TIDMMEDG TIDMMEDU
RNS Number : 7760Y
Medgenics Inc
06 March 2012
Press Release 6 March 2012
Medgenics Announces 2011 Financial Results
Medgenics, Inc. (NYSE Amex: MDGN and AIM: MEDU, MEDG) (the
"Company"), the developer of a novel technology for the sustained
production and delivery of therapeutic proteins in patients using
their own tissue, today announced financial results for the year
ended December 31, 2011, and the filing with the U.S. Securities
and Exchange Commission ("SEC") of the Company's Annual Report on
Form 10-K. The Form 10-K includes audited annual consolidated
financial statements containing the information highlighted below,
as well as additional information regarding the Company. The Form
10-K is available at www.sec.gov and at www.medgenics.com. It will
be mailed to shareholders on or about March 9, 2012.
2011 Financial Results
For the year ended December 31, 2011, net research and
development ("R&D") expense increased to $5.05 million from
$1.53 million for the year ended December 31, 2010. This increase
is due to the use of materials and sub-contractors in connection
with the Phase I/II EPODURE(TM) clinical trial, increased expenses
in developing our Factor VIII Biopump(TM) and preparations for the
clinical trial of INFRADURE(TM), including the production of a GMP
vector, as well as an increase in R&D personnel and patent
expenses. These increases were partially offset by $0.94 million
participation from the Israeli Office of the Chief Scientist
("OCS") and a third party recorded during 2011, compared with $1.85
million participation from the OCS, a U.S. grant and a third party
during 2010.
General and administrative expense for the year was $4.92
million compared with $4.41 million for 2010. The increase was
largely due to legal and professional services fees in connection
with Medgenics' IPO and to stock-based compensation expense related
to options granted to consultants.
Other income for 2011 was $0.00 compared with $2.58 million for
2010. Other income in 2010 reflects the excess of the recognized
amount received from the third party collaboration agreement over
the amount of R&D expense incurred during the period in
connection with the agreement.
Financial expenses for 2011 decreased to $0.21 million from
$1.66 million for 2010, mainly due to the decrease in the fair
value of the convertible debentures, which were converted into
common stock in April 2011.
Financial income for 2011 increased to $2.10 million from $0.87
million for 2010, primarily due to the decrease in the fair value
of outstanding warrants.
The Company reported a net loss for 2011 of $8.10 million or
$0.96 per share, compared with a net loss of $4.15 million or $0.95
per share for 2010.
As of December 31, 2011 Medgenics had $5.00 million in cash and
cash equivalents, compared with $2.86 million as of December 31,
2010. In April 2011, the Company raised $13.2 million of gross
proceeds (approximately $10.4 million, net) in its U.S. IPO. Net
cash used in operating activities during the year was $8.02 million
compared with $4.15 million used in 2010.
"2011 was a breakthrough year for Medgenics marked by a number
of important corporate and clinical achievements that position the
Company for growth and expansion in the coming year. We have
exciting clinical development programs underway in a number of
disease indications where the sustained production and delivery of
therapeutic proteins by patients using their own tissue holds
potential to greatly enhance current treatment paradigms," stated
Andrew L. Pearlman, Ph.D., Chief Executive Officer of
Medgenics.
Highlights of 2011 include:
-- Significant enhancement of the Company's leadership with the
addition of accomplished executives and physicians with directly
relevant experience to its management team, Board of Directors and
Strategic Advisory Board.
-- Presentation at the American Society of Nephrology's Kidney
Week 2011of positive data from the first two completed dose groups
(low-dose and mid-dose) of our Phase I/II clinical trial of EPODURE
to treat anemia in chronic kidney disease ("CKD") patients. These
data demonstrated that a single EPODURE administration maintained
hemoglobin levels for six months or more in most of these patients,
and as much as 36months in one, without requiring any injections of
erythropoietic stimulating agents ("ESAs") such as erythropoietin
("EPO").
-- Successful completion of our U.S. Initial Public Offering
("IPO")raising net proceeds of approximately $10.4 million, to fund
ongoing development programs towards Biopump(TM) applications to
treat anemia, hepatitis, hemophilia and other diseases.
Dr. Pearlman commented further, "We are awaiting clearance from
the Israeli Ministry of Health to begin two Phase I/II clinical
trials of INFRADURE, our next product candidate in the Biopump
pipeline, to provide sustained production and delivery of
interferon-alpha to treat hepatitis. During 2011, our INFRADURE
Biopump technology drew increasing interest from several leading
experts in the field of hepatitis. As a consequence, while our
initial focus is on hepatitis C, we believe INFRADURE can more
broadly address the growing and unmet need in a variety of forms of
hepatitis.To this end, we have added to our Strategic Advisory
Board hepatologist Nezam H. Afdhal, M.D., Chief of Hepatology,
Director of Liver Center, Beth Israel Deaconess Medical Center and
an Associate Professor of Medicine, Harvard School of Medicine. A
world-leading authority in hepatitis, Dr. Afdhal will be
instrumental in guiding this strategy as we advance our clinical
programs to address this worldwide health epidemic," continued Dr.
Pearlman.
"We continue to make considerable progress with our anemia
program and are now in the process of expanding its application
from the pre-dialysis patients we have treated thus far, to now
address patients on dialysis. In the coming months, we expect to
initiate a Phase IIa clinical study in Israel, evaluating the
safety and efficacy of sustained EPO therapy using the EPODURE
Biopump for the treatment of anemia in dialysis patients with
end-stage renal disease ("ESRD"). ESRD represents the largest
addressable market for anemia and is a logical indication for
EPODURE. We hope this Phase IIa study will build on the positive
Phase I/II results using EPODURE to treat pre-dialysis patients
with CKD. In parallel, we continue our preparations in the United
States towards a larger clinical trial in dialysis patients. We
anticipate filing an Investigation New Drug application with the
U.S. Food and Drug Administration for a Phase IIb clinical trial of
EPODURE in ESRD in the second quarter of 2012. A safe, sustained
delivery of EPO could reduce the risks of hemoglobin variability
while achieving the recommended hemoglobin targets, without the
supraphysiologic EPO concentrations and their attendant risks
associated with the current injections of ESAs. It also could
significantly improve the logistics of anemia management to the
benefit of both patients and payors."
In closing, Dr. Pearlman stated, "We look forward to an exciting
year ahead, launching multiple clinical trials in the treatment of
kidney disease and hepatitis, which affect millions of people. We
believe that these new trials will provide significant data further
supporting our Biopump platform technology for the autologous
production and sustained delivery of therapeutic proteins via the
patients' own tissue."
About Medgenics
Medgenics is developing and commercializing Biopump(TM), a
proprietary tissue-based platform technology for the sustained
production and delivery of therapeutic proteins using the patient's
own skin biopsy for the treatment of a range of chronic diseases
including anemia, hepatitis C and hemophilia. Medgenics believes
this approach has multiple benefits compared with current
treatments, which include regular and costly injections of
therapeutic proteins.
Medgenics has three long-acting protein therapy products in
development based on this technology:
-- EPODURE (now completing a Phase I/II dose-ranging trial) to
produce and deliver erythropoietin for many months from a single
administration, has demonstrated elevation and stabilization of
hemoglobin levels in anemic patients for six to more than 36
months;
-- INFRADURE (planning to commence a Phase I/II trial in Israel
in 1H12 in hepatitis C) to produce a sustained therapeutic dose of
interferon-alpha for use in the treatment of hepatitis; and
-- HEMODURE is a sustained Factor VIII therapy for the
prophylactic treatment of hemophilia, now in development.
Medgenics intends to develop its innovative products and bring
them to market via strategic partnerships with major pharmaceutical
and/or medical device companies.
In addition to treatments for anemia, hepatitis and hemophilia,
Medgenics plans to develop and/or out-license a pipeline of future
Biopump(TM) products targeting the large and rapidly growing global
protein therapy market, which is forecast to reach $132 billion in
2013. Other potential applications for Biopumps(TM) include
multiple sclerosis, arthritis, pediatric growth hormone deficiency,
obesity and diabetes.
Forward-looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E
of the Securities Exchange Act of 1934 and as that term is defined
in the Private Securities Litigation Reform Act of 1995, which
include all statements other than statements of historical fact,
including (without limitation) those regarding the Company's
financial position, its development and business strategy, its
product candidates and the plans and objectives of management for
future operations. The Company intends that such forward-looking
statements be subject to the safe harbors created by such laws.
Forward-looking statements are sometimes identified by their use of
the terms and phrases such as "estimate," "project," "intend, "
"forecast," "anticipate," "plan," "planning, "expect," "believe,"
"will," "will likely," "should," "could," "would," "may" or the
negative of such terms and other comparable terminology. All such
forward-looking statements are based on current expectations and
are subject to risks and uncertainties. Should any of these risks
or uncertainties materialize, or should any of the Company's
assumptions prove incorrect, actual results may differ materially
from those included within these forward-looking statements.
Accordingly, no undue reliance should be placed on these
forward-looking statements, which speak only as of the date made.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are based.
As a result of these factors, the events described in the
forward-looking statements contained in this release may not
occur.
