred tax:

Deferred tax is provided using the liability method on temporary differences between the

tax bases of assets and liabilities and their carrying amounts for financial reporting

purposes at the reporting date.

Deferred tax assets are recognized for all deductible temporary differences. Deferred tax

assets are recognized to the extent that it is probable that taxable profit will be available

against which the deductible temporary differences and unused tax losses can be utilized.

Unrecognized deferred tax assets are re-assessed at each reporting date and are

recognized to the extent that it has become probable that future taxable profits will allow

the deferred tax asset to be recovered.

o. Employee benefit liabilities:

The Company has several employee benefit plans:

1. Short-term employee benefits:

Short-term employee benefits include salaries, paid annual leave, paid sick leave,

recreation and social security contributions and are recognized as expenses as the

services are rendered.

2. Post-employment benefits:

The plans are normally financed by contributions to insurance companies and

classified as defined benefit plan.

The Company operates a defined benefit plan in respect of severance pay pursuant

to the Severance Pay Law ,1963 (the "Law"). According to the Law, employees are

entitled to severance pay upon dismissal or retirement. The liability for termination

of employment is measured using the projected unit credit method. The amounts

are presented based on discounted expected future cash flows using a discount rate

determined by reference to yields on Government bonds.

In respect of its severance pay obligation to certain of its employees, the Company

makes current deposits in pension funds and insurance companies ("the Plan

Assets"). Plan Assets comprise assets held by a long-term employee benefit fund or

qualifying insurance policies. Plan Assets are not available to the Company's own

creditors and cannot be returned directly to the Company.

Actuarial gains and losses are recognized in other comprehensive income or (loss)

retrospectively in the period in which they occur.

GAMIDA CELL LTD.



18

NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUPMTIONS

USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS

The key assumptions made in the financial statements concerning uncertainties at the end of the

reporting period and the critical estimates computed by the Company that may result in a

material adjustment to the carrying amounts of assets and liabilities within the next financial

year are discussed below.

- Government grants:

Government grants received from the OCS at the Ministry of Industry, Trade and Labor

are recognized as a liability if future economic benefits are expected from the research

and development activity that will result in royalty-bearing sales. There is uncertainty

regarding the estimated future cash flows and the estimated discount rate used to measure

the amount of the liability.

- Pension and other post-employment benefits:

The liability in respect of post-employment defined benefit plans is determined using

actuarial valuations. The actuarial valuation involves making assumptions about, among

others, discount rates, expected rates of return on assets, future salary increases and

mortality rates. The carrying amount of the liability may be significantly affected by

changes in such estimates.

- Determining the fair value of an unquoted financial liabilities:

The fair value of unquoted financial liabilities in Level 3 of the fair value hierarchy is

determined using valuation techniques including projected cash flows discounted at

current rates applicable for items with similar terms and risk characteristics. Changes in

estimated projected cash flows and estimated discount rates, after consideration of risk

factors such as liquidity risk, credit risk and volatility, are liable to affect the fair value of

these liabilities (See also Note 10b).

- Impairment for investment in joint venture:

The Company assesses at the end of each reporting period whether there is objective

evidence that the investment in joint venture has been impaired and an impairment loss

has been incurred. In evaluating impairment, the Company evaluates if changes in

estimated projected cash flows and estimated discount rates, are liable to affect the fair

value of the recoverable amounts of such investment in joint venture.

GAMIDA CELL LTD.



19

NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR

ADOPTION

IFRS 9 - Financial Instruments:

The IASB has published IFRS 9 - Financial instruments: Classification and Measurement. IFRS

9 addresses the classification, measurement and recognition of financial assets and financial

liabilities. This standard replaces IAS 39 - Financial Instruments: Recognition and Measurement

IFRS 9 requires financial assets to be classified into two measurement categories: those

measured at fair value and those measured at amortized cost. The determination is made at

initial recognition. The classification depends on the entity’s business model for managing its

financial instruments and the contractual cash flow characteristics of the instrument. For

financial liabilities, the standard retains most of the IAS 39 requirements. The main change is

that, in cases where the fair value option is elected for financial liabilities, the part of a fair value

change due to an entity’s own credit risk is recorded in other comprehensive income rather than

in net earnings, unless this creates an accounting mismatch. The effective date of this standard is

for annual periods beginning on or after January 1, 2018, with early application permitted.

