ROSGQ Rosetta Genomics Ltd (CE)

 

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

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Form 6-K

 

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Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

 

 

For the Month of October 2015

 

Commission File Number 001-33042

 

Rosetta Genomics Ltd.
(Translation of registrant’s name into English)

 

10 Plaut Street, Science Park
Rehovot 76706, Israel
(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

   

Rosetta Genomics Ltd.

 

The unaudited condensed interim consolidated financial statements of Rosetta Genomics Ltd. (the “Company”) and its subsidiaries as of and for the six months ended June 30, 2015, are filed as Exhibit 99.1 to this Form 6-K and incorporated by reference herein.

 

In addition, as previously reported, on April 13, 2015, the Company completed its acquisition of CynoGen Inc. (“CynoGen”) from Prelude Corporation, a Fjord Ventures portfolio company. In connection with this acquisition, the Company is also filing the unaudited historical financial information for CynoGen for the three months ended March 31, 2015 and unaudited combined pro forma condensed financial information for the six months ended June 30, 2015, as Exhibit 99.2 and Exhibit 99.3, respectively, to this Form 6-K, which are incorporated herein by reference. The unaudited combined pro forma condensed financial information gives effect to certain pro forma events related to the acquisition of CynoGen and has been presented for informational purposes only. It does not purport to project the future financial position or operating results of the post-acquisition combined company.

 

The information contained in this Report (including the exhibits hereto) is hereby incorporated by reference into the Company’s Registration Statements on Form F-3, File Nos. 333-163063, 333-171203, 333-172655, 333-177670 and 333-185338

 

Exhibits

 

Exhibit Number		Description of Exhibit
99.1		Unaudited Condensed Interim Consolidated Financial Statements as of and for the six months ended June 30, 2015.
99.2		CynoGen Inc. unaudited financial statements as of and for the three months ended March 31, 2015.
99.3		Rosetta Genomics Ltd. unaudited combined pro forma condensed consolidated Statements of Operations for the six months ended June 30, 2015.
101		The following materials from Exhibit 99.1 to this Report on Form 6-K formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Interim Consolidated Balance Sheets, (ii) the Condensed Interim Consolidated Statements of Loss, (iii) the Condensed Interim Consolidated Statements of Changes in Shareholders' Equity, (iv) the Condensed Interim Consolidated Statements of Cash Flows, and (v) Notes to Condensed Interim Consolidated Financial Statements..

 

  

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	ROSETTA GENOMICS LTD.
Date: October 26, 2015	By:	/s/ Oded Biran
		Oded Biran Chief Legal Officer and Corporate Secretary

 

 

 

Exhibit 99.1

 

 

ROSETTA GENOMICS LTD. AND ITS SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

 

AS OF JUNE 30, 2015

 

 

 

UNAUDITED

 

 

 

INDEX

 

	Page
Condensed Interim Consolidated Balance Sheets	2 - 3
Condensed Interim Consolidated Statements of Loss	4
Condensed Interim Consolidated Statements of Changes in Shareholders' Equity	5
Condensed Interim Consolidated Statements of Cash Flows	6
Notes to Condensed Interim Consolidated Financial Statements	7 - 14

 

 

 

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

 

 

ROSETTA GENOMICS LTD. AND ITS SUBSIDIARIES

  

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

 

		June 30,				December 31,
		2015				2014
		Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	4,723			$	7,929
Restricted cash			54				52
Short-term bank deposits			9,068				7,650
Trade receivables			5,016				338
Other accounts receivable and prepaid expenses			560				483
Total current assets			19,421				16,452
LONG TERM ASSETS:
Property and equipment, net			3,265				822
Restricted bank deposit and other long-term receivables			625				4
Total long term assets			3,890				826
Total assets		$	23,311			$	17,278

 

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

 

 

ROSETTA GENOMICS LTD. AND ITS SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

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

 

		June 30,				December 31,
		2015				2014
		Unaudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables		$	1,367			$	563
Other accounts payables and accruals			2,117				1,648
Total current liabilities			3,484				2,211
LONG-TERM LIABILITIES:
Warrants related to share purchase agreements			6				2
Total long-term liabilities			6				2
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS EQUITY:
Share capital:
Ordinary Shares of NIS 0.6 par value: 40,000,000 shares authorized at June 30, 2015 (unaudited) and December 31, 2014; 14,502,942 (unaudited) and 11,765,678 shares issued at June 30, 2015 and December 31, 2014, respectively; 14,499,684 (unaudited) and 11,762,420 shares outstanding at June 30, 2015 and December 31, 2014, respectively			2,254				1,830
Additional paid-in capital			147,179				136,160
Accumulated deficit			(129,612	)			(122,925	)
Total shareholders' equity			19,821				15,065
Total liabilities and shareholders' equity		$	23,311			$	17,278

 

 

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

 

 

ROSETTA GENOMICS LTD. AND ITS SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS

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

 

		Six months ended June 30,
		2015				2014
		Unaudited
Revenues		$	2,278			$	554
Cost of revenues			2,269				770
Gross profit (loss)			9				(216	)
Operating expenses:
Research and development, net			1,361				1,011
Marketing and business development			4,075				3,393
General and administrative			3,643				2,620
Gain from bargain purchase related to acquisition of CynoGen, Inc. (Note 1)			(2,352	)			-
Total operating expenses			6,727				7,024
Operating loss			6,718				7,240
Financial income, net			41				64
Tax expenses			10				8
Net loss		$	6,687			$	7,184
Basic and diluted net loss per ordinary share attributable to Rosetta Genomics' shareholders		$	0.49			$	0.66
Weighted average number of ordinary shares used to compute basic and diluted net loss per ordinary share			13,598,198				10,806,738

