NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – DESCRIPTION OF BUSINESS
Orgenesis
Inc., a Nevada corporation, is a global biotech company working to unlock the potential of cell and gene therapies in an affordable
and accessible format (“CGTs”).
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 focusses 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 at their point of care for treatment of the patient. 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 the 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 comprised of three enabling components: a pipeline of
licensed POCare Therapies that are designed to be processed and produced in closed, automated POCare Technology
systems across a collaborative POCare Network. Via a combination of science, technology, engineering, and networking, the
Company is working to provide a more efficient and scalable pathway for advanced therapies to reach patients more rapidly at lowered
costs. 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, industry partners, research institutes and hospitals worldwide with a goal of
achieving harmonized, regulated clinical development and production of the therapies.
Over
time, the Company has worked to develop and validate POCare Technologies that can be combined within mobile production units for
advanced therapies. In 2020, the Company 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 our POCare Network of partners, collaborators,
and joint ventures. As of the date of this report, the 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 cell and gene 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 design delivers a potential industrial
solution for the Company to deliver CGTs to practically any clinical institution at the point of care.
Until
December 31, 2019, the Company operated the POCare Platform as one of two business separate business segments.
Historically,
the second separate business segment was operated as a Contract Development and Manufacturing Organization (“CDMO”)
platform, providing contract manufacturing and development services for biopharmaceutical companies (the “CDMO Business”).
The CDMO platform was historically operated mainly through majority owned Masthercell Global (which consisted of the following
two subsidiaries: MaSTherCell S.A. in Belgium (“MaSTherCell”), and Masthercell U.S., LLC in the United States (“Masthercell
U.S.”) (collectively, the “Masthercell Global Subsidiaries”)).
In
February 2020, the Company and GPP-II Masthercell LLC (“GPP”) sold 100% of the outstanding equity interests of Masthercell
(the “Masthercell Business”), which comprised the majority of the Company’s CDMO Business, to Catalent Pharma
Solutions, Inc. for an aggregate nominal purchase price of $315 million, (the “Masthercell Sale”). After accounting
for GPP’s liquidation preference and equity stake in Masthercell as well as other investor interests in our Belgian subsidiary
MaSTherCell, distributions to Masthercell option holders and transaction costs, the company received approximately $126.7 million.
The Company incurred an additional approximately $5.6 million in transaction costs.
The
Company determined that the Masthercell Business (“Discontinued Operation”) meets the criteria to be classified as
a discontinued operation as of the first quarter of 2020. The Discontinued Operation includes the vast majority of the previous
CDMO Business, including majority-owned Masthercell, including MaSTherCell, Masthercell U.S. and all of the Masthercell Global
Subsidiaries.
Since
the Masthercell Sale, the Company has entered into new joint venture agreements with new partners in various jurisdictions. This
has allowed the Company to grow its infrastructure and expand its processing sites into new markets and jurisdictions. In addition,
the Company has engaged some of these joint venture partners to perform research and development services to further develop and
adapt its systems and devices for specific purposes. The Company has been investing manpower and financial resources to focus
on developing, manufacturing and rolling out several types of OMPULs to be used and/or distributed through our POCare Network
of partners, collaborators, and joint ventures.
The
Chief Executive Officer (“CEO”) is the Company’s chief operating decision-maker who reviews financial
information prepared on a consolidated basis. Effective from the first quarter of 2020, all of our continuing operations
are in one segment, being the point-of-care business via our POCare Platform. Therefore, no segment report 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:
●
|
United
States: Orgenesis Maryland Inc. (the “U.S. Subsidiary”) is the center of activity in North America currently focused
on setting up of the POCare Network.
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|
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●
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Koligo
Therapeutics Inc. (“Koligo”) is a Kentucky corporation that was acquired in 2020 and is currently focused on developing
the POCare network and therapies (See Note 4 for the acquisition of Koligo).
|
|
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●
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European
Union: Orgenesis Belgium SRL (the “Belgian Subsidiary”) is the center of activity in Europe currently focused
on process development and preparation of European clinical trials.
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●
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Orgenesis
Switzerland Sarl (the “Swiss subsidiary) incorporated in October 2020 is currently focused on providing management services
to the Company.
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●
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Israel:
Orgenesis Ltd. (the “Israeli Subsidiary”) is a provider of regulatory, clinical and pre-clinical services, and
Orgenesis Biotech Israel Ltd. (“OBI”) previously known as Atvio Biotech Ltd. (“Atvio”) is a provider
of cell-processing services in Israel.
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●
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Korea:
Orgenesis Korea Co. Ltd. (the “Korean Subsidiary”), previously known as CureCell Co. Ltd., is a provider of processing
and pre-clinical services in Korea. The Company owns 94.12% of the Korean Subsidiary.
|
These
consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries including the Discontinued Operation.
On
April 7, 2020, the Company entered into an Asset Purchase Agreement (the “Tamir Purchase Agreement”) with Tamir Biotechnology,
Inc. (“Tamir” or “Seller”), 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 Ranpirnase and use for antiviral therapy (collectively, the “Purchased Assets and Assumed
Liabilities” and such acquisition, the “Tamir Transaction”). 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 (See Note 4).
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.
As
of December 31, 2020 ,the Company has accumulated losses of approximately $88 Million.
On
February 10, 2020, the Company received approximately $126.7
million, of which $7.2
million was used for the repayment of
intercompany loans and payables, from the Masthercell Sale (See Note 3). In addition, on January 20, 2020, the Company
entered into a Securities Purchase Agreement with certain investors pursuant to which the Company received gross proceeds of approximately
$9.24
million before deducting related offering
expenses.
The
Company invested significant resources in research and development and research and development services in 2020. The Company
believes that these investments will enable it to substantially increase revenues in the next 12 months. Based on its current
cash resources and commitments, 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. 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 may decide to seek additional financing.
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.
b. Business Combination
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. Other 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.
d. Discontinued operations
Upon
divestiture of a business, the Company classifies such business as a discontinued operation, 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 operation
until the period in which the business is actually abandoned.
The
Masthercell Business divestiture qualifies as a discontinued operation and therefore has been presented as such.
The
results of businesses that have qualified as a discontinued operation 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).
e. Cash Equivalents
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.
f. Cost of research and development and research and development services, net
Cost
of research and development and research and development services 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.
g. 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.
h. 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.
i. Functional Currency
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.
j. Inventory
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.
k. 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
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|
Weighted Average
Useful Life (Years)
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Production facility
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5 - 10
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Laboratory equipment
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2 - 7
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Office equipment and computers
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3 - 17
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l. Intangible assets
Intangible
assets and their useful lives are as follows:
SCHEDULE OF INTANGIBLE ASSETS AND THEIR USEFUL LIVE
|
|
Useful Life (Years)
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Amortization Recorded at Comprehensive
Loss Line Item
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Customer Relationships
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10
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Amortization of intangible assets
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Know-How
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12
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Amortization of intangible assets
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Technology
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15
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Amortization of intangible assets
|
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.
m. Goodwill
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.
n. 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 year
ended December 31, 2020 and 2019.
o. Income Taxes
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 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.
p. 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.
q. 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.
r.
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).
s. 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, 2020 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 or material delays in payments are all considered indicative of reduced debtor balance value.
t. Treasury shares
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. During the years ended December 31,
2020, the Company repurchased 55,309
shares. The Company did not reissue nor cancel treasury
shares during the year ended December 31, 2020.
u. 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).
v. Other Comprehensive Loss
Other
comprehensive loss represents adjustments of foreign currency translation.
w. 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;
|
●
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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
|
●
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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 operation 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).
Included
in POC development services is Hospital supplies revenue which is derived principally from the sale or lease of products and 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.
Practical
Expedients
As
part of ASC 606, the Company has adopted several practical expedients including the Company’s determination that it need
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 when the Company transfers a promised service to the customer and when the customer
pays for that service will be one year or less.
Cell
Process Development Services (mainly discontinued operations)
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 the customer pays, together with the payment term and cancellation
fine, it has a right to payment (which include 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.
Tech
Transfer Services (discontinued operations)
Revenue
recognized under contracts for tech transfer services are considered a single performance obligation, as all work packages (including
data collection, GMP documentation, validation runs) and milestones are interrelated. Additionally, the customer is unable to
complete services of work performed independently or by using competitors of the Company. Revenue is recognized over time using
a cost-based based input method where progress on the performance obligation is measured by the proportion of actual costs incurred
to the total costs expected to complete the contract.
Cell
Manufacturing Services (discontinued operations)
Revenues
from cell manufacturing services represent a single performance obligation which is recognized over time. The progress towards
completion will continue to be measured on an output measure based on direct measurement of the value transferred to the customer
(units produced).
Reimbursed
Expenses (discontinued operations)
The
Company includes reimbursed expenses in revenues and costs of revenue as the Company is primarily responsible for fulfilling the
promise to provide the specified service, including the integration of the related services into a combined output to the customer,
which are inseparable from the integrated service. These costs include such items as consumable, reagents, transportation and
travel expenses, over which the Company has discretion in establishing prices.