- Ends -
For further information, contact:
Medgenics, Inc. Phone: +972 4 902 8900
Dr. Andrew L. Pearlman
Andrew.pearlman@medgenics.com
LHA Phone: 212-838-3777
Anne Marie Fields
afields@lhai.com
@LHA_IR_PR
Abchurch Communications Phone: +44 207 398 7719
Adam Michael
Joanne Shears
Jamie Hooper
jamie.hooper@abchurch-group.com
Religare Capital Markets (NOMAD) Phone: +44 207 444 0800
Emily Staples
SVS Securities plc (Joint Broker) Phone: +44 207 638 5600
Alex Mattey
Ian Callaway
Nomura Code Securities (Joint Broker) Phone: +44 207 776 1219
Jonathan Senior
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)
December 31
----------------
Note 2010 2011
---- ------- -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 3 $ 2,859 $ 4,995
Accounts receivable and prepaid expenses 4 983 1,122
------- -------
Total current assets 3,842 6,117
------- -------
LONG-TERM ASSETS:
Restricted lease deposits 7(d) 46 52
Severance pay fund 318 259
------- -------
364 311
------- -------
PROPERTY AND EQUIPMENT, NET 5 243 434
------- -------
DEFERRED ISSUANCE EXPENSES 672 -
------- -------
Total assets $ 5,121 $ 6,862
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)
December 31
------------------
Note 2010 2011
---- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Trade payables $ 743 $ 903
Other accounts payable and accrued expenses 6 1,235 1,156
Convertible debentures 9 5,460 -
-------- --------
Total current liabilities 7,438 2,059
-------- --------
LONG-TERM LIABILITIES:
Accrued severance pay 1,087 1,328
Liability in respect of warrants 9 3,670 478
-------- --------
Total long-term liabilities 4,757 1,806
-------- --------
Total liabilities 12,195 3,865
-------- --------
COMMITMENTS AND CONTINGENCIES 7
STOCKHOLDERS' EQUITY (DEFICIT): 8
Common stock - $0.0001 par value;
100,000,000 shares authorized;5,295,531
shares and9,722,725shares issued and outstanding
at December 31, 2010 and 2011, respectively 1 1
Additional paid-in capital 34,334 52,501
Deficit accumulated during the development
stage (41,409) (49,505)
-------- --------
Total stockholders' equity (deficit) (7,074) 2,997
-------- --------
Total liabilities and stockholders' equity
(deficit) $ 5,121 $ 6,862
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)
Period from
January 27,
2000 (inception)
Year ended through December
December 31 31,
--------------------
Note 2010 2011 2011
---- --------- --------- -----------------
Research and development expenses $ 3,377 $ 5,987 $ 30,442
Less - Participation by the Office
of the Chief
Scientist 1(e) (705) (860) (5,293)
U.S. Government Grant 1(f) (244) - (244)
Participation by third party 1(d) (902) (75) (1,067)
--------- --------- -----------------
Research and development expenses,
net 1,526 5,052 23,838
General and administrative expenses 4,405 4,924 26,398
Other income:
Excess amount of participation
in research and development from
third party 1(d) (2,577) - (2,904)
--------- --------- -----------------
Operating loss (3,354) (9,976) (47,332)
Financial expenses 11 (1,664) (214) (3,280)
Financial income 11 873 2,097 754
--------- --------- -----------------
Loss before taxes on income (4,145) (8,093) (49,858)
Taxes on income 10 2 3 76
--------- --------- -----------------
Loss $ (4,147) $ (8,096) $ (49,934)
========= ========= =================
Basic and diluted loss per share $ (0.95) $ (0.96)
========= =========
Weighted average number of Common
stock used in computing basic
and diluted loss per share 4,374,520 8,447,908
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)
Deficit
accumulated
Additional Receipts during the Total
paid-in on account development stockholders'
Common stock capital of shares stage deficit
-------------------- ------------ ------------ ------------- ---------------
Shares Amount
---------- --------
Balance as of December 31, 2009 3,490,512 $ 1 $ 29,523 $ 25 $ (37,262) $ (7,713)
Exercise of options and warrants in
January, May, September and
December
2010 785,419 (*) 559 (25) - 534
Stock based compensation related to
options and warrants
granted to consultants and
employees - - 1,834 - - 1,834
Issuance of Common stock in
February
2010 at $4.38 per share to
consultants 32,142 (*) 141 - - 141
Issuance of Common stock in March
2010,
net at $2.63
(GBP 1.75) per share 407,800 (*) 943 - - 943
Issuance of Common stock in May
2010,
net at $2.52
(GBP 1.75) per share 477,934 (*) 1,115 - - 1,115
Issuance of Common stock in May
2010
at $3.43
(GBP 2.28) per share 5,502 (*) 19 - - 19
Issuance of Common stock in August
and September 2010 to consultants 39,080 (*) 164 - - 164
Issuance of warrants in September
2010
to a consultant - - 36 - - 36
Issuance of restricted Common stock
in December 2010 to a director 57,142 (*) (*) - - -
Loss - - - - (4,147) (4,147)
---------- -------- ------------ ------------ ------------- ---------------
Balance as of December 31, 2010 5,295,531 $ 1 $ 34,334 $ - $ (41,409) $ (7,074)
========== ======== ============ ============ ============= ===============
(*) Represents an amount lower than $1.
The accompanying notes are an integral part of the consolidated
financial statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)
Deficit
accumulated Total
Additional during the stockholders'
paid-in development equity
Common stock capital stage (deficit)
-------------------- ------------ ------------- ---------------
Shares Amount
---------- --------
Balance as of December 31, 2010 5,295,531 $ 1 $ 34,334 $ (41,409) $ (7,074)
Issuance of Common stock at $4.54 per share
and warrants at $0.46 per share, net of issuance
costs in the amount of $2,826 2,624,100 (*) 10,389 - 10,389
Issuance of Common stock upon conversion of
debentures 1,410,432 (*) 5,585 - 5,585
Issuance of Common stock to a consultant at
$3.67 per share 12,500 (*) 46 - 46
Issuance of warrants to consultants - - 558 - 558
Exercise of options and warrants 380,162 (*) 1,194 - 1,194
Stock based compensation related to options
and warrants granted to consultants and
employees - - 395 - 395
Loss - - - (8,096) (8,096)
---------- -------- ------------ ------------- ---------------
Balance as of December 31, 2011 9,722,725 $ 1 $ 52,501 $ (49,505) $ 2,997
========== ======== ============ ============= ===============
(*) Represents an amount lower than $1.
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------
U.S. dollars in thousands
Period from
January 27,
2000 (inception)
Year ended through December
December 31 31,
--------------------
2010 2011 2011
--------- --------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss $ (4,147) $ (8,096) $ (49,934)
--------- --------- -----------------
Adjustments to reconcile loss to net
cash used in operating activities:
Depreciation 120 98 1,081
Loss from disposal of property and equipment 1 - 330
Issuance of shares as consideration
for providing security for letter of
credit - - 16
Stock based compensation related to
options and warrants granted to employees
and consultants 1,834 395 7,162
Interest and amortization of beneficial
conversion feature of Convertible note - - 759
Change in fair value of convertible
debentures and warrants 633 (1,936) 1,642
Accrued severance pay, net 39 300 1,069
Exchange differences on a restricted
lease deposit 1 4 3
Exchange differences on a long term
loan - - 3
Increase (decrease) in trade payables (204) 764 1,507
Decrease (increase) in accounts receivable,
prepaid expenses and deferred issuance
expenses (1,644) 533 (1,122)
Increase (decrease) in other accounts
payable, accrued expenses and advance
payment (787) (79) 1,703
--------- --------- -----------------
Net cash used in operating activities (4,154) (8,017) (35,781)
--------- --------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property and
equipment - - 173
Increase in restricted lease deposits (8) (10) (55)
Purchase of property and equipment (61) (289) (2,019)
--------- --------- -----------------
Net cash used in investing activities $ (69) $ (299) $ (1,901)
--------- --------- -----------------
The accompanying notes are an integral part of the consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------
U.S. dollars in thousands
Period from
January 27,
2000 (inception)
Year ended through
December 31 December 31
--------------------
2010 2011 2011
--------- --------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares and
warrants, net $ 2,077 $ 10,389 $ 34,501
Proceeds from exercise of options and
warrants, net 534 63 1,011
Repayment of a long-term loan - - (73)
Proceeds from long term loan - - 70
Issuance of convertible debentures and
warrants 4,001 - 7,168
Net cash provided by financing activities 6,612 10,452 42,677
--------- --------- -----------------
Increase in cash and cash equivalents 2,389 2,136 4,995
--------- --------- -----------------
Balance of cash and cash equivalents
at the beginning of the period 470 2,859 -
--------- --------- -----------------
Balance of cash and cash equivalents
at the end of the period $ 2,859 $ 4,995 $ 4,995
========= ========= =================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 117 $ 49 $ 242
========= ========= =================
Taxes $ 14 $ 1 $ 98
========= ========= =================
Supplemental disclosure of non-cash
flow information:
Issuance expenses paid with shares $ - $ - $ 310
========= ========= =================
Issuance of Common stock upon conversion
of convertible debentures $ - $ 5,585 $ 8,430
========= ========= =================
Issuance ofCommon stock and warrants
to consultants $ 451 $ 604 $ 1,151
========= ========= =================
Classification of liability in respect
of warrants into equity due to the exercise
of warrants $ - $ 1,131 $ 1,131
========= ========= =================
The accompanying notes are an integral part of the consolidated
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------
U.S. dollars in thousands
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 the Subsidiary are engaged in the research and
development of products in the field of biotechnology and
associated medical equipment and are thus considered development
stage companies as defined in Accounting Standards Codification
("ASC") topic number 915, "Development Stage Entities" ("ASC
915").
On December 4, 2007 the Company's Common stock was admitted for
trading on the AIM market of the London Stock Exchange ("AIM").
(see note 8(d)22).
On April 13, 2011 the Company completed an Initial Public
Offering ("IPO") of its Common stock on the NYSE Amex, raising
$10,389 in net proceeds (see Note 8(d)41).
According to ASC 815-15, prior to the consummation of the
Company's IPO, the Company classified the $570 in principal value
of convertible debentures issued in 2009 (the "2009 Debentures")
and the $4,000 in principal value of convertible debentures issued
in 2010 (the "2010 Debentures") as liabilities and measured them
entirely at fair value at each reporting date. On the closing date
of the IPO and upon the automatic conversion of the 2009 Debentures
and 2010 Debentures into Common stock, the Company classified these
liabilities as additional paid in capital (see Note 8(d)42).
