TIDMMEDG
RNS Number : 9139Z
Medgenics Inc
30 September 2009
Medgenics, Inc.
('Medgenics' or the 'Company')
Misgav, Israel and London, UK - 30 September 2009 - Medgenics (AIM: MEDG and
MEDU) is pleased to announce its unaudited half-yearly results for the six
months ended 30 June 2009.
Highlights for the period
* Phase I/II safety and efficacy clinical trial with EPODURE demonstrating
positive results.
* A Phase I/II clinical trial in the low dosage cohort has documented safety and
efficacy of EPODURE as a sustained anaemia therapy lasting up to 11 months from
a single treatment in kidney disease patients.
* Unprecedented milestones reached by Phase I/II patient: 12 months without an
erythropoietin (EPO) injection, 11 months of anaemia relief from a single
treatment of Biopump.
* Advanced discussions underway with several major Pharmaceutical companies
regarding possible investments in both new and existing Biopump protein
applications
Financial Summary (unaudited)
* Award of $1.3 million through Israeli government grant.
* Completion of fund raising totalling $570,000 in convertible debentures and
approximately $408,000 in warrant exercise programme.
* Net loss after tax for the six month period of $2.23 million (2008: $2.97
million) primarily as a result of furthering the Phase I/II clinical trial of
EPODURE.
* R&D costs for the six month period of $0.99 million (2008: $1.63 million) and
general and administrative costs of $1.2 million (2008: $1.39 million).
* Cash, cash equivalents and short-term investments at 30 June 2009 of $0.05
million (at 30 June 2008: $1.74 million).
* Medgenics continues to seek further funding to renew patient recruitment.
Dr. Andrew Pearlman, Chief Executive Officer of Medgenics, said:
"During the first half of 2009 Medgenics has drawn growing encouragement from
the continuing positive results of the Biopump anaemia study. EPODURE has
demonstrated months of continuous treatment in nearly all the patients, with one
who will shortly be celebrating an unprecedented full year of sustained protein
therapy from a single administration. Besides demonstrating the potential
of EPODURE as an anaemia treatment, we believe these results also provide
powerful proof of the broader concept of Biopump as a method of sustained
protein therapy. We are pleased by the significant progress with potential
partners and institutional investors which gives us great hope that this will
yield concrete results in the coming months. The raising of nearly $1 million of
additional operating funds through the issuance of convertible debentures and
warrant exercises was also an important development. Meanwhile, the Company
continues its focused efforts to raise additional funds in the coming months to
enable it to support its existing operations, expand the clinical trial and its
other operations and to realize the potential of the great opportunities it now
has."
####
For further information, contact:
+------------------------------------------------+-------------------------------+
| Medgenics, Inc. | Phone: +972 4 902 8900 |
| Dr. Andrew L. Pearlman | |
| | |
+------------------------------------------------+-------------------------------+
| Grayling (Financial PR) | Phone: +44 7900 053 536 |
| Jonathan Shillington | |
| Alistair Scott | |
| | |
+------------------------------------------------+-------------------------------+
| Blomfield Corporate Finance Limited (Nominated | Phone: +44 207 489 4500 |
| Adviser) | |
| James Pinner | |
| Alan MacKenzie | |
| | |
+------------------------------------------------+-------------------------------+
| SVS Securities plc (Broker) | Phone: +44 207 638 5600 |
| Ian Callaway | |
| | |
+------------------------------------------------+-------------------------------+
Chairman's Review
The Board of Medgenics presents the unaudited financial results of the Company
and its subsidiary (the "Group") for the six months ended 30 June 2009.
The first half of 2009 has been important for Medgenics in that it provided key
evidence over a longer term of the safety and efficacy of EPODURE as a
sustained-action protein therapy to treat anaemia. This was shown particularly
in the case of the results of Trial Patient 2, who has experienced an
unprecedented 11 months of sustained protein treatment after a single
administration of EPODURE in September 2009. The promising results of this trial
were reflected in the confidence of investors in the fundraising, which secured
$978,000 of additional funding, much of which was raised from my fellow
directors and existing investors, including those with expertise in the clinical
field of renal disease which EPODURE aims to treat. Additionally, in Q2/09 the
Group was awarded a government grant of $1.3 million from the Office of the
Chief Scientist (OCS) at the Ministry of Industry, Trade and Labor of Israel.
These funds are awarded to industry in Israel to advance technological
innovations and 2009 is the fourth consecutive year that Medgenics has received
this respected grant. As most recently reported in August, the Company has
progressed in discussions with several large pharmaceutical and medical device
companies with whom the Company hopes to form strategic alliances for Biopumps
producing a range of proteins for various clinical applications.
Clinical Development Review
During the first six months of 2009, Medgenics continued to gather and present
results for its Phase I/II trial to determine the safety and efficacy of
EPODURE, its lead protein therapy to treat anaemia. To date, seven clinical
patients have been enrolled in the study. The first six patients received the
lowest dose of 20 Units of EPO per kilogram per day through the Biopump, while
the seventh was the first to receive the medium dose of 40 Units of EPO per
kilogram per day through the Biopump. For the majority of the test subjects, the
Biopump platform technology has proven effective in maintaining hemoglobin
levels within the target range for many months, with one patient exceeding 11
months on a single administration of the low-dose treatment
The primary aim of the study is to assess the safety and efficacy of EPODURE in
three controlled dose ranges, in providing sustained, elevated levels of the
deficient protein EPO and, thereby, in elevating the red blood cell count and
hemoglobin levels for six months or longer in those patients receiving
appropriate doses. Throughout the trial to date, no adverse effects have been
reported or observed other than minor localised bruising typically associated
with skin biopsies and implants. The treatment has been responded to positively
by the test patients, two of which have requested to re-enrol at higher dosages.
Commercialisation Strategy
As I previously reported in May, commercialisation of the Company's proprietary
platform technology through development of alliances with major partners, and
further clinical trials to secure FDA, EMEA and/or other regulatory approvals
and eventual clinical adoption of EPODURE, remain key strategic priorities for
the Company. With initial positive results from the study, the Company has
generated renewed interest from major potential strategic partners interested in
multiple therapeutic applications of the technology. Particular interest has
been noted with regards to applying the Biopump technology to other treatments
including haemophilia and obesity. Further updates on these discussions will be
made in due course.
Funding
Since admission to AIM, and in tandem with the implementation of the Company's
strategy for its Phase I/II clinical trial of EPODURE and seeking out strategic
partnering opportunities, the directors have focused on raising further capital
for the Company. This capital is required to ensure the Company's ability to:
continue to finance its operations; pursue strategic partnering alliances with
major corporations; continue its device development programme; advance the
development of additional products towards clinical trial and commercialization;
and, most importantly, conclude the Phase I/II clinical trial of EPODURE.
