TIDMMEDG
RNS Number : 2999L
Medgenics Inc
05 May 2010
Medgenics, Inc.
('Medgenics' or the 'Company')
2009 Final Results
Misgav, Israel and London, UK - 5 May 2010 - Medgenics (AIM: MEDG, MEDU) is
pleased to announce its final results for the 12 months ended 31 December 2009.
The Annual Report and Accounts of the Company and its subsidiary (the 'Group')
will be posted to shareholders by 21 May 2010 and will be available on the
Company's website (www.medgenics.com) from the date of posting.
Highlights
· Signed first agreement with a major pharmaceutical partner - a preclinical
development and option agreement for Biopumps to treat haemophilia with Factor
VIII, with a market leader in haemophilia.
· Proved sustained anaemia treatment with unprecedented 6-12 month duration
from a single EPODURE treatment, in low dose of Phase I/II trial in patients
with chronic kidney disease; Israel Ministry of Health approval and funds raised
to commence higher dose study.
· Introduced INFRADURE at major European EASL liver conference, with two
posters presenting key data showing INFRADURE Biopumps producing
interferon-alpha for use in treatment of hepatitis C, also proving the concept
of the Biopump Platform producing various proteins.
· Obtained issuance of key new patents in USA, Japan and Korea.
· Significantly expanded partnering discussions with interested
pharmaceutical and device companies.
· Raised additional funding, through equity, debentures and warrant
exercises, in the UK and the US.
Financial Summary
· Net loss after tax of $4.41 million (2008: $4.85 million).
· R&D costs for the twelve-month period of $1.32 million (2008: $2.10
million) and general and administrative costs of $2.54 million (2008: $2.76
million).
· Cash and cash equivalents at 31 December 2009 of $0.47 million (at 31
December 2008: $1.04 million).
Dr. Andrew Pearlman, Chief Executive Officer of Medgenics, said:
"This last financial year was transformative for the Company, with some
significant accomplishments for Medgenics, achieved against the powerful tide of
the financial storm which has swept the globe.
Through the creative and tenacious efforts of truly dedicated staff, we have
managed to navigate the storm while keeping our key operations moving forward,
which enabled us to achieve unprecedented results in our EPODURE clinical trial
and to complete our first commercial agreement with a major pharmaceutical
company.
The demonstration of over 6-12 months of sustained anaemia treatment from a
single administration of EPODURE in patients with chronic kidney disease proved
that an appropriate dose of EPODURE can provide effective and sustained anaemia
therapy and represents an unprecedented duration from a single treatment in
patients - replacing scores of EPO injections. Our clinical results build upon
the extensive laboratory experience, with more than 5,000 Biopumps successfully
produced from more than 150 patients' tissue.
Furthermore, the EPODURE clinical results, taken together with our production of
interferon-alpha (IFNa) by INFRADURE Biopumps, have proven the concept of the
Biopump as a platform to provide safe and sustained production and delivery of
therapeutic protein on a continuous basis.
This demonstration of the Biopump as a platform technology helped convince our
first pharmaceutical partner, a market leader in the field of haemophilia, to
pursue with us a new application of the Biopump: to produce blood clotting
Factor VIII, which if successful, could revolutionize the treatment of
haemophilia. This first deal validated the commercial appeal of the Biopump
value proposition, the strength of the Biopump science, brought needed funds to
our operations and strengthened our ongoing efforts to raise equity funding.
This first commercial agreement has also spurred a substantial increase in
commercial interest in the Biopump platform technology, as we found at the
BioEurope conference in November 2009, and continuing in 2010. For Medgenics'
more advanced pipeline applications, EPODURE in Phase I/II clinical trials in
anaemia, and INFRADURE in preclinical stage, Medgenics will seek during the
coming 12-24 months to reach attractive terms with partners along the lines of
recent deals for protein therapies, involving milestones for preclinical and
early stage clinical applications.
We have now obtained approval to extend our EPODURE Phase I/II trial to an
additional major teaching hospital in Israel's largest city, the Tel Aviv
Sourasky Medical Center, to continue with the higher dose treatments -
implementing an important step in our plan made possible by the recent and
ongoing fundraising, and have already commenced patient recruitment.
In addition to EPODURE, we are continuing to advance our pipeline development of
other protein therapies on the Biopump platform. In particular, INFRADURE, the
Company's Biopump for producing IFNa for treating hepatitis C, has moved
forward.
We introduced INFRADURE for the first time at a major clinical conference, when
we presented two posters in April 2010 at the leading European conference on
liver disease, EASL, generating interest from liver experts, pharmaceutical and
hospital product companies. Our Scientific Advisory Board experts on hepatitis
C, and numerous of their colleagues at the EASL conference, confirmed the value
proposition of INFRADURE in the future treatment of hepatitis C, even with the
likely introduction of new direct antiviral agents.
Meanwhile, we are continuing early stage development of a Factor VIII Biopump,
with our commercial partner. The haemophilia (Factor VIII) Biopump deal
structure potentially provides a model for new applications more generally,
including a funding mechanism for proving feasibility of a new Biopump
application before commencement of licensing negotiations. Following on this
model, Medgenics is exploring opportunities for further commercial interest in
new applications using the Biopump platform to provide superior delivery and
treatment over existing protein therapies.
In addition to developing new protein applications of the Biopump, the Company
has advanced, and continues to advance, its planning for practical scale-up and
commercial implementation of its Biopump treatment technology. This includes
designing automated Biopump processing technology utilizing low cost single-use
sealed cassettes intended for use in regional or local Biopump processing
centres capable of producing and storing Biopumps for hundreds or even thousands
of patients per year, in a cost-effective manner.
The practical implementation of the Biopump system will take advantage of the
robustness and stability of the microorgans and Biopumps for practical
logistical transport using standard shipping means. This will enable local
implementation of microorgan harvest from patients, and Biopump administration
to patients, by their own local physicians.
As the Biopump processing centre model evolves, an additional concept for
partnering has emerged and garnered interest from potential partners: the
establishment and operation of regional or even local Biopump processing
centres. This model can offer pharmaceutical partners the advantages of Biopump
therapy in their market applications, building on their existing infrastructure
for selling injected therapeutics, while sparing them the need to establish
their own Biopump processing centres.
Medgenics believes its unique technology aligns the Company with the objectives
and priorities of the recent U.S. healthcare reforms, since the Biopump directly
addresses major objectives such as:
· reducing costs while not reducing care - the inherent cost-effectiveness of
the Biopump can offer same or superior clinical efficacy at lower cost than
standard of care or current alternative treatments
· preventive medicine - Medgenics believes Biopump technology can make a
significant contribution in such areas as management of renal anaemia, obesity
and diabetes, where control can help prevent deterioration and further health
issues.
· personalised medicine - a Biopump produces the patient's own protein, which
extends the concept of personalised medicine from diagnosis to therapy.
These advances have brought Medgenics to what we believe is a new chapter: the
pre-revenue commercialization stage, where the Company can now focus major
attention on advancing partnering activities towards deals with
bio/pharmaceutical or other therapeutic partners for Biopumps producing various
proteins and clinical applications and with manufacturing partners to set up
Biopump processing centres and produce Biopumps.
We look forward to 2010 with renewed vigour. Against the backdrop of a
difficult financial climate, we are now positioned to move forward on many
fronts with the aim of developing the Biopump as a commercially viable platform
technology, offering substantial advantages to patients, doctors and third-party
payers over existing protein therapies. We will continue to update our
shareholders as we make further progress in these respects."
####
For further information, contact:
+-----------------------------------------+--------------------------+
| Medgenics, Inc. | Phone: +972 4 902 8900 |
| Dr. Andrew L. Pearlman | |
| | |
+-----------------------------------------+--------------------------+
| DeFacto (Financial PR) | Phone: +44 207 861 3838 |
| Michael Wort | |
| Anna Dunphy | |
| | |
+-----------------------------------------+--------------------------+
| Religare Capital Markets (Nominated | Phone: +44 207 444 0800 |
| Adviser) | |
| James Pinner | |
| Derek Crowhurst | |
| | |
+-----------------------------------------+--------------------------+
| SVS Securities plc (Broker) | Phone: +44 207 638 5600 |
| Ian Callaway | |
| | |
| | |
+-----------------------------------------+--------------------------+
| Grayling Global | Phone +1 646 284 9472 |
| Ms. Leslie Wolf-Creutzfeldt | |
| | |
+-----------------------------------------+--------------------------+
Chairman's Review
The Board of Medgenics presents the financial results of the Company and its
subsidiary (the "Group") for the 12 months ended 31 December 2009.
I am pleased to be able to report on a period of significant progress for our
Company during the past financial year, together with a further update on
progress to date. The key points are:
· Signed first commercial agreement concluded with a major pharmaceutical
partner, for preclinical development and option fees for Biopumps producing
blood clotting Factor VIII, with a market leader in haemophilia.
· Completed the low dose stage of the EPODURE Phase I/II clinical trial and
safety review, including attainment of 6-12 months sustained anaemia treatment
from a single treatment and received required Israeli Ministry of Health
approval and raised sufficient funds to commence higher dose groups.
· Introduced "INFRADURE" at its first major clinical conference, presenting
data demonstrating Biopumps producing IFNa intended for use in treatment of
hepatitis C, generating significant new partnering interest and also proving the
Biopump platform can produce various proteins.