In addition, the exercise price of certain warrants which were
initially issued with down-round protection mechanism was adjusted
based upon the public offering price of the shares of Common stock
sold in the IPO.
b. The Company and the Subsidiary are in the development stage.
As reflected in the accompanying financial statements, the Company
incurred a loss of $8,096 and had a negative cash flow from
operating activities of $8,017 during the year ended December 31,
2011.The Company and the Subsidiary have not yet generated revenues
from product sale. The Company generated income from partnering on
development programs and expects to expand its partnering activity.
Management's plans also include seeking additional investments and
commercial agreements to continue the operations of the Company and
the 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 Company believes that the net
proceeds of the IPO, plus our existing cash and cash equivalents,
should be sufficient to meet its operating and capital requirements
through the second quarter of 2012. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern. 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. Pursuant to an agreement entered into on February 11, 2011,
the Regents of the University of Michigan (Michigan) have granted
an exclusive worldwide license for patent rights relating to
certain uses of variants of clotting Factor VIII. See note
7(a)(3).
d. On October 22, 2009, the Company signed a preclinical
development and option agreement which was amended in December 2009
(the "Agreement"), with a major international healthcare company
(the "Healthcare company") that is a market leader in the field of
hemophilia. The Agreement included funding for preclinical
development of the Company's Biopump(TM) protein technology to
produce and deliver the clotting protein Factor VIII ("FVIII") for
the sustained treatment of hemophilia.
Under the terms of the Agreement, the Company was entitled to
receive up to $4,100 to work exclusively with the Healthcare
company for one year ended October 22, 2010 to develop a Biopump to
test the feasibility of continuous production and delivery of this
clotting protein. The Agreement granted the Healthcare company an
option to extend exclusivity upon the payment of a $2,500 fee. Such
option was not exercised. The Company estimated the value of this
option as immaterial.
The Company recognized income in its Statements of Operations
based on hours incurred assigned to the project. The excess of the
recognized amount received from the Healthcare company over the
amount of research and development expenses incurred during the
period for the Agreement was recognized as other income within
operating income.
If the two parties choose not to proceed to a full commercial
agreement, the Company will receive all rights to the jointly
developed intellectual property and will pay royalties to the
Healthcare company at the rates between 5% and 10% of any future
income arising from such intellectual property up to a maximum of
ten times the total funds paid by the Healthcare company to the
Company.
In October 2010 and in July 2011, the Company and the Healthcare
company agreed on extensions of the Agreement. During the extension
periods, the Company assumed most of the funding responsibilities.
Under the second extension, confirmatory studies were conducted
implanting HEMODURE(TM) Biopumps producing FVIII in mice. The
Healthcare company agreed to bear $75 of the costs of these
studies. The Agreement, as extended, expired on September 30,
2011.
Through December 31, 2011, payments totaling $3,971 were
received from the Healthcare company.
e. In June 2011, the Subsidiary received approval for an
additional Research and Development program from the Office of the
Chief Scientist in Israel ("OCS") for the period March through
August 2011, subsequently extended through September 2011. The
approval allows for a grant of up to approximately $900 based on
research and development expenses, not funded by others, of up to
$1,500. The Subsidiary has applied for an additional program which
is currently under review by the OCS.
f. In December 2010, the Company received a cash grant of $244
under the U.S. government's Qualifying Therapeutic Discovery
Project (QTDP) to fund its Biopump research and development costs
incurred in 2009. The Company recorded the grant in 2010 as a
reduction of research and development expenses.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance
with United States Generally Accepted Accounting Principles ("U.S.
GAAP").
a. Use of estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions. The
Company's management believes that the estimates and assumptions
used are reasonable based upon information available at the time
they are made. These estimates and assumptions can affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
b. Financial statements in U.S. dollars
The majority of the Company and the Subsidiary's operations are
currently conducted in Israel; however, it is anticipated that the
majority of the Company's revenues will be generated outside Israel
and will be denominated in U.S. dollars ("dollars"), and financing
activities including loans, equity transactions and cash
investments, are made mainly in dollars. The Company's management
believes that the dollar is the primary currency of the economic
environment in which the Company and its subsidiary operate. Thus,
the functional and reporting currency of the Company and the
Subsidiary is the dollar.
Accordingly, transactions and balances denominated in dollars
are presented at their original amounts. Non-dollar transactions
and balances have been re-measured to dollars, in accordance with
ASC 830, "Foreign Currency Matters" of the Financial Accounting
Standards Board ("FASB"). All exchange gains and losses from
re-measurement of monetary balance sheet items denominated in
non-dollar currencies are reflected in the statements of operations
as financial income or expenses, as appropriate.
c. Principles of consolidation
The consolidated financial statements include the accounts of
the Company and the Subsidiary. Intercompany transactions and
balances have been eliminated upon consolidation.
d. Cash equivalents
The Company and the Subsidiary consider all highly liquid
investments originally purchased with maturities of three months or
less to be cash equivalents.
e. Property and equipment
Property and equipment are stated at cost net of accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
The annual rates of depreciation are as follows:
%
---------------------------
Furniture and office equipment 6 - 15 (mainly 15)
Computers and peripheral equipment 33
Laboratory equipment 15 - 33 (mainly 15)
Leasehold improvements The shorter of term of
the lease or the useful
life of the asset
f. Impairment of long-lived assets
Long-lived assets are reviewed for impairment in accordance with
ASC 360, "Property, Plant, and Equipment" ("ASC 360"), whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of an
asset to be held and used is measured by a comparison of the
carrying amount of the asset to the future undiscounted cash flows
expected to be generated by the asset. If such an asset is
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset
exceeds the fair value of the asset. During the years ended
December 31, 2010 and 2011 and for the period from January 27, 2000
(inception) through December 31, 2011, no impairment losses have
been identified.
g. Severance pay
The Subsidiary's liability for severance pay is calculated
pursuant to the Israeli severance pay law based on the most recent
salary for the employees multiplied by the number of years of
employment, as of the balance sheet date. Employees are entitled to
one month salary for each year of employment or a portion thereof.
In addition, several employees are entitled to additional severance
compensation as per their employment agreements. The Subsidiary's
liability for all of its employees is fully provided by an accrual
and is mainly funded by monthly deposits with insurance policies.
The value of these policies is recorded as an asset in the
Company's balance sheet.
The deposited funds may be withdrawn only upon the fulfillment
of the obligation pursuant to Israeli severance pay law or labor
agreements. The value of the deposited funds is based on the cash
surrender value of these policies and includes profits or losses as
appropriate.
As part of employment agreements, the Company and certain of its
employees agreed to the terms set forth in Section 14 of the
Israeli Severance Pay Law, according to which amounts deposited in
severance pay funds by the Subsidiary shall be the only severance
payments released to the employee upon termination of employment,
voluntarily or involuntarily. During the year, 6 additional
employees agreed to the terms set forth in Section 14. Accordingly,
the financial statements do not include the severance pay fund and
the severance pay accrual in connection with these employees.
Severance expenses for the years ended December 31, 2010 and
2011 and for the period from January 27, 2000 (inception) through
December 31, 2011, amounted to $96, $382 and $1,880,
respectively.
h. Income taxes
The Company accounts for income taxes in accordance with ASC
740, "Income Taxes" ("ASC 740"). ASC 740 prescribes the use of the
liability method whereby deferred tax assets and liabilities are
determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are
expected to reverse. The Company provides a valuation allowance, if
necessary, to reduce deferred tax assets to their estimated
realizable value. As of December 31, 2011, a full valuation
allowance was provided by the Company.
The Company also accounts for income taxes in accordance with
ASC 740-10, "Accounting for Uncertainty in Income Taxes" ("ASC
740-10"). ASC 740-10 contains a two-step approach for recognizing
and measuring uncertain tax positions accounted for in accordance
with ASC 740-10. The first step is to evaluate the tax position
taken or expected to be taken in a tax return by determining if the
weight of available evidence indicates that it is more likely than
not that, on an evaluation of the technical merits, the tax
position will be sustained on audit, including resolution of any
related appeals or litigation processes. The second step is to
measure the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. No liability has
been recorded as a result of the adoption of ASC 740-10 in
2007.
i. Accounting for stock based compensation
On January 1, 2006, the Company adopted ASC 718,
"Compensation-Stock Compensation" ("ASC 718") which requires the
measurement and recognition of compensation expense based on
estimated fair values for all share-based payment awards made to
employees and directors.
The Company recognized compensation expenses for awards granted
based on the straight line method over the requisite service period
of each of the grants, net of estimated forfeitures. The Company
estimated the fair value of stock options granted to employees and
directors using the Binomial option pricing model.
In 2010 and 2011, the Company estimated the fair value of stock
options granted to employees and directors using the Binominal
options pricing model with the following assumptions:
2010 2011
------ ------
Dividend yield 0% 0%
Expected volatility 66% 75%
Risk-free interest
rate 2.9% 2.9%
Suboptimal exercise
factor 1.5-2 1.5-2
Contractual life (years) 10 10
The Company uses historical data to estimate pre and post
vesting exit rate within the valuation model; separate groups of
employees that have similar historical exercise behavior are
considered separately for valuation purposes.
The suboptimal exercise factor represents the value of the
underlying stock as a multiple of the exercise price of the option
which, if achieved, results in exercise of the option.
The risk-free interest rate assumption is based on observed
interest rates appropriate for the term of the Company's employee
stock options.
The Company has historically not paid dividends and has no
foreseeable plans to pay dividends.
