TIDMMEDG
RNS Number : 0972R
Medgenics Inc
16 August 2010
Medgenics, Inc.
('Medgenics' or the 'Company')
Half Yearly Report
Misgav, Israel and London, UK - 16 August 2010 - Medgenics (AIM: MEDG and MEDU)
is pleased to announce its unaudited, half-yearly results for the six months
ended 30 June 2010.
During the period the Company made significant progress on a number of fronts:
Highlights for the period
· A major medical centre has joined the Phase I/II EPODURE anaemia trial,
and now successfully treated the next two patients at the mid-dose range.
· The trial has documented safety and efficacy of EPODURE as a sustained
anaemia therapy, now lasting up to 21 months from a single treatment in kidney
disease patients.
· Posters at a major European Liver Congress in April 2010 provided the
world debut for INFRADURE Biopumps producing interferon-alpha for use in
treatment of hepatitis-C
· The deal with a major pharmaceutical firm to develop Biopumps for
haemophilia has spurred additional discussions with companies interested in both
new and existing Biopump protein applications.
· Medgenics engaged Nomura Code, a leading healthcare brokerage, whose
analyst released a first report on Medgenics on 29 June 2010.
Financial Summary (unaudited)
· The Company raised funds totaling $2.3 million through equity offerings.
· The net loss after tax for the six month period was $0.55 million
(1-6/2009: $2.23 million), primarily as a result of the ongoing Phase I/II
clinical trial of EPODURE. Reduction in losses was mainly due to the
collaboration agreement with the major pharmaceutical firm.
· R&D costs for the six month period were $0.7 million (1-6/2009: $1.0
million). Participation in R&D costs amounted to a total of $2 million in the
six month period (1-6/2009: $0.3 million). General and administrative costs
were $1.1 million (1-6/2009: $1.2 million).
· Cash, cash equivalents and short-term investments at 30 June 2010 were
$1.36 million (at 30 June 2009: $0.05 million).
· The loss per share of common stock for the six month period was $0.004
(2009:$0.02)
· Medgenics continues to seek further funding to complete its EPODURE Phase
I/II trial, prepare for and launch an INFRADURE Phase I/II trial for the
treatment of hepatitis-C, continue its collaboration agreement to develop the
treatment for haemophilia and continue activities towards additional commercial
and collaboration deals.
Dr. Andrew Pearlman, Chief Executive Officer of Medgenics, said:
"During the first half of 2010, Medgenics saw significant new interest in its
Biopump platform technology from a range of large corporations, stemming not
only from our continued strong results in our Phase I/II clinical trial of
EPODURE Biopump for anaemia, but also from our first commercial agreement with a
major pharmaceutical company to develop a haemophilia Biopump producing clotting
Factor VIII. Following the recent fundraisings we have renewed active patient
enrolment in the EPODURE trial at a new major clinical centre, where we have
already successfully implanted Biopumps delivering the mid-dose range of 40
Units/kg/day in the two new patients. In April, we introduced our INFRADURE
Biopumps, producing interferon-alpha for treatment of hepatitis-C, presenting
two posters at a major European Liver conference (EASL, Vienna April 2010),
drawing interest from experts and pharmaceutical companies in the major
potential advantages that INFRADURE could provide in the treatment of
hepatitis-C. The demonstration of different Biopumps successfully producing
different proteins provides powerful demonstration of the Biopump platform as a
method of sustained protein production. In addition, we are pleased that Nomura
Code Securities, a leading healthcare brokerage firm in the UK, has now joined
SVS Securities as Medgenics' co-broker, and has issued the first report on
Medgenics by a leading recognised healthcare analyst. Our financial position has
strengthened in the past 6 months, with most of our current burn rate covered by
non-dilutive commercial or government sources, and the addition of $2.3m raised
thus far in 2010. We plan to launch an additional fundraising round imminently
to enable us to complete enrolment for the current clinical trial, to advance
towards further partnering agreements and to move forward on INFRADURE and other
programs. We are pleased with the progress that we have made on the Factor VIII
project with our first corporate partner, and we remain confident that the
Company is well-placed to deliver increased shareholder value in the medium term
based on its current performance and on the increased value opportunities now
emerging. We continue to look forward to taking Medgenics into a new era of
personalised medicine.
For further information, contact:
+-----------------------------------------+--------------------------+
| Medgenics, Inc. | Phone: +972 4 902 8900 |
| Dr. Andrew L. Pearlman | |
| | |
+-----------------------------------------+--------------------------+
| Religare Capital Markets (Nominated | Phone: +44 207 444 0800 |
| Adviser) | |
| James Pinner | |
| Derek Crowhurst | |
| | |
+-----------------------------------------+--------------------------+
| SVS Securities plc (Joint Broker) | Phone: +44 207 638 5600 |
| Ian Callaway | |
| | |
+-----------------------------------------+--------------------------+
| Nomura Code Securities PLC (Joint | Phone: +44 207 776 1219 |
| Broker) | |
+-----------------------------------------+--------------------------+
Chairman's Review
The Board of Medgenics presents the unaudited financial results of the Company
and its subsidiary (the "Group") for the six months ended 30 June 2010.
The first half of 2010 has been important for Medgenics in that it has provided
additional evidence for the long-term safety and efficacy of EPODURE as a
sustained-action, protein therapy to treat anaemia. This was shown particularly
in the case of the results of Trial Patient 2, who has experienced an
unprecedented 21 months of sustained protein treatment after a single
implantation of EPODURE Biopumps in September 2008. The promising results of
this trial and the commencement of the Company's first corporate collaboration
were reflected in the confidence of investors in the recent equity funding
rounds, which secured $2.3 million of additional funding. Some of my fellow
Directors and existing investors also participated in this financing round. As
reported, most recently on 22 June, the Company has added a second site to the
EPODURE clinical trial and recruited patients for the mid-dose group.
Additionally, the Company presented pre-clinical data on its INFRADURE Biopump
producing Interferon-alpha and has continued its program to develop Biopumps
producing clotting Factor VIII for the treatment of haemophilia. The Company
continues to draw interest from several large pharmaceutical, dialysis and
medical device companies with which it hopes to form strategic alliances that
will allow the Company to develop a range of Biopumps producing proteins for
various clinical applications.
Clinical Development Review
The Company has now initiated a second site for its Phase I/II trial to
determine the safety and efficacy of EPODURE, its lead protein therapy to treat
anaemia. To date, nine patients have been enrolled in the ongoing trials. The
first six patients have received the lowest dose of 20 Units of EPO per kilogram
per day through their Biopumps, while the subsequent three patients received the
medium dose of 40 Units of EPO per kilogram per day through their Biopumps. For
the majority of the test subjects, the Biopump platform technology has proven
effective in maintaining haemoglobin levels within the target range for many
months, with one patient exceeding 21 months on a single administration of the
low-dose treatment.