Financial Review
The Company has incurred significant expenditure in establishing and carrying
out its ongoing clinical trial. As a result, the Company has generated a loss of
$2.23 million in the first half of the year in further development of the
Biopump platform technology. Since our IPO in December 2007, in which we raised
$6.72 million, we have secured $570,000 through our recent Private Offering and
$406,000 from the warrant exercise programme in 2009; which fundraisings were
notably supported by significant investments by Lord Leonard Steinberg and Mr.
Joel Kanter and a new investment by Stephen McMurray all Directors of the
Company, as well as by shareholders who are physicians with expertise in the
clinical field addressed by Medgenics' lead product, EPODURE, and an additional
$95,000 from new investors. This was further bolstered by the yearly grants
awarded by the OCS, which have been awarded every year for the past four years.
However, the Board remains aware that there is still significant further funding
required in order to complete the trial and the Board is considering ways to
raise funds through further equity fund raising, new grants and strategic
partnerships. We will update Shareholders as soon as we have more concrete news
to report on these fronts.
Outlook
With the results of the Phase I/II EPODURE safety and efficacy trial to date
which have surpassed expectations, Medgenics has been able to demonstrate
soundly the potential of the Group's platform technology of the Biopump, and the
specific application of EPODURE for the treatment of renal anaemia. Our
discussions with a number of major pharmaceutical companies are progressing well
as the results of the trial further strengthen the viability of the Biopump as a
long lasting, safe alternative to the treatment of chronic protein deficiencies.
Eugene A. Bauer, MD
Chairman of the Board of Directors
30 September 2009
+-----------------------------------------------------------------------------------+
| CONSOLIDATED BALANCE SHEETS |
+-----------------------------------------------------------------------------------+
| In US Dollars |
+-----------------------------------------------------------------------------------+
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | June 30, | | December 31, |
+--------------------------------------------------------------------------+-------------------+---+-----------------+
| | | | 2009 | | 2008 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | Unaudited | | |
+--------------------------------------------------------------------------+-------------------+---+-----------------+
| | |
+---------------------------------------------------------+----------------------------------------------------------+
| ASSETS | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| CURRENT ASSETS: | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Cash and cash equivalents | | | $ | | $ 1,043,338 |
| | | | 53,479 | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Accounts receivable and prepaid expenses | | | 116,325 | | 121,794 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Total current assets | | | 169,804 | | 1,165,132 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| LONG TERM ASSETS: | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Restricted lease deposit | | | 22,432 | | 22,607 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Prepaid lease payments | | | 22,443 | | 22,443 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Severance pay fund | | | 203,010 | | 171,048 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Total long term assets | | | 247,885 | | 216,098 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| PROPERTY AND EQUIPMENT, NET | | | 361,365 | | 400,214 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| | | | | | |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
| Total assets | | | $ 779,054 | | $ 1,781,444 |
+---------------------------------------------------------+-------+--------+-------------------+---+-----------------+
+------------------------------------------------------------------------------------+
| CONSOLIDATED BALANCE SHEETS |
+------------------------------------------------------------------------------------+
| In US Dollars |
+------------------------------------------------------------------------------------+
+-------------------------------------------------------+----+--------------+--+---------------+
| | | June 30, | | December |
| | | | | 31, |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | 2009 | | 2008 |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | Unaudited | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| CURRENT LIABILITIES: | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Short - term bank credit | | $ 12,281 | | $ 52,886 |
+-------------------------------------------------------+----+--------------+--+---------------+
| Trade payables | | 977,617 | | 889,002 |
+-------------------------------------------------------+----+--------------+--+---------------+
| Other accounts payable and accrued expenses | | 1,397,748 | | 1,068,518 |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Total current liabilities | | 2,387,646 | | 2,010,406 |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| LONG-TERM LIABILITIES: | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Accrued severance pay | | 904,913 | | 818,639 |
+-------------------------------------------------------+----+--------------+--+---------------+
| Convertible debentures | | 273,130 | | - |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Total long term liabilities | | 1,178,043 | | 818,639 |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Total liabilities | | 3,565,689 | | 2,829,045 |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| SHAREHOLDERS' DEFICIENCY: | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Common shares - $0.0001 par value; 500,000,000 shares | | 11,775 | | 10,672 |
| authorized at June 30, 2009 and December 31, 2008; | | | | |
| 117,754,028 and 106,728,195 shares issued and | | | | |
| outstanding at June 30, 2009 and December 31, 2008, | | | | |
| respectively | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Additional paid-in capital | | 29,606,783 | | 28,968,015 |
+-------------------------------------------------------+----+--------------+--+---------------+
| Receipts on account of shares | | - | | 150,000 |
+-------------------------------------------------------+----+--------------+--+---------------+
| Deficit accumulated during the development stage | | (32,405,193) | | (30,176,288) |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Total shareholders' deficiency | | (2,786,635) | | (1,047,601) |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| | | | | |
+-------------------------------------------------------+----+--------------+--+---------------+
| Total liabilities and shareholders' deficiency | | $ 779,054 | | $ |
| | | | | 1,781,444 |
+-------------------------------------------------------+----+--------------+--+---------------+
+---------------------------------------------------------------------------------------+
| CONSOLIDATED STATEMENTS OF OPERATIONS |
+---------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+---------------------------------------------------------------------------------------+
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | Six months ended June 30, | | Year | | From |
| | | | ended | |date of inception |
| | | | December | |(January27, 2000) |
| | | | 31, | | through |
| | | | | | June 30 |
+---------------------------------+----------------------------+-+-------------+-+--------------------+
| | 2009 | | 2008 | | 2008 | | 2009 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | Unaudited | | | | Unaudited |
+---------------------------------+----------------------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Research and development | $ | | $ | | $ | | $ |
| expenses | 1,282,669 | | 1,632,531 | | 3,435,538 | | 20,010,032 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Less - Participation by the | (292,893) | | - | |(1,336,446) | | (3,532,600) |
