RNS Number : 1034E
Medgenics Inc
24 September 2008
Medgenics, Inc.
('Medgenics' or the 'Company')
HALF-YEARLY REPORT THE SIX-MONTH PERIOD ENDED 30 JUNE 2008
Misgav, Israel and London, UK - 24 September 2008 - Medgenics (AIM: MEDG) announces its half-yearly report for the six-month period
ended 30 June 2008.
Highlights for the period
* Appointment of Lord Steinberg as Non-Executive Director in February 2008.
* Appointment of Dr. Ehud Shoshani, former CEO of Quintiles, Israel, as Vice President of Clinical Affairs and addition of key
scientific and engineering personnel in accordance with its plan and preparation for the Phase I/II clinical trial for EPODURE
sustained-action protein therapy to treat anaemia.
* Successful manufacture of the key 'gutless' adenoviral vector in a GMP (Good Manufacturing Practice) vector production facility.
This vector will be used to prepare EPODURE Biopumps capable of producing sufficient daily amounts of erythropoietin (EPO) to meet the
Company's requirements for use in its Phase I/II clinical trials in anaemic patients with chronic kidney disease.
* Completion of the design, fabrication and evaluation of the key proprietary patient contact devices that will be used both to
enable Medgenics to conduct its current Phase I/II clinical trial and to assist in future clinical trials.
* Successful move to a new larger facility, allowing the corporate and R&D operations to be housed in one location.
Significant Post-period Highlights
* Commencement of Phase I/II safety and efficacy clinical trial with EPODURE following receipt of approval from Israel's Ministry of
Health.
Financial Summary (in US $; unaudited)
* Net loss after tax of $2.97 million for the period (2007: $1.04 million) as a result primarily of preparations for and initiation
of the Phase I/II clinical trial of EPODURE, including the set up costs associated with the new laboratories and the recruitment of
additional R&D staff.
* R&D costs for the six-month period of $1.63 million (2007: $0.44 million) and general and administrative costs of $1.39 million
(2007: $0.64 million).
* Cash, cash equivalents and short-term investments at 30 June 2008 of $1.74 million (at 31 December 2007: $4.68 million).
Dr. Andrew Pearlman, Chief Executive Officer of Medgenics, said:
"2008 continues to be an exciting year for Medgenics and we have been focused on preparing for the start of our landmark Phase I/II
safety and efficacy trial of our EPODURE Biopump for providing sustained treatment of anaemia in patients with chronic kidney disease. We
were pleased to receive approval to start this trial at the end of July, and have been fully engaged in the process of recruiting patients
since early August. We have now begun the final screening process of the first patients for this trial who were referred from several
cooperating nephrology centers in Israel and we continue on track towards publishing our initial data and findings before the end of the
year."
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For further information, contact:
Medgenics, Inc. Phone: +972 4 902 8900
Dr. Andrew L. Pearlman
Citigate Dewe Rogerson Phone: +44 207 638 9571
Dr. Mark Swallow
Jonathan Shillington (Grayling Global)
Blomfield Corporate Finance Limited Phone: +44 207 489 4500
James Pinner
Alan MacKenzie
SVS Securities plc (Broker) Phone: +44 207 638 5600
Peter Manfield
Ian Callaway
NOTES TO EDITORS:
Medgenics, Inc. is a clinical-stage biopharmaceutical company developing its unique tissue-based Biopump platform technology to provide
sustained-action protein therapy for the treatment of a range of chronic diseases.
Medgenics currently has two products in development based on this technology:
* EPODURE - producing erythropoietin (EPO) to treat anaemia
* INFRADURE - producing interferon-alpha (IFN-*) to treat hepatitis C
The Company has demonstrated proof of principle of the Biopump treatment procedure in a clinical trial using a short-acting version of
EPODURE in anaemic patients. A long-acting version of EPODURE, designed to produce and deliver a therapeutic dose of EPO steadily for six
months or more, entered a Phase I/II trial in mid-2008. The Company plans to follow with a clinical trial of INFRADURE in 2009.