 

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

 

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

 

 

		Number of Ordinary Shares				Share capital				Additional paid-in capital				Accumulated deficit				Total equity
Balance as of January 1, 2015			11,762,420			$	1,830			$	136,160			$	(122,925	)		$	15,065
Issuance of shares in February 2015, at 4.46 per share, net of $491 issuance expenses			2,204,764				344				8,995				-				9,339
Issuance of shares related to acquisition (Note 1)			500,000				75				1,485				-				1,560
RSU's conversion			32,500				5				(5	)			-				-
Share-based compensation relating to options and RSUs issued to employees and directors			-				-				544				-				544
Net loss			-				-				-				(6,687	)			(6,687	)
Balance as of June 30, 2015 (unaudited)			14,499,684			$	2,254			$	147,179			$	(129,612	)		$	19,821

 

 

 

		Number of Ordinary Shares				Share capital				Additional paid-in capital				Accumulated deficit				Total equity
Balance as of January 1, 2014			10,470,230			$	1,609			$	130,423			$	(108,399	)		$	23,633
Issuance of shares in January 2014, net of $33 issuance expenses			261,654				45				876				-				921
Issuance of shares in April 2014, net of $9 issuance expenses			59,241				10				283				-				293
Issuance of shares in May 2014, net of $8 issuance expenses			66,387				11				247				-				258
Issuance of shares in June 2014, net of $45 issuance expenses			361,967				62				1,422				-				1,484
RSU's conversion			3,000				1				(1	)			-				-
Exercise of warrants			8,946				1				(1	)			-				-
Employee options exercised			37				(*)				(*)				-				-
Stock-based compensation			-				-				471				-				471
Net loss			-				-				-				(7,184	)			(7,184	)
Balance as of June 30, 2014 (unaudited)			11,231,462			$	1,739			$	133,720			$	(115,583	)		$	19,876

 

(*)

Represents an amount lower than $1.

 

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

 

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

		Six months ended June 30,
		2015				2014
		Unaudited
Cash flows from operating activities:
Net loss		$	(6,687	)		$	(7,184	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			293				158
Increase in trade receivables			(566	)			(220	)
Decrease in other accounts receivable and prepaid expenses			(73	)			(336	)
Stock-based compensation			544				471
Gain from bargain purchase related to acquisition of CynoGen, Inc.			(2,352	)			-
Change in fair value of warrants related to share purchase agreement			4				(22	)
Increase (decrease) in trade payables			9				(154	)
Increase (decrease) in other accounts payable and accruals			436				(274	)
Net cash used in operating activities			(8,392	)			(7,561	)
Cash flows from investing activities:
Purchase of property and equipment			(108	)			(74	)
Investment in short-term bank deposits			(2,043	)			(3,003	)
Acquisition of CynoGen, Inc. (a)			(2,000	)			-
Increase in restricted cash, net			(2	)			(35	)
Net cash used in investing activities			(4,153	)			(3,112	)
Cash flows from financing activities:
Issuance of shares, net			9,339				2,956
Net cash provided by financing activities			9,339				2,956
Decrease in cash and cash equivalents			(3,206	)			(7,717	)
Cash and cash equivalents at beginning of period			7,929				16,774
Cash and cash equivalents at end of period		$	4,723			$	9,057
Supplemental cash flow activities:
(a) Acquisition of CynoGen, Inc.
Fair value of assets acquired and liabilities assumed at the date of acquisition:
Working capital, net (excluding cash and cash equivalents)		$	2,673			$	-
Property and equipment			2,628				-
Gain from bargain purchase related to acquisition of CynoGen, Inc.			(2,352	)			-
Issuance of shares, net			(1,560	)			-
Commitment to issue shares			(389	)			-
		$	2,000			$	-
(b) Supplemental disclosure of non-cash activities:
Share issuance for acquisition of CynoGen, Inc.		$	1,560			$	-
Commitment to issue shares with respect to the Acquisition of CynoGen, Inc.		$	389			$	-

 

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

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

NOTE 1:

GENERAL

 

Organization and Business

 

Rosetta Genomics Ltd. (the "Company") commenced operations on March 9, 2000.

 

The Company's integrative research platform combining bioinformatics and state-of-the-art laboratory processes has led to the discovery of hundreds of biologically-validated novel human microRNAs. Building on its strong patent position and proprietary platform technologies, Rosetta Genomics is working on the application of these technologies in the development of a full range of microRNA-based diagnostic tools. The Company's microRNA-based tests, Rosetta Cancer Origin Test^TM, Rosetta Lung Cancer Test^TM, and Rosetta Kidney Cancer Test^TM are commercially available worldwide and all samples are processed in its Philadelphia-based CAP-accredited, CLIA-certified lab.

 

The Company has a wholly-owned subsidiary in the U.S., Rosetta Genomics Inc. The principal business activity of the subsidiary is to commercialize the Company's products, distribute the diagnostic services of the Company's, perform and develop tests in its CLIA-approved laboratory and expand the business development of the Company in the U.S.

 

Acquisition of CynoGen, Inc.