| Office of the Chief Scientist | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Research and development | 989,776 | | 1,632,531 | | 2,099,092 | | 16,477,432 |
| expenses, net | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| General and administrative | 1,198,690 | | 1,388,281 | | 2,761,008 | | 15,349,557 |
| expenses | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Loss from disposal of property | - | | - | | - | | 325,842 |
| and equipment | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Operating loss | 2,188,466 | | 3,020,812 | | 4,860,100 | | 32,152,831 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Financial (income) expenses, | 37,247 | | (51,343) | | (11,457) | | 609,328 |
| net | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Loss before taxes on income | 2,225,713 | | 2,969,469 | | 4,848,643 | | 32,762,159 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Taxes on income | - | | 1,839 | | 3,615 | | 70,294 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Net loss | 2,225,713 | | 2,971,308 | | 4,852,258 | | 32,832,453 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Dividend in respect of | 3,192 | | - | | 6,745 | | 9,937 |
| reduction in exercise price of | | | | | | | |
| certain warrants | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| | | | | | | | |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
| Net loss attributable to common | $ | | $ | | $ | | $ |
| shareholders | 2,228,905 | | 2,971,308 | | 4,859,003 | | 32,842,390 |
+---------------------------------+------------+--+------------+-+-------------+-+--------------------+
+---------------------------------+-------------+--+-------------+-+-----------------+-+------------+
| | | | | | | | |
+---------------------------------+-------------+--+-------------+-+-----------------+-+------------+
| Basic and diluted net loss per | $ 0.02 | | $ 0.03 | | $ 0.05 | | |
| share | | | | | | | |
+---------------------------------+-------------+--+-------------+-+-----------------+-+------------+
| | | | | | | | |
+---------------------------------+-------------+--+-------------+-+-----------------+-+------------+
| Weighted average number of | 111,249,104 | | 106,204,484 | | 106,447,604 | | |
| shares used | | | | | | | |
| in per share calculation | | | | | | | |
+---------------------------------+-------------+--+-------------+-+-----------------+-+------------+
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+---------------+---------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------+
| | Old Common shares | | Preferred shares | | Preferred shares | |Additional | | Deferred | | Deficit | | Total |
| | | | Series A | | Series B | | Paid-in | | Stock | | Accumulated | | Shareholders' |
| | | | | | | | Capital | | Compensation | | During the | | Equity |
| | | | | | | | | | | | Development | | (Deficiency) |
| | | | | | | | | | | | Stage | | |
+-------------------+----------------------+-+------------------------------+-+----------------------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| | Number | |Amount | | Number | | Amount | |Number | | Amount | | | | | | | | |
| | of | | | | of | | | | of | | | | | | | | | | |
| | Shares | | | | Shares | | | | Shares | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Balance as of | - | | $ | | - | | $ | | - | | $ - | | $ | | $ - | | $ - | | $ - |
| January 27, | | | - | | | | - | | | | | | - | | | | | | |
| 2000 | | | | | | | | | | | | | | | | | | | |
| (inception) | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Issuance of Old | | | | | | | | | | | | | | | | | | | |
| Common shares | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| in January 2000 | 2,000,000 | | 2 | | - | | - | | - | | - | | - | | - | | - | | 2 |
| at par value | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Issuance of Old | 69,677 | | - | | - | | - | | - | | - | | - | | - | | - | | - |
| Common shares | | | | | | | | | | | | | | | | | | | |
| in March 2000 | | | | | | | | | | | | | | | | | | | |
| at par value | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Issuance of Old | 437,936 | | - | | - | | - | | - | | - | | 499,997 | | - | | - | | 499,997 |
| Common shares | | | | | | | | | | | | | | | | | | | |
| in August 2000 | | | | | | | | | | | | | | | | | | | |
| at $1.14 per | | | | | | | | | | | | | | | | | | | |
| share, net | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Issuance of Old | 940,950 | | 1 | | - | | - | | - | | - | | - | | - | | - | | 1 |
| Common shares | | | | | | | | | | | | | | | | | | | |
| in respect of | | | | | | | | | | | | | | | | | | | |
| license | | | | | | | | | | | | | | | | | | | |
| agreement in | | | | | | | | | | | | | | | | | | | |
| August 2000 at | | | | | | | | | | | | | | | | | | | |
| par value | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | (681,216) | | (681,216) |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Balance as of | 3,448,563 | | 3 | | - | | - | | - | | - | | 499,997 | | - | | (681,216) | | (181,216) |
| December 31, | | | | | | | | | | | | | | | | | | | |
| 2000 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Stock split | - | | 342 | | - | | - | | - | | - | | (342) | | - | | - | | - |
| effected as | | | | | | | | | | | | | | | | | | | |
| stock Dividend | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Issuance of | - | | - | | 138,502 | | 14 | | - | | - | | 195,122 | | - | | - | | 195,136 |
| Preferred | | | | | | | | | | | | | | | | | | | |
| shares in | | | | | | | | | | | | | | | | | | | |
| January 2001 | | | | | | | | | | | | | | | | | | | |
| at $1.41 per | | | | | | | | | | | | | | | | | | | |
| share, net | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Issuance of | - | | - | | 4,085,837 | | 408 | | - | | - | | 6,805,968 | | - | | - | | 6,806,376 |
| Preferred | | | | | | | | | | | | | | | | | | | |
| shares in | | | | | | | | | | | | | | | | | | | |
| March and | | | | | | | | | | | | | | | | | | | |
| June 2001 at | | | | | | | | | | | | | | | | | | | |
| $1.67 per | | | | | | | | | | | | | | | | | | | |
| share, net | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Deferred stock | - | | - | | - | | - | | - | | - | | 248,165 | | (248,165) | | - | | - |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Amortization of | - | | - | | - | | - | | - | | - | | - | | 40,880 | | - | | 40,880 |
| deferred | | | | | | | | | | | | | | | | | | | |
| stock | | | | | | | | | | | | | | | | | | | |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Stock based | - | | - | | - | | - | | - | | - | | 510,869 | | - | | - | | 510,869 |
| compensation | | | | | | | | | | | | | | | | | | | |
| expense related | | | | | | | | | | | | | | | | | | | |
| to options to | | | | | | | | | | | | | | | | | | | |
| consultants | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | (3,243,701) | | (3,243,701) |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| Balance as of | 3,448,563 | | $ | | 4,224,339 | | $422 | | - | | $ - | | $8,259,779 | | $(207,285) | | $(3,924,917) | | $4,128,344 |
| December 31, | | | 345 | | | | | | | | | | | | | | | | |
| 2001 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+-------------------------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+----------------+-+---------+-+----------+-+------------+-+--------------+-+--------------+-+---------------+---------------+
+------------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+------------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+------------------------------------------------------------------------------------------------------------------------+
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| | Old Common shares | | Preferred shares | | Preferred shares | | Additional | | Deferred | | Deficit | | Total |
| | | | Series A | | Series B | | Paid-in | | Stock | | Accumulated | |Shareholders' |
| | | | | | | | Capital | | Compensation | | During the | | Equity |
| | | | | | | | | | | | Development | | (Deficiency) |
| | | | | | | | | | | | Stage | | |
+-------------------+-----------------------+-+-----------------------+-+------------------------+-+-------------+-+--------------+-+--------------+-+---------------+