· Obtained issuance of key new patents in USA, Japan and Korea.
· Expanded active partnering discussions with interested pharmaceutical and
device companies.
· Raised additional funding, including debentures and warrant exercise, in
the UK and the US.
Operational Review
During the period under review, the financial horizon of the Company provided by
the working capital from our initial placing was extended through an additional
placing of 4,420,000 shares in October 2009 in consideration for $0.4 million;
through the issuance of $0.6 million in convertible debentures during
June-September 2009; and the exercise of warrants in respect of 11,025,832
Common Shares in consideration for $0.4 million, which (together with
non-dilutive funding from the Israel Office of the Chief Scientist) gave the
Company sufficient resources to survive the financial storm of 2009, while
advancing and completing negotiations for our first significant commercial deal
with a tier one international pharmaceutical company. This provided a further,
non-dilutive cash injection of $1.2 million in 2009 and an additional $1.4
million in the first quarter of 2010, which has significantly strengthened our
financial status, and has given momentum to our ongoing fundraising activities
aimed at securing the financial position of the Company and our ongoing
development activities through 2011.
Having successfully completed the first low dose group of our Phase I/II study
of EPODURE in the treatment of anaemia in patients with renal failure, at the
Hadassah Medical Center in Israel, approval has now been received to extend the
study to another of Israel's major teaching hospitals, the Tel Aviv Sourasky
Medical Center, which we believe should significantly help accelerate
recruitment of patients as we proceed with the higher dose groups. EPODURE
Biopumps produce erythropoietin ("EPO") which is used to treat anaemia in
patients with chronic kidney disease.
The data generated in the seven patients in the trial to date is highly
encouraging, with all EPODURE Biopumps producing EPO to an acceptable level
before administration and, once implanted in the patients, delivering active EPO
into the patients for months, with no material adverse effects, and resulting in
haemoglobin elevation and maintenance of an unprecedented 6-12 months from a
single administration of EPODURE Biopumps. The primary endpoint for successful
treatment was the sustained elevation of haemoglobin level for up to 6 months in
each patient following EPODURE treatment compared to the levels projected for
the same period without EPO injections, and without EPODURE treatment. A
secondary objective was, for appropriate dose for a given patient, to maintain
haemoglobin within the target range for these patients for a sustained period.
Both these were attained in most patients, even at the lowest dose of only
20IU/kg/day, with sustained levels of haemoglobin over 6-12 months. In one
formerly EPO-dependent patient, whom we have been following over 18 months, the
haemoglobin levels have remained in the target range for all of that time, which
is a considerable achievement for the technology, both for EPODURE itself and
for the Biopump technology platform more generally.
As the low dose was designed to be equivalent to the low end of the FDA approved
EPO dosing range (3 weekly injections of 50 IU/kg), which is not normally
sufficient to raise haemoglobin to target levels in most patients in routine
use, we were not expecting our low dose EPODURE to be sufficient for most
patients. Thus, we were very pleased to note that, nonetheless, most patients
responded even at this low dose. In accordance with the study protocol, in
those cases where the haemoglobin levels remained below target range, those
patients exited the study to receive supplementary injections of EPO. In
clinical practice, additional Biopumps would be administered to raise the
haemoglobin level, but the protocol of the current trial does not allow for
that.
I am particularly pleased to be able to report the completion of our first
commercial agreement with a tier one international pharmaceutical company. This
preclinical development and option agreement is worth up to $7 million in
payments which include funding for preclinical development of Medgenics' Biopump
protein technology to produce and deliver clotting protein Factor VIII for the
sustained treatment of haemophilia. Under the terms of the agreement, Medgenics
will receive $4 million to work exclusively with this partner for one year to
develop a Biopump to test the feasibility of continuous production and delivery
of this clotting protein. Additional payments totalling $3 million are payable
upon Medgenics meeting certain technical milestones and upon the partner's
exercise of an option to extend the exclusivity through an additional period to
negotiate terms to commercialize the Biopump technology for Factor VIII. We
anticipate having early in vitro data during the second half of this year, which
could lead to the first licensing deal for the technology in 2011.
This haemophilia preclinical development and option deal is extremely important
for the Company on a number of levels:
· Commercially, it generates cash inflows.
· As a "new protein" application for our Biopump technology, it
validates the Biopump as a true platform technology applicable to a wide range
of therapeutic proteins.
· It raises the profile of Medgenics as a partner for companies with
significant interest in the biologics arena.
· It offers potential partners the opportunity to enter the biologics
market without the necessity of building and approving a protein production
plant.
· It circumvents the issues and hurdles to generic biologics in the yet
to be resolved debate over biosimilars.
INFRADURE was introduced for the first time at in April 2010 at the leading
European conference on liver disease, EASL, with the presentation of two
posters, generating interest from liver experts, pharmaceutical and hospital
product companies. The value proposition of INFRADURE was confirmed by our
Scientific Advisory Board experts on hepatitis C, and many of their colleagues
at the EASL conference, as a future treatment of hepatitis C, even with the
likely introduction of new direct antiviral agents.
We have now generated extensive in-vitro data on Biopumps that produce EPO, IFNa
and other proteins, having produced more than 5,000 Biopumps in vitro. This
gives us the confidence that we can look at many of the major biologicals that
are being commercialized today and offer a Biopump alternative.
We believe that this places Medgenics at the very core of personalised and
cost-effective medicine going forward and that Medgenics' technology directly
addresses key goals of the U.S. healthcare reform. We further believe that this
supports our commercialisation plans for our Biopump technology as a robust
platform from which the Company can grow dramatically in the future.
Commercialisation Strategy
The Company's active discussions with potential strategic partners have expanded
with additional companies expressing interest in one or more therapeutic
applications. Furthermore, as the Company has developed its model for Biopump
regional processing centres, this model has sparked new interest in the Biopump
as a technology platform, particularly in potential partners with expertise in
manufacturing and in medical devices. Further updates on these discussions will
be given in due course.
Key Appointments
In December 2009, Dr. Bruce R. Bacon was appointed to the Scientific Advisory
Board of the Company. Dr. Bacon is a former President of the American
Association for the Study of Liver Diseases (AASLD) and a recognized world
expert on hepatitis. Dr. Bacon is the James F. King, MD Endowed Chair in
Gastroenterology, Professor of Internal Medicine and Director of the Division of
Gastroenterology and Hepatology at Saint Louis University School of Medicine in
St. Louis, Missouri. Hepatitis is one of the core areas of treatment that we are
seeking to commercialize. Having an expert of Dr. Bacon's calibre is essential
as we move into the clinic with the exciting new approach to treatment that our
INFRADURE technology offers.
Other
It was with great sadness that the Company announced the death of Lord Leonard
Steinberg, Non-Executive Director, on 2 November 2009. Lord Steinberg had
served as a director of the Company since February 2008 and made an invaluable
contribution to the continuing development of Medgenics and supported the
Company enormously. He will be greatly missed.
Funding
In parallel with the implementation of significant cost cutting measures to
survive the 2009 financial crisis, the directors have focused on raising
additional capital for the Company to continue to finance its operations and to
realize its strategy of completing the Phase I/II clinical trial of EPODURE,
advancing the development of additional products towards clinical trial and
commercialization, developing additional Biopump applications, and pursuing
strategic alliances with major corporations.
In January and February 2009, warrants over 11,025,832 Common Shares were
exercised, raising gross proceeds of $0.4 million.
In May 2009, Medgenics commenced a private placement to accredited investors of
10% convertible debentures, together with warrants to purchase 35% of the number
of shares of Common Shares to be issued upon conversion of such debentures. In
a series of closings, the Company raised $0.6 million in gross proceeds from
this private placement.
In October 2009, Medgenics issued a total of 4,420,000 Common Shares in
consideration for $0.4 million in gross proceeds.
In addition, during 2009 Medgenics received non-dilutive funding of $1.2 million
from its Factor VIII Biopump development agreement and an additional $0.5
million in R&D grants from the Israeli government.
Financial Review
Despite significant economies taken in 2009, the Company has incurred
significant expenditure in carrying out its ongoing clinical trials, in
development of the Biopump platform technology, in maintaining and expanding its
intellectual property, in the active pursuit of strategic partnering and in
fundraising efforts. As a result, the Company has generated a loss of $4.4
million for the year. The Company continues to receive grants from the Israeli
Office of the Chief Scientist. However, the Board is fully aware that there is
still significant further funding required in order to complete the ongoing
trial and other programs for 2010. As highlighted above, the Board is
constantly looking at ways to raise funds through equity funding, grants and/or
strategic partnerships.
Of the funds required for the 2010 program, a total of about $4m is expected in
non-dilutive funding from a combination of the Factor VIII Biopump deal (of
which $1.4m has already been received in 2010) and in funding from the Office of
the Chief Scientist in Israel. Furthermore, in March 2010 the Company
successfully closed an additional round of equity financing, raising gross
proceeds of $1.1 million.
Outlook
With the approval of the Israel Ministry of Health to add an additional clinical
site at Tel Aviv Sourasky Medical Center for our Phase I/II EPODURE clinical
trial, we look forward to treating additional patients in the higher dose group
and receiving further data regarding the efficacy of the technology in the
coming months. We also look forward to obtaining early in vitro data on our
Factor VIII Biopumps. In addition we will be actively pursuing strategic
partnering opportunities that are already in process and seeking additional
opportunities.
Finally I would like to thank all of the team at Medgenics for their dedication
in what was a difficult but productive year for the Company and I know you will
all share in that vote of confidence in the management and advisory boards who
have worked hard to bring the Company to this position.
Professor Eugene Bauer
Chairman of the Board of Directors
4 May 2010
+--------------------------------------------------------------------------+
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
+--------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+--------------------------------------------------------------------------+
+---------------------------------------------+------+-----------+----------+-----------+
| | | December 31, |
+---------------------------------------------+------+----------------------------------+
| |Note | 2009 | | 2008 |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| ASSETS | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| CURRENT ASSETS: | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| Cash and cash equivalents | | $ | | $ |
| | | 469,928 | | 1,043,338 |
+---------------------------------------------+------+-----------+----------+-----------+
| Accounts receivable and prepaid expenses | | 11,187 | | 121,794 |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| Total current assets | | 481,115 | | 1,165,132 |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| LONG TERM ASSETS: | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| Restricted lease deposit | | 24,169 | | 22,607 |
+---------------------------------------------+------+-----------+----------+-----------+
| Prepaid lease payments | | 14,742 | | 22,443 |
+---------------------------------------------+------+-----------+----------+-----------+
| Severance pay fund | | 261,561 | | 171,048 |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| Total long term assets | | 300,472 | | 216,098 |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| PROPERTY AND EQUIPMENT, NET | | 302,733 | | 400,214 |
+---------------------------------------------+------+-----------+----------+-----------+
| | | | | |
+---------------------------------------------+------+-----------+----------+-----------+
| Total Assets | | $ | | $ |
| | | 1,084,320 | | 1,781,444 |
+---------------------------------------------+------+-----------+----------+-----------+
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| LIABILITIES AND SHAREHOLDERS' DEFICIENCY | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| CURRENT LIABILITIES: | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Short-term bank credit | | $ | | $ |
| | | - | | 52,886 |
+-----------------------------------------------+-----+--------------+-+--------------+
| Trade payables | | 947,104 | | 889,002 |
+-----------------------------------------------+-----+--------------+-+--------------+
| Advance payment for research and development | 1c | 667,012 | | - |
| participation | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Other accounts payable and accrued expenses | 3 | 1,689,518 | | 1,068,518 |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Total current liabilities | | 3,303,634 | | 2,010,406 |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| LONG-TERM LIABILITIES: | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Accrued severance pay | | 990,764 | | 818,639 |
+-----------------------------------------------+-----+--------------+-+--------------+
| Convertible debentures | 6 | 1,013,404 | | - |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Total long-term liabilities | | 2,004,168 | | 818,639 |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Total liabilities | | 5,307,802 | | 2,829,045 |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| COMMITMENTS AND CONTINGENCIES | 4 | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| SHAREHOLDERS' DEFICIENCY: | 5 | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Common shares - $0.0001 par value; | | 12,217 | | 10,672 |
| 500,000,000 shares authorized at December | | | | |
| 31, 2009 and 2008; 122,174,027 and | | | | |
| 106,728,195 shares issued and outstanding at | | | | |
| December 31, 2009 and 2008, respectively | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Additional paid-in capital | | 30,327,813 | | 28,968,015 |
+-----------------------------------------------+-----+--------------+-+--------------+
| Receipts on account of shares | | 25,000 | | 150,000 |
+-----------------------------------------------+-----+--------------+-+--------------+
| Deficit accumulated during the development | | (34,588,512) | | (30,176,288) |
| stage | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Total Shareholders' Deficiency | | (4,223,482) | | (1,047,601) |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| | | | | |
+-----------------------------------------------+-----+--------------+-+--------------+
| Total Liabilities and Shareholders' | | $ | | $ |
| Deficiency | | 1,084,320 | | 1,781,444 |
+-----------------------------------------------+-----+--------------+-+--------------+
+--------------------------------------------------------------------------+
| CONSOLIDATED STATEMENTS OF OPERATIONS |
+--------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+--------------------------------------------------------------------------+
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | Year ended | |
| | | | December 31 | |
+--------------------------------------+------+--+---------------------------------------+-+
| |Note | | 2009 | | 2008 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Research and development expenses | | | $ | | $ | |
| | | | 2,342,304 | | 3,435,538 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Less - Participation by the Office | 2 | | (488,532) | | (1,336,446) | |
| of the Chief Scientist | (h) | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Participation of third |1(c) | | (532,988) | | - | |
| party | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Research and development expenses, | | | 1,320,784 | | 2,099,092 | |
| net | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| General and administrative expenses | | | 2,540,452 | | 2,761,008 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Loss from disposal of property and | | | 2,860 | | - | |
| equipment | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Operating loss | | | 3,864,096 | | 4,860,100 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Financial expenses (income) | 8 | | 543,893 | | (11,457) | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Loss before taxes on income | | | 4,407,989 | | 4,848,643 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Taxes on income | 7 | | 1,043 | | 3,615 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Net loss | | | $ | | $ | |
| | | | 4,409,032 | | 4,852,258 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Dividend in respect of reduction in | | | 3,192 | | | |
| exercise price of | | | | | 6,745 | |
| certain warrants | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Net loss attributable to common | | | $ | | $ | |
| shareholders | | | 4,412,224 | | 4,859,003 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Basic and diluted net loss per share | | | $ | | $ | |
| | | | 0.04 | | 0.05 | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| Weighted average number of shares | | | 117,845,867 | | 106,447,604 | |
| used in | | | | | | |
| computing basic and diluted net | | | | | | |
| loss per share | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
| | | | | | | |
+--------------------------------------+------+--+-------------------+-+-----------------+-+
+---------------------------------------------------------------------------------------------------------+
| STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY |
+---------------------------------------------------------------------------------------------------------+
| In US Dollars (except for share data) |
+---------------------------------------------------------------------------------------------------------+
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| | Common shares | | | | Receipts | | Deficit | | |
| | | | | | on | | Accumulated | | Total |
| | | | Additional | | account | | During the | |Shareholders' |
| | | | Paid-in | | of | | Development | | Equity |
| | | | Capital | | shares | | Stage | | (Deficiency) |
+---------------------------------------+------------------------------------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| | Number | | | | | | | | | | |
| | of | | Amount | | | | | | | | |
| | Shares | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Balance as of December 31, 2007 | 104,093,417 | | $ | | $ | | $ | | $(25,317,285) | | $ |
| | | | 10,409 | | 28,634,642 | | - | | | | 3,327,766 |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Cashless exercise of warrants in | 2,462,050 | | 246 | | (246) | | - | | - | | - |
| January 2008 | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Issuance of Common shares to | 142,609 | | 14 | | 31,435 | | - | | - | | 31,449 |
| consultant in April 2008 at $0.22 | | | | | | | | | | | |
| per share | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Exercise of warrants in December 2008 | 30,119 | | 3 | | (3) | | - | | - | | - |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Stock based compensation related to | - | | - | | 295,442 | | - | | - | | 295,442 |
| options granted to | | | | | | | | | | | |
| consultants and employees | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Receipts on account of shares in | - | | - | | - | | 150,000 | | - | | 150,000 |
| respect to exercise of warrants in | | | | | | | | | | | |
| January 2009 | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Dividend in respect of reduction in | - | | - | | 6,745 | | - | | (6,745) | | - |
| exercise price of certain 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) |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Exercise of warrants in January and | 11,025,832 | | 1,103 | | 387,821 | | (150,000) | | - | | 238,924 |
| February 2009 | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Stock based compensation related to | - | | - | | 604,567 | | - | | - | | 604,567 |
| options granted to | | | | | | | | | | | |
| consultants and employees | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Issuance of Common Shares in October | 4,420,000 | | 442 | | 364,218 | | - | | | | 364,660 |
| 2009, net at $0.10 per | | | | | | | | | - | | |
| Share | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Receipts on account of shares in | - | | - | | - | | 25,000 | | - | | 25,000 |
| respect to exercise of warrants in | | | | | | | | | | | |
| January 2010 | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Dividend in respect of reduction in | - | | - | | 3,192 | | - | | (3,192) | | - |
| exercise price of certain warrants | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Net loss | - | | - | | - | | - | | (4,409,032) | | (4,409,032) |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
| Balance as of December 31, 2009 | 122,174,027 | | $ | | $ | | $ | | $(34,588,512) | | $(4,223,482) |
| | | | 12,217 | | 30,327,813 | | 25,000 | | | | |
+---------------------------------------+-------------+----------+-----------+----------+----------------+----------+-------------+----------+---------------+----------+---------------+
+----------------------------------------------------------------------------+
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
+----------------------------------------------------------------------------+
| In US Dollars |
+----------------------------------------------------------------------------+
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | |
| | | | |
| | | | |
| | | | |
| | | Year ended December 31 | |
+-------------------------------------+----------+--------------------------------------+----------+
| | | 2009 | | 2008 | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| CASH FLOWS FROM OPERATING | | | | | |
| ACTIVITIES: | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Net loss | | $ | | $ | |
| | | (4,409,032) | | (4,852,258) | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Adjustments to reconcile net loss | | | | | |
| to net cash used in | | | | | |
| operating activities: | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Depreciation | | 120,483 | | 96,497 | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Exchange differences on a long term | | - | | - | |
| loan | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Loss from disposal of property and | | 2,860 | | - | |
| equipment | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Issuance of shares in consideration | | - | | - | |
| for providing security for | | | | | |
| letter of credit | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Stock based compensation related to | | 604,567 | | 295,442 | |
| options and warrants | | | | | |
| granted to employees and | | | | | |
| consultants | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Interest and amortization of | | - | | - | |
| beneficial conversion feature of | | | | | |
| convertible note | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Change in fair value of convertible | | 443,404 | | - | |
| debentures | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Accrued severance pay, net | | 81,612 | | 77,035 | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Exchange differences on a | | (1,562) | | - | |
| restricted lease deposit | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Increase in trade payables | | 66,194 | | 439,036 | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Decrease in accounts receivable | | 110,607 | | 261,354 | |
| and pre-paid | | | | | |
| expenses | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Increase in other accounts payable | | 1,288,012 | | 564,055 | |
| and accrued expenses | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Net cash used in operating | | (1,692,855) | | (3,118,839) | |
| activities | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| CASH FLOWS FROM INVESTING | | | | | |
| ACTIVITIES: | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Proceeds from disposal of property | | - | | - | |
| and equipment | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Decrease (Increase) in prepaid | | 7,701 | | (10,939) | |
| lease payments | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Increase in restricted lease | | - | | (22,607) | |
| deposit | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Purchase of property and equipment | | (33,954) | | (371,622) | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Net cash used in investing | | (26,253) | | (405,168) | |
| activities | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| CASH FLOWS FROM FINANCING | | | | | |
| ACTIVITIES: | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Proceeds from issuance of shares, | | 364,660 | | (309,741) | |
| net | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Proceeds from exercise of warrants, | | 263,924 | | 150,000 | |
| net | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Proceeds from a convertible Note | | 570,000 | | - | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Increase (Decrease) in short-term | | (52,886) | | 43,172 | |
| bank credit | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Net cash provided by (used in) | | 1,145,698 | | (116,569) | |
| financing activities | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Decrease in cash and cash | | (573,410) | | (3,640,576) | |
| equivalents | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Balance of cash and cash | | 1,043,338 | | 4,683,914 | |
| equivalents at the beginning of the | | | | | |
| period | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
| Balance of cash and cash | | $ | | $ | |
| equivalents at the end of the | | 469,928 | | 1,043,338 | |
| period | | | | | |
+-------------------------------------+----------+-------------+----------+-------------+----------+
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | |
| | | | |
| | | | |
| | | | |
| | | Year ended December 31 | |
+-----------------------------------------+----------+----------------------------+----------+
| | | 2009 | | 2008 | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| Supplemental disclosure of cash flow | | | | | |
| information: | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| Cash paid during the period for: | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| Interest | | $ | | $ | |
| | | 36,192 | | 833 | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| Taxes | | $ | | $ | |
| | | 13,243 | | 12,420 | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| Supplemental disclosure of non cash | | | | | |
| flow information: | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| Purchase of property and equipment | | $ | | $ | |
| | | - | | 8,092 | |
+-----------------------------------------+----------+--------+----------+--------+----------+
| | | | | | |
+-----------------------------------------+----------+--------+----------+--------+----------+
+----------------------------------------------------------------------------+
| NOTES TO THE FINANCIAL INFORMATION |
+----------------------------------------------------------------------------+
| In US Dollars |
+----------------------------------------------------------------------------+
NOTE 1:- GENERAL
a. Medgenics, Inc. ("the Company") was incorporated in January 2000 in
Delaware. The Company has a 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
Accounting Standards Codification ("ASC") Topic number 915 "Development Stage
Entities" ("ASC 915") (originally issued as "FAS 7").
The financial information set out in this final results announcement
does not constitute the Company's audited accounts but it is derived from those
accounts. The consolidated statement of financial position at 31 December 2009
and the consolidated statement of operations, the consolidated statement of cash
flows and the Statements of Changes in Shareholders' Deficiency for the year
then ended and the notes to the financial information have been extracted from
the Group's 2009 audited financial statements upon which the auditor's opinion
is unqualified (other than an emphasis of matter which refers to the going
concern status of the Company as outlined in more detail in Note 1(b)) and which
were approved by the Board on 4 May 2010.
Copies of this final results announcement are available from the
Company's website (www.medgenics.com). Copies of the Annual Report and Accounts
will be sent to shareholders by 21 May 2010 and will be also be available on the
Company's website from the date of posting.
On December 4, 2007 the Company's Common shares wereadmitted for trading on the
AIM market of the London Stock Exchange.
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 information, the Company incurred a loss during the year
ended December 31, 2009 of $ 4,409,032 and has an accumulated deficit since
inception in the amount of $ 34,588,512. The Company and its subsidiary have not
yet generated revenues from product sale and have negative cash flows from
operations. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans include seeking
additional investments to continue the operations of the Company and its
subsidiary. However, there is no assurance that the Company will be successful
in its efforts to raise the necessary capital to continue its planned research
and development activities. The consolidated financial statements do not include
any adjustments with respect to the carrying amounts of assets and liabilities
and their classification that might result from the outcome of this uncertainty.
c. On October 22, 2009 ("Effective Date") the Company signed a preclinical
development and option agreement which was amended in December 2009 ("the
Agreement"), with a major international healthcare company ("the healthcare
company") that is a market leader in the field of hemophilia. The Agreement
includes funding for preclinical development of the Company's Biopump protein
technology to produce and deliver the clotting protein Factor VIII ("FVIII") for
the sustained treatment of hemophilia.
Under the terms of the Agreement, the Company will receive up to $4.1 million to
work exclusively with the healthcare company for one year to develop a Biopump
to test the feasibility of continuous production and delivery of this clotting
protein. The amount of $4.1 million will include the following:
· $1.5 million to work exclusively with the healthcare company (Standstill
Payment)
· $2.6 million as development funding
Additional payments totaling $3 million are payable upon the Company's meeting
certain milestones ($0.5 million) and upon the healthcare company's exercise of
an option to extend the exclusivity through an additional period to negotiate
terms to commercialize the Biopump technology for FVIII ($2.5 million).
If the two parties choose not to proceed to a full commercial agreement, the
Company will receive all rights to the jointly developed intellectual property
and will pay royalties to the healthcare company on any future proceeds arising
from such intellectual property up to a maximum of ten times the total funds
paid by the healthcare company.
According to the above, the Company will recognize income in its statements of
operation as follows:
· Standstill Payment - ratably over the expected standstill period, commencing
on the Effective Date and expiring on October 22, 2010, taking into
consideration the probability of the extension period.
· Development- based on hours incurred assigned to the project and expenses
incurred. The excess of the recognized amount received from the healthcare
company over the amount of research and development expenses incurred during the
period shall be recognized as other income within operating income.
· Milestones - upon the achievement of the specific milestone.
Regarding the option to negotiate a future definitive agreement for the
continuation of the development or for a sale, license or other transfer of the
FVIII Biopump technology, as of the Balance Sheet date, the Company estimated
the value of this Option at the effective date as immaterial.
As of balance sheet date, the Company has recognized an income of $532,988
related to the Standstill Payment and to the development which is classified as
a reduction of research and development expenses in the statement of operations.
A payment of $1.2 million was received from the healthcare company in November
2009 and an additional payment of $1.4 million was received subsequent to
balance sheet date, in February 2010.
d. During 2009 the subsidiary received approval for an additional Research
and Development program from the Office of the Chief Scientist in Israel for the
period April 2009 through March 2010 (which was extended to August 2010
subsequent to balance sheet date).
The approval allows for a grant of up to approximately $1.3 million
based on R&D expenses of up to $2.1 million.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with United
States Generally Accepted Accounting Principles ("U.S. GAAP").
a. Use of estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates, judgments and assumptions. The Company's
management believes that the estimates, judgments and assumptions used are
reasonable based upon information available at the time they are made. These
estimates, judgments and assumptions can affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
b. Financial statements in Dollars
The majority of the Company and its subsidiary's operations are currently
conducted in Israel; however, most of the expenses are denominated in or linked
to U.S. Dollars ("Dollars"). Financing activities including loans, equity
transactions and cash investments, are made mainly in Dollars. The Company's
management believes that the Dollar is the primary currency of the economic
environment in which the Company and its subsidiary operate. Thus, the
functional and reporting currency of the Company and its subsidiary is the
Dollar.
Accordingly, transactions and balances denominated in Dollars are
presented at their original amounts. Non-Dollar transactions and balances have
been re-measured to Dollars, in accordance with ASC 830 of the Financial
Accounting Standards Board ("FASB") (originally issued as FAS 52). All exchange
gains and losses from re-measurement of monetary balance sheet items denominated
in non-Dollar currencies are reflected in the statements of operations as
financial income or expenses, as appropriate.
c. Accrued severance pay
The subsidiary's liability for severance pay is calculated pursuant to the
Israeli severance pay law based on the most recent salary for the employees
multiplied by the number of years of employment, as of the balance sheet date.
Employees are entitled to one month salary for each year of employment or a
portion thereof. In addition, several employees are entitled to additional
severance compensation as per their employment agreement. The subsidiary's
liability for all of its employees is fully provided by an accrual and is mainly
funded by monthly deposits with insurance policies. The value of these policies
is recorded as an asset in the Company's balance sheet.
The deposited funds may be withdrawn only upon the fulfillment of the obligation
pursuant to Israeli severance pay law or labor agreements. The value of the
deposited funds is based on the cash surrender value of these policies and
includes profits or losses as appropriate.
Severance expenses for the years ended December 31, 2009 and 2008 amounted to
$172,125 and $155,848, respectively.
d. Income taxes
The Company and its subsidiary account for income taxes in accordance with ASC
740, "Income Taxes" ")ASC 740 ,( " (originally issued as FAS 109). ASC 740
prescribes the use of the liability method whereby deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
The Company and its subsidiary provide a valuation allowance, if necessary, to
reduce deferred tax assets to their estimated realizable value. As of December
31, 2009 a full valuation allowance was provided by the Company.
On January 1, 2007, the Company adopted ASC 740-10, "Accounting for Uncertainty
in Income Taxes", (originally issued as "FIN 48"). ASC 740-10 contains a
two-step approach for recognizing and measuring uncertain tax positions
accounted for in accordance with ASC 740. The first step is to evaluate the tax
position taken or expected to be taken in a tax return by determining if the
weight of available evidence indicates that it is more likely than not that, on
an evaluation of the technical merits, the tax position will be sustained on
audit, including resolution of any related appeals or litigation processes. The
second step is to measure the tax benefit as the largest amount that is more
than 50% likely to be realized upon ultimate settlement.
e. Stock based compensation
On January 1, 2006, the Company adopted ASC 718, "Compensation-Stock
Compensation" ("ASC 718"), (originally issued as FAS 123(R)) which requires the
measurement and recognition of compensation expense based on estimated fair
values for all share-based payment awards made to employees and directors.
ASC 718 requires companies to estimate the fair value of equity-based payment
awards on the date of grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as an
expense over the requisite service periods in the Company's consolidated
statement of operations. Prior to the adoption of ASC 718, the Company accounted
for equity-based awards to employees and directors using the intrinsic value
method in accordance with APB 25.
The Company adopted ASC 718 using the modified prospective transition method,
which requires the application of the accounting standard starting from January
1, 2006, the first day of the Company's fiscal year 2006. Under that transition
method, compensation cost recognized in the years ended December 31, 2009 and
2008 includes compensation cost for all share-based payments granted subsequent
to January 1, 2006, based on the grant-date fair value estimated in accordance
with the provisions of ASC 718. Results for prior periods have not been
restated.
The Company recognized compensation expenses for awards granted subsequent to
January 1, 2006 based on the straight line method over the requisite service
period of each of the grants, net of estimated forfeitures.
The Company estimated the fair value of stock options granted to employees and
directors using the Binomial option pricing model.
During 2009 no options were granted to employees or directors of the Company. In
2008 the Company estimated the fair value of stock options granted to employees
and directors using the Binominal options pricing model with the following
assumptions:
+---------------------+--------------+
| | 2008 |
+---------------------+--------------+
| | |
+---------------------+--------------+
| Dividend yield | 0% |
+---------------------+--------------+
| Expected volatility |44.4%-111.1% |
+---------------------+--------------+
| Risk-free interest | 1.5%-5.4% |
| rate | |
+---------------------+--------------+
| Forfeiture rates | 8.2%-10.5% |
+---------------------+--------------+
| Suboptimal exercise | 2.2-2.4 |
| factor | |
+---------------------+--------------+
| Contractual life | 5 |
| (in years) | |
+---------------------+--------------+
The Company uses historical data of traded companies to estimate pre and post
vesting exit rate within the valuation model; separate groups of employees that
have similar historical exercise behavior are considered separately for
valuation purposes.
The suboptimal exercise factor represents the value of the underlying stock as a
multiple of the exercise price of the option which, if achieved, results in
exercise of the option.
The risk-free interest rate assumption is based on observed interest rates
appropriate for the term of the Company's employee stock options.
The Company has historically not paid dividends and has no foreseeable plans to
issue dividends.
The Company applies ASC 718 and ASC 505-50 "Equity- Based Payments to Non
-Employees", with respect to options issued to non-employees. ASC 718 requires
the use of option valuation models to measure the fair value of the options. The
fair value of these options was estimated at grant date and at the end of each
reporting period, using the Binomial option pricing model with the following
assumptions:
+--------------------+----------+--------------+----------+-------------+
| | | 2009 | | 2008 |
+--------------------+----------+--------------+----------+-------------+
| | | | | |
+--------------------+----------+--------------+----------+-------------+
| Dividend yield | | 0% | | 0% |
+--------------------+----------+--------------+----------+-------------+
| Expected | |74.6%-122.1% | |67.5%-77.5% |
| volatility | | | | |
+--------------------+----------+--------------+----------+-------------+
| Risk-free interest | | 0.4%-2.5% | | 1.2%-2.2% |
| rate | | | | |
+--------------------+----------+--------------+----------+-------------+
| Expected life (in | | 1.3-4.9 | | 2.3-4.8 |
| years) | | | | |
+--------------------+----------+--------------+----------+-------------+
f. Net loss per share
Basic net loss per share is computed based on the weighted average number of
Common shares outstanding during each year. Diluted net loss per share is
computed based on the weighted average number of Common shares outstanding
during each year, plus the dilutive effect of options considered to be
outstanding during each year, in accordance with ASC 260, "Earnings Per Share"
("ASC 260") (originally issued as "FAS 128").
In 2008 and 2009, all outstanding stock options and warrants have been
excluded from the calculation of the diluted net loss per Common share because
all such securities were anti-dilutive for the periods presented.
g. Research and development ("R&D") expenses
All research and development expenses, net of grants and
participations, are charged to the statement of operations as incurred.
h.Grants and participation
Royalty-bearing grants from the Office of the Chief Scientist of the Government
of Israel for funding approved research and development projects are recognized
at the time the subsidiary is entitled to such grants, on the basis of the costs
incurred and are presented as a deduction from research and development
expenses.
Participation from third party for funding the development of the
Company's FVIII Biopump are presented as a deduction from research and
development expenses.
The excess of the recognized amount received from the funding party
over the amount of research and development expense incurred is recognized as a
component of operating income.
i. Impact of recently issued Accounting Standards
1. In June 2009, FASB issued ASC Topic No. 105 "Generally Accepted
Accounting Principles" ("the Codification"). The Codification was effective for
interim and annual periods ended after September 15, 2009 and became the single
official source of authoritative, nongovernmental U.S. GAAP, other than guidance
issued by the Securities and Exchange Commission. All other literature is
non-authoritative. The adoption of the Codification did not have a material
impact on the Company's consolidated financial statements and notes thereto.
The Company has appropriately updated its disclosures with the appropriate
Codification references for the year ended December 31, 2009. As such, all the
notes to the consolidated financial statements have been updated with the
appropriate Codification references.
2. In October 2009, the FASB issued ASU 2009-13, "Revenue Recognition (ASC
Topic 605)-Multiple-Deliverable Revenue Arrangements" ("ASU 2009-13"). ASU
2009-13 amends the criteria in ASC Subtopic 605-25, "Revenue
Recognition-Multiple-Element Arrangements", for separating consideration in
multiple-deliverable arrangements. This update addresses the accounting for
multiple-deliverable arrangements to enable vendors to account for products or
services (deliverables) separately rather than as a combined unit. ASU 2009-13
modifies the requirements for determining whether a deliverable can be treated
as a separate unit of accounting by removing the criteria that verifiable and
objective evidence of fair value exists for the undelivered elements. This
guidance eliminates the residual method of allocation and requires that
arrangement consideration be allocated at the inception of the arrangement to
all deliverables using the relative selling price method. This guidance
establishes a selling price hierarchy for determining the selling price of a
deliverable, which is based on: a) vendor-specific objective evidence; b)
third-party evidence; or c) estimates. In addition, this guidance significantly
expands required disclosures related to a vendor's multiple-deliverable revenue
arrangements. ASU 2009-13 is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010, with early adoption permitted. The Company has chosen not to early
adopt ASU 2009-13. The Company is currently evaluating the potential impact, if
any, of the adoption of ASU 2009-13 on its consolidated financial statements.
3. In May 2009, the FASB issued ASC 855 "Subsequent Events" ("ASC 855")
(originally issued as "FAS 165").
ASC 855 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. ASC 855 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.
NOTE 3:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
+------------------------------------------+----------+-----------+----------+-----------+
| | | December 31, |
+------------------------------------------+----------+----------------------------------+
| | | 2009 | | 2008 |
+------------------------------------------+----------+-----------+----------+-----------+
| | | | | |
+------------------------------------------+----------+-----------+----------+-----------+
| Employees and payroll accruals | | $ | | $ |
| | | 783,299 | | 641,916 |
+------------------------------------------+----------+-----------+----------+-----------+
| Governmental authorities | | 96,455 | | - |
+------------------------------------------+----------+-----------+----------+-----------+
| Interest payable on debentures | | 32,703 | | - |
+------------------------------------------+----------+-----------+----------+-----------+
| Accrued expenses and others | | 777,061 | | 426,602 |
+------------------------------------------+----------+-----------+----------+-----------+
| | | | | |
+------------------------------------------+----------+-----------+----------+-----------+
| | | $ | | $ |
| | | 1,689,518 | | 1,068,518 |
+------------------------------------------+----------+-----------+----------+-----------+
NOTE 4:- COMMITMENTS AND CONTINGENCIES
a. License agreements
1. On November 23, 2005 the Company signed a new agreement with Yissum
Research and Development Company of the Hebrew University of Jerusalem
("Yissum"). According to the agreement, Yissum granted the Company a license of
certain patents for commercial development, production, sub-license and
marketing of products to be based on its know-how and research results. In
consideration, the Company agreed to pay Yissum the following amounts:
(a) Three fixed installments measured by reference to investment made in
the Company, as follows:
I. 1st installment - $50,000 shall be paid when the cumulative
investments in the Company by any third party or parties, from May 23, 2005,
amount to at least $3,000,000.
II. 2nd installment - $150,000 shall be paid when the cumulative investments
in the Company by any third party or parties, from May 23, 2005, amount to at
least $12,000,000.
III. 3rd installment - $200,000 shall be paid when the cumulative investments
in the Company by any third party or parties, from May 23, 2005, amount to at
least $18,000,000.
The 1st installment of $50,000 to Yissum was paid on June 5, 2007. As of
December 31, 2009 the Company has a full accrual for the 2nd installment since
the cumulative investment of $12,000,000 was almost reached. Payments to Yissum
are recorded as R&D expenses.
(b) Royalties at a rate of 5% of net sales of the product.
(c) Sub-license fees at a rate of 9% of sublicense considerations.
The total aggregate payment of royalties and Sub-license fees by the Company to
Yissum shall not exceed $10,000,000.
2. Pursuant to an agreement dated January 25, 2007 between Baylor College
of Medicine ("Baylor") and the Company, Baylor granted the Company a non
exclusive worldwide license of a certain technology ("the Subject Technology").
This agreement modifies collaboration agreements entered into on January 25,
2006 and April 6, 2006.
The license gives the Company a non exclusive right to use, market,
sell, lease and import the Subject Technology by way of any product process or
service that incorporates, utilizes or is made with the use of the Subject
Technology.
The Company has agreed to pay Baylor:
i a one time, non-refundable license fee of $25,000 which was paid in
2007;
ii an annual non-refundable maintenance fee of $20,000;
iii a one time milestone payment of $75,000 upon FDA clearance or equivalent
of clearance for therapeutic use. As of the balance sheet
date, the Company did not achieve FDA clearance; and
iiii an installment of $25,000 upon executing any sub-licenses that the
Company executes in respect of the Subject Technology.
The license agreement shall expire (unless terminated earlier for default or by
the Company at its discretion) on the first day following the tenth anniversary
of the first commercial sale of licensed products by the Company, following
which the Company shall have a perpetual, royalty free license to the Subject
Technology.
b.Letter of credit
Under the terms of an irrevocable Letter of Credit issued on November 26, 2007
an amount of up to $500,000 was available (subject to certain conditions) for
drawdown at any time during an 18-month period which expired on May 25, 2009.
The Letter of Credit facility was provided by the Canadian Imperial Bank of
Commerce and was procured by CIBC Trust Company (Bahamas) Limited (the "Trust"),
one of the Company's shareholders, for the benefit of the Company. One of the
beneficiaries of the Trust is a director of the Company.
In consideration for the Trust arranging the issue of the Letter of Credit, the
Company paid as follows: (i) $12,500 in cash in 2007 and (ii) issuance of 76,389
Common shares with a market value of $15,748. At the 12 month anniversary of the
date of issue, the Company should have paid to the Trust an additional fee of
$6,000. As of December 31, 2009, this amount is recorded as accrued expenses.
c. Chief Scientist
Under agreements with the Office of the Chief Scientist in Israel regarding
research and development projects, the subsidiary is committed to pay royalties
to the Office of the Chief Scientist at rates between 3.5% and 5% of the income
resulting from this research and development, at an amount not to exceed the
amount of the grants received by the subsidiary as participation in the research
and development program, plus interest at LIBOR. The obligation to pay these
royalties is contingent on actual income and in the absence of such income no
payment is required. As of December 31, 2009 the aggregate contingent liability
amounted to approximately $3.7 million.
d. Clinical trials
On July 30, 2008 approval was received from the Israel Ministry of Health to
conduct a Phase I/II safety and efficacy trial of the EPODURE Biopump for
providing sustained treatment of anemia in patients with chronic kidney disease.
The subsidiary had agreements with physicians, consultants and Hadasit Medical
Research and Development Ltd. ("Hadasit") to operate the trial. The major
agreements were entered into in April 2008, with Hadasit to conduct the clinical
trial at Hadassah Medical Center ("Hadassah"). The subsidiary paid Hadasit about
$8,400 per month through September 2009 to conduct the trial in addition to an
estimated cost of $9,156 per patient in the trial. The subsidiary also used the
lab facilities at a cost of about $33,000 per month through March 2009.
On April 15, 2010, approval was received from the Israel Ministry of Health to
continue the clinical trial at Tel Aviv Medical Center. The subsidiary will
continue to use the labs facilities at Hadassah.
e. Lease Agreement
1. The facilities of the subsidiary are rented under operating lease
agreement for a three year period ending December 2010 with an option to renew
the lease for an additional 12 month period. Future minimum lease commitment
under the existing non-cancelable operating lease agreement for 2010 is
approximately $54,000.
The subsidiary pledged a bank deposit which is used as a bank guarantee
at an amount of $24,169 to secure its payments under the lease agreement.
2. The subsidiary leases vehicles under standard commercial operating leases.
Future minimum lease commitments under various non-cancelable operating lease
agreements in respect of motor vehicles are as follows:
+---------------------------+--------+
| Year | |
+---------------------------+--------+
| | |
+---------------------------+--------+
| 2010 | $ |
| | 43,891 |
+---------------------------+--------+
| 2011 | 25,180 |
+---------------------------+--------+
| 2012 | 3,663 |
+---------------------------+--------+
| | |
+---------------------------+--------+
| | $ |
| | 72,734 |
+---------------------------+--------+
The subsidiary paid the last three months lease installments in advance which
amounted to $14,742.
NOTE 5:- SHAREHOLDERS' EQUITY
a. Composition:
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
| | December 31, | | December 31, |
+------------------+--------------------------------------+----------+--------------------------------------+
| | 2009 | | 2008 | | 2009 | | 2008 |
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
| | Authorized | | Issued and Outstanding |
+------------------+--------------------------------------+----------+--------------------------------------+
| | Number of shares |
+------------------+----------------------------------------------------------------------------------------+
| | | | | | | | |
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
| Shares of | | | | | | | |
| $0.0001 par | | | | | | | |
| value: | | | | | | | |
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
| | | | | | | | |
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
| Common shares | 500,000,000 | | 500,000,000 | | 122,174,027 | | 106,728,195 |
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
| | | | | | | | |
+------------------+-------------+----------+-------------+----------+-------------+----------+-------------+
b. Common shares
The Common shares confer upon the holders the right to receive notice to
participate and vote in general and special meetings of the shareholders of the
Company and the right to receive dividends, if declared.
c.Issuance of shares and warrants to investors
1. In January 2008, a total of 3,560,314 warrants were exercised in a cashless
conversion to 2,414,326 Common shares by consultants of the Company. In
addition 47,724 warrants were exercised and resulted in the issuance of 47,724
Common shares. The cash consideration received was immaterial.
2. In April 2008, the Company issued a total of 142,609 Common shares to an
advisor in consideration for assistance with the Company's fund raising in
relation to the placing of the Common shares on December 4, 2007.
3. In December 2008, 30,119 warrants were exercised and resulted in the
issuance of 30,119 Common shares. The cash consideration received upon exercise
of the warrants was immaterial.
4. On December 17, 2008, the Company announced that it was implementing a
warrant repricing program ("program") to encourage the exercise of existing
warrants provided that such exercise be completed by January 30, 2009. During
February 2009, the Company extended the date to February 13, 2009. To encourage
existing warrant holders to exercise their warrants for cash before the closing
date as aforesaid, the following terms were offered:
a) Reduced Exercise Price: $0.0375/share (2.5 pence/share) or the current
exercise price, whichever is lower;
b) Bonus Warrants: for every one dollar ($1.00) or 0.667 GBP paid for
exercise of warrants during this program, a new bonus warrant will be issued to
purchase three Common Shares, which will be immediately exercisable for three
years at an exercise price of $0.25 per share.
The exercise price of any warrants that were not exercised before the expiration
of the program revert to the original price as stated in the warrant prior to
this program.
5. Pursuant to the warrant repricing program mentioned above, during January
and February 2009, 11,025,832 warrants were exercised into 11,025,832 Common
shares in consideration for a reduced price of $ 406,048 and the issuance of
1,218,144 new warrants as a bonus. The issuance costs were $17,124. The bonus
warrants were 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. According to ASC 815 the benefit resulted 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 December 31, 2009, respectively,
was recorded as a dividend to the warrant holders.
6. On October 6, 2009, the Company issued a total of 4,420,000 Common shares
in consideration for GBP 265,200 ($423,475). The issuance costs were $58,815.
e. Stock options and warrants to employees and directors
1. On June 12, 2008, the Company granted to the Company's employees 3,188,370
options exercisable at a price of $0.146 per share. The options vest in four
equal annual tranches of 797,092. The options were granted under the stock
option plan terms. The fair value of these options at the grant date was $0.036
per option.
2. On December 1, 2008, the Company granted to a Company's director 1,711,319
options exercisable at a price of $0.042 per share. Upon the death of the
director in November 2009, 570,440 options were vested, and are exercisable
until November 2010. The fair value of these options at the grant date was
$0.0261 per option.
3. No options or warrants were granted to employees or directors during the
year ended December 31, 2009.
4. A summary of the Company's activity for options and warrants granted to
employees and directors is as follows:
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| | Year ended December 31, 2009 |
+----------------------+-----------------------------------------------------------------------------------+
| | | | | | Weighted | | |
| | | | | | average | | |
| | | |Weighted | | remaining | | |
| | Number | | average | |contractual | |Aggregate |
| | of | |exercise | | terms (in | |intrinsic |
| | options | | price | | years) | | value |
| | and | | | | | | price |
| | warrants | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| Options and warrants | 85,853,410 | | $ | | | | |
| outstanding | | | 0.081 | | | | |
| at the beginning | | | | | | | |
| of the year | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| Changes during the | | | | | | | |
| year: | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| Forfeited | (2,595,501) | | 0.109 | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| Options and warrants | 83,257,909 | | $ | | 1.56 | | $ |
| outstanding | | | 0.081 | | | | 4,342,931 |
| at the end of the | | | | | | | |
| year | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| Options and warrants | 74,023,902 | | $ | | 1.45 | | $ |
| exercisable | | | 0.071 | | | | 4,223,830 |
| at the end of the | | | | | | | |
| year | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
| Options and warrants | 82,456,683 | | $ | | 1.55 | | $ |
| vested and expected | | | 0.080 | | | | 4,332,986 |
| to vest | | | | | | | |
+----------------------+-------------+----------+----------+----------+-------------+----------+-----------+
As of December 31, 2009, there was $434,529 of total unrecognized compensation
cost related to non-vested share-based compensation arrangements granted to
employees. That cost is expected to be recognized over a weighted-average period
of 0.8 years.
Calculation of aggregate intrinsic value is based on the share price of the
Company's Common shares as of December 31, 2009 ($0.1234 / 0.075 GBP,
per share).
5. The Company's outstanding options and warrants under the Company's stock
option plan to employees and directors as of December 31, 2009 have been
separated into ranges of exercise prices as follows:
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| Issuance date | | Options | |Exercise | Options | | Weighed |
| | | and | | price | and | | average |
| | | warrants | | | warrants | | remaining |
| | |outstanding | | |exercisable | |contractual |
| | | | | | | | term |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| | | | | | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| March 2006 | | 14,480,755 | | $ | 14,480,755 | | 1.25 |
| | | | | 0.0001 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| March 2006 | | 46,478,702 | | $ | 44,879,148 | | 1.25 |
| | | | | 0.071 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| April 2006 | | 1,599,549 | | $ | 1,599,549 | | 1.28 |
| | | | | 0.071 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| May 2006 | | 3,419,430 | | $ | 2,564,572 | | 1.36 |
| | | | | 0.071 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| September 2006 | | 1,599,549 | | $ | 1,599,549 | | 1.72 |
| | | | | 0.071 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| August 2007 | | 1,497,404 | | $ | 748,702 | | 2.65 |
| | | | | 0.120 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| November 2007 | | 11,878,332 | | $ | 7,147,750 | | 2.87 |
| | | | | 0.210 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| June 2008 | | 1,733,748 | | $ | 433,437 | | 3.45 |
| | | | | 0.146 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| December 2008 | | 570,440 | | $ | 570,440 | | 0.92 |
| | | | | 0.042 | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| | | | | | | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
| Total | | 83,257,909 | | | 74,023,902 | | |
+------------------+----------+-------------+----------+----------+-------------+----------+-------------+
6. Compensation expenses related to options granted to employees and directors
were recorded, in the statements of operations in the following line items:
+-------------------------+----------+---------+----------+---------+----------+
| | | Year ended December 31, | |
+-------------------------+----------+------------------------------+----------+
| | | 2009 | | 2008 | |
+-------------------------+----------+---------+----------+---------+----------+
| | | | | | |
+-------------------------+----------+---------+----------+---------+----------+
| Research and | | $ | | $ | |
| development expenses | | 102,683 | | 98,072 | |
+-------------------------+----------+---------+----------+---------+----------+
| General and | | 309,218 | | 343,916 | |
| administrative expenses | | | | | |
+-------------------------+----------+---------+----------+---------+----------+
| | | | | | |
+-------------------------+----------+---------+----------+---------+----------+
| | | $ | | $ | |
| | | 411,901 | | 441,988 | |
+-------------------------+----------+---------+----------+---------+----------+
f. Warrants and options to-non-employees
1. On October 16, 2008, the Company granted to a consultant 677,397
warrants exercisable at a price of $0.146 per share and having a 5 year term.
33.3% of the warrants vested immediately at the grant date and the remaining
portion of the warrants vest in two equal annual tranches starting from the
grant date of 225,799. The warrants were granted under the stock option plan
terms. The fair value of these warrants at the grant date was $0.00511. The fair
value was estimated using Binomial model with the following weighted-average
assumptions: expected stock price volatility range of 62%, risk-free interest
rate of 4.2%, expected dividend yield of 0% and a contractual life of the
options of five years.
2. On December 1, 2008, the Company granted to a consultant 2,353,064
warrants exercisable at a price of $0.194 per share and having a 5 year term.
The warrants vest immediately at the grant date. The warrants were granted under
the stock option plan terms. The fair value of these warrants at the grant date
was $0.00934 per warrant.
3. On December 7, 2009, the Company granted to a consultant 677,397 options
exercisable at a price of $0.12 per share and having a 5 year term. The options
vest in three equal annual tranches of 225,799. The options were granted under
the stock option plan terms. The fair value of these options at the grant date
was $0.08768 per warrant. The fair value was estimated using Binomial model with
the following weighted-average assumptions: expected stock price volatility
range of 74.9%, risk-free interest rate of 2.4%, expected dividend yield of 0%
and a contractual life of the options of five years.
4. A summary of the Company's stock option activity for warrants and options
granted to consultants under the stock option plan is as follows:
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| | Year ended December 31, 2009 |
+----------------------+----------------------------------------------------------------------------------+
| | | | | | Weighted | | |
| | | | | | average | | |
| | | |Weighted | | remaining | | |
| | Number | | average | |contractual | |Aggregate |
| | of | |exercise | | terms (in | |intrinsic |
| | Warrants | | price | | years) | | value |
| | and | | | | | | price |
| | options | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| Warrants and options | 19,795,892 | | $ | | | | |
| outstanding | | | 0.115 | | | | |
| at the beginning of | | | | | | | |
| the year | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| Changes during the | | | | | | | |
| year: | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| Granted | 677,397 | | 0.12 | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| Warrants and options | 20,473,289 | | $ | | 2.21 | | $ |
| outstanding | | | 0.116 | | | | 607,399 |
| at the end of the | | | | | | | |
| year | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
| Warrants and options | 18,389,796 | | $ | | 2.09 | | $ |
| exercisable at the | | | 0.114 | | | | 580,220 |
| end of the year | | | | | | | |
+----------------------+------------+----------+----------+----------+-------------+----------+-----------+
The weighted-average grant-date fair value of warrants and options granted to
consultants during the year ended December 31, 2009 and 2008 was $0.09 and
$0.01, respectively. As of December 31, 2009, there was $65,071 of total
unrecognized compensation cost related to non-vested share-based compensation
arrangements granted to consultants under the Company's stock option plan. That
cost is expected to be recognized over a weighted-average period of 1.2 years.
Calculation of aggregate intrinsic value is based on the share price of the
Company's Common shares as of December 31, 2009 ($0.1234 / 0.075 GBP, per
share).
5. The Company's outstanding warrants and options under the Company's stock
option plan to consultants as of December 31, 2009 were as follows:
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| Issuance date | | warrants | |Exercise | | Warrants | | Weighed |
| | | and | | price | | and | | average |
| | | options | | per | | options | | remaining |
| | |outstanding | | share | |exercisable | |contractual |
| | | | | | | | | term |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| | | | | | | | | |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| March 2006 | | 1,200,063 | | $0.000 | | 1,200,063 | | 1.25 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| March 2006 | | 6,011,543 | | $0.071 | | 6,011,543 | | 1.25 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| April 2006 | | 106,957 | | $0.071 | | 80,218 | | 1.28 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| May 2006 | | 2,132,732 | | $0.071 | | 1,599,549 | | 1.36 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| June 2006 | | 1,283,490 | | $0.071 | | 1,283,490 | | 1.50 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| October 2006 | | 1,040,397 | | $0.117 | | 1,040,397 | | 1.81 |
| | | | | | | | | |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| August 2007 | | 1,024,011 | | $0.164 | | 1,024,011 | | 2.62 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| November 2007 | | 1,861,125 | | $0.210 | | 1,240,750 | | 2.87 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| December 2007 | | 288,785 | | $0.164 | | 288,785 | | 2.93 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| December 2007 | | 1,222,153 | | $0.194 | | 1,222,153 | | 2.93 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| December 2007 | | 594,175 | | $0.159 | | 594,175 | | 2.93 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| October 2008 | | 677,397 | | $0.159 | | 451,598 | | 3.79 |
| | | | | | | | | |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| December 2008 | | 2,353,064 | | $0.194 | | 2,353,064 | | 3.92 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| December 2009 | | 677,397 | | $0.120 | | - | | 4.92 |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| | | | | | | | | |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
| | | 20,473,289 | | | | 18,389,796 | | |
| Total | | | | | | | | |
+----------------+----------+-------------+----------+----------+----------+-------------+----------+-------------+
6. Compensation expense related to warrants and options granted to consultants
was recorded in the statement of operations in the following line items:
+--------------------------+----------+----------+----------+-----------+----------+
| | | Year ended December 31, | |
+--------------------------+----------+---------------------------------+----------+
| | | 2009 | | 2008 | |
+--------------------------+----------+----------+----------+-----------+----------+
| | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| Research and development | | $ | | $ | |
| expenses | | 164,769 | | (113,004) | |
| (income) | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| General and | | 27,897 | | (33,542) | |
| administrative expenses | | | | | |
| (income) | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| | | $ | | $ | |
| | | 192,666 | | (146,546) | |
+--------------------------+----------+----------+----------+-----------+----------+
NOTE 6:- CONVERTIBLE DEBENTURES
In May 2009, the Company offered to accredited investors only, through a private
placement, convertible debentures (the "Debentures"), together with warrants
(the "Warrants") to purchase a number of Common share, par value $0.0001 per
share, of the Company (the "Common Share"), equal to 35% of the number of Common
shares issued upon conversion of the Debentures. Warrants shall not be issued
unless and until the conversion of the Debentures. The Debentures will mature
two years after the date of issuance and will bear interest at an annual rate of
10%, paid on a quarterly basis. The Debentures will automatically be converted
into Common shares upon the closing of a Qualified Transaction, as defined in
the Debenture.
In a series of closings from June 16 through September 15, 2009, the Company
raised $570,000 in gross proceeds through the issuance of Debentures.
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 paid on a
quarterly basis. 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 had been paid. The interest due on September
30 and December 31, 2009, including default interest, has been accrued.
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 (as defined
in the Debenture)) (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.
The Warrants are exercisable for a number of Common shares equal to 35% of the
number of Common shares issued upon 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 ASC 815-15-25 (originally issued as par. 16 of FAS
133) thus the Company will not separate the embedded derivative instrument from
the host contract and account for it as a derivative instrument pursuant to ASC
815.
This election was made only in respect to the Debentures, as permitted by ASC
815-15-25, which states that this election may be made on an
instrument-by-instrument basis.
As of the balance sheet date, the fair value of the Debentures amounted to
$1,013,404. In 2009, the Company recorded financial expenses in the amount of
$443,404 as a result of the change in fair value of the Debentures.
NOTE 7:- TAXES ON INCOME
a. Carryforward losses for tax purposes:
As of December 31, 2009, the Company had U.S. federal net operating loss
carryforward for income tax purposes in the amount of approximately $23.1
million. Net operating loss carryforward arising in taxable years beginning
after January 2000 (inception date) can be carried forward and offset against
taxable income for 20 years and expiring between 2020 and 2029. As of December
31, 2009 the Company had net operating loss carryforward for state franchise tax
purposes of approximately $21.6 million which will begin to expire in 2011.
Utilization of U.S. net operating losses may be subject to substantial annual
limitations due to the "change in ownership" provisions of the Internal Revenue
Code of 1986 and similar state provisions. The annual limitation may result in
the expiration of net operating losses before utilization.
The Company's subsidiary in Israel has accumulated losses for tax purposes as of
December 31, 2009, in the amount of approximately $5 million, which may be
carried forward and offset against taxable income and capital gain in the future
for an indefinite period.
b. Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:
+------------------------------+----------+---------------+----------+-----------------+
| | | December 31, |
+------------------------------+----------+--------------------------------------------+
| | | 2009 | | 2008 |
+------------------------------+----------+---------------+----------+-----------------+
| | | | | |
+------------------------------+----------+---------------+----------+-----------------+
| Deferred tax assets: | | | | |
+------------------------------+----------+---------------+----------+-----------------+
| Net operating loss | | $ | | $ |
| carryforward | | 4,941,779 | | 3,476,589 |
+------------------------------+----------+---------------+----------+-----------------+
| Allowances and reserves | | 325,136 | | 262,191 |
+------------------------------+----------+---------------+----------+-----------------+
| | | | | |
+------------------------------+----------+---------------+----------+-----------------+
| Total deferred tax assets | | 5,266,915 | | 3,738,780 |
| before valuation allowance | | | | |
+------------------------------+----------+---------------+----------+-----------------+
| | | | | |
+------------------------------+----------+---------------+----------+-----------------+
| Valuation allowance | | (5,266,915) | | (3,738,780) |
+------------------------------+----------+---------------+----------+-----------------+
| | | | | |
+------------------------------+----------+---------------+----------+-----------------+
| Net deferred tax asset | | $ | | $ |
| | | - | | - |
+------------------------------+----------+---------------+----------+-----------------+
As of December 31, 2009, the Company and its subsidiary have provided valuation
allowances in respect of deferred tax assets resulting from tax loss
carryforward and other temporary differences, since they have a history of
operating losses and current uncertainty concerning its ability to realize these
deferred tax assets in the future. Management currently believes that it is more
likely than not that the deferred tax regarding the loss carryforward and other
temporary differences will not be realized in the foreseeable future.
In 2008 and 2009, the main reconciling item of the statutory tax rate of the
Company and its subsidiary (27% to 35% in 2008 and 26% to 35% in 2009) to the
effective tax rate (0%) is tax loss carryforwards and other deferred tax assets
for which a full valuation allowance was provided.
NOTE 8: - FINANCIAL EXPENSE (INCOME)
+-----------------------------+-+-----------+--+-------------+-+
| | | Year ended December | |
| | | 31, | |
+-----------------------------+-+----------------------------+-+
| | | 2009 | | 2008 | |
+-----------------------------+-+-----------+--+-------------+-+
| | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Financial expense (income) | | | | | |
| , net: | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Financial income: | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Foreign currency | | $ | | $ | |
| translation adjustments | | (6,471) | | (87,868) | |
+-----------------------------+-+-----------+--+-------------+-+
| Interest on cash | | (2,578) | | (62,477) | |
| equivalents, short-term | | | | | |
| bank deposits and others | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Others | | - | | (14,963) | |
+-----------------------------+-+-----------+--+-------------+-+
| | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| | | (9,049) | | (165,308) | |
+-----------------------------+-+-----------+--+-------------+-+
| | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Financial expenses: | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Bank charges | | 15,593 | | 26,603 | |
+-----------------------------+-+-----------+--+-------------+-+
| Interest expenses | | 42,053 | | 2,437 | |
+-----------------------------+-+-----------+--+-------------+-+
| Convertible debentures | | 443,404 | | - | |
| valuation | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Foreign currency | | 51,892 | | 121,771 | |
| translation adjustments | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| Others | | - | | 3,040 | |
+-----------------------------+-+-----------+--+-------------+-+
| | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| | | 552,942 | | 153,851 | |
+-----------------------------+-+-----------+--+-------------+-+
| | | | | | |
+-----------------------------+-+-----------+--+-------------+-+
| | | $ | | $ | |
| | | 543,893 | | (11,457) | |
+-----------------------------+-+-----------+--+-------------+-+
NOTE 9:- SUBSEQUENT EVENTS
1. In March 2010, the Company issued a total of 14,465,591 Common
shares in consideration for GBP 726,168 ($1,096,845). The issuance costs
amounted to $110,297.
2. In February 2010, the Company issued 1,275,000 Common shares
as compensation for services rendered to the Company by a consultant.
Notes to Editors:
About Medgenics:
Medgenics is a clinical-stage biopharmaceutical Company developing its unique
tissue-based Biopump platform technology to provide sustained-action protein
therapy for the treatment of a range of chronic diseases. Biopumps are made
using needle biopsies taken from the lower layer of the patient's skin under
local anaesthetic, and processed during 10-14 days to become 30 mm long tissue
biofactories producing the required protein. The requisite number of Biopumps
are injected under the patient's skin to provide sustained protein production
and delivery for many months. The Company is developing the Biopump to provide
substantially greater safety and reliability in protein treatment in a more cost
effective manner than experienced with the existing injected protein therapies.
Medgenics currently has three products in development based on this technology
and addressing the indications of:
- Anaemia - using EPODURE, a Biopump producing erythropoietin (EPO)
- Hepatitis-C - using INFRADURE - a Biopump producing interferon-alpha (IFN-a)
- Haemophilia - using a Biopump to produce clotting Factor VIII
The Company's Phase I/II clinical trial using EPODURE to treat anaemia in
patients with chronic kidney disease, has demonstrated proof of concept of the
Biopump. Designed to produce and deliver a therapeutic dose of EPO steadily for
six months or more, EPODURE Biopumps have already provided effective anaemia
treatment in most of these patients for 6-12 months, even at the low
administered dose.
Medgenics intends to develop its innovative products and bring them to market
via multiple strategic partnerships with major pharmaceutical and/or medical
device companies. In addition to treatments for Anaemia, Hepatitis-C, and
Haemophilia, Medgenics plans to develop and/or out-license a pipeline of future
Biopump products targeting the large and rapidly growing global protein therapy
market, which is forecast to reach US $87 billion by 2010. Other potential
applications of Biopumps producing various proteins include multiple sclerosis,
arthritis, pediatric growth hormone deficiency, obesity, and diabetes.
<ENDS>
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BSGDUUUGBGGS
Medgenics(Regs) (LSE:MEDG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Medgenics(Regs) (LSE:MEDG)
Historical Stock Chart
From Jul 2023 to Jul 2024