The Company is evaluating the possible impact IFRS 9 but is presently unable to assess its

effect, if any, on the financial statements.

NOTE 5:- CASH AND CASH EQUIVALENTS

December 31,

2015 2014

Cash for immediate withdrawal $ 2,724 $ 1,808 Cash equivalents in USD deposit (1) 26,018 3,900 Cash equivalents in NIS deposits (2) - 3,600 $ 28,742 $ 9,308

(1) The cash equivalent are short-term bank deposits denominated in USD and bear interest

at an average annual rate of 0.67% and 0.19% as of December 31, 2015 and 2014,

respectively.

(2) The cash equivalent are short-term bank deposits denominated in NIS and bear interest at

an average annual rate of 0.22% as of December 31, 2014.

GAMIDA CELL LTD.



20

NOTE 6:- OTHER CURRENT ASSETS

December 31

2015 2014

Grants receivable $ 369 $ 133

Government authorities 152 252

Other 14 4

$ 535 $ 389

NOTE 7:- PROPERTY AND EQUIPMENT, NET

Composition and movement:

2015:

Machinery

Office furniture and

equipment Leasehold

improvements Total

Cost:

Balance at January 1, 2015 $ 1,579 $ 352 $ 788 2,719 Additions 215 10 23 248

Balance at December 31, 2015 1,794 362 811 2,967

Accumulated depreciation: Balance at January 1, 2015 1,274 266 775 2,315 Depreciation 92 15 5 112

Balance at December 31, 2015 $ 1,366 $ 281 $ 780 $ 2,427

Property and equipment, net at

December 31, 2015 $ 428 $ 81 $ 31 $ 540

GAMIDA CELL LTD.



21

NOTE 7:- PROPERTY AND EQUIPMENT, NET (Cont.)

2014:

Machinery

Office furniture and

equipment Leasehold

improvements Total

Cost:

Balance at January 1, 2014 $ 1,381 $ 327 $ 788 $ 2,496 Additions 198 25 - 223

Balance at December 31, 2014 1,579 352 788 2,719

Accumulated depreciation: Balance at January 1, 2014 1,228 247 772 2,247 Depreciation 46 19 3 68

Balance at December 31, 2014 $ 1,274 $ 266 $ 775 $ 2,315

Property and equipment, net at

December 31, 2014 $ 305 $ 86 $ 13 $ 404

NOTE 8:- ACCRUED EXPENSES AND OTHER PAYABLES

December 31,

2015 2014

Employees and payroll accruals $ 484 $ 391

Accrued expenses 221 82

Other 136 115

$ 841 $ 588

NOTE 9:- INVESTMENTS IN JOINT VENTURE

On February 16, 2005, the Shareholder decided to exercise its option to enter into a joint venture

with the Company to develop, manufacture and commercialize certain product based on the

copper chelator Technology (StemEx®) for patients with blood cancer. Consequently, on May

6, 2005, a joint venture was founded between the parties and a founders agreement was

executed on February 12, 2006 pursuant to which the Company transferred a technology license

to the JV for issuance of 5,000 Ordinary Shares of NIS 0.01 par value. The Shareholder was

obligated to fund the JV's activity in total amount of $25,000 for issuance of 5,000 Ordinary

Shares of NIS 0.01 par value.

In addition, the Company and the Shareholder agreed to render services to the JV. All services

are charged at cost only (refer also to Note 15).

GAMIDA CELL LTD.



22

NOTE 9:- INVESTMENTS IN JOINT VENTURE (Cont.)

During the period starting mid 2009 through December 31, 2014, the Company and the

Shareholder entered into certain share purchase agreements to invest approximately $31,815,

based on their holding of the voting rights in the JV for issuance of additional 4,242 Ordinary

Shares of NIS 0.01 par value, 2,121 Ordinary Shares each. No investment has been done during

the years ended December 31, 2014 and 2015.

As of December 31, 2015 and 2014, the Company owned 50% of the voting rights of the JV

which is a private entity. Based on such voting rights and on the terms of the founders

agreement, the JV is jointly controlled by the Company and the Shareholder. In addition, the

investment in the JV is considered to be a joint venture as defined in IFRS 11 and accordingly is

accounted for using the equity method.