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.
Costs
of Revenue (discontinued operations)
Costs
of revenue include (i) compensation and benefits for billable employees and personnel involved in production, data management
and delivery, and the costs of acquiring and processing data for the Company’s information offerings; (ii) costs of staff
directly involved with delivering services offerings and engagements; (iii) consumables used for the services; and (iv) other
expenses directly related to service contracts such as courier fees, laboratory supplies, professional services and travel expenses.
x. Leases
The Company adopted
the new lease standard ASC 842 and all the related amendments on January 1, 2019.
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’s 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.
y. 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 is currently evaluating the impact that this new guidance
will have on its consolidated financial statements.
z. Newly issued and recently adopted accounting pronouncements
The
Company early adopted ASU 2019-12 on January 1, 2020, which did not have a material impact on the Consolidated Financial Statements
except for the removal of the exception related to intra-period tax allocations. Commencing from January 1, 2020, the Company
followed the general intra-period allocation of tax expenses. The Company had incurred a loss from continuing operations and subsequent
to the adoption of ASU 2019-12, the Company determined the amount attributable to continuing operations without regard to the
tax effect of other items. The ASU 2019-12 amendment related to the intra-period tax allocation was applied prospectively.
Had
the Company not adopted ASU 2019-12, an approximately $20 million tax benefit would have been recognized along with corresponding
decreases to net loss from continuing operations with a corresponding increase in tax expenses and decrease in net income resulting
from discontinued operations. The Company had no intra-period tax allocation items in prior years.
aa. Reclassifications
Certain
reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These
reclassifications had no net effect on previously reported results of operations.
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 OPERATION AND BALANCE SHEETS
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
OPERATIONS
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,556
|
|
|
$
|
31,053
|
|
Cost of revenues
|
|
|
1,482
|
|
|
|
18,318
|
|
Cost of research and development and research and development services, net
|
|
|
7
|
|
|
|
54
|
|
Amortization of intangible assets
|
|
|
137
|
|
|
|
1,631
|
|
Selling, general and administrative expenses
|
|
|
1,896
|
|
|
|
13,886
|
|
Other (income) expenses, net
|
|
|
305
|
|
|
|
(207
|
)
|
Operating loss
|
|
|
1,271
|
|
|
|
2,629
|
|
Financial expenses (income), net
|
|
|
(29
|
)
|
|
|
31
|
|
Loss before income taxes
|
|
|
1,242
|
|
|
|
2,660
|
|
Tax expenses (income)
|
|
|
(30
|
)
|
|
|
792
|
|
Net loss from discontinuing operation, net of tax
|
|
$
|
1,212
|
|
|
$
|
3,452
|
|
|
|
|
|
|
|
|
|
|
DISPOSAL
|
|
|
|
|
|
|
|
|
Gain on disposal before income taxes
|
|
$
|
96,918
|
|
|
$
|
-
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
Gain on disposal
|
|
$
|
96,918
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) from discontinuing operation, net of tax
|
|
$
|
95,706
|
|
|
$
|
(3,452
|
)
|
The
following table is a summary of the assets and liabilities of discontinued operations (in thousands):
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,281
|
|
Restricted cash
|
|
|
186
|
|
Accounts receivable, net
|
|
|
6,654
|
|
Prepaid expenses and other receivables
|
|
|
845
|
|
Grants receivable
|
|
|
1,979
|
|
Inventory
|
|
|
1,907
|
|
Deposits
|
|
|
326
|
|
Property and equipment, net
|
|
|
22,149
|
|
Intangible assets, net (mainly Know How)
|
|
|
10,858
|
|
Operating lease right-of-use assets
|
|
|
8,860
|
|
Goodwill
|
|
|
10,129
|
|
Other assets
|
|
|
47
|
|
TOTAL CURRENT ASSETS OF DISCONTINUED OPERATIONS
|
|
$
|
75,221
|
|
|
|
December 31,
2019
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable
|
|
$
|
5,756
|
|
Accrued expenses and other payables
|
|
|
372
|
|
Employees and related payables
|
|
|
2,047
|
|
Advance payments on account of grant
|
|
|
2,227
|
|
Short-term loans and current maturities of long- term loans
|
|
|
372
|
|
Contract liabilities
|
|
|
8,301
|
|
Current maturities of long-term finance leases
|
|
|
291
|
|
Current maturities of operating leases
|
|
|
1,365
|
|
Non-current operating leases
|
|
|
7,069
|
|
Loans payable
|
|
|
1,230
|
|
Deferred taxes
|
|
|
1,868
|
|
Long-term finance leases
|
|
|
688
|
|
TOTAL CURRENT LIABILITIES OF DISCONTINUED OPERATIONS
|
|
$
|
31,586
|
|
Property,
plants and equipment, net and right-of-use assets by geographical location were as follows:
|
|
December 31,
2019
|
|
|
|
|
|
United States
|
|
$
|
16,707
|
|
Belgium
|
|
|
14,302
|
|
Total
|
|
$
|
31,009
|
|
The
following table represents the components of the cash flows from discontinued operations (in thousands):
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
$
|
(2,409
|
)
|
|
$
|
(1,248
|
)
|
Net cash flows used in investing activities
|
|
$
|
(579
|
)
|
|
$
|
(11,621
|
)
|
Net cash flows (used in) provided by financing activities
|
|
$
|
(51
|
)
|
|
$
|
12,570
|
|
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
|
|
|
2019
|
|
Revenue stream:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cell process development services
|
|
$
|
2,556
|
|
|
$
|
20,834
|
|
Tech transfer services
|
|
|
-
|
|
|
|
5,396
|
|
Cell manufacturing services
|
|
|
-
|
|
|
|
4,823
|
|
Total
|
|
$
|
2,556
|
|
|
$
|
31,053
|
|
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 SPFI 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 Ranpirnase 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. $59 thousand and 340,000 Shares are being held in an escrow account for a period of 18 months
from closing to secure indemnification obligations of Tamir pursuant to the terms of the Tamir Purchase Agreement. $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.
Description
of Koligo Acquisition during 2020
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
is 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, we 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.
The
Merger Agreement contains customary indemnification provisions whereby the Shareholders of Koligo will indemnify the Company and
certain affiliated parties for any losses arising out of breaches of the representations, warranties and covenants of Koligo and
the Shareholders under the Merger Agreement. 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. 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 has also 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 pursuant to which Long Hill will have one demand registration right to require the registration of
the shares of Company common stock received by Long Hill in the Merger and Long Hill and Maxim will have certain piggyback registration
rights. In addition, Long Hill agreed with the Company that, during the applicable Restriction Period (as defined below), it shall
not sell or transfer, subject to certain limited exceptions, the portion of the shares received in the Merger during the applicable
Restriction Period, subject to a limitation on the number of shares sold per any trading day not to exceed 10% of the average
daily trading volume of the Common Stock, as reported by Bloomberg Financial L.P. “Restriction Period” means (a) in
relation to 70% of all of the shares received in the Merger that Long Hill is entitled to receive under or in connection with
the Merger Agreement, the period beginning on the date of the closing and ending on the date that is the four month anniversary
thereof, and (b) in relation to the remaining 30% of all of the shares received in the Merger that Long Hill is entitled to receive
under or in connection with the Merger Agreement, the period beginning on the date of the closing and ending on the date that
is the twelve month anniversary thereof. 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)
|
|
|
|
(in thousands)
|
|
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)
|
(a)
|
|
9,340
|
|
IPR&D (a)
|
|
|
641
|
|
Operating lease right-of-use assets
|
|
|
238
|
|
Goodwill (b)
|
|
|
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
|
|
2020
|
|
|
2019
|
|
|
|
Year ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,239
|
|
|
$
|
4,398
|
|
Net loss
|
|
$
|
318
|
|
|
$
|
27,263
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
|
$
|
1.91
|
|
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.
Cooperate
reorganization, description of the Transactions Korea and OBI during 2019
On
August 7, 2019, the Company, Masthercell Global and GPP-II Masthercell, LLC, a Delaware limited liability company (“GPP-II”),
(the “Parties”) entered into a Transfer Agreement (the “Transfer Agreement”). As a result of the Transfer
Agreement, Masthercell Global transferred all of its equity interests of OBI and the Korean Subsidiary to Orgenesis Inc in exchange
for one dollar ($1.00). The Transfer Agreement also contained agreements made with respect to certain intercompany loans. The
Company accounted for the Transfer Agreement as a transaction with non-controlling interest.
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
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Cost:
|
|
|
|
|
|
|
|
|
Production facility
|
|
$
|
2,801
|
|
|
$
|
2,481
|
|
Office furniture and computers
|
|
|
697
|
|
|
|
606
|
|
Lab equipment
|
|
|
1,483
|
|
|
|
656
|
|
Advance payment
|
|
|
281
|
|
|
|
-
|
|
Subtotal
|
|
|
5,262
|
|
|
|
3,743
|
|
Less – accumulated depreciation
|
|
|
(2,189
|
)
|
|
|
(1,438
|
)
|
Total
|
|
$
|
3,073
|
|
|
$
|
2,305
|
|
Depreciation
expense for the years ended December 31, 2020 and December 31, 2019 were $ 705 thousand and $634 thousand, respectively.