Medgenics intends to develop its innovative products and bring them to market via multiple strategic partnerships with major
pharmaceutical and/or medical device companies, starting with EPODURE and INFRADURE.
Beyond these, Medgenics plans to develop and/or out-license a pipeline of future Biopump products targeting the large and rapidly
growing global protein therapy market, which is forecast to reach US $87 billion by 2010. Other potential areas include multiple sclerosis
(interferon-*), haemophilia (Factor XIII), paediatric growth hormone deficiency (human growth hormone) and diabetes (insulin).
Founded in 2000, Medgenics is a US-incorporated company with major operations in Misgav, Israel. Medgenics was admitted to AIM in
December 2007 (AIM: MEDG).
www.medgenics.com
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, which include all statements other than statements of historical fact, including
(without limitation) those regarding the Company's financial position, business strategy, plans and objectives of management for future
operations. These statements relate to future events, prospects, developments and strategies. Forward-looking statements are sometimes
identified by their use of the terms and phrases such as "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning,
"expect," "believe," "will," "will likely," "should," "could," "would," "may" or the negative of such terms and other comparable
terminology. All such forward-looking statements are based on current expectations and are subject to risks and uncertainties. Should any of
these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may differ materially
from those included within these forward-looking statements. Accordingly, no undue reliance should be placed on these forward-looking statements, which speak only as of the date made. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such
statements are based. As a result of these factors, the events described in the forward-looking statements contained in this release may not
occur.
Chairman's Review
Medgenics has made important progress during 2008, preparing for and successfully launching its landmark Phase I/II safety and efficacy
trial of EPODURE, its lead protein therapy to treat anemia. We were pleased to receive approval from Israel's Ministry of Health in late
July and have begun the trial at the Hadassah University Medical Center in Jerusalem, Israel, where it is being led by Principal
Investigator, Dr. Eithan Galun, a veteran of numerous clinical trials. Patient recruitment is ongoing and we remain on track to announce
initial data from the trial by the end of the year.
This study will involve up to 30 patients with anaemia as a consequence of chronic kidney disease. The primary aim is to assess the
safety and efficacy of EPODURE in three controlled dose ranges, in providing sustained, elevated levels of the deficient protein
erythropoietin (EPO) and, thereby, in elevating the red blood cell count and haemoglobin levels for up to 4-6 months in those patients
receiving appropriate doses. The first patients are scheduled to receive the lowest dose range of up to 20 Units of EPO per kilogram per
day. Once an interim review has confirmed initial safety in at least six patients, higher doses of 40 and 60 Units are planned
EPODURE is based on Medgenics' revolutionary proprietary platform technology for treating certain chronic diseases, whereby a biological
"Biopump" is created from patients' own tissue, enabling them to produce their own natural human protein therapy for what we hope will be up
to six months or more from a single procedure. We believe this technology has the potential to improve significantly the treatment of such
diseases by improving efficacy, reducing side-effects, eliminating frequent injections, improving patient compliance and quality of life and
reducing overall healthcare costs associated with existing treatments.
We have been able to advance our clinical development activities for EPODURE as a result of the �3.28 million ($6.72 million)
fundraising we concluded successfully in December 2007 in conjunction with the Company's admission to AIM.
During the first half of 2008, the Company has incurred a large number of one-off costs including the set-up of new facilities and the
design and manufacture of several key elements that were necessary to enable us to commence the Phase I/II clinical trial. We are therefore
confident that the funds raised at Admission, together with ongoing Israeli government funding from the Office of the Chief Scientist, as
well as the existing letter of credit, are sufficient to enable the Company to continue its current programme of ongoing development and
testing of our Biopump platform technology and associated products, focusing on EPODURE with the first set of data expected towards the end
of 2008.