The following table illustrates the summarized financial information of the Company's

investment in the JV:

December 31,

2015 2014

Current assets $ 1,371 $ 1,493 Non-current assets 72 116 Current liabilities (161) (173) Equity (1,282) (1,436)

Proportion of the Company's ownership 50% 50%

Carrying amount of the investment $ 641 $ 718

Year ended

December 31,

2015 2014

Research and development expenses $ 107 $ 1,920 General and administrative expenses 21 285 Financial expenses 44 76 Financial income (18) (8)

Loss for the year 154 2,273

Proportion of the Company's ownership 50% 50% Company's share of loss for the year $ 77 $ 1,137

Refer also to Note 15 for Related Party Transactions.

GAMIDA CELL LTD.



23

NOTE 10:- WARRANTS PRESENTED AT FAIR VALUE

a. Warrants to purchase Series Preferred E1 Shares:

1. On May 14, 2012 (the "Effective Date") the Company entered into share purchase

agreement (the "SPA") with certain investors for issuance of units of securities

consisting of 571,478 and 655,021 Series Preferred E1 Shares and Series Preferred

E2 Shares of the Company, nominal value NIS 0.01 each, respectively, and

warrants to purchase 556,165 Preferred E2 Shares of the Company, nominal value

NIS 0.01, at a exercise price of $9.16, in exchange for an aggregate gross purchase

price of up to $10,000.

The warrants may be exercised, in part or in whole, from time to time, during the

period from the Effective Date until the earlier of (i) May 14, 2015, or (ii)

immediately prior to the consummation of an IPO or Deemed Liquidation,

whichever comes first. In May 2015, 38,598 warrants were exercised for total

consideration of $354. On May 14, 2015, the remaining 517,567 warrants have

been expired.

2. On January 2, 2014 (the "Effective Date"), the Company's Board of Directors and

the shareholders approved the share purchase agreement (the "SPA") with certain

existing investors, pursuant to which the Company issued to such investors

316,593 Series Preferred E2 Shares of the Company, nominal value NIS 0.01 each,

in exchange for an aggregate gross consideration of $2,900 ($374 out of which

were allocated to the below warrants to purchase Preferred E2 Shares at the

Effective Date), at a price per share of $9.16. The total related issuance costs

amounted to $20.

In addition, the Company granted to such investors 158,296 warrants to purchase

the same amount of additional Preferred E2 Shares of the Company, nominal value

NIS 0.01, at a exercise price of $9.16. The warrants may be exercised, in part or in

whole, from time to time, during the period from the Effective Date until the earlier

of (i) January 14, 2017, or (ii) immediately prior to the consummation of an IPO or

Deemed Liquidation, whichever comes first. In May 2015, 13,100 warrants were

exercised for total consideration of $120. As of December 31, 2015, 145,196

warrants are still outstanding.

The aforesaid warrants to purchase Preferred E2 Shares are subject to non-standard anti-

dilution protection provisions and cashless exercise mechanism and therefore accounted

for as a financial liability which is measured at fair value through profit or loss.

The Company measures the fair value of the warrants by using Option Pricing Method

utilized in a Monte Carlo simulation model. The option-pricing model requires a number

of assumptions, of which the most significant are the expected stock price volatility and

the expected time until liquidation. Expected volatility was calculated based upon

historical volatilities of similar entities in the related sector index. The expected time until

liquidation is the period in which liquidation event will occurred subject to the

Company's expectations. 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.

GAMIDA CELL LTD.



24

NOTE 10:- WARRANTS PRESENTED AT FAIR VALUE (Cont.)

Warrants to purchase Preferred E2 Shares:

December 31,

2015 December 31,

2014

Risk-free interest rate 0.7%-1.1% 0.3%-2.1% Expected volatility 90% 90% Expected life (in years) 1.2-2 1.2-1.5 Expected dividend yield 0 0 Fair value: $ 8.7 $ 5.3

b. Changes in the fair value of warrants classified as Level 3 in the fair value hierarchy:

Fair value of

warrants

Balance at January 1, 2014 1,084 Issuance of warrants to purchase Preferred E2 Shares (see also Note 10a2) 374 Revaluation of financial derivatives 3,841

Balance at December 31, 2014 $ 5,299 Conversion of warrants into Series D Preferred Shares (see also Note 10a) (395) Revaluation of financial derivatives (3,638)

Balance at December 31, 2015 $ 1,266

c. Description of significant unobservable inputs to valuation:

December 31,

2015 2014

Sensitivity to changes in inputs: Gain (loss) from change: 10% increase in volatility $ 70 $ 282 10% decrease in volatility $ (75) $ (310) Gain (loss) from change: 1% increase in revenue growth rate $ 222 $ 302 1% decrease in revenue growth rate $ (200) $ (266) Gain (loss) from change: 1% increase in discount rate $ 91 $ 302 1% decrease in discount rate $ (100) $ (266)

GAMIDA CELL LTD.