| | Number | | Amount | | Number | | Amount | | Number | | Amount | | | | | | | | |
| | of | | | | of | | | | of | | | | | | | | | | |
| | Shares | | | | Shares | | | | Shares | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Balance as of | 3,448,563 | | $ 345 | | 4,224,339 | | $ 422 | | - | | $ - | | $ | | $ | | $ | | $ |
| December 31, | | | | | | | | | | | | | 8,259,779 | | (207,285) | | (3,924,917) | | 4,128,344 |
| 2001 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Issuance of | - | | - | | - | | - | | 2,676,674 | | 268 | | 5,264,352 | | - | | - | | 5,264,620 |
| Preferred | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | |
| In October | | | | | | | | | | | | | | | | | | | |
| 2002 at | | | | | | | | | | | | | | | | | | | |
| $1.97 per | | | | | | | | | | | | | | | | | | | |
| share, net | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Deferred stock | - | | - | | - | | - | | - | | - | | 63,855 | | (63,855) | | - | | - |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Amortization of | - | | - | | - | | - | | - | | - | | - | | 66,937 | | - | | 66,937 |
| deferred | | | | | | | | | | | | | | | | | | | |
| stock | | | | | | | | | | | | | | | | | | | |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Stock based | - | | - | | - | | - | | - | | - | | 371,560 | | - | | - | | 371,560 |
| compensation | | | | | | | | | | | | | | | | | | | |
| expenses | | | | | | | | | | | | | | | | | | | |
| related to | | | | | | | | | | | | | | | | | | | |
| options | | | | | | | | | | | | | | | | | | | |
| to | | | | | | | | | | | | | | | | | | | |
| consultants | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | (5,049,391) | | (5,049,391) |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| Balance as of | 3,448,563 | | $ | | 4,224,339 | | $ 422 | | 2,676,674 | | $ 268 | | $13,959,546 | | $ | | $(8,974,308) | | $ |
| December 31, | | | 345 | | | | | | | | | | | | (204,203) | | | | 4,782,070 |
| 2002 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+---------+-+-----------+-+---------+-+-----------+-+----------+-+-------------+-+--------------+-+--------------+-+---------------+
+------------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+------------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+------------------------------------------------------------------------------------------------------------------------+
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | Old Common shares | | Preferred shares | | Preferred shares | | Additional | | Deferred | | Deficit | | Total |
| | | | Series A | | Series B | | Paid-in | | Stock | | Accumulated | |Shareholders' |
| | | | | | | | Capital | | Compensation | | During the | | Equity |
| | | | | | | | | | | | Development | | (Deficiency) |
| | | | | | | | | | | | Stage | | |
+-------------------+----------------------+-+-----------------------+-+--------------------------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | Number | |Amount | | Number | | Amount | | Number | | Amount | | | | | | | | |
| | of | | | | of | | | | of | | | | | | | | | | |
| | Shares | | | | Shares | | | | Shares | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Balance as of | 3,448,563 | | $ | | 4,224,339 | | $ 422 | | 2,676,674 | | $ 268 | | | | $ | | | | |
| December 31, | | | 345 | | | | | | | | | | $13,959,546 | | (204,203) | | $(8,974,308) | | $4,782,070 |
| 2002 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Exercise of | 19,443 | | 2 | | - | | - | | - | | - | | 193 | | - | | - | | 195 |
| stock options | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Issuance of | - | | - | | - | | - | | 216,507 | | 22 | | 432,994 | | - | | - | | 433,016 |
| Preferred | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | |
| in April 2003 | | | | | | | | | | | | | | | | | | | |
| at $ 2.00 per | | | | | | | | | | | | | | | | | | | |
| share, net | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Issuance of | - | | - | | - | | - | | 850,490 | | 85 | | 1,603,783 | | - | | - | | 1,603,868 |
| Preferred | | | | | | | | | | | | | | | | | | | |
| shares | | | | | | | | | | | | | | | | | | | |
| in May 2003 at | | | | | | | | | | | | | | | | | | | |
| $ 2.00 per | | | | | | | | | | | | | | | | | | | |
| share, net | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Deferred stock | - | | - | | - | | - | | - | | - | | 440,811 | | (440,811) | | - | | - |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Amortization of | - | | - | | - | | - | | - | | - | | - | | 105,213 | | - | | 105,213 |
| deferred | | | | | | | | | | | | | | | | | | | |
| stock | | | | | | | | | | | | | | | | | | | |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Stock based | | | | | | | | | | | | | | | | | | | |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| expenses | - | | - | | - | | - | | - | | - | | 475,469 | | - | | - | | 475,469 |
| related to | | | | | | | | | | | | | | | | | | | |
| options to | | | | | | | | | | | | | | | | | | | |
| consultants | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | (5,038,272) | | (5,038,272) |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| Balance as of | 3,468,006 | | $ | | 4,224,339 | | $ 422 | | 3,743,671 | | $ 375 | | $16,912,796 | | $ | | (14,012,580) | | $ |
| December 31, | | | 347 | | | | | | | | | | | | (539,801) | | | | 2,361,559 |
| 2003 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+----------+----------------+-+---------------+
+------------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+------------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+------------------------------------------------------------------------------------------------------------------------+
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | Old Common shares | | Preferred shares | | Preferred shares | | Additional | | Deferred | | Deficit | | Total |
| | | | Series A | | Series B | | Paid-in | | Stock | | Accumulated | |Shareholders' |
| | | | | | | | Capital | | Compensation | | During the | | Equity |
| | | | | | | | | | | | Development | | (Deficiency) |
| | | | | | | | | | | | Stage | | |
+-------------------+----------------------+-+-----------------------+-+--------------------------+-+-------------+-+--------------+-+---------------+-+---------------+
| | Number | |Amount | | Number | | Amount | | Number | | Amount | | | | | | | | |
| | | | | | of | | | | of | | | | | | | | | | |
| | of | | | | Shares | | | | Shares | | | | | | | | | | |
| | Shares | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Balance as of | 3,468,006 | | $347 | | 4,224,339 | | $ 422 | | 3,743,671 | | $ 375 | | $ | | $ | | | | $ |
| December 31, | | | | | | | | | | | | | 16,912,796 | | (539,801) | | $(14,012,580) | | 2,361,559 |
| 2003 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Exercise of | 12,750 | | 1 | | - | | - | | - | | - | | 126 | | - | | - | | 127 |
| stock options | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Stock based | 33,333 | | 3 | | - | | - | | - | | - | | 9,997 | | - | | - | | 10,000 |
| compensation | | | | | | | | | | | | | | | | | | | |
| related to | | | | | | | | | | | | | | | | | | | |
| shares to | | | | | | | | | | | | | | | | | | | |
| consultants | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Amortization of | - | | - | | - | | - | | - | | - | | - | | 539,801 | | - | | 539,801 |
| deferred | | | | | | | | | | | | | | | | | | | |
| stock | | | | | | | | | | | | | | | | | | | |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Stock based | | | | | | | | | | | | | | | | | | | |
| compensation | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| expense related | - | | - | | - | | - | | - | | - | | 346,762 | | - | | - | | 346,762 |
| to options | | | | | | | | | | | | | | | | | | | |
| to consultants | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | (4,515,829) | | (4,515,829) |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Balance as of | 3,514,089 | | $351 | | 4,224,339 | | $ 422 | | 3,743,671 | | $ 375 | | $17,269,681 | | $ - | | $(18,528,409) | | $(1,257,580) |
| December 31, | | | | | | | | | | | | | | | | | | | |