 

On April 13, 2015, the Company, through its wholly-owned U.S. subsidiary, acquired all of the outstanding shares of Minuet Inc., a Delaware corporation which holds all of the Shares of CynoGen, Inc., a Delaware corporation ("CynoGen" or "PersonalizeDx") from Prelude Corporation, a Fjord Ventures portfolio company. PersonalizeDx is a molecular diagnostics and services company serving community-based pathologists, urologists, oncologists and other reference laboratories across the United States. PersonalizeDx is focused on the detection of genomic changes through FISH technology, which helps to detect cancer, measure the potential aggressiveness of the disease and identify patients most likely to respond to targeted therapies.

 

The purchase price included $2,000 in cash, 500,000 of the Company’s ordinary shares and the provision of certain assets and services at cost to Prelude Corporation. Prelude Corporation has accepted 120,000 of the Company’s ordinary shares in lieu of the above mentioned provision of certain assets and services owed to it by the Company. The aggregate fair value of the total 620,000 ordinary shares issued amounted to approximately $1,949. As a result, the total consideration amounted to approximately $3,949.

 

The acquisition was accounted for under the purchase method of accounting, in accordance with Accounting Standard Codification ("ASC") 805, "Business Combinations", and accordingly, the Company allocated the purchase price to assets acquired and liabilities assumed based on a preliminary purchase price allocation study using management's best estimate. As a result, the Company recognized a bargain purchased gain of approximately $2,352. ASC 805 provides for a period of time (limited to 1 year from the acquisition date) during which the acquirer may adjust provisional amounts recognized at the acquisition date to their subsequently determined acquisition-date fair values, referred to as the measurement period. Accordingly, the recognized bargain purchased gain is subject to a change during the measurement period.

 

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

 

NOTE 1:

GENERAL (Cont.)

  

Liquidity and Capital Resources

 

In the six-month period ended June 30, 2015, the Company incurred losses of $6,687 and it had negative cash flows from operating activities in the amount of $8,392, as well as accumulated losses from previous years. As of June 30, 2015, the Company’s total shareholders’ equity amounted to $19,821 (unaudited).

 

On February 18, 2015, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “2015 Cantor Sales Agreement”) with Cantor, as sales agent, and filed a prospectus supplement with the SEC relating to the offer and sale of up to $14,400 of its Ordinary Shares. Sales of the Company’s Ordinary Shares under the 2015 Cantor Sales Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. In February 2015, the Company sold through the 2015 Cantor Sales Agreement an aggregate of 2,204,764 of its Ordinary Shares, and received gross proceeds of $9,829, before deducting issuance expenses in an amount of $490.

 

Sales of the Company’s ordinary shares under the Cantor Sales Agreements are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

 

Subsequent to the balance sheet date, during July and August 2015, the Company sold through the 2015 Cantor Sales Agreement an aggregate of 219,594 of its ordinary shares, and received gross proceeds of $711, before deducting issuance expenses in an amount of $21.

 

In addition, subsequent to the balance sheet date, on October 13, 2015, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement"), pursuant to which the Company agreed to sell securities to various accredited investors (the "Purchasers") in a private placement transaction (the "Private Placement").  The Private Placement closed on or about October 15, 2015 (the "Closing Date").

 

Under the terms of the Private Placement, the Company issued an aggregate of 3,333,333 units at $2.40 per unit, with each unit consisting of (i) one ordinary share (collectively, the "Shares"), (ii) a Series A Warrant to purchase one-half of an ordinary share at an exercise price of $2.75 per ordinary share (subject to adjustment), exercisable for a period of five years from the Closing Date, and (iii) a partially pre-funded Series B Warrant (collectively and together with the Series A Warrants, the "Warrants").  The Series B Warrants have an exercise price of NIS 0.6 (which has been prepaid) plus $0.0001 per share.  The Series B Warrants are intended to reset the price of the units, and will be exercisable for an aggregate number of ordinary shares based on a reset price per unit equal to 85% of the arithmetic average of the five lowest weighted average prices calculated during the ten trading days following the effective date of the Resale Registration Statement (as defined below); provided that the maximum aggregate number of ordinary shares issuable upon exercise of the Series B Warrants will not exceed 2,666,667, provided, further, that if 85% of the arithmetic average of the five lowest weighted-average prices calculated during the ten trading days following the effective date of the Resale Registration Statement is $2.40 or greater the Series B Warrants will not be exercisable for any ordinary shares.  The Series B Warrants are exercisable for 60 days following the effective date of the Resale Registration Statement.

 

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

NOTE 1:

GENERAL (Cont.)

 

The Company has also entered into a Registration Rights Agreement (the "Registration Rights Agreement") with the Purchasers pursuant to which the Company is required to file a registration statement on Form F-3 within 60 days to cover the resale of the Shares and the ordinary shares issuable upon exercise of the Warrants (the "Resale Registration Statement").  The failure on the part of the Company to satisfy certain conditions and deadlines described in the Registration Rights Agreement may subject the Company to payment of certain liquidated damages.

 

The net proceeds to the Company from the Private Placement, after deducting placement agent fees and expenses, Rosetta’s estimated offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants, are approximately $7,400. 

 

According to the Company's current plans, it has sufficient liquidity resources to support its operations into the first quarter of 2017.