Our strategy for commercialization is to develop alliances with major partners and to proceed with further clinical trials leading to
eventual FDA, EMEA and/or other regulatory approvals and eventual clinical adoption of EPODURE. Furthermore, in the longer-term, we also
plan to pursue similar steps towards commercialization of other potential applications of the Biopump platform technology. Pending the
success of the Phase I/II trial of EPODURE, our next product is likely to be INFRADURE, which we are developing to produce and deliver
interferon-alpha for the treatment of hepatitis C. In preclinical in vitro studies with this product we have already demonstrated that it
can produce therapeutically relevant amounts for more than six months.
Beyond that, we believe our Biopump technology has the potential to be developed to produce and deliver protein therapies to treat other
chronic diseases such as multiple sclerosis (interferon-beta), hemophilia (Factor VIII) and growth failure/muscular atrophy (human growth
hormone).
Key events during the period
The start of the EPODURE Phase I/II trial and initiation of patient recruitment parallels the Company's achievement of several important
milestones in recent months, which have been crucial to facilitating the commencement of the trial:
* We have significantly enhanced the clinical and technical teams that will be driving the trial forward. In particular, we are
pleased that Dr. Ehud Shoshani, former CEO of Quintiles, Israel, has joined the Company as Vice President of Clinical Affairs. Dr. Shoshani
has 13 years' experience in managing clinical trials. Not only will his experience be highly valuable to Medgenics in completing the
preparations for and the launch and the management of our imminent Phase I/II clinical trial for EPODURE, but also, in the development of
our future clinical programmes for this and our other pipeline products.
* We have successfully manufactured the key 'gutless' adenoviral vector in a GMP vector production facility which was a significant
achievement for the Company from a technological standpoint. We have tested this vector and are confident that it can be used to prepare
EPODURE Biopumps capable of producing sufficient daily amounts of EPO to meet the Company's requirements for use in the trial.
* The Company has completed the design, fabrication and evaluation of the key proprietary devices required for harvesting patient
micro-organs and implanting Biopumps, including EPODURE, back into patients.
* The Group's operations were relocated to a new facility in March 2008 in the Teradion Business Park in Misgav, thereby bringing
all operations under one roof and representing an important step for enhancing communication among the various departments.
Board Appointment
Medgenics appointed Lord Leonard Steinberg as Non-Executive Director in February 2008. Lord Steinberg is a Life Peer and a Conservative
Party member of the UK House of Lords and is the founder, former Chairman and Life President of Genting Stanley plc (formerly Stanley
Leisure plc). He is one of the UK's most successful and respected businessmen, with substantial experience of the London stock market. We
are pleased that he joined the Board of Directors and we look forward to the valuable contribution he will make to the Company.
Financial Review of the six-month period to 30 June 2008 (unaudited)
* Net research and development expenses were $1.63 million (2007: $0.44 million)
* Group general and administrative expenses were $1.39 million (2007: $0.64 million)
* Operating loss was $3.02 million (2007: $1.08 million)
* Loss on ordinary activities before taxation for the period was $2.97 million (2007: $1.04 million)
* Loss per share was $0.03 (2007: $0.02)
* Cash, cash equivalents and short-term investments at the end of the period was $1.74 million (at 31 December 2007: $4.68 million)
* Consolidated balance sheet has net assets of $0.61 million (at 31 December 2007: $3.33 million)
Outlook
The start of our Phase I/II clinical trial with EPODURE was a major milestone for the Company and is progressing. Positive results of
the trial will be crucial to confirm both the safety and efficacy of EPODURE in anaemia patients, and will more broadly provide
proof-of-concept of our innovative Biopump technology for the long-term treatment of chronic diseases. If the results are as we hope and
expect, they will support our ambitions of raising significant funds to advance EPODURE into further clinical studies, to enhance our
strategic partnering activities and to progress the development of additional Biopump-based therapeutic procedures in other disease areas.
All the evidence we have seen on the effectiveness of the Biopump technology in various preclinical studies and our previous clinical
study give us confidence that the Phase I/II trial will be successful. We are looking forward to reporting the first preliminary data over
the coming months.