| 2004 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | (776,129) | | (776,129) |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| Balance as of | 3,514,089 | | $351 | | 4,224,339 | | $ 422 | | 3,743,671 | | $ 375 | | $17,269,681 | | $ - | | $(19,304,538) | | $(2,033,709) |
| December 31, | | | | | | | | | | | | | | | | | | | |
| 2005 | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------+-----------+-+--------+-+-----------+-+---------+-+-------------+-+----------+-+-------------+-+--------------+-+---------------+-+---------------+
+-----------------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+-----------------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
| |
+-----------------------------------------------------------------------------------------------------------------------------+
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| | Common shares | | Old Common | | Preferred shares | | Preferred shares | |Additional | | Deficit | | Total |
| | | | shares | | Series A | | Series B | | Paid-in | | Accumulated | | Shareholders' |
| | | | | | | | | | Capital | | During the | | Equity |
| | | | | | | | | | | | Development | | (Deficiency) |
| | | | | | | | | | | | Stage | | |
+--------------------------+------------------------+-+------------------------+-+-----------------------------+-+------------------------+-+------------+-+--------------+-+----------------+
| | Number | |Amount | | Number | |Amount | | Number | | Amount | | Number | |Amount | | | | | | |
| | of | | | | of | | | | of | | | | of | | | | | | | | |
| | Shares | | | | Shares | | | | Shares | | | | Shares | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Balance as of | - | | $ | | 3,514,089 | | $ | | 4,224,339 | | $ | | 3,743,671 | | $ | | $ | | $ | | $ |
| December 31, 2005 | | | - | | | | 351 | | | | 422 | | | | 375 | | 17,269,681 | | (19,304,538) | | (2,033,709) |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Conversion of Old | 9,885,842 | | 46 | | (3,514,089) | | (351) | | (4,224,339) | | (422) | | (3,743,671) | | (375) | | (436,095) | | 437,197 | | - |
| Common shares, Series | | | | | | | | | | | | | | | | | | | | | |
| A and Series B | | | | | | | | | | | | | | | | | | | | | |
| Preferred shares into | | | | | | | | | | | | | | | | | | | | | |
| New Common shares | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Conversion of | 11,982,914 | | 56 | | - | | - | | - | | - | | - | | - | | 1,795,016 | | - | | 1,795,072 |
| convertible Note into | | | | | | | | | | | | | | | | | | | | | |
| New Common shares | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Issuance of Common | 2,633,228 | | 12 | | - | | - | | - | | - | | - | | - | | 96,004 | | - | | 96,016 |
| shares in settlement | | | | | | | | | | | | | | | | | | | | | |
| of due debt in March | | | | | | | | | | | | | | | | | | | | | |
| 2006 | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Issuance of Common | 14,110,490 | | 66 | | - | | - | | - | | - | | - | | - | | 828,197 | | - | | 828,263 |
| shares and | | | | | | | | | | | | | | | | | | | | | |
| warrants in March 2006 | | | | | | | | | | | | | | | | | | | | | |
| at $0.07 per share | | | | | | | | | | | | | | | | | | | | | |
| and warrant, net | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Issuance of Common | 513,396 | | 2 | | - | | - | | - | | - | | - | | - | | 30,133 | | - | | 30,135 |
| shares and | | | | | | | | | | | | | | | | | | | | | |
| warrants in April 2006 | | | | | | | | | | | | | | | | | | | | | |
| at $0.07 per share | | | | | | | | | | | | | | | | | | | | | |
| and warrant, net | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Issuance of Common | 1,593,666 | | 8 | | - | | - | | - | | - | | - | | - | | 93,538 | | - | | 93,546 |
| shares and | | | | | | | | | | | | | | | | | | | | | |
| warrants in June 2006 | | | | | | | | | | | | | | | | | | | | | |
| at $0.07 per share | | | | | | | | | | | | | | | | | | | | | |
| and warrant, net | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Issuance of Common | 5,391,725 | | 25 | | - | | - | | - | | - | | - | | - | | 521,752 | | - | | 521,777 |
| shares and | | | | | | | | | | | | | | | | | | | | | |
| warrants in November | | | | | | | | | | | | | | | | | | | | | |
| 2006 at $0.12 per | | | | | | | | | | | | | | | | | | | | | |
| share and warrant, net | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Issuance of Common | 11,294,065 | | 53 | | - | | - | | - | | - | | - | | - | | 1,092,916 | | - | | 1,092,969 |
| shares and | | | | | | | | | | | | | | | | | | | | | |
| warrants in December | | | | | | | | | | | | | | | | | | | | | |
| 2006 at $0.12 per | | | | | | | | | | | | | | | | | | | | | |
| share and warrant, net | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Stock based | - | | - | | - | | - | | - | | - | | - | | - | | 1,161,287 | | - | | 1,161,287 |
| compensation expense | | | | | | | | | | | | | | | | | | | | | |
| related to options | | | | | | | | | | | | | | | | | | | | | |
| and warrants granted | | | | | | | | | | | | | | | | | | | | | |
| to consultants and | | | | | | | | | | | | | | | | | | | | | |
| employees | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Net loss | - | | - | | - | | - | | - | | - | | - | | - | | - | | (2,598,605) | | (2,598,605) |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| Balance as of | 57,405,326 | | $ | | - | | $ | | - | | $ | | - | | $ | | $ | | $ | | $ |
| December 31, 2006 | | | 268 | | | | - | | | | - | | | | - | | 22,452,429 | | (21,465,946) | | 986,751 |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
| | | | | | | | | | | | | | | | | | | | | | |
+--------------------------+-------------+-+--------+-+-------------+-+--------+-+-------------+-+-------------+-+-------------+-+--------+-+------------+-+--------------+-+----------------+
+-----------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+-----------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+-----------------------------------------------------------------------------------------------------------------------+
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| | Common shares | | Additional | | Deficit | | Total |
| | | | Paid-in | | Accumulated | | Shareholders' |
| | | | Capital | | During the | | Equity |
| | | | | | Development | | |
| | | | | | Stage | | |
+-----------------------------------------------------------------------------------+-------------------------------+-+--------------+-+---------------+-+---------------+
| | Number of | | | | | | | | |
| | Shares | | Amount | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Balance as of December 31, 2006 | 57,405,326 | | $ 268 | | $22,452,429 | | $(21,465,946) | | $ |
| | | | | | | | | | 986,751 |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares and warrants in January 2007 at $0.12 per share and | 427,402 | | 2 | | 33,318 | | - | | 33,320 |
| warrant, net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares and warrants inMay 2007 at $0.16 per share and | 5,347,851 | | 25 | | 583,636 | | - | | 583,661 |
| warrant, net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares in July 2007 at $0.13 per share, net | 771,612 | | 3 | | 84,211 | | | | 84,214 |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Exercise of warrants in July 2007 | 451,939 | | 2 | | - | | - | | 2 |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares to consultant in August 2007, net | 122,232 | | 1 | | (1) | | - | | - |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares and warrants in August 2007 at $0.16 per share and | 1,527,973 | | 7 | | 166,753 | | - | | 166,760 |
| warrant, net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Stock split effected as stock dividend in December 2007 | - | | 6,297 | | (6,297) | | - | | - |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Conversion of convertible Note into Common shares and issuance of warrants in | 6,417,447 | | 642 | | 699,751 | | - | | 700,393 |
| December 2007, at $0.16 per share and warrant, net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares and warrants in December 2007 at $0.19 - $0.21 per | 28,537,213 | | 2,853 | | 3,778,659 | | | | 3,781,512 |
| share and warrant, net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares and warrants to consultants in December 2007, net | 3,008,033 | | 301 | | (301) | | - | | - |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares for arrangement of security for Letter of Credit in | 76,389 | | 8 | | 15,740 | | - | | 15,748 |
| December 2007, net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Issuance cost due to obligation to issue 142,609 Common shares for consultant, | - | | - | | (31,449) | | - | | (31,449) |
| net | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Stock based compensation expense related to options granted to consultants and | - | | - | | 346,802 | | - | | 346,802 |
| employees | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Beneficial conversion feature embedded in Convertible Note. | - | | - | | 511,391 | | - | | 511,391 |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Net loss | - | | - | | - | | (3,851,339) | | (3,851,339) |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| Balance as of December 31, 2007 | 104,093,417 | | $10,409 | | $28,634,642 | | $(25,317,285) | | $3,327,766 |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | |
+-----------------------------------------------------------------------------------+---------------+-+-------------+-+--------------+-+---------------+-+---------------+
+-----------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+-----------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+-----------------------------------------------------------------------------------------------------------------------+
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | Common shares | | | | Receipts on | | Deficit | | |
| | | | | | account of | | Accumulated | | Total |
| | | | Additional | | shares | | During the | | Shareholders' |
| | | | Paid-in | | | | Development | | Equity |
| | | | Capital | | | | Stage | | (Deficiency) |
+----------------------------------------------------------------------+---------------------------+-+--------------+-+--------------+-+---------------+-+---------------+
| | Number of | | | | | | | | | | |
| | Shares | | Amount | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Balance as of December 31, 2007 | 104,093,417 | | $ 10,409 | | $28,634,642 | | $ | | $(25,317,285) | | $3,327,766 |
| | | | | | | | - | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Exercise of warrants in January 2008 | 2,462,050 | | 246 | | (246) | | - | | - | | - |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Issuance of Common shares to consultant in April 2008 | 142,609 | | 14 | | 31,435 | | - | | - | | 31,449 |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Exercise of warrants in December 2008 | 30,119 | | 3 | | (3) | | - | | - | | - |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Stock based compensation expense related to options granted to | - | | - | | 295,442 | | - | | - | | 295,442 |
| consultants and employees | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Receipts on account of shares in respect to exercise of warrants in | - | | - | | - | | 150,000 | | - | | 150,000 |
| January 2009 | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Dividend in respect of reduction in exercise price of certain | - | | - | | 6,745 | | - | | (6,745) | | - |
| warrants | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Net loss | - | | - | | - | | - | | (4,852,258) | | (4,852,258) |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Balance as of December 31, 2008 | 106,728,195 | | $10,672 | | $28,968,015 | | $150,000 | | $(30,176,288) | | $ |
| | | | | | | | | | | | (1,047,601) |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
+-----------------------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) |
+-----------------------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+-----------------------------------------------------------------------------------------------------------------------+
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | Common shares | | | | Receipts on | | Deficit | | |
| | | | | | account of | | Accumulated | | Total |
| | | | Additional | | shares | | During the | | Shareholders' |
| | | | Paid-in | | | | Development | | Equity |
| | | | Capital | | | | Stage | | (Deficiency) |
+----------------------------------------------------------------------+---------------------------+-+--------------+-+--------------+-+---------------+-+---------------+
| | Number of | | | | | | | | | | |
| | Shares | | Amount | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Balance as of December 31, 2008 | 106,728,195 | | $ | | $ 28,968,015 | | $ 150,000 | | $(30,176,288) | | $ |
| | | | 10,672 | | | | | | | | (1,047,601) |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Exercise of warrants | 11,025,833 | | 1,103 | | 404,902 | | (150,000) | | - | | 256,005 |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Stock based compensation expense related to options granted to | - | | - | | 230,674 | | - | | - | | 230,674 |
| consultants and employees | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Dividend in respect of reduction in exercise price of certain | - | | - | | 3,192 | | - | | (3,192) | | - |
| warrants | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Net loss | - | | - | | - | | - | | (2,225,713) | | (2,225,713) |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| Balance as of June 30, 2009 (Unaudited) | 117,754,028 | | $ 11,775 | | $ 29,606,783 | | $ | | $ | | $ |
| | | | | | | | - | | (32,405,193) | | (2,786,635) |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
| | | | | | | | | | | | |
+----------------------------------------------------------------------+-------------+--+----------+-+--------------+-+--------------+-+---------------+-+---------------+
+----------------------------------------------------------------------------------------+
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
+----------------------------------------------------------------------------------------+
| In US Dollars |
+----------------------------------------------------------------------------------------+
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | Six months ended | | Year | | From |
| | | June 30, | | ended | | date of |
| | | | | December | |Inception (January |
| | | | | 31, | | 27, |
| | | | | | |2000) through June |
| | | | | | | 30 |
+----------------------------------------+-+------------------------------+-+-------------+-+--------------------+
| | | 2009 | | 2008 | | 2008 | | 2009 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | Unaudited | | | | Unaudited |
+----------------------------------------+-+------------------------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Net loss | | $ | | $(2,971,308) | | $ | | $ |
| | | (2,225,713) | | | | (4,852,258) | | (32,832,453) |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Adjustments to reconcile net loss to | | | | | | | | |
| net cash used in operating activities: | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Depreciation | | 60,250 | | 36,912 | | 96,497 | | 804,214 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Exchange differences on long term loan | | - | | - | | - | | 2,950 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Loss from disposal of property and | | - | | - | | - | | 325,842 |
| equipment | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Interest on Convertible debentures | | 8,130 | | - | | - | | 8,130 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Issuance of shares in consideration | | - | | - | | - | | 15,748 |
| for providing security for letter of | | | | | | | | |
| credit | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Stock based compensation related to | | 230,674 | | 219,345 | | 295,442 | | 4,501,697 |
| options and warrants granted to | | | | | | | | |
| consultants and employees | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Interest and amortization of | | - | | - | | - | | 759,197 |
| beneficial conversion feature of | | | | | | | | |
| convertible note | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Purchase of short-term investment, net | | - | | (47,278) | | - | | (47,278) |
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Gain from short term investment | | - | | (53,690) | | - | | (53,690) |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Capital loss | | 2,859 | | - | | - | | 2,859 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Accrued severance pay, net | | 54,312 | | 120,314 | | 77,035 | | 701,903 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Increase in trade payables | | 88,615 | | 163,161 | | 439,036 | | 969,525 |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Decrease (increase) in other accounts | | 5,469 | | (39,893) | | 261,354 | | (116,325) |
| receivable and pre-paid expenses | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Increase in other accounts payable and | | 329,230 | | 212,494 | | 564,055 | | 1,493,764 |
| accrued expenses | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Net cash used in operating activities | | (1,446,174) | | (2,359,943) | | (3,118,839) | | (23,362,949) |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Proceeds from disposal of property and | | - | | - | | - | | 172,869 |
| equipment | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Increase in prepaid lease payments | | - | | - | | (10,939) | | (22,443) |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Decrease (increase) in restricted | | 175 | | - | | (22,607) | | (22,432) |
| lease deposit | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Purchase of property and equipment | | (24,260) | | (363,607) | | (371,622) | | (1,659,017) |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| | | | | | | | | |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
| Net cash used in investing activities | | (24,085) | | (363,607) | | (72,991) | | (1,531,023) |
+----------------------------------------+-+-------------+-+--------------+-+-------------+-+--------------------+
+----------------------------------------------------------------------------------------+
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
+----------------------------------------------------------------------------------------+
| In US Dollars |
+----------------------------------------------------------------------------------------+
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| | | Six months ended | | Year | | From |
| | | June 30, | | ended | | date of |
| | | | | December | |Inception |
| | | | | 31, | | (January |
| | | | | | |27, 2000) |
| | | | | | | through |
| | | | | | | June 30 |
+----------------------------------------+--+---------------------------+-+-------------+-+------------+
| | | 2009 | | 2008 | | 2008 | | 2009 |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| | | Unaudited | | | | Unaudited |
+----------------------------------------+--+---------------------------+-+-------------+-+------------+
| | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Proceeds from issuance of shares, net | | - | | - | | (309,741) | | 21,669,890 |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Exercise of Warrants | | 256,005 | | - | | - | | 256,005 |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Repayment of issuance expenses | | - | | (309,741) | | - | | (309,741) |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Repayment of long-term loan | | - | | - | | - | | (73,080) |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Proceeds from long term loan | | - | | - | | - | | 70,130 |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Receipts on account of shares | | - | | | | 150,000 | | 150,000 |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Proceeds from Convertible Note | | 265,000 | | - | | - | | 2,862,225 |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Increase (decrease) in short-term bank | | (40,605) | | (9,714) | | 43,172 | | 12,281 |
| credit | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Net cash provided by (used in) | | 480,400 | | (319,455) | | (116,569) | | 24,947,451 |
| financing activities | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Increase (decrease) in cash and cash | | (989,859) | | (3,043,005) | | (3,640,576) | | 53,479 |
| equivalents | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Balance of cash and cash equivalents | | 1,043,338 | | 4,683,914 | | 4,683,914 | | - |
| at the beginning of the period | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| | | | | | | | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
| Balance of cash and cash equivalents | | $ | | $1,640,909 | | $ | | $ 53,479 |
| at the end of the period | | 53,479 | | | | 1,043,338 | | |
+----------------------------------------+--+-----------+-+-------------+-+-------------+-+------------+
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Supplemental disclosure of cash flow | | | | | | | | |
| information: | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Cash paid during the period for: | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Interest | | $ (35) | | $ | | $ 833 | | $ |
| | | | | (7,145) | | | | (45,571) |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Taxes | | $ 3,660 | | $ | | $ | | $ |
| | | | | (1,839) | | 12,420 | | (57,982) |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Supplemental disclosure of non cash | | | | | | | | |
| flow information: | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Accrued issuance expenses | | $- | | $- | | $ | | $ |
| | | | | | | - | | (460,739) |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Issuance of Common shares upon | | $- | | $ | | $ | | $ |
| conversion of a Convertible Note | | | | - | | - | | 2,845,072 |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Issuance of shares in settlement of | | $- | | $ | | $- | | $ |
| debt | | | | - | | | | 96,016 |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Issuance cost due to obligation to | | $- | | $ | | $ (31,449) | | $ |
| issue Common shares to consultant | | | | - | | | | (31,449) |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Issuance of Common shares to consultant | | $ | | $ | | $ | | $ |
| | | - | | 31,449 | | - | | 31,449 |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Purchase of property and equipment | | $- | | $ | | $ | | $ |
| | | | | - | | 8,092 | | 17,243 |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| | | | | | | | | |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
| Issuance of common shares upon | | $ | | $ | | $ | | $ |
| conversion of a warrants | | 150,000 | | - | | - | | 150,000 |
+-----------------------------------------+-+------------+-+----------+-+-------------+-+-----------+
+--------------------------------------------------------------------------------------+
| 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 Common shares were admitted for trading on the
London Stock Exchange's Alternative Investment Market (AIM).
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's operations
for the six months ended on June 30, 2009, resulted in a net loss of $ 2,228,905
and the Company's balance sheet reflects a net shareholders' deficiency of $
2,786,635, accumulated deficit of $ 32,405,193 and a working capital deficiency
of $ 2,217,841.
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 in this regard include, among others, seeking additional
capital 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.
+--------------------------------------------------------------------------------------+
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
+--------------------------------------------------------------------------------------+
| In US Dollars |
+--------------------------------------------------------------------------------------+
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual financial statements
as of December 31, 2008 are applied consistently in these financial statements.
Recently issued Accounting Standards:
FSP FAS 157-4:
In April 2009 the FASB issued FASB staff position 157-4, "Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly". This
FSP applies to all assets and liabilities within the scope of accounting
pronouncements that require or permit fair value measurements, except as
discussed in paragraphs 2 and 3 of statement 157. The FSP is Effective for
interim and annual reporting periods ending after June 15, 2009, and shall be
applied prospectively.
FSP FAS 157-4 relates to determining fair values when there is no active market
or where the price inputs being used represent distressed sales. It reaffirms
what Statement 157 states is the objective of fair value measurement-to reflect
how much an asset would be sold for in an orderly transaction (as opposed to a
distressed or forced transaction) at the date of the financial statements under
current market conditions. Specifically, it reaffirms the need to use judgment
to ascertain if a formerly active market has become inactive and in determining
fair values when markets have become inactive.
FSP FAS 157-4 provides guidance on (1) estimating the fair value of an asset or
liability (financial and nonfinancial) when the volume and level of activity for
the asset or liability have significantly decreased and (2) identifying
transactions that are not orderly. The adoption of this standard did not have
any impact on the consolidated results of operations or financial position of
the Company.
SFAS 165:
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS No. 165").
SFAS No. 165 establishes general standards of accounting for, and disclosure of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. In particular, this statement sets
forth: (1) the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (2) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements and (3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. SFAS No. 165 is effective for the
interim or annual financial periods ending after June 15, 2009. The adoption
of this standard did not have any impact on the consolidated results of
operations or financial position of the Company.
+--------------------------------------------------------------------------------------+
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
+--------------------------------------------------------------------------------------+
| In US Dollars |
+--------------------------------------------------------------------------------------+
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)
SFAS 166:
In June 2009 the FASB issued SFAS No.166 "Accounting for Transfers of Financial
Assets" ("SAFS No. 166"). SAFS No. 166 is a revision to Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, and will require more
information about transfers of financial assets, including securitization
transactions, and where companies have continuing exposure to the risks related
to transferred financial assets. It eliminates the concept of a "qualifying
special-purpose entity," changes the requirements for derecognizing financial
assets, and requires additional disclosures. SFAS No. 166 enhances information
reported to users of financial statements by providing greater transparency
about transfers of financial assets and a company's continuing involvement in
transferred financial assets. SFAS No. 166 will be effective at the start of a
company's first fiscal year beginning after November 15, 2009. The Company is
currently examining this new standard; the adoption of this standard is not
expected to have a material impact on the Company's condensed consolidated
financial statements.
NOTE 3:- 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, 2009 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2009.
NOTE 4:-SHAREHOLDERS' EQUITY
Issuance of shares:
Pursuant to Note 10d (25) to the Company's annual report regarding the Warrant
Repricing Program of the Company to encourage existing warrant holders to
exercise their warrants, during January and February 2009, 11,025,833 warrants
were exercised into 11,025,833 Common shares of the Company in consideration for
a reduced price of $ 406,048 and issuance of 1,218,144 new warrants as a bonus.
The bonus warrants are exercisable immediately for a period of three years from
the issuance date at an exercise price of $0.25 per share. The consideration was
paid partly in the year ended December 31, 2008 ($ 150,000) and the balance was
paid in 2009. The benefit resulting to the warrant holders from the reduction of
the exercise price and the bonus warrants in the amount of $6,745 and $3,192 as
of December 31, 2008 and June 30, 2009, respectively, was recorded as a
preferred dividend to the warrant holders.
+--------------------------------------------------------------------------------------+
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
+--------------------------------------------------------------------------------------+
| In US Dollars |
+--------------------------------------------------------------------------------------+
NOTE 5:-CONVERTIBLE DEBENTURES
Commencing May 2009, the Company offered to accredited investors only, in a
private placement, convertible debentures in multiples of $50,000 each (the
"Debentures"), together with warrants (the "Warrants") to purchase a number of
Common shares, par value $0.0001 per share, of the Company, equal to 35% of the
number of shares of Common shares issued upon conversion of the Debentures. The
Debentures issued in the private placement will mature two years after the date
of issuance. The Debentures will automatically be converted into Common shares
upon the closing of a Qualified Transaction, as defined in the Securities
Purchase Agreement entered into by the Company in connection with the private
placement.
On June 16, 2009, the Company closed the first series of the private placement.
The Company announced at that date, that it has raised $265,000 in gross
proceeds through the issuance of Debentures.
The Debentures bear interest at a rate of 10% per annum. Interest will accrue on
the Debentures quarterly from the date of issue and shall be paid on a quarterly
basis. In the event of default, the interest rate shall increase 2% per month
for every month the Debentures are in default to a maximum of 18% per annum. The
Company shall repay the principal and any accrued interest at the two-year
anniversary of the date the Debentures were issued. The Debentures are unsecured
and the Company has no right to redeem the Debentures. If the Company is
liquidated, the holders of the Debentures will participate pari passu with all
general creditors of the Company with no seniority or preference. The interest
due on June 30, 2009 has been paid.
Until such time the Debentures are repaid, the Debentures (including any accrued
interest) shall automatically convert into Common shares at the closing of a
Qualified Transaction at the following valuation:
* In the event that the per share price paid in the Qualified Transaction (or per
share value of merger consideration in a merger transaction) (the "Qualified
Transaction Price") is $0.12 per share or greater, the conversion price shall be
the lesser of $0.12 per share or a 40% discount from the Qualified Transaction
Price.
* In the event that the Qualified Transaction Price is at least $0.07 but less
than $0.12 per share, the conversion price shall be $0.07 per share.
* In the event that the Qualified Transaction Price is less than $0.07 per share,
the conversion price shall be the Qualified Transaction Price; provided,
however, that the holder of the Debenture shall receive 100% more Warrants than
such holder would have otherwise been entitled to receive upon conversion.
The share prices referenced above shall be adjusted to reflect any stock splits,
stock combinations, stock dividends, reorganizations and the like.
+--------------------------------------------------------------------------------------+
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
+--------------------------------------------------------------------------------------+
| In US Dollars |
+--------------------------------------------------------------------------------------+
NOTE 5:-CONVERTIBLE DEBENTURES (CONT.)
The Warrants exercisable for a number of shares of Common Stock equal to 35% of
the number of shares which will be issued upon conversion of the Debentures
are for Common Stock. Warrants shall not be issued unless and until the
conversion of the Debentures. The Warrants shall be immediately exercisable upon
issuance and shall expire five years from the date of issuance. The exercise
price shall be 110% of the Qualified Transaction Price.
The Company irrevocably elected to initially and subsequently measure the
Debentures entirely at fair value (with changes in fair value recognized in
earnings) in accordance with par. 16 of SFAS 133 (as amended by SFAS 155), thus
the Company will not separate the embedded derivative instrument from the host
contract and account for it as a derivative instrument pursuant to SFAS 133.
This election was made only in respect to the Debentures, as permitted by SFAS
155, which states that this election may be made on an instrument-by-instrument
basis.
Subsequent to the balance sheet date, and in conjunction with this private
placement, the Company issued additional Debentures for gross proceeds of $
305,000 under the same terms.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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