Property,
plants and equipment, net by geographical location were as follows:
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT BY GEOGRAPHICAL LOCATION
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Belgium
|
|
$
|
358
|
|
|
$
|
-
|
|
Korea
|
|
|
839
|
|
|
|
983
|
|
Israel
|
|
|
1,386
|
|
|
|
1,322
|
|
U.S.
|
|
|
490
|
|
|
|
-
|
|
Total
|
|
$
|
3,073
|
|
|
$
|
2,305
|
|
NOTE
6 – INTANGIBLE ASSETS AND GOODWILL
Changes
in the carrying amount of the Company’s goodwill for the years ended December 31, 2020 and 2019 are as follows:
SCHEDULE OF GOODWILL
|
|
(in thousands)
|
|
Goodwill as of December 31, 2018
|
|
$
|
4,942
|
|
Goodwill as acquired, (Koligo) see note 4
|
|
|
-
|
|
Translation differences
|
|
|
(130
|
)
|
Goodwill as of December 31, 2019
|
|
$
|
4,812
|
|
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
|
|
Goodwill
Impairment
See
Note 2(m) for the Company’s goodwill impairment analysis.
Other
Intangible Assets
Other
intangible assets consisted of the following:
SCHEDULE OF OTHER INTANGIBLE ASSETS
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Gross Carrying Amount:
|
|
|
|
|
|
|
|
|
Know How
|
|
$
|
3,170
|
|
|
$
|
2,991
|
|
Customer relationships
|
|
|
886
|
|
|
|
895
|
|
Kyslecel Technology
|
|
|
9,340
|
|
|
|
-
|
|
IPR&D
|
|
|
641
|
|
|
|
-
|
|
Subtotal
|
|
|
14,037
|
|
|
|
3,886
|
|
Less – Accumulated amortization
|
|
|
(1,014
|
)
|
|
|
(538
|
)
|
Net carrying amount of other intangible assets
|
|
$
|
13,023
|
|
|
$
|
3,348
|
|
Intangible
assets amortization expenses were approximately $478 thousand
and $430 thousand for the years ended December 31, 2020 and December 31, 2019, respectively.
Estimated
aggregate amortization expenses for the five succeeding years ending on December 31st are as follows:
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSES
|
|
2021
|
|
|
2022 to 2025
|
|
|
|
(in thousands)
|
|
Amortization expenses
|
|
$
|
965
|
|
|
$
|
3,910
|
|
NOTE
7 – CONVERTIBLE LOANS
SCHEDULE OF LONG TERM CONVERTIBLE LOANS
a.
|
Long
term convertible loans outstanding as of December 31, 2020 and December 31, 2019 are as follows:
|
Principal
Amount
|
|
|
Issuance
Year
|
|
Interest
Rate
|
|
|
Maturity Period
|
|
Exercise Price
|
|
|
BCF
|
|
(in thousands)
|
|
|
|
|
|
|
|
(Years)
|
|
|
|
|
|
|
Convertible Loans Outstanding as of December
31, 2020
|
|
|
|
|
$
|
1,000
|
|
|
2018
|
|
|
2
|
%
|
|
3
|
|
|
7.00
|
(1)
|
|
|
71
|
|
|
9,500
|
|
|
2019
|
|
|
6%-8
|
%
|
|
2-5
|
|
|
7.00
|
(2)
|
|
|
-
|
|
|
250
|
|
|
2020
|
|
|
8
|
%
|
|
2
|
|
|
7.00
|
(3)
|
|
|
-
|
|
$
|
10,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Loans Outstanding as of December 31, 2019
|
|
$
|
1,500
|
|
|
2018
|
|
|
2
|
%
|
|
3
|
|
|
7.00
|
(1)
|
|
|
124
|
|
|
11,400
|
|
|
2019
|
|
|
6%-8
|
%
|
|
2-5
|
|
|
7.00
|
(2)
|
|
|
-
|
|
$
|
12,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Loans repaid during the year ended December
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount
|
|
|
Issuance
Year
|
|
Interest
Rate
|
|
|
Maturity Period
|
|
Exercise Price
|
|
|
BCF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
2018
|
|
|
2
|
%
|
|
0.87
|
|
$
|
7
|
|
|
|
53
|
|
|
500
|
|
|
2019
|
|
|
6
|
%
|
|
0.28
|
|
|
7
|
|
|
|
-
|
|
|
1,400
|
|
|
2019
|
|
|
8
|
%
|
|
0.76
|
|
|
7
|
|
|
|
-
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apart
from the items mentioned below there were no repayments of convertible loans during the fiscal years ended December 31, 2019 and
December 31, 2020. In addition, there were no conversions during the fiscal years ended December 31, 2019 and December 31,
2020.
(1)
|
The holders,
at their option, may convert the outstanding principal amount and accrued interest under this note into a total of 148,838 shares
and 148,838 three-year warrants to purchase up to an additional 148,838 shares of the Company’s common stock at a per share
exercise price of $7. In the initial two years, the holders have the right to convert the outstanding principal amount and accrued
interest into shares of capital stock of Hemogenyx-Cell or Immugenyx, LLC according under the relevant note agreement, subsidiaries
of Hemogenyx Pharmaceuticals Plc, at a price per share based on a pre-money valuation of Hemogenyx-Cell or Immugenyx, LLC of $12
million and $8 million, respectively, pursuant to the collaboration agreement with Hemogenyx Pharmaceuticals Plc and Immugenyx,
LLC. As of December 31, 2020, the loans are presented in current maturities of convertible notes in the balance sheet (See Notes
11(c) and 11(d).
|
(2)
|
The holders,
at their option, may convert the outstanding principal amount and accrued interest under this note into a total of 1,443,734 shares
and 1,053,503 three-year warrants to purchase up to an additional 1,053,503 shares of the Company’s common stock at a per
share exercise price of $7. As of December 31, 2020, $2,500 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(e), 7(f)
and 7(g).
|
(3)
|
The holders,
at their option, may convert the outstanding principal amount and accrued interest under this note into a total of 38,559 shares
at a per share exercise price of $7. As of December 31, 2020, all the principal amount is included in long-term convertible loans
in the balance sheet See also Notes 7(h).
|
b.
During April 2019, the Company entered into a convertible loan agreement with an offshore investor for an aggregate amount of
$500 thousand into the U.S. Subsidiary. The investor, at its option, may convert the outstanding principal amount and accrued
interest under this note into shares and three-year warrants to purchase shares of the Company’s common stock at a per share
exercise price of $7.00; or into shares of the U.S. Subsidiary at a valuation of the U.S. Subsidiary of $50 million. During February
2020 the company repaid this convertible loan to the investor in full.
c.
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.
d.
In May 2019, the Company had agreed to enter into a 6% convertible loan agreement with an investor for an aggregate amount of
$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 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. As of the date of the
filing of this Annual Report on Form 10-K, the loan had not yet been received by the Company.
e.
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.
f.
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 is 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,
shall become 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 issue 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. The modification of the existing warrants in the
amount of $145 thousands was recorded against the accumulated deficit and the value of the new warrants in the amount of $370
thousands was offset against the convertible loan amount.
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 shares of common stock of the Company at a conversion price per share equal to $7.00.
As
at December 31, 2019, the Company had received $3.65
million from the Convertible Credit
Line investment comprised of $1.15
million from one investor, $1
million from a second investor, and $750
thousand from two of the other lenders.
The
transaction costs were approximately $145
thousand.
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.
g.
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 and warrants to purchase
183,481 additional shares of the Company’s 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.
h.
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.
i.
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.
j.
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, 2020.
NOTE
8 – LOANS
Terms
of Short-term Loans
SCHEDULE OF LOANS
|
|
|
|
|
|
|
December 31,
|
|
|
|
Currency
|
|
Interest Rate
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Short term loans
|
|
KRW
|
|
|
3.61
|
%
|
|
$
|
-
|
|
|
$
|
260
|
|
Short term loans
|
|
KRW
|
|
|
6.00
|
%
|
|
|
-
|
|
|
|
131
|
|
Short term loans
|
|
USD
|
|
|
1.00
|
%
|
|
|
145
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
$
|
145
|
|
|
$
|
391
|
|
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
|
|
December 31, 2020
|
|
Assets
|
|
|
|
|
Operating Leases
|
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
1,474
|
|
|
|
|
|
|
Finance Leases
|
|
|
|
|
Property, plants and equipment, gross
|
|
|
99
|
|
Accumulated depreciation
|
|
|
(17
|
)
|
Property and equipment, net
|
|
$
|
82
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current liabilities
|
|
|
|
|
Current maturities of operating leases
|
|
$
|
485
|
|
Current maturities of long-term finance leases
|
|
$
|
19
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
Non-current operating leases
|
|
$
|
1,020
|
|
Long-term finance leases
|
|
$
|
64
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term
|
|
|
|
|
Operating leases
|
|
|
3.4 years
|
|
Finance leases
|
|
|
4.2 years
|
|
|
|
|
|
|
Weighted Average Discount Rate
|
|
|
|
|
Operating leases
|
|
|
6.7
|
%
|
Finance leases
|
|
|
2.0
|
%
|
Lease
Costs
The
table below presents certain information related to lease costs and finance and operating leases during the year ended December
31, 2020.