The Company applies ASC 718 and ASC 505-50, "Equity-Based
Payments to Non-Employees" ("ASC 505-50"), with respect to options
issued to non-employees. ASC 718 requires the use of option
valuation models to measure the fair value of the options. The fair
value of these options was estimated at grant date and at the end
of each reporting period, using the Binomial option pricing model
with the following assumptions:
2010 2011
----- --------
Dividend yield 0% 0%
Expected volatility 82% 68%
Risk-free interest
rate 1.4% 1.7%
Contractual life 1-10 1.1-9.7
(years)
j. Loss per share
Basic loss per share is computed based on the weighted average
number of shares of Common stock outstanding during each year.
Diluted loss per share is computed based on the weighted average
number of shares of Common stock outstanding during each year, plus
the dilutive effect of options considered to be outstanding during
each year, in accordance with ASC 260, "Earnings Per Share" ("ASC
260").
In 2010 and 2011, all outstanding stock options and warrants
have been excluded from the calculation of the diluted loss per
Common share because all such securities were anti-dilutive for the
periods presented.
k. Research and development expenses
All research and development expenses are charged to the
Statements of Operations as incurred. Grants from the OCS and the
U.S. Government and participation from third-parties related to
such research and development expenses are offset against the
expense at the later of when receipt is assured or the expenses are
incurred.
l. Grants and participation
Royalty-bearing grants from the OCS for funding approved
research and development projects are recognized at the time the
Subsidiary is entitled to such grants, on the basis of the costs
incurred, and are presented as a deduction from research and
development expenses.
Participation from third parties in the Company's research and
development operations relating to the HEMODURE Biopump was
recognized at the time the Company was entitled to such
participation from the third parties, and is presented as a
deduction from the Company's research and development expenses.
The Company recognizes income in its statements of operation as
follows:
-- Participation from third party - in accordance with ASC
605-35 based on hours incurred assigned to the project. The excess
of the recognized amount received from the Healthcare company over
the amount of research and development expenses incurred during the
period was recognized as other income within operating income.
-- Milestones - upon the achievement of the specific milestone.
-- Grants from the U.S. government's QTDP for funding approved
research and development projects were recognized at the time the
Company was entitled to such grants, on the basis of the costs
incurred and are presented as a deduction from research and
development expenses.
m. Concentrations of credit risks
Financial instruments that potentially subject the Company and
the Subsidiary to concentrations of credit risk consist principally
of cash and cash equivalents.
Cash and cash equivalents are invested in major banks in Israel,
the United Kingdom and the United States. Such deposits in the
United States may be in excess of insured limits and are not
insured in other jurisdictions. Management believes that the
financial institutions that hold the Company's and the Subsidiary's
investments are institutions with high credit standing and
accordingly, minimal credit risk exists with respect to these
investments.
The Company has no off-balance-sheet concentrations of credit
risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements.
n. Fair value of financial instruments
The carrying amount of cash and cash equivalents, accounts
receivable, short term bank credit, accounts payable and accrued
liabilities are generally considered to be representative of their
respective fair values because of the short-term nature of those
instruments. The convertible debentures are presented at fair
value.
Effective January 1, 2008, the Company adopted ASC 820, "Fair
Value Measurements and disclosures" ("ASC 820). ASC 820 clarifies
that fair value is an exit price, representing the amount that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use
in pricing an asset or a liability. As a basis for considering such
assumptions, ASC 820 establishes a three-tier value hierarchy,
which prioritizes the inputs used in the valuation methodologies in
measuring fair value:
Level 1 Inputs - Quoted prices for identical instruments in active markets.
Level 2 Inputs - Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all
significant
inputs and significant value drivers are observable.
Level 3 Inputs - Valuation derived from valuation techniques in which one or more significant inputs or
significant
value drivers are unobservable.
The financial instruments carried at fair value on the Company's
balance sheet as of December 31, 2010 were convertible debentures
and warrants. The financial instruments carried at fair value on
the Company's balance sheet as of December 31, 2011 are warrants.
Currently, certain warrants with down-round protection are valued
using level 3 inputs.
The fair value of certain warrants (see Note 9(b)) was estimated
at December 31, 2010 and 2011 using the Binomial pricing model with
the following assumptions:
December 31, December 31,
2010 2011
------------- --------------
Dividend yield 0% 0%
Expected volatility 37.8% - 77% 19.1% - 77.8%
Risk-free interest
rate 0.5% - 2.1% 0.1% - 0.5%
Contractual life
(in years) 0.3 - 4.7 0.4 - 3.7
n. Fair value of financial instruments (cont.)
The fair value of the convertible debentures issued at 2009 was
estimated at December 31, 2010 using the Binomial pricing model
with the following assumptions:
December 31,
2010
-------------
Dividend yield 0%
Expected volatility 76%
Risk-free interest
rate 0.18%
Contractual life
(in years) 0.46
The fair value of the convertible debentures issued at 2010 was
estimated at December 31, 2010 using the Binomial pricing model
with the following assumptions:
December 31,
2010
-------------
Dividend yield 0%
Expected volatility 51%
Risk-free interest
rate 0.56%
Contractual life
(in years) 0.73
o. Impact of recently issued Accounting Standards
1. In May 2011, the FASB issued Accounting Standards Update
2011-04, "Fair Value Measurement" (Topic 820): Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs. This guidance amends the disclosure
requirements related to recurring and nonrecurring fair value
measurements and includes the following provisions: application of
the concepts of highest and best use and valuation premise,
introduction of an option to measure groups of offsetting assets
and liabilities on a net basis, incorporation of certain premiums
and discounts in fair value measurements, and the measurement of
fair value of certain instruments classified in stockholders'
equity. In addition, the amended guidance includes several new fair
value disclosure requirements, including, among other things,
information about valuation techniques and unobservable inputs used
in Level 3 fair value measurements and a narrative description of
Level 3 measurements' sensitivity to changes in unobservable
inputs. The guidance becomes effective for the reporting period
beginning January 1, 2012. The Company expects that adoption of
this new guidance will not have a material impact on the Company's
financial statements.
2. In June 2011, the FASB issued Accounting Standards Update
2011-05, "Comprehensive Income" (topic 220): Presentation of
Comprehensive Income. This amended guidance eliminates the option
for reporting entities to present components of other comprehensive
income in the statement of stockholders' equity. Instead, this
amended guidance now requires reporting entities to present all
non-owner changes in stockholders' equity either as a single
continuous statement of comprehensive income or as two separate but
consecutive statements. The guidance will become effective for the
reporting period beginning January 1, 2012. The Company expects
that adoption of this new guidance will not have a material impact
on the Company's financial statements.
p. Reclassifications
Certain financial statement data for prior years has been
reclassified to conform to current year financial statement
presentation.
NOTE 3:- CASH AND CASH EQUIVALENTS
December 31,
----------------------------
2010 2011
------------- -------------
In Dollars $ 2,851 $ 4,994
In NIS 8 1
------------- -------------
$ 2,859 $ 4,995
------------- -------------
NOTE 4:- ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
December 31,
----------------------------
2010 2011
------------- -------------
Grant receivable from the
OCS $ 415 $ 956
Participation receivable 307 -
Government authorities 37 81
Prepaid expenses and other 224 85
------------- -------------
$ 983 $ 1,122
------------- -------------
NOTE 5:- PROPERTY AND EQUIPMENT, NET
Composition of property and equipment is as follows:
December 31,
----------------------------
2010 2011
------------- -------------
Cost:
Furniture and office equipment $ 114 $ 117
Computers and peripheral
equipment 40 59
Laboratory equipment 277 364
Leasehold improvements 170 350
------------- -------------
Total cost 601 890
------------- -------------
Total accumulated depreciation 358 456
------------- -------------
Depreciated cost $ 243 $ 434
------------- -------------
Depreciation expense for the years ended December 31, 2010 and
2011 and for the period from January 27, 2000 (inception) through
December 31, 2011 amounted to $120, $98 and $1,081,
respectively.
NOTE 6:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31,
----------------------------
2010 2011
------------- -------------
Employees and payroll accruals $ 622 $ 797
Interest payable on debentures 79 -
Accrued expenses and others 534 359
------------- -------------
$1,235 $ 1,156
------------- -------------
NOTE 7:- COMMITMENTS AND CONTINGENCIES
a. License agreements
1. On November 23, 2005, the Company signed a new agreement with
Yissum Research and Development Company of the Hebrew University of
Jerusalem ("Yissum"). According to the agreement, Yissum granted
the Company a license of certain patents for commercial
development, production, sub-license and marketing of products to
be based on its know-how and research results. In consideration,
the Company agreed to pay Yissum the following amounts:
(a) Three fixed installments measured by reference to investment
made in the Company, as follows:
I. 1(st) installment - $50 shall be paid when the cumulative
investments in the Company by any third party or parties, from May
23, 2005, amount to at least $3,000.
II. 2nd installment - Additional $150 shall be paid when the
cumulative investments in the Company by any third party or
parties, from May 23, 2005, amount to at least $12,000.
III. 3rd installment - Additional $200 shall be paid when the
cumulative investments in the Company by any third party or
parties, from May 23, 2005, amount to at least $18,000.
The 1(st) installment of $50 to Yissum was paid in 2007, the 2nd
installment of $150 was paid in 2010 and the 3(rd) and final
installment of $200 was paid in April 2011. Payments to Yissum are
recorded as research and development expenses.
(b) Royalties at a rate of 5% of net sales of the product.
(c) Sub-license fees at a rate of 9% of sublicense considerations.
The total aggregate payment of royalties and sub-license fees by
the Company to Yissum shall not exceed $10,000.
2. Pursuant to an agreement dated January 25, 2007 between
Baylor College of Medicine ("BCM") and the Company, BCM granted the
Company a non-exclusive worldwide license of a certain technology
(the "Subject Technology").