 

NOTE 2:

SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2014, are applied consistently in these financial statements. For further information, refer to the consolidated financial statements for the year ended December 31, 2014, set forth in the Company’s Annual Report on Form 20-F as filed with the U.S. Securities and Exchange Commission on March 16, 2015, except for the following:

 

BUSINESS COMBINATIONS

 

The Company applies ASC 805, "Business Combinations". ASC 805 requires recognition of assets acquired, liabilities assumed and non-controlling interest in the acquired entity at the acquisition date, measured at their fair values as of that date. This ASC also requires the fair value of acquired in-process research and development ("IPR&D") to be recorded as intangibles with indefinite lives, contingent consideration to be recorded on the acquisition date, and restructuring and acquisition-related deal costs to be expensed as incurred. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings.

 

NOTE 3:

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2015, are not necessarily indicative of the results that may be expected for the year ended December 31, 2015.

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

NOTE 4:

FAIR VALUE MEASUREMENT

 

The Company applies ASC 820, "Fair Value Measurements and Disclosures". Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.

 

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

 

The hierarchy is broken down into three levels based on the inputs as follows:

 

Level 1 - Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

 

Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the investments are categorized as Level 3.

 

The following methods and assumptions were used by the Company and its subsidiaries in estimating their fair value disclosures for financial instruments:

 

The carrying amounts of cash and cash equivalents, short-term bank deposits, trade receivables, trade payables, and other accounts payable approximate their fair values due to the short-term maturities of such instruments.

 

The fair value of the liability for warrants related to share purchase agreement was calculated using the Black-Scholes Model and the Company classified this liability within Level 3. The fair value of the warrants at June 30, 2015 and December 31, 2014 was $6 (unaudited) and $2, respectively. Loss of $4 from the revaluation of warrants related to share purchase agreement is recorded under "Financial Income, Net" in the Condensed Interim Consolidated Statements of Loss.

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

  

NOTE 4:

FAIR VALUE MEASUREMENT (Cont.)

 

 

The following table summarizes information about the fair value of the above warrants related to share purchase agreements:

 

		June 30, 2015				December 31, 2014
		Unaudited
A' Warrants		$	6			$	2
Total		$	6			$	2

 

NOTE 5:

COMMITMENTS AND CONTINGENT LIABILITIES

 

a.

Restricted cash and restricted bank deposit:

 

1.

As of June 30, 2015 and December 31, 2014, restricted cash was primarily attributed to a bank guarantee to the landlord of the Israeli property for the fulfillment of its lease commitments in the amount of approximately $54 and $52, respectively.

 

2.

As of June 30, 2015, restricted long term bank deposit was primarily attributed to a bank guarantee to the landlord of CynoGen’s U.S. property for the fulfillment of its lease commitments in the amount of approximately $625.

 

b.

The facilities of the Company are rented under operating leases. Aggregate minimum rental commitments under the non-cancelable rent agreements as of June 30, 2015, are as follows:

 

2015		$	388
2016			784
2017			771
2018			621
Total		$	2,564

 

c.

The Company leases its motor vehicles under cancelable operating lease agreements. The minimum payment under these operating leases, upon cancellation of these lease agreements was $8 as of June 30, 2015.

 

Lease expenses for motor vehicles for the six months ended June 30, 2015 and 2014, were $22 and $27, respectively.

 

d.

In May 2006, the Company signed a royalty-bearing, co-exclusive, worldwide license agreement with a third party. Under this agreement, the Company was granted the right to make, use and sell the third party's proprietary microRNAs for diagnostic purposes including a limited right to sublicense. In consideration for this license the Company paid an initiation fee and will pay a fixed annual license maintenance fee, royalties based on net sales and a percentage of the Company's revenues from any sublicense. The Company estimates that until 2029 the minimum aggregate license maintenance fees over the term of this agreement should be approximately $960, of which $580 will be paid after June 30, 2015.

 

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

NOTE 5:

COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

  

e.

In June 2006, the Company signed a royalty-bearing, co-exclusive, worldwide license agreement with a third party. Under this agreement, the Company licensed from this third party the rights to its proprietary microRNAs for diagnostic purposes. In consideration for this license the Company paid an initiation fee and will pay a fixed annual license maintenance fee, royalties based on net sales and a percentage of the Company's revenue from any sublicense. The Company estimates that until 2022 the minimum aggregate license maintenance fees over the term of this agreement should be approximately $437, of which $252 will be paid after June 30, 2015.

 

f.

In August 2006, the Company signed a royalty-bearing, exclusive, worldwide license agreement with a third party. Under this agreement, the Company has exclusively licensed from this third party the rights to its proprietary microRNAs for all fields and applications including a limited right to sublicense. In consideration for this license the Company paid an initiation fee and will pay minimum annual royalties, royalties based on net sales and a percentage of the Company's revenues from any sublicense. This agreement was amended and restated in August 2011 and is now on a non-exclusive basis. For the amendment, the Company paid an amendment fee. The Company estimates that until 2032 the aggregate minimum royalties over the term of this agreement should be approximately $320, of which $175 will be paid after June 30, 2015.

 

g.

In December 2006, the Company signed a royalty-bearing, non-exclusive, worldwide license agreement with a third party. Under this agreement the Company licensed from the third party its proprietary microRNAs for research purposes. In consideration for this license the Company will pay an initiation fee and will be required to pay a fixed annual license maintenance fee, royalties based on net sales and a percentage of the Company's revenues from any sublicenses. The Company estimates that until 2022 the minimum aggregate license maintenance fees over the term of this agreement should be approximately $269, of which $126 will be paid after June 30, 2015.