SCHEDULE OF LEASE COSTS
|
|
Year ended
December 31,
2020
|
|
|
|
|
|
Operating lease cost:
|
|
$
|
547
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
|
Amortization of leased assets
|
|
|
17
|
|
Interest on lease liabilities
|
|
|
3
|
|
Total finance lease cost
|
|
$
|
20
|
|
The
table below presents supplemental cash flow information related to leases during the year ended December 31, 2020:
SCHEDULE OF SUPPLEMENTAL CASHFLOW INFORMATION
|
|
Year ended
December 30,
2020
|
|
|
|
(in Thousands)
|
|
Cash paid for amounts included in the measurement of leases liabilities:
|
|
|
|
|
Operating leases
|
|
$
|
515
|
|
Finance leases
|
|
$
|
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,
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
526
|
|
|
$
|
20
|
|
2022
|
|
|
528
|
|
|
|
20
|
|
2023
|
|
|
342
|
|
|
|
20
|
|
2024
|
|
|
188
|
|
|
|
20
|
|
2025
|
|
|
59
|
|
|
|
4
|
|
Total minimum lease payments
|
|
|
1,643
|
|
|
|
84
|
|
Less: amount of lease payments representing interest
|
|
|
(138
|
)
|
|
|
(1
|
)
|
Present value of future minimum lease payments
|
|
|
1,505
|
|
|
|
83
|
|
Less: Current leases obligations
|
|
|
(485
|
)
|
|
|
(19
|
)
|
Long-term leases obligations
|
|
$
|
1,020
|
|
|
$
|
64
|
|
Right-of-use
assets by geographical location were as follows:
SCHEDULE OF RIGHT-OF-USE ASSETS BY GEOGRAPHICAL LOCATION
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Korea
|
|
$
|
683
|
|
|
$
|
145
|
|
Israel
|
|
|
496
|
|
|
|
580
|
|
U.S.
|
|
|
295
|
|
|
|
-
|
|
Total
|
|
$
|
1,474
|
|
|
$
|
725
|
|
NOTE
10 – COMMITMENTS
See
Note 11 for additional commitments for funding of the ventures of the company.
a.
|
Maryland
Technology Development Corporation
|
On
June 30, 2014, the Company’s U.S. Subsidiary entered into a grant agreement with Maryland Technology Development Corporation
(“TEDCO”). TEDCO was created by the Maryland State Legislature in 1998 to facilitate the transfer and commercialization
of technology from Maryland’s research universities and federal labs into the marketplace and to assist in the creation
and growth of technology-based businesses in all regions of the State. Under the agreement, TEDCO paid to the U.S Subsidiary an
amount of $406 thousand (the “Grant”). On June 21, 2016 TEDCO has approved an extension until June 30, 2017.
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
thousand (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 thousand 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,
2020, the Company repaid to the DGO6 a total amount of $118 thousand (Euro 96 thousand) and amount of $106 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,
2020, an amount of Euro 358
thousand ($437
thousand) was recorded as deduction of
research and development expenses and an amount of Euro 80
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). Up through December 31,
2020, an amount of Euro 1.7 million was recorded as deduction of research and development expenses and an amount of Euro 53 thousand
was recorded as receivable on account of grant.
(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 an advance payment of Euro 301
thousand ($366 thousand) in December 2020. The research program is to be 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 $400 thousand each (according to terms defined in the agreement),
for a joint research and development project for the use Autologous Insulin Producing (AIP) Cells for the Treatment of Diabetes
(the “Project”). The Project started on March 1, 2015. Upon the conclusion of product development, the grant shall
be repaid at the rate of 5% of gross sales. The grant will be used solely to finance the costs to conduct the research of the
project during a period of 18 months starting on March 1, 2015. On July 28, 2016, BIRD approved an extension for the project period
until May 31, 2017 and the final report was submitted to BIRD. As of December 31, 2020, the Israeli Subsidiary received a total
amount of $299 thousand under the grant and the project was completed.
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 give 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 AIP Cells for the Treatment of Diabetes (the “Project”).
The Project started on June 1, 2016. Upon the conclusion of product development, the grant shall be repaid at the yearly rate
of 2.5% of gross sales. The grant will be used solely to finance the costs to conduct the research of the project during a period
of 18 months starting. On July 26, 2018 KORIL approved extension for the project period till May 31, 2019 and was further extended
to May 2020. During 2019, the grant was assigned to Cure Therapeutics from the Korean Subsidiary. As of December 31, 2020, the
Israeli Subsidiary and the Korean Subsidiary received $440 thousand under the grant.
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 the beginning of 2018, OBI entered into a Cooperation and Project Funding Agreement (CPFA)
with BIRD and Secant. BIRD will give a conditional grant up to $450 thousand each to support the joint project (according to terms
defined in the agreement).
As
of December 31, 2020, OBI received a total amount of $425 thousand under the grant. For the year ended December 31, 2020, an amount
of $28 thousand was recorded as deduction of research and development expenses.
NOTE
11 – COLLABORATION AND LICENSE AGREEMENTS
a.
|
Adva
Biotechnology Ltd.
|
On
January 28, 2018, the Company and Adva Biotechnology Ltd. (“Adva”), entered into a Master Services Agreement (“MSA”),
under which the Company and/or its affiliates are to provide certain services relating to development of products to Adva, as
may be agreed between the parties from time to time. Under the MSA, the Company undertook to provide Adva with in kind funding
in the form of materials and services having an aggregate value of approximately $760 thousand at the Company’s own cost
in accordance with a project schedule and related mutually acceptable project budget. The Company entered into an agreement with
Orgenesis Biotech Israel (previously Atvio), to fulfill its obligations pursuant this MSA and it completed its contractual obligations
under the contract during 2019.
In
consideration for and subject to the fulfillment by the Company of such in-kind funding commitment, 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.
|
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, 2020, 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.
c.
|
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. 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. During 2018
and 2020 the Company advanced $0.75
million and $0.25
million, respectively,
to Hemo as a convertible loan and the entire loan was charged to expenses under ASC 730-10-50 and 20-50 and presented as research
and development costs.
See
Note 7.
On
October 16, 2018, the Company and Immugenyx LLC., a corporation with its registered office in the USA (“Immu”), who
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. 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.
During 2018 and 2020 the Company advanced $0.75
million and $0.25
million, respectively,
to Immu as a convertible loan and the entire loan was charged to expenses under ASC 730-10-50 and 20-50 and presented as research
and development
e.
|
BG
Negev Technologies and Applications (“BGN”).
|
On
August 2, 2018, the Company’s U.S. Subsidiary entered into a licensing agreement with BGN. According to the agreement, the
U.S. Subsidiary 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’s U.S. Subsidiary 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
consideration for the licenses, the U.S. Subsidiary will pay royalties of between 4% and 7% (subject to rate reductions to 5%
and 4%, respectively, in specific circumstances) of net sales of the licensed product, sub-license fees of 20% of sub-license
income received, license fees of $10,000 per year per license, and milestone and budget payments according to agreed upon work
plans to BGN.
f.
|
Collaboration
Agreement with Tarus Therapeutics, Inc.
|
On
February 27, 2019, the Company and Tarus Therapeutics Inc., a Delaware corporation, (“Tarus”) entered into a Collaboration
Agreement (the “Tarus Agreement”) for the collaboration in the funding, development and commercialization of certain
technologies, products and patents of Tarus in the areas of therapeutics for cancer and other diseases in the field of cell therapies
and their combination with checkpoint inhibitors comprised of Adenosine Receptor Antagonists. Under the terms of the Tarus Agreement
and subject to final due diligence and approved financing of the Company, the Company and/or one or more qualified investors (the
“Investors”) shall advance to Tarus a convertible loan in an amount of not less than $1,750 thousand and up to $3,000
thousand (the “Loan Agreement”). As of December 31, 2020, the loan agreements have not been concluded, nor has any
financing been made to Tarus. As part of such Loan Agreement, and subject to approval by the board of directors of the Company,
the Investors shall have the right, within two years of the date of the Loan Agreement, to convert the outstanding convertible
loan into either (i) shares of Tarus at a price per share based on a pre- money valuation of $12,500 thousand or (ii) shares of
the Company’s common stock at a price per share set in accordance with an approved financing of the Company, with such terms
as approved by the Company in its sole discretion. In the event the Investors elect to convert into shares of the Company’s
common stock, the Company shall have the right upon notice to Tarus to receive the same number of shares of capital stock of Tarus
that the Investors would have received had the Investors converted their convertible loans into shares of Tarus. Further, as part
of the Loan Agreement, the Company shall advance to Tarus up to $500 thousand within fourteen days of execution of the Loan Agreement.