25

NOTE 11:- CONTINGENT LIABILITIES AND COMMITMENTS

a. The facilities of the Company are rented under an operating lease for a period ending

June 2020. Future minimum lease commitments as of December 31, 2015 are as follows:

b. The Company rents motor vehicles under an operating lease agreement, for a monthly

aggregate fee of $13.

c. The Company is obligated to pay royalties to the Government of Israel through the OCS,

at the rates of 3% to 5% on sales proceeds from products developed with the grants

received from the OCS. The maximum amount of royalties payable to the Government of

Israel is limited to 100% of the grants received, linked to the dollar and bearing interest at

the LIBOR rate. The obligation to pay these royalties is contingent on actual sales of the

products and in the absence of such sales, no payment is required.

Management concluded that it is not reasonable assured that the grants from OCS will be

repaid in the foreseeable future, based on the current development status of NiCord®, no

liability related to OCS was recorded as of December 31, 2015.

As of December 31, 2015, the Company's aggregate contingent obligations for payments

to OCS, based on royalty-bearing participation received or accrued amounted to $17,178.

As of December 31, 2015

2016 $ 265

2017 265

2018 265

2019 265

2020 132

$ 1,192

GAMIDA CELL LTD.



26

NOTE 12:- SHAREHOLDERS' EQUITY

a. Composition of share capital:

December 31, 2015 December 31, 2014

Authorized Issued and

outstanding Authorized Issued and outstanding

Number of shares

Ordinary Share of NIS 0.01

par value

15,500,000 490,000 15,500,000 490,000 Ordinary B Share of NIS 0.01

par value

1,400,073 199,898 1,400,073 199,898 Ordinary C Share of NIS 0.01

par value

1,500,000 - 1,500,000 -

18,400,073 689,898 18,400,073 689,898 Series Preferred A Share of

NIS 0.01 par value

600,000 600,000 600,000 600,000 Series Preferred B Share of

NIS 0.01 par value

1,547,170 1,453,846 1,547,170 1,453,846 Series Preferred C Share of

NIS 0.01 par value

2,971,667 2,827,430 2,971,667 2,541,061 Series Preferred D Share of

NIS 0.01 par value

3,500,000 3,404,314 3,500,000 3,404,314 Series Preferred E1 Share of

NIS 0.01 par value

600,000 571,478 600,000 571,478 Series Preferred E2 Share of

NIS 0.01 par value

3,200,000 1,023,312 3,200,000 971,614

12,418,837 9,880,380 12,418,837 9,542,313

Total 30,818,910 10,570,278 30,818,910 10,232,211

b. Rights attached to the Shares:

1. Ordinary Shares:

Subject to Articles of Association (the "AOA") the holders of Ordinary Shares

have the right to receive notices to attend and vote in general meetings, the right to

share in dividends and a residual right upon liquidation subject to the liquidation

rights of all preferred shareholders.

The Ordinary B Shares confer on the holders thereof substantially all rights

accruing to holders of Ordinary Shares in the Company, provided however, that

until the initial Public Offering (the "IPO"), Ordinary B Shares shall not entitle the

holders thereof to participate in, nor to vote on any matter submitted to, the

meetings of the Company's shareholders.

GAMIDA CELL LTD.



27

NOTE 12:- SHAREHOLDERS' EQUITY (Cont.)

2. Preferred shares:

The holders of All Preferred Shares are entitled to the same rights, preferences and

privileges conferred by the Ordinary Shares and in addition the following rights:

Conversion rights - Each Preferred Share shall be convertible at the option of the

respective holder, at any time after the date of issuance of such share, into such

number of Ordinary Share as is determined by dividing its then applicable original

issue price by its then applicable conversion price which may be adjusted upon the

occurrence of certain scenarios of recapitalization and pursuant to anti-dilution and

other adjustments provisions as set below.