The license gives the Company a non-exclusive right to use,
market, sell, lease and import the Subject Technology by way of any
product process or service that incorporates, utilizes or is made
with the use of the Subject Technology.
In consideration, the Company agreed to pay BCM the following
amounts:
I. a one time, non-refundable license fee of $25 which was paid in 2007;
II. an annual non-refundable maintenance fee of $20;
III. a one-time milestone payment of $75 upon FDA clearance or
equivalent of clearance for therapeutic use. As of the balance
sheet date, the Company did not achieve FDA clearance; and
IV. aninstallmentof $25 upon executing any sub-licenses that the
Company executes in respect of the Subject Technology.
All payments to BCM are recorded as research and development
expenses. The license agreement shall expire (unless terminated
earlier for default or by the Company at its discretion) on the
first day following the tenth anniversary of the first commercial
sale of licensed products by the Company, following which the
Company shall have a perpetual, royalty free license to the Subject
Technology.
3. Pursuant to an agreement entered into on February 11, 2011
(effective as of January 31, 2011), the Regents of the University
of Michigan (Michigan) have granted an exclusive worldwide license
for patent rights relating to certain uses of variants of clotting
Factor VIII. The license agreement covers a portfolio of 2 issued
and 3 pending patents. In consideration, the Company agreed to pay
Michigan the following amounts:
I. an initial license fee of $25 which was paid in 2011;
II. an annual license fee in arrears of $10 rising to $50
following the grant by the Company of a sub-license or (if sooner)
from the 6th anniversary of the effective date of the licence
agreement;
III. staged milestone payments of $750 (in aggregate), of which
$400 will be recoupable against royalties;
IV. royalties at an initial rate of 5% of net sales, reducing by
a percentage point at predetermined thresholds to 2% upon
cumulative net sales exceeding $50,000;
V. sub-license fees at an initial rate of 6% of sub-licensing
revenues, reducing by a percentage point at predetermined
thresholds to 4% upon cumulative sub-licensing revenues exceeding
$50,000; and
VI. patent maintenance costs.
The exclusive worldwide license is expected to expire in 2026
upon the expiration of the last to expire of the patent rights
licensed. During 2011, the Company paid to Michigan patent
maintenance costs of $123.
a. Chief Scientist
Under agreements with the OCS in Israel regarding research and
development projects, the Subsidiary is committed to pay royalties
to the OCS at rates between 3.5% and 5% of the income resulting
from this research and development, at an amount not to exceed the
amount of the grants received by the Subsidiary as participation in
the research and development program, plus interest at LIBOR. The
obligation to pay these royalties is contingent on actual income
and in the absence of such income no payment is required. As of
December 31, 2011, the aggregate contingent liability amounted to
approximately $5,300.
b. Clinical trials
On July 30, 2008, approval was received from the Israel Ministry
of Health to conduct a Phase I/II safety and efficacy trial of the
EPODURE(TM) Biopump for providing sustained treatment of anemia in
patients with chronic kidney disease. The Subsidiary had agreements
with physicians, consultants and Hadasit Medical Research and
Development Ltd. ("Hadasit") to operate the trial. The major
agreements were entered into in April 2008, with Hadasit to conduct
the clinical trial at Hadassah Medical Center ("Hadassah"). The
Subsidiary conducted the trial at Hadassah through September 2009.
The Subsidiary also used the lab facilities at a cost of
approximately $33 per month through March 2009.
On April 15, 2010, approval was received from the Israel
Ministry of Health to continue the clinical trial at Tel Aviv
Medical Center where the Subsidiary pays approximately $14.4 per
patient. The Subsidiary resumed the use of the lab facilities at
Hadassah on May 1, 2010 at the same cost of approximately $33 per
month.
c. Lease Agreement
1. The facilities of the Subsidiary were rented under an
operating lease agreement for a three year period ending December
2010 and the option to renew the lease for an additional period
through December 2013 has been exercised. The Company has the
option to extend the lease through December 2014. Future minimum
lease commitment under the existing non-cancelable operating lease
agreement is approximately $63 for each of 2012 and 2013.
As of December 31, 2011 the Subsidiary pledged a bank deposit
which is used as a bank guarantee at an amount of $22 to secure its
payments under the lease agreement.
2. The offices of the Company were rented under an operating
lease agreement for one year ending June 30, 2012. Future minimum
lease commitment under the existing non-cancelable operating lease
agreement for 2012 is approximately $39.
3. The Subsidiary leases vehicles under standard commercial
operating leases. Future minimum lease commitments under various
non-cancelable operating lease agreements in respect of motor
vehicles are as follows:
Year
2012 $ 70
2013 56
2014 22
$ 146
------
As of December 31, 2011, the Subsidiary paid three months lease
installments in advance which amounted to $21.
NOTE 8:- STOCKHOLDERS' EQUITY
a. Common stock
The Common stock confers upon the holders the right to receive
notice to participate and vote in general and special meetings of
the stockholders of the Company and the right to receive dividends,
if declared.
b. Recapitalization of equity capital
According to a recapitalization agreement signed on March 30,
2006 with the requisite number of the Company's stockholders and
Note providers, the convertible note and the outstanding Old Common
stock, Series A Preferred shares and Series B Preferred shares were
converted into Common stock. The conversion rates were as
follows:
1. A total of 342,368 shares of Common stock were issued to the
holders of the convertible Note upon conversion of the Note.
2. One share of Common stock was issued for 302 shares of Old Common stock.
3. One share of Common stock was issued for 11 Series A Preferred shares.
4. One share of Common stock was issued for 9 Series B Preferred shares.
As a result of the recapitalization of the equity, the Company
issued a total of 282,452 shares of Common stock.
Pursuant to ASC 260-10 "Earnings Per Share", the Company added
the excess of the fair value of the Common stock that would have
been issued pursuant to the original conversion terms of the
Preferred shares over the fair value of the Common stock issued to
the holders of the Preferred shares in the recapitalization in the
amount of $437,197 to deficit accumulated during the development
stage with a corresponding reduction in share capital and
additional paid in capital.
c. Reverse split
In February 2011, the Company's Board of Directors approved a
one (1) for thirty five (35) reverse split of the Company's Common
stock and the number of authorized shares of the Company's Common
stock was reduced from 500,000,000 to 100,000,000, effective
February 14, 2011. Upon the effectiveness of the reverse stock
split, thirty-five shares of Common stock of $0.0001 par value were
converted and reclassified as one share of Common stock of $0.0001
par value. Accordingly, all references to number of shares, Common
stock and per share data in the accompanying financial statements
have been adjusted to reflect the stock split on a retroactive
basis. Fractional shares created as a result of the stock split
were paid in cash based on the then current market price. As a
result of the rounding down effect, 166 shares of Common stock have
been eliminated.
d. Issuance of shares, stock options and warrants to investors
1. In January and March 2000, the Company issued a total of
59,133 shares of Old Common stock at par value.
2. In August 2000, the Company issued 12,512 shares of Old
Common stock in consideration of $500.
3. In August 2000, in respect of the earlier license agreement
with Yissum, the Company issued 26,884 shares of Old Common stock
at par value.
4. In January 2001, the Company issued 3,957 Series A Preferred
shares in consideration of $200. The issuance costs amounted to
$5.
5. On March 19, 2001, the Board of Directors authorized a 10 to
1 stock split and 1,000 to 1 stock split effected as stock
dividend. In addition, the par value of each share was reduced from
$0.001 to $0.0001.
6. In March and June 2001, the Company issued a total of 116,738
Series A Preferred shares in consideration of $6,998. The issuance
costs amounted to $192.
7. In October 2002, the Company issued a total of 76,476 Series
B Preferred shares in consideration for $5,353. The issuance costs
amounted to $89.
8. In February, September and November 2003, the Company issued
a total of 555 shares of Old Common stock in consideration of
$0.195, upon exercise of stock options.
9. In April and May 2003, the Company issued a total of 30,485 Series B Preferred shares in consideration of $2,134. The issuance costs amounted to $97.
10. In January and February 2004, the Company issued a total of
1,316 Old shares of Common stock in consideration of $0.1 in cash
upon exercise of stock options and $10 in consideration of
services.
11. In March 2006, the Company issued 75,235 shares of Common
stock as a settlement of a debt.
12. In March 2006, as part of the recapitalization, warrants to
purchase 61,117 shares of Common stock at an exercise price per
share of $0.0001 with a term of 5 years were issued by the Company
to existing holders of Old Common stock, Series A Preferred shares
and Series B Preferred shares.
13. In March 2006, the Company issued 342,368 shares of Common
stock in consideration for the conversion of a convertible
loan.
14. In March, April and June 2006, the Company issued a total of
463,358 shares of Common stock and warrants to purchase 926,717
shares of Common stock at an exercise price per share of $2.49 and
a term of 5 years in consideration of $1,149. These warrants
include anti-dilution protection and a cashless exercise provision.
The issuance costs amounted to $197.
15. In November and December 2006, the Company issued a total of
476,736 shares of Common stock and warrants to purchase 595,921
shares of Common stock at an exercise price of $4.10 and a term of
5 years in consideration of $1,949. These warrants include
anti-dilution protection and a cashless exercise provision. The
issuance costs amounted to $334.
16. In January 2007, the Company issued a total of 12,211 shares
of Common stock and warrants to purchase 15,264 shares of Common
stock at an exercise price per share of $4.10 and a term of 5
years, in consideration of $50. These warrants include
anti-dilution protection and a cashless exercise provision. The
issuance costs amounted to $17.
17. In May, July, and August 2007, the Company issued a total of
218,498 shares of Common stock and warrants to purchase 46,711
shares of Common stock at an exercise price per share of $5.74 and
a term of 5 years in consideration of $1,251. These warrants
include anti-dilution protection and a cashless exercise provision.