Eugene A. Bauer, MD
Chairman of the Board of Directors
24 September 2008
CONSOLIDATED BALANCE SHEETS
In US Dollars
June 30, December 31,
2008 2007
Unaudited Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,640,909 $4,683,914
Short term investments 100,968 -
Other accounts receivable and prepaid 434,545 394,652
expenses
Total current assets 2,176,422 5,078,566
SEVERANCE PAY FUND 134,503 92,235
PROPERTY AND EQUIPMENT, NET 443,692 134,240
Total assets $2,754,617 $5,305,041
CONSOLIDATED BALANCE SHEETS
In US Dollars (except for share data)
June 30, December 31,
2008 2007
Unaudited Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short - term bank credit $ - $ 9,714
Trade payables 605,035 459,117
Other accounts payable and accrued expenses 716,957 845,653
Total current liabilities 1,321,992 1,314,484
LONG-TERM LIABILITIES:
Accrued severance pay 825,373 662,791
Total liabilities 2,147,365 1,977,275
SHAREHOLDERS' EQUITY:
New Common shares - $0.0001 par value; 10,669 10,409
500,000,000 shares authorized at June 30, 2008
and December 31, 2007;
106,698,076 and 104,093,417 shares issued and
outstanding at June 30, 2008 and December 31,
2007, respectively
Additional paid-in capital 28,885,176 28,634,642
Deficit accumulated during the development (28,288,593) (25,317,285)
stage
Total shareholders' equity 607,252 3,327,766
Total liabilities and shareholders' equity $2,754,617 $5,305,041
CONSOLIDATED STATEMENTS OF OPERATIONS
In US Dollars (except for share data)
Six months ended June 30, Year ended From date
December of
31, inception (January
27, 2000)
through
June 30,
2008 2007 2007 2008
Unaudited Audited Unaudited
Research and development $1,632,531 $443,717 $1,986,710 $ 15,021,095
expenses, net
General and administrative 1,388,281 637,660 1,439,054 12,778,140
expenses
Loss from disposal of property
and equipment - - - 325,842
Operating loss 3,020,812 1,081,377 3,425,764 28,125,077
Financial (income) expenses, (51,343) (42,093) 414,972 532,195
net
Loss before taxes on income 2,969,469 1,039,284 3,840,736 28,657,272
Taxes on income 1,839 - 10,603 68,518
Net loss for the period $2,971,308 $1,039,284 $3,851,339 $ 28,725,790
Basic and diluted net loss per $ 0.03 $ 0.02 $ 0.06
share
Weighted average number of 106,204,484 58,695,498 64,968,152
shares used
in per share calculation
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
Common shares Preferred sharesSeries A
Preferred sharesSeries B Deferred DeficitAccumulatedDu
TotalShareholders'Equity(Deficiency)
AdditionalPaid- StockCompensation ring
inCapital theDevelopmentStage
Number of Shares Amount Numberof Shares Amount Numberof Shares
Amount
Balance as of January 27,2000 - $ - - $ - - $
- $ - $ - $ - $ -
(inception)
Issuance of common shares in 2,000,000 2 - - -
- - - - 2
January 2000 at par value
Issuance of common shares 69,677 - - - -
- - - - -
inMarch 2000 at par value
Issuance of common shares 437,936 - - - -
- 499,997 - - 499,997
inAugust 2000 at $1.14
pershare, net
Issuance of common shares 940,950 1 - - -
- - - - 1
inrespect of license
agreementin August 2000 at par
value
Net loss - - - - -
- - - (681,216) (681,216)
Balance as of December 31,2000 3,448,563 3 - - -
- 499,997 - (681,216) (181,216)
Stock split effected as - 342 - - -
- (342) - - -
stockdividend
Issuance of Preferred shares - - 138,502 14 -
- 195,122 - - 195,136
inJanuary 2001 at $1.41
pershare, net
Issuance of Preferred shares - - 4,085,837 408 -
- 6,805,968 - - 6,806,376
inMarch and June 2001 at$1.67
per share, net
Deferred stock compensation - - - - -
- 248,165 (248,165) - -
Amortization of deferredstock - - - - -