Anti dilution protection - The conversion price of the applicable Series of Preferred

Shares (except Series Preferred A Shares) shall be reduced, concurrently with

issuance of additional shares (as defined in the AOA) without consideration or for

a consideration per share less than the applicable conversion price of any series of

Preferred Shares in effect immediately prior to such issue.

Dividend - The holders of Preferred shares shall be entitled to participate in the

distribution of all dividends.

Liquidation preference - In the event of voluntary or involuntary winding up,

liquidation or dissolution, distribution or consummation of merger, consolidation,

reorganization or sale of substantially all of the Company's shares or assets (the

"Deem Liquidation"), the holders of Preferred Shares shall be entitled to receive

(subject to preference of distribution as determined in the AOA) an amount equal

to the sum of the original issuance price per Series that actually paid by each

Preferred shareholder plus interest of eight percent per annum on such original

issuance price, from the date of the issuance, compounded annually less any

amounts previously paid in preference.

As of December 31, 2015 and 2014, the aggregate liquidation preference

amounted $166,903 and $149,430, respectively.

Preemptive rights - Until the earlier of the consummation of a IPO or a Deem

Liquidation, each holder of Preferred Shares, holding at least one and half percent

of the issued and outstanding share capital of the Company on a fully diluted and

as converted basis, shall have the right of preemption to purchase its pro-rata share

of all new securities (as defined in the AOA) that the Company may, from time to

time, propose to sell and issue.

Subject to the rights, preferences and privileges aforementioned the Preferred

Shares were classified as part of the Company's shareholders' equity under IAS 32.

GAMIDA CELL LTD.



28


c. On January 2, 2014 (the "Effective Date"), the Company's Board of Directors and the

shareholders approved the share purchase agreement (the "SPA") with certain existing

investors, pursuant to which the Company issued to such investors 316,593 Series

Preferred E2 Shares of the Company, nominal value NIS 0.01 each, in exchange for an

aggregate gross consideration of $2,900, at a price per share of $9.16.

In addition, the Company granted to such investors 158,296 warrants to purchase the

same amount of additional Preferred E2 Shares of the Company, nominal value NIS 0.01,

at a exercise price of $9.16, which is subject to certain non-standard anti-dilution

protection and cashless exercise mechanism and therefore will be accounted for as a

financial liability which is measured at fair value through profit or loss (see also Note

10a2).

d. Investment and option agreement:

On August 18, 2014 (the "Effective Date"), the Company signed an investment and

option agreement ("Agreement") with Novartis Pharma AG ("Investor") pursuant to

which the Company issued Preferred Shares and a warrants to purchase Ordinary Share

for total gross consideration of $35,000 ("Investment Amount") net of $637 issuance

costs. The warrants are subject to cashless exercise mechanism and with exercise price of

NIS 0.01. The aforementioned Preferred Shares and warrants to purchase Ordinary Shares

reflects 15% of the Company's equity on fully diluted basis.

The warrants may be exercised, in part or in whole, from time to time, during the period

from the Effective Date until the earlier of (i) August 18, 2017, or (ii) immediately prior

to the consummation of an IPO or Deemed Liquidation. Since the Effective Date and

until December 31, 2015, no warrants were exercised.

In addition, the Agreement included an option to acquire the remaining Company's equity

of 85% on fully diluted basis ("Option"). The Option was exercisable for a limited period

of time following achievement of certain milestones linked to the development of the

NiCord®.

Upon exercising the Option, the Investor would pay in return to the shareholders of the

Company cash payments of approximately $165,000, in accordance with the terms of the

option agreement. In addition, the shareholders would be entitled to contigent

consideration of up to $435,000, depending on certain development and regulatory

milestones and on future sales of the Company's products.

On June 4, 2015, the Investor has orally notified the Company that although the Company

had met all of the milestones in the Agreement it will not exercise its option to acquire the

Company but will consider to continue investing in the Company.

GAMIDA CELL LTD.



29


On October 9, 2015, the Company signed an Investment Agreement ("Agreement") with

the Investor pursuant to which the Company issued Preferred Shares for total gross

consideration of $5,000. In addition, the Agreement included commitment of the Investor

to invest up to another $10,000 in case of closing equity financing by the end of 2017 to

fund the late stage development of Nicord®.