The issuance costs amounted to $416.
18. In July 2007, 12,912 warrants were exercised into 12,912 shares of Common stock. The cash consideration received was immaterial.
19. In August 2007, the Company issued 3,492 shares of Common
stock at fair value of $18 to an advisor in consideration of
consulting services related to the issuance of shares. The fair
value of the shares was recorded as issuance costs.
20. Based on a resolution approved by shareholders in November
22, 2007, a stock split was effectuated on December 4, 2007 such
that 21.39149 shares of Common stock were given in exchange for
each existing share of Common stock. In addition all existing
warrants and options were automatically adjusted so that each
warrant or option to purchase one share of Common stock was
converted to a warrant or option to purchase 21.39149 shares of
Common stock. Data regarding share and per share amounts in these
financial statements has been retroactively adjusted to reflect
this stock split.
21. On August 13, 2007, the Company issued a $1.05 million
convertible unsecured promissory note ("Note"). In addition, the
Company issued to the Note holder warrants to purchase up to 91,677
shares of Common stock at an exercise price per share of $5.74 and
a term of 5 years. These warrants include anti-dilution protection
and a cashless exercise provision. In respect of the Note and
warrants, the Company recorded financial expenses relating to the
beneficial conversion feature in accordance with the provisions of
ASC 470-20, "Debt with Conversion and Other Options" ("ASC 470-20")
(originally issued as EITF 98-5 and EITF 00-27) in the amount of
$470 with a corresponding credit to additional paid in capital in
shareholders' equity. The Company computed the value of the
warrants using the Black-Scholes option pricing model with the
following assumptions: a risk-free interest rate of 4.72%, zero
dividends, volatility of 66%, and an expected term of 5 years. On
November 14, 2007, the Note term was extended to December 15, 2007.
In respect of this change, the Company recorded additional
financial costs of $42 in the statement of operations with a
corresponding credit to additional paid-in capital in shareholders'
equity. On December 4, 2007, the Note was converted into 183,355
shares of Common stock.
22. On December 4, 2007, the Company's Common stock was admitted
for trading on the AIM Market of the London Stock Exchange (AIM).
Concurrently, the Company placed 275,429 shares of Common stock at
a per share price of GBP 3.50 ($7.35), issued 539,755 shares of
Common stock and 88,126 shares of Common stock to investors and
consultants, respectively, and issued additional 183,355 shares of
Common stock resulting from the conversion of a convertible Note
(see note 8(d)21), for a total gross consideration for GBP
3,276,985 ($6,719). The issuance costs amounted to $2,221. In
addition, the Company issued warrants to purchase 27,745 shares of
Common stock at an exercise price per share of $5.74, and
additional warrants to purchase 165,701 shares of Common stock at
an exercise price per share of $6.79, each with a term of 5 years.
These warrants include anti-dilution protection and a cashless
exercise provision.
23. In January 2008, a total of 101,723 warrants were exercised
in a cashless conversion to 68,980 shares of Common stock by
consultants of the Company. In addition 1,363 warrants were
exercised and resulted in the issuance of 1,363 shares of Common
stock. The cash consideration received was immaterial.
24. In April 2008, the Company issued a total of 4,074 shares of
Common stock to an advisor in consideration of assistance with the
Company's fund raising in relation to the placing of the Common
stock on December 4, 2007.
25. In December 2008, 860 warrants were exercised and resulted
in the issuance of 860 shares of Common stock. The cash
consideration received upon exercise of the warrants was
immaterial.
26. On December 17, 2008, the Company announced that it was
implementing a warrant repricing program ("program") to encourage
the exercise of existing warrants provided that such exercise was
completed by February 13, 2009. To encourage existing warrant
holders to exercise their warrants before the closing date as
aforesaid, the following terms were offered:
a) Reduced Exercise Price: $1.313/share (GBP 0.875/share) or the
then current exercise price, whichever was lower;
b) Bonus Warrants: for every one dollar ($1.00) or GBP 0.667
paid for exercise of warrants during this program, a new bonus
warrant would be issued to purchase 0.1 share of Common stock (
three shares of Common stock before the reverse stock split), which
would be immediately exercisable for three years at an exercise
price of $8.75 per share.
The exercise price of any warrants that were not exercised
before the expiration of the program reverted to the original price
as stated in the warrant prior to the program.
27. Pursuant to the warrant repricing program mentioned above,
during January and February 2009, 315,023 warrants were exercised
and resulted in the issuance of 315,023 shares of Common stock in
consideration of a reduced price of $406 and the issuance of 34,804
new warrants as a bonus. The issuance costs were $17. The bonus
warrants were exercisable immediately for a period of three years
from the issuance date at an exercise price of $8.75 per share. The
consideration was paid partly in the year ended December 31, 2008
($150) and the balance was paid in 2009. According to ASC 815 the
benefit provided to the warrant holders from the reduction of the
exercise price and the bonus warrants in the amount of $7 and $3 as
of December 31, 2008 and December 31, 2009, respectively, was
recorded as a dividend to the warrant holders.
28. On October 6, 2009, the Company issued a total of 126,285
shares of Common stock in consideration of GBP 265,200 ($423). The
issuance costs were $59.
29. In January 2010, an investor exercised warrants to purchase
6,105 share of Common stock at an exercise price of $4.10 per
share, or an aggregate exercise price of $25. An additional
investor exercised warrants to purchase 525 share of Common stock
at an aggregate price of less than $1.
30. In a series of closings from March through June 2010, the
Company issued a total of 413,302 shares of Common stock consisting
of 407,800 shares of Common stock issued in March 2010 in
consideration of GBP 713,650 ($1,078) with issuance costs of $135
and 5,502 shares of Common stock issued to directors of the Company
in May 2010 in consideration of GBP 12,518 ($19).
31. In May 2010, the Company issued 477,934 shares of Common
stock in consideration of $1,202. The issuance costs amounted to
$87.
32. In August and September 2010, the Company issued 39,080
shares of Common stock in settlement of advisers' fees in relation
to the Company's ongoing fundraising endeavors and consultancy
advice to the Company's Board's Compensation Committee. Total
compensation, measured as the grant date fair market value of the
stock, amounted to $164.
33. In September 2010, several investors exercised warrants to
purchase 402,307 shares of Common stock at an exercise price of
$0.0175 per share, or an aggregate exercise price of $7, exercised
warrants to purchase 30,559 shares at an exercise price of $4.10
per share, or an aggregate exercise price of $125, exercised
warrants to purchase 0.1 share of Common stock (three shares of
Common stock before the reverse stock split) at an exercise price
of $8.75 per share, or an aggregate exercise price less than $1,
and exercised warrants to purchase 87,405 shares of Common stock at
an exercise price of $2.49 per share, or an aggregate exercise
price of $218.
34. In September 2010, the purchasers of the 2010 Debentures
(see Note 9b) received warrants to purchase 428,571 shares of
Common stock. Such warrants are immediately exercisable, have a
5-year term and have an exercise price of $4.54.
35. In October 2010, an investor exercised options to purchase
16,298 shares of Common stock at an exercise price of $1.61 per
share using the cashless exercise mechanism. Using this cashless
exercise method, the investor was issued 12,320 shares.
36. In January 2011, an investor exercised warrants to purchase
19,558 shares of Common stock at an exercise price of $2.49 per
share using the cashless exercise mechanism. Using this cashless
exercise method, the investor was issued 12,298 shares. In
addition, an investor exercised warrants to purchase 3,026 shares
of Common stock at an exercise price of $2.49 per share, or an
aggregate exercise price of $8.
37. In February 2011, three investors each exercised warrants to
purchase 40,338 shares of Common stock at an exercise price of
$2.49 per share using the cashless exercise mechanism. Using this
cashless exercise method, the investors were each issued 25,534
shares.
38. In March 2011, two investors exercised warrants to purchase
a total of 496 shares of Common stock at an exercise price of
$0.002 per share. The cash consideration received was immaterial.
In addition, an investor exercised warrants to purchase 12,224
shares of Common stock at an exercise price of $2.49 per share, or
an aggregate exercise price of $30. Also in March 2011, eight
investors exercised warrants to purchase a total of 162,765 shares
of Common stock at the exercise price of $2.49 per share using the
cashless exercise mechanism. Using this cashless exercise method,
the investors were issued a total of 80,765 shares of Common
stock.
39. In March 2011, unexercised warrants held by eight investors
to purchase a total of 270,992 shares of Common stock expired. The
aggregate value of these warrants, $636, was recorded to finance
income.
40. In April 2011, an investor exercised warrants to purchase
7,334 shares of Common stock at the exercise price of $2.49 per
share using the cashless exercise mechanism. Using this cashless
exercise method, the investor was issued 3,060 shares of Common
stock.
41. On April 13, 2011 the Company completed the IPO of its
Common stock on the NYSE Amex. The Company issued 2,624,100 shares
of Common stock, including 164,100 shares pursuant to the exercise
of the underwriters' over-allotment option, at a price of $4.54 per
share and warrants to purchase 2,829,000 shares, including 369,000
warrants pursuant to the exercise of the underwriters'
over-allotment option, at a price of $0.46 per warrant for total
gross proceeds of $13,215 or approximately $10,389 in net proceeds
after deducting underwriting discounts and commissions of $1,454
and other offering costs of approximately $1,372.
42. On the closing date of the IPO (April 13, 2011) the 2009 Debentures (see Note 9(a)) were automatically converted at a conversion price of $2.724 per share of Common stock into an aggregate 209,656 shares of Common stock. In addition the Company issued 5-year warrants to purchase 84,693 shares of Common stock (of which warrants to purchase11,310 shares of Common stock were granted to placement agents) at an initial exercise price of $4.99 per share in connection with the conversion of the 2009 Debentures. The 2010 Debentures were automatically converted at a conversion price of $3.405 per share of Common stock into an aggregate 1,198,242 shares of Common stock. In November 2011, an additional 2,534 shares of Common stock were issued to compensate the 2010 Debenture holders for a minor portion of the interest which was not paid at the time of conversion.