- - 40,880 - 40,880
compensation
Stock based compensation - - - - -
- 510,869 - - 510,869
expense related to options to
consultants
Net loss - - - - -
- - - (3,243,701) (3,243,701)
Balance as of December 31, 3,448,563 $345 4,224,339 $422 - $
- $8,259,779 $(207,285) $(3,924,917) $4,128,344
2001
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
Deficit
Accumulated Total
During the Shareholders'
Preferred shares Preferred shares Additional
Development Equity
Series A Series B Paid-in
Stage (Deficiency)
Common shares Capital Deferred Stock
Compensation
Number of Shares Number Number
Amount of Shares Amount of Shares Amount
Balance as of December 31, 3,448,563 $ 345 4,224,339 $ 422 - $ - $ 8,259,779 $ (207,285)
$ (3,924,917) $ 4,128,344
2001
Issuance of Preferred shares
In October 2002 at
$1.97 per share, net
- - - - 2,676,674 268 5,264,352 -
- 5,264,620
Deferred stock compensation - - - - - - 63,855 (63,855)
- -
Amortization of deferred
stock compensation - - - - - - - 66,937
- 66,937
Stock based compensation
expenses related to options
to consultants
- - - - - - 371,560 -
- 371,560
Net loss - - - - - - - -
(5,049,391) (5,049,391)
Balance as of December 31, 3,448,563 $ 345 4,224,339 $ 422 2,676,674 $ 268 $13,959,546 $ (204,203)
$(8,974,308) $ 4,782,070
2002
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
Deficit
Accumulated Total
During the Shareholders'
Preferred shares Preferred shares Additional
Development Equity
Series A Series B Paid-in
Stage (Deficiency)
Common shares Capital
Deferred Stock
Compensation
Number of Shares Number Number
Amount of Shares Amount of Shares Amount
Balance as of December 31, 3,448,563 $ 345 4,224,339 $ 422 2,676,674 $ 268 $13,959,546 $
(204,203) $(8,974,308) $4,782,070
2002
Exercise of stock options 19,443 2 - - - - 193
- - 195
Issuance of Preferred shares
in April 2003 at $ 2.00 per
share, net
- - - - 216,507 22 432,994
- - 433,016
Issuance of Preferred shares
in May 2003 at $ 2.00 per
share, net
- - - - 850,490 85 1,603,783
- - 1,603,868
Deferred stock compensation - - - - - - 440,811
(440,811) - -
Amortization of deferred
stock compensation - - - - - - -
105,213 - 105,213
Stock based compensation
expenses related to
options to consultants - - - - - - 475,469
- - 475,469
Net loss - - - - - - -
- (5,038,272) (5,038,272)
Balance as of December 31, 3,468,006 $ 347 4,224,339 $ 422 3,743,671 $ 375 $16,912,796 $
(539,801) (14,012,580) $ 2,361,559
2003
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
Deficit
Accumulated Total
During the Shareholders'
Preferred shares Preferred shares Additional
Development Equity
Series A Series B Paid-in
Stage (Deficiency)
Common shares Capital Deferred Stock
Compensation
Number Number Number
of Shares Amount of Shares Amount of Shares Amount
Balance as of December 31, 3,468,006 $347 4,224,339 $ 422 3,743,671 $ 375 $ 16,912,796 $ (539,801)
$(14,012,580) $ 2,361,559
2003
Exercise of stock options 12,750 1 - - - - 126 -
- 127
Stock based compensation 33,333 3 - - - - 9,997 -
- 10,000
related to shares to
consultants
Amortization of deferred - - - - - - - 539,801
- 539,801
stock compensation
Stock based compensation
expense related to options - - - - - - 346,762 -
- 346,762
to consultants
Net loss - - - - - - - -
(4,515,829) (4,515,829)
Balance as of December 31, 3,514,089 $351 4,224,339 $ 422 3,743,671 $ 375 $17,269,681 $ -
$(18,528,409) $(1,257,580)
2004
Net loss - - - - - - - -
(776,129) (776,129)
Balance as of December 31, 3,514,089 $351 4,224,339 $ 422 3,743,671 $ 375 $17,269,681 $ -
$(19,304,538) $(2,033,709)
2005
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