As of December 31, 2015, the Investor has no rights whatsoever in the Company's

product or the Company, other than its holding in the aforementioned issued Preferred

Shares which reflects 17.76% of the Company's equity on fully diluted basis.

e. Share option plan:

1. On July 23, 2003, the Company's Board of Directors approved the 2003 Stock

Option Plan (the "2003 Plan"), provide for the grant of options to the Company's

officers, directors, employees and consultants. Pursuant to the Plan, the Company

reserved for issuance 1,353,231 Ordinary B Shares, nominal value NIS 0.01 each.

On November 23, 2014, the Company's Board of Directors approved subject to the

approval of the shareholders to create a new class of shares of the Company,

Ordinary C Shares, nominal value NIS 0.01 each and to classify 1,500,000

Ordinary Shares for such class, 1,152,044 out of which for allocation to the

Company's employees under the new amended 2014 Israel Share Option Plan

("2014 ISOP"). The 2014 ISOP was adopted in accordance with the amended

sections 102 and 3(i) of Israel's Income Tax Ordinance. The exercise price of the

options granted under the plans may not be less than the nominal value of the

shares into which the options are exercised. The options vest primarily over three

years. Any options, which are forfeited or not exercised before expiration, become

available for future grants. There are no cash settlement alternatives. On December

29, 2014, the Company's shareholders meeting ratified and approved the aforesaid

decisions.

Following to the above board of directors and shareholders decisions, it was

resolved to cancel the reservation under the Company's 2003 ISOP of all the

unallocated Ordinary B Shares and further cancel the reservation under the

Company's 2003 ISOP of all the allocated Ordinary B Shares which shall be

waived and released by the Employees upon the receipt of the option to purchase

Ordinary C Shares. Following said cancellations and save for the Ordinary B

Shares previously purchased pursuant to the Company's 2003 ISOP, no further

Ordinary B Shares shall be reserved and/or allocated under the Company's 2003

ISOP.

GAMIDA CELL LTD.



30


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 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.

2. On January 18, 2015, the Company's Board of Directors approved grant of

1,143,665 options to its employees to purchase ordinary shares at an exercise price

of 0.25 per share. The options have been granted in accordance with the terms and

conditions set forth in the 2014 ISOP.

3. The fair value for options granted during the year ended December 31, 2015 is

estimated at the date of grant with the following weighted average assumptions:


2015

Dividend yield 0%

Expected volatility 85%

Risk-free interest 0.3%

Expected life (in years) 1.3

4. The total compensation cost related to all of the Company's equity-based awards,

recognized during the year ended December 31, 2015 was comprised as follows:


2015

Research and development expenses, net $ 4,576

General and administrative expenses 3,639

$ 8,215

5. As of December 31, 2015, there are $6,558 of total unrecognized company cost

related to non-vested share based compensation that are expected to be recognized

over a period of up to 1.5 years.

GAMIDA CELL LTD.



31

NOTE 13:- TAXES ON INCOME

a. Tax rates applicable to the income of the Company:

Taxable income of the Israeli parent is subject to the Israeli corporate tax at the rate of

26.5% in 2014 and 2015.

On 5 January 2016, the Israeli Parliament officially published the Law for the

Amendment of the Israeli Tax Ordinance (Amendment 216), that reduces the standard

corporate income tax rate from 26.5% to 25%.

b. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the

Law"):

In 2000, the Company's production facilities in Israel have been granted "Approved

Enterprise" status under the Law. The Law provides that capital investments in a

production facility (or other eligible assets) may be designated as an Approved

Enterprise. Until 2005, the designation required advance approval from the Investment

Center of the Israel Ministry of Economy (formerly named the Ministry of Industry,

Trade and Labor). Each certificate of approval for an Approved Enterprise ("certificate of

approval") relates to a specific investment program.

Under the Law a company elected to receive an alternative package comprised of tax

benefits ("Alternative Track") pursuant to which the Company's undistributed income

derived from an Approved Enterprise is exempt from corporate tax for an initial period of

two to ten years (depending on the geographic location of the Approved Enterprise within

Israel which begins in the first year that the Company realizes taxable income from the

Approved Enterprise following the year of operation. After expiration of the initial tax

exemption period, the Company is eligible for a reduced corporate tax rate of 10% to

25% for the following five to eight years, depending on the extent of foreign investment

in the company . The benefits period is limited to 12 years from the year of operation, or

14 years from the year in which the certificate of approval was obtained, whichever is

earlier. Such limitation does not apply to the exemption period.

As of December 31, 2015, the period in which the Company will be entitled to benefit

under the Law has not been started.

c. The Law for the Encouragement of Industry (Taxation), 1969:

The Company has the status of an "industrial company", under this law. According to this

status and by virtue of regulations published thereunder, the Company is entitled to claim

a deduction of accelerated depreciation on equipment used in industrial activities, as

determined in the regulations issued under the Inflationary Law. The Company is also

entitled to amortize a patent or a patent or knowhow usage right that are used in the

enterprise's development or promotion, to deduct listed share issuance expenses and to

file consolidated financial statements under certain conditions.

GAMIDA CELL LTD.



32

NOTE 13:- TAXES ON INCOME (Cont.)

d. Net operating losses carryforward:

The Company has accumulated losses and deductions and capital loss for tax purposes as

of December 31, 2015, in the amount of approximately $46,314 and $423, respectively,

which may be carried forward and offset against taxable income in the future for an

indefinite period.

e. Final tax assessments:

The Company's tax assessments through the 2011 tax year are considered final.

f. Deferred taxes:

The Company did not recognize deferred tax assets in the Company's financial statements

for the years ended December 31, 2015 and 2014 for carryforward losses and other

temporary differences because their utilization in the foreseeable future is not probable.

g. Theoretical tax:

The reconciliation between the tax expense, assuming that all the income and expenses,

gains and losses in the statement of income were taxed at the statutory tax rate and the

taxes on income recorded in profit or loss, does not provide significant information and

therefore was not presented.

NOTE 14:- SELECTED STATEMENTS OF COMPREHENSIVE INCOME DATA

a. Research and development expenses, net:

Year ended

December 31,

2015 2014

Salaries and social benefits $ 2,527 $ 2,447 Share-based payment 4,576 - Subcontractors 4,312 3,012 Materials 1,796 1,251 Rent and maintenance 340 229 Travel and trade shows 292 314 Depreciation 112 68 Other 21 31 Less royalty bearing grants (3,535) (2,202)

Total research and development expenses, net $ 10,441 $ 5,150

GAMIDA CELL LTD.



33

NOTE 14:- SELECTED STATEMENTS OF COMPREHENSIVE INCOME DATA (Cont.)

b. General and administrative expenses:

Year ended

December 31,

2015 2014

Salaries and social benefits $ 800 $ 810 Share-based payment 3,639 - Professional services 583 1,368 Rent and maintenance 125 125 Other 120 81

Total general and administrative expenses $ 5,267 $ 2,384

c. Finance expenses:

Year ended

December 31,

2015 2014

Bank charges, interest expense and other $ 18 $ 15 Revaluation of warrants at fair value - 3,841 Foreign currency translation adjustments 504 289

Total finance expenses $ 522 $ 4,145

d. Finance income:

Year ended

December 31,

2015 2014

Interest income $ 84 $ 14 Revaluation of warrants at fair value 3,638 - Foreign currency translation adjustments 244 98

Total finance income $ 3,966 $ 112

GAMIDA CELL LTD.



34

NOTE 15:- RELATED PARTY TRANSACTIONS

On June 18, 2006, the Company entered into services agreement (the "Agreement") with the JV

pursuant to which the Company agrees to provide from time to time with services, as defined in

the Agreement.

It was further agreed that the Company shall provide the services under the Agreement at cost.

The balances with the related parties were as follows:

a. Balances with related party:

December 31,

2015 2014

Related Parties - receivables *) $ 148 $ 145

*) The balance is unlinked and bears no interest.

b. Benefit to key executive personnel:

Year ended

December 31,

2015 2014

Short-term benefits $ 864 $ 1,231

Other long-term benefits 54 59

Share-based payment 6,609 -

$ 7,527 $ 1,290

c. Transactions with related party:

Year ended

December 31,

2015 2014

Research and development services of JV $ - $ 85

General and administration services of JV $ - $ 255

- - - - - - - - - - - - - -

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