The primary aim of the study is to assess the safety and efficacy of EPODURE in
three controlled dose ranges. The study plans to demonstrate sustained, elevated
levels of EPO, the deficient protein, and, thereby, to elevate the red blood
cell count and haemoglobin levels for six months or longer in those patients who
receive appropriate doses. Throughout the trial to date, no adverse effects have
been observed other than minor localised bruising typically associated with skin
biopsies and implantation of the Biopumps. Patients have responded positively to
this form of treatment, and have requested to re-enroll at higher dosages.
Commercialisation Strategy
As I previously reported, the Company's key strategic priorities are
commercialisation of the Company's proprietary platform technology through
development of alliances with major partners, in order to advance the clinical
trials to a point of our being able to secure FDA, EMEA and/or other regulatory
approvals for EPODURE and/or other proteins to which Medgenics' platform Biopump
technology can be applied. With initial positive results from the EPODURE study,
the Company has generated renewed interest from major potential strategic
partners interested in developing other therapeutic applications of the
technology. As reported previously, the Company signed an agreement with a major
pharmaceutical company to develop Biopumps producing Factor VIII, a major
clotting factor. This program has progressed during the period under review.
Other potential partners have shown interest in the possibility of applying the
Biopump technology to other clinical indications, including diabetes, obesity
and niche drugs. Further updates on these discussions will be given in due
course.
Funding
Since admission to AIM, and in tandem with the implementation of the Company's
strategy for its Phase I/II clinical trial of EPODURE and seeking out strategic
partnering opportunities, the Directors have focused on raising further capital
for the Company. This capital is required to ensure the Company's ability to:
continue to finance its operations; pursue strategic partnering alliances with
major corporations; continue its device development programme; advance the
development of additional products towards clinical trial and commercialisation;
and, most importantly, conclude the Phase I/II clinical trial of EPODURE.
However, we acknowledge the need for further funds to complete the existing and
ongoing Phase I/II clinical trial and we will, therefore, pursue a further
fundraising round in the near future.
Financial Review
The Company has incurred significant expenditures in establishing and continuing
its ongoing clinical trial. As a result, the Company has generated a loss of
$0.55 million in the first half of the year. Since our admission to AIM in
December 2007, in which we raised $6.72 million, we have secured $1.4 million in
funding through a warrant exercise programme, a convertible debenture and an
equity funding in 2009 and an additional $2.3 million in equity funding in the
first six months of 2010. This was further bolstered by non-dilutive development
funding of $1.2 million in 2009 and $1.6 million received in the first 6 months
of 2010, as part of a partnering program with a major pharmaceutical company.
Despite these successes, the Board remains aware that significant additional
funding will be required to complete the EPODURE trial and launch the trial for
INFRADURE to treat hepatitis-C. The Board is considering ways to raise funds
through further convertible debt and equity offerings, new grants and strategic
partnerships. We will update shareholders as soon as we have more concrete news
to report on these efforts.
Outlook
The results of the Phase I/II EPODURE trial have continued to surpass
expectations. Medgenics has been able to demonstrate the potential of its
platform technology through the specific application of EPODURE for the
treatment of renal anaemia. Our discussions with several major pharmaceutical
companies are progressing well as the results of the EPODURE trial further
strengthen the scientific basis for our concluding that the Biopump will offer a
safe, long lasting alternative for the treatment of chronic protein
deficiencies.
Eugene A. Bauer, MD
Chairman of the Board of Directors
16 August 2010
CONSOLIDATED BALANCE SHEETS
In U.S. Dollars
+-----------------------------------+-----------+----------+------------+
| | June 30, | December |
| | | 31, |
+-----------------------------------+----------------------+------------+
| | 2010 | 2009 | *) 2009 |
+-----------------------------------+-----------+----------+------------+
| | (Unaudited) | |
+-----------------------------------+----------------------+------------+
| ASSETS | | | |
+-----------------------------------+-----------+----------+------------+
| | | | |
+-----------------------------------+-----------+----------+------------+
| CURRENT ASSETS: | | | |
+-----------------------------------+-----------+----------+------------+
| Cash and cash equivalents | $ | $ | $ |
| | 1,363,235 | 53,479 | 469,928 |
+-----------------------------------+-----------+----------+------------+
| Accounts receivable and prepaid | 320,521 | 116,325 | 11,187 |
| expenses | | | |
+-----------------------------------+-----------+----------+------------+
| | | | |
+-----------------------------------+-----------+----------+------------+
| Total current assets | 1,683,756 | 169,804 | 481,115 |
+-----------------------------------+-----------+----------+------------+
| | | | |
+-----------------------------------+-----------+----------+------------+
| LONG TERM ASSETS: | | | |
+-----------------------------------+-----------+----------+------------+
| Restricted lease deposit and | 31,715 | 44,875 | 38,911 |
| prepaid lease payments | | | |
+-----------------------------------+-----------+----------+------------+
| Severance pay fund | 247,164 | 203,010 | 261,561 |
+-----------------------------------+-----------+----------+------------+
| | | | |
+-----------------------------------+-----------+----------+------------+
| Total long term assets | 278,879 | 247,885 | 300,472 |
+-----------------------------------+-----------+----------+------------+
| | | | |
+-----------------------------------+-----------+----------+------------+
| PROPERTY AND EQUIPMENT, NET | 253,034 | 361,365 | 302,733 |
+-----------------------------------+-----------+----------+------------+
| | | | |
+-----------------------------------+-----------+----------+------------+
| Total assets | $ | $ | $ |
| | 2,215,669 | 779,054 | 1,084,320 |
+-----------------------------------+-----------+----------+------------+
*) Revised, see Note 7.
CONSOLIDATED BALANCE SHEETS
In U.S. Dollars
+-------------------------------------+--------------+--------------+-----------------+
| | June 30, | December |
| | | 31, |
+-------------------------------------+-----------------------------+-----------------+
| | 2010 | 2009 | *) 2009 |
+-------------------------------------+--------------+--------------+-----------------+
| | (Unaudited) | |
+-------------------------------------+-----------------------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| LIABILITIES AND SHAREHOLDERS' | | | |
| DEFICIT | | | |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| CURRENT LIABILITIES: | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Short-term bank credit | $ | $ | $ |
| | - | 12,281 | - |
+-------------------------------------+--------------+--------------+-----------------+
| Trade payables | 824,218 | 977,617 | 947,104 |
+-------------------------------------+--------------+--------------+-----------------+
| Advance payment | 678,089 | - | 783,012 |
+-------------------------------------+--------------+--------------+-----------------+
| Other accounts payable and accrued | 1,197,421 | 1,397,748 | 1,689,518 |
| expenses | | | |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Total current liabilities | 2,699,728 | 2,387,646 | 3,419,634 |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| LONG-TERM LIABILITIES: | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Accrued severance pay | 994,583 | 904,913 | 990,764 |
+-------------------------------------+--------------+--------------+-----------------+
| Convertible debentures | 992,309 | 273,130 | 1,013,404 |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Total long term liabilities | 1,986,892 | 1,178,043 | 2,004,168 |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Total liabilities | 4,686,620 | 3,565,689 | 5,423,802 |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| SHAREHOLDERS' DEFICIT: | | | |
+-------------------------------------+--------------+--------------+-----------------+
| New Common shares - $0.0001 par | 15,472 | 11,775 | 12,217 |
| value; 500,000,000 | | | |
| shares authorized; 154,727,554 | | | |
| shares ,117,754,027 | | | |
| shares and 122,174,027 shares | | | |
| issued and outstanding | | | |
| at June 30, 2010 and 2009 and | | | |
| December 31, 2009, | | | |
| respectively | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Additional paid-in capital | 32,825,203 | 29,606,783 | 30,384,813 |
+-------------------------------------+--------------+--------------+-----------------+
| Receipts on account of shares | - | - | 25,000 |
+-------------------------------------+--------------+--------------+-----------------+
| Deficit accumulated during the | (35,311,626) | (32,405,193) | (34,761,512) |
| development stage | | | |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Total shareholders' deficit | (2,470,951) | (2,786,635) | (4,339,482) |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| | | | |
+-------------------------------------+--------------+--------------+-----------------+
| Total liabilities and shareholders' | $ | $ | $ |
| deficit | 2,215,669 | 779,054 | 1,084,320 |
+-------------------------------------+--------------+--------------+-----------------+
*) Revised, see Note 7.
CONSOLIDATED STATEMENTS OF OPERATION
In U.S. Dollars (except for share data)
+---------------------------------------+-------------+----------+----------+-------------------------+----------+-------------+
| | Six months ended | Year ended | Period |
| | June 30, | December 31, | from |
| | | | January |
| | | | 27, 2000 |
| | | |(inception) |
| | | | through |
+---------------------------------------+------------------------+-----------------------------------------------+-------------+
| | 2010 | 2009 | *) 2009 | June 30, 2010 |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | (Unaudited) | | *) |
| | | |(Unaudited) |
+---------------------------------------+-----------------------------------+------------------------------------+-------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Research and development expenses | $ | $ 1,282,669 | $ 2,267,304 | $ 22,444,220 |
| | 1,366,553 | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Less - Participation by the Office of | (237,965) | (292,893) | (488,532) | (3,966,204) |
| the Chief Scientist | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Participation in research | (432,423) | - | (89,558) | (521,981) |
| and development from third party | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Research and development expenses, | 696,165 | 989,776 | 1,689,214 | 17,956,035 |
| net | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| General and administrative expenses | 1,110,905 | 1,198,690 | 2,534,312 | 18,179,926 |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Other (income) expenses: | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Excess amount of participation in | (1,292,500) | - | (327,430) | (1,619,930) |
| research and | | | | |
| development from third party | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Operating loss | 514,570 | 2,188,466 | 3,896,096 | 34,516,031 |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Financial expenses | 107,435 | 45,064 | 552,942 | 1,716,358 |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Financial income | (71,891) | (7,817) | (9,049) | (564,840) |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Loss before taxes on income | 550,114 | 2,225,713 | 4,439,989 | 35,667,549 |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Taxes on income | - | - | 1,043 | 71,337 |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Loss | $ | $ 2,225,713 | $ 4 | $ 35,738,886 |
| | 550,114 | | ,441,032 | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Dividend in respect of reduction in | - | 3,192 | 3,192 | |
| exercise price of certain Warrants | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Loss attributable to Common | $ | $ 2,228,905 | $ | |
| shareholders | 550,114 | | 4,444,224 | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Basic and diluted Loss per share of | $ | $ 0.02 | $ | |
| common stock | 0.004 | | 0.04 | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| Weighted average number of shares of | 135,958,955 | 111,249,104 | 117,845,867 | |
| Common shares used in computing basic | | | | |
| and diluted loss per share used in | | | | |
| per share calculation | | | | |
+---------------------------------------+-------------+---------------------+-------------------------+------------------------+
| | | | | | | |
+---------------------------------------+-------------+----------+----------+-------------------------+----------+-------------+
*) Revised, see Note 7.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+-----------------+---------------+-------+----------+---------------+---------+----------+----------+---------+----------+-------------+-+---------------+----------+-------------+----------+-----------------+
| | | | | | | Deficit | |
| | | | | | |accumulated | Total |
| | | Series A | Series B | Additional | | during the | stockholders' equity |
| | Old Common | Preferred shares | Preferred shares | paid-in | Deferred Stock |development | (deficit) |
| | shares | | | capital | compensation | stage | |
+-----------------+-----------------------+------------------------------------+-------------------------------+------------------------+----------------------------+-------------+----------------------------+
| | Shares | Amount | Shares | Amount | Shares | Amount | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Balance as of | | $ - | | | | | | | | |
| January 27, | - | | - | $ - | - | $ - | $ | $ | $ - | $ |
| 2000 | | | | | | | - | - | | - |
| (inception) | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Issuance of Old | 2,069,677 | 2 | - | - | - | - | - | - | - | 2 |
| Common | | | | | | | | | | |
| shares in | | | | | | | | | | |
| January and | | | | | | | | | | |
| March 2000 at | | | | | | | | | | |
| par value | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Issuance of Old | | | | | | | | | | |
| Common | | | | | | | | | | |
| shares in | 437,936 | - | - | - | - | - | 499,997 | - | - | 499,997 |
| August 2000 at | | | | | | | | | | |
| $1.14 per | | | | | | | | | | |
| share, net | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Issuance of Old | | | | | | | | | | |
| Common | | | | | | | | | | |
| shares in | 940,950 | 1 | - | - | - | - | - | - | - | 1 |
| respect of | | | | | | | | | | |
| license | | | | | | | | | | |
| agreement in | | | | | | | | | | |
| August 2000 at | | | | | | | | | | |
| par value | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | (681,216) | (681,216) |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Balance as of | | | | | | | | | | |
| December 31, | 3,448,563 | 3 | - | - | - | - | 499,997 | - | (681,216) | (181,216) |
| 2000 | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Stock split | | | | | | | | | | |
| effected as | - | 342 | - | - | - | - | (342) | - | - | - |
| stock | | | | | | | | | | |
| dividend | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Issuance of | | | | | | | | | | |
| Preferred | | | | | | | | | | |
| shares in | - | - | 138,502 | 14 | - | - | 195,122 | - | - | 195,136 |
| January 2001 at | | | | | | | | | | |
| $1.41 per | | | | | | | | | | |
| share, net | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Issuance of | | | | | | | | | | |
| Preferred | | | | | | | | | | |
| shares in March | - | - | 4,085,837 | 408 | - | - | 6,805,968 | - | - | 6,806,376 |
| and June 2001 | | | | | | | | | | |
| at | | | | | | | | | | |
| $1.67 per | | | | | | | | | | |
| share, net | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Deferred stock | - | - | - | - | - | - | 248,165 | (248,165) | - | - |
| compensation | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Amortization of | | | | | | | | | | |
| deferred | - | - | - | - | - | - | - | 40,880 | - | 40,880 |
| stock | | | | | | | | | | |
| compensation | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Stock based | | | | | | | | | | |
| compensation | - | - | - | - | - | - | 510,869 | - | - | 510,869 |
| expense | | | | | | | | | | |
| related to | | | | | | | | | | |
| options | | | | | | | | | | |
| to | | | | | | | | | | |
| consultants | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | (3,243,701) | (3,243,701) |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| Balance as of | 3,448,563 | $ 345 | 4,224,339 | $ 422 | - | $ - | $ | $ | $ (3,924,917) | $ |
| December 31, | | | | | | | 8,259,779 | (207,285) | | 4,128,344 |
| 2001 | | | | | | | | | | |
+-----------------+---------------+------------------+---------------+--------------------+----------+--------------------+---------------+---------------+-----------------------------------+-----------------+
| | | | | | | | | | | | | | | | | |
+-----------------+---------------+-------+----------+---------------+---------+----------+----------+---------+----------+-------------+-+---------------+----------+-------------+----------+-----------------+
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| | | | | | | Deficit | |
| | | | | | | accumulated | Total |
| | | Series A | Series B | Additional | | during the | stockholders' |
| | Old Common | Preferred | Preferred | paid-in | Deferred | development | equity |
| | shares | shares | shares | capital | Stock | stage | (deficit) |
| | | | | | compensation | | |
+------------------+-------------------------+-------------------------+-------------------------+----------------+---------------+-----------------+-----------------+
| | Shares | Amount | Shares | Amount | Shares | Amount | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Balance as of | | | | | | | | | | |
| December 31, | 3,448,563 | $ | 4,224,339 | $ | - | $ | $ | $ | $ | $ 4,128,344 |
| 2001 | | 345 | | 422 | | - | 8,259,779 | (207,285) | (3,924,917) | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Issuance of | | | | | | | | | | |
| Preferred shares | | | | | | | | | | |
| in | - | - | - | - | 2,676,674 | 268 | 5,264,352 | - | - | 5,264,620 |
| October 2002 | | | | | | | | | | |
| at $1.97 per | | | | | | | | | | |
| share, net | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Deferred stock | - | - | - | - | - | - | 63,855 | (63,855) | - | - |
| compensation | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Amortization of | | | | | | | | | | |
| deferred | - | - | - | - | - | - | - | 66,937 | - | 66,937 |
| stock | | | | | | | | | | |
| compensation | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Stock based | | | | | | | | | | |
| compensation | | | | | | | | | | |
| expenses | - | - | - | - | - | - | 371,560 | - | - | 371,560 |
| related to | | | | | | | | | | |
| options | | | | | | | | | | |
| to | | | | | | | | | | |
| consultants | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | (5,049,391) | (5,049,391) |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| Balance as of | | | | | | | | | | |
| December 31, | 3,448,563 | $ | 4,224,339 | $ | 2,676,674 | $ | $ | $ | $ | $ |
| 2002 | | 345 | | 422 | | 268 | 13,959,546 | (204,203) | (8,974,308) | 4,782,070 |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
| | | | | | | | | | | |
+------------------+---------------+---------+---------------+---------+---------------+---------+----------------+---------------+-----------------+-----------------+
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+-----------------+---------------+---------+---------------+---------+----------+--------+----------+----------+------------+---------------+-------------------+-----------------+
| | | | | | | | |
| | | | | | | Deficit | |
| | | Series A | Series B | | | accumulated | Total |
| | Old Common | Preferred shares | Preferred shares |Additional | Deferred | during the | stockholders' |
| | shares | | | paid-in | Stock | development | equity |
| | | | | capital | compensation | stage | (deficit) |
+-----------------+-------------------------+------------------------------------+------------------------------+------------+---------------+-------------------+-----------------+
| | Shares | Amount | Shares | Amount | Shares | Amount | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Balance as of | | | | | | $ 268 | $13,959,546 | | | |
| December 31, | 3,448,563 | $ | 4,224,339 | $ | 2,676,674 | | | $ | $ | $ |
| 2002 | | 345 | | 422 | | | | (204,203) | (8,974,308) | 4,782,070 |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Exercise of | 19,443 | 2 | - | - | - | - | 193 | - | - | 195 |
| stock options | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Issuance of | | | | | 1,066,997 | 107 | 2,036,777 | - | - | 2,036,884 |
| Preferred | | | | | | | | | | |
| shares | - | - | - | - | | | | | | |
| in April and | | | | | | | | | | |
| May 2003 at | | | | | | | | | | |
| $2.00 per | | | | | | | | | | |
| share, net | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Deferred stock | - | - | - | - | - | - | 440,811 | (440,811) | - | - |
| compensation | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Amortization of | | | | | | | | | | |
| deferred | - | - | - | - | - | - | - | 105,213 | - | 105,213 |
| stock | | | | | | | | | | |
| compensation | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Stock based | | | | | | | | | | |
| compensation | | | | | | | | | | |
| expenses | - | - | - | - | - | - | 475,469 | - | - | 475,469 |
| related to | | | | | | | | | | |
| options | | | | | | | | | | |
| to | | | | | | | | | | |
| consultants | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | (5,038,272) | (5,038,272) |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| Balance as of | | | | | 3,743,671 | $ | | | | |
| December 31, | 3,468,006 | | 4,224,339 | | | 375 | $16,912,796 | $ | | $ |
| 2003 | | $ | | $ | | | | (539,801) | $(14,012,580) | 2,361,559 |
| | | 347 | | 422 | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+-------------------+----------+-----------------------+---------------+-------------------+-----------------+
| | | | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+----------+--------+----------+----------+------------+---------------+-------------------+-----------------+
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+-----------------+---------------+---------+---------------+---------+----------+---------+----------+----------+------------+----------+-----------+-------------------+-----------------+
| | | | | | | Deficit | |
| | | | | | | accumulated | Total |
| | | Series A | Series B |Additional | | during the | stockholders' |
| | Old Common | Preferred shares | Preferred shares | paid-in | Deferred Stock | development | equity |
| | shares | | | capital | compensation | stage | (deficit) |
+-----------------+-------------------------+------------------------------------+-------------------------------+------------+----------------------+-------------------+-----------------+
| | Shares | Amount | Shares | Amount | Shares | Amount | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Balance as of | | $ | | $ | | $ | | | $(14,012,580) | |
| December 31, | 3,468,006 | 347 | 4,224,339 | 422 | 3,743,671 | 375 | $16,912,796 | $ | | $ |
| 2003 | | | | | | | | (539,801) | | 2,361,559 |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Exercise of | 12,750 | 1 | - | - | - | - | 126 | - | - | 127 |
| stock options | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Shares issued | 33,333 | 3 | - | - | - | - | 9,997 | - | - | 10,000 |
| to service | | | | | | | | | | |
| providers | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Amortization of | - | - | - | - | - | - | - | 539,801 | - | 539,801 |
| deferred | | | | | | | | | | |
| stock | | | | | | | | | | |
| compensation | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Stock based | - | - | - | - | - | - | 346,762 | - | - | 346,762 |
| compensation | | | | | | | | | | |
| expenses | | | | | | | | | | |
| related to | | | | | | | | | | |
| options | | | | | | | | | | |
| to | | | | | | | | | | |
| consultants | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | (4,515,829) | (4,515,829) |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Balance as of | 3,514,089 | $ | 4,224,339 | $ | 3,743,671 | $ 375 | $17,269,681 | $ | (18,528,409) | $ |
| December 31, | | 351 | | 422 | | | | - | | (1,257,580) |
| 2004 | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | (776,129) | (776,129) |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| Balance as of | 3,514,089 | $ | 4,224,339 | $ | 3,743,671 | $ | $17,269,681 | $ | $(19,304,538) | $ |
| December 31, | | 351 | | 422 | | 375 | | - | | (2,033,709) |
| 2005 | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+--------------------+----------+----------------------------------+-----------+-------------------+-----------------+
| | | | | | | | | | | | | | |
+-----------------+---------------+---------+---------------+---------+----------+---------+----------+----------+------------+----------+-----------+-------------------+-----------------+
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+----------+-------------+-----------------+
| | Common | Old Common | | | Additional | Deficit | Total |
| | shares | shares | | | paid-in |accumulated | stockholders' |
| | | | Series A | Series B | capital | during the | equity |
| | | | Preferred | Preferred | |development | (deficit) |
| | | | shares | shares | | stage | |
+----------------------+--------------------------+----------------------+----------------------+----------------------+----------------------------+-------------+-----------------+
| | Shares | Amount | Shares |Amount | Shares |Amount | Shares |Amount | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Balance as of | - | $ | 3,514,089 | $ | 4,224,339 | $ | 3,743,671 | $ | $17,269,681 | $(19,304,538) | $(2,033,709) |
| December 31, 2005 | | - | | 351 | | 422 | | 375 | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Conversion of Old | 9,885,842 | 46 | (3,514,089) | (351) | (4,224,339) | (422) | (3,743,671) | (375) | (436,095) | 437,197 | - |
| Common shares, | | | | | | | | | | | |
| Series A and | | | | | | | | | | | |
| Series B Preferred | | | | | | | | | | | |
| shares into Common | | | | | | | | | | | |
| shares | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Conversion of | 11,982,914 | 56 | - | - | - | - | - | - | 1,795,016 | - | 1,795,072 |
| convertible Note | | | | | | | | | | | |
| into | | | | | | | | | | | |
| Common shares | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Issuance of Common | 2,633,228 | 12 | - | - | - | - | - | - | 96,004 | - | 96,016 |
| shares as | | | | | | | | | | | |
| settlement of debt | | | | | | | | | | | |
| in March 2006 | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Issuance of Common | 16,217,552 | 76 | - | - | - | - | - | - | 951,868 | - | 951,944 |
| shares and | | | | | | | | | | | |
| warrants in March, | | | | | | | | | | | |
| April and June | | | | | | | | | | | |
| 2006 at $0.071 per | | | | | | | | | | | |
| share and warrants, | | | | | | | | | | | |
| Net | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Issuance of Common | 16,685,790 | 78 | - | - | - | - | - | - | 1,614,668 | - | 1,614,746 |
| shares and | | | | | | | | | | | |
| warrants in November | | | | | | | | | | | |
| and December | | | | | | | | | | | |
| 2006 at $0.117 per | | | | | | | | | | | |
| share and warrants, | | | | | | | | | | | |
| Net | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Stock based | - | - | - | - | - | - | - | - | 1,161,287 | - | 1,161,287 |
| compensation expense | | | | | | | | | | | |
| related to options | | | | | | | | | | | |
| and warrants granted | | | | | | | | | | | |
| to consultants and | | | | | | | | | | | |
| employees | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Loss | - | - | - | - | - | - | - | - | - | (2,598,605) | (2,598,605) |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| Balance as of | 57,405,326 | $ | - | $ | - | $ | - | $ | $22,452,429 | $(21,465,946) | $ |
| December 31, 2006 | | 268 | | - | | - | | - | | | 986,751 |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+------------------------+-----------------+
| | | | | | | | | | | | | |
+----------------------+----------------+---------+-------------+--------+-------------+--------+-------------+--------+-----------------+----------+-------------+-----------------+
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| | Common shares |Additional | Deficit | Total |
| | | paid-in | accumulated |stockholders' |
| | | capital | during the | equity |
| | | | development | |
| | | | stage | |
+----------------------------------------------+--------------------------+------------+--------------+---------------+
| | Shares | Amount | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Balance as of December 31, 2006 | 57,405,326 | $ | $ | $ | $ |
| | | 268 | 22,452,429 | (21,465,946) | 986,751 |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Issuance of Common shares and warrants in | 427,402 | 2 | 33,318 | - | 33,320 |
| January 2007 at $0.117 per share | | | | | |
| and warrants, net | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Issuance of Common shares and warrants | 7,647,436 | 35 | 834,600 | - | 834,635 |
| in May, July and August 2007 at | | | | | |
| $0.164 per share and warrants, net | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Exercise of warrants in July 2007 | 451,939 | 2 | - | - | 2 |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Issuance of Common shares to consultant in | 122,232 | 1 | (1) | - | - |
| August 2007, net | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Stock split effected as stock dividend in | - | 6,297 | (6,297) | - | - |
| December 2007 | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Beneficial conversion feature embedded in | - | - | 511,391 | - | 511,391 |
| convertible note | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Issuance of Common shares and warrants in | 38,039,082 | 3,804 | 4,493,849 | - | 4,497,653 |
| December 2007 at $0.19 - $0.21 | | | | | |
| per share and warrants, where applicable, | | | | | |
| net, related to the admission to | | | | | |
| AIM | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Issuance cost due to obligation to issue | - | - | (31,449) | - | (31,449) |
| 142,609 Common shares for | | | | | |
| consultant, net | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Stock based compensation expense related to | - | - | 346,802 | - | 346,802 |
| options granted to consultants | | | | | |
| and employees | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Loss | - | - | - | (3,851,339) | (3,851,339) |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| Balance as of December 31, 2007 | 104,093,417 | $ | $ | $ | $ |
| | | 10,409 | 28,634,642 | (25,317,285) | 3,327,766 |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
| | | | | | |
+----------------------------------------------+---------------+----------+------------+--------------+---------------+
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+-------------------------------------------+-------------+----------+----------------+----------+----------+---------------+----------+---------------+
| | Common shares | |Receipts | Deficit | Total |
| | | | on | accumulated |stockholders' |
| | | Additional | account | during the | equity |
| | | paid-in | of | development | (deficit) |
| | | capital | shares | stage | |
+-------------------------------------------+------------------------+----------------+----------+-------------------------------------+---------------+
| | Shares | Amount | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Balance as of December 31, 2007 | 104,093,417 | $ | $ | $ - | $ | $ 3,327,766 |
| | | 10,409 | 28,634,642 | | (25,317,285) | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Cashless exercise of warrants in January | 2,462,050 | 246 | (246) | - | - | - |
| 2008 | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Issuance of Common shares to consultant | 142,609 | 14 | 31,435 | - | - | 31,449 |
| in April 2008 at $0.22 | | | | | | |
| per share | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Exercise of warrants in December 2008 | 30,119 | 3 | (3) | - | - | - |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Stock based compensation related to | - | - | 436,442 | - | - | 436,442 |
| options granted to | | | | | | |
| consultants and employees (*) | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Receipts on account of shares in respect | - | - | - | 150,000 | - | 150,000 |
| to exercise of warrants in | | | | | | |
| January 2009 | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Dividend in respect of reduction in | - | - | 6,745 | - | (6,745) | - |
| exercise price of certain | | | | | | |
| Warrants | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Loss (*) | - | - | - | - | (4,993,258) | (4,993,258) |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Balance as of December 31, 2008 | 106,728,195 | 10,672 | 29,109,015 | 150,000 | (30,317,288) | (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 | - | - | 520,567 | - | - | 520,567 |
| 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 related to | - | - | - | 25,000 | - | 25,000 |
| exercise of warrants in | | | | | | |
| January 2010 | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Dividend in respect of reduction in | - | - | 3,192 | - | (3,192) | - |
| exercise price of certain | | | | | | |
| Warrants | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Loss (*) | - | - | - | - | (4,441,032) | (4,441,032) |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| | | | | | | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| Balance as of December 31, 2009 | 122,174,027 | $ | $ | $ 25,000 | $ | $ (4,339,482) |
| | | 12,217 | 30,384,813 | | (34,761,512) | |
+-------------------------------------------+-------------+----------+----------------+---------------------+---------------+--------------------------+
| | | | | | | | | |
+-------------------------------------------+-------------+----------+----------------+----------+----------+---------------+----------+---------------+
*) Revised, see Note 7.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
In U.S. Dollars (except for share data)
+------------------------------------------+-------------+----------+------------+----------+----------+--------------+---------------+
| | Common shares | |Receipts | Deficit | |
| | | | on | accumulated | Total |
| | |Additional | account | during the |stockholders' |
| | | paid-in | of | development | deficit |
| | | capital | shares | stage | |
+------------------------------------------+------------------------+------------+----------+-------------------------+---------------+
| | Shares | Amount | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Balance as of December 31, 2009 | 122,174,027 | $ | $ | $ 25,000 | $ | $ |
| | | 12,217 | 30,384,813 | | (34,761,512) | (4,339,482) |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Exercise of warrants in January 2010 | 235,238 | 23 | 24,977 | (25,000) | - | - |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Stock based compensation related to | - | - | 200,220 | - | - | 200,220 |
| options granted to | | | | | | |
| consultants and employees | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Issuance of Common shares in February | 1,125,000 | 113 | 140,887 | - | - | 141,000 |
| 2010 at $0.125 per share | | | | | | |
| as settlement of debt | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Issuance of Common shares in March 2010, | 14,273,000 | 1,427 | 942,412 | - | - | 943,839 |
| net at $0.075 | | | | | | |
| (GBP 0.05) per share | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Issuance of Common shares in May 2010, | 16,727,698 | 1,673 | 1,113,058 | - | - | 1,114,731 |
| net at $0.072 | | | | | | |
| (GBP 0.05) per share | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Issuance of Common shares in May 2010 at | 192,591 | 19 | 18,836 | - | - | 18,855 |
| $0.098 (GBP 0.065) | | | | | | |
| per share | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Loss | - | - | - | - | (550,114) | (550,114) |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| | | | | | | |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| Balance as of June 30, 2010 (unaudited) | 154,727,554 | $ | $ | $ - | $ | $ |
| | | 15,472 | 32,825,203 | | (35,311,626) | (2,470,951) |
+------------------------------------------+-------------+----------+------------+---------------------+--------------+---------------+
| | | | | | | | |
+------------------------------------------+-------------+----------+------------+----------+----------+--------------+---------------+
CONSOLIDATED STATEMENTS OF CASH FLOWS
In U.S. Dollars
+------------------------------------+-------------+---+---------+-------------+--------------+----------+
| | Six months ended | Year | Period from |
| | June 30, | ended | January 27, 2000 |
| | | December | (inception) through |
| | | 31, | |
+------------------------------------+---------------------------+-------------+-------------------------+
| | 2010 | | 2009 | *) 2009 | June 30, 2010 |
+------------------------------------+-------------+---+---------+-------------+-------------------------+
| | (Unaudited) | | *) (Unaudited) |
+------------------------------------+---------------------------+-------------+-------------------------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| CASH FLOWS FROM OPERATING | | | | | |
| ACTIVITIES: | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Loss | $ | $ | $ | $ | |
| | (550,114) | (2,225,713) | (4,441,032) | (35,738,886) | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Adjustments to reconcile loss to | | | | | |
| net cash | | | | | |
| used in operating activities: | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Depreciation | 59,532 | 60,250 | 120,483 | 923,979 | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Stock based compensation related | 200,220 | 230,674 | 520,567 | 5,132,810 | |
| to options and warrants | | | | | |
| granted to consultants and | | | | | |
| employees | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Change in fair value of | (21,095) | 8,129 | 443,404 | 422,309 | |
| convertible debentures | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Loss from disposal of property and | 627 | 2,860 | 2,860 | 329,329 | |
| equipment | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Interest and amortization of | - | - | | 759,197 | |
| beneficial conversion feature | | | - | | |
| of convertible note | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Issuance of shares as | - | | | 15,748 | |
| consideration for providing | | - | - | | |
| security for letter of credit | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Exchange differences on long term | - | - | - | 2,950 | |
| loan | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Accrued severance pay, net | 18,216 | 54,312 | 81,612 | 747,419 | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Exchange differences on a | 3,183 | - | (1,562) | 1,621 | |
| restricted lease deposit | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Increase (decrease) in trade | (122,886) | 88,615 | 66,194 | 824,218 | |
| payables | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Decrease (increase) in accounts | (309,334) | 5,469 | | | |
| receivable and pre-paid | | | 110,607 | (320,521) | |
| Expenses | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Increase (decrease) in other | (456,020) | 329,230 | 1,404,012 | 2,112,526 | |
| accounts payable, accrued expenses | | | | | |
| and advance payment | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Net cash used in operating | (1,177,671) | (1,446,174) | (1,692,855) | (24,787,301) | |
| activities | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| CASH FLOWS FROM INVESTING | | | | | |
| ACTIVITIES: | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Purchase of property and equipment | (10,460) | (24,260) | (33,954) | (1,679,171) | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Decrease (increase) in restricted | 4,013 | | | | |
| lease deposit and prepaid lease | | 175 | 7,701 | (33,336) | |
| Payments | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Proceeds from disposal of property | - | - | - | 172,869 | |
| and equipment | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| Net cash used in investing | $ | $ | $ | $ | |
| activities | (6,447) | (24,085) | (26,253) | (1,539,638) | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | |
+------------------------------------+-------------+-------------+-------------+--------------+----------+
| | | | | | | |
+------------------------------------+-------------+---+---------+-------------+--------------+----------+
*) Revised, see Note 7.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In U.S. Dollars
+------------------------------------+------+-----------+--------+----------+-----------+-------------+----------+
| | | Six months ended | Year ended | Period | |
| | | June 30, | December 31, | from | |
| | | | | January | |
| | | | | 27, 2000 | |
| | | | |(inception) | |
| | | | | through | |
+------------------------------------+------+--------------------+----------------------+-------------+----------+
| | | 2010 | 2009 | 2009 | June 30, 2010 |
+------------------------------------+------+-----------+--------+----------------------+------------------------+
| | | (Unaudited) | |(Unaudited) | |
+------------------------------------+------+--------------------+----------------------+-------------+----------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| CASH FLOWS FROM FINANCING | | | | | |
| ACTIVITIES: | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Proceeds from issuance of shares, | | $ | $ | $ | $ 24,111,975 |
| net | | 2,077,425 | - | 364,660 | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Proceeds from exercise of | | - | 256,005 | 263,924 | 413,924 |
| warrants, net | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Repayment of a long-term loan | | - | - | - | (73,080) |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Proceeds from long term loan | | - | - | - | 70,130 |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Proceeds from a convertible Note | | - | 265,000 | 570,000 | - |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Increase (decrease) in short-term | | - | (40,605) | (52,886) | 3,167,225 |
| bank credit | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Net cash provided by financing | | 2,077,425 | 480,400 | 1,145,698 | 27,690,174 |
| activities | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Increase (decrease) in cash and | | 893,307 | (989,859) | (573,410) | 1,363,235 |
| cash equivalents | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Balance of cash and cash | | 469,928 | 1,043,338 | 1,043,338 | - |
| equivalents at the beginning of | | | | | |
| the Period | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Balance of cash and cash | | $ | $ 53,479 | $ | $ 1,363,235 |
| equivalents at the end of the | | 1,363,235 | | 469,928 | |
| period | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Supplemental disclosure of cash | | | | | |
| flow information: | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Cash paid during the period for: | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Interest | | $ | - $ | $ | $ |
| | | 91,347 | | 36,192 | 166,798 |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Taxes | | $ | - $ | $ | $ |
| | | 10,870 | | 13,243 | 94,407 |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Supplemental disclosure of | | | | | |
| non-cash flow information: | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Issuance of shares in settlement | | $ | - $ | $ | $ |
| of debt | | 141,000 | | - | 237,016 |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Issuance expenses | | - | - $ | $ | $ |
| | | $ | | - | 309,741 |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| Issuance of Common shares upon | | - | - | $ | $ 2,845,072 |
| conversion of a convertible note | | $ | $ | - | |
+------------------------------------+------+-----------+-------------------+-----------+------------------------+
| | | | | | | | |
+------------------------------------+------+-----------+--------+----------+-----------+-------------+----------+
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In U.S. 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
inAccounting Standards Codification ("ASC") topic number 915, "Development Stage
Entities" ("ASC 915") (originally issued as "FAS 7").
On December 4, 2007 the Company's Common shares were admitted for
trading on the AIM market of the London Stock Exchange
b. The Company and its subsidiary are in the development stage. As
reflected in the accompanying financial statements, the Company incurred a loss
during the six month ended June 30, 2010 of $550,114 and had a shareholders'
deficit of $2,470,951 as of that date.
Although the Company and its subsidiary have not yet generated revenues
from product sale, the Company has begun generating income from partnering on
development programs and expects to continue to expand its partnering activity.
These conditions raise doubt about the Company's ability to continue as
a going concern. Management's plans include seeking additional investments and
commercial agreements 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 and/or reach such commercial
agreements 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 haemophilia. 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 haemophilia.
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 for a period of
one year ended October 22, 2010 ("Standstill" period). The Standstill period may
be extended for one to six months in certain circumstances.
· $2.6 million as funding for the Company's operations related to the
development of the Biopump technology for FVIII.
The Company recognizes income in its Statements of Operations 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 for that agreement,
are recognized as other income within operating income.
Funding for the Company's operations related to the development is based
on an agreed amount for each Full Time Equivalent ("FTE"). FTE was agreed to be
measured, by the parties, as 162 development hours. The amount to be paid for
each FTE is not subject to actual costs of the Company.
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 of 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 to the Company.
The Company recognizes income in its statements of operations according
to the performance based method.
The Company estimated the value of 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, at the balance sheet
date as immaterial.
Through June 30, 2010, payments totaling $2.8 million were received from
the Healthcare company.
d. During 2009 the Subsidiary received approval for an additional Research and
Development program from the Office of the Chief Scientist in Israel ("OCS") for
the period April 2009 through August 2010.
The approval allows for a grant of up to approximately $1.3 million based
on research and development expenses, not funded by others, of up to $2.1
million.
e. On March 30, 2006, the Company adopted a stock option plan ("the stock
option plan") according to which options to purchase up to 21,327,380 Common
shares of the Company may be granted to Directors, employees and consultants
(non-employees) of the Company and its subsidiary, as determined by the
Company's Board of Directors from time to time. The options outstanding are
exercisable within a period of 5 years from the date of grant at an exercise
price as determined by the Company's Board of Directors. The options outstanding
to employees, Directors and consultants will vest over a period of three or four
years from the date of grant. Any option which is canceled or forfeited before
expiration becomes available for future grants.
On August 23, 2007, the shareholders approved an amendment to the stock
option plan increasing the share reserve under the stock option plan by
27,167,192 Common shares to a total of 48,494,572 Common shares.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual financial statements
as of December 31, 2009 are applied consistently in these financial statements.
Impact of recently issued Accounting Standards
In March 2010, the FASB issued an update to ASC 605 (ASU No. 2010-17, "Revenue
Recognition - Milestone Method", originally issued as EITF 08-9). The update
provides that the milestone method is a valid application of the proportional
performance model for revenue recognition for research and development
transactions if the milestones are substantive and there is substantive
uncertainty about whether the milestones will be achieved. Determining whether a
milestone is substantive requires judgment that should be made at the inception
of the arrangement. To meet the definition of a substantive milestone, the
consideration earned by achieving the milestone (1) would have to be
commensurate with either the level of effort required to achieve the milestone
or the enhancement in the value of the item delivered, (2) would have to relate
solely to past performance, and (3) should be reasonable relative to all
deliverables and payment terms in the arrangement. No bifurcation of an
individual milestone is allowed and there can be more than one milestone in an
arrangement. The new guidance is effective prospectively for interim and annual
periods beginning on or after June 15, 2010. Early adoption is permitted. While
the Company is still analyzing the potential impact of this guidance, the
Company believes that its current practices are consistent with the guidance
and, accordingly, the Company does not expect the adoption of this guidance will
have a material impact on the financial statements.
NOTE 3:- UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. Operating results for the six months ended June
30, 2010 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2010.
NOTE 4:- SHAREHOLDERS' EQUITY
Issuance of shares:
a. In February 2010, the Company issued 1,125,000 Common shares as
compensation for services rendered to the Company by a consultant in 2009. An
additional 150,000 Common shares will be issued to the same consultant during
the year 2010 with regard to services rendered to the Company as well as future
services which will be provided to the Company.
b. In a series of closings from March through June 2010, the Company issued a
total of 14,465,591 Common shares consisting of 14,273,000 Common shares issued
in March 2010 in consideration of GBP 713,650 ($1,077,611) with issuance costs
of $133,772, and 192,591 Common shares issued to Directors of the Company in
June 2010 in consideration of GBP 12,518 ($18,855).
c. In May 2010, the Company issued 16,727,698 Common shares in consideration
of $1,202,115. The issuance costs amounted to $87,384.
d. Subsequent to the balance sheet date, on August 6, 2010, 150,000 Common
shares were issued to a consultant for services rendered to the Company as well
as future services which will be provided to the Company..
NOTE 5:- CONVERTIBLE DEBENTURES
As of the June 30, 2010 the fair value of the Debentures amounted to $992,309.
In the six months ended June 30, 2010, the Company recorded financial income in
the amount of $21,095 as a result of the change in fair value of the Debentures.
The interest payable at June 30, 2010 in the amount of $95,925 has been paid
subsequent to the balance sheet date.
NOTE 6:- DEFERRED EXPENSES
During the six month period ended June 30, 2010, the Company incurred legal and
accounting fees totaling $108,400 which have been deferred in anticipation of an
equity fundraising at which time these costs will be capitalized. These deferred
expenses are included in Accounts receivable and prepaid expenses.
NOTE 7:- PRIOR PERIOD MISSTATMENTS
In 2010, the Company noted that in connection with the agreement with the
Healthcare company it had over-recognized other income in the amount of $116,000
in 2009. In addition the Company noted that, with regards to options granted to
consultants, it had overstated stock based compensation expenses in the amount
of $84,000 in 2009 and understated stock based compensation expenses of $141,000
in 2008. The Company determined that these errors are immaterial to the 2009 and
2008 consolidated financial statements. Under SAB No. 108, "Considering the
Effects of Prior Year Misstatements in Current Year Financial Statements", the
Company assessed the materiality of making this correction in the current period
and concluded that the correction of this misstatement in current period would
be material to the consolidated financial statements. Based on these facts, the
Company has revised the December 31, 2009 consolidated balance sheet and the
2009 statement of operations within these financial statements. The Company has
revised the year 2008 in these financial statements through the statements of
changes in shareholders' deficit.
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | December | | Revision | | December |
| | | 31, 2008 | | | | 31, |
| | | as | | | | 2008 |
| | | reported | | | | Revised |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Consolidated Balance Sheet: | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Additional paid-in capital | | $ | | $ | | $ |
| | | 28,968,015 | | 141,000 | | 29,109,015 |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Accumulated deficit | | $ | | $ | | $ |
| | | (30,176,288) | | (141,000) | | (30,317,288) |
+------------------------------+-+--------------+-+-----------+-+--------------+
NOTE 7:- PRIOR PERIOD MISSTATMENTS (CONT.)
+------------------------------+-+------------+-+----------+-+------------+
| | |Year ended | |Revision | |Year ended |
| | | December | | | | December |
| | | 31, 2008 | | | | 31, 2008 |
| | | as | | | |as revised |
| | | reported | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| Consolidated Statement of | | | | | | |
| Operations: | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| Research and development, | | $ | | $ | | $ |
| net | | 2,099,092 | | 83,000 | | 2,182,092 |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| General and administrative | | $ | | $ | | $ |
| | | 2,761,008 | | 58,000 | | 2,819,008 |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| Total operating loss | | $ | | $ | | $ |
| | | 4,860,100 | | 141,000 | | 5,001,100 |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| Loss before taxes on income | | $ | | $ | | $ |
| | | 4,848,643 | | 141,000 | | 4,989,643 |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| Loss | | $ | | $ | | $ |
| | | 4,852,258 | | 141,000 | | 4,993,258 |
+------------------------------+-+------------+-+----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+----------+-+------------+
| Loss attributable to Common | | $ | | $ | | $ |
| shareholders | | 4,859,003 | | 141,000 | | 5,000,003 |
+------------------------------+-+------------+-+----------+-+------------+
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | December | | Revision | | December |
| | | 31, 2009 | | | | 31, |
| | | as | | | | 2009 |
| | | reported | | | | Revised |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Consolidated Balance Sheet: | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Advance payment | | $ | | $ | | $ |
| | | 667,012 | | 116,000 | | 783,012 |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Total current liabilities | | $ | | $ | | $ |
| | | 3,303,634 | | 116,000 | | 3,419,634 |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Additional paid-in capital | | $ | | $ | | $ |
| | | 30,327,813 | | 57,000 | | 30,384,813 |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Accumulated deficit | | $ | | $ | | $ |
| | | (34,588,512) | | (173,000) | | (34,761,512) |
+------------------------------+-+--------------+-+-----------+-+--------------+
| | | | | | | |
+------------------------------+-+--------------+-+-----------+-+--------------+
| Total shareholders' equity | | $ ( | | $ | | $ ( |
| | | 4,223,482) | | (116,000) | | 4,339,482) |
+------------------------------+-+--------------+-+-----------+-+--------------+
+------------------------------+-+------------+-+-----------+-+------------+
| | |Year ended | | Revision | |Year ended |
| | | December | | | | December |
| | | 31, 2009 | | | | 31, 2009 |
| | | as | | | |as revised |
| | | reported | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Consolidated Statement of | | | | | | |
| Operations: | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Research and development, | | $ | | $ | | $ |
| net | | 1,764,214 | | (75,000) | | 1,689,214 |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| General and administrative | | $ | | $ | | $ |
| | | 2,543,312 | | (9,000) | | 2,534,312 |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Standstill payment | | $ | | $ | | $ |
| | | (287,611) | | 287,611 | | - |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Excess amount of | | $ | | $ | | $ |
| participation in research | | (155,759) | | (171,671) | | (327,430) |
| and development from third | | | | | | |
| party | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Total operating loss | | $ | | $ | | $ |
| | | 3,864,096 | | 32,000 | | 3,896,096 |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Loss before taxes on income | | $ | | $ | | $ |
| | | 4,407,989 | | 32,000 | | 4,439,989 |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Loss | | $ | | $ | | $ |
| | | 4,409,032 | | 32,000 | | 4,441,032 |
+------------------------------+-+------------+-+-----------+-+------------+
| | | | | | | |
+------------------------------+-+------------+-+-----------+-+------------+
| Loss attributable to Common | | $ | | $ | | $ |
| shareholders | | 4,412,224 | | 32,000 | | 4,442,224 |
+------------------------------+-+------------+-+-----------+-+------------+
*************
This information is provided by RNS
The company news service from the London Stock Exchange
END
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