 

h.

In May 2007, the Company signed a royalty-bearing, co-exclusive, worldwide license agreement with a third party. Under this agreement, the Company has licensed from this third party the rights to its proprietary microRNAs for therapeutic purposes including a limited right to sublicense. In consideration for this license the Company paid an initiation fee and will pay a fixed annual license maintenance fee, payments based on milestones and royalties based on net sales and a percentage of the Company's revenues from any sublicense. The Company estimates that until 2029 the minimum aggregate maintenance fees over the term of this agreement should be approximately $690, of which $435 will be paid after June 30, 2015.

 

i.

In January 2008, the Company signed a royalty-bearing, co-exclusive, worldwide license agreement with a third party. Under this agreement, the Company was granted the right to make, use and sell the third party's proprietary microRNAs for research purposes including a limited right to sublicense. In consideration for this license the Company paid an initiation fee and will pay a fixed annual license maintenance fee, royalties based on net sales and a percentage of the Company's revenues from any sublicense. The Company estimates that until 2029 the minimum aggregate license maintenance fees over the term of this agreement should be approximately $440, of which $290 will be paid after June 30, 2015.

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

NOTE 5:

COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

 

j.

In July 2014, the Company signed a royalty-bearing joint research and license agreement with a third party. Under this agreement, the Company and the third party engage in joint research and the Company was granted a non-exclusive, royalty bearing, non-transferable and non-sublicensable license to use the joint information, inventions and patents for the development, manufacture, commercialization, distribution and sale of products, while the third party was also granted a non-exclusive, sublicensable and a worldwide license. In consideration for this agreement, the Company will pay a fixed annual license maintenance fees and royalties based on net sales. In the six month period ended June 30, 2015, the Company paid $5 under this agreement.

 

k.

Rimonim Consortium:

 

In January 2011, the Company joined the Rimonim Consortium, which is supported by the Office of the Chief Scientist of Israel's Ministry of Economy, of the State of Israel (the "OCS"). The purpose of the consortium is to develop RNAi-based therapeutics. As of June 30, 2015, the Company received total grants of $55 from the OCS for its development under the consortium.

 

l.

Magneton Project:

 

In October 2013, the Company entered into a sponsored research agreement with Ramot at Tel Aviv University ("Ramot"), a Company organized under the laws of Israel and a wholly-owned subsidiary of Tel Aviv University, for the joint development of a nano-carrier system for miR mimetic technology to treat cancer. The Company and Ramot performed joint research under the Magneton Project administered by the OCS for an initial period of 12 months commencing on October 1, 2013. On October 2, 2014, the OCS approved an additional period of 12 months.

 

As of June 30, 2015, the Company received total grants of $18 from the OCS for its development under the Project.

 

NOTE 6:

SHARE CAPITAL

 

a.

Equity financings

 

On March 22, 2013, The Company entered into a Controlled Equity Offering^SM Sales Agreement (the "2013 Cantor Sales Agreement") with Cantor Fitzgerald & Co., as sales agent ("Cantor"), pursuant to which the Company could offer and sell, from time to time through Cantor, its ordinary shares. The Company terminated the Cantor Sales Agreement on October 13, 2014.

 

 

ROSETTA GENOMICS LTD. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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

 

NOTE 6:

SHARE CAPITAL (Cont.)

  

Between March 22, 2013 and October 13, 2014, the Company sold through the 2013 Cantor Sales Agreement an aggregate of 2,532,089 of its ordinary shares and received gross proceeds of $10,096.

 

Refer to Note 1 for additional information about equity financings during 2015.

 

b.

Stock-based compensation

 

During the six month period ended June 30, 2015, the Company's Board of Directors granted employees options to purchase 72,083 ordinary shares of the Company. The exercise prices for such options ranges from $3.62-$3.84 per share, with vesting to occur over 4-4.5 years.

 

The Company estimates the fair value of stock options granted during the six-month period ended June 30, 2015, under ASC 718 using the Black-Scholes option pricing model with the following weighted-average assumptions: expected volatility of 1.16%; risk free interest rates range between 1.93%-1.96%; dividend yield of 0%; time to maturity of 6.25 years; and options forfeiture rate of 10%.

 

During the six month periods ended June 30, 2015 and 2014, the Company recorded stock-based compensation in a total amount of $544 and $471, respectively.

 

During the six month period ended June 30, 2015, the Company's Board of Directors approved the granting of 24,219 Restricted Share Units ("RSUs") to certain employees. Each RSU will convert to one Ordinary share of the Company, one year after the grant.

 

NOTE 7:

FINANCIAL INCOME, NET

 

		Six months ended, June 30,
		2015				2014
		Unaudited
Financial income:
Interest income on short-term bank deposits		$	(23	)		$	(54	)
Change in fair value of warrants related to share purchase agreement			-				(22	)
Foreign currency adjustments gains, net			(59	)			(4	)
Total financial income			(82	)			(80	)
Financial expenses:
Interest expense			37				16
Change in fair value of warrants related to share purchase agreement			4				-
Total financial expenses			41				16
Total financial income, net		$	(41	)		$	(64	)

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

 

 

 

Exhibit 99.2

 

INDEX TO FINANCIAL STATEMENTS

 

Unaudited Condensed Financial Statements
Condensed Statements of Operations			F-2
Condensed Balance Sheets			F-3
Condensed Statements of Cash Flows			F-4
Notes to the Condensed Financial Statements			F-5

 

 

CynoGen, Inc.

 

Condensed Statements of Operations

 

(Unaudited)

 

(in thousands)

 

		Three Months Ended March 31
		2015				2014
Net Sales		$	1,734			$	889
Cost of services provided			1,847				1,280
Selling, general and administrative			1,923				1,561
Total Operating Cost and Expenses			3,770				2,841
Operating (Loss)			(2,036	)			(1,952	)
Interest expense			2				2
(Loss) Before Taxes			(2,038	)			(1,954	)
Tax Benefit			--				--
Net Loss and Comprehensive Loss		$	(2,038	)		$	(1,954	)

 

The accompanying notes to the condensed financial statements are an integral part of this statement.

 

 

 

CynoGen, Inc.

 

Condensed Balance Sheets

 

(in thousands)

 

		March 31 2015				December 31 2014
Assets		(unaudited)
Current Assets:
Trade receivables, less allowances of—2015: $1,552; 2014: $1,100		$	4,112			$	3,718
Prepaid expenses and other current assets			52				164
Total Current Assets			4,164				3,882
Property and equipment, at cost			3,839				3,729
Less: accumulated depreciation			(1,114	)			(978	)
Net Property and Equipment			2,725				2,751
Intangible assets, net of amortization			891				937
Other assets			25				25
Total Assets		$	7,805			$	7,595
Liabilities and Net Parent Company Investment in CynoGen
Current Liabilities:
Trade accounts payable		$	504			$	1,073
Salaries, wages, and commissions			685				651
Other accrued liabilities			98				173
Total Current Liabilities			1,287				1,897
Long-term Liabilities			24				19
Commitments and Contingencies
Common stock, 1,000 shares authorized, issued, and outstanding, no par value			--				--
Net parent company investment in CynoGen			6,494				5,679
Total Net Parent Company Investment in CynoGen			6,494				5,679
Total Liabilities and Net Parent Company Investment in CynoGen		$	7,805			$	7,595

 

The accompanying notes to the condensed financial statements are an integral part of this statement.

 

 

CynoGen, Inc.

 

Condensed Statements of Cash Flows

 

(Unaudited)

 

(in thousands)

 

		Three Months Ended March 31
		2015				2014
Cash Flow (Used in) Operating Activities:
Net loss		$	(2,038	)		$	(1,954	)
Adjustments to reconcile net loss to net cash used in operating activities—
Depreciation			136				152
Amortization of intangible assets			46				--
Share-based compensation			38				46
Trade receivables			(394	)			(276	)
Other, net			(493	)			173
Net Cash (Used in) Operating Activities			(2,705	)			(1,859	)
Cash Flow (Used in) Investing Activities:
Acquisitions of property and equipment			(110	)			(140	)
Net Cash (Used in) Investing Activities			(110	)			(140	)
Cash Flow Provided by Financing Activities:
Net cash inflows from transactions with Abbott Laboratories			2,815				1,999
Net Cash Provided by Financing Activities			2,815				1,999
Net Increase (Decrease) in Cash and Cash Equivalents			--				--
Cash and Cash Equivalents, Beginning of Year			--				--
Cash and Cash Equivalents, End of Period		$	--			$	--

 

The accompanying notes to the condensed financial statements are an integral part of this statement.

 

 

CynoGen, Inc.

 

Notes to the Condensed Financial Statements

 

March 31, 2015

 

(Unaudited)

 

Note 1—Basis of Presentation

 

The accompanying unaudited, condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. The financial data presented herein should be read in conjunction with the financial statements and accompanying notes as of December 31, 2014 and 2013 and for the two years ended December 31, 2014. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results for interim periods should not be considered indicative of results for the full year.

 

On April 13, 2015, Abbott Molecular, Inc., a subsidiary of Abbott Laboratories (Abbott) entered into a Stock Purchase Agreement (the Agreement) with Minuet Diagnostics, Inc. (Minuet), a subsidiary of Prelude Corporation (Prelude) whereby Abbott sold its wholly-owned subsidiary, CynoGen, Inc. (CynoGen or the Company), for $1 million. Prelude subsequently sold the Company to Rosetta Genomics, Ltd., who will combine its business with that of the Company.

 

The principal business of CynoGen is the performance of laboratory tests. All of CynoGen’s services are provided in the United States, and its services are primarily marketed to physician groups, hospitals, and other health care providers. CynoGen’s services are primarily billed to health care insurers, who reimburse CynoGen based on contractually agreed rates.

 

The accompanying condensed financial statements have been prepared on a stand-alone basis and are derived from Abbott’s consolidated financial statements and accounting records. The condensed financial statements reflect CynoGen’s financial position, results of operations, and cash flows as its business was operated as part of Abbott for the periods presented, in conformity with U.S. generally accepted accounting principles.

 

Since its inception, CynoGen has generated significant losses and CynoGen expects to incur additional losses as it continues to grow its customer base and related revenues. Historically, its cash needs for operating expenses have been principally met by proceeds from Abbott through the date of the Agreement. Rosetta Genomics, Ltd. has represented that it has the positive intent and ability to provide all necessary financial support to CynoGen to ensure that CynoGen will continue as a going concern for at least one year after the date of these condensed financial statements. The accompanying condensed financial statements have been prepared under the presumption that CynoGen would continue as a going concern.

 

The condensed financial statements include the allocation of certain assets and liabilities that have historically been maintained at the Abbott corporate level but which are specifically identifiable or allocable to CynoGen. Cash, cash equivalents, and short-term investment securities held by Abbott were excluded from CynoGen’s financial statements. Per the terms of the Agreement between Abbott and Minuet, no cash was transferred. All intercompany transactions between Cynogen and Abbott are considered to be effectively settled in the accompanying condensed financial statements at the time the transactions are recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Condensed Statements of Cash Flows as a financing activity and in the Condensed Balance Sheets as Net parent company investment in CynoGen.

 

CynoGen’s condensed financial statements include an allocation of expenses related to certain Abbott corporate functions, including senior management, legal, human resources, finance, and information technology. These expenses have been allocated to CynoGen based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of revenues, headcount, number of transactions, or other reasonable measures. CynoGen considers the expense allocation methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had CynoGen operated as an independent company for the periods presented.

 

Abbott maintains various benefit and stock-based compensation plans at a corporate level and other benefit plans for its United States-based employees. CynoGen employees participate in those programs and a portion of the cost of those plans is included in CynoGen’s condensed financial statements. However, CynoGen’s Condensed Balance Sheets do not include any equity related to stock-based compensation plans or any net benefit plan assets or obligations because the plans do not only cover CynoGen employees and CynoGen is not the plan sponsor. See Note 4 and Note 5 for a further description of the accounting for stock-based compensation and benefit plans.

 

 

Note 2—Supplemental Financial Information

 

Other accrued liabilities as of March 31, 2015 and December 31, 2014, included approximately $48 and $46 thousand, respectively, of accrued self-insurance reserves, zero and $34 thousand, respectively, of accrued tax withholdings, zero and $43 thousand of accrued non-income taxes, and $20 thousand and $18 thousand, respectively, of deferred rent.

 

Note 3—Intangible Assets

 

The gross amount of amortizable intangible assets was $1 million as of March 31, 2015 and December 31, 2014, respectively, and the associated accumulated amortization was approximately $109 thousand and $63 thousand as of March 31, 2015 and December 31, 2014, respectively. The acquired intangible assets relate to an acquired license which gives CynoGen the right to commercialize a certain proprietary laboratory test. The term of the agreement expires on December 31, 2019, and can be renewed by mutual agreement with the counterparty. In the event that the agreement is not renewed, the rights to commercialize the laboratory test would revert back to the counterparty, and CynoGen would be entitled to receive payments of 25% of 2019 sales in 2020, 20% of 2019 sales in 2021, and 15% of 2019 sales in 2022.

 

The estimated annual amortization expense for intangible assets recorded at March 31, 2015 is approximately $188 thousand from 2015 through 2019. Intangible asset amortization is included in Cost of services provided in the Condensed Statements of Operations.

 

Note 4—Incentive Stock Program

 

Abbott maintains an incentive stock program for the benefit of its officers, directors, and certain employees, including certain CynoGen employees. The following disclosures represent the portion of Abbott’s program in which CynoGen employees participate. All awards granted under the program consist of Abbott common shares. Accordingly, the amounts presented are not necessarily indicative of future performance and do not necessarily reflect the results that CynoGen would have experienced as an independent company for the periods presented.

 

During the three months ended March 31, 2015, 2.1 thousand restricted stock units were granted to certain CynoGen employees. Total non-cash compensation expense charged against income for the three months ended March 31, 2015 and March 31, 2014 was $38 thousand and $46 thousand, respectively.

 

Note 5—Post-Employment Benefits

 

CynoGen employees participate in defined benefit pension and other postretirement plans sponsored by Abbott Laboratories, which include participants from Abbott Laboratories’ other businesses. Such plans are accounted for as multiemployer benefit plans. As a result, no asset or liability was recorded by CynoGen to recognize the funded status of these plans in the accompanying condensed financial statements. CynoGen recognized expense of $184 thousand and $98 thousand for the three months ended March 31, 2015 and March 31, 2014, respectively, for Abbott’s allocation of pension and other postretirement benefit costs related to CynoGen’s employees. As of March 31, 2015 and December 31, 2014 there were no required contributions outstanding.

 

Additionally, CynoGen employees participate in the Abbott Stock Retirement Plan, which is sponsored by Abbott Laboratories and include participants of Abbott Laboratories’ other businesses. CynoGen recognized expense of $52 thousand and $44 thousand for the three months ended March 31, 2015 and March 31, 2014, respectively, for Abbott’s allocation of its contributions to this plan on behalf of CynoGen employees.

 

Note 6—Taxes on Losses

 

Taxes on losses have been calculated on a separate tax return basis although CynoGen’s operations have historically been included in the tax returns filed by Abbott. Taxes on losses reflect the estimated annual effective rates, which are less than the statutory U.S. federal income tax rate principally due to the valuation allowance recognized on deferred tax assets.

 

 

Note 7—Related Party Transactions

 

Abbott provides certain services to CynoGen, which include administration of treasury, payroll, employee compensation and benefits, travel and meeting services, public and investor relations, real estate services, internal audit, telecommunications, information technology, corporate income tax and selected legal services. Some of these services will be provided to CynoGen on a temporary basis after the divestiture. The financial information in these condensed financial statements does not necessarily include all the expenses that would have been incurred had CynoGen been a separate, stand-alone entity. As such, the financial information herein may not necessarily reflect the condensed financial position, results of operations and cash flows of CynoGen in the future or what they would have been had CynoGen been a separate, stand-alone entity during the periods presented. Management believes that the methods used to allocate expenses to CynoGen are reasonable. The allocation methods include relative sales, headcount, number of transactions or other reasonable measures. These allocations totaled approximately $427 thousand and $145 thousand for the three months ended March 31, 2015 and March 31, 2014, respectively. These allocations are included in cost of services provided and selling, general, and administrative expenses on the condensed statements of operations.

 

Note 8—Subsequent Events

 

On April 13, 2015, as part of the sale of CynoGen, Abbott discontinued its guarantee of CynoGen’s performance under the lease of CynoGen’s office and laboratory space.

 

CynoGen evaluated subsequent events for recognition or disclosure through June 29, 2015, the date the condensed financial statements were available to be issued.

 

 

 

Exhibit 99.3

 

UNAUDITED COMBINED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2015

 

On April 9, 2015, Rosetta Genomics Inc. (“Rosetta” or the “Company“), a wholly-owned subsidiary of Rosetta Genomics, Ltd., entered into a Stock Purchase Agreement (the "SPA") pursuant to which it agreed to acquire CynoGen, Inc. (“CynoGen”) from Prelude Corporation, a Fjord Ventures portfolio company. CynoGen is a rapidly growing molecular diagnostics and services company serving community-based pathologists, urologists, oncologists and other reference laboratories across the U.S. On April 13, 2015, the Company closed the transaction (the “Acquisition”).

 

Under the SPA the total consideration was comprised of a cash payment of $2 million, issuance of 500,000 of the Company’s ordinary shares at closing, valued at $3.12 per share or $1.56 million, and the provision of certain assets and services to be provided by Rosetta to Prelude Corporation. Prelude Corporation has since accepted 120,000 of our ordinary shares in lieu of the above mentioned provision for certain assets and services. The aggregate fair value of the total 620,000 ordinary shares issued amounted to approximately $1.95 million.

 

The following unaudited combined pro forma condensed consolidated Statements of Operations for the six month period ended June 30, 2015, give effect to the Acquisition as if it had been completed on January 1, 2014. For the purposes of the pro forma Statements of Operations, the Company has assumed that it had sufficient cash to make the Acquisition.

 

The pro forma information has been prepared by management of the Company and it may not be indicative of the results that actually would have occurred had the transaction been in effect on the dates indicated, nor does it purport to indicate the results that may be obtained in the future. The pro forma information is based on provisional amounts allocated by management to various assets and liabilities acquired and may be eventually different than currently presented.

 

The pro forma information should be read in conjunction with the financial statements and notes thereto of CynoGen and the Company’s financial statements and notes thereto, including: (i) the Company’s audited consolidated financial statements contained in its Annual Report on Form 20-F for the year ended December 31, 2014, filed with the SEC on March 16, 2015; (ii) the Company’s unaudited pro forma condensed consolidated financial statements for the year ended December 31, 2014, filed as Exhibit 99.1 to the Report on Form 6-K filed with the SEC on July 8, 2015; (iii) CynoGen’s audited financial statements for the year ended December 31, 2014, filed as Exhibit 99.2 to the Report on Form 6-K filed with the SEC on July 8, 2015; (iv) the Company’s unaudited condensed interim consolidated financial statements for the six months ended June 30, 2015, filed as Exhibit 99.1 to the Report on Form 6-K filed with the SEC on October 26, 2015; and (v) CynoGen’s unaudited financial statements for the three months ended March 31, 2015, filed as Exhibit 99.2 to the Report on Form 6-K filed with the SEC on October 26, 2015.

 

The unaudited combined pro forma condensed consolidated Statements of Operations do not give effect to planned synergies and/or cost savings related to the Acquisition.

 

 

Unaudited Combined Pro-Forma Condensed Statement of Operations for the Six-Month Period Ended June 30, 2015

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

 

		Rosetta Genomics (A)				CynoGen (B)				Pro forma adjustments						Pro forma combined
Revenues		$	691			$	3,490				-					$	4,181
Cost of revenues			493				3,813				-						4,306
Gross profit (loss)			198				(323	)			-						(125	)
Operating expenses:
Research and development, net			1,361				-				-						1,361
Selling, General and Administrative			6,644				2,997				(347	)		C			9,294
Gain from bargain purchase related to acquisition of CynoGen, Inc.			(2,352	)			-				2,352			D			-
Total operating expenses			5,653				2,997				2,005						10,655
Operating loss			5,455				3,320				2,005						10,780
Financial expenses (income), net			(61	)			22				-						(39	)
Loss before taxes on income			5,394				3,342				2,005						10,741
Tax expenses			10				-				-						10
Net loss		$	5,404			$	3,342				2,005					$	10,751
Basic and diluted net loss per Ordinary Share from continuing operations		$	0.40											E		$	0.77
Weighted average number of Ordinary Shares used to compute basic and diluted net loss per Ordinary Share			13,598,198											E			13,882,729

 

 

A.

Reflects Rosetta Genomics' unaudited consolidated statement of operations for the six months period ended June 30, 2015 (without giving effect to the acquisition of CynoGen on April 13, 2015)

 

B.

Reflects CynoGen’s unaudited statement of operations for the six months period ended June 30, 2015

 

C.

To eliminate the transaction costs paid for the acquisition of CynoGen

 

D.

To eliminate the gain from bargain purchase related to the acquisition of CynoGen

 

E.

To reflect the issuance of shares as part of the acquisition