43. In May 2011, a Director of the Company exercised warrants to
purchase 60,507 shares of Common stock at an exercise price of
$2.49 per share using the cashless exercise mechanism. The Director
was issued 18,269 shares as a result of the warrant exercise. The
Director received these warrants as an investor, prior to his
appointment to the Board of Directors.
44. In August 2011, three investors exercised warrants to
purchase a total of 137,517 shares of Common stock at an exercise
price of $3.85 per share using the cashless exercise mechanism.
Using this cashless exercise method, the investors were issued a
total of 22,472 shares of Common stock.
45. In October 2011, several investors exercised warrants to
purchase a total of 314,346 shares of Common stock at an exercise
price of $3.85 per share using the cashless exercise mechanism.
Using this cashless exercise method, the investors were issued a
total of 21,684 shares.
In addition, an investor exercised warrants to purchase 6,494
shares of Common stock at an exercise price of $3.85 per share. The
cash consideration received was $25.
46. Also in October 2011, unexercised warrants held by an
investor to purchase a total of 76,398 shares of Common stock
expired. The aggregate value of these warrants, $50, was recorded
to finance income.
47. Subsequent to the balance sheet date, in January and
February 2012, unexercised warrants held by several investors to
purchase a total of 34,804 shares of Common stock expired.
e. Issuance of stock options, warrants and restricted shares to employees and directors
1. On March 30, 2006, the Company adopted a stock option plan
(the "stock option plan") according to which options to purchase up
to 609,353 shares of Common stock of the Company may be granted to
directors, employees and consultants (non-employees) of the Company
and the Subsidiary, as determined by the Company's Board of
Directors from time to time. The options outstanding are
exercisable within a designated period from the date of grant and
at an exercise price, each 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 776,205 shares of Common stock to a total of
1,385,558 shares of Common stock.
2. On June 12, 2008, the Company granted to the Company's
employees 91,096 options exercisable at a price of $5.11 per share.
The options have a five-year term and vest in four equal annual
tranches of 22,774 each. The options were granted under the stock
option plan terms. The fair value of these options at the grant
date was $0.036 per option.
3. On December 1, 2008, the Company granted to a Director of the
Company 48,895 options exercisable at a price of $1.47 per share.
The options have a five-year term and vest in three equal annual
tranches of 16,298 each. The options were granted under the stock
option plan terms. The fair value of these options at the grant
date was $0.91 per option.
4. No options or warrants were granted to employees or directors
during the year ended December 31, 2009.
5. In September 2010, the expiry date of certain warrants and
options held by the Company's Chief Executive Officer was extended
from March 31, 2011 to March 31, 2016, consisting of (i) warrants
to purchase 905,190 shares of Common stock at an exercise price of
$2.49 per share, (ii) warrants to purchase 35,922 shares of Common
stock at an exercise price of $0.04 per share, and (iii) options to
purchase 182,806 shares of Common stock at an exercise price of
$2.49 per share. All of the other terms of these warrants and
options remain the same.
The Company accounted for the exchange of warrants and options
under the provisions of ASC 718 (formerly SFAS 123(R)) as a
modification. A modification to the terms of an award should be
treated as an exchange of the original award for a new award with
total
compensation cost equal to the grant-date fair value of the
original award plus the incremental value measured at the same
date. Under ASC 718, the calculation of the
incremental value is based on the excess of the fair value of
the (modified) award based on current circumstances over the fair
value of the original option measured immediately before its terms
are modified based on current circumstances. That is, the original
(pre-modification) award will be valued based on current
assumptions, without regard to the assumptions made on the grant
date. As a result of the modification, the Company recorded
incremental compensation cost of $1,426 on the modification date.
The fair value was estimated using Binomial model with the
following weighted-average assumptions: expected stock price
volatility range of 54%-77%, risk-free interest rate of 0.3%-1.7%,
expected dividend yield of 0%, suboptimal exercise factor of 2 and
a contractual life of the warrants and the options as defined prior
the modification and subsequently.
As the modified options and warrants were already vested, the
Company recorded the incremental value measured fair value of the
modified award at the modification date as operating expenses. No
future compensation will be recorded.
6. In September 2010, the Company granted options to purchase
28,571 shares of Common stock under the stock option plan at an
exercise price of $ 8.19 per share to each of four of the Company's
non-executive directors. Such options have a 10-year term and vest
in equal installments over three years. The Company also granted
options to purchase 12,857 shares of Common stock at an exercise
price of $8.19 per share to a director who joined the Board in
August 2010. Such options have a 10-year term and vest in equal
installments over three years.
The fair value of these options at the grant date was $2.03 per
option.
7. In September 2010, a Director of the Company exercised
warrants to purchase 28,571 shares of Common stock at an exercise
price of $2.49 per share ($71 aggregate exercise price) and used
the cashless exercise mechanism to exercise warrants to purchase an
additional 57,147 shares. Using this cashless exercise method, the
Director was issued 39,786 shares and, together with the warrants
exercised for cash, he was issued a total of 68,357 shares of
Common stock.
8. In September 2010, a Director of the Company exercised
options to purchase 45,701 shares of Common stock at an exercise
price of $2.49 per share, or an aggregate exercise price of
$114.
9. In September 2010, the Company granted to the Company's
employees 91,571 options exercisable at a price of $8.19 per share.
The options have a 10 year term and vest in four equal annual
tranches of 22,892 each. The options were granted under the stock
option plan terms. The fair value of these options at the grant
date was $2.07 per option.
In September 2010, a Director of the Company exercised warrants
to purchase 30,559 shares of Common stock and options to purchase
45,701 shares of Common stock, each having an exercise price of
$2.49 per share, using the cashless exercise mechanism. The
Director was issued 21,275 shares as a result of the warrant
exercise and 31,817 shares as a result of the option exercise, or
53,092 shares of Common stock in total.
10. In December 2010, a Director of the Company exercised
options to purchase 91,402 shares of Common stock at an exercise
price of $2.49 per share using the cashless exercise mechanism. The
Director was issued 56,859 shares as a result of the option
exercise.
11. In December 2010, two employees of the Company exercised
warrants. One employee exercised warrants to purchase 11,429 shares
of Common stock at an exercise price of $0.01645, or an aggregate
exercise price of less than $1. The other employee exercised
warrants to purchase 17,143 shares of Common stock at an exercise
price of $2.49 per share using the cashless exercise mechanism. The
employee was issued 10,664 shares as a result of the warrant
exercise.
12. In December 2010, the Company granted the Executive Chairman
of the Board of the Company 57,142 shares of restricted Common
stock in compensation for his services in his new role as the
Executive Chairman of the Board of the Company. These shares of
Common stock are restricted in that they may not be disposed of and
are not entitled to dividends. These restrictions will be removed
in relation to 14,285 shares of Common stock on each of October 18,
2012 and October 18, 2013 and the final 28,572 shares of Common
stock on October 18, 2014. The value of these restricted shares of
Common stock, $285, was based on the fair value at the grant date
and is being recognized as an expense using the straight line
method. The Company recorded expenses in the amount of $73 in
2011.
A summary of the Company's activity for restricted shares
granted to employees and directors is as follows:
Restricted shares Outstanding Exercisable
----------------------------- ------------ ------------
Number of restricted shares
as of December 31, 2010 and
2011 57,142 -
------------ ------------
13. In January 2011, the Company granted options to purchase
12,857 shares of Common stock. These options were granted under the
stock option plan (see definition in 8(e)(1)), at an exercise price
of $6.55 per share to each of four of the Company's non-executive
directors. Such options have a 10-year term and vest in equal
installments over three years.
14. In May and June 2011, unexercised options held by two
employees to purchase a total of 34,135 shares of Common stock
expired.
15. In May 2011, three employees exercised options to purchase a
total of 67,231 shares of Common stock at an exercise price of
$2.49 per share using the cashless exercise method. The employees
were issued a total of 25,159 shares as a result of the option
exercises.
16. In July 2011, the Company granted an employee 40,000 options
exercisable at a price of $3.64 per share. The options have a
10-year term and vest in four equal annual tranches of 10,000 each.
The options were granted under the stock option plan terms.
17. In September 2011, the Company granted an employee 11,429
options exercisable at $3.86 per share. The options have a 10-year
term and vest in equal tranches over four years. The options were
granted under the stock option plan terms.
18. In September 2011, a Director of the Company exercised
options to purchase 45,701 shares of Common stock at an exercise
price of $2.49 per share using the cashless exercise mechanism. The
Director was issued 16,197 shares of Common stock as a result of
the option exercise.
19. In December 2011, the Company granted to the Company's
employees 209,857 options exercisable at a price of $3.14 per
share. The options have a 10 year term and vest in four equal
annual tranches. The options were granted under the stock option
plan terms. The fair value of these options at the grant date range
from $1.301 to $1.597 per option.
In addition, in December 2011, the Company granted to an
employee 35,000 options exercisable at a price of $3.14 per share.
The options vest immediately and have a 10 year term. These options
were granted under the stock option plan terms. The fair value of
these options at the grant date was $1.096 per option.
20. Subsequent to the balance sheet date, in January 2012, the
Company granted 15,000 options and 7,000 shares of restricted
Common stock to 5 non-executive Directors of the Company. These
shares of Common stock are restricted in that they may not be
disposed of and are not entitled to dividends. 50% of these shares
were vested the day after grant and 50% will vest one year from the
date granted. All of the options are for a term of 10 years, vest
in three equal installments and have an exercise price of $2.66.
These options and restricted Common stock were granted under the
stock option plan terms.
