NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – DESCRIPTION OF BUSINESS
a.
General
Orgenesis
Inc., a Nevada corporation, is a global biotech company working to unlock the potential of cell and gene therapies (“CGTs”)
in an affordable and accessible format.
CGTs
can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a
class of medicines referred to as advanced therapy medicinal products (“ATMP”). The Company mostly focused on autologous
therapies, with processes and systems that are developed for each therapy using a closed and automated processing system approach that
is validated for compliant production near the patient for treatment of the patient at the point of care (“POCare”). This
approach has the potential to overcome the limitations of traditional commercial manufacturing methods that do not translate well to
commercial production of advanced therapies due to their cost prohibitive nature and complex logistics to deliver such treatments to
patients (ultimately limiting the number of patients that can have access to, or can afford, these therapies).
To
achieve these goals, the Company has developed a Point of Care Platform (“POCare Platform”) comprised of three enabling components:
(i) a pipeline of licensed POCare advanced therapies that are designed to be processed and produced, (ii) automated closed POCare technology
systems, and (iii) a collaborative worldwide network of POCare research institutes and hospitals (“POCare Network”).
The
POCare Platform relies in particular on the development of its own production capacity, known as “POCare Services”, whose
goal is to ensure that therapies are accessible at the point of treatment (the “POCare Center”). POCare Services, which have
been expanding worldwide, are based on a global approach and local adaptation that allows replication and expansion. Global harmonization
of the POCare Services is ensured by a central quality system, replicability of infrastructure and equipment and centralized monitoring
and data management.
The
POCare Services include:
● |
Process
development of therapies that are intended for use of the POCare Network, |
● |
Adaptation
of automation and closed systems to such therapies, |
● |
Incorporation
of the processing systems and the Good Manufacturing Processes (“GMP”) in the OMPULs, |
● |
Tech
transfers to required POCare Centers and training of local teams, |
● |
Processing
and supply and of the therapies and required supplies under GMP conditions by the various POCare centers, including required quality
control testing, |
● |
CRO
services for clinical trials. |
POCare
Centers are the decentralised hubs that provide harmonized services to customers and partners. The Company is working to provide a more
efficient and scalable pathway for advanced therapies to reach patients more rapidly at lowered costs. The workflow of a POCare Center
is designed to allow rapid capacities expansion while integrating new technologies. The Company also draws on extensive medical expertise
to identify promising new autologous therapies to leverage within the POCare Platform either via ownership or licensing.
The
POCare Network brings together patients, doctors and industry partners with a goal of achieving harmonized, regulated clinical development
and production of POCare advanced therapies.
The
Company has worked to develop and validate POCare technologies that can be combined within mobile production units for advanced therapies.
The Company has made significant investments in the development of several types of Orgenesis Mobile Processing Units and Labs (“OMPULs”)
with the expectation of use and/or distribution through the Company’s POCare Network and/or partners, collaborators, and regional
distributors. As of the date of this report, the OMPULs have been adapted for processing of CAR-T (chimeric antigen receptor T-cell)
therapy, TIL (tumor infiltrating lymphocyte) and MSC (mesenchymal stem cell) based products, and are in the qualification stage for clinical
use in various locations. Additional OMPULs are still in the development stage.
OMPULs
are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential
or approved advanced therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing
of such CGTs in a consistent and standardized manner in all locations. The OMPUL design delivers a potential industrial solution for
us to deliver CGTs to practically any clinical institution at the point of care.
The
Company has continued to grow its infrastructure and expand its processing sites into new markets and jurisdictions. In addition, the
Company has continued investing manpower and financial resources to focus on developing, processing and rolling out several types of
OMPULs to be used and/or distributed through its POCare Network and/or partners, collaborators, and regional distributors.
The
Chief Executive Officer is the Company’s chief operating decision-maker who reviews
financial information prepared on a consolidated basis. All of our continuing operations are in one segment, being the point-of-care
business via our POCare Platform. Therefore, no segment information has been presented.
The
Company currently conducts its core CGT business operations through itself and its subsidiaries which are all wholly owned except as
otherwise stated (collectively, the “Subsidiaries”). The Subsidiaries are as follows:
● | Orgenesis
Maryland Inc. (the “U.S. Subsidiary”) is the center of activity in North America
and is currently focused on setting up and providing POCare Services to the POCare Network. |
● | Koligo
Therapeutics, Inc. (“Koligo”) is a Kentucky corporation that we acquired in 2020.
Koligo is a leading regenerative medicine company, specializing in developing personalized
cell therapies. It is currently focused on commercialising its metabolic pipeline via the
POCare network throughout the United States and in international markets. |
● | Orgenesis
CA, Inc. (the “California subsidiary”) is a Californian subsidiary incorporated
in 2021 and is currently focussed on development of the Company’s technologies and
therapies in California. |
● | Orgenesis
Belgium SRL (the “Belgian Subsidiary”) is currently focused on expanding our
POCare network in Europe, process development and the preparation of European clinical trials. |
● | Orgenesis
Switzerland Sarl (the “Swiss Subsidiary”), was incorporated in October 2020,
and is currently focused on providing management services to us. |
● | Orgenesis
Germany GmbH (incorporated in 2021) (the “German subsidiary”) is currently focused
on providing CRO services to the POCare Network. |
● | Korea:
Orgenesis Korea Co. Ltd. (the “Korean Subsidiary”), is a provider of processing
and pre-clinical services in Korea. The Company owns 94.12% of the Korean Subsidiary. |
● | Orgenesis
Ltd. in Israel (the “Israeli Subsidiary”) is a provider of regulatory, clinical
and pre-clinical services in Israel. |
● | Orgenesis
Biotech Israel Ltd. (“OBI”) is a provider of process development and cell-processing
services in Israel. |
These
consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries including the Discontinued Operations.
The
Company’s common stock, par value $0.0001 per share (the “Common Stock”) is listed and traded on the Nasdaq Capital
Market under the symbol “ORGS.”
As
used in this report and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its Subsidiaries. Unless
otherwise specified, all amounts are expressed in United States Dollars.
Through December 31,
2021, the Company had an accumulated deficit of $106.4
million as of December 31, 2021 and negative operating cashflows of $26.9
million in the year ended December 31, 2021. The Company’s activities have been funded by generating revenue, through
offerings of the Company’s securities and selling its Contract Development and Manufacturing Organization (“CDMO”)
business. There is no assurance that the Company’s business will generate sustainable positive cash flows to fund its
business. See also note 21 with respect to an investment agreement in the amount of approximately $14.8
million (before deducting related offering expenses), which has been entered into subsequent to December 31, 2021.
Based on its current cash
resources and commitments, including such investment agreement discussed in note 21, the Company believes it will be able to
maintain its current planned development activities and expected level of expenditures for at least 12 months from the date of the
issuance of these financial statements, although no assurance can be given that it will not need additional funds prior to such
time. If there are further increases in operating costs for facilities expansion, research and development, commercial and clinical
activity or decreases in revenues from customers, the Company will need to use mitigating actions as to seek additional financing or postpone expenses that are not based on firm commitments. In addition, in order to fund the Company’s operations until such
time that the Company can generate sustainable positive cash flows, the Company may need to raise additional funds.
The
estimation and execution uncertainty regarding the Company’s future cash flows and management’s judgments and assumptions
in estimating these cash flows to conclude that the Company would have sufficient liquidity to fund its operations for at least the next
12 months is a significant estimate. Those assumptions include reasonableness of the forecasted revenue, operating expenses, and uses
and sources of cash.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES
The
consolidated financial statements are prepared in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”).
a. |
Use
of Estimates in the Preparation of Financial Statements |
The
preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions
that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience
and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying
values of assets, liabilities and equity, the amount of revenues and expenses and determining whether an acquisition is a business combination
or a purchase of asset. Actual results could differ from those estimates.
The
full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition,
will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and
the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers
and markets. We examined the impact of COVID-19 on our financial statements, and although there is currently no major impact, there may
be changes to those estimates in future periods. Actual results may differ from these estimates.
The
Company allocates the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based
upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired
is recorded as goodwill. Acquired in-process backlog, customer relations, technology, IPR&D, brand name and know how are recognized
at fair value. The purchase price allocation process requires management to make significant estimates and assumptions, especially at
the acquisition date with respect to intangible assets. Direct transaction costs associated with the business combination are expensed
as incurred. The allocation of the consideration transferred in certain cases may be subject to revision based on the final determination
of fair values during the measurement period, which may be up to one year from the acquisition date. The Company includes the results
of operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.
If
the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest
in the acquire is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized
in profit or loss.
c. | Discontinued
operations |
Upon
divestiture of a business, the Company classifies such business as a discontinued operations, if the divested business represents a strategic
shift that has (or will have) a major effect on an entity’s operations and financial results. For disposals other than by sale
such as abandonment, the results of operations of a business would not be recorded as a discontinued operations until the period in which
the business is actually abandoned.
The
Masthercell Business divestiture qualifies as a discontinued operations and therefore has been presented as such.
The
results of businesses that have qualified as a discontinued operations have been presented as such for all reporting periods. Results
of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not
allocated to discontinued operations. Any loss or gain that arose from the divestiture of a business that qualifies as discontinued operations
is included within the results of the discontinued operations. The Company included information regarding cash flows from discontinued
operations (See Note 3).
The
Company considers cash equivalents to be all short-term, highly liquid investments, which include money market instruments, that are
not restricted as to withdrawal or use, and short-term bank deposits with original maturities of three months or less from the date of
purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.
e. |
Cost
of services and other research and development expenses, net |
Cost
of services and other research and development expenses, net include costs directly attributable to the conduct of research and development
activities, including the cost of salaries, stock-based compensation expenses, payroll taxes and other employees’ benefits, lab
expenses, consumable equipment, courier fees, travel expenses, professional fees and consulting fees. All costs associated with research
and developments are expensed as incurred. Participation from government departments and from research foundations for development of
approved projects is recognized as a reduction of expense as the related costs are incurred. Research and development in-process acquired
as part of an asset purchase, which has not reached technological feasibility and has no alternative future use, is expensed as incurred.
f. |
Principles
of Consolidation |
The
consolidated financial statements include the accounts of the Company and its Subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation.
g. |
Non-Marketable
Equity Investments |
The
Company’s investments in certain non-marketable equity securities in which it has the ability to exercise significant influence,
but it does not control through variable interests or voting interests. These are accounted for under the equity method of accounting
and presented as Investment in associates, net, in the Company’s consolidated balance sheets. Under the equity method, the Company
recognizes its proportionate share of the comprehensive income or loss of the investee. The Company’s share of income and losses
from equity method investments is included in share in losses of associated company.
The
Company reviews its investments accounted for under the equity method for possible impairment, which generally involves an analysis of
the facts and changes in circumstances influencing the investments.
For
other investments, the Company applies the measurement alternative upon the adoption of ASU 2016-01, and elected to record equity investments
without readily determinable fair values at cost, less impairment, adjusted for subsequent observable price changes. In this measurement
alternative method, changes in the carrying value of the equity investments are reflected in current earnings. Changes in the carrying
value of the equity investment are required to be made whenever there are observable price changes in orderly transactions for the identical
or similar investment of the same issuer.
The
currency of the primary economic environment in which the operations of the Company and part of its Subsidiaries are conducted is the
U.S. dollar (“$” or “dollar”). The functional currency of the Belgian Subsidiaries is the Euro (“€”
or “Euro”). The functional currency of Orgenesis Korea is the Won (“KRW”). Most of the Company’s expenses
are incurred in dollars, and the source of the Company’s financing has been provided in dollars. Thus, the functional currency
of the Company and its other subsidiaries is the dollar. Transactions and balances originally denominated in dollars are presented at
their original amounts. Balances in foreign currencies are translated into dollars using historical and current exchange rates for nonmonetary
and monetary balances, respectively. For foreign transactions and other items reflected in the statements of operations, the following
exchange rates are used: (1) for transactions – exchange rates at transaction dates or average rates and (2) for other items (derived
from nonmonetary balance sheet items such as depreciation) – historical exchange rates. The resulting transaction gains or losses
are recorded as financial income or expenses. The financial statements of the Belgian Subsidiaries and Orgenesis Korea are included in
the consolidated financial statements, translated into U.S. dollars. Assets and liabilities are translated at year-end exchange rates,
while revenues and expenses are translated at yearly average exchange rates during the year. Differences resulting from translation of
assets and liabilities are presented as other comprehensive income.
The
Company’s inventory consists of raw material for use for the services provided. The Company periodically evaluates the quantities
on hand. Cost of the raw materials is determined using the weighted average cost method. The inventory is recorded at the lower of cost
or net realizable value.
j. | Property,
plant and Equipment |
Property,
plant and equipment are recorded at cost and depreciated by the straight-line method over the estimated useful lives of the related assets.
Annual
rates of depreciation are presented in the table below:
SCHEDULE OF ANNUAL DEPRECIATION RATES, PROPERTY AND EQUIPMENT
| |
Weighted
Average Useful
Life (Years) |
Production
facility | |
5
– 10 |
Laboratory
equipment | |
2
– 10 |
Office
equipment and computers | |
3
– 17 |
Intangible
assets and their useful lives are as follows:
SCHEDULE OF INTANGIBLE ASSETS AND THEIR USEFUL LIVE
| |
Useful
Life (Years) | |
Amortization Recorded at Comprehensive Loss
Line Item |
Customer
Relationships | |
10 | |
Amortization
of intangible assets |
Know-How | |
12 | |
Amortization
of intangible assets |
Technology | |
15 | |
Amortization
of intangible assets |
In-process
research and development | |
Indefinite | |
|
Intangible
assets are recorded at acquisition less accumulated amortization and impairment. Definite lived intangible assets are amortized over
their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from
the asset are expected to be generated. The Company capitalizes IPR&D projects acquired as part of a business combination. On successful
completion of each project, IPR&D assets are reclassified to developed technology and amortized over their estimated useful lives.
Goodwill
represents the excess of consideration transferred over the value assigned to the net tangible and identifiable intangible assets of
businesses acquired. Goodwill is allocated to reporting units expected to benefit from the business combination. Goodwill is not amortized
but rather tested for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate
that goodwill may be impaired. Following the sale of Masthercell the Company manages the business as one operating segment and one reporting
unit. Goodwill impairment is recognized when the quantitative assessment results in the carrying value exceeding the fair value, in which
case an impairment charge is recorded to the extent the carrying value exceeds the fair value.
There
were no impairment charges to goodwill during the periods presented.
m. | Impairment
of Long-lived Assets |
The
Company reviews its property, plants and equipment, intangible assets subject to amortization and other long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable. Indicators of
potential impairment include: an adverse change in legal factors or in the business climate that could affect the value of the asset;
an adverse change in the extent or manner in which the asset is used or is expected to be used, or in its physical condition; and current
or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of the asset. If indicators of
impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated
undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of
the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated
discounted cash flows. There were no impairment charges in the years ended December 31, 2021 and 2020. For indefinite life intangible
assets, The Company performs an impairment test annually in the fourth quarter and whenever events or changes in circumstances indicate
the carrying value of an asset may not be recoverable. The Company determines the fair value of the asset based on discounted cash flows
and records an impairment loss if its book value exceeds fair value.
1)
With respect to deferred taxes, income taxes are computed using the asset and liability method. Under the asset and liability method,
deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that
it is more likely than not that the deferred taxes will not be realized in the foreseeable future.
2)
The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position
for recognition by determining if the available evidence indicates that it is more likely than not that the position will be sustained
on examination. If this threshold is met, the second step is to measure the tax position as the largest amount that is greater than 50%
likely of being realized upon ultimate settlement.
3)
Taxes that would apply in the event of disposal of investment in Subsidiaries and associated companies have not been taken into account
in computing the deferred income taxes, as it is the Company’s intention to hold these investments and not realize them.
o. | Stock-based
Compensation |
The
Company recognizes stock-based compensation for the estimated fair value of share-based awards. The Company measures compensation expense
for share-based awards based on estimated fair values on the date of grant using the Black-Scholes option-pricing model. This option
pricing model requires estimates as to the option’s expected term and the price volatility of the underlying stock. The Company
amortizes the value of share-based awards to expense over the vesting period on a straight-line basis.
p. | Redeemable
Non-controlling Interest |
Non-controlling
interests with embedded redemption features, whose settlement is not at the Company’s discretion, are considered redeemable non-controlling
interest. Redeemable non-controlling interests are considered to be temporary equity and are therefore presented as a mezzanine section
between liabilities and equity on the Company’s consolidated balance sheets. Subsequent adjustment of the amount presented in temporary
equity is required only if the Company’s management estimates that it is probable that the instrument will become redeemable. Adjustments
of redeemable non-controlling interest to its redemption value are recorded through additional paid-in capital.
q. | Loss
(income) per Share of Common Stock |
Basic
net loss (income) per share is computed by dividing the net loss (income) for the period by the weighted average number of shares of
common stock outstanding for each period. Diluted net loss (income) per share is based upon the weighted average number of common shares
and of common shares equivalents outstanding when dilutive. Common share equivalents include: (i) outstanding stock options and warrants
which are included under the treasury share method when dilutive, and (ii) common shares to be issued under the assumed conversion of
the Company’s outstanding convertible loans and debt, which are included under the if-converted method when dilutive (See Note
14).
r. | Concentration
of Credit Risk |
Financial
instruments that potentially subject the Company to concentration of credit risk consist of principally cash and cash equivalents, bank
deposits and certain receivables. The Company held these instruments with highly rated financial institutions and the Company
has not experienced any significant credit losses in these accounts and does not believe the Company is exposed to any significant credit
risk on these instruments apart of accounts receivable. The Company performs ongoing credit evaluations of its customers for the purpose
of determining the appropriate allowance for doubtful accounts. An appropriate allowance for doubtful accounts is included in the accounts
and netted against accounts receivable. In the year ended December 31, 2021 the Company has not
experienced any material credit losses in these accounts and does not believe it is exposed to significant credit risk on these instruments.
Bad
debt allowance is created when objective evidence exists of inability to collect all sums owed it under the original terms of the debit
balances. Material customer difficulties, the probability of their going bankrupt or undergoing economic reorganization and insolvency,
material delays in payments and other objective considerations by management that indicate expected risk of payment are all considered
indicative of reduced debtor balance value.
The
Company repurchases its ordinary shares from time to time on the open market and holds such shares as treasury stock. The Company presents
the cost to repurchase treasury stock as a reduction of shareholders’ equity. The Company did not reissue nor cancel treasury shares
during the year ended December 31, 2021 and December 31, 2020.
t. | Beneficial
Conversion Feature (“BCF”) |
When
the Company issues convertible debt, if the stock price is greater than the effective conversion price (after allocation of the total
proceeds) on the measurement date, the conversion feature is considered “beneficial” to the holder. If there is no contingency,
this difference is treated as issued equity and reduces the carrying value of the host debt; the discount is accreted as deemed interest
on the debt (See Note 7).
u. | Other
Comprehensive Loss |
Other
comprehensive loss represents adjustments of foreign currency translation.
v. | Revenue
from Contracts with Customers |
The
Company recognizes revenue from contracts with customers according to ASC 606, Revenue from Contracts with Customers and the related
amendments (“New Revenue Standard”) to all contracts.
The
Company’s agreements are primarily service contracts that range in duration from a few months to one year. The Company recognizes
revenue when control of these services is transferred to the customer for an amount, referred to as the transaction price, which reflects
the consideration to which the Company is expected to be entitled in exchange for those goods or services.
A
contract with a customer exists only when:
● | the
parties to the contract have approved it and are committed to perform their respective obligations; |
● | the
Company can identify each party’s rights regarding the distinct goods or services to
be transferred (“performance obligations”); |
● | the
Company can determine the transaction price for the goods or services to be transferred;
and |
● | the
contract has commercial substance and it is probable that the Company will collect the consideration
to which it will be entitled in exchange for the goods or services that will be transferred
to the customer. |
The
Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects,
at contract inception, that the period between the time of transfer of the promised goods or services to the customer and the time the
customer pays for these goods or services to be generally one year or less. The Company’s credit terms to customers are in average
between thirty and one hundred and fifty days.
Nature
of Revenue Streams
The
Company’s main revenue streams from continuing operations are POC development services and Cell Process Development Services.
POC
Development Services
Revenue
recognized under contracts for POC development services may, in some contracts, represent multiple performance obligations (where promises
to the customers are distinct) in circumstances in which the work packages are not interrelated
or the customer is able to complete the services performed.
For
arrangements that include multiple performance obligations, the transaction price is allocated to the identified performance obligations
based on their relative standalone selling prices.
The
Company recognizes revenue when, or as, it satisfies a performance obligation. At contract inception, the Company determines whether
the services are transferred over time or at a point in time. Performance obligations that have no alternative use and that the Company
has the right to payment for performance completed to date, at all times during the contract term, are recognized over time. All other
performance obligations are recognized as revenues by the Company at point of time (upon completion).
In addition, during 2021, the Company started providing support services to its customers. These revenues are recognized as and when
the services are provided because the customer simultaneously receives and consumes the benefits provided.
Also
included in POC development services is Hospital supplies revenue which is derived principally from the performance of services to hospitals
or other medical providers. Revenue is earned and recognized when product and services are received by the customer.
Significant
Judgement and Estimates
Significant
judgment is required to identifying the distinct performance
obligations and estimating the standalone selling price of each distinct performance obligation and identifying which performance obligations
create assets with alternative use to the Company, which results in revenue recognized upon completion, and which performance obligations
are transferred to the customer over time.
Cell
Process Development Services
Revenue
recognized under contracts for cell process development services may, in some contracts, represent multiple performance obligations (where
promises to the customers are distinct) in circumstances in which the work packages and milestones
are not interrelated or the customer is able to complete the services performed independently or by using competitors of the Company.
In other contracts when the above circumstances are not met, the promises are not considered distinct and the contract represents one
performance obligation. All performance obligations are satisfied over time, as there is no alternative use to the services it
performs, since, in nature, those services are unique to the customer, which retain the ownership of the intellectual property created
through the process. Additionally, due to the non-refundable upfront payment feature which may exist in certain contracts and which the
customer pays together with the payment term and cancellation fine, Company has a right to payment (which includes a reasonable margin),
at all times, for work completed to date, which is enforceable by law.
For
arrangements that include multiple performance obligations, the transaction price is allocated to the identified performance obligations
based on their relative standalone selling prices. For these contracts, the standalone selling prices are based on the Company’s
normal pricing practices when sold separately with consideration of market conditions and other factors, including customer demographics
and geographic location.
The
Company measures the revenue to be recognized over time on a contract-by-contract basis, determining the use of either
a cost-based input method or output method, depending on whichever best depicts the transfer of control over the life of the performance
obligation.
Change
Orders
Changes
in the scope of work are common and can result in a change in transaction price, equipment used and payment terms. Change orders are
evaluated on a contract-by-contract basis to determine if they should be accounted for as a new contract or as part of the existing contract.
Generally, services from change orders are not distinct from the original performance obligation. As a result, the effect that the contract
modification has on the contract revenue, and measure of progress, is recognized as an adjustment to revenue when they occur.
The
Company recognizes lease expenses according to the lease standard ASC 842 and related amendments.
The
Company determines if an arrangement is a lease at inception. Lease classification is governed by five criteria in ASC 842-10-25-2. If
any of these five criteria is met, The Company classifies the lease as a finance lease; otherwise, the Company classifies the lease as
an operating lease. When determining lease classification, the Company’s approach in assessing two of the mentioned criteria is:
(i) generally 75% or more of the remaining economic life of the underlying asset is a major part of the remaining economic life of that
underlying asset; and (ii) generally 90% or more of the fair value of the underlying asset comprises substantially all of the fair value
of the underlying asset.
Operating
leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance
sheet.
ROU
assets represent Orgenesis’ right to use an underlying asset for the lease term and lease liabilities represent its obligation
to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based
on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information
available at the commencement date to determine the present value of the lease payments.
The
standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition
exemption for all leases with a term shorter than 12 months. This means that for those leases, the Company does not recognize ROU assets
or lease liabilities, including not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition,
but recognizes lease expenses over the lease term on a straight-line basis.
Lease
terms will include options to extend or terminate the lease when it is reasonably certain that Orgenesis will exercise or not exercise
the option to renew or terminate the lease.
x. | Recently
issued accounting pronouncements, not yet adopted |
In
June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial
Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected
credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
The guidance will be effective for Smaller Reporting Companies (SRCs, as defined by the SEC) for the fiscal year beginning on January
1, 2023, including interim periods within that year. The Company is currently evaluating this guidance to determine the impact it may
have on its consolidated financial statements.
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and
Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models
required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no
separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the
diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after
December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those
fiscal years. The Company expects to apply modified retrospective basis adoption of this guidance, which will not have a significant
impact on the Company’s consolidated financial statements.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU
2021-04”). The guidance is effective for the Company on January 1, 2022. The Company expects that this guidance, will not have
a significant impact on the Company’s consolidated financial statements.
In
October 2021, the FASB issued ASU 2021-08 “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers”, which requires contract assets and contract liabilities acquired in a business combination to be
recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. The
guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.
The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for
fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including
in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluating this guidance to
determine the impact it may have on its consolidated financial statements.
In
November 2021, the FASB issued ASU 2021-10 “Government Assistance (Topic 832)”, which requires annual disclosures that increase
the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions,
and (3) the effect of those transactions on an entity’s financial statements. The amendments in this update are effective for financial
statements issued for annual periods beginning after December 15, 2021. The Company is currently evaluating this guidance to determine
the impact it may have on its consolidated financial statements.
NOTE
3 – DISCONTINUED OPERATION
On
February 2, 2020, the Company entered into a Purchase Agreement with GPP, Masthercell and the Buyer. Pursuant to the terms and conditions
of the Purchase Agreement, Sellers agreed to sell 100% of the outstanding equity interests of Masthercell to Buyer for an aggregate nominal
purchase price of $315 million. The Company has determined that the Masthercell Business meets the criteria to be classified as discontinued
operations.
On
February 10, 2020, the Masthercell Sale was consummated in accordance with the terms of the Purchase Agreement. After accounting for
GPP’s liquidation preference and equity stake in Masthercell, as well as SFPI – FPIM’s interest in MaSTherCell, distributions
to Masthercell option holders and transaction costs, the Company received approximately $126.7 million at the closing of the Masthercell
Sale, of which $7.2 million was used for the repayment of intercompany loans and payables, including $4.6 million of payables to MaSTherCell.
Due
to the sale of the controlling interest in Masthercell, the Company retrospectively reclassified the assets and liabilities of these
entities as assets and liabilities of discontinued operations and included the financial results of these entities as discontinued operations
in the Company’s consolidated financial statements.
Discontinued
operations relate to the Masthercell Business. The comprehensive loss and balance sheet for this operation are separately reported as
discontinued operations for all periods presented.
The
financial results of the Masthercell Business are presented as income (loss) from discontinued operations, net of income taxes on the
Company’s consolidated statement of comprehensive loss. The following table presents the financial results associated with the
Masthercell Business operation as reflected in the Company’s Consolidated Comprehensive loss (in thousands):
SCHEDULE
OF DISCONTINUED FINANCIAL STATEMENTS
| |
Year
Ended December 31, | |
OPERATIONS | |
2020 | |
Revenues | |
$ | 2,556 | |
Cost
of revenues | |
| 1,482 | |
Cost
of services and other research and development expenses, net | |
| 7 | |
Amortization
of intangible assets | |
| 137 | |
Selling,
general and administrative expenses | |
| 1,896 | |
Operating
loss | |
| 966 | |
Other expenses, net | |
| 305 | |
Financial income, net | |
| (29 | ) |
Loss
before income taxes | |
| 1,242 | |
Tax income | |
| (30 | ) |
Net
loss from discontinuing operation, net of tax | |
$ | 1,212 | |
| |
| | |
DISPOSAL | |
| | |
Gain
on disposal before income taxes | |
$ | 96,918 | |
Provision
for income taxes | |
| - | |
Gain
on disposal | |
$ | 96,918 | |
| |
| | |
Net
profit from discontinuing operation, net of tax | |
$ | 95,706 | |
The
following table represents the components of the cash flows from discontinued operations (in thousands):
| |
Year
Ended December 31, | |
| |
2020 | |
| |
| |
Net
cash flows used in operating activities | |
$ | (2,409 | ) |
Net
cash flows used in investing activities | |
$ | (579 | ) |
Net
cash flows used in financing activities | |
$ | (51 | ) |
Disaggregation
of Revenue
The
following table disaggregates the Company’s revenues by major revenue streams related to discontinued operations (in thousands):
SCHEDULE OF DISAGGREGATION OF REVENUE RELATED TO DISCONTINUED OPERATIONS
| |
Year
Ended December 31, | |
| |
2020 | |
Revenue
stream: | |
| | |
| |
| | |
Cell
process development services | |
$ | 2,556 | |
Total | |
$ | 2,556 | |
Redeemable
Non-Controlling Interest of Discontinued Operations
a. | Subscription
and Shareholders Agreement with Belgian Sovereign Funds Société Fédérale
de Participations et d’Investissement (“SFPI(“. |
On
November 15, 2017, the Company, MaSTherCell and SFPI entered into a Subscription and Shareholders Agreement (“SFPI Agreement”)
pursuant to which SFPI made an equity investment in MaSTherCell.
Due
to the embedded redemption feature of the SFPI agreement whose settlement was not at the Company discretion, the Company had accounted
for the investment made by GPP as a redeemable non-controlling interest.
b. | Stock
Purchase Agreement and Stockholders’ Agreement with Great Point Partners, LLC (“GPP”)
|
On
June 28, 2018, the Company, Masthercell Global GPP, and certain of GPP’s affiliates, entered into a series of definitive strategic
agreements intended to finance, strengthen and expand Orgenesis’ CDMO business.
Due
to the embedded redemption feature of the GPP agreement whose settlement was not at the Company discretion, the Company had accounted
for the investment made by GPP as a redeemable non-controlling interest.
NOTE
4 – ACQUISITION AND REORGANIZATION
Tamir
Biotechnology, Inc.
On
April 7, 2020, the Company entered into the Tamir Purchase Agreement with Tamir, pursuant to which the Company agreed to acquire certain
assets and liabilities of Tamir related to the discovery, development and testing of therapeutic products for the treatment of diseases
and conditions in humans, including all rights to Ranprinase and use for antiviral therapy. The Tamir Transaction closed on April 23,
2020.
As
aggregate consideration for the acquisition, the Company paid $2.5 million in cash and issued an aggregate of 3,400,000 shares (the “Shares”)
of Common Stock to Tamir resulting in a total consideration of $20.2 million based on the Company’s share price at the closing
date. $4.5 million of the consideration was attributable to research and development related inventory and most of the remaining amount
reflected the cost of intangible assets. The Shares were registered for resale by the Company in November 2020.
The
Company’s acquired right to Tamir’s intellectual property represents a single identifiable asset sourced from the agreement.
Because substantially all (more than 90%) of the fair value of the gross assets acquired are concentrated in a single asset being the
right to Tamir’s intellectual property and related assets (“IPR&D”), the Company determined that the acquisition
is not considered a business in accordance with ASC 805-10-55-5A. Therefore, the Company accounted the transaction as an asset acquisition.
The fair value associated with Tamir’s IPR&D in the amount of $19.5 million was charged to research and development expenses
under ASC 730. The remaining amount was attributed to the above-mentioned share in a private company, which is presented in the balance
sheet as long term “other assets”.
Included
in the purchased assets of Tamir was the assumption by us of a worldwide license to a private company of certain Tamir technologies in
the field of treatment, amelioration, mitigation or prevention of diseases or conditions of the eye and its adnexa in return for certain
development and sales milestone payments to be paid to Tamir. We also received a less than 10% share interest in said private company
in addition to the license fee and right to receive future milestone payments and royalties.
Koligo
Therapeutics Acquisition
On
September 26, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”)
by and among the Company, Orgenesis Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger
Sub”), Koligo Therapeutics Inc., a Kentucky corporation (“Koligo”), the shareholders of Koligo (collectively, the “Shareholders”),
and Long Hill Capital V, LLC (“Long Hill”), solely in its capacity as the representative, agent and attorney-in-fact of the
Shareholders. The Merger Agreement provides for the acquisition of Koligo by the Company through the merger of Merger Sub with and into
Koligo, with Koligo surviving as a wholly-owned subsidiary of the Company (the “Merger”). The acquisition was completed on
October 15, 2020 (the “Effective Time”).
Koligo
was a privately-held US regenerative medicine company. Koligo’s first commercial product is KYSLECEL® (autologous pancreatic
islets) for chronic and acute recurrent pancreatitis. Koligo’s 3D-V technology platform incorporates the use of advanced 3D bioprinting
techniques and vascular endothelial cells to support development of transformational cell and tissue products for serious diseases.
Pursuant
to the terms of the Merger Agreement, at the Effective Time, the shares of capital stock of Koligo that were issued and outstanding immediately
prior to the Effective Time were automatically cancelled and converted into the right to receive, subject to customary adjustments, an
aggregate of 2,061,713 shares of Company common stock which have been issued to Koligo’s accredited investors (with certain non-accredited
investors being paid solely in cash in the amount of approximately $20 thousand). In addition, the Company issued 66,910 shares to Maxim
Group LLC for advisory services in connection with the Merger. The share price was $5.26 at the day of the closing.
As
partial security for the indemnification and purchase price adjustment obligations of Koligo shareholders under the Merger Agreement,
$7 thousand in cash and 328,587 shares of Company common stock of the merger consideration otherwise payable in the Merger to the Shareholders
were placed in a third party escrow account until April 2022. The aggregate indemnification obligations of the Koligo shareholders under
the Merger Agreement is capped at the amounts in escrow, subject to certain limited exceptions.
In
addition, according to the agreement between the parties, the Company funded an additional cash consideration of $500 thousand (with
$100 thousand of such reducing the ultimate consideration payable to Koligo) for the acquisition of the assets of Tissue Genesis, LLC
(“Tissue Genesis”) by Koligo that was consummated on October 14, 2020. The Tissue Genesis assets include the entire inventory
of Tissue Genesis Icellator® devices, related kits and reagents, a broad patent portfolio to protect the technology, registered trademarks,
clinical data, and existing business relationships for commercial and development stage use of the Icellator technology.
In
connection with the Merger Agreement, the Company, Long Hill and Maxim Group LLC (“Maxim”) entered into a Registration Rights
and Lock-Up Agreement. All of the shares required to be registered by the Company pursuant to the Registration Rights and Lock-Up Agreement
were registered by the Company in November 2020.
In
addition, pursuant to separate Lock-Up Agreements entered into by the Shareholders other than Long Hill with the Company (the “Shareholders
Lock-Up Agreement”), such Shareholders agreed that they will not transfer any of their shares received in the Merger except in
accordance with the following lock-up release schedule whereby one fifth of such holder’s respective shares will be released from
such restriction every six months, starting six months from the closing of the Merger. Each holder’s sales of such shares are subject
to a resale limit of its pro rata portion of 10% of the average daily trading volume, allocated to the Shareholders other than Long Hill
pro-rata.
The
acquisition was accounted in accordance with Accounting Standards Codification Topic 805, “Business Combinations”. The allocation
of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the
measurement period, which may be up to one year from the acquisition date. The Company includes the results of operations of the business
that it has acquired in its consolidated results prospectively from the date of acquisition.
Fair
Value of Consideration Transferred
The
following table summarizes the allocation of purchase price to the fair values of the assets acquired and liabilities assumed as of the
transaction date:
SUMMARY OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
| |
(in
thousands) | |
Fair
value of 8.8%
of shared issued * | |
| 11,172 | |
Fair
value of 8.8%
of shared issued * | |
| 11,172 | |
Cash
payment | |
| 1,115 | |
Total
consideration transferred | |
$ | 12,287 | |
* | | Fair value of the
consideration is based on the company’s market share price. |
Total
assets acquired: | |
| | |
Cash
and cash equivalents | |
$ | 8 | |
Restricted
Cash | |
| 152 | |
Accounts
Receivable | |
| 228 | |
Inventory | |
| 34 | |
Other
assets | |
| 25 | |
Property,
plants and equipment, net | |
| 482 | |
Kyslecel
Technology (a) | |
| 9,340 | |
IPR&D
(a) | |
| 641 | |
Other intangible assets | |
| 641 | |
Operating
lease right-of-use assets | |
| 238 | |
Goodwill
(b) | |
| 3,704 | |
Goodwill
| |
| 3,704 | |
Total
assets | |
| 14,852 | |
| |
| | |
Total
liabilities assumed: | |
| | |
Operating
leases | |
| 238 | |
Accounts
Payable | |
| 216 | |
Accrued
Expenses | |
| 4 | |
Orgenesis
Inc loan | |
| 651 | |
Deferred
taxes | |
| 1,293 | |
Notes
Payable | |
| 162 | |
Other
liabilities | |
| 1 | |
Total
liabilities | |
| 2,565 | |
Total
consideration transferred | |
$ | 12,287 | |
a. | | The allocation
of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of other intangible assets which
comprised of: Kyslecel Technology of $9,340 and IPR&D of 641. Kyslecel Technology has a useful life of 15 years. The useful life
of these intangible assets for amortization purposes was determined considering the period of expected cash flows generated by the assets
used to measure the fair value of the intangible assets adjusted as appropriate for the entity-specific factors, including legal, regulatory,
contractual, competitive, economic or other factors that may limit the useful life of intangible assets. |
These
intangible assets were estimated using a discounted cash flow method with the application of the multi-period excess earnings method.
Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows attributable
only to the subject intangible asset after deducting contributory asset charges. An income and expenses forecast were built based upon
revenue and expense estimates.
b. | | The primary items
that generate goodwill include the value of the synergies between the acquired company and the Company and the acquired assembled workforce,
neither of which qualifies for recognition as an intangible asset. The Goodwill is not deductible for tax purposes. |
Pro
forma Impact of Business Combination
The
unaudited pro forma financial results have been prepared using the acquisition method of accounting and are based on the historical financial
information of the Company and Koligo. The unaudited pro forma condensed financial results have been prepared for illustrative purposes
only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition of Koligo
occurred at the beginning of the fiscal year, or of future results of the combined entities. The unaudited pro forma condensed financial
information does not reflect any operating efficiencies and expected realization of cost savings or synergies associated with the acquisition.
Unaudited
supplemental pro forma combined results of operations (in thousands):
SCHEDULE OF UNAUDITED SUPPLEMENTAL PRO FORMA
| |
Year
ended December 31, | |
| |
2020 | |
| |
| |
Revenues | |
$ | 8,239 | |
Net
loss | |
$ | 318 | |
Loss
per share: | |
| | |
Basic | |
$ | 0.05 | |
Koligo’s
related actual results from the date of acquisition to December 31, 2020 resulted in a loss of $513 thousand.
Koligo’s
Acquisition-related Costs
Acquisition-related
expenses consist of transaction costs which represent external costs directly related to the acquisition of Koligo and primarily include
expenditures for professional fees such as legal, accounting and other directly related incremental costs incurred to close the acquisition
by both the Company and Koligo.
Acquisition-related
expenses for the year ended December 31, 2020 were $682 thousand. These expenses were recorded to selling and general administrative
expense in the consolidated statements of comprehensive loss.
Extracellular
Vesicle (“EV”) Technology License
During
the third quarter of 2020, the Company purchased IP and related EV technology pursuant to an EV agreement (the “EV agreement”).
According to the EV agreement, the Company received all of the rights in the EV technology purchased, in the amount of $500 thousand,
which was paid during 2020 and 2021. The $500 thousand was recorded in R&D expenses. In addition, the Company received an exclusive
worldwide license to use the EV IP technology for any purpose.
NOTE
5 – PROPERTY, PLANTS AND EQUIPMENT
The
following table represents the components of property, plants and equipment:
SCHEDULE OF COMPONENTS OF PROPERTY, PLANTS AND EQUIPMENT
| |
2021 | | |
2020 | |
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
Cost: | |
| | |
| |
Production
facility | |
$ | 4,040 | | |
$ | 2,801 | |
Office
furniture and computers | |
| 555 | | |
| 697 | |
Lab
equipment | |
| 2,435 | | |
| 1,483 | |
Advance
payment | |
| 6,181 | | |
| 281 | |
Subtotal | |
| 13,211 | | |
| 5,262 | |
Less
– accumulated depreciation | |
| (2,940 | ) | |
| (2,189 | ) |
Total | |
$ | 10,271 | | |
$ | 3,073 | |
Depreciation
expense for the years ended December 31, 2021 and December 31, 2020 were $916 thousand and $705 thousand, respectively.
Property,
plants and equipment, net by geographical location were as follows:
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT BY GEOGRAPHICAL LOCATION
| |
2021 | | |
2020 | |
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Belgium | |
$ | 1,149 | | |
$ | 358 | |
Korea | |
| 694 | | |
| 839 | |
Israel | |
| 2,602 | | |
| 1,386 | |
U.S. | |
| 5,826 | | |
| 490 | |
Total | |
$ | 10,271 | | |
$ | 3,073 | |
Property,
plants and equipment, net | |
$ | 10,271 | | |
$ | 3,073 | |
NOTE
6 – INTANGIBLE ASSETS AND GOODWILL
Changes
in the carrying amount of the Company’s goodwill for the years ended December 31, 2021 and 2020 are as follows:
SCHEDULE OF GOODWILL
| |
(in
thousands) | |
Goodwill
as of December 31, 2019 | |
$ | 4,812 | |
Goodwill
as acquired, (Koligo) see note 4 | |
| 3,704 | |
Translation
differences | |
| 229 | |
Goodwill
as of December 31, 2020 | |
$ | 8,745 | |
Translation
differences | |
| (342 | ) |
Goodwill
as of December 31, 2021 | |
$ | 8,403 | |
Goodwill
Impairment
See
Note 2(l) for the Company’s goodwill impairment analysis.
Other
Intangible Assets
Other
intangible assets consisted of the following:
SCHEDULE OF OTHER INTANGIBLE ASSETS
| |
2021 | | |
2020 | |
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
Gross
Carrying Amount: | |
| | | |
| | |
Know
How | |
$ | 2,904 | | |
$ | 3,170 | |
Customer
relationships | |
| 811 | | |
| 886 | |
Kyslecel
Technology | |
| 9,340 | | |
| 9,340 | |
IPR&D | |
| 641 | | |
| 641 | |
Subtotal | |
| 13,696 | | |
| 14,037 | |
Less
– Accumulated amortization | |
| (1,875 | ) | |
| (1,014 | ) |
Net
carrying amount of other intangible assets | |
$ | 11,821 | | |
$ | 13,023 | |
Intangible
assets amortization expenses were approximately $948 thousand and $478 thousand for the years ended December 31, 2021 and December 31,
2020, respectively.
Estimated
aggregate amortization expenses for the five succeeding years ending on December 31st are as follows:
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSES
| |
2022 | | |
2023
to 2026 | |
| |
(in
thousands) | |
Amortization
expenses | |
$ | 323 | | |
$ | 1,390 | |
NOTE
7 – CONVERTIBLE LOANS
SCHEDULE OF LONG TERM CONVERTIBLE LOANS
a. | Long
term convertible loans outstanding as of December 31, 2021 and December 31, 2020 are as follows: |
Principal
Amount | | |
Issuance
Year | | |
Interest
Rate | | |
Maturity
Period | | |
Exercise
Price | | |
NOTE | | |
BCF | |
(in
thousands) | | |
| | |
| | |
(Years) | | |
| | |
| | |
| |
| | |
| | |
| |
Convertible
Loans Outstanding as of December 31, 2021 | | |
| | |
| |
$ | 750 | | |
| *2018 | | |
| 2 | % | |
| 5 | | |
| 7.00 | | |
| (1)+(4) | | |
| 39 | |
| 8,750 | | |
| *2019 | | |
| 6%-8 | % | |
| 3-5 | | |
| 7.00 | | |
| (2)+(4) | | |
| - | |
| 250 | | |
| *2020 | | |
| 8 | % | |
| 3 | | |
| 7.00 | | |
| (3 | ) | |
| - | |
$ | 9,750 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
* |
Extended during the year ended December 31,
2021 |
Convertible
Loans Outstanding as of December 31, 2020 | | |
| | | |
| | |
| | |
| | | |
| | |
$ | 1,000 | | |
| 2018 | | |
| 2 | % | |
| 3 | | |
| 7.00 | | |
| (1)+(4) | | |
| 71 | |
| 9,500 | | |
| 2019 | | |
| 6%-8 | % | |
| 2-5 | | |
| 7.00 | | |
| (2)+(4) | | |
| - | |
| 250 | | |
| 2020 | | |
| 8 | % | |
| 2 | | |
| 7.00 | | |
| (3 | ) | |
| - | |
$ | 10,750 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Convertible Loans repaid during the year ended December 31, 2021 | |
| |
| Principal Amount | | |
Issuance Year | |
| Interest Rate | | |
| Maturity Period | | |
| Exercise Price | | |
| BCF | |
| 750 | | |
2019 | |
| 8 | % | |
| 2 | | |
$ | 7 | | |
| 31 | |
| 250 | | |
2018 | |
| 2 | % | |
| 3 | | |
| 7 | | |
| - | |
| 1,000 | | |
| |
| | | |
| | | |
| | | |
| | |
Convertible
Loans repaid during the year ended December 31, 2020 |
|
Principal
Amount | | |
Issuance
Year | | |
Interest
Rate | | |
Maturity
Period | | |
Exercise
Price | | |
BCF | |
| 500 | | |
| 2018 | | |
| 2 | % | |
| 2 | | |
$ | 7 | | |
| 53 | |
| 500 | | |
| 2019 | | |
| 6 | % | |
| 2 | | |
| 7 | | |
| - | |
| 1,400 | | |
| 2019 | | |
| 8 | % | |
| 3 | | |
| 7 | | |
| - | |
| 2,400 | | |
| | | |
| | | |
| | | |
| | | |
| | |
Apart
from the items mentioned below there were no repayments of convertible loans during the fiscal years ended December 31, 2020 and December
31, 2021. In addition, there were no conversions during the fiscal years ended December 31, 2020 and December 31, 2021.
(1) |
The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of 113,775
shares and 113,775 three-year warrants to purchase up to an additional 113,775 shares of the Company’s common stock at a per share
exercise price of $7. As of December 31, 2021, the loans are presented in current maturities of convertible notes in the balance sheet
(See Notes 10(f) and 10(g)). |
(2) |
The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of 1,363,206
shares and 1,070,176 three-year warrants to purchase up to an additional 1,070,176 shares of the Company’s common stock at a per
share exercise price of $7. As of December 31, 2021, $3,750 thousand of the principal amount is included in current maturities of convertible
loans in the balance sheet and the remainder in long-term convertible loans. See also Notes 7(b), 7(c), 7(d) and 7(e). |
(3) |
The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of 41,416
shares at a per share exercise price of $7. As of December 31, 2021, all the principal amount is included in short-term convertible loans
in the balance sheet. See also Notes 7(f). |
(4) |
During the year ended December 31, 2021, the Company and certain convertible loan
holders (including certain credit line investors, see note 7 (e)) agreed to extend the maturity date on loans due during the fourth
quarter of 2021 to June 30, 2023. The principal amount extended was $2.25
million excluding the credit line investors. The loan holders may request that the Company repay them on November 21, 2022 (the
“Early Redemption Option”). In consideration for the extension, including for the credit line investors, warrants to purchase
926,413
shares of common stock of the Company were issued to the loan holders at an exercise price of $6.24
per share. If the Early Redemption Option is exercised, the warrants will be cancelled. The latest date to exercise the warrants
is June
30, 2023. During March 2022 the loan holders waived the early redemption option. |
The
Company concluded that the change in the terms (including for the credit line investors extension) does not constitute a troubled debt
restructuring. The Company therefore applied the guidance in ASC 470-50, Modifications and Extinguishments. The accounting treatment
is determined by whether terms of the new debt and original debt are substantially different. The new debt and the old debt are considered
“substantially different” pursuant to ASC 470-50 when the change in the fair value of the embedded conversion option is at
least 10% of the carrying amount of the original debt instrument immediately before the modification or exchange or the value of the
cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under
the terms of the original instrument (including the incremental fair value resulting from issuing new warrants held by the lender). If
the original and new debt instruments are substantially different, the original debt is derecognized and the new debt should be initially
recorded at fair value, with the difference recognized as an extinguishment gain or loss. Based on the analysis, the Company concluded
that the change in terms should be accounted for as an extinguishment. The extinguishment resulted in a loss of $1,865 thousand. The
Company concluded that, since the warrants cannot be exercised prior to the expiry date of the Early Redemption Option, the warrants
are considered embedded in the convertible loan and not freestanding instruments. It also concluded that the prepayment option and the
embedded warrants should not be bifurcated from the debt host. In accordance with ASC 470-20-25-13, if a convertible debt instrument
is issued at a substantial premium, there is a presumption that such premium represents paid-in capital. Since the fair value of the
new convertible loan instrument issued as part of the change in terms are higher than the par value of the loan and the premium is substantial,
the Company allocated the premium to paid in capital and the reminder to the convertible loan.
The
fair value of the conversion feature was estimated using the binomial model. The total fair value of the new instruments is $4.4M (including
the credit line agreements).
Following
are the main estimates and assumptions that were used for the valuation of the new instruments as of the valuation date:
SCHEDULE
OF ESTIMATES AND ASSUMPTIONS OF NEW INSTRUMENTS OF VALUATION DATE
Parameter | |
8%
Note | | |
2%
Note | | |
Warrants | |
Notional
(USD) | |
| 1,500,000 | | |
| 750,000 | | |
| 926,413 | |
Accrued
Coupon (USD) | |
| 224,603 | | |
| 41,945 | | |
| - | |
Coupon
Rate | |
| 8.00 | % | |
| 2.00 | % | |
| - | |
Conversion
Ratio (USD) | |
| 7.00 | | |
| 7.00 | | |
| - | |
Exercise
Price (USD) | |
| - | | |
| - | | |
| 6.24 | |
Stock
Price (USD) | |
| 5.02 | | |
| 5.02 | | |
| 5.02 | |
Expected
Term (years) | |
| 1.79 | | |
| 1.79 | | |
| 1.79 | |
Risk
Free Rate | |
| 0.20 | % | |
| 0.20 | % | |
| 0.20 | % |
Volatility | |
| 72.84 | % | |
| 72.84 | % | |
| 72.84 | % |
Yield | |
| 7.87 | % | |
| 7.84 | % | |
| - | |
b.
During May 2019, the Company entered into a private placement subscription agreement with an investor for $5 million. The lender shall
be entitled, at any time prior to or no later than the maturity date, to convert the outstanding amount, into units of (1) shares of
common stock of the Company at a conversion price per share equal to $7.00 and (2) warrants to purchase an equal number of additional
shares of the Company’s common stock at a price of $7.00 per share.
The
transaction costs were approximately $497 thousand, out of which $97 thousand are stock-based compensation due to issuance of warrants.
c.
In June 2019, the Company entered into private placement subscription agreements with investors for an aggregate amount of $2 million.
The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the outstanding amount, into units
of (1) shares of common stock of the Company at a conversion price per share equal to $7.00 and (2) warrants to purchase an equal number
of additional shares of the Company’s common stock at a price of $7.00 per share.
d.
During October 2019, the Company entered into a Private Placement Subscription Agreement and Convertible Credit Line Agreement (collectively,
the “Credit Line Agreements”) with four non-U.S. investors (the “Lenders”), pursuant to which the Lenders furnished
to the Company access to an aggregate $5.0 million credit line (which consists of $1.25 million from each Lender) (collectively, the
“Credit Line”). Pursuant to the Credit Line Agreements, the Company was entitled to draw down an aggregate of $1 million
(consisting of $250 thousand from each Lender) of the Credit Line in each of October 2019 and November 2019. In each of December 2019,
January 2020 and February 2020, the Company may draw down an additional aggregate of $1 million (consisting of $250 thousand from each
Lender), until the total amount drawn down under the Credit Line reaches an aggregate of $5 million (consisting of $1.25 million from
each Lender), subject to the approval of the Lenders.
Pursuant
to the terms of the Credit Line Agreements and the Notes, the total loan amount, and all accrued but unpaid interest thereon, became
due and payable on the second anniversary of the Effective Date (the “Maturity Date”). The Maturity Date may be extended
by each Lender in its sole discretion and shall be in writing signed by the Company and the Lender. Interest on any amount that has been
drawn down under the Credit Line accrues at a per annum rate of eight percent (8%). At any time prior to or on the Maturity Date, by
providing written notice to the Company, each of the Lenders is entitled to convert its respective drawdown amounts and all accrued interest,
into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at a conversion price
equal to $7.00 per share.
Furthermore,
upon the drawdown of $500 thousand from each Lender and, together with the other Lenders, a drawdown of an aggregate of $2 million under
the Credit Line, the existing warrants of the Lenders to purchase shares of Common Stock shall be amended to extend their exercise date
to June 30, 2021 and the Company will issued to each of the Lenders warrants to purchase 50,000 shares of Common Stock at an exercise
price of $7.00 per share. The new warrants will be exercisable for three (3) years from the Effective Date. During October 2019, such
drawdown was reached and the warrants were issued.
During
the year ended December 2020, the Company repaid principal amount of $2,400 thousand and a total interest amount of $372 thousand to
certain of the credit line investors.
During
the year ended December 2021, the company repaid principal amount of $1,000 thousand and a total interest amount of $140 thousand to
certain of the credit line investors.
See
note 7 (a) (4) regarding the extension of certain of the Credit Line Agreements.
e.
In December 2019, the Company entered into private placement subscription agreements with investors for an aggregate amount of $250 thousand.
The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the outstanding amount, into units
of 1 share of common stock of the Company at a conversion price per share equal to $7.00. In addition, the Company granted the investors
183,481 warrants to purchase an equal number of additional shares of Common Stock at a price of $7.00 per share. The fair value of the
warrants was $124 thousand using the fair value of the shares on the grant date. During 2021, the Company and the investors agreed to
extend the maturity of the loans to December 2022. Based on the analysis, the Company concluded that the change in terms should be accounted
for as a modification.
f. On
January 2, 2020, the Company entered into private placement subscription agreements with investors for an aggregate amount of $250 thousand
of convertible loans. The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the outstanding
amount, into shares of Common Stock of the Company at a conversion price per share equal to $7.00. In addition, the Company granted the
investors 151,428 warrants to purchase an equal number of additional shares of Common Stock at a price of $7.00 per share. During 2021,
the Company and the investors agreed to extend the maturity of the loans to December 2022. Based on the analysis, the Company concluded
that the change in terms should be accounted for as a modification.
h
. On November 2, 2016, the Company entered into unsecured convertible note agreements with accredited or offshore investors for an aggregate
amount of NIS 1 million ($280 thousand). The loan bears a monthly interest rate of 2% and mature on May 1, 2017, unless converted earlier.
On April 27, 2017 and November 2, 2017, the Company entered into extension agreements through November 2, 2017 and May 2, 2018, respectively.
In
March 2018, the investor submitted a notice of its intention to convert into shares of the Company’s common stock the principal
amount and accrued interest of approximately $383 thousand outstanding. A related party of such investor at the same time, exercised
warrants issued in November 2016 to purchase shares of the Company’s Common Stock. The exercise price of the warrants and conversion
price were fixed at $0.52 per share (pre-reverse stock split implemented by the Company in November 2017). There is a significant disagreement
between the Company and these two entities as to the number of shares of Common Stock issuable to these entities, and they contend that
the number of shares of Common Stock issuable to them should not consider the reverse stock split. The Company rejects these contentions
in their entirety and, based on the advice of specially retained counsel, believes that these claims are without legal merit and not
made in good faith. The Company intends to vigorously defend its interests and pursue other avenues of legal address. Through its counsel,
the Company has advised these entities that unless they withdraw their request within a specified period, the Company will cancel the
above referenced agreements and these parties’ right to receive any shares of the Company’s Common Stock. In April 2018,
the Company withdrew the agreements and deposited the shares in total amount of 107,985 issued under those agreements and the principal
amount and accrued interest of the loan in escrow account. The deposit of the principal amount and accrued interest presented as restricted
cash in the balance sheet as of December 31, 2021.
NOTE
8 – LOANS
Terms
of Short-term Loans
SCHEDULE OF LOANS
| |
Currency | |
Interest
Rate | | |
2021 | | |
2020 | |
| |
| |
| | |
December
31, | |
| |
Currency | |
Interest
Rate | | |
2021 | | |
2020 | |
| |
| |
| | |
(in
thousands) | |
Short
term loans | |
USD | |
| 1.00 | % | |
| - | | |
| 145 | |
Total
loans | |
| |
| | | |
$ | - | | |
$ | 145 | |
NOTE
9 – LEASES
The
Company leases research and development facilities, equipment and offices under finance and operating leases. For leases with terms greater
than 12 months, the Company record the related asset and obligation at the present value of lease payments over the term. Many of the
leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease
payments when appropriate.
The
Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company estimated the incremental borrowing
rate to discount the lease payments based on information available at lease commencement.
Manufacturing
facilities
The
Company leases space for its manufacturing facilities in Israel under operating lease agreements. The leasing contracts are for a period
of 3 – 5 years.
Research
and Development facilities
The
Company leases space for its research and development facilities in South Korea under an operating lease agreement. The leasing contracts
are for a period of 2 – 5 years.
Offices
The
Company leases space for offices in Israel under operating leases. The leasing contracts are valid for terms of 5 years. These contracts
are considered as operational leasing and under operating lease right-of-use assets.
Lease
Position
The
table below presents the lease-related assets and liabilities recorded on the balance sheet:
SCHEDULE OF LEASE-RELATED ASSETS AND LIABILITIES
| |
2021 | | |
2020 | |
| |
December
31, | |
| |
2021 | | |
2020 | |
Assets | |
| | |
| |
Operating
Leases | |
| | | |
| | |
Operating
lease right-of-use assets | |
$ | 1,015 | | |
$ | 1,474 | |
| |
| | | |
| | |
Finance
Leases | |
| | | |
| | |
Property,
plants and equipment, gross | |
| 91 | | |
| 99 | |
Accumulated
depreciation | |
| (33 | ) | |
| (17 | ) |
Property
and equipment, net | |
$ | 58 | | |
$ | 82 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current
liabilities | |
| | | |
| | |
Current
maturities of operating leases | |
$ | 481 | | |
$ | 485 | |
Current
maturities of long-term finance leases | |
$ | 18 | | |
$ | 19 | |
| |
| | | |
| | |
Long-term
liabilities | |
| | | |
| | |
Non-current
operating leases | |
$ | 561 | | |
$ | 1,020 | |
Long-term
finance leases | |
$ | 41 | | |
$ | 64 | |
| |
| | | |
| | |
Weighted
Average Remaining Lease Term | |
| | | |
| | |
Operating
leases | |
| 2.3
years | | |
| 3.4
years | |
Finance
leases | |
| 3.2
years | | |
| 4.2
years | |
Weighted
Average Discount Rate | |
| | | |
| | |
Operating
leases | |
| 6.9 | % | |
| 6.7 | % |
Finance
leases | |
| 2.0 | % | |
| 2.0 | % |
Lease
Costs
The
table below presents certain information related to lease costs and finance and operating leases:
SCHEDULE OF LEASE COSTS
| |
2021 | | |
2020 | |
| |
Years
ended December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Operating
lease cost: | |
$ | 514 | | |
| 547 | |
| |
| | | |
| | |
Finance
lease cost: | |
| | | |
| | |
Amortization
of leased assets | |
| 20 | | |
| 17 | |
Interest
on lease liabilities | |
| 1 | | |
| 3 | |
Total
finance lease cost | |
$ | 21 | | |
| 20 | |
The
table below presents supplemental cash flow information related to lease:
SCHEDULE OF SUPPLEMENTAL CASHFLOW INFORMATION
| |
Years
ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
Thousands) | |
Cash
paid for amounts included in the measurement of leases liabilities: | |
| | |
| |
Operating
leases | |
$ | 526 | | |
$ | 515 | |
Finance
leases | |
$ | 20 | | |
$ | 42 | |
| |
| | | |
| | |
Right-of-use
assets obtained in exchange for lease obligations: | |
| | | |
| | |
Operating
leases | |
$ | - | | |
$ | 967 | |
Finance
leases | |
| - | | |
| 366 | |
Undiscounted
Cash Flows
The
table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease
liabilities and operating lease liabilities recorded on the balance sheet.
SCHEDULE OF FINANCE LEASE LIABILITIES AND OPERATING LEASE LIABILITIES
| |
Operating Leases | | |
Finance
Leases | |
Year
ended December 31, | |
| | | |
| | |
2022 | |
$ | 516 | | |
$ | 19 | |
2023 | |
| 338 | | |
| 19 | |
2024 | |
| 181 | | |
| 19 | |
2025 | |
| 54 | | |
| 4 | |
Total
minimum lease payments | |
| 1,089 | | |
| 61 | |
Less:
amount of lease payments representing interest | |
| (47 | ) | |
| (2 | ) |
Present
value of future minimum lease payments | |
| 1,042 | | |
| 59 | |
Less:
Current leases obligations | |
| (481 | ) | |
| (18 | ) |
Long-term
leases obligations | |
$ | 561 | | |
$ | 41 | |
Right-of-use
assets by geographical location were as follows:
SCHEDULE OF RIGHT-OF-USE ASSETS BY GEOGRAPHICAL LOCATION
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Korea | |
$ | 432 | | |
$ | 683 | |
Israel | |
| 365 | | |
| 496 | |
U.S. | |
| 218 | | |
| 295 | |
Total | |
$ | 1,015 | | |
$ | 1,474 | |
NOTE
10 – COMMITMENTS AND LICENSE AGREEMENTS
See
Note 11 for additional commitments for funding of the ventures of the company.
| a. | Tel
Hashomer Medical Research, Infrastructure and Services Ltd (“THM”) |
On
February 2, 2012, the Company’s Israeli Subsidiary entered into a licensing agreement with THM. According to the agreement, the
Israeli Subsidiary was granted a worldwide, royalty bearing, exclusive license to trans-differentiation of cells to insulin producing
cells, including the population of insulin producing cells, methods of making this population, and methods of using this population of
cells for cell therapy or diabetes treatment developed by Dr. Sarah Ferber of THM.
As
consideration for the license, the Israeli Subsidiary will pay the following to THM:
| 1) | A
royalty of 3.5% of net sales; |
| 2) | 16%
of all sublicensing fees received; |
| 3) | An
annual license fee of $15 thousand, which commenced on January 1, 2012 and shall be paid
once every year thereafter. The annual fee is non-refundable, but it shall be paid each year
against the royalty noted above, to the extent that such are payable, during that year; and |
| 4) | Milestone
payments as follows: |
| a. | $50
thousand on the date of initiation of Phase I clinical trials in human subjects; |
| b. | $50
thousand on the date of initiation of Phase II clinical trials in human subjects; |
| c. | $150
thousand on the date of initiation of Phase III clinical trials in human subjects; |
| d. | $750
thousand on the date of initiation of issuance of an approval for marketing of the first
product by the FDA; and |
| e. | $2
million when worldwide net sales of Products (as defined in the agreement) have reached the
amount of $150 million for the first time, (the “Sales Milestone”). |
As
of December 31, 2021, the Israeli Subsidiary had not reached any of these milestones.
In
the event of closing of an acquisition of all of the issued and outstanding share capital of the Israeli Subsidiary and/or consolidation
of the Israeli Subsidiary or the Company into or with another corporation (“Exit”), the THM shall be entitled to choose whether
to receive from the Israeli Subsidiary a one-time payment based, as applicable, on the value of either 463,651 shares of common stock
of the Company at the time of the Exit or the value of 1,000 shares of common stock of the Israeli Subsidiary at the time of the Exit.
b.
Department De La Gestion Financiere Direction De L’analyse Financiere (“DGO6”)
(1)
On November 17, 2014, the Belgian Subsidiary, received the formal approval from the DGO6 for a Euro 2 million ($2.4 million) support
program for the research and development of a potential cure for Type 1 Diabetes. The financial support was composed of Euro 1.085 million
(70% of budgeted costs) grant for the industrial research part of the research program and a further recoverable advance of Euro 930
thousand (60% of budgeted costs) of the experimental development part of the research program. In December 2014, the Belgian Subsidiary
received advance payment of Euro 1.209 million under the grant. The grants are subject to certain conditions with respect to the Belgian
Subsidiary’s work in the Walloon Region. In addition, the DGO6 is also entitled to a royalty upon revenue being generated from
any commercial application of the technology. In 2017 the Company received by the DGO6 final approval for Euro 1.8 million costs invested
in the project out of which Euro 1.2 million funded by the DGO6. As of December 31, 2021, the Company repaid to the DGO6 a total amount
of approximately $145 thousand and amount of $264 thousand was recorded in other payables.
(2)
In April 2016, the Belgian Subsidiary received the formal approval from DGO6 for a Euro 1.3 million ($1.5 million) support program for
the development of a potential cure for Type 1 Diabetes. The financial support was awarded to the Belgium Subsidiary as a recoverable
advance payment at 55% of budgeted costs, or for a total of Euro 717 thousand ($800 thousand). The grant will be paid over the project
period. The Belgian Subsidiary received advance payment of Euro 438 thousand ($537 thousand). Up through December 31, 2021, an amount
of Euro 358 thousand ($406 thousand) was recorded as deduction of research and development expenses and an amount of Euro 74 thousand
was recorded as advance payments on account of grant.
(3)
On October 8, 2016, the Belgian Subsidiary received the formal approval from the DGO6 for a Euro 12.3 million ($12.8 million) support
program for the GMP production of AIP cells for two clinical trials that will be performed in Germany and Belgium. The project will be
conducted during a period of three years commencing January 1, 2017. The financial support is awarded to the Belgium subsidiary at 55%
of budgeted costs, a total of Euro 6.8 million ($7 million). The grant will be paid over the project period. On December 19, 2016, the
Belgian Subsidiary received a first payment of Euro 1.7 million ($2 million). As of December 31, 2021 the program is pending for extension
approval.
(4)
In December 2020, the Belgian Subsidiary received the formal approval from DGO6 for a Euro 2.9 million ($3.5 million) support program
for research on Dermatitis Treatments and Wound Healing Using Cell Regenerative Technologies. The financial support was awarded to the
Belgium Subsidiary as a recoverable advance payment at 60% of budgeted costs, or for a total of Euro 1.7 million ($2.1 million). The
grant will be paid over the project period. The Belgian Subsidiary received advance payments of Euro 301 thousand ($366 thousand) in
2020 and of Euro 392 thousand ($445 thousand) in 2021. The research program started in 2021.
c.
Israel-U.S. Binational Industrial Research and Development Foundation (“BIRD”)
On
September 9, 2015, the Israeli Subsidiary entered into a pharma Cooperation and Project Funding Agreement (CPFA) with BIRD and Pall Corporation,
a U.S. company. BIRD awarded a conditional grant of up to $400 thousand each (according to terms defined in the agreement), for a joint
research and development project for the use of Autologous Insulin Producing (AIP) Cells for the Treatment of Diabetes (the “Project”).
Company received a total of $299 thousand under the grant. The project was completed in 2019. The grant is to be repaid at the rate of
5% of gross sales generated from the Project. To date no sales have been generated.
d.
Korea-Israel Industrial Research and Development Foundation (“KORIL”)
On
May 26, 2016, the Israeli Subsidiary and the Korean Subsidiary entered into a pharma Cooperation and Project Funding Agreement (CPFA)
with KORIL. KORIL will make a conditional grant of up to $400 thousand to each company (according to terms defined in the agreement),
for a joint research and development project for the use of AIP Cells for the Treatment of Diabetes (the “Project”). The
Project started on June 1, 2016. The project was completed in 2021 and the Company is currently awaiting the grant audit report from
KORIL. The grant is to be repaid at the yearly rate of 2.5% of gross sales. To date no sales have been generated. As of December 31,
2021, the Israeli Subsidiary and the Korean Subsidiary received $440 thousand under the grant.
e.
BIRD Secant
On
July 30, 2018, Orgenesis Inc and OBI entered into a collaboration agreement with Secant Group LLC (“Secant”). Under the agreement,
Secant will engineer and prototype 3D scaffolds based on novel biomaterials and technologies involving bioresorbable polymer microparticles,
while OBI will provide expertise in cell coatings, cell production, process development and support services. Under the agreement, Orgenesis
is authorized to utilize the jointly developed technology for its autologous cell therapy platform, including its Autologous Insulin
Producing (“AIP”) cell technology for patients with Type 1 Diabetes, acute pancreatitis and other insulin deficient diseases.
In 2018, OBI entered into a Cooperation and Project Funding Agreement (CPFA) with the BIRD fund, which provided certain grant funding,
and Secant.
As
of December 31, 2021, OBI had received a total amount of $425 thousand under the grant and the project was completed. The grant is to
be repaid at the yearly rate of 5% of gross sales. To date no sales have been generated.
| f. | Hemogenyx
Pharmaceuticals PLC. |
On
October 18, 2018, the Company and Hemogenyx Pharmaceuticals PLC., a corporation with its registered office in the United Kingdom and
Hemogenyx-Cell (“H-Cell”), a corporation with its registered office in Belgium (together “Hemo”), who are engaged
in the development of cell replacement bone marrow therapy technology, entered into a Collaboration Agreement (the “Hemo Agreement”)
pursuant to which the parties will collaborate in the funding, continued development, and commercialization of the Hemo technology via
Hemo. Pursuant to the Hemo agreement the Company and Hemogenyx LLC (“Hemo-LLC”) (a wholly owned US subsidiary of Hemo) entered
into a loan agreement on November 7, 2018 according to which the Company agreed to loan Hemo-LLC not less than $1 million by way of a
convertible loan. On November 25, 2018 the Company and Hemo entered into a License and Distribution agreement according to which Company
received the worldwide rights to market the products under the agreement in consideration for the payment of a 12% royalty all subject
to the terms of the agreement. As of December 31, 2021, no royalty incurring sales were made. On November 25, 2018, the Company and H-Cell
signed an Exclusive Manufacturing agreement according to which the Company will receive the exclusive right to manufacture certain of
H-Cell products. The Company recorded the loan amounts as research and development expenses under ASC 730-10-50 and 20-50 in 2018 and
2019. The loan amounts were repaid in 2021 and presented as other income.
g.
Immugenyx LLC.
On
October 16, 2018, the Company and Immugenyx LLC., a corporation with its registered office in the USA (“Immu”), which is
engaged in the development of technology related to the production and use of humanized mice entered into a Collaboration Agreement (the
“Immu Agreement”) pursuant to which the parties will collaborate in the funding, continued development, and commercialization
of the Immu technology. Pursuant to the agreement, the Company received the worldwide rights to market the products under the agreement
in consideration for the payment of a 12% royalty all subject to the terms of the agreement. As of December 31, 2021 no royalty incurring
sales were made. Pursuant to the Immu agreement the Company and Immu entered into a loan agreement on November 7, 2018 according to which
the Company agreed to loan Immu not less than US$1 million by way of a convertible loan. The Company recorded the loan amounts as research
and development expenses under ASC 730-10-50 and 20-50 in 2018 and 2019. The loan amounts were repaid in 2021 and were presented as other
income.
h.
BG Negev Technologies and Applications (“BGN”).
On
August 2, 2018, Company entered into a licensing agreement with BGN. According to the agreement, the Company was granted a worldwide,
royalty bearing, exclusive license to develop and commercialize a novel alginate scaffold technology for cell transplantation focused
on autoimmune diseases.
On
November 25, 2018, the Company entered into a further licensing agreement with BGN. According to the agreement, the U.S. Subsidiary was
granted a worldwide, royalty bearing, exclusive license to develop and commercialize technology directed to RAFT modification of polysaccharides
and use of a bioreactor for supporting cell constructs.
As
of December 31, 2021 no royalty incurring sales were made.
In
January 2022, the Company terminated both of the licensing agreements with BGN effective April 26, 2022.
i.
Sponsored Research and Exclusive License Agreement with Columbia University
Effective
April 2, 2019, the Company and The Trustees of Columbia University in the City of New York, a New York corporation, (“Columbia”)
entered into a Sponsored Research Agreement (the “SRA”) whereby the Company will provide financial support for studying the
utility of serological tumor marker for tumor dynamics monitoring. Under the terms of the SRA, the Company shall pay $300 thousand per
year for three years, or for a total of $900 thousand, with payments of $150 thousand due every six months.
Effective
April 2, 2019, the Company and Columbia entered into an Exclusive License Agreement (the “Columbia License Agreement”) whereby
Columbia granted to the Company an exclusive license to discover, develop, manufacture, sell, and otherwise distribute certain product
in the field of cancer therapy. In consideration of the licenses granted under the Columbia License Agreement, the Company shall pay
to Columbia (i) a royalty of 5% of net sales of any product sold which incorporates a licensed Columbia patent and (ii) 2.5% of net sales
of other products. In addition, the Company shall pay a flat $100 thousand fee to Columbia upon the achievement of each regulatory milestone.
As of December 31, 2021, no royalty incurring sales were made.
j.
Regents of the University of California
In
December 2019, the Company and the Regents of the University of California (“University”) entered into a joint research agreement
in the field of therapies and processing technologies according to an agreed upon work plan. According to the agreement, the Company
will pay the University royalties of up to 5% (or up to 20% of sub-licensing sales) in the event of sales that includes certain types
of University owned IP. As of December 31, 2021, no royalty incurring sales were made.
k.
Caerus Therapeutics Inc
In
October 2019, the Company and Caerus Therapeutics (“Caerus”), a Virginia company, concluded a license agreement whereby Caerus
granted the Company an exclusive license to all Caerus IP relating to Advance Chemeric Antigen Vectors for Targeting Tumors for the development
and/or commercialization of certain licensed products. In consideration for the License granted to the Company under this Agreement,
the Company shall pay Caerus annual maintenance fees and royalties of sales of up to 5% and up to 18% of sub-license fees. As of December
31, 2021, no royalty incurring sales were made.
l.
Tissue Genesis, LLC (“Tissue Genesis”)
Included
in the Koligo acquisition (See Note 4) were the assets of Tissue Genesis. The Company is committed to paying the previous owners of Tissue
Genesis up to $500 thousand upon the achievement of certain performance milestones and earn-out payments on future sales provided that
in no event will the aggregate of the earn-out payments exceed $4 million. To date, no milestones have been reached.
m.
University of Louisville research foundation (“ULRF”)
Koligo
had exclusively licensed patents and technology from the ULRF related to the revascularization and 3D printing of cell and tissue for
transplant (“ULRF licensed products”). The Company is committed to utilizing commercial reasonable efforts to achieving certain
milestones regarding the ULRF licensed products. Pursuant to the license, Company will pay ULRF royalties of 3.5% of sales and certain
performance milestones. During the year ended December 31, 2021, Company paid $40 thousand under its obligations.
n.
Neuro-Immunotherapy Exclusive License Agreement
During
the twelve months ended December 31, 2021, the Company entered into an exclusive license agreement in the field of neuro-immunotherapy.
Pursuant to the agreement, the Company received an exclusive, worldwide, sublicensable, royalty-bearing license of certain technology
and patents for the purpose of developing, manufacturing, using, and commercializing the licenced technology. Royalties of between 0.5%
and 5% on royalty-bearing sales are payable for up to 15 years from the date of first sale in any country in which licensed products
are sold, and sublicense fees are payable at the rate of 12% on sublicense income (but no less than two percent (2.0%) of sublicenses’
net sales). Pursuant to the agreement, the Company is required to invest within thirty-six (36) months of the effective date an aggregate
amount of at least $2 million in its efforts to develop the licensed technology.
o.
Savicell
On
June 14, 2021, the Company and Savicell Ltd (“Savicell”) entered into a collaboration agreement (the “Savicell Agreement”)
to collaborate in the evaluation, continued development, validation, and use of Savicell’s platform designed for the early detection
and diagnosis of diseases and conditions and for quality control and monitoring purposes, in conjunction with the Company’s systems.
Pursuant to the Savicell Agreement, the Company will provide to Savicell funding for the performance of certain tasks agreed upon by
the parties in a work plan. In consideration for such funding, Savicell will supply the Company with products developed under the Savicell
Agreement at preferential rates and grant to the Company a worldwide exclusive licence to sell such products in the Company’s point-of-care
network of hospitals, clinics and institutions for quality control and monitoring of manufacturing and processing of autologous immune
cells manipulated by cell and gene therapies. The Company will be required to pay a 10% royalty for all gross sales of such products
developed under the Savicell Agreement. As of December 31, 2021, no royalty incurring sales were made.
p.
Stromatis Pharma
On
June 15, 2021, the Company and Stromatis Pharma Inc. (“Stromatis”) entered into a Collaboration and Sublicense Agreement
(the “Stromatis Agreement”) to collaborate in refining methods for GMP manufacturing of CAR-T/CAR-NK CT109; and the development
and validation of the Stromatis technology as it relates to the CAR-T/CAR-NK CT109 antibody up to and inclusive of filing of Investigational
New Drug Application relating to Stromatis’ CAR-T/CAR-NK CT109 antibody (“Licensed Product”), in accordance with the
agreed project plan (“Project”). The Company will fund the Project by providing Stromatis an amount of $1.2 million such
funding to be provided based on approved projects. Stromatis will grant the Company certain perpetual, irrevocable royalty free and fully
paid-up exclusive rights to manufacture, process and supply the Licensed Product (“Manufacturing Rights”) and perpetual,
irrevocable, royalty bearing exclusive rights to market and sell and offer for sale the Licensed Product within the Company’s point
of care network (“Marketing Rights”). As of December 31, 2021, no royalty incurring sales were made.
Stromatis
has the option to convert the exclusive Manufacturing Rights to non-exclusive rights subject to repayment by Stromatis of an amount equal
to funding provided by the Company and an additional payment by Stromatis of an ongoing revenue share of five percent (5%) of revenues
of any kind received by Stromatis or its affiliates from the sale or transfer of Licensed Products or license of rights under the licensed
technology in relation to the Licensed Products. The Company shall pay Stromatis in consideration for the Marketing Rights and royalties
equal to 12% of net revenues of Licensed Products received by the Company. The Company advanced to Stromatis an initial sum of $500 thousand
under the Stromatis Agreement, which was recorded as cost of services and other research and development expenses, net.
q.
Helmholtz Zentrum München Deutsches Forschungszentrum für Gesundheit und Umwelt (GmbH)) (“HMGU”)
During
September 2021, HMGU granted an exclusive licence under HGMU owned patent rights and non-exclusive license under HGMU know how and licensed
materials, to the Company in the field of certain human stem cells. The Company incurred a one-time up-front payment of approximately
$60 thousand and annual license maintenance fees of between $18 thousand and $36 thousand. In addition, payments will be due by the Company
upon certain milestones. The agreement also includes payment of royalties of between 3% and 4% on net sales of licensed product (with
a minimum annual royalty of Euro 200,000, creditable against royalties on net sales incurred during such contract year) and 5% in service
revenues and payment of between 10% and 18% on sublicense revenues.
NOTE
11 – COLLABORATIONS
a.
Adva Biotechnology Ltd.
On
January 28, 2018, the Company and Adva Biotechnology Ltd. (“Adva”), entered into a Master Services Agreement (“MSA”),
pursuant to which the Company and/or its affiliates provided certain services relating to development of products for Adva.
In
consideration for and subject to the fulfillment by the Company of certain funding commitments which were completed in 2019, Adva agreed
that upon completion of the development of the products, the Company and/or its affiliates and Adva shall enter into a supply agreement
pursuant to which for a period of eight (8) years following execution of such supply agreement, the Company and/or its affiliates (as
applicable) is entitled (on a non-exclusive basis) to purchase the products from Adva at a specified discount pricing from their then
standard pricing. The Company and/or its affiliates were also granted a non-exclusive worldwide right to distribute such products, directly
or indirectly. The MSA shall remain in effect for 10 years unless earlier terminated in accordance with its terms.
b.
IRB Approval for Liver Cell Collection
On
April 29, 2019, the Company received Institutional Review Board (“IRB”) approval to collect liver biopsies from patients
at Rambam Medical Center located in Haifa, Israel for a planned study to confirm the suitability of liver cells for personalized cell
replacement therapy for patients with insulin-dependent diabetes resulting from total or partial pancreatectomy. The liver cells are
intended to be bio-banked for potential future clinical use.
The
goal of the proposed study, entitled “Collection of Human Liver Biopsy and Whole Blood Samples from Type 1 Diabetes Mellitus (T1DM),
Total or Partial Pancreatectomy Patients for Potential use as an Autologous Source for Insulin Producing Cells in Future Clinical Studies,”
is to confirm the suitability of the liver cells for personalized cell replacement therapy, as well as eligibility of patients to participate
in a future clinical study, as defined by successful AIP cell production from their own liver biopsy. The secondary objective of the
study is to evaluate patients’ immune response to AIPs based on the patient’s blood samples and followed by subcutaneous
implantation into the patients’ arm which would represent the first human trial. The Company has developed a novel technology based
on technology licensed from Tel Hashomer Medical Research Infrastructure and Services Ltd., utilizing liver cells as a source for AIP
cells as replacement therapy for islet transplantation.
During
the study, liver samples will be collected and then processed and stored in specialized, clinical grade, tissue banks for potential clinical
use. The propagated cells will be maintained in a tissue bank and are intended to be utilized in a future clinical study, in which the
cells will be transdifferentiated and administered back to the patients as a potential treatment. This personalized autologous process
will be performed under our POC platform in which the patient liver samples are processed, cryopreserved and potentially re-injected,
all in the medical center under clinical grade/GMP level conditions.
In
June 2019, the Company received additional Institutional Review Board (“IRB”) approval to collect liver biopsies from patients
at a leading medical center in USA for a planned study to confirm the suitability of liver cells for personalized cell replacement therapy
for patients with insulin-dependent diabetes resulting from total pancreatectomy (the granted Orphan Drug Designation indication). Two
liver samples have been processed and stored for potential clinical use.
c.
FDA Approval for Orphan Drug Designation for AIP Cells
On
June 11, 2019, the FDA granted Orphan Drug Designation for the Company’s AIP cells as a cell replacement therapy for the treatment
of severe hypoglycemia-prone diabetes resulting from total pancreatectomy (“TP”) due to chronic pancreatitis.
d.
Johns Hopkins University
During
the year ended December 31, 2021, the Company and Johns Hopkins University entered into a sublease and construction agreement for the
establishment of a clinical therapeutic development and point of care center in Maryland of approximately 6,830 rentable square feet.
Pursuant to the agreement, the Company will pay for certain leasehold improvements in the premises according to plans and specifications
to be agreed upon. The Company advanced an initial $510 thousand for this purpose. The costs of the leasehold improvements will be offset
by up to $5 million pursuant to a grant from the Board of Public Works of the State of Maryland to Johns Hopkins University. The annual
base rent is initially $260 thousand per year, increasing to $324 thousand per year over the 10-year initial lease term. The Company
has an option to renew the sublease for two additional periods of five years each under the same terms and conditions. The Company is
expected to gain occupancy of the premises during the second quarter of 2022.
e.
Joint venture agreements
The
Company has entered into joint venture agreements (“JVAs”) with its joint venture partners (Company and partner are referred
to as “Parties”) to facilitate the collaboration in the field of CGT development and development of the Company’s worldwide
POCare network. During 2021, the Company and / or JV partner continued the POCare network expansion in each of the territories as relevant.
The provisos and the table below summarize the major agreements. CGT and POCare activities covered by the JVAs include the development,
marketing, clinical development, and commercialization of the Company’s and / or partner’s products within defined territories.
The extent of the collaboration is set out in each agreement.
Unless
otherwise stated in the table below the JVAs include the following provisos (“Provisos”):
1. | The
incorporation of a joint venture entity (“JVE”) in which the Company will hold
between 49% and 51% of the equity. |
2. | The
partner will manage the joint venture activities until the JVE is incorporated. |
3. | The
JVE will be managed by a steering committee consisting of 3 members which will act as the
entity’s board of directors. The Company is entitled to appoint 1 member, the partner
is entitled to appoint 1 member, and Company and partner will jointly appoint the third member. |
4. | The
Company has the right to exercise a call option to acquire the partner’s share in the
JVE based on the occurrence of certain events and according to an agreed upon mechanism. |
5. | The
funding of the parties’ investment in the joint venture share may be made in the form
of cash investment and / or in-kind services. The Company’s cash investment may be
in the form of additional shares, a convertible loan, and/or procured services. |
6. | Each
of the parties may agree to provide additional funding to the JVE to cover the operation
costs and such additional funding may be in the form of in-kind contributions. The Company’s
investments may be made in the form of a cash investment for additional shares, a convertible
loan, and/or procured services. Procured services refer to certain services that the Company
has engaged the partner or the JVE to provide the Company with, in support of Company’s
activity. All results of these procured services shall be owned by Company. |
7. | As
appropriate, the parties will grant to the JVE an exclusive or nonexclusive, sublicensable,
royalty-bearing, right and license to the relevant party’s background IP as required
solely to manufacture, distribute and market and sell the party’s products within the
territory. Each party shall receive royalties in an amount of ten percent (10%) of the net
sales generated by the JVE and/or its sublicensees. |
8. | Once
the JVE is profitable, the Company will be entitled (in addition to any of its rights as
the holder of the JVE) to an additional share of fifteen percent (15%) of the JVE’s
GAAP profit after tax, over and above all rights granted pursuant to Company’s participating
interest in the JVE. |
9. | Unless
otherwise stated, the relevant JVE had not been incorporated by December 31, 2021. |
Name
of party (and country of origin) |
|
POC
Territory |
|
Notes |
Theracell
Advanced Biotechnology SA (Greece) |
|
Greece,
Turkey, Cyprus, Israel and Balkans |
|
(1) |
Broaden
Bioscience and Technology Corp (USA) |
|
Certain
projects in China and the Middle East |
|
|
Mircod
LLC (US) |
|
Russia |
|
(2) |
Image
Securities FZC (UAE) (a related party) |
|
India |
|
(3) |
Cure
Therapeutics (Korea) |
|
Korea
and Japan |
|
|
Kidney
Cure Ltd (Israel) |
|
N
/ A |
|
(4) |
Sescom
Ltd (Israel) |
|
N
/ A |
|
(5) |
Educell
D.O.O
(Slovenia) |
|
Croatia,
Serbia and Slovenia |
|
(6) |
Med
Centre for Gene and Cell Therapy FZ-LLC
(UAE) |
|
UAE |
|
|
Mida
Biotech B.V.
(Netherlands) |
|
Netherlands,
Lithuania, Spain, Switzerland, Germany, Belgium or any other countries within West Europe |
|
(7) |
First
Choice International Company, Inc (USA) |
|
Panama
and certain other Latin American countries |
|
(8) |
SBH
Sciences Inc (USA) |
|
N
/ A |
|
(9) |
Celleska
Pty Ltd (Australia) |
|
Australia |
|
(10) |
Revitas
SA (Belgium) |
|
N
/ A |
|
(11) |
Deep
Med IO Ltd. (UK) |
|
N
/ A |
|
(12) |
(1) | The
Theracell JVE was incorporated in Greece under the name of Theracell Laboratories Ltd. (See
Note 12). In November 2021, the Company loaned approximately $800 thousand to Theracell the
proceeds of which will be used to by Theracell to guarantee its obligations under a lease
agreement for a biopark facility in Greece which may also be used for the Company’s
POC activities. The loan bears 8% annual interest and will be repaid at the termination of
the lease. The lease period is 20 years. The loan is shown as a long-term asset on the balance
sheet. The Company also loaned approximately $287 thousand as part of its obligations under
the JVA to Theracell Laboratories Ltd. The 3-year loan bears interest at the annual rate
of 8% and has been shown as a long-term asset on the balance sheet. |
(2) | Under
the Mircod JVA, provisos 7 and 8 do not apply. Subject to payment by the Company of the contribution
amount, the JVA will grant Company an exclusive, perpetual, irrevocable, royalty free and
fully paid up and sublicensable license to use the Project IP for research and development
and for the manufacturing, processing, supplying, and use of products based on point of care
manufacturing and/or processing of treatments for patients and for use in hospitals, medical
centers and academic institution settings solely outside the territory. In order for the
Company to fulfil its obligations pursuant to proviso 6, the Parties concluded a convertible
loan agreement pursuant to which Company shall lend to Mircod Biotech Inc up to $5 million.
Mircod Biotech Inc., performs technological development work ordered by Company. The loan
bears simple interest in the amount of 6% annually. During 2021, the Company had transferred
$1,640 thousand under the loan agreement. The Company recorded the loan amounts as research
and development expenses under ASC 730. |
(3) | On
August 24, 2021, the Company entered into a convertible loan agreement with Image whereby,
pursuant to the terms of the Image joint venture agreement, the Company agreed to loan Image
up to $5 million. The loan bears interest at the rate of 6% and is subject to repayment by
August 21, 2022, unless the Company agrees to an extension or the loan is converted into
shares of Image or, if established, Image’s Indian joint venture. As of December 31,
2021, the Company transferred $3 million to Image under the loan agreement, and this has
been reflected as a short-term asset on the Company’s balance sheet. |
(4) | The
Kidney Cure JVE was incorporated in Switzerland under the name of Butterfly Biosciences Sarl
(“BB”) (See Note 12). The Company recorded the expenses paid to BB as research
and development expenses under ASC 730. |
(5) | Under
the Sescom JVA, the parties will collaborate in the field of the assessment of relevant tools
and technologies to be used in the Company’s information security system (the “ISS”);
(ii) the implementation of the ISS within the Company and in the Company’s point-of-care
network; and (iii) the operation and maintenance of the ISS. Provisos 7 and 8 do not apply
to this JVA. Company has agreed to provide the Sescom JVE with: (a) a non-exclusive, not
transferable and non-sublicensable worldwide royalty-free license to use its background IP
to the extent required for carrying out certain activities by the Sescom JVE; and (b) access
to its point-of-care network and relevant data to be used for the certain activities. The
Company recorded the expenses paid to Sescom under the JVA as research and development expenses
under ASC 730. |
(6) | During
2021, the Company and Educell entered into a convertible loan agreement whereby the Company,
pursuant to its obligations under the JVA, agreed to loan up to $1.2 million. As at December
31, 2021, the Company had transferred $970 thousand under the loan agreement. The Company
recorded the loan amounts as research and development expenses under ASC 730. The loan bears
interest at the annual rate of 4.5% and is repayable after 5 years. At Company’s election,
the loan is convertible into equity of borrower, or JVE entity if incorporated, at a valuation
to be determined by an independent third party. |
(8) | Under
the First Choice JVA, each party shall, subject to fulfilment of the party’s JVA, grant
the Panama JV Entity an exclusive license to certain intellectual property of the part to
develop and commercialize the party’s products in the territory, subject to minimum
sales obligations. In consideration of such license, the Panama JV shall pay the relevant
part royalties at the rate of 15% of the Panama JVE net sales of party’s products sold
in the territory. The First Choice JVE will be managed by a steering committee consisting
of 5 members which will act as the entity’s board of directors. Each of the Partners
is entitled to appoint 2 members, and Company and partner will jointly appoint the fifth
member. Under the First Choice JVA, provisos 5,6,7 and 8 do not apply. There was no material
activity under the First Choice JVA during 2021. |
(9) | Pursuant
to the SBH JVA the parties will collaborate in the field of gene and cell therapy development,
process and services of bio-exosome therapy products and services in the areas of diabetes,
liver cells and skin applications, including wound healing. According to the JVA, the board
of directors of the SBH JVE shall be comprised of three directors with one appointed by SBH
and two appointed by the Company. Provisos 7 and 8 do not apply to the SBH JVA. There was
no material activity under the SBH JVA during 2021. |
(10) | The
Celleska JVA was signed in 2021. |
(11) | The
Revitas JVE was incorporated in Belgium under the name of RevaCel Srl during 2021 (See Note
12). The Company holds 51% of the share capital of RevaCel and has the right to appoint two
members to the RevaCel board of directors. The Company’s partner, Revatis SA, (a Belgian
entity) holds the remaining 49% and has the right to appoint two members to the Revacel board
of directors. The fifth RevaCel board member will be an independent industry expert appointed
with the mutual agreement of the Company and Revatis SA. The Company recorded the expenses
paid to Revitas and RevaCel under the JVA as research and development expenses under ASC
730. |
(12) | In
November 2021, Deep Med IO Ltd (“Deep Med”) and Company entered into a JVA. The
parties agreed to collaborate in the development and commercialization of an AI-powered system
to be used in the manufacturing and/or quality control of CGTs, in accordance with an agreed
upon work plan. Under the JVA, the Company committed to provide Deep Med with funding in
the amount of up to $3 million at an agreed upon valuation (the “Funding”), for
carrying out the Project in accordance with the work plan. Company was granted an option,
during the period ending upon the earlier of (i) three years after the effective date of
the JVA or (ii) the next financing round of the Deep Med (in which at least $1 million is
invested in the capital of Deep Med), to invest additional amounts of up to $3 million in
Deep Med based on a pre-money valuation of $6 million. The Company recorded the expenses
paid to Deep Med under the JVA as research and development expenses under ASC 730. |
NOTE
12 – INVESTMENTS IN ASSOCIATES, NET
a.
Theracell Laboratories Private Company
During
2020, the Company and Theracell, pursuant to the Greek JVA (See Note 11) incorporated the Greek JVA entity known as Theracell Laboratories
Private Company (“TLABS”). The Theracell Project activities will be run through TLABS. The Company and Theracell each hold
a 50% participating interest in TLABS. Due to the Company’s significant influence over the JVE the Company applies the equity method
of accounting.
b.
Butterfly Biosciences Sarl
During
2020, the Company and Kidney Cure (“KC”), pursuant to the Kidney Cure JVA (See Note 11) incorporated the KC JV Entity known
as Butterfly Biosciences Sarl (“BB”) in Switzerland. BB will be involved in the (i) implementation of a point-of-care strategy;
(ii) assessment of the options for development and manufacture of various cell-based types (including kidney derived cells, MSC cells,
exosomes, gene therapies) development; and (iii) development of protocols and tests for kidney therapies (the “BB Project”).
The Company holds a 49% participating interest in BB and Kidney Cure holds the remaining 51%. Due to the Company’s significant
influence over the JVE the Company applies the equity method of accounting.
c.
RevaCel
During
2021, the Company and Revatis S.A (“Revatis”), pursuant to the Revatis JVA (See Note 11) incorporated the Revatis JV Entity
known as RevaCel Srl (“RevaCel”) in Belgium. RevaCel will develop products in the field of muscle-derived mesenchymal stem/progenitor
cells. The Company holds a 51% participating interest in RevaCel and Revatis holds the remaining 49% and is entitled to appoint 2 of
the 5 members of RevaCel’s board. Due to the Company’s significant influence over the JVE the Company applies the equity
method of accounting.
d.
The table below sets forth a summary of the changes in the investments for the years ended December 31, 2021 and December 31, 2020:
SCHEDULE OF CHANGES IN INVESTMENTS
| |
2021 | | |
2020 | |
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Opening
balance | |
$ | 175 | | |
$ | - | |
Investments
during the period | |
| 260 | | |
| 69 | |
Share
in net loss of associated companies | |
| (272 | ) | |
| 106 | |
Exchange
rate differences | |
| (11 | ) | |
| - | |
Total | |
$ | 152 | | |
$ | 175 | |
Ending
balance | |
$ | 152 | | |
$ | 175 | |
NOTE
13 – EQUITY
a.
Financings
On
January 20, 2020, the Company entered into a Securities Purchase Agreement (the “January Purchase Agreement”) with certain
investors pursuant to which the Company issued and sold, in a private placement (the “Offering”), 2,200,000 shares of Common
Stock at a purchase price of $4.20 per share (the “Shares”) and warrants to purchase up to 1,000,000 shares of Common Stock
at an exercise price of $5.50 per share (the “Warrants”) which are exercisable between June 2021 and January 2023. The Company
received gross proceeds of approximately $9.24 million before deducting related offering expenses in the amount of $0.8 million. The
fair value of those warrants as of the date of grant using the Black-Scholes valuation model was $1.911 million.
b.
Tamir Biotechnology, Inc.
For
the acquisition of Tamir, see Note 4.
As
aggregate consideration for the acquisition, the Company issued an aggregate of 3,400,000 shares of Common Stock to Tamir.
c.
Koligo Therapeutics Inc.
For
the acquisition of Koligo, see Note 4.
Pursuant
to the terms of the Merger Agreement, at the Effective Time, the shares of capital stock of Koligo that were issued and outstanding immediately
prior to the Effective Time were automatically cancelled and converted into the right to receive, subject to customary adjustments, an
aggregate of 2,063,713 shares of Company common stock which have been issued to Koligo’s accredited investors (with certain non-accredited
investors being paid solely in cash in the amount of approximately $20 thousand). In addition, the Company issued 66,910 shares to Maxim
Group LLC for advisory services in connection with the Merger.
d.
Warrants
A
summary of the Company’s warrants granted to investors and as finder’s fees as of December 31, 2021, and December 31, 2020
and changes for the periods then ended is presented below:
SCHEDULE OF WARRANTS ACTIVITY
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
Number
of Warrants
| | |
Weighted Average Exercise
Price $ | | |
Number
of Warrants
| | |
Weighted Average Exercise
Price $ | |
Warrants
outstanding at the beginning
of the period | |
| 7,070,241 | | |
| 6.20 | | |
| 6,010,087 | | |
| 6.35 | |
Changes
during the period: | |
| | | |
| | | |
| | | |
| | |
Issued | |
| 926,413 | | |
| 6.24 | | |
| 1,344,606 | | |
| 5.64 | |
Exercised | |
| (319,811 | ) | |
| 6.19 | | |
| - | | |
| - | |
Expired | |
| (4,634,323 | ) | |
| 6.29 | | |
| (284,452 | ) | |
| 6.53 | |
Warrants
outstanding and exercisable at end of the period* | |
| 3,042,521 | | |
| 6.09 | | |
| 7,070,241 | | |
| 6.20 | |
During
the year ended December 31, 2021, the Company received approximately $1.9 million from the exercise of warrants for the purchase of the
Company’s Common Stock at a weighted average price of $6.24, and 305,523 shares were issued accordingly.
As
of December 31, 2021 and December 31, 2020, there are no warrants that are subject to exercise price adjustments.
e.
Treasury shares
During
the year ended December 31, 2021, the Company repurchased its shares under a stock repurchase plan (the “Stock Repurchase Plan”).
The following table summarizes the share repurchase activity pursuant to the Stock Repurchase Plan during the year ended December 31,
2021.
SCHEDULE
OF STOCK REPURCHASE PLAN
| |
Total
Number of Shares Purchased | | |
Average
Price Paid per Share | | |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | |
Maximum
Value that May Yet Be Purchased Under the Plans or Programs | |
| |
| | |
| | |
| | |
(in
thousands) | |
January
2021 | |
| 2,306 | | |
$ | 4.45 | | |
$ | 10,255 | | |
$ | 9,740 | |
April
2021 | |
| 8,850 | | |
| 4.49 | | |
| 39,730 | | |
| 9,699 | |
May
2021 | |
| 195,625 | | |
| 4.34 | | |
| 848,234 | | |
| 8,841 | |
November
2021 | |
| 24,477 | | |
| 4.32 | | |
| 105,806 | | |
| 8,734 | |
| |
| 231,258 | | |
$ | 4.34 | | |
$ | 1,004,025 | | |
$ | 8,734 | |
The
following table summarizes the share repurchase activity from the inception of the Stock Repurchase Plan through December 31, 2020.
| |
Total
Number of Shares Purchased | | |
Average
Price Paid per Share | | |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | |
Maximum
Value that May Yet Be Purchased Under the Plans or Programs | |
| |
| | |
| | |
| | |
(in
thousands) | |
October
2020 | |
$ | 8,807 | | |
$ | 4.47 | | |
$ | 8,807 | | |
$ | 9,960 | |
November
2020 | |
| 101 | | |
| 4.50 | | |
| 101 | | |
| 9,960 | |
December
2020 | |
| 46,401 | | |
| 4.47 | | |
| 46,401 | | |
| 9,750 | |
| |
| 55,309 | $ | |
$ | 4.47 | | |
$ | 55,309 | | |
$ | 9,750 | |
| g. | Controlled
Equity Offering Sales Agreement In December 2018, the Company entered into a Controlled
Equity Offering Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or
Cantor, pursuant to which the Company may offer and sell, from time to time through Cantor,
shares of its common stock having an aggregate offering price of up to $25.0 million. The
Company will pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from
each sale. Shares sold under the Sales Agreement will be offered and sold pursuant to the
Company’s Shelf Registration Statement on Form S-3 (Registration No. 333-223777) that
was declared effective by the Securities and Exchange Commission on March 28, 2018, or the
Shelf Registration Statement, and a prospectus supplement and accompanying base prospectus
that the Company filed with the Securities and Exchange Commission on December 20, 2018.
The Company has not yet sold any shares of its common stock pursuant to the Sales Agreement. |
NOTE
14 – INCOME (LOSS) PER SHARE
The
following table sets forth the calculation of basic and diluted loss per share for the periods indicated:
SCHEDULE OF BASIC AND DILUTED LOSS PER SHARE
| |
2021 | | |
2020 | |
| |
Years
ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands, except per share data) | |
Basic
and diluted: | |
| | | |
| | |
Net
loss from continuing operations attributable to Orgenesis Inc. | |
$ | 18,053 | | |
$ | 95,088 | |
| |
| | | |
| | |
Net
income from discontinued operations attributable to Orgenesis Inc. for loss per share | |
| - | | |
| (96,198 | ) |
Adjustment
of redeemable non-controlling interest to redemption amount | |
| - | | |
| (5,160 | ) |
Basic: Net income (loss) available to common stockholders | |
| - | | |
| (101,358 | ) |
| |
| | | |
| | |
Net
(income) loss attributable to Orgenesis Inc. for loss per share | |
| 18,053 | | |
| (6,270 | ) |
| |
| | | |
| | |
Weighted
average number of common shares outstanding | |
| 24,273,658 | | |
| 21,320,314 | |
Loss
per common share from continuing operations | |
$ | 0.74 | | |
$ | 4.46 | |
Net
income common share from discontinued operations | |
$ | - | | |
$ | (4.75 | ) |
Net
(income) loss per share | |
$ | 0.74 | | |
$ | (0.29 | ) |
For
the year ended December 31, 2021, and December 31, 2020, all outstanding convertible notes, options and warrants have been excluded from
the calculation of the diluted net loss per share since their effect was anti-dilutive. Diluted loss per share does not include 5,919,739
shares underlying outstanding options and warrants and 1,518,397 shares upon conversion of convertible loans for the year ended December
31, 2021, because the effect of their inclusion in the computation would be anti-dilutive. Diluted loss per share does not include 10,212,789
shares underlying outstanding options and warrants and 1,630,857 shares upon conversion of convertible loans for the year ended December
31, 2020, because the effect of their inclusion in the computation would be antidilutive.
NOTE
15 – STOCK-BASED COMPENSATION
a. | Global
Share Incentive Plan |
The
Company’s stockholders have approved the 2017 Equity Incentive Plan (the “2017 Plan”) under which, the Company had
reserved a pool of 3,000,000 shares of the Company’s common stock, which may be issued at the discretion of the Company’s
board of directors from time to time. Under this Plan, each option is exercisable into one share of common stock of the Company. The
options may be exercised after vesting and in accordance with the vesting schedule that will be determined by the Company’s board
of directors for each grant. The maximum contractual life term of the options is 10 years. As of December 31, 2021, total options granted
under this plan are 2,470,283 and the total options that are available for grants under this plan are 900,901.
On
May 23, 2012, the Company’s board of directors adopted the Global Share Incentive Plan 2012 (the “2012 Plan”) under
which, the Company had reserved a pool of 1,000,000 shares of the Company’s common stock, which may be issued at the discretion
of the Company’s board of directors from time to time. Under this plan, each option is exercisable into one share of common stock
of the Company. The options may be exercised after vesting and in accordance with the vesting schedule that will be determined by the
Company’s board of directors for each grant. The maximum contractual life term of the options is 10 years. As of December 31, 2021,
total options granted under this plan are 1,415,008 and the total options that are available for grants under this plan are 16,198.
b. | Options
Granted to Employees and Directors |
Below
is a table summarizing all of the options grants to employees and Directors made during the years ended December 31, 2021, and December
31, 2020:
SCHEDULE
OF EMPLOYEE STOCK OWNERSHIP PLAN DISCLOSURES
| |
Year
Ended | |
No.
of options granted | | |
Exercise
price | | |
Vesting
period | |
Fair
value at grant (in
thousands) | | |
Expiration
period |
Employees | |
December
31, 2021 | |
| 277,000 | | |
$ | 2.96-$5.12 | | |
Quarterly
over a period of two years | |
$ | 812 | | |
10
years |
| |
| |
| | | |
| | | |
| |
| | | |
|
Directors | |
December
31, 2021 | |
| 84,650 | | |
$ | 2.89 | | |
On
the one-year anniversary | |
$ | 149 | | |
10
years |
| |
| |
| | | |
| | | |
| |
| | | |
|
Employees | |
December
31, 2020 | |
| 531,450 | | |
$ | 2.99-$6.84 | | |
Quarterly
over a period of two years | |
$ | 1,312 | | |
10
years |
| |
| |
| | | |
| | | |
| |
| | | |
|
Directors | |
December
31,2020 | |
| 145,050 | | |
$ | 2.99-$4.7 | | |
96%
on the one-year anniversary, and the remaining 4% in three equal instalments on the first, second and third year anniversaries | |
$ | 377 | | |
10
years |
The
fair value of each stock option grant is estimated at the date of grant using a Black Scholes option pricing model. The volatility is
based on historical volatility of the Company, by statistical analysis of the weekly share price for past periods based on expected term.
The expected option term is calculated using the simplified method, as the Company concludes that its historical share option
exercise experience does not provide a reasonable basis to estimate its expected option term. The fair value of each option grant is
based on the following assumptions:
SCHEDULE OF STOCK OPTIONS, VALUATION ASSUMPTIONS
| |
Years Ended December 31, | |
| |
2021 | | |
2020 | |
Value of one common share | |
| $2.89-$5.12 | | |
| $2.99-$6.84 | |
Dividend yield | |
| 0 | % | |
| 0 | % |
Expected stock price volatility | |
| 71%-77 | % | |
| 80%-86 | % |
Risk free interest rate | |
| 0.96%-1.34 | % | |
| 0.36%-1.71 | % |
Expected term (years) | |
| 5.5-5.56 | | |
| 5.50-6.00 | |
A
summary of the Company’s stock options granted to employees and directors as of December 31, 2021 and December 31, 2020 is presented
below:
SCHEDULE OF STOCK OPTIONS ACTIVITY
| |
Years
Ended December 31 | |
| |
2021 | | |
2020 | |
| |
Number
of Options | | |
Weighted Average Exercise
Price $ | | |
Number
of Options | | |
Weighted Average Exercise Price $ | |
Options
outstanding at the beginning of the period | |
| 2,917,667 | | |
| 4.05 | | |
| 2,465,522 | | |
| 4.44 | |
Changes
during the period: | |
| | | |
| | | |
| | | |
| | |
Granted | |
| 361,650 | | |
| 4.19 | | |
| 676,500 | | |
| 3.74 | |
Exercised | |
| *(13,750 | ) | |
| 4.63 | | |
| - | | |
| - | |
Expired | |
| (20,813 | ) | |
| 5.67 | | |
| (11,876 | ) | |
| 7.88 | |
Forfeited | |
| (34,749 | ) | |
| 4.67 | | |
| (57,042 | ) | |
| 4.52 | |
Cancelled | |
| - | | |
| - | | |
| (155,437 | ) | |
| 8.38 | |
Options
outstanding at end of the period | |
| 3,210,005 | | |
| 4.05 | | |
| 2,917,667 | | |
| 4.05 | |
Options
exercisable at end of the period | |
| 2,777,563 | | |
| 4.00 | | |
| 2,299,937 | | |
| 4.03 | |
* |
During
the year ended December 31, 2021, the Company received $64 thousand from the exercise of employee options for the purchase of 13,750
shares of the Company’s Common Stock at a weighted average price of $4.63. |
The
following table presents summary information concerning the options granted and exercisable to employees and directors outstanding as
of December 31, 2021 (in thousands, except per share data):
SCHEDULE OF STOCK OPTIONS EXERCISABLE
Exercise Price $ | | |
Number
of Outstanding Options | | |
Weighted
Average Remaining Contractual Life | | |
Aggregate Intrinsic Value $ | | |
Number
of Exercisable Options | | |
Aggregate Exercisable Options Value
$ | |
| | |
| | |
| | |
(in
thousands) | | |
| | |
(in
thousands) | |
| 0.0012 | | |
| 230,189 | | |
| 2.64 | | |
| 663 | | |
| 230,189 | | |
| - | |
| 0.012 | | |
| 510,017 | | |
| 0.09 | | |
| 1,463 | | |
| 510,017 | | |
| 6 | |
| 2.89 | | |
| 84,650 | | |
| 9.96 | | |
| - | | |
| - | | |
| - | |
| 2.96 | | |
| 63,500 | | |
| 9.96 | | |
| - | | |
| - | | |
| - | |
| 2.99 | | |
| 432,200 | | |
| 8.15 | | |
| - | | |
| 431,638 | | |
| 1,291 | |
| 3.14 | | |
| 2,500 | | |
| 7.91 | | |
| - | | |
| 2,500 | | |
| 8 | |
| 4.42 | | |
| 50,000 | | |
| 5.93 | | |
| - | | |
| 50,000 | | |
| 221 | |
| 4.5 | | |
| 34,000 | | |
| 7.17 | | |
| - | | |
| 34,000 | | |
| 153 | |
| 4.6 | | |
| 174,800 | | |
| 8.68 | | |
| - | | |
| 112,488 | | |
| 517 | |
| 4.7 | | |
| 6,250 | | |
| 8.03 | | |
| - | | |
| 2,083 | | |
| 10 | |
| 4.8 | | |
| 483,337 | | |
| 4.94 | | |
| - | | |
| 483,337 | | |
| 2,320 | |
| 5.02 | | |
| 78,500 | | |
| 9.71 | | |
| - | | |
| - | | |
| - | |
| 5.07 | | |
| 52,500 | | |
| 7.00 | | |
| - | | |
| 52,500 | | |
| 266 | |
| 5.1 | | |
| 60,500 | | |
| 8.34 | | |
| - | | |
| 44,750 | | |
| 228 | |
| 5.99 | | |
| 327,050 | | |
| 6.61 | | |
| - | | |
| 297,425 | | |
| 1,782 | |
| 6 | | |
| 16,667 | | |
| 2.59 | | |
| - | | |
| 16,667 | | |
| 100 | |
| 6.84 | | |
| 15,125 | | |
| 6.79 | | |
| - | | |
| 12,453 | | |
| 85 | |
| 7.2 | | |
| 83,334 | | |
| 5.43 | | |
| - | | |
| 83,334 | | |
| 600 | |
| 8.36 | | |
| 250,001 | | |
| 6.50 | | |
| - | | |
| 250,001 | | |
| 2,090 | |
| 8.91 | | |
| 15,000 | | |
| 6.46 | | |
| - | | |
| 15,000 | | |
| 134 | |
| 9 | | |
| 20,834 | | |
| 1.54 | | |
| - | | |
| 20,834 | | |
| 187 | |
| 9.48 | | |
| 58,908 | | |
| 0.52 | | |
| - | | |
| 58,908 | | |
| 558 | |
| 10.2 | | |
| 39,267 | | |
| 0.42 | | |
| - | | |
| 39,267 | | |
| 401 | |
| | | |
| 3,210,005 | | |
| 5.45 | | |
| 2,126 | | |
| 2,777,563 | | |
| 11,111 | |
Costs
incurred with respect to stock-based compensation for employees and directors for the years ended December 31, 2021 and December 31,
2020 were $1,349 thousand and $1,470 thousand, respectively, out of which $450 thousand related to options granted to employees of Masthercell
Global, for the years ended December 31, 2020, and presented as part of net loss from discontinued operations in the consolidated statements
of comprehensive loss. As of December 31, 2021, there was $1,093 thousand of unrecognized compensation costs related to non-vested employees
and directors stock options, to be recorded over the next 1.75 years.
c.
Options Granted to Consultants and service providers
Below
is a table summarizing all the compensation granted to consultants and service providers during the years ended December 31, 2021 and
December 31, 2020:
SCHEDULE OF STOCK OPTIONS GRANTED TO CONSULTANTS
|
|
Year of grant |
|
No. of options
granted |
|
|
Exercise price |
|
|
Vesting
period |
|
Fair
value at grant
(in
thousands) |
|
|
Expiration
period |
Non-employees
|
|
2021
|
|
|
7,500 |
|
|
$ |
2.96 |
|
|
Quarterly
over a period of two years |
|
$ |
22 |
|
|
10
years |
Non-employees
|
|
2020
|
|
|
62,500 |
|
|
$ |
2.99-$6.84 |
|
|
Quarterly
over a period of two years |
|
$ |
209 |
|
|
10
years |
The
fair value of options granted during 2021 and
2020 to consultants and service providers, was computed using the Black-Scholes model. The
fair value of each stock option grant is estimated at the date of grant using a Black Scholes option pricing model. The volatility is
based on historical volatility of the Company, by statistical analysis of the weekly share price for past periods based on the expected
term period, the expected term is the contractual term of each grant. The underlying data used
for computing the fair value of the options are as follows:
SCHEDULE
OF STOCK OPTIONS, VALUATION ASSUMPTIONS
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
Value
of one common share | |
$ | 2.96 | | |
$ | 2.99-$6.84 | |
Dividend
yield | |
| 0 | % | |
| 0 | % |
Expected
stock price volatility | |
| 145 | % | |
| 86%-89% | |
Risk
free interest rate | |
| 1.47 | % | |
| 0.73%-1.12% | |
Expected
term (years) | |
| 10 | | |
| 10 | |
A
summary of the Company’s stock options granted to consultants and service providers as of December 31, 2021, and December 31, 2020
is presented below:
SCHEDULE OF STOCK OPTIONS ACTIVITY
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
Number
of Options | | |
Weighted Average Exercise Price $ | | |
Number
of Options | | |
Weighted Average Exercise Price $ | |
Options
outstanding at the beginning of the year | |
| 549,141 | | |
| 5.89 | | |
| 598,310 | | |
| 5.76 | |
Changes
during the year: | |
| | | |
| | | |
| | | |
| | |
Granted | |
| 7,500 | | |
| 2.96 | | |
| 62,500 | | |
| 3.97 | |
Exercised | |
| - | | |
| - | | |
| (83,334 | ) | |
| 3.60 | |
Forfeited | |
| (8,950 | ) | |
| 3.88 | | |
| (8,335 | ) | |
| 5.99 | |
Cancelled | |
| - | | |
| - | | |
| (20,000 | ) | |
| 5.30 | |
Options
outstanding at end of the year | |
| 547,691 | | |
| 5.89 | | |
| 549,141 | | |
| 5.89 | |
Options
exercisable at end of the year | |
| 467,689 | | |
| 6.20 | | |
| 450,972 | | |
| 6.28 | |
The
following table presents summary information concerning the options granted and exercisable to consultants and service providers outstanding
as of December 31, 2021 (in thousands, except per share data):
SCHEDULE OF STOCK OPTIONS EXERCISABLE
Exercise Price $ | | |
Number
of Outstanding Options | | |
Weighted Average Remaining Contractual Life | | |
Aggregate Intrinsic Value* $ | | |
Number
of Exercisable Options | | |
Aggregate Exercisable Options Value
$ | |
| | | |
| | | |
| | | |
| (in
thousands) | | |
| | | |
| (in
thousands) | |
| 2.96 | | |
| 7,500 | | |
| 9.96 | | |
| - | | |
| - | | |
| - | |
| 2.99 | | |
| 35,000 | | |
| 8.22 | | |
| - | | |
| - | | |
| - | |
| 3.14 | | |
| 11,250 | | |
| 7.91 | | |
| - | | |
| 11,250 | | |
| 35 | |
| 3.36 | | |
| 136,775 | | |
| 4.32 | | |
| - | | |
| 136,775 | | |
| 459 | |
| 4.09 | | |
| 25,000 | | |
| 7.76 | | |
| - | | |
| 25,000 | | |
| 102 | |
| 4.42 | | |
| 5,125 | | |
| 5.93 | | |
| - | | |
| 5,125 | | |
| 23 | |
| 4.5 | | |
| 13,335 | | |
| 7.53 | | |
| - | | |
| 5,000 | | |
| 23 | |
| 4.6 | | |
| 20,000 | | |
| 8.96 | | |
| - | | |
| 4,000 | | |
| 18 | |
| 4.8 | | |
| 16,668 | | |
| 4.94 | | |
| - | | |
| 16,668 | | |
| 80 | |
| 5.07 | | |
| 5,000 | | |
| 7.19 | | |
| - | | |
| 1,000 | | |
| 5 | |
| 5.3 | | |
| 15,000 | | |
| 6.70 | | |
| - | | |
| 15,000 | | |
| 80 | |
| 5.99 | | |
| 16,670 | | |
| 6.81 | | |
| - | | |
| 16,670 | | |
| 100 | |
| 6 | | |
| 90,000 | | |
| 2.59 | | |
| - | | |
| 90,000 | | |
| 540 | |
| 6.84 | | |
| 7,500 | | |
| 8.38 | | |
| - | | |
| - | | |
| - | |
| 7 | | |
| 70,000 | | |
| 7.83 | | |
| - | | |
| 70,000 | | |
| 490 | |
| 7.32 | | |
| 8,334 | | |
| 0.89 | | |
| - | | |
| 8,334 | | |
| 61 | |
| 8.34 | | |
| 8,600 | | |
| 6.52 | | |
| - | | |
| 8,600 | | |
| 72 | |
| 8.43 | | |
| 8,333 | | |
| 6.05 | | |
| - | | |
| 6,666 | | |
| 56 | |
| 11.52 | | |
| 8,334 | | |
| 1.26 | | |
| - | | |
| 8,334 | | |
| 96 | |
| 16.8 | | |
| 39,267 | | |
| 0.28 | | |
| - | | |
| 39,267 | | |
| 660 | |
| | | |
| 547,691 | | |
| 5.22 | | |
| - | | |
| 467,689 | | |
| 2,900 | |
Costs
incurred with respect to options granted to consultants and service providers for the years ended December 31, 2021 and December 31,
2020 were $122 thousand and $113 thousand, respectively. As of December 31, 2021, there was $109 thousands of unrecognized compensation
costs related to non-vested consultants and service providers, to be recorded over the next 3.58 years.
d.
Warrants and Shares Issued to Non-Employees
The
fair value of Common Stock issued was the share price of the shares issued at the day of grant.
1)
On January 2, 2020, the Company entered into private placement subscription agreements with investors for an aggregate amount of $250
thousand of convertible loans. The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the
outstanding amount, into shares of Common Stock of the Company at a conversion price per share equal to $7.00. In addition, the Company
granted the investors 151,428 warrants to purchase an equal number of additional shares of the Company’s Common Stock at a price
of $7.00 per share. The fair value of those warrants as of the date of grant using the Black-Scholes valuation model was $210 thousand.
2)
During the year ended December 31, 2020, the Company granted to several consultants 193,178 warrants each exercisable between $3.14 and
$5.34 per share for three years. The fair value of those options as of the date of grant using the Black-Scholes valuation model was
$378 thousand, out of which $350 thousand is related to 179,428 warrants granted as a success fee with respect to the issuance of the
convertible notes and private Investment.
3)
During the twelve months ended December 31, 2021, the Company issued 25,000 shares of common stock to a service provider. As of December
31, 2021, 25,000 shares have restrictions on transfer until such services have been provided.
NOTE
16 – TAXES
a.
Corporate taxation in the U.S.
The
corporate U.S. Federal Income tax rate applicable to the Company and its US subsidiaries is 21%.
As
of December 31, 2021, the Company has an accumulated tax loss carryforward of approximately $29 million (as of December 31, 2020, approximately
$18 million).
For
U.S. federal income tax purposes, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, the
Internal Revenue Code of 1986, as amended (the “Code”) limits the ability to utilize NOL carryforwards to 80% of taxable
income in tax years beginning after December 31, 2020. In addition, NOLs arising in tax years ending after December 31, 2017 can be carried
forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be
subject to the taxable income limitation, and NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year
carryback and twenty-year carryforward period. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect
when the NOL is expected to be utilized. The changes in the carryforward/carryback periods as well as the new limitation on use of NOLs
may significantly impact the Company’s valuation allowance assessments for NOLs generated after December 31, 2017.
In
addition, utilization of the NOLs may be subject to substantial annual limitation under Section 382 of the Code due to an “ownership
change” within the meaning of Section 382(g) of the Code. An ownership change subjects pre-ownership change NOL carryforwards to
an annual limitation, which significantly restricts the ability to use them to offset taxable income in periods following the ownership
change. In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change
multiplied by a specified tax-exempt interest rate.
On
March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law. The CARES Act
is aimed at providing emergency relief and health care for individuals and businesses affected by the COVID-19 pandemic. The CARES Act,
among other things, includes provisions related to refundable payroll tax credits, deferral of the employer portion of social security
payments, expanded net operating loss application, modifications to the net interest deduction limitations, and technical corrections
to tax depreciation methods for qualified improvement property. The CARES act allowed the Company to utilize 100% of NOLs arising in
tax years after December 31, 2017 and before January1, 2021. The Company has assessed all other provisions of the CARES Act and notes
no other material impact to the Company.
b.
Corporate taxation in Israel
The
Israeli Subsidiaries are taxed in accordance with Israeli tax laws. The corporate tax rate applicable to 2021 and 2020 are 23%.
As
of December 31, 2021, the Israeli Subsidiaries has an accumulated tax loss carryforward of approximately $11 million (as of December
31, 2020, approximately $11 million). Under the Israeli tax laws, carryforward tax losses have no expiration date.
c.
Corporate taxation in Belgium
The
Belgian Subsidiary are taxed according to Belgian tax laws. The corporate tax rates applicable to 2021, 2020 are 25%.
As
of December 31, 2021, the Belgian Subsidiary has an accumulated tax loss carryforward of approximately $8 million (€7 million),
(as of December 31, 2020 $8 million). Under the Belgian tax laws there are limitation on accumulated tax loss carryforward deductions
of Euro 1 million per year.
d.
Corporate taxation in Korea
The
basic Korean corporate tax rates are currently: 10% on the first KRW 200 million of the tax base, 20% up to KRW 20 billion, 22% up to
KRW 300 billion and 25% for tax base above KRW 300 billion. In addition, the local income tax rate is 1% on the first KRW 200 million
of taxable income, 2% on taxable income over KRW 200 million up to KRW 20 billion, 2.2% of taxable income over KRW 20 billion up to 300
billion and 2.5% on taxable income over KRW 300 billion.
As
of December 31, 2021, the Korean subsidiary has an accumulated tax loss carryforward of approximately $3 million (KRW 3,023 million),
(as of December 31, 2020, approximately $4 million). Under the Korean tax laws accumulated tax loss can be carry forwarded for 15 years.
e.
Deferred Taxes
The
following table presents summary of information concerning the Company’s deferred taxes as of the years ending December 31, 2020
and December 31, 2020 (in thousands):
SCHEDULE OF DEFERRED TAX ASSETS
| |
2021 | | |
2020 | |
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(U.S.
dollars in thousands) | |
Deferred
tax assets (liabilities), net: | |
| | | |
| | |
Net
operating loss carry forwards | |
$ | 11,451 | | |
$ | 9,606 | |
Research
and development expenses | |
| 1,273 | | |
| 1,684 | |
Equity
compensation | |
| 2,631 | | |
| 2,747 | |
Employee
benefits | |
| 197 | | |
| 252 | |
Property,
plant and equipment | |
| (206 | ) | |
| - | |
Leases
asset | |
| 186 | | |
| 533 | |
Lease
liability | |
| (134 | ) | |
| (324 | ) |
Loans | |
| 26 | | |
| - | |
Intangible
assets | |
| (2,738 | ) | |
| (2,863 | ) |
Other | |
| 119 | | |
| 297 | |
Total | |
| 12,805 | | |
| 11,932 | |
| |
| | | |
| | |
Valuation
allowance | |
| (12,805 | ) | |
| (11,932 | ) |
Net
deferred tax liabilities | |
$ | - | | |
$ | - | |
Realization
of deferred tax assets is contingent upon sufficient future taxable income during the period that deductible temporary differences and
carry forwards losses are expected to be available to reduce taxable income. As the achievement of required future taxable income is
not considered more likely than not achievable, the Company and all its subsidiaries except the Korean Subsidiary have recorded full
valuation allowance.
The
changes in valuation allowance are comprised as follows:
SCHEDULE OF VALUATION ALLOWANCE, ACTIVITY
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(U.S
dollars in thousands) | |
Balance
at the beginning of year | |
$ | (11,932 | ) | |
$ | (14,939 | ) |
Change
during the year | |
| (873 | ) | |
| 3,007 | |
Balance
at end of year | |
$ | (12,805 | ) | |
$ | (11,932 | ) |
f.
Reconciliation of the Theoretical Tax Expense to Actual Tax Expense
The
main reconciling item between the statutory tax rate of the Company and the effective rate is the provision for valuation allowance with
respect to tax benefits from carry forward tax losses.
g.
Uncertain Tax Provisions
ASC
Topic 740, “Income Taxes” requires significant judgment in determining what constitutes an individual tax position as well
as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect
the estimate of the effective tax rate and consequently, affect the operating results of the Company. As of December 31, 2021, the Company
has not accrued a provision for uncertain tax positions.
NOTE
17 – REVENUES
Disaggregation
of Revenue
The
following table disaggregates the Company’s revenues by major revenue streams.
SCHEDULE OF DISAGGREGATION OF REVENUE
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
Revenue
stream: | |
| | | |
| | |
POC
and hospital services (Mainly POC) | |
$ | 32,819 | | |
$ | 6,068 | |
Cell
process development services | |
| 2,683 | | |
| 1,584 | |
Total | |
$ | 35,502 | | |
$ | 7,652 | |
POC
development services are the result of agreements between Company and its partners (See Note 11).
A
breakdown of the revenues per customer what constituted at least 10% of revenues is as follows:
SCHEDULE
OF BREAKDOWN OF REVENUES PER CUSTOMER
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
Revenue
earned: | |
| | | |
| | |
Customer
A (Korea) | |
$ | 7,703 | | |
$ | 2,857 | |
Customer
B (United Arab Emirates) | |
| 6,969 | | |
| - | |
Customer
C (China) | |
| 6,491 | | |
| 1,577 | |
Customer
D (India) – related party | |
| 3,856 | | |
| 1,475 | |
Customer
E (Greece) | |
| 4,693 | | |
| 1,412 | |
Contract
Assets and Liabilities
Contract
assets are mainly comprised of trade receivables net of allowance for doubtful debts, which includes amounts billed and currently due
from customers.
The
activity for trade receivables is comprised of:
SCHEDULE
OF ACTIVITY FOR TRADE RECEIVABLES
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Balance
as of beginning of period | |
$ | 3,085 | | |
$ | 1,831 | |
Acquisition
of Koligo | |
| - | | |
| 228 | |
Additions | |
| 34,570 | | |
| 6,997 | |
Collections | |
| (22,333 | ) | |
| (5,982 | ) |
Exchange
rate differences | |
| (77 | ) | |
| 11 | |
Balance
as of end of period | |
$ | 15,245 | | |
$ | 3,085 | |
The
activity of the related party included in the trade receivables activity above is comprised of:
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
Balance
as of beginning of period | |
$ | 744 | | |
$ | - | |
Additions | |
| 3,856 | | |
| 1,244 | |
Collections | |
| (2,628 | ) | |
| (500 | ) |
Balance
as of end of period | |
$ | 1,972 | | |
$ | 744 | |
The
activity for contract liabilities is comprised of:
SCHEDULE
OF ACTIVITY FOR CONTRACT LIABILITIES
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Balance
as of beginning of period | |
$ | 59 | | |
$ | 325 | |
Additions | |
| - | | |
| 597 | |
Realizations | |
| - | | |
| (862 | ) |
Exchange
rate differences | |
| - | | |
| (1 | ) |
Balance
as of end of period | |
$ | 59 | | |
$ | 59 | |
The
activity of the related party included in the contract liabilities activity above is comprised of:
| |
Year
Ended December 31, | |
| |
2020 | |
| |
(in
thousands) | |
Balance
as of beginning of period | |
$ | - | |
Additions | |
| 231 | |
Collections | |
| (231 | ) |
Balance
as of end of period | |
$ | - | |
NOTE
18 – COST OF SERVICES AND OTHER RESEARCH AND DEVELOPMENT EXPENSES, NET
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Total
expenses | |
$ | 36,644 | | |
$ | 84,182 | |
Less
grants | |
| - | | |
| (196 | ) |
Total | |
$ | 36,644 | | |
$ | 83,986 | |
NOTE
19 – FINANCIAL EXPENSES, NET
SCHEDULE
OF FINANCIAL EXPENSES
| |
2021 | | |
2020 | |
| |
Years
Ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Interest
expense on convertible loans | |
$ | 943 | | |
$ | 1,254 | |
Foreign
exchange loss, net | |
| 574 | | |
| 160 | |
Other
income | |
| (225 | ) | |
| (353 | ) |
Total | |
$ | 1,292 | | |
$ | 1,061 | |
NOTE
20 – RELATED PARTIES TRANSACTIONS
a.
Related Parties presented in the consolidated statements of comprehensive loss
SCHEDULE OF RELATED PARTY TRANSACTIONS
| |
Years
ended December 31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
Continuing
operations: | |
| | | |
| | |
Stock-based
compensation expenses to executive officers | |
$ | 247 | | |
$ | 221 | |
Stock-based
compensation expenses to Board Members | |
$ | 265 | | |
$ | 209 | |
Compensation
of executive officers | |
$ | 4,422 | | |
$ | 1,321 | |
Management
and consulting fees to Board Members | |
$ | 380 | | |
$ | 264 | |
Revenues
from customer | |
$ | 3,856 | | |
$ | 1,475 | |
Cost
of services and other research and development expenses, net | |
$ | - | | |
$ | 4,772 | |
Financial
income | |
$ | 64 | | |
$ | 169 | |
b.
Related Parties presented in the consolidated balance sheets
SCHEDULE
OF RELATED PARTIES PRESENTED IN CONSOLIDATED BALANCE SHEETS
| |
December
31, | |
| |
2021 | | |
2020 | |
| |
(in
thousands) | |
| |
| | |
| |
Executive
officers’ payables | |
$ | 51 | | |
$ | 170 | |
Non-executive
directors’ payable | |
$ | 178 | | |
$ | 13 | |
Loan
to Related Party | |
$ | 3,064 | | |
$ | - | |
Accounts
receivable, net | |
$ | 1,972 | | |
$ | 744 | |
NOTE
21 – SUBSEQUENT EVENTS
| a) | On
January 18, 2022, a complaint (the “Complaint”) was filed in the Tel Aviv District
Court (the “Court”) against us and the Israeli subsidiary, Prof. Sarah Ferber,
Vered Caplan and Dr. Efrat Asa Kunik (collectively, the “defendants”) by plaintiffs
the State of Israel, as the owner of Chaim Sheba Medical Center at Tel HaShomer (“Sheba”),
and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (collectively, the “plaintiffs”).
In the Complaint, the
plaintiffs are seeking that the Court issue a declaratory remedy whereby the defendants are
required to pay royalties to the plaintiffs at the rate of 7% of the sales and 24% of any
and all revenues in consideration for sublicenses related to any product,
service or process that contain know-how and technology of Sheba and any and all know-how
and technology either developed or supervised by Prof. Ferber in the field of cell therapy,
including in the category of the point-of-care platform and any and all services and products
in relation to the defendants’ CDMO activity. In addition, the plaintiffs seek that
the defendants provide financial statements and pay NIS 10 million to the plaintiffs due
to the royalty provisions of the license agreement, dated February 2, 2012, between the Israeli
subsidiary and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (the “License
Agreement”). The Complaint alleges that the Company and the Israeli subsidiary used
know-how and technology of Sheba and know-how and technology either developed or supervised
by Prof. Ferber while employed by Sheba in the field of cell therapy, including in the category
of the point-of-care platform and the services and products in relation to the defendants’
CDMO activity and are entitled to the payment of certain royalties pursuant to the terms
of the License Agreement. The defendants were required to file their statement of defense
responding to this Complaint by March 20, 2022. The Company believes that the allegations
in this Complaint are without merit and intend to vigorously defend itself against the claims.
Since a loss is not considered probable, no provision
was made in the financial statements. |
| b) | License
and research agreement Yeda Research and Development Company Limited |
On
January 25, 2022, the Company and Yeda Research and Development Company Limited (“Yeda”), an Israeli corporation, entered
into a license and research agreement. Pursuant to the agreement, Yeda granted to the Company an exclusive, worldwide license to its
licensed information and the licensed patents, for the development, manufacture, use, offer for sale, sale and import of products in
the Field a field of tumor-infiltrating lymphocytes (TIL) and Chimeric antigen receptor (CAR) T cell immunotherapy platforms (excluding
CAR-Cytokine Induced Killer cell immunotherapy). The Company undertakes to make commercially reasonable efforts to develop and commercialize
products in the field, and to achieve certain milestones. In consideration for the grant of the License, the Company shall pay Yeda:
A
non-refundable annual license fee of $10 thousand;
Royalties
of up to 2% on sales of licensed products;
25%
of all Other Receipts received in respect of a Sublicense first granted or an assignment of rights made prior to the achievement of the
dosing of a first patient in a Phase I Clinical Trial; and (ii) 12.5% of all Other Receipts received in respect of a Sublicense first
granted or an assignment of rights made on or after the date described in subclause (i)
Milestone
Events payments:
$50
thousand upon the dosing of a first patient in a Phase I Clinical Trial;
$500
thousand upon the receipt of FDA marketing approval in respect of a product 350 thousand upon receipt of marketing approval from a non-FDA
regulatory agency in a major market territory (namely, a regulatory agency in Europe, Japan, China or Canada);
$250
thousand upon receipt of marketing approval from an additional non-FDA major regulatory agency (namely, a regulatory agency in Europe,
Japan, China or Canada);
Patent
fees already incurred by Yeda in connection with the Licensed Patents in the amount of $27 thousand, and all future costs and fees relating
to the filing, prosecution, and maintenance of the Licensed Patents, Research related expenses based on an agreed research budget.
| c) | Joint
venture agreement with Proterna Inc |
On
January 26, 2022, the Company and Proterna, Inc. a Delaware corporation, (“Proterna”) (together, the “Parties”),
entered into a joint venture agreement (“JVA”). Pursuant to the JVA, the Parties agreed to collaborate with each other and
expand their activities in the development and commercialization of mRNA based vaccines and cellular immunotherapies for respiratory
diseases, including, without limitation, COVID-19. The JVA provides that Proterna will grant to the JV Entity (“JVE”), under
a separate license agreement, an exclusive, sublicensable right and license to its background IP as required to carry out the terms of
the JVA including to develop, manufacture, distribute and market and sell mRNA vaccines and cellular immunotherapies for respiratory
diseases, including COVID-19. In consideration for such license, the JVE will pay Proterna a 5% royalty on sales. The Company will provide
funding for the joint venture of up to $5 million, based on a work plan to be approved, of which $2.5 million will be in the form of
services to be procured from Proterna. Until the JVE is formed, the activities of the collaboration will be performed by Proterna. The
Parties will each hold 50% of the JVE. In addition, once JVE is profitable, Company shall have the rights to additional profit share.
The Board of the JVE will be comprised of three directors, one to be appointed by the Company, one to be appointed by Proterna, and a
third board member to be appointed upon mutual agreement of the Parties. Company shall have the right to purchase all of Proterna’s
then issued and outstanding equity interests in the JVE in return for, at Company’s option: payment of cash and/or issuance of
shares of common stock of Company. In the event that Company seeks to exercise this right, JVE’s valuation shall be determined
by an independent third-party expert to be mutually selected by the Parties, provided that in no event may such valuation be lower than
US $2,000,000. As at the date of this report the JVE has not been incorporated.
| d) | On
February 22, 2022, the Company, pursuant to the joint venture agreement between itself and
Mida Biotech BV, purchased all the issued shares in the latter for a consideration of $100
thousand. The consideration will be paid via Company shares to be issued to Mida Biotech
BV;s shareholders. |
| | |
| e) | On
March 30, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors
(collectively, the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors, in a private placement
(the “Offering”), an aggregate of 4,933,333
shares of the Company’s Common Stock at a purchase price of $3.00
per share and warrants to purchase up to an aggregate of 1,000,000
shares of Common Stock at an exercise price of $4.50
per share. The warrants are not exercisable until after six months and expire three years from the date of issuance. The
Company expects to receive gross proceeds of approximately $14.8
million before deducting related offering expenses. The Offering is expected to close on or about April 30, 2022, subject
to customary closing conditions. |