New Common shares Common shares Preferred shares Preferred shares
Additional Deficit Total
Series A Series B
Paid-in Accumulated Shareholders'
Capital During the Equity
Development (Deficiency)
Stage
Number of Shares Number of Shares Number Number
Amount Amount of Shares Amount of Shares Amount
Balance as of December 31, - $ - 3,514,089 $ 351 4,224,339 $ 422 3,743,671 $ 375
$17,269,681 $(19,304,538) $ (2,033,709)
2005
Conversion of common shares, 9,885,842 46 (3,514,089) (351) (4,224,339) (422) (3,743,671) (375)
(436,095) 437,197 -
Series A and Series B
Preferred shares into New
Common shares
Conversion of convertible Note 11,982,914 56 - - - - - -
1,795,016 - 1,795,072
into New Common shares
Issuance of New Common shares 2,633,228 12 - - - - - -
96,004 - 96,016
in settlement of due debt in
March 2006
Issuance of New Common shares 14,110,490 66 - - - - - -
828,197 - 828,263
and warrants in March 2006 at
$0.07 per share and warrant,
net
Issuance of New Common shares 513,396 2 - - - - - -
30,133 - 30,135
and warrants in April 2006 at
$0.07 per share and warrant,
net
Issuance of New Common shares 1,593,666 8 - - - - - -
93,538 - 93,546
and warrants in June 2006 at
$0.07 per share and warrant,
net
Issuance of New Common shares 5,391,725 25 - - - - - -
521,752 - 521,777
and warrants in November 2006
at $0.12 per share and
warrant, net
Issuance of New Common shares 11,294,065 53 - - - - - -
1,092,916 - 1,092,969
and warrants in December 2006
at $0.12 per share and
warrant, net
Stock based compensation - - - - - - - -
1,161,287 - 1,161,287
expense related to options and
warrants granted to
consultants and employees
Net loss - - - - - - - -
- (2,598,605) (2,598,605)
Balance as of December 31, 57,405,326 $ 268 - $ - - $ - - $ -
$22,452,429 $(21,465,946) $ 986,751
2006
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
New Common shares Additional Deficit Total
Paid-in Accumulated Shareholders'
Capital During the Equity
Development
Stage
Number of Shares
Amount
Balance as of December 31, 57,405,326 $ 268 $22,452,429 $(21,465,946) $ 986,751
2006
Issuance of New Common shares 427,402 2 33,318 - 33,320
and warrants in January 2007
at $0.12 per share and
warrant, net
Issuance of New Common shares 5,347,851 25 583,636 - 583,661
and warrants in May 2007 at
$0.16 per share and warrant,
net
Issuance of New Common shares 771,612 3 84,211 84,214
in July 2007 at $0.13 per
share, net
Exercise of warrants in July 451,939 2 - - 2
2007
Issuance of New Common shares 122,232 1 (1) - -
to consultant in August 2007,
net
Issuance of New Common shares 1,527,973 7 166,753 - 166,760
and warrants in August 2007 at
$0.16 per share and warrant,
net
Stock split effected as stock - 6,297 (6,297) - -
dividend in December 2007
Conversion of convertible Note 6,417,447 642 699,751 - 700,393
into New Common shares and
issuance of warrants in
December 2007, at $0.16 per
share and warrant, net
Issuance of New Common shares 28,537,213 2,853 3,778,659 3,781,512
and warrants in December 2007
at $0.19 - $0.21 per share and
warrant, net
Issuance of New Common shares 3,008,033 301 (301) - -
and warrants to consultants in
December 2007, net
Issuance of New Common shares 76,389 8 15,740 - 15,748
for arrangement of security
for Letter of Credit in
December 2007, net
Issuance cost due to - - (31,449) - (31,449)
obligation to issue 142,609
New Common shares for
consultant, net
Stock based compensation - - 346,802 - 346,802
expense related to options
granted to consultants and
employees
Beneficial conversion feature - - 511,391 - 511,391
embedded in Convertible Note.
Net loss - - - (3,851,339) (3,851,339)
Balance as of December 31, 104,093,417 $ 10,409 $ 28,634,642 $(25,317,285) $ 3,327,766
2007
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In US Dollars (except for share data)
New Common shares Additional Deficit Total
Paid-in Accumulated Shareholders'
Capital During the Equity
Development
Stage
Number of Shares
Amount
Balance as of December 31, 104,093,417 $ 10,409 $ 28,634,642 $(25,317,285) $ 3,327,766
2007
Exercise of warrants in 2,462,050 246 (246) - -
January 2007
Issuance of New Common shares 142,609 14 31,435 - 31,449
to consultant in April 2008,
net
Stock based compensation - - 219,345 - 219,345
expense related to options
granted to consultants and
employees
Net loss - - - (2,971,308) (2,971,308)
Balance as of June 30, 2008 106,698,076 $ 10,669 $ 28,885,176 $(28,288,593) $ 607,252
CONSOLIDATED STATEMENTS OF CASH FLOWS
In US Dollars
Six months ended Year ended From date
June 30, December 31, of
inception (January
27, 2000)
through
June 30,
2008 2007 2007 2008
Unaudited Audited Unaudited
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (2,971,308) $(1,039,284) $ (3,851,339) $ (28,725,790)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 36,912 3,992 14,683 684,379
Exchange differences on long - - - 2,950
term loan
Loss from disposal of property - - - 325,842
and equipment
Interest on Convertible Note - - - 247,847
Issuance of shares in
consideration for providing - - 15,748 15,748
security for letter of credit
Stock based compensation 219,345 104,816 346,802 4,194,925
related to options and
warrants granted to
consultants and employees
Amortization of beneficial
conversion feature of - - 511,391 511,391
convertible note
Purchase of short-term (47,278) - - (47,278)
investment, net
Gain from short term (53,690) - - - (53,690)
investment
Accrued severance pay, net 120,314 (1,455) 270,560 690,870
Increase in trade payables 163,161 85,268 308,779 605,035
Increase in accounts (39,893) (410,768) (200,680) (434,545)
receivable and pre-paid
expenses
Increase (decrease) in other 212,494 (140,990) 232,812 812,973
accounts payable and accrued
expenses
Net cash used in operating (2,359,943) (1,398,421) (2,351,244) (21,169,343)
activities
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from disposal of - - - 172,829
property and equipment
Purchase of property and (363,607) (25,395) (72,991) (1,626,742)
equipment
Net cash used in investing (363,607) (25,395) (72,991) (1,453,913)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of - 905,262 4,458,605 21,979,631
shares, net
Repayment of issuance expenses (309,741) - - (309,741)
Repayment of long-term loan - - - (73,080)
Proceeds from long term loan - - - 70,130
Proceeds from cash for shares - 25,000 - -
to be issued
Proceeds from Convertible Note - - 1,050,000 2,597,225
Decrease in short-term bank (9,714) (14,387) (7,930) -
credit
Net cash provided by (used in) (319,455) 915,875 5,500,675 24,264,165
financing activities
Increase (decrease) in cash (3,043,005) (507,941) 3,076,440 1,640,909
and cash equivalents
Balance of cash and cash 4,683,914 1,607,474 1,607,474 -
equivalents at the beginning
of the period
Balance of cash and cash $1,640,909 $ 1,099,533 $4,683,914 1,640,909
equivalents at the end of the
period
CONSOLIDATED STATEMENTS OF CASH FLOWS
In US Dollars
Six months ended Year ended From date
June 30, December 31, of
inception (January
27, 2000)
through
June 30,
2008 2007 2007 2008
Unaudited Audited Unaudited
Supplemental disclosure of
cash flow information:
Cash paid during the period
for:
Interest $ (7,145) $ - $ (15,583) $ (45,571)
Taxes $ (1,839) $ - $ (2,101) $ (57,982)
Supplemental disclosure of non
cash flow information:
Accrued issuance expenses $ - $ (75,515) $ (309,741) $ (460,739)
Issuance of New Common shares $ - $ - $ 1,050,000 $ 2,845,072
upon conversion of a
Convertible Note
Issuance of shares in $ - $ - $ - $ 96,016
settlement of debt
Issuance cost due to $ - $ - $ (31,449) $ (31,449)
obligation to issue New Common
shares to consultant
Issuance of New Common shares $ 31,449 $ - $ - $ 31,449