Subject to the closing of the Loan Agreement, the Company and/or the Investors shall have an option, exercisable by sending written
notice to Tarus at any time through the second anniversary of the closing of the Loan Agreement, to invest additional funds in
an amount of up to $1,250 thousand and not less than $500 thousand in Tarus. The Company will also have the right to appoint and/or
replace one member of board of directors of Tarus. Upon and subject to the execution of a definitive development and manufacturing
agreement between the Company and Tarus (“Manufacturing and Supply Agreement”), the Company, or one or more of its
affiliates, shall manufacture and supply to Tarus and any of its affiliates, licensees, assignees of interest all requirements
for all cell therapy elements of any combination therapy incorporating the technology of Tarus. Following the conclusion of the
clinical development stage of each product emanating from the technology of Tarus, the cell therapy component of any such product
borne out of the technology of Tarus shall be exclusively supplied by the Company under the Manufacturing and Supply Agreement.
If the Company and Tarus fail to sign such Manufacturing and Supply Agreement for any given Tarus product, Tarus shall pay the
Company an amount equal to four percent (4%) of gross revenues derived by Tarus from such Tarus products.
Apart
from the above, there was no activity in the Tarus collaboration.
g.
|
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.
h.
|
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). The liver cells are intended to be bio-banked at the New York Blood Center, NYC for potential future
clinical use. In October 2019, a liver sample from the first recruited patient was collected and processed and stored at the New
York Blood Center, NYC in specialized, clinical grade, tissue banks for potential clinical use.
i.
|
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.
The incidence of diabetes following TP is 100%, resulting in immediate and lifelong insulin-dependence with the loss of both endogenous
insulin secretion and that of the counter-regulatory hormone, glucagon. Glycemic control after TP is notoriously difficult with
conventional insulin therapy due to complete insulin dependence and loss of glucagon-dependent counter-regulation. Patients with
this condition experience both severe hyperglycemic and hypoglycemic episodes.
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.
k.
|
Caerus
Therapeutics Inc (a related party)
|
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 feasibility fees (including the grant to purchase 70,000 options in the Company,
annual maintenance fees and royalties of sales of up to 5% and up to 18% of sub-license fees. Expenses in the amount of approximately
$200 thousand including the fair value of the options granted were recorded as research and development expenses. The Company
also has the right to instruct Caerus to transfer the license, development, development results and any other rights and licenses
granted to the Company to a joint venture (“JV”) in which Company shall have a 51% controlling ownership stake in
the JV Entity. Upon Company’s election of such option, the development shall be carried out by Caerus for the JV and the
royalty, sublicense fees and annual maintenance fee shall be terminated. Company may provide requisite funding for the JV Entity
as determined by the Company and Caerus.
l.
|
Extracellular
Vesicle (“EV”) Technology License
|
During
the third quarter of 2020, the Company purchased the IP and related EV technology from a service provider (the “Service
Provider”) pursuant to an EV agreement (the “EV agreement”). According to the EV agreement, the Service Provider
sold to the Company all of its rights in the EV technology that it had produced, in the amount of $500 thousand, to be paid in
installments over the next 12 months from September 2020. The $500 thousand was recorded in R&D expenses. In addition, the
Service Provider granted the Company an exclusive worldwide license to use the EV IP technology for any purpose.
m.
|
Tamir
Biotechnology acquisition
|
Included
in the purchased assets of the Tamir Biotechnology Inc acquisition (See Note 4) was the assumption by the Company 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. This license fee and the right to receive future milestone payments (of up to $11 million assuming that certain milestones
are reached) and royalties (of up to $35 million based on net sales milestones), were assumed by the Company in connection with
the Tamir Purchase Agreement together with a less than 10% share interest. To date, no milestones have been reached.
n.
|
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.
o.
|
Joint
venture agreements
|
Additionally,
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. 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 50 % 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.
|
Name
of party (and country of origin)
|
|
Territory
|
|
Notes
|
Theracell
Advanced Biotechnology
|
|
Greece,
Turkey, Cyprus, Israel and Balkans
|
|
(1)
|
Broaden
Bioscience and Technology Corp
|
|
Certain
projects in China and the Middle East
|
|
|
Mircod
LLC
(US)
|
|
Russia
|
|
(2)
|
Image
Securities FZC (UAE) (a related party)
|
|
India
|
|
|
Cure
Therapeutics
|
|
Korea
and Japan
|
|
|
Kidney
Cure Ltd
|
|
Worldwide
|
|
(3)
|
Sescom
Ltd
|
|
Worldwide
|
|
(4)
|
Educell
D.O.O
(Slovenia)
|
|
Croatia,
Serbia and Slovenia
|
|
|
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
|
|
(5)
|
First
Choice International Company, Inc
|
|
Panama
and certain other Latin American countries
|
|
(6)
|
KinerjaPay
Corp
|
|
Singapore
|
|
(7)
|
SBH
Sciences Inc
|
|
Worldwide
|
|
(8)
|
HekaBio
KK
|
|
Japan
|
|
(9)
|
(1)
|
The
Theracell JVE was incorporated in Greece under the name of Theracell Laboratories Ltd. (See Note 12).
|
|
|
(2)
|
Under
the Mircod JVA, provisos 7 and 8 do not apply. Subject to payment by the Company ORGS 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. The parties also, following proviso 6, concluded a convertible loan agreement
pursuant to which Company shall lend Mircod up to $5 million based upon a development plan to be agreed upon. The loan bears
simple interest in the amount of 6% annually. As at December 31, 2020, the development plan had not been finalized and no
transfers under the loan agreement were made.
|
|
|
(3)
|
Pursuant
to the Kidney Cure JVA, the parties will collaborate 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 “Project”).
Provisos 7 and 8 do not apply to the Kidney Cure JVA. The Kidney Cure JVE was incorporated in Switzerland under the name of
Butterfly Biosciences Sarl (See Note 12).
|
|
|
(4)
|
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.
|
|
|
(5)
|
Under
the Mida JVA, commencing January 1, 2022 and thereafter Mida shall have the right to sell to Company its then issued and outstanding
shares in the JVA, and if the JVA was not yet set up, its assets, contracts and liabilities relating to the project, for a
consideration to be agreed between the parties in good faith, provided that such consideration is not lower than $500 thousand.
|
|
|
(6)
|
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.
|
(7)
|
No
activities have taken place since the JVA was signed. According to the JVA, Company was eligible to receive 51% of the equity
and 10% royalties on sales of products. The steering committee was to compromise 5 members of which Company could appoint
2, and a third member to be an industry expert, to be appointed by Orgenesis. The JVA did not include the proviso 8.
|
|
|
(8)
|
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. The SBH
JVE has not yet been incorporated. 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. All intellectual property conceived or developed resulting
from the business of the SBH JV Entity, that is not SBH’s or the Company’s background intellectual property, shall
be owned exclusively by the SBH JV Entity, although the Company shall be granted the right to exclusively license any intellectual
property arriving from the development activities of the SBH JV Entity, or exclusively distribute products based thereon.
Provisos 7 and 8 do not apply to the SBH JVA.
|
|
|
|
During
the third quarter of 2019, the Company transferred $50 thousand to SBH. Apart from the above, there was no material activity
in the SBH Collaboration and the SBH JV entity had not been incorporated as at December 31, 2020.
|
|
|
(9)
|
During
the third quarter of 2020, the Company and HB agreed to terminate the license agreement. As of December 31, 2020, no activity
had begun in the said JV and no investments were made therein.
|
NOTE
12 – INVESTMENTS IN ASSOCIATES, NET
a.
|
Theracell
Laboratories Private Company
|
During
October 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.
b.
|
Butterfly
Biosciences Sarl
|
During
October 2020, the Company and Kidney Cure, 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 on BB and Kidney Cure holds the remaining 51%.
c.
|
The
table below sets forth a summary of the changes in the investments for the year ended December 31, 2020:
|
SCHEDULE OF CHANGES IN INVESTMENTS
|
|
December 30,
|
|
|
|
2020
|
|
|
|
(In thousands)
|
|
|
|
|
|
Opening balance
|
|
$
|
-
|
|
Investments during the period
|
|
|
69
|
|
Share in net income of associated companies
|
|
|
106
|
|
Ending balance
|
|
$
|
175
|
|
NOTE
13 – EQUITY
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.
b.
|
Tamir
Biotechnology, Inc.
|
For
the acquisition of Tamir, see Note 4.
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. $59 thousand and 340,000 Shares are being held in an escrow account for a period of 18 months
from closing to secure indemnification obligations of Tamir pursuant to the terms of the Tamir Purchase Agreement. The share price
was $5.26 at the day of the closing.
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, we issued 66,910
shares to Maxim Group LLC for advisory services in connection
with the Merger.
A
summary of the Company’s warrants granted to investors and as finder’s fees as of December 31, 2020, and December
31, 2019 and changes for the periods then ended is presented below:
SCHEDULE OF WARRANTS ACTIVITY
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
Average
Exercise Price
$
|
|
|
|
|
|
Weighted
Average
Exercise Price
$
|
|
Warrants outstanding at the
beginning of the period
|
|
|
6,010,087
|
|
|
|
6.35
|
|
|
|
6,286,351
|
|
|
|
6.29
|
|
Changes during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
1,344,606
|
|
|
|
5.64
|
|
|
|
471,980
|
|
|
|
6.95
|
|
Expired
|
|
|
(284,452
|
)
|
|
|
6.53
|
|
|
|
(748,244
|
)
|
|
|
6.24
|
|
Warrants outstanding and exercisable at end of the period*
|
*
|
|
7,070,241
|
|
|
|
6.20
|
|
|
|
6,010,087
|
|
|
|
6.35
|
|
*
|
As
of December 31, 2020 and December 31, 2019, there are no warrants that are subject to exercise price adjustments.
|
A
summary of the Company’s treasury shares purchased as of December 31, 2020 and changes for the period then ended is presented
below:
SCHEDULE
OF TREASURY SHARES
|
|
December 31,
|
|
|
|
2020
|
|
|
|
Number of
Treasury Shares
|
|
|
Weighted
Average
Price Paid
$
|
|
Treasury Shares at the beginning of the period
|
|
|
-
|
|
|
|
-
|
|
Changes during the period:
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
55,309
|
|
|
|
4.47
|
|
Shares at end of the period
|
|
|
53,309
|
|
|
|
4.47
|
|
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
|
|
2020
|
|
|
2019
|
|
|
|
Year ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands, except per share data)
|
|
Basic and diluted:
|
|
|
|
|
|
|
|
|
Net loss from continuing operations attributable to Orgenesis Inc.
|
|
$
|
95,088
|
|
|
$
|
22,490
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss from discontinued operations attributable to Orgenesis Inc. for loss per share
|
|
|
(96,198
|
)
|
|
|
1,631
|
|
Adjustment of redeemable non-controlling interest to redemption amount
|
|
|
(5,160
|
)
|
|
|
4,095
|
|
Basic: Net income (loss) available to common stockholders
|
|
|
(101,358
|
)
|
|
|
5,726
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to Orgenesis Inc. for loss per share
|
|
|
(6,270
|
)
|
|
|
28,216
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
21,320,314
|
|
|
|
15,907,995
|
|
Loss per common share from continuing operations
|
|
$
|
4.46
|
|
|
$
|
1.41
|
|
Net (income) loss common share from discontinued operations
|
|
$
|
(4.75
|
)
|
|
$
|
0.36
|
|
Net (income) loss per share
|
|
$
|
(0.29
|
)
|
|
$
|
1.77
|
|
For
the year ended December 31, 2020, and December 31, 2019, 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
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 anti-dilutive.
NOTE
15 – STOCK-BASED COMPENSATION
a.
|
Global
Share Incentive Plan
|
On
May 11, 2017, the annual meeting of the Company’s stockholders approved the 2017 Equity Incentive Plan (the “2017
Plan”) under which, the Company had reserved a pool of 1,750,000 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. At the Company’s annual meeting of stockholders on November 26, 2019 the Company’s stockholders approved
an amendment to increase the number of shares authorized for issuance of awards under the Company’s 2017 Equity Incentive
Plan from 1,750,000 shares to an aggregate of 3,000,000 shares of Common Stock. As of December 31, 2020, total options granted
under this plan are 1,362,133 and the total options that are available for grants under this plan are 1,724,966.
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, 2020, total options granted under this plan are 1,183,182 and the total options that are available for
grants under this plan are 248,024.
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, 2020, and
December 31, 2019:
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, 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
|
Employees
|
|
December 31, 2019
|
|
|
94,500
|
|
|
|
$3.14-$5.07
|
|
|
Quarterly over a period of two years
|
|
$
|
322
|
|
|
10 years
|
Directors
|
|
December 31, 2019
|
|
|
50,000
|
|
|
$
|
2.99
|
|
|
One-year anniversary
|
|
$
|
103
|
|
|
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
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Value of one common share
|
|
$
|
2.99-$6.84
|
|
|
$
|
2.99-$5.07
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
80%-86
|
%
|
|
|
83%-88
|
%
|
Risk free interest rate
|
|
|
0.36%-1.71
|
%
|
|
|
1.45%-2.47
|
%
|
Expected term (years)
|
|
|
5.50-6.00
|
|
|
|
5.38-5.56
|
|
A
summary of the Company’s stock options granted to employees and directors as of December 31, 2020 and December 31, 2019
is presented below:
SCHEDULE OF STOCK OPTIONS ACTIVITY
|
|
Year Ended December 31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
Average
Exercise Price
$
|
|
|
|
|
|
Weighted
Average
Exercise
Price
$
|
|
Options outstanding at the beginning of the period
|
|
|
2,465,522
|
|
|
|
4.44
|
|
|
|
2,376,427
|
|
|
|
4.51
|
|
Changes during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
676,500
|
|
|
|
3.74
|
|
|
|
144,500
|
|
|
|
4.15
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
(11,876
|
)
|
|
|
7.88
|
|
|
|
(16,750
|
)
|
|
|
6.01
|
|
Forfeited
|
|
|
(57,042
|
)
|
|
|
4.52
|
|
|
|
(38,655
|
)
|
|
|
7.11
|
|
Cancelled
|
|
|
(155,437
|
)
|
|
|
8.38
|
|
|
|
-
|
|
|
|
-
|
|
Options outstanding at end of the period
|
|
|
2,917,667
|
|
|
|
4.05
|
|
|
|
2,465,522
|
|
|
|
4.44
|
|
Options exercisable at end of the period
|
|
|
2,299,937
|
|
|
|
4.03
|
|
|
|
2,112,567
|
|
|
|
4.21
|
|
The
following table presents summary information concerning the options granted and exercisable to employees and directors outstanding
as of December 31, 2020 (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
|
|
|
|
3.64
|
|
|
|
1,036
|
|
|
|
230,189
|
|
|
|
-
|
|
|
0.012
|
|
|
|
510,017
|
|
|
|
1.09
|
|
|
|
2,289
|
|
|
|
510,017
|
|
|
|
6
|
|
|
2.99
|
|
|
|
445,013
|
|
|
|
9.15
|
|
|
|
672
|
|
|
|
174,208
|
|
|
|
521
|
|
|
3.14
|
|
|
|
3,750
|
|
|
|
6.27
|
|
|
|
5
|
|
|
|
1,875
|
|
|
|
6
|
|
|
4.42
|
|
|
|
50,000
|
|
|
|
6.93
|
|
|
|
4
|
|
|
|
50,000
|
|
|
|
221
|
|
|
4.5
|
|
|
|
34,000
|
|
|
|
8.47
|
|
|
|
-
|
|
|
|
23,938
|
|
|
|
108
|
|
|
4.6
|
|
|
|
185,300
|
|
|
|
9.96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
4.7
|
|
|
|
6,250
|
|
|
|
9.03
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
4.8
|
|
|
|
483,337
|
|
|
|
5.94
|
|
|
|
-
|
|
|
|
483,337
|
|
|
|
2,320
|
|
|
5.07
|
|
|
|
53,250
|
|
|
|
8.08
|
|
|
|
-
|
|
|
|
39,750
|
|
|
|
202
|
|
|
5.1
|
|
|
|
63,000
|
|
|
|
9.68
|
|
|
|
-
|
|
|
|
7,875
|
|
|
|
40
|
|
|
5.99
|
|
|
|
352,550
|
|
|
|
7.26
|
|
|
|
-
|
|
|
|
290,488
|
|
|
|
1,740
|
|
|
6
|
|
|
|
16,667
|
|
|
|
3.59
|
|
|
|
-
|
|
|
|
16,667
|
|
|
|
100
|
|
|
6.84
|
|
|
|
17,000
|
|
|
|
9.38
|
|
|
|
-
|
|
|
|
4,250
|
|
|
|
29
|
|
|
7.2
|
|
|
|
83,334
|
|
|
|
6.43
|
|
|
|
-
|
|
|
|
83,334
|
|
|
|
600
|
|
|
8.36
|
|
|
|
250,001
|
|
|
|
7.50
|
|
|
|
-
|
|
|
|
250,001
|
|
|
|
2,090
|
|
|
8.91
|
|
|
|
15,000
|
|
|
|
7.46
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
134
|
|
|
9
|
|
|
|
20,834
|
|
|
|
2.54
|
|
|
|
-
|
|
|
|
20,834
|
|
|
|
187
|
|
|
9.48
|
|
|
|
58,908
|
|
|
|
1.52
|
|
|
|
-
|
|
|
|
58,908
|
|
|
|
558
|
|
|
10.2
|
|
|
|
39,267
|
|
|
|
1.42
|
|
|
|
-
|
|
|
|
39,267
|
|
|
|
401
|
|
|
|
|
|
|
2,917,667
|
|
|
|
5.98
|
|
|
|
4,006
|
|
|
|
2,299,937
|
|
|
|
9,263
|
|
Costs
incurred with respect to stock-based compensation for employees and directors for the years ended December 31, 2020 and December
31, 2019 were $1,470
thousand and $2,107
thousand, respectively,
out of which $450
thousand
and $360
thousand
related to options granted to employees of Masthercell Global, respectively, and presented as part of net loss from discontinued
operations in the consolidated statements of comprehensive loss. As of December 31, 2020, there was $1,594
thousands of unrecognized compensation
costs related to non-vested employees and directors stock options, to be recorded over the next 2.02
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, 2020
and December 31, 2019 and for the one-month period ended December 31, 2019:
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
|
|
2020
|
|
|
62,500
|
|
|
$
|
2.99-$6.84
|
|
|
Quarterly over a period of two years
|
|
$
|
209
|
|
|
10 years
|
Non-employees
|
|
2019
|
|
|
128,336
|
|
|
$
|
3.14-$7
|
|
|
Vest immediately-5 years
|
|
$
|
394
|
|
|
10 years
|
The
fair value of options granted during 2020 and 2019 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
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Value of one common share
|
|
$
|
2.99-$6.84
|
|
|
$
|
3.14-$5.07
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
86%-89
|
%
|
|
|
89%-92
|
%
|
Risk free interest rate
|
|
|
0.73%-1.12
|
%
|
|
|
1.52%-2.62
|
%
|
Expected term (years)
|
|
|
10
|
|
|
|
10
|
|
A
summary of the Company’s stock options granted to consultants and service providers as of December 31, 2020, and December
31, 2019 is presented below:
SCHEDULE OF STOCK OPTIONS ACTIVITY
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
Average
Exercise
Price
$
|
|
|
|
|
|
Weighted
Average
Exercise
Price
$
|
|
Options outstanding at the
beginning of the year
|
|
|
598,310
|
|
|
|
5.76
|
|
|
|
469,974
|
|
|
|
5.75
|
|
Changes during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
62,500
|
|
|
|
3.97
|
|
|
|
128,336
|
|
|
|
5.65
|
|
Exercised
|
|
|
(83,334
|
)
|
|
|
3.60
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(8,335
|
)
|
|
|
5.99
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
(20,000
|
)
|
|
|
5.30
|
|
|
|
-
|
|
|
|
-
|
|
Options outstanding at end of the year
|
|
|
549,141
|
|
|
|
5.89
|
|
|
|
598,310
|
|
|
|
5.76
|
|
Options exercisable at end of the year
|
|
|
450,972
|
|
|
|
6.28
|
|
|
|
539,515
|
|
|
|
5.88
|
|
The
following table presents summary information concerning the options granted and exercisable to consultants and service providers
outstanding as of December 31, 2020 (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)
|
|
|
2.99
|
|
|
|
35,000
|
|
|
|
9.22
|
|
|
|
53
|
|
|
|
-
|
|
|
|
-
|
|
|
3.14
|
|
|
|
15,000
|
|
|
|
8.91
|
|
|
|
20
|
|
|
|
-
|
|
|
|
-
|
|
|
3.36
|
|
|
|
136,775
|
|
|
|
5.32
|
|
|
|
156
|
|
|
|
136,775
|
|
|
|
460
|
|
|
4.09
|
|
|
|
25,000
|
|
|
|
8.76
|
|
|
|
10
|
|
|
|
25,000
|
|
|
|
102
|
|
|
4.42
|
|
|
|
10,325
|
|
|
|
6.93
|
|
|
|
1
|
|
|
|
10,325
|
|
|
|
46
|
|
|
4.5
|
|
|
|
13,335
|
|
|
|
8.53
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
4.6
|
|
|
|
20,000
|
|
|
|
9.96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
4.8
|
|
|
|
16,668
|
|
|
|
5.94
|
|
|
|
-
|
|
|
|
16,668
|
|
|
|
80
|
|
|
5.07
|
|
|
|
5,000
|
|
|
|
8.19
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
5
|
|
|
5.3
|
|
|
|
15,000
|
|
|
|
7.70
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
80
|
|
|
5.99
|
|
|
|
16,670
|
|
|
|
7.81
|
|
|
|
-
|
|
|
|
16,670
|
|
|
|
100
|
|
|
6
|
|
|
|
90,000
|
|
|
|
3.59
|
|
|
|
-
|
|
|
|
90,000
|
|
|
|
540
|
|
|
6.84
|
|
|
|
7,500
|
|
|
|
9.38
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
7
|
|
|
|
70,000
|
|
|
|
8.83
|
|
|
|
-
|
|
|
|
70,000
|
|
|
|
490
|
|
|
7.32
|
|
|
|
8,334
|
|
|
|
1.89
|
|
|
|
-
|
|
|
|
8,334
|
|
|
|
61
|
|
|
8.34
|
|
|
|
8,600
|
|
|
|
7.52
|
|
|
|
-
|
|
|
|
8,600
|
|
|
|
72
|
|
|
8.43
|
|
|
|
8,333
|
|
|
|
7.05
|
|
|
|
-
|
|
|
|
4,999
|
|
|
|
42
|
|
|
11.52
|
|
|
|
8,334
|
|
|
|
2.26
|
|
|
|
-
|
|
|
|
8,334
|
|
|
|
96
|
|
|
16.8
|
|
|
|
39,267
|
|
|
|
1.28
|
|
|
|
-
|
|
|
|
39,267
|
|
|
|
660
|
|
|
|
|
|
|
549,141
|
|
|
|
6.18
|
|
|
|
240
|
|
|
|
450,972
|
|
|
|
2,834
|
|
Costs
incurred with respect to options granted to consultants and service providers for the years ended December 31, 2020 and December
31, 2019 were $113 thousand and $330 thousand, respectively. As of December 31, 2020, there was $231 thousands of unrecognized
compensation costs related to non-vested consultants and service providers, to be recorded over the next 4.58 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 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 $9.2 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 thousand.
2)
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.
3)
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.
4)
During the year ended December 31, 2019, the Company granted to several consultants 88,499 warrants each exercisable between $4.3
and $7.00 per share for three years. The fair value of those options as of the date of grant using the Black-Scholes valuation
model was $155 thousand, out of which $97 thousand is related to 57,142 warrants granted as a success fee with respect to the
issuance of the convertible notes.
5)
In September 2019, the Company entered into an investor relation services, marketing and related services agreement. Under the
terms of the agreement, the Company agreed to issue the consultant 40,174
shares of restricted
common stock, of which the first 20,087
shares will be
held in escrow by the Company until the six months anniversary of the agreement and 20,087
shares will be
issued on the six months anniversary of the agreement to be held in escrow by the company until the one-year anniversary of the
agreement. The fair value of the shares was $178
thousand using
the fair value of the shares on the grant date. $96
and 82
thousand was recognized
during the year ended December 31, 2020 and December 31, 2019, respectively.
6)
In March 2019, the Company issued First Choice 525,000 shares of Common Stock. The value of Common Stock issued in the amount
of $2.6 million were charged to research and development expenses during the year ended December 31, 2019.
7)
In December 2018, the Company entered into an investor relation services, marketing and related services agreement. Under the
terms of the agreement, the Company agreed to issue the consultant 10,000 shares of restricted common stock, of which the first
2,500 shares vested on the signing date, and 7,500 shares are to vest monthly over 3 months commencing January 2019. As of December
31, 2019, 10,000 shares were fully vested. The fair value of the shares was $51 thousand using the fair value of the shares on
the vesting dates. $37 thousand was recognized during the year ended December 30, 2019.
8)
In December 2018, the Company entered into a separate investor relations services, marketing and related services agreement. Under
the terms of the agreement, the Company agreed to issue the consultant 40,000 shares of restricted common stock, of which the
first 6,667 shares vested on the signing date, and 33,333 shares vested monthly over five months commencing January 2019. As of
December 31, 2019, 40,000 shares were fully vested. The fair value of the shares was $200 thousand using the fair value of the
shares at the vesting dates. $163 thousand was recognized during the year ended December 30, 2019.
9)
During the year ended November 30, 2018, the Company granted to several consultants 78,782 warrants each exercisable between $6.24
and $15.41 per share for three years. The fair value of those warrants as of the date of grant using the Black-Scholes valuation
model was $350 thousand. The warrants granted as a success fee with respect to private placement and the issuance of convertible
loans.
10)
In January 2018, the Company entered into a consulting agreement with a financial advisor for a period of one year. Under the
terms of the agreement, the consultant was entitled to receive $60 thousand and 19,000 units of the Company securities. Each unit
is comprised of (i) one share of the Company’s common stock and (ii) a three-year warrant to purchase up to an additional
one share of the Company’s Common Stock at a per share exercise price of $6.24. The fair value of the units as of the date
of grant was $171 thousand, out of which $62 thousand reflect the fair value of the warrants using the Black-Scholes valuation
model. In July 2018, the board approved an additional issuance of 6,629 shares and three-year warrants to purchase up to 6,629
shares of the Company’s Common Stock at a per share exercise price of $6.24. The fair value of the units as of the date
of grant was $88 thousand.
11)
In December 2017, the Company entered into investor relations services, marketing and related services agreements. Under the terms
of the agreement, the Company agreed to grant the consultants a total of 195,000 shares of restricted common stock, out of which
the first 50,000 shares will vest after 30 days from the signing date, and 145,000 shares are to vest monthly over 15 months commencing
February 2018. As of December 31, 2019, all shares were vested. The fair value of the shares as of the date of grant was $1,439
thousand.
12)
During the twelve months ended December 31, 2020, the Company issued 270,174 shares of common stock to service providers. As of
December 31, 2020, 30,000 shares have additional restrictions on transfer until such services have been provide.
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, 2020, the Company has an accumulated tax loss carryforward of approximately $ 18
million (as of December 31, 2019,
approximately $34 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 NOLs 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. The Company assess 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 2020 and 2019 are 23%.
As
of December 31, 2020, the Israeli Subsidiaries has an accumulated tax loss carryforward of approximately $11 million (as of December
31, 2019, approximately $10 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 2020, 2019
are 25%
and 29.58%,
respectively.
As
of December 31, 2020, the Belgian Subsidiary has an accumulated tax loss carryforward of approximately $ 8
million (€ 6
million), (as of December 31, 2019 $6
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, 2020, the Korean subsidiary has an accumulated tax loss carryforward of approximately $ 4
million (KRW 3,813
million), (as of December 31, 2019,
approximately $3
million). Under the Korean tax laws accumulated
tax loss can be carry forwarded for 15
years.
The
following table presents summary of information concerning the Company’s deferred taxes as of the years ending December
31, 2019 and December 31, 2019 (in thousands):
SCHEDULE OF DEFERRED TAX ASSETS
|
|
2020
|
|
|
2019
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(U.S. dollars in thousands)
|
|
Net operating loss carry forwards
|
|
$
|
9,606
|
|
|
$
|
14,033
|
|
Research and development expenses
|
|
|
1,684
|
|
|
|
1,358
|
|
Equity compensation
|
|
|
2,747
|
|
|
|
-
|
|
Employee benefits
|
|
|
252
|
|
|
|
228
|
|
Leases asset
|
|
|
533
|
|
|
|
-
|
|
Lease liability
|
|
|
(324
|
)
|
|
|
-
|
|
Intangible assets
|
|
|
(2,863
|
)
|
|
|
(737
|
)
|
Other
|
|
|
297
|
|
|
|
(1
|
)
|
Less: Valuation allowance
|
|
|
(11,932
|
)
|
|
|
(14,939
|
)
|
Net deferred tax liabilities
|
|
$
|
-
|
|
|
$
|
(58
|
)
|
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 (previously
CureCell) have recorded full valuation allowance.
The
changes in valuation allowance are comprised as follows:
SCHEDULE OF VALUATION ALLOWANCE, ACTIVITY
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(U.S dollars in thousands)
|
|
Balance at the beginning of year
|
|
$
|
(14,939
|
)
|
|
$
|
(10,254
|
)
|
Change during the year
|
|
|
3,007
|
|
|
|
(4,685
|
)
|
Balance at end of year
|
|
$
|
(11,932
|
)
|
|
$
|
(14,939
|
)
|
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, 2020, 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
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Revenue stream:
|
|
|
|
|
|
|
|
|
POC and hospital services
|
|
$
|
6,068
|
|
|
$
|
3,109
|
|
Cell process development services
|
|
|
1,584
|
|
|
|
790
|
|
Total
|
|
$
|
7,652
|
|
|
$
|
3,899
|
|
POC
development services are the result of agreements between Company and its partners (See Note 11). The Company provides certain
services in support of the partners’ clinical activity. The Company has signed Master Services Agreements with joint venture
partners in the aggregate amount of over $38 million for services to be provided from 2021 to 2022.
A
breakdown of the revenues per customer what constituted at least 10% of revenues is as follows:
SCHEDULE OF BREAKDOWN OF REVENUES PER CUSTOMER
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Revenue earned:
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
2,857
|
|
|
$
|
1,420
|
|
Customer B
|
|
|
1,577
|
|
|
|
-
|
|
Customer C – related party
|
|
|
1,475
|
|
|
|
1,270
|
|
Customer D
|
|
|
1,412
|
|
|
|
857
|
|
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
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
1,831
|
|
|
$
|
129
|
|
Acquisition of Koligo
|
|
|
228
|
|
|
|
-
|
|
Additions
|
|
|
6,997
|
|
|
|
2,079
|
|
Collections
|
|
|
(5,982
|
)
|
|
|
(364
|
)
|
Exchange rate differences
|
|
|
11
|
|
|
|
(13
|
)
|
Balance as of end of period
|
|
$
|
3,085
|
|
|
$
|
1,831
|
|
The
activity for contract liabilities is comprised of:
SCHEDULE OF ACTIVITY FOR CONTRACT LIABILITIES
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
325
|
|
|
$
|
56
|
|
Additions
|
|
|
597
|
|
|
|
1,126
|
|
Realizations*
|
|
|
(862
|
)
|
|
|
(854
|
)
|
Exchange rate differences
|
|
|
(1
|
)
|
|
|
(3
|
)
|
Balance as of end of period
|
|
$
|
59
|
|
|
$
|
325
|
|
*
|
Out of which $ 325 thousand were realized from the beginning of the period for the year ended December 31, 2020.
|
NOTE
18 – COST OF RESEARCH AND DEVELOPMENT AND RESEARCH AND DEVELOPMENT SERVICES, NET
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Total expenses
|
|
$
|
84,182
|
|
|
$
|
14,826
|
|
Less grants
|
|
|
(196
|
)
|
|
|
(812
|
)
|
Total
|
|
$
|
83,986
|
|
|
$
|
14,014
|
|
NOTE
19 – FINANCIAL EXPENSES, NET
SCHEDULE OF FINANCIAL EXPENSES
|
|
2020
|
|
|
2019
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Increase in fair value of warrants and financial liabilities measured at fair value
|
|
$
|
-
|
|
|
$
|
63
|
|
Interest expense on convertible loans
|
|
|
1,254
|
|
|
|
498
|
|
Foreign exchange loss, net
|
|
|
160
|
|
|
|
395
|
|
Other income
|
|
|
(353
|
)
|
|
|
(113
|
)
|
Total
|
|
$
|
1,061
|
|
|
$
|
843
|
|
NOTE
20 – RELATED PARTIES TRANSACTIONS
a.
|
Related
Parties presented in the consolidated statements of comprehensive loss
|
SCHEDULE OF RELATED PARTY TRANSACTIONS
|
|
Year ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
Stock-based compensation expenses to executive officers
|
|
$
|
221
|
|
|
$
|
898
|
|
Stock-based compensation expenses to Board Members*
|
|
$
|
209
|
|
|
$
|
414
|
|
Compensation of executive officers
|
|
$
|
1,321
|
|
|
$
|
812
|
|
Management and consulting fees to Board Members
|
|
$
|
264
|
|
|
$
|
233
|
|
Revenues from customer
|
|
$
|
1,475
|
|
|
$
|
1,270
|
|
Cost of research and development and research and development services, net
|
|
$
|
4,772
|
|
|
$
|
-
|
|
Financial income
|
|
$
|
169
|
|
|
$
|
112
|
|
*
|
Does not include $192 thousand
for the year ended December 31, 2019 related to Stock Based Compensation expenses for options exercisable at an exercise price
of $7.00 per share into 70,000 ordinary shares held by Caerus Therapeutics LLC for which the director does not have beneficial
control.
|
|
|
Year ended
December 31,
|
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Discontinued operations:
|
|
|
|
|
Stock-based compensation expenses to executive officers
|
|
$
|
76
|
|
Compensation of executive officers
|
|
$
|
685
|
|
b.
|
Related
Parties presented in the consolidated balance sheets
|
SCHEDULE OF RELATED PARTIES PRESENTED IN CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
Executive officers’ payables
|
|
$
|
170
|
|
|
$
|
1,251
|
|
Non-executive directors’ payable
|
|
$
|
13
|
|
|
$
|
202
|
|
Loan to Related Party
|
|
$
|
-
|
|
|
$
|
2,623
|
|
Accounts receivable, net
|
|
$
|
744
|
|
|
$
|
-
|
|
Contract liabilities
|
|
$
|
-
|
|
|
$
|
230
|
|