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UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-Q
(Mark
One)
☒
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
Quarterly Period Ended
June 30, 2020
or
☐
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Transition Period from ___________ to ___________
Commission file
number:
001-38416
ORGENESIS INC.
(Exact name
of registrant as specified in its charter)
|
Nevada |
|
98-0583166 |
|
(State or
other jurisdiction
of
incorporation or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
20271 Goldenrod
Lane
Germantown,
MD 20876
(Address of
principal executive offices) (Zip Code)
(480)
659-6404
(Registrant’s telephone
number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of
each class |
|
Trading
symbols(s) |
|
Name of each
exchange on which registered |
|
Common
Stock |
|
ORGS |
|
The
Nasdaq Capital
Market |
Indicate by
check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
☒ No
☐
Indicate by
check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
☒ No
☐
Indicate by
check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer |
☐ |
Accelerated
filer |
☒ |
| Non-accelerated
filer |
☐ |
Smaller reporting
company |
☒ |
|
|
Emerging growth
company |
☐ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by
check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
As of August
6, 2020, there were
22,094,470 shares of registrant’s
common stock outstanding
ORGENESIS
INC.
FORM
10-Q
FOR THE
SIX MONTHS ENDED JUNE 30, 2020 AND 2019
TABLE OF
CONTENTS
PART I –FINANCIAL
INFORMATION
Item 1. Financial
Statements
ORGENESIS
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(U.S.
Dollars in Thousands)
(Unaudited)
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS (Cont’d)
(U.S.
Dollars in Thousands)
(Unaudited)
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS
INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(U.S.
Dollars in Thousands, Except Share and Loss Per Share
Amounts)
(Unaudited)
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS
INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
(U.S.
Dollars in thousands, except share amounts)
(Unaudited)
| (*) |
represent an amount
lower than $ 1 thousand |
| (**) |
out of which 135,000
shares have additional restrictions on transfer until services have
been provided. |
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S.
Dollars in thousands, except share amounts)
(Unaudited)
|
(*) |
represent an amount
lower than $ 1 thousand |
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S.
Dollars in thousands, except share amounts)
(Unaudited)
|
((*)) |
represent an amount
lower than $ 1 thousand |
| ((**)) |
out of which 135,000
shares have additional restrictions on transfer until services have
been provided. |
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S.
Dollars in thousands, except share amounts)
(Unaudited)
|
(*) |
represent an amount
lower than $ 1 thousand |
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
ORGENESIS INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (*)
(U.S.
Dollars in Thousands)
(Unaudited)
| (*) |
|
|
(*) |
|
|
|
(*) |
|
| |
|
Six Months Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
|
|
|
|
|
| CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
54,624 |
|
|
$ |
(14,275 |
) |
| Adjustments required to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
1,697 |
|
|
|
1,964 |
|
| Stock-based compensation to for
strategic collaborations |
|
|
- |
|
|
|
2,641 |
|
| Stock-based compensation for Tamir
Purchase Agreement, see Note 4 and Note 6 |
|
|
17,048 |
|
|
|
- |
|
| Capital loss (gain), net |
|
|
14 |
|
|
|
(5 |
) |
| Gain on disposal of subsidiaries |
|
|
(102,594 |
) |
|
|
- |
|
| Depreciation and amortization
expenses |
|
|
739 |
|
|
|
1,907 |
|
| Effect of exchange differences on
inter-company balances |
|
|
124 |
|
|
|
103 |
|
| Net changes in operating leases |
|
|
(9 |
) |
|
|
(700 |
) |
| Interest expenses accrued on loans and
convertible loans (including amortization of beneficial conversion
feature) |
|
|
201 |
|
|
|
58 |
|
| Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
| Increase in
accounts receivable |
|
|
(2,453 |
) |
|
|
(3,678 |
) |
| Increase in
inventory |
|
|
(123 |
) |
|
|
(571 |
) |
| Increase in other
assets |
|
|
(20 |
) |
|
|
- |
|
Decrease
(increase) in prepaid expenses and other accounts
receivable |
|
|
(512 |
) |
|
|
47 |
|
| Increase
(decrease) in accounts payable |
|
|
(4,748 |
) |
|
|
1,803 |
|
| Increase
(decrease) in accrued expenses and other payables |
|
|
13,451 |
|
|
|
(111 |
) |
| Increase in
employee and related payables |
|
|
12 |
|
|
|
62 |
|
| Increase
(decrease) in contract liabilities |
|
|
(64 |
) |
|
|
2,198 |
|
Change in advance
payments and receivables on account of
grant, net |
|
|
(156 |
) |
|
|
(49 |
) |
|
Increase (decrease) in deferred taxes liability |
|
|
(65 |
) |
|
|
438 |
|
| Net cash used in operating
activities |
|
$ |
(22,834 |
) |
|
$ |
(8,168 |
) |
| |
|
|
|
|
|
|
|
|
| CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Increase in loan to JV with a related
party |
|
|
(500 |
) |
|
|
(1,000 |
) |
| Sale of property and equipment |
|
|
4 |
|
|
|
80 |
|
| Purchase of property and
equipment |
|
|
(974 |
) |
|
|
(2,802 |
) |
| Proceed from sale of subsidiaries |
|
|
104,222 |
|
|
|
- |
|
| Repayment
(investment) in short term deposits |
|
|
20 |
|
|
|
(225 |
) |
| Net cash provided by (used in)
investing activities |
|
$ |
102,772 |
|
|
$ |
(3,947 |
) |
| |
|
|
|
|
|
|
|
|
| CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Increase in redeemable non-controlling
interests received from GPP |
|
|
- |
|
|
|
6,600 |
|
| Proceeds from issuance of shares and
warrants (net of transaction costs) |
|
|
8,738 |
|
|
|
- |
|
| Proceeds from issuance of convertible
loans (net of transaction costs) |
|
|
250 |
|
|
|
7,500 |
|
| Repayment of convertible loans and
convertible bonds |
|
|
(2,400 |
) |
|
|
- |
|
| Repayment of short and long-term
debt |
|
|
(430 |
) |
|
|
(304 |
) |
| Other financing
activities |
|
|
1 |
|
|
|
- |
|
| Net cash provided by financing
activities |
|
$ |
6,159 |
|
|
$ |
13,796 |
|
| |
|
|
|
|
|
|
|
|
| NET CHANGE IN CASH,
CASH EQUIVALENTS AND RESTRICTED CASH |
|
$ |
86,097 |
|
|
$ |
1,681 |
|
| EFFECT OF EXCHANGE
RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
(43 |
) |
|
|
(25 |
) |
| CASH,
CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
12,041 |
|
|
|
14,999 |
|
| CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD (*) |
|
$ |
98,095 |
|
|
$ |
16,655 |
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
| Finance leases of property, plant and
equipment |
|
$ |
363 |
|
|
$ |
- |
|
| Acquisition of other asset |
|
$ |
700
|
|
|
$ |
- |
|
| Right-of-use assets obtained in
exchange for new operating lease liabilities, net |
|
$ |
231 |
|
|
$ |
- |
|
| Purchase of
property, plant and equipment included in accounts payable |
|
$ |
200 |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
|
(*) |
See Note 3 for
information regarding the discontinued operation. |
ORGENESIS INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the
Period Ended June 30, 2020 and 2019
(Unaudited)
NOTE 1 –
DESCRIPTION OF
BUSINESS
Orgenesis
Inc., a Nevada corporation (the “Company”), is a pioneering global
biotech company in the Cell & Gene Therapy (“CGT”) industry
focused on unlocking the full potential of its therapeutics
products and personalized therapies and closed processing systems
with the ultimate aim of providing life-changing treatments to
large numbers of patients at reduced costs in a point-of-care
setting. It pursues this strategy through a point-of-care platform
(“CGT Biotech Platform”) that combines therapeutics, technologies,
processes, and systems via a network of collaborative partners, and
research institutes and hospitals around the world.
The
Company’s CGT Biotech Platform consists of: (a) POCare
Therapeutics, a pipeline of licensed CGTs, anti-viral and
proprietary scientific know-how; (b) POCare Technologies, a suite
of proprietary and in-licensed technologies which are engineered to
create customized processing systems for affordable point-of-care
therapies; and (c) a POCare Network, a collaborative, international
ecosystem of leading research institutions and hospitals committed
to clinical development and supply of CGTs at the point-of-care
(“POCare Network”). By combining science, technology, including its
mobile processing units that it is developing, and a collaborative
network, the Company believes that it is able to identify the most
promising new autologous therapies and provide a pathway for them
to reach patients more quickly, more efficiently and in a scalable
way, thereby unlocking the power of cell and gene therapy for all
patients.
The Company
had historically also operated a Contract Development and
Manufacturing Organization (“CDMO”) platform, which provided
contract manufacturing and development services for
biopharmaceutical companies (the “CDMO Business”). On February 2,
2020, the Company entered into a Stock Purchase Agreement (the
“Purchase Agreement”) with GPP-II Masthercell LLC (“GPP” and
together with the Company, the “Sellers”), Masthercell Global Inc.
(“Masthercell”) and Catalent Pharma Solutions, Inc. (the “Buyer”).
Pursuant to the terms and conditions of the Purchase Agreement, on
February 10, 2020, the Sellers sold
100% of the outstanding
equity interests of Masthercell (the “Masthercell Business”), which
comprised the majority of the CDMO Business, to the Buyer (the
“Masthercell Sale”) for an aggregate nominal purchase price of
$315
million,
subject to customary adjustments. After accounting for GPP’s
liquidation preference and equity stake in Masthercell as well as
other investor interests in its Belgian subsidiary MaSTherCell,
S.A. (“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
has 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 most of the previous CDMO Business, including
majority-owned Masthercell, including its subsidiaries Cell Therapy
Holdings, MaSTherCell and Masthercell U.S. (collectively, the
“Masthercell Global Subsidiaries”) (See Note 3).
The Chief
Executive Officer (“CEO”) is the Company’s chief operating
decision-maker. Management has determined that effective from the
first quarter of 2020, all of the Company’s continuing operations
are in the point-of-care business via the Company’s CGT Biotech
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 (as defined below). |
|
|
|
|
● |
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. |
|
● |
Israel:
Orgenesis Ltd. (the “Israeli Subsidiary”) is the center for
research and technology, as well as a provider of regulatory,
clinical and pre-clinical services, and Atvio Biotech Ltd.
(“Atvio”) is a provider of cell-processing services in
Israel. |
|
|
|
|
● |
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
condensed consolidated financial statements include the accounts of
Orgenesis Inc. and its subsidiaries, including the U.S. Subsidiary,
the Belgian Subsidiary, the Israeli Subsidiary, the Korean
subsidiary, Atvio and 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 $2.462
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.
$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 (See Note 6).
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 June
30, 2020, the Company has accumulated losses of approximately
$34
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. 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 (See Note 4).
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 the 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
accounting policies adopted are consistent with those of the
previous financial year except as described below.
Cash and 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.
Discontinued
operations
Upon
divesture 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 divesture qualifies as a discontinued
operation and therefore have been presented as such.
The results
of businesses that have qualified as discontinued operations have
been presented as such for all reporting periods. Results of
discontinued operations include all revenues and expenses directly
derived from such businesses; general corporate overhead is not
allocated to discontinued operations. Any loss or gain that arose
from the divesture of a business that qualifies as discontinued
operations has been included within the results of the discontinued
operations. The Company included information regarding cash flows
from discontinued operations (See Note 3).
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 $11.5
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.
Use of
Estimates
The
preparation of our consolidated financial statements 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 and the amount of revenues and expenses. 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 have made estimates of the impact of
COVID-19 within 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.
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,
subject to customary adjustments. The Company has determined that
the Masthercell Business meets the criteria to be classified as a
discontinued operation.
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. Included in this amount is $1.5
million
which was deposited into an escrow account in connection with
potential adjustments based on working capital and indebtedness at
closing. The escrow amount was transferred to the Company at the
end of July 2020.
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 of the
February 10, 2020) in 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
| |
|
Six Months
Ended |
|
|
Three
Months Ended |
|
|
Six Months
Ended |
|
|
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
|
June 30,
2019
|
|
|
OPERATIONS |
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
2,556 |
|
|
$ |
6,626 |
|
|
$ |
13,508 |
|
| Cost
of revenues |
|
|
1,482 |
|
|
|
3,928 |
|
|
|
7,967 |
|
| Cost of research and
development and research and development services, net |
|
|
7 |
|
|
|
(364 |
) |
|
|
(514 |
) |
| Amortization of
intangible assets |
|
|
137 |
|
|
|
408 |
|
|
|
816 |
|
| Selling, general and
administrative expenses |
|
|
1,896 |
|
|
|
3,094 |
|
|
|
5,708 |
|
| Other (income)
expenses, net |
|
|
305 |
|
|
|
(31 |
) |
|
|
(65 |
) |
| Operating
loss |
|
|
1,271 |
|
|
|
409 |
|
|
|
404 |
|
| Financial (income)
expenses, net |
|
|
(29 |
) |
|
|
6 |
|
|
|
45 |
|
| Loss before income
taxes |
|
|
1,242 |
|
|
|
415 |
|
|
|
449 |
|
| Tax expenses
(income) |
|
|
(30 |
) |
|
|
537 |
|
|
|
623 |
|
| Net loss from
discontinuing operation, net of tax |
|
$ |
1,212 |
|
|
$ |
952 |
|
|
$ |
1,072 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| DISPOSAL |
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on disposal
before income taxes |
|
$ |
102,594 |
|
|
$ |
- |
|
|
$ |
- |
|
| Provision for income
taxes (*) |
|
|
(12,622 |
) |
|
|
- |
|
|
|
- |
|
| Gain on
disposal |
|
$ |
89,972 |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net profit (loss) from
discontinuing operation, net of tax |
|
$ |
88,760 |
|
|
$ |
(952 |
) |
|
$ |
(1,072 |
) |
|
* |
Provision for income
taxes was updated in the three months period ended June 30, 2020 in
the amount of $6.7 million due to tax benefit recognized from net
loss from continuing operation according to ASU 2019-12, see also
Note 2. |
The
following table is a summary of the assets and liabilities of
discontinued operations (in thousands):
| |
|
As
of |
|
| |
|
December
31,
2019
|
|
| Assets |
|
|
|
|
| |
|
|
|
|
| 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 |
|
|
10,858 |
|
| Operating lease
right-of-use assets |
|
|
8,860 |
|
| Goodwill |
|
|
10,129 |
|
|
Other
assets |
|
|
47 |
|
|
TOTAL
ASSETS OF DISCONTINUED OPERATIONS |
|
$ |
75,221 |
|
| |
|
As
of |
|
| |
|
December
31,
2019
|
|
| 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
LIABILITIES OF DISCONTINUED OPERATIONS |
|
$ |
31,586 |
|
The
following table represents the components of the cash flows from
discontinued operations (in thousands):
| |
|
Six Months
Ended |
|
|
Three
Months Ended |
|
|
Six Months
Ended |
|
| |
|
June
30,
2020
|
|
|
June
30,
2019
|
|
|
June
30,
2019
|
|
| |
|
|
|
|
|
|
|
|
|
| Net cash flows
provided by (used in) operating activities |
|
$ |
(2,409 |
) |
|
$ |
2,271 |
|
|
$ |
(2,416 |
) |
| Net cash flows used in
investing activities |
|
$ |
(579 |
) |
|
$ |
(1,356 |
) |
|
$ |
(2,300 |
) |
Net cash flows (used
in) provided by financing activities
|
|
$ |
(51 |
) |
|
$ |
(216 |
) |
|
$ |
6,296 |
|
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
| |
|
Six Months
Ended |
|
|
Three
Months Ended |
|
|
Six Months
Ended |
|
| |
|
June
30,
2020 |
|
|
June
30,
2019 |
|
|
June
30,
2019 |
|
| Revenue
stream: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cell
process development services |
|
$ |
2,556 |
|
|
$ |
3,891 |
|
|
$ |
8,647 |
|
| Tech transfer
services |
|
|
- |
|
|
|
1,702 |
|
|
|
3,532 |
|
|
Cell
manufacturing services |
|
|
- |
|
|
|
1,033 |
|
|
|
1,329 |
|
| Total |
|
$ |
2,556 |
|
|
$ |
6,626 |
|
|
$ |
13,508 |
|
NOTE 4 –
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.
During April
2020, the Company and Tamir Biotechnology, Inc. (“Tamir”) entered
into an Asset Purchase Agreement pursuant to which
3,400,000 shares of Common Stock
were issued to Tamir (See Note 6).
During the
six months ended June 30, 2020, the Company issued
270,174 ordinary shares to
service providers. As of June 30, 2020,
135,000 shares have additional
restrictions on transfer until such services have been
provided.
During the
three months ended June 30, 2020, one option holder exercised
83,334 options at an exercise
price of $3.60
for
83,334 ordinary shares, and the
Company received $300
thousand.
NOTE 5 –
CONVERTIBLE
LOANS
On January
2, 2020, the Company entered into private placement subscription
agreements with investors for an aggregate amount of $250
thousand of
convertible loans. The lenders shall be entitled, at any time prior
to or no later than the maturity date, to convert the outstanding
amount, into shares of Common Stock of the Company at a conversion
price per share equal to $7.00.
In addition, the Company granted the investors
151,428 warrants to purchase an
equal number of additional shares of Common Stock at a price of
$7.00
per
share.
During the
six months ended June 30, 2020, the Company repaid $2,746
thousand on
account of the principal amount and accrued interest of convertible
loans.
NOTE 6 –
COLLABORATIONS,
LICENSE AGREEMENTS AND COMMITMENTS
Image
Securities Ltd. (a related party)
As described
in Note 12 to the financial statements of December 31, 2019, on
July 11, 2018, the Company and Image Securities Ltd., a corporation
with its registered office in Grand Cayman, Grand Cayman Islands
(“India Partner”), entered into a Joint Venture Agreement (the
“India JVA”) pursuant to which the parties will collaborate in the
development, marketing, clinical development and/or
commercialization of cell therapy products in India (the “Cell
Therapy Products”). The India Partner will collaborate with a
network of healthcare facilities and a healthcare infrastructure as
well as financial partners to advance the development and
commercialization of the cell therapy products in India. As of June
30, 2020, the Company had advanced $3
million, of
which $500
thousand was
transferred in the first quarter of 2020, as part of its financing
obligations under the India JVA to the India Partner, who is
holding the loan in escrow on behalf of the Company. The loan is
reflected on the balance sheet as a loan to a related
party.
As part of
the agreement, the India joint venture will procure consulting
services from the Company. During January 2020, the Company entered
into a new statement of work pursuant to the master services
agreement signed in 2019 for the provision of certain services
during 2020 and 2021. The Company, subject to mutually agreed
timing and definition of the scope of services, will provide
regulatory services, pre-clinical studies, intellectual property
services, point-of-care services and co-development services to the
India Partner. The Company received $500
thousand as
payments for such services during the six months ended June 30,
2020. $772thousand
for these services was recognized during the six months ended June
30, 2020 as income under ASC 606.
Apart from
the above, there was no activity in the India joint venture during
the six months ended June 30, 2020.
Hemogenyx
Pharmaceuticals PLC.
As described
in Note 12 to the financial statements of December 31, 2019, on
October 18, 2018, the Company and Hemogenyx Pharmaceuticals PLC., a
corporation with its registered office in the United Kingdom, and
Hemogenyx-Cell, a corporation with its registered office in
Belgium, and which is engaged in the development of cell
replacement bone marrow therapy technology (“H-Cell” and,
collectively with the Company, “Hemo”), entered into a
Collaboration Agreement (the “Hemo Agreement”) pursuant to which
the parties will collaborate in the funding of the continued
development of and commercialization of, the Hemo technology via
the Hemo group companies. Pursuant to the Hemo Agreement, the
Company and Hemogenyx LLC, a wholly owned USA subsidiary of Hemo
(“Hemo-LLC”), entered into a loan agreement. During the six months
ended June 30, 2020, the Company advanced $250
thousand
under the loan agreement, which was charged to expenses under ASC
730-10-50 and 20-50 and presented as research and development
costs.
Immugenyx
LLC
As described
in Note 12 to the financial statements as of December 31, 2019, on
October 16, 2018, the Company and Immugenyx LLC, (“Immu”), which is
engaged in the development of technology related to the production
and use of humanized mice, entered into a Collaboration Agreement
(the “Immu Agreement”) pursuant to which the parties will
collaborate in the funding of the continued development of, and
commercialization of, the Immu technology. The Company received the
worldwide rights to market the products under the Immu Agreement in
consideration for the payment of a
12% royalty, subject to
the terms of the agreement. Pursuant to the Immu Agreement, the
Company and Immu also entered into a loan agreement. During the six
months ended June 30, 2020, the Company advanced $250
thousand
under the loan agreement, which was charged to expenses under ASC
730-10-50 and ASC 20-50 and presented as research and development
costs.
Theracell
Advanced Biotechnology
As described
in Note 12 to the financial statements as of December 31, 2019, on
February 14, 2019, the Company and Theracell Advanced
Biotechnology, a corporation organized under the laws of Greece
(“Theracell”), entered into a Joint Venture Agreement (the “Greek
JVA”) pursuant to which the parties will collaborate in the
clinical development and commercialization of the Company’s
products (hereinafter, the “Company Products”) in Greece, Turkey,
Cyprus and Balkan countries (the “Territory”) and the clinical
development and commercialization of Theracell’s products
(hereinafter, the “Theracell Products”) worldwide (the “Theracell
Project”). The parties intend to pursue the Theracell Project
through a joint venture (“JV”) by forming a JV entity (the “Greek
JV Entity”). Until the Greek JV Entity is formed, all JV activities
are being carried out by Theracell. The Company by itself, or
together with a designee, will hold a
50% participating interest
in the Greek JV Entity, with the remaining
50% participating interest
being held by Theracell or its affiliate following the parties’
contributions to the Greek JV Entity as set forth under the Greek
JVA. Each of the parties committed to contribute $10
million to
the JV Entity, of which $5
million will
be provided as in-kind contributions. The Greek JV Entity will have
a steering committee that will act as the board of directors of the
Greek JV Entity and shall be composed of a total of five members,
with two members appointed by each party and one industry expert to
be appointed by both parties. The Company shall have the option, at
its sole discretion and subject to all rules and regulations to
which it is then subject, to require Theracell to transfer to the
Company the entirety of Theracell’s equity interest in the JV
Entity for a consideration of shares of Common Stock according to
an agreed-upon formula.
During
January 2020, the Company entered into a new statement of work
pursuant to the master services agreement signed in 2019 with
Theracell for the provision of certain services by the Company
during 2020 and 2021. During the six months ended June 30, 2020,
the Company recognized point of care service revenue in the amount
of $733
thousand.
During the
six months ended June 30, 2020, the Company recorded expenses
related to activities in the territory in the amount of $896
thousand.
As of June
30, 2020, the Greek JV had not yet been incorporated.
Broaden
Bioscience and Technology Corp
As described
in Note 12 to the financial statements as of December 31, 2019, on
November 10, 2019, the U.S. Subsidiary and Broaden Bioscience and
Technology Corp, a Delaware corporation (“Broaden”), entered into a
Joint Venture Agreement (the “Broaden JVA”) pursuant to which the
parties will collaborate in the development and/or marketing,
clinical development and commercialization of cell therapy products
and the setting up of point-of-care processing facilities in China
and the Middle East (the “Broaden Project”). The parties intend to
pursue the Broaden Project through a joint venture by forming a
joint venture entity (the “Broaden JV Entity”).
During
January 2020, the Company entered into a master service agreement
with Broaden whereby the Company, subject to mutually agreed timing
and definition of the scope of services, will provide regulatory
services, pre-clinical studies, intellectual property services, GMP
process translation services and co-development services to Broaden
during 2020 and 2021. During the six months ended June 30, 2020,
the Company recognized point of care services revenue in the amount
of $806
thousand.
During
January 2020, the U.S. Subsidiary and Broaden Bioscience and
Technology Corp entered into a convertible loan agreement pursuant
to which the Company agreed to lend Broaden Bioscience and
Technology Corp an amount of up to $5
million as a
convertible loan as part of Company’s investment in the Broaden JV.
As of the date of this report, the Company has not lent Broaden
Bioscience and Technology Corp any funds as part of this
loan.
During the
six months ended June 30, 2020, the Company recorded research and
development expenses related to activities in the Broaden JVA in
the amount of $830
thousand.
Apart from
the above, as of June 30, 2020, the Broaden JV Entity had not been
incorporated.
Cure
Therapeutics
During 2019,
the Company entered into a master service agreement with Cure
Therapeutics whereby the Company, subject to mutually agreed timing
and definition of the scope of services, will provide point-of-care
services to Cure Therapeutics during 2020 and 2021. During the six
months ended June 30, 2020, the Company recognized point of care
services revenue in the amount of $714
thousand.
As described
in Note 12 to the financial statements as of December 31, 2019, on
May 7, 2018, the Company and Cure Therapeutics entered into a
collaboration agreement for the development of therapies based on
liver and NK cells. An amount of $976
thousand was
charged during the six months ended June 30, 2020. As
of June 30, 2020, the development project had not been completed.
As part of the agreement, Cure Therapeutics subcontracted
development and contract manufacturing activities to Orgenesis
Korea. An amount of $567
thousand was
recognized as revenues by Orgenesis Korea during the six months
ended June 30, 2020.
Mircod
Limited
As described
in Note 12 to the financial statements as of December 31, 2019, on
June 19, 2018, the Company and Mircod Limited, a company formed
under the laws of Cyprus (“Mircod”), entered into a Collaboration
and License Agreement (the “Mircod Collaboration Agreement”) for
the adaptation of Mircod’s background technologies related to
biological sensing for use for the Company’s clinical development
and manufacturing projects (the “Development Project”). The
Development Project is to be carried out in accordance with an
agreed development plan. During the six months ended June 30, 2020,
the Company recorded research and development expenses related to
the development plan in the amount of $500
thousand.
In addition,
during the first quarter of 2020, as per the Mircod Collaboration
agreement, Mircod formed a wholly-owned US subsidiary named Mircod
Biotech (the “Mircod Subsidiary”). The Mircod Subsidiary shall
perform the duties of Mircod under the Collaboration Agreement,
provided that Mircod shall remain responsible for the performance
of the Mircod Subsidiary. At any time, the Company shall have the
option, at its sole discretion, to transfer and require Mircod or
the Mircod Subsidiary to transfer the Development Project and/or
the rights and licenses granted by Mircod to a joint venture
company (“JV Entity”) which shall be established by the parties for
the purposes of carrying out and commercializing the Development
Project, and in which the Company and Mircod will each hold
50%. The Company shall
also have the option to, at its sole discretion and subject to all
rules and regulations to which it is then subject, require Mircod
to transfer to the Company the entirety of Mircod’s equity interest
in the JV Entity for a consideration of shares of Common Stock
according to an agreed formula. The parties agreed to amend the
development plan to reflect the fact that the parties shall
collaborate with each other on: (i) point-of-care processing,
regulatory and therapy development; (ii) setting up one or more
point–of-care processing facilities in institutions or hospitals
the territory of Russia; (iii) the supply of the Company’s products
and services within Russia, and (iv) clinical, regulatory,
development and commercialization in Russia. The Company may, at
its sole discretion, agree to provide Mircod with a convertible
loan (which may be converted into shares of Mircod then outstanding
or into the JV Entity, upon a valuation to be agreed between the
parties and validated by a third party subject to terms to be
agreed upon by the parties in a separate convertible loan
agreement). The convertible loan will be used to finance the
modification of the processing facility or facilities including,
planning, designing, testing, training or supervising, as required
for obtaining cGMP status approval(s) and/or relevant certification
for any processing facility and other activities. As at June 30,
2020, the loan agreement was not executed.
Kidney
Cure Ltd
During
April 2020, the Company entered into a joint venture agreement with
Kidney Cure Ltd. (“Kidney Cure” and the “Kidney Cure JVA,”
respectively), pursuant to which 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”). The
parties intend to pursue the joint venture through a newly
established company (hereinafter, the “KC JV Entity”), which the
Company, directly or indirectly by itself, will hold a
49% participating
interest therein, with the remaining
51% participating
interest being held by Kidney Cure. The board of directors of the
KC JV Entity will act as a steering committee KC JV Entity and
shall be composed of a total of three members, with one member
appointed by each party and the third member appointed by both
parties.
The Company will procure services from the Kidney Cure JVA in the
amount of $5
million, subject to and in accordance with a development and
manufacturing plan to be mutually agreed upon by the parties. Under
the Kidney Cure JVA, the Company can require Kidney Cure to sell to
the Company its participating (including equity) interest in the KC
JV Entity in consideration for the issuance of Common Stock based
on an agreed-upon formula for determining the KC JV Entity’s
valuation, provided that Company has contributed at least
$5
million. As of June 30, 2020, the Company had advanced $200
thousand to Kidney Cure on account of its obligations under the
Kidney Cure JVA and a further $250
thousand was advanced during July 2020.
Apart from
the above, as of June 30, 2020, no activity has begun in the said
KC JV Entity, no contributions were made therein and the KC JV
Entity had not been incorporated.
Sescom
Ltd
During April
2020, the Company entered into a joint venture agreement with
Sescom Ltd (“Sescom”), pursuant to which the parties will
collaborate in (i) 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. The parties intend to pursue
the joint venture through a company to be established (the “Sescom
JV Entity”), which shall be
50% owned by the Company
and
50% owned by Sescom. The
Sescom JV Entity will have a steering committee that will act as
the board of directors of the Sescom JV Entity and shall be
composed of a total of three members, with one member appointed by
each party and one industry expert.
Sescom
has agreed to provide Sescom JV Entity with: (a) a non-exclusive,
transferable and sublicensable worldwide royalty-free license to
use its background IP, to the extent required for carrying out the
development activities by the Sescom JV Entity; and (b) to make
available to the Sescom JV Entity all relevant know-how and
royalty-free licenses to any proprietary technologies to be
implemented as part of the ISS.
The
Company has agreed to procure services from Sescom or the Sescom JV
Entity in an amount of up to $1
million,
of which $500
thousand
was paid to Sescom during April 2020. In addition, the Company has
agreed to provide the Sescom JV Entity 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 JV Entity; and (b)
access to its point-of-care network and relevant data to be used
for the certain activities.
The parties
agreed that at any time after the Company has contributed
$1
million in
Sescom or the Sescom JV Entity, the Company shall have the right,
in its sole discretion, to purchase from Sescom all of Sescom’s
then-issued and outstanding shares in the Sescom JV Entity based on
a valuation of the Sescom JV Entity to be determined by an
agreed-upon formula.
Apart from
the above, as of June 30, 2020, no other activity had taken place
in the Sescom JV Entity and the Sescom JV Entity had not been
incorporated.
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.
The Tamir
Transaction closed upon the occurrence of the closing conditions
contained in the Tamir Purchase Agreement. As aggregate
consideration for the acquisition, the Company paid $2.462
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.
$59
thousand and
340,000 Shares will be 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.
Included in
the purchased assets and assumed liabilities 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.
The
Company’s acquired right to Tamir’s intellectual property
represents a single identifiable asset sourced from the agreement.
Therefore, all the fair value associated with the agreement is
concentrated in one identifiable asset and is not considered a
business in accordance with ASC 805-10-55-5A. The Company therefore
accounted for the right to Tamir’s intellectual property and other
assets acquired under the agreement as an acquisition of an asset
and recognized $19.5
million as
research and development expenses under ASC 730.
NOTE 7 –
STOCK-BASED
COMPENSATION
| a. |
Options Granted to
employees |
The table
below summarizes the terms of options for the purchase of shares in
the Company granted to employees and directors during the period
from January 1, 2020 to June 30, 2020:
SCHEDULE OF STOCK
OPTIONS GRANTED
| |
|
No.
of
Options
Granted
|
|
|
Exercise
Price |
|
|
Vesting
Period |
|
Fair
Value at Grant
(in thousands)
|
|
|
Expiration
Period
|
| Employees |
|
|
359,450 |
|
|
$ |
2.99-$6.84 |
|
|
Quarterly over a
period of two years |
|
|
768 |
|
|
10
years |
| Directors |
|
|
68,750 |
|
|
$ |
2.99-$4.70 |
|
|
91% on the one-year anniversary and
the remaining 9% in three equal installments on the first, second
and third year anniversaries |
|
$ |
147 |
|
|
10
years |
The fair
valuation of these option grants is based on the following
assumptions:
SCHEDULE
OF VALUATION ASSUMPTIONS OF STOCK OPTIONS
| |
|
During the
Period from
January 1, 2020 to
June 30, 2020 |
|
| Value
of one common share |
|
$ |
2.99-$6.84 |
|
| Dividend
yield |
|
|
0 |
% |
| Expected stock price
volatility |
|
|
82%-86 |
% |
| Risk free interest
rate |
|
|
0.48%-1.71 |
% |
| Expected term
(years) |
|
|
5.5.6 |
|
| b. |
Options Granted to
Non-Employees |
The table
below summarizes all the options for the purchase of shares in the
Company granted to consultants and service providers during the
period from January 1, 2020 to June 30, 2020:
SCHEDULE
OF STOCK OPTIONS GRANTED TO NON-EMPLOYEE
| |
|
No. of
Options
Granted
|
|
|
Exercise
Price |
|
|
Vesting
Period |
|
Fair
Value at Grant
(in thousands)
|
|
|
Expiration
Period |
| Non-employees |
|
|
42,500 |
|
|
$ |
2.99-$6.84 |
|
|
Quarterly over a
period of two years |
|
$ |
132 |
|
|
10
years |
The fair
valuation of these option grants is based on the following
assumptions:
SCHEDULE
OF VALUATION ASSUMPTIONS OF STOCK OPTIONS
| |
|
During the
Period from
January 1, 2020
to June 30, 2020 |
|
| Value
of one common share |
|
$ |
2.99-$6.84 |
|
| Dividend
yield |
|
|
0 |
% |
| Expected stock price
volatility |
|
|
89 |
% |
| Risk free interest
rate |
|
|
0.73%-1.12 |
% |
| Expected term
(years) |
|
|
10 |
|
| c. |
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.
During
the six months ended June 30, 2020, the Company granted
193,178 warrants
to several consultants at an exercise price of between $3.14
and
$5.34
per
share and exercisable for up to for
three years.
The fair value of those warrants as of the date of grant using the
Black-Scholes valuation model was $377
thousand.
See
also Notes 4 and 5.
NOTE 8 –
LOSS PER
SHARE
The
following table sets forth the calculation of basic and diluted
loss per share for the period indicated:
SCHEDULE
OF BASIC AND DILUTED LOSS PER SHARE
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
Three
Months Ended |
|
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(in
thousands, except per share data) |
|
| Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss from
continuing operations attributable to Orgenesis Inc. |
|
$ |
27,127 |
|
|
$ |
4,860 |
|
|
$ |
34,103 |
|
|
$ |
13,169 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (income) loss from
discontinued operations attributable to Orgenesis Inc. for loss per
share |
|
|
(6,721 |
) |
|
|
341 |
|
|
|
(89,252 |
) |
|
|
343 |
|
| Adjustment of
redeemable non-controlling interest to redemption
amount |
|
|
- |
|
|
|
611 |
|
|
|
414 |
|
|
|
853 |
|
| Basic: Net income
(loss) available to common stockholders |
|
|
(6,721 |
) |
|
|
952 |
|
|
|
(88,838 |
) |
|
|
1,196 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (income) loss
attributable to Orgenesis Inc. for loss per share |
|
|
20,406 |
|
|
|
5,812 |
|
|
|
(54,735 |
) |
|
|
14,365 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average
number of common shares outstanding |
|
|
21,515,254 |
|
|
|
16,001,439 |
|
|
|
19,648,042 |
|
|
|
15,772,333 |
|
| Loss per common share
from continuing operations |
|
$ |
1.26 |
|
|
$ |
0.30 |
|
|
$ |
1.73 |
|
|
$ |
0.83 |
|
|
Net
(earnings) loss common share from discontinued
operations
|
|
$ |
(0.31 |
) |
|
$ |
0.06 |
|
|
$ |
(4.52 |
) |
|
$ |
0.08 |
|
|
Net
(earnings) loss per share
|
|
$ |
0.95 |
|
|
$ |
0.36 |
|
|
$ |
(2.79 |
) |
|
$ |
0.91 |
|
| Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss from
continuing operations attributable to Orgenesis Inc. for loss per
share |
|
|
27,127 |
|
|
|
4,860 |
|
|
|
34,103 |
|
|
|
13,169 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (income) loss from
discontinued operations attributable to Orgenesis Inc. for loss per
share |
|
|
(6,721 |
) |
|
|
952 |
|
|
|
(88,838 |
) |
|
|
1,196 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (income) loss
attributable to Orgenesis Inc. for loss per share |
|
|
20,406 |
|
|
|
5,812 |
|
|
|
(54,735 |
) |
|
|
14,365 |
|
| Weighted average
number of shares used in the computation of basic and diluted loss
per share |
|
|
21,515,254 |
|
|
|
16,001,439 |
|
|
|
19,648,042 |
|
|
|
15,772,333 |
|
| Net loss per common
share from continuing operations |
|
$ |
1.26 |
|
|
$ |
0.30 |
|
|
$ |
1.73 |
|
|
$ |
0.83 |
|
| Net (earnings) loss
per common share from discontinued operations |
|
$ |
(0.31 |
) |
|
$ |
0.06 |
|
|
$ |
(4.52 |
) |
|
$ |
0.08 |
|
| Net (earnings) loss
per share |
|
$ |
0.95 |
|
|
$ |
0.36 |
|
|
$ |
(2.79 |
) |
|
$ |
0.91 |
|
NOTE 9 –
REVENUES
Disaggregation of
Revenue
The
following table disaggregates the Company’s revenues by major
revenue streams.
SCHEDULE
OF DISAGGREGATION OF REVENUE
| |
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(in
thousands) |
|
| Revenue
stream: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cell
process development services |
|
$ |
575 |
|
|
$ |
169 |
|
|
$ |
602 |
|
|
$ |
588 |
|
|
Point-of-care
services |
|
|
1,174 |
|
|
|
962 |
|
|
|
3,025 |
|
|
|
962 |
|
| Total |
|
$ |
1,749 |
|
|
$ |
1,131 |
|
|
$ |
3,627 |
|
|
$ |
1,550 |
|
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
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(in
thousands) |
|
| Balance as of
beginning of period |
|
$ |
1,831 |
|
|
$ |
129 |
|
| Additions |
|
|
2,944 |
|
|
|
654 |
|
| Collections |
|
|
(828 |
) |
|
|
(157 |
) |
|
Exchange
rate differences |
|
|
3 |
|
|
|
(8 |
) |
| Balance as of end of
period |
|
$ |
3,950 |
|
|
$ |
618 |
|
The activity
for contract liabilities is comprised of:
SCHEDULE
OF ACTIVITY FOR CONTRACT LIABILITIES
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(in
thousands) |
|
| Balance as of beginning
of period |
|
$ |
325 |
|
|
$ |
56 |
|
| Additions |
|
|
597 |
|
|
|
518 |
|
|
Realizations |
|
|
(760 |
) |
|
|
(116 |
) |
| Balance as of end of
period |
|
$ |
162 |
|
|
$ |
458 |
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking
Statements
The
following discussion should be read in conjunction with the
financial statements and related notes contained elsewhere in this
Quarterly Report on Form 10-Q, as well as our Annual Report on Form
10-K for the fiscal year ended December 31, 2019 as filed with the
Securities and Exchange Commission (the “SEC”) on March 9, 2020.
Certain statements made in this discussion are “forward-looking
statements” within the meaning of 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are
based upon beliefs of, and information currently available to, the
Company’s management as well as estimates and assumptions made by
the Company’s management. Readers are cautioned not to place undue
reliance on these forward-looking statements, which are only
predictions and speak only as of the date hereof. When used herein,
the words “anticipate,” “believe,” “estimate,” “expect,”
“forecast,” “future,” “intend,” “plan,” “predict,” “project,”
“target,” “potential,” “will,” “would,” “could,” “should,”
“continue” or the negative of these terms and similar expressions
as they relate to the Company or the Company’s management identify
forward-looking statements. Such statements reflect the current
view of the Company with respect to future events and are subject
to risks, uncertainties, assumptions, and other factors, including
the risks relating to the Company’s business, industry, and the
Company’s operations and results of operations and the effects that
the COVID-19 outbreak, or similar pandemics, could have on our
business and CGT Biotech Platform. Should one or more of these
risks or uncertainties materialize, or should the underlying
assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated,
expected, intended, or planned.
Although the
Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law, including the
securities laws of the United States, the Company does not intend
to update any of the forward-looking statements to conform these
statements to actual results.
Our
financial statements are prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”). These
accounting principles require us to make certain estimates,
judgments and assumptions. We believe that the estimates, judgments
and assumptions upon which we rely are reasonable based upon
information available to us at the time that these estimates,
judgments and assumptions are made. These estimates, judgments and
assumptions can affect the reported amounts of assets and
liabilities as of the date of the financial statements as well as
the reported amounts of revenues and expenses during the periods
presented. Our financial statements would be affected to the extent
there are material differences between these estimates and actual
results. The following discussion should be read in conjunction
with our financial statements and notes thereto appearing elsewhere
in this report.
Unless
otherwise indicated or the context requires otherwise, the words
“we,” “us,” “our,” the “Company,” “our Company” or “Orgenesis”
refer to Orgenesis Inc., a Nevada corporation, and our
majority-owned subsidiaries, Orgenesis Korea Co. Ltd. (the “Korean
Subsidiary”), formerly known as CureCell, and its wholly owned
subsidiaries Orgenesis Belgium SRL, a Belgian-based entity which is
engaged in development and manufacturing activities, together with
clinical development studies in Europe (the “Belgian Subsidiary”),
Orgenesis Ltd., an Israeli corporation (the “Israeli Subsidiary”),
Orgenesis Maryland Inc., a Maryland corporation (the “U.S.
Subsidiary”) and Atvio Biotech Ltd. (“Atvio”). The subsidiaries of
our former subsidiary Masthercell Global Inc. (“Masthercell”),
include Cell Therapy Holdings S.A., MaSTherCell, S.A
(“MaSTherCell”), a Belgian-based subsidiary and a Contract
Development and Manufacturing Organization (“CDMO”) specialized in
cell therapy development and manufacturing for advanced medicinal
products, and Masthercell U.S., LLC (“Masthercell U.S.”), a
U.S.-based CDMO.
Corporate
Overview
We are a
pioneering global biotech company in the Cell & Gene Therapy
(“CGT”) industry focused on unlocking the full potential of
personalized therapies and closed processing systems with the
ultimate aim of providing life-changing treatments to large numbers
of patients at reduced costs in a point-of-care setting. We pursue
this strategy through a point-of-care platform (“CGT Biotech
Platform”) that combines therapeutics and technologies via a
network of collaborative research institutes and hospitals, and
including via its mobile processing units, around the
world.
We had
historically also operated a Contract Development and Manufacturing
Organization (“CDMO”) platform, which provided contract
manufacturing and development services for biopharmaceutical
companies (the “CDMO Business”). On February 2, 2020, we sold our
CDMO Business when we entered into a Stock Purchase Agreement (the
“Purchase Agreement”) with GPP-II Masthercell LLC (“GPP” and
together with the Company, the “Sellers”), Masthercell Global and
Catalent Pharma Solutions, Inc. (the “Buyer”). Pursuant to the
terms and conditions of the Purchase Agreement, on February 10,
2020, the Sellers sold 100% of the outstanding equity interests of
Masthercell Global to Buyer (the “Masthercell Sale”) for an
aggregate nominal purchase price of $315 million, subject to
customary adjustments. After accounting for GPP’s liquidation
preference and equity stake in Masthercell as well as other
investor interests in MaSTherCell, distributions to Masthercell
Global option holders and transaction costs, we received
approximately $126.7 million. We determined that the Masthercell
Global business (“Discontinued Operation”) met the criteria to be
classified as a discontinued operation as of the first quarter of
2020. The Discontinued Operation includes most of the previous CDMO
Business, including majority-owned Masthercell Global, including
its subsidiaries Cell Therapy Holdings S.A., MaSTherCell and
Masthercell U.S. (collectively, the “Masthercell Global
Subsidiaries”).
We conduct
our operations through our wholly-owned 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 technology
licensing and the setting up of the POCare Network (as defined
below). |
|
|
|
|
● |
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. |
|
|
|
|
● |
Israel:
Orgenesis Ltd. (the “Israeli Subsidiary”) is the center for
research and technology, as well as a provider of regulatory,
clinical and pre-clinical services, and Atvio Biotech Ltd.
(“Atvio”) is a provider of cell-processing services in
Israel. |
|
|
|
|
● |
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. We own 94.12% of the Korean
Subsidiary. |
CGT
Biotech Platform
Business
Strategy
Our CGT
Biotech Platform consists of: (a) POCare Therapeutics, a pipeline
of licensed CGTs, anti-viral and proprietary scientific know-how;
(b) POCare Technologies, a suite of proprietary and in-licensed
technologies which are engineered to create customized processing
systems for affordable point-of-care therapies; and (c) a POCare
Network, a collaborative, international ecosystem of leading
research institutions and hospitals committed to clinical
development and supply of CGTs at the point-of-care (“POCare
Network”). By combining science, technologies and a collaborative
network, we believe that we are able to identify the most promising
new autologous therapies and provide a pathway for them to reach
patients more quickly, more efficiently and in a scalable way,
thereby unlocking the power of cell and gene therapy for all
patients. Autologous therapies are produced from a patient’s own
cells, instead of mass-cultivated donor-cells, or allogeneic cells.
Allogeneic therapies are derived from donor cells and, through the
construction of master and working cell banks, are produced on a
large scale. Autologous therapies are derived from the treated
patient and manufactured through a defined protocol before
re-administration and generally demand a more complex supply chain.
Currently with the CGT market relying heavily on production and
supply chain of manufacturing sites, we believe our CGT Biotech
Platform may help overcome some of the development and supply
challenges with bringing these therapies to patients.
In pursuit
of this focus, we have been forming key strategic relationships
with leading research institutions and hospitals around the world.
We are also licensing breakthrough technologies, including via our
mobile processing units, that complement our offerings and support
our model. As a result, we believe that we now have significant
expertise and capabilities across a wide range of therapies and
supporting technologies including, but not limited to, Tumor
Infiltrating Lymphocytes (“TILs”), CAR-T and CAR-NK, dendritic cell
technologies, exosomes and bioxomes and viral vectors. We believe
that these capabilities enable us to launch an aggressive push into
a wide array of promising new potential therapies.
We are
developing an efficient and streamlined organization, whereby we
are able to share both costs and revenues with our partners in
order to avoid the historically high development costs associated
with CGT drug development. We believe we have developed a truly
unique model with the ability to cost-effectively develop and
produce CGTs at scale, which we believe has the potential to
transform the CGT industry.
We consider
the following to be the four pillars in order to advance our
business strategy under our CGT Biotech Platform:
|
● |
Innovation – This leverages our
unique know-how and expertise for industrial processes, operational
excellence, process development and optimization, quality control
assays development, quality management systems and regulatory
expertise. |
|
|
|
|
● |
Systems – We are developing
cell production cGMP systems utilizing sensor technology and unique
systems for biological production, closed system technology for
processing cells, proprietary virus/ media technologies and
partnerships with key system providers. |
|
|
|
|
● |
Cell & Gene Products – We
intend to grow our internal asset pipeline consisting of our unique
portfolio of immuno-oncology related technologies, anti-viral
therapies, MSC and liver-based therapies and secretome-based
therapies. |
|
|
|
|
● |
Distribution – This is our
POCare Network which is designed to enable development,
commercialization and distribution of CGTs via the installation of
point-of-care systems in major hospitals in key geographies (i.e.,
Europe, North America, Asia, South America etc.), thereby creating
a regional and international system network to serve as our
distribution channel. |
While our
CGT Biotech Platform is currently limited to early stage
development to overcome certain industry challenges, we intend to
continue developing our global POCare Network, with the goal of
developing CGTs via joint ventures with partners who bring strong
regional networks. Such networks include partnerships with leading
research institutions and local hospitals which allows us to engage
in continuous in-licensing of, namely, autologous therapies from
academia and research institutes, co-development of hospital and
academic-based therapies, and utilization of hospital networks for
clinical development of therapies.
Our IP
portfolio includes trans-differentiation technology licensed by our
Israeli Subsidiary. Our development plan calls for conducting
additional pre-clinical safety and efficacy studies with respect to
diabetes and other potential indications prior to initiating human
clinical trials.
We own or
have exclusive rights to twenty eight (28) United States, thirty
(30) foreign-issued patents, twenty nine (29) pending applications
in the United States, fifty seven (57) pending applications in
foreign jurisdictions, including Europe, Australia, Brazil, Canada,
China, Eurasia, Hong Kong, India, Israel, Japan, Mexico, New
Zealand, Panama, Russia, Singapore, South Africa, and South Korea,
and four (4) international Patent Cooperation Treaty (“PCT”) patent
applications. These patents and applications relate, among others,
to (1) the trans-differentiation of cells (including hepatic cells)
to cells having pancreatic β-cell-like phenotype and function and
to their use in the treatment of degenerative pancreatic disorders,
including diabetes, pancreatic cancer and pancreatitis; (2)
scaffolds, including alginate and sulfated alginate scaffolds,
polysaccharides thereof, and scaffolds for use for cell
propagation, trans-differentiation, and transplantation in the
treatment of autoimmune diseases, including diabetes; (3)
bioconjugates comprising sulfated polysaccharides and diverse
bioactive peptides, and their use in the treatment of inflammatory
conditions; (4) bioreactors for cell culture; (5) dendritic and
macrophages based vaccines; (6) compositions comprising ranpirnase
and their use in the treatment of viral diseases; (7) tumor
infiltrating lymphocytes (TILs) and their use for treating cancer;
(8) compositions and methods for treating COVID-19; (9) methods for
producing antibodies; and (10) cysteinazed ribonucleases. In June
2019, the United States Food & Drug Administration (the “FDA”)
granted us the Orphan Drug designation for our Autologous Insulin
Producing (“AIP”) cells as a cell replacement therapy for the
treatment of severe hypoglycemia-prone diabetes resulting from
total pancreatectomy (“TP”) due to chronic pancreatitis
(“CP”).
Revenue
Model
We believe
that our CGT Biotech Platform is a novel business model in that it
brings autologous therapies in a cost-effective, high-quality and
scalable manner to patients. We believe that this approach is an
attractive proposition for personalized medicine because
point-of-care therapy facilitates the development of technologies
through our strategic partnerships and utilizes closed systems that
have the potential of reducing the required grade of clean room
facilities, thus substantially reducing manufacturing costs.
Furthermore, cell transportation, which is a high-risk and costly
aspect of the supply chain, could be minimized or eliminated. We
are establishing and positioning our CGT Biotech Platform in order
to bring therapies to patients in a scalable way via a network of
leading research institutions and hospitals committed to clinical
development and supply of CGTs, including facilities in Germany,
Austria, Greece, the U.S., Korea and India, or otherwise referred
to as our POCare Network. We established our POCare Network through
licensing, collaboration and joint venture agreements. Once
established, along with our POCare Therapeutics and POCare
Technologies, this network can then reach patients at the
point-of-care. Our POCare Therapeutics and POCare Technologies
allow us to offer a range of technologies and processes to provide
CGTs worldwide that potentially generate revenues within our POCare
Network. This includes:
|
● |
Development Services – These
are services for industrial manufacturing know-how to our network
of licensing partners, thus reducing cost of goods and facilitating
regulatory scrutiny, higher automation level required to increase
process robustness and reduce attrition rates, biological assay
development, assay validation and assay optimization. |
|
|
|
|
● |
Licensing Fees – Such fees are
for (a) innovative technologies such as scaffolds and IoT sensors
and closed system-related technologies that allow autologous cell
manufacturing in lower grade clean rooms and (b) out-licensing of
our portfolio of CGTs to our POCare Network. |
|
|
|
|
● |
Point-of-Care Services – This
includes regulatory, development and training assistance to local
partners who bring strong regional networks through (a) joint
venture partnerships with local hospitals, (b) local regulatory
know-how, and (c) local therapeutic development. |
Recent
Developments During the Three Months Ended June 30, 2020
Tamir
Biotechnology, Inc.
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.
The Tamir
Transaction closed upon the occurrence of the closing conditions
contained in the Tamir Purchase Agreement. As aggregate
consideration for the Acquisition, the Company paid $2.462 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. $59 thousand and 340,000 Shares will be 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.
Coronavirus disease
19 (COVID-19)
Due to the
global outbreak of SARS-CoV-2, the novel strain of coronavirus that
causes Coronavirus disease 19 (COVID-19), we experienced minor
impacts on certain aspects of our business during the three months
ended June 30, 2020. The scope and duration of any disruptions, for
example, as a result of governmental “stay at home” orders in the
interests of public health and safety and the ultimate impacts of
COVID-19 on our operations, are currently unknown. We are
continuing to actively monitor the situation and may take further
precautionary and preemptive actions as may be required by federal,
state or local authorities or that we determine are in the best
interests of public health and safety and that of our patient
community, employees, partners, and stockholders. We cannot predict
the effects that such actions, or the impact of COVID-19 on global
business operations and economic conditions, may have on our
business, strategy, collaborations, or financial and operating
results.
Results
of Operations
Comparison of
the Three Months Ended June 30, 2020 to the Three Months Ended June
30, 2019.
The
following table presents our results of operations for the three
months ended June 30, 2020 and 2019:
| |
|
Three-Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Revenues |
|
$ |
1,470 |
|
|
$ |
575 |
|
| Revenues to Related
Party |
|
|
279 |
|
|
|
556 |
|
| Cost
of Revenues |
|
|
243 |
|
|
|
1,007 |
|
| Cost of research and
development and research and development services |
|
|
24,720 |
|
|
|
2,073 |
|
| Amortization of
intangible assets |
|
|
(52 |
) |
|
|
108 |
|
| Selling, general and
administrative expenses |
|
|
3,611 |
|
|
|
2,789 |
|
| Financial expenses,
net |
|
|
337 |
|
|
|
47 |
|
| Other income,
net |
|
|
(1 |
) |
|
|
(1 |
) |
| Loss before income
taxes |
|
$ |
27,109 |
|
|
$ |
4,892 |
|
Our revenues
for the three months ended June 30, 2020 were $1,749 thousand, as
compared to $1,131 thousand for the three months ended June 30,
2019, representing an increase of 55%. The increase in revenues for
the three months ended June 30, 2020 is attributable to the
increase in point-of-care services revenue.
Expenses
Research and Development and Research
and Development Services Expenses
| |
|
Three-Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Salaries and related
expenses |
|
$ |
1,244 |
|
|
$ |
586 |
|
| Stock-based
compensation |
|
|
134 |
|
|
|
132 |
|
| Professional fees and
consulting services |
|
|
573 |
|
|
|
516 |
|
| Lab
expenses |
|
|
443 |
|
|
|
649 |
|
| Tamir purchase
agreement, see Note 6 |
|
|
19,510 |
|
|
|
- |
|
| Depreciation expenses,
net |
|
|
114 |
|
|
|
108 |
|
| Other research and
development expenses |
|
|
2,755 |
|
|
|
391 |
|
| Less –
grant |
|
|
(53 |
) |
|
|
(309 |
) |
| Total |
|
$ |
24,720 |
|
|
$ |
2,073 |
|
Research and
development expenses for the three months ended June 30, 2020 were
$24,720 thousand, as compared to $2,073 thousand for the three
months ended June 30, 2019, representing an increase of 1092%. The
increase is mainly attributable to the following:
|
|
● |
An increase
in salaries and related expenses and other research and development
expenses. |
Additional
R&D staff were hired as the Company expanded its research and
development to the evaluation and development of new cell therapies
and related technologies in the field of immune-oncology (our novel
CD19 CAR-T and CD19.22 CAR-T programs, cellular vaccination for
solid cancers, advanced Tumor infiltrating lymphocyte, NK-based
therapies, etc.), liver pathologies, stem cell based therapies and
other cell based technologies such as the novel delivery system,
Bioxomes. The Company invested in converting biological processes
to GMP-compliant processes as these therapies progress to clinical
stage.
|
|
● |
The Tamir
purchase agreement (See Note 6). |
On April
7, 2020, the Company entered into the Tamir Purchase Agreement with
Tamir pursuant to which it 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 Company’s acquired right to Tamir’s
intellectual property represents a single identifiable asset
sourced from the agreement. Therefore, all the fair value
associated with the agreement is concentrated in one identifiable
asset and is not considered a business in accordance with ASC
805-10-55-5A. The Company therefore accounted for the right to
Tamir’s intellectual property and other assets acquired under the
agreement as an acquisition of an asset and recognized $19.5
million as Research and Development expenses under ASC
730.
Selling, General and Administrative
Expenses
| |
|
Three-Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Salaries and related
expenses |
|
$ |
367 |
|
|
$ |
772 |
|
| Stock-based
compensation |
|
|
697 |
|
|
|
615 |
|
| Accounting and legal
fees |
|
|
1,793 |
|
|
|
496 |
|
| Professional
fees |
|
|
389 |
|
|
|
149 |
|
| Rent and related
expenses |
|
|
68 |
|
|
|
194 |
|
| Business
development |
|
|
175 |
|
|
|
339 |
|
| Depreciation expenses,
net |
|
|
25 |
|
|
|
53 |
|
| Other general and
administrative expenses |
|
|
97 |
|
|
|
171 |
|
| Total |
|
$ |
3,611 |
|
|
$ |
2,789 |
|
Selling,
general and administrative expenses for the three months ended June
30, 2020 were $3,611 thousand, as compared to $2,789 thousand for
the three months ended June 30, 2019, representing an increase of
29%.The increase in selling, general and administrative expenses in
the three months ended in June 2020 compared to the three months
ended June 30, 2019 is primarily attributable to (i) An increase in
accounting and legal fees of $1,297 thousand, which is mainly
attributable to additional legal fees incurred for recent business
and collaboration agreements and (ii) An increase in professional
fees of $240 thousand.
Financial Expenses,
net
| |
|
Three-Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Interest expense on
convertible loans and loans |
|
$ |
317 |
|
|
$ |
9 |
|
| Foreign exchange loss
(gain), net |
|
|
108 |
|
|
|
(5 |
) |
| Other expenses
(income) |
|
|
(88 |
) |
|
|
43 |
|
| Total |
|
$ |
337 |
|
|
$ |
47 |
|
Financial
expenses, net for the three months ended June 30, 2020 were $337
thousand, as compared to $47 thousand for the three months ended
June 30, 2019, representing an increase of 617%. The increase is
primarily attributable to interest expenses on convertible
loans.
Comparison of
the Six Months Ended June 30, 2020 to the Six Months Ended June 30,
2019.
The
following table presents our results of operations for the six
months ended June 30, 2020 and 2019:
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Revenues |
|
$ |
2,855 |
|
|
$ |
994 |
|
| Revenues to Related
Party |
|
|
772 |
|
|
|
556 |
|
| Cost
of Revenues |
|
|
413 |
|
|
|
1,312 |
|
| Cost of research and
development and research and development services |
|
|
29,423 |
|
|
|
7,373 |
|
| Amortization of
intangible assets |
|
|
171 |
|
|
|
217 |
|
| Selling, general and
administrative expenses |
|
|
7,129 |
|
|
|
5,775 |
|
| Financial expenses,
net |
|
|
666 |
|
|
|
148 |
|
| Other income,
net |
|
|
(4 |
) |
|
|
(4 |
) |
| Loss before income
taxes |
|
$ |
34,171 |
|
|
$ |
13,271 |
|
Our revenues
for the six months ended June 30, 2020 were $3,627 thousand, as
compared to $1,550 thousand for the six months ended June 30, 2019,
representing an increase of 134%. The increase in revenues for the
six months ended June 30, 2020 is attributable to the increase in
point-of-care services revenue as a result of increased activity
under master service agreements with our joint venture
partners.
Expenses
Research and Development and Research
and Development Services Expenses
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Salaries and related
expenses |
|
$ |
2,090 |
|
|
$ |
1,218 |
|
| Stock-based
compensation |
|
|
218 |
|
|
|
299 |
|
| Professional fees and
consulting services |
|
|
973 |
|
|
|
1,468 |
|
| Lab
expenses |
|
|
1,047 |
|
|
|
1,405 |
|
| First Choice
JVA |
|
|
- |
|
|
|
2,741 |
|
| Tamir purchase
agreement. Note 6 |
|
|
19,510 |
|
|
|
- |
|
| Depreciation expenses,
net |
|
|
218 |
|
|
|
195 |
|
| Other research and
development expenses |
|
|
5,505 |
|
|
|
612 |
|
| Less –
grant |
|
|
(138 |
) |
|
|
(565 |
) |
| Total |
|
$ |
29,423 |
|
|
$ |
7,373 |
|
Research and
development expenses for the six months ended June 30, 2020 were
$29,423 thousand, as compared to $7,373 thousand for the six months
ended June 30, 2019, representing an increase of 299%.
The increase
in research and development and development services is mainly
attributable to increases in salaries and related expenses and
other research and development expenses as well as the Tamir
purchase agreement as detailed above in the “Comparison of the
Three Months Ended June 30, 2020 to the Three Months Ended June 30,
2019”.
Selling, General and Administrative
Expenses
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Salaries and related
expenses |
|
$ |
869 |
|
|
$ |
1,362 |
|
| Stock-based
compensation |
|
|
1,028 |
|
|
|
1,397 |
|
| Accounting and legal
fees |
|
|
3,417 |
|
|
|
1,221 |
|
| Professional
fees |
|
|
826 |
|
|
|
426 |
|
| Rent and related
expenses |
|
|
129 |
|
|
|
224 |
|
| Business
development |
|
|
425 |
|
|
|
676 |
|
| Depreciation expenses,
net |
|
|
50 |
|
|
|
53 |
|
| Other general and
administrative expenses |
|
|
385 |
|
|
|
416 |
|
| Total |
|
$ |
7,129 |
|
|
$ |
5,775 |
|
Selling,
general and administrative expenses for the six months ended June
30, 2020 were $7,129 thousand, as compared to $5,775 thousand for
the six months ended June 30, 2019, representing an increase of
23%. The increase in selling, general and administrative expenses
in the six months ended in June 2020 compared to the six months
ended June 30, 2019 is primarily attributable to the
following:
|
|
(i) |
A decrease
in salaries and related expenses of $493 thousand, due to the
accrual of related expenses in the six months ended June 30, 2019,
and the reassignment of certain employees from selling, general,
and administration to research and development
services; |
|
|
|
|
|
|
(ii) |
An increase
in accounting and legal fees of $2,196 thousand, which is mainly
attributable to legal fees incurred for recent business and
collaboration agreements; and |
|
|
|
|
|
|
(iii) |
An increase
in professional fees of $400 thousand, which is related to the
increase in the related activities. |
Financial Expenses,
net
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| Interest expense on
convertible loans and loans |
|
$ |
739 |
|
|
$ |
11 |
|
| Foreign exchange loss,
net |
|
|
165 |
|
|
|
76 |
|
| Other expenses
(income) |
|
|
(238 |
) |
|
|
61 |
|
| Total |
|
$ |
666 |
|
|
$ |
148 |
|
Financial
expenses, net for the six months ended June 30, 2020 were $666
thousand, as compared to $148 thousand for the six months ended
June 30, 2019, representing an increase of 350%. The increase is
primarily attributable to interest expenses on convertible
loans.
Working
Capital
| |
|
June 30,
2020 |
|
|
December
31, 2019
|
|
| |
|
(In
Thousands) |
|
| Current
assets |
|
$ |
104,312 |
|
|
$ |
78,348 |
|
| Current
liabilities |
|
|
19,758 |
|
|
|
42,434 |
|
| Working capital
gain |
|
$ |
84,554 |
|
|
$ |
35,914 |
|
Current assets increased, and current liabilities decreased,
primarily due to the Masthercell sale.
Liquidity
and Financial Condition
| |
|
Six Months
Ended |
|
| |
|
June 30,
2020 |
|
|
June 30,
2019 |
|
| |
|
(In
Thousands) |
|
| |
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
54,624 |
|
|
$ |
(14,275 |
) |
| |
|
|
|
|
|
|
|
|
| Net cash used in
operating activities |
|
|
(22,834 |
) |
|
|
(8,168 |
) |
| Net cash provided by
(used in) investing activities |
|
|
102,772 |
|
|
|
(3,947 |
) |
| Net cash provided by
financing activities |
|
|
6,159 |
|
|
|
13,796 |
|
| |
|
|
|
|
|
|
|
|
| Increase in cash and
cash equivalents |
|
$ |
86,097 |
|
|
$ |
1,681 |
|
As mentioned
in above, on February 2, 2020, we entered into a Stock Purchase
Agreement (the “Purchase Agreement”) with GPP-II Masthercell LLC
(“GPP” and together with us, the “Sellers”), Masthercell Global
Inc. (“Masthercell”) and Catalent Pharma Solutions, Inc. (the
“Buyer”). Pursuant to the terms and conditions of the Purchase
Agreement, on February 10, 2020, the Sellers sold 100% of the
outstanding equity interests of Masthercell to Buyer (the
“Masthercell Sale”) for an aggregate nominal purchase price of $315
million, subject to customary adjustments. 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, we received
approximately $126.7 million, of which $7.2 million was used for
the repayment of intercompany loans and payables.
During the
six month period ended June 30, 2020, we funded our operations from
the Masthercell sale and through various financing activities
consisting of proceeds primarily from private placements of our
equity securities, debt securities and equity-linked instruments in
the net amount of approximately $9.4 million.
Net cash
used in operating activities for the six months ended June 30, 2020
was approximately $23 million, as compared to net cash used in
operating activities of approximately $8 million for the six months
ended June 30, 2019.
Net cash
provided by investing activities for the six months ended June 30,
2020 was approximately $103 million, as compared to net cash used
in investing activities of approximately $4 million for the six
months ended June 30, 2019.
Liquidity
& Capital Resources Outlook
We believe
that the proceeds from the Masthercell Sale, as well as our
business plan, will provide sufficient liquidity to fund our
operating needs for at least the next 12 months. However, there are
factors that can impact our ability to continue to fund our
operating needs, including:
|
● |
restrictions
on our ability to expand sales volume from our CGT Biotech
Platform; and |
|
● |
the need for
us to continue to invest in operating activities to remain
competitive or acquire other businesses and technologies and to
complement our products, expand the breadth of our business,
enhance our technical capabilities or otherwise offer growth
opportunities. |
The net
proceeds of approximately $126.7 million from the sale of
Masthercell were used for the repayment of $7.2 million of
intercompany loans and payables. In addition, on January 20, 2020,
we entered into a Securities Purchase Agreement with certain
investors pursuant to which we issued an aggregate of 2,200,000
shares of Common Stock and warrants to purchase up to an aggregate
of 1,000,000 shares of Common Stock, which resulted in our receipt
of gross proceeds of approximately $9.24 million before deducting
related offering expenses.
If there are
further increases in operating costs in general and administrative
expenses for facilities expansion, funding for some of our
collaborations and joint ventures, research and development,
commercial and clinical activity or decreases in revenues from
customers, we may decide to seek additional financing.
Off-Balance Sheet
Arrangements
The Company
has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on the Company’s
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
Not
applicable.
Item 4. Controls and
Procedures
Evaluation of
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) that are
designed to ensure that information required to be disclosed in our
reports under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and
communicated to our management, including our principal executive
officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosures. In designing
disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures. The
design of any disclosure controls and procedures also is based in
part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future
conditions. Any controls and procedures, no matter how well
designed and operated, can provide only reasonable, not absolute,
assurance of achieving the desired control objectives.
Our management, with the participation of our principal executive
officer and principal financial officer, has evaluated the
effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this
report. Based upon that evaluation and subject to the foregoing,
our principal executive officer and principal financial officer
concluded that, as of the end of the period covered by this report,
the design and operation of our disclosure controls and procedures
were effective to accomplish their objectives at the reasonable
assurance level.
Changes
in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial
reporting during the quarter ended June 30, 2020 that have
materially affected, or that are reasonably likely to materially
affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We know of
no material pending legal proceedings to which the Company or its
subsidiaries are a party or of which any of its properties, or the
properties of its subsidiaries, are the subject. In addition, we do
not know of any such proceedings contemplated by any governmental
authorities.
We know of
no material proceedings in which any of the Company’s directors,
officers or affiliates, or any registered or beneficial stockholder
is a party adverse to the Company or its Subsidiaries or has a
material interest adverse to the Company or its
subsidiaries.
ITEM 1A. RISK FACTORS
An
investment in the Company’s Common Stock involves a number of very
significant risks. You should carefully consider the risk factors
included in the “Risk Factors” section of our Annual Report on Form
10-K for the year ended December 31, 2019, as filed with the SEC on
March 9, 2020, in addition to other information contained in our
reports and in this quarterly report in evaluating the Company and
its business before purchasing shares of our Common Stock. Except
as set forth below, there have been no material changes to our risk
factors contained in our Annual Report on Form 10-K for the year
ended December 31, 2019. The Company’s business, operating results
and financial condition could be adversely affected due to any of
those risks. In addition:
The
coronavirus outbreak has the potential to cause disruptions in our
business, including our clinical development
activities.
The outbreak
of the novel strain of coronavirus, or COVID-19, has currently
impacted and may continue to impact our business, including our
preclinical studies and clinical trials. COVID-19 has spread to
multiple countries, including the United States and Israel, where
the Company conducts its operations.
Efforts to
contain the spread of COVID-19 have intensified and the United
States and Israel, among other countries, have implemented and may
continue to implement severe travel restrictions, shelter in place
orders, social distancing and delays or cancellations of elective
surgeries. These and other disruptions have caused, and may
continue to cause, a delay in the supply of consumable goods, which
could result in further delays and affect our ability to
commercialize and develop our product candidates.
The spread
of an infectious disease, including COVID-19, may also result in a
period of business disruption, and in reduced operations, any of
which could materially affect our business, financial condition and
results of operations. Although, as of the date of this Quarterly
Report on Form 10-Q, we do not expect any material impact on our
long-term activity, the extent to which COVID-19 impacts our
business will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which
may emerge concerning the severity of COVID-19 and the actions to
contain COVID-19 or treat its impact, among others.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
None.