to consultant
Purchase of property and $ - $ - $ 17,243 $ 17,243
equipment
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In US Dollars
NOTE 1:- GENERAL
a. Medgenics, Inc. (*the Company*) was incorporated in January 2000 in Delaware, and is a holding company with one wholly-owned
subsidiary Medgenics Medical Israel Ltd. (formerly Biogenics Ltd.) (*The subsidiary*) which was incorporated in Israel in March 2000. The
Company and its subsidiary are engaged in the research and development of products in the field of biotechnology and associated medical
equipment and are thus considered development stage companies as defined in Statement of Financial Accounting Standards No. 7 "Accounting
and Reporting by Development Stage Enterprises ("SFAS No.7").
On December 4, 2007 the Company's New Common shares wereadmitted for trading on the London Stock Exchange*s Alternative Investment Market
(AIM). Concurrently the Company placed 9,640,000 New Common shares at a per share price of GBP 0.10 ($0.21), issued 18,897,213 New Common
shares and 3,084,422 New Common shares to investors and consultants, respectively, and issued additional 6,417,447 New Common shares
resulting from the conversion of a Convertible Note, for a total gross consideration of GBP 3,276,985 ($6,719,075).
b. The Company and its subsidiary are in the development stage. The subsidiary ceased operating in 2004 and in 2006 renewed its
research and development activities after having raised additional funds. As reflected in the accompanying financial statements, the Company
and its subsidiary incurred a loss for the six months ended June 30, 2008 amounting to $ 2,971,308 and have an accumulated deficit since
inception in the amount of $ 28,288,593. The Company and its subsidiary have not yet generated revenues and have negative cash flows from
operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management*s plans include
seeking additional investments to continue the operations of the Company and its subsidiary. However, there is no assurance that the Company
will be successful in its efforts to raise the necessary capital to continue its planned research and development activities. The
consolidated financial statements do not include any adjustments with respect to the carrying amounts of assets and liabilities and their classification that might result from the outcome of this
uncertainty.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the financial statements as of June 30, 2008 are consistant with those applied in
the financial statements as of December 31, 2007.
Impact of recently issued Accounting Standards
Emerging Issues Task Force document No. 07-05:
In April 2008, the FASB issued EITF 07-05, *Determining whether an Instrument (or Embedded Feature) is indexed to an Entity*s Own Stock*,
(EITF 07-05). EITF 07-05 provides guidance on determining what types of instruments or embedded features in an instrument held by a
reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in
paragraph 11 (a) of FAS 133. EITF 07-05 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and
early application is not permitted. Management is currently evaluating the effect of the adoption of EITF 07-05 on its financial statements.
NOTE 3:- SHAREHOLDERS* EQUITY
Issuance of shares
a. In January 2008, a total of 3,560,314 warrants were exercised in a cashless conversion to 2,414,326 New Common shares. In addition
47,724 warrants were exercised and resulted in the issue of 47,724 New Common shares. The cash consideration received upon exercise of the
warrants was an immaterial amount.
b. In April 2008, the Company issued a total of 142,609 Common shares to an advisor in consideration for assistance with the Company*s
fund raising endeavours in relation to the placing of the company shares on December 4, 2007.
NOTE 4:- UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for
the six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31,
2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PUUBCBUPRGWW
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