21. A summary of the Company's activity for options and warrants
granted to employees and Directors is as follows:
Weighted
Weighted average
Number of average remaining Aggregate
options exercise contractual intrinsic
and warrants price terms (years) value price
-------------- ---------- --------------- -------------
Outstanding at January
1, 2010 2,378,796
Granted 218,712 $ 8.19
Exercised (*) (715,700) $ 1.05
Forfeited (3,667) $ 7.35
-------------- ----------
Outstanding at December
31,
2010 1,878,141 $ 4.13 4.64 $ 2,890
-------------- ---------- --------------- -------------
Vested and expected
to vest at
December 31, 2010 1,863,827 $ 4.10 4.62 $ 2,890
-------------- ---------- --------------- -------------
Exercisable at December
31, 2010 1,591,831 $ 3.50 4.06 $ 2,883
-------------- ---------- --------------- -------------
Outstanding at January
1, 2011 1,878,141 $ 4.13
Granted 347,714 $ 3.73
Exercised 112,932 $ 2.49
Forfeited 34,135 $ 3.01
-------------- ----------
Outstanding at December
31, 2011 2,078,788 $ 4.17 4.96 $ 11
-------------- ---------- --------------- -------------
Vested and expected
to vest at
December 31, 2011 2,054,861 $ 4.16 4.91 $ 11
-------------- ---------- --------------- -------------
Exercisable at December
31, 2011 1,600,250 $ 3.86 3.70 $ 11
-------------- ---------- --------------- -------------
(*) Includes warrants to purchase 402,307 shares of Common stock
issued to a Director and sold to an investor and exercised in 2010
(see Note 8(d)33). Also includes options to purchase 16,298 shares
of Common stock issued to a former Director and exercised in 2010
(see Note 8(d)35).
As of December 31, 2011, there was $713 of total unrecognized
compensation cost related to non-vested share-based compensation
arrangements granted to employees. That cost is expected to be
recognized over a weighted-average period of 3.1 years.
The aggregate intrinsic value represents the total intrinsic
value (the difference between the Company's Common stock fair value
as of December 31, 2010 and 2011 and the exercise price, multiplied
by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised
their options on December 31, 2010 and 2011.
Calculation of aggregate intrinsic value is based on the share
price of the Company's Common stock as of December 31, 2010 ($4.81
/ GBP 3.10 per share, as reported on the AIM) and December 31, 2011
($2.50 per share, as reported on the NYSE Amex).
f. Issuance of shares, stock options and warrants to consultants
1. On October 16, 2008, the Company granted to a consultant
warrants to purchase 19,354 shares of Common stock exercisable at a
price of $5.11 per share and has contractual life of 5 years. 33.3%
of the warrants vested immediately at the grant date and the
remaining portion of the warrants vest in two equal annual tranches
of 6,451 starting from the grant date. The warrants were granted
under the stock option plan terms. The fair value of these warrants
at the grant date was $0.179 per warrant. The fair value was
estimated using Binomial model with the following weighted-average
assumptions: expected stock price volatility range of 62%,
risk-free interest rate of 4.2%, expected dividend yield of 0% and
a contractual life of the options of five years.
2. On December 1, 2008, the Company granted to a consultant
warrants to purchase 67,230 shares of Common stock exercisable at a
price of $6.79 per share and has contractual life of 5 years. The
warrants vest immediately at the grant date. The fair value of
these warrants at the grant date was $0.327 per warrant.
3. On December 7, 2009, the Company granted to a consultant
options to purchase 19,354 shares of Common stock, exercisable at a
price of $4.20 per share and has contractual life of 5 years. The
options vest in three equal annual tranches of 6,451. The options
were granted under the stock option plan terms. The fair value of
these options at the grant date was $3.07 per warrant. The fair
value was estimated using Binomial model with the following
weighted-average assumptions: expected stock price volatility range
of 74.9%, risk-free interest rate of 2.4%, expected dividend yield
of 0% and a contractual life of the options of five years.
4. In February 2010, the Company issued 32,142 shares of Common
stock as settlement of debt for services rendered to the Company by
a consultant in 2009. Total compensation, measured as the grant
date fair market value of the stock, amounted to $141 and was
recorded as an operating expense in the statement of operations in
2009.
5. In September 2010, the Company granted a warrant to purchase
11,369 shares of Common stock at an exercise price of $3.185 per
share to a consultant. Such warrant has a 5-year term and was
immediately exercisable.
The fair value of the warrant at the grant date was $3.185 per
warrant.
6. In September 2010, the Company granted options to purchase
19,069 shares of Common stock at an exercise price of $8.19 per
share to each of two new members of the Company's Strategic
Advisory Board. Such options have a 10 year term and vest in equal
installments over three years. These options were granted under the
stock option plan terms.
The fair value of these options at the grant date was $3.01 per
option.
7. In September 2010, the Company issued warrants to purchase
46,071 shares of Common stock in settlement of fees in relation to
the 2010 Debentures issued in 2010. These warrants were cancelled
in March 2011.
8. In January 2011, a consultant exercised warrants to purchase
2,250 shares of Common stock at an exercise price of $2.49 per
share using the cashless exercise mechanism. Using this cashless
exercise method, the consultant was issued 1,428 shares
9. In March 2011, a consultant exercised warrants to purchase
34,288 shares of Common stock at an exercise price of $0.02 per
share using the cashless exercise mechanism. Using this cashless
exercise method, the consultant was issued 34,111 shares. In
addition, a consultant exercised warrants to purchase 32,038 shares
of Common stock at an exercise price of $2.49 per share using the
cashless exercise mechanism. Using this cashless exercise method,
the consultant was issued 13,400 shares.
10. In March 2011, the Company granted options to purchase
19,068 shares of Common at an exercise price of $6.65 per share to
each of two new members of the Company's Strategic Advisory Board.
Such options have a 10 year term and vest in equal installments
over three years. These options were granted under the stock option
plan terms. The fair value of these options at the grant date was
$2.51 per option.
11. In March 2011, unexercised warrants held by a consultant to
purchase 15,234 shares of Common stock expired.
12. In April 2011, the Company granted warrants to purchase
11,310 shares of Common stock at an exercise price of $4.99 per
share to placement agents in settlement of fees in relation to the
2009 Debentures.
13. In April 2011, unexercised options held by a consultant to
purchase 3,056 shares of Common stock expired.
14. In June and July 2011, unexercised options held by a
consultant to purchase an aggregate 19,355 shares of Common stock
expired.
15. In May and June 2011, three consultants exercised options to
purchase a total of 85,383 shares of Common stock at an exercise
price of $2.49 per share using the cashless exercise method. Using
this cashless exercise method, the consultants were issued a total
of 30,553 shares.
16. In July 2011, the Company issued to consultants warrants to
purchase 50,000 shares of Common stock at an exercise price of
$4.01 in compensation for financial advisory services.
17. In August 2011, the Company issued to a consultant warrants
to purchase 150,000 shares of Common stock at an exercise price of
$4.80 in compensation for financial advisory services.
18. In September 2011, the Company issued to a consultant 12,500
shares of Common stock in compensation for investor relation
services. Total compensation, measured as the grant date fair
market value of the stock, amounted to $46 and was recorded as an
operating expense in the Statement of Operations.
19. In October 2011, several consultants exercised warrants to
purchase a total of 29,725 shares of Common stock at an exercise
price of $3.85 per share using the cashless exercise method. Using
the cashless exercise method, the consultants were issued a total
of 1,896 shares.
20. A summary of the Company's activity for options granted
under the stock option plan and warrants to consultants is as
follows:
Weighted
average
Number Weighted remaining Aggregate
of average contractual intrinsic
Warrants exercise terms value
and options price ( years) price
------------- ---------- ------------- -----------
Outstanding at January
1, 2010 584,950
Granted 95,578 $ 7.91
Forfeited (122,236) $ 2.49
------------- ----------
Outstanding at December
31, 2010 558,292 $ 5.04 2.36 $ 564
------------- ---------- ------------- -----------
Exercisable at December
31, 2010 499,304 $ 4.80 1.77 $ 557
------------- ---------- ------------- -----------
Outstanding at January
1, 2011 558,292 $ 5.04
Granted 249,446 $ 4.93
Exercised (183,684) $ 2.25
Forfeited (83,716) $ 6.46
------------- ----------
Outstanding at December
31, 2011 540,338 $ 5.49 3.72 $ -
------------- ---------- ------------- -----------
Exercisable at December
31, 2011 483,039 $ 5.30 3.19 $ -
------------- ---------- ------------- -----------
The weighted-average grant-date fair value of warrants and
options granted to consultants during the years ended December 31,
2010 and 2011 was $2.80 and $4.93, respectively. As of December 31,
2011, there was $71 of total unrecognized compensation cost related
to non-vested share-based compensation arrangements granted to
consultants under the Company's stock option plan. That cost is
expected to be recognized over a weighted-average period of 1.7
years.
Calculation of aggregate intrinsic value is based on the share
price of the Company's Common stock as of December 31, 2010 ($4.81
/ GBP 3.10 per share, as reported on the AIM) and December 31, 2011
($2.50 per share, as reported on the NYSE Amex).
g. Compensation expenses
Compensation expense related to warrants and options granted to
employees, directors and consultants was recorded in the Statement
of Operations in the following line items:
Year ended December
31,
------------------------------
2010 2011
-------------- --------------
Research and development expenses $ 181 $ 78
General and administrative expenses 1,653 317
-------------- --------------
$ 1,834 $ 395
-------------- --------------
h. Summary of options and warrants:
A summary of all the options and warrants outstanding as of
December 31, 2010 and 2011 is presented in the following
tables:
As of December 31, 2010
--------------------------------------------------------------
Weighted Average
Remaining
Exercise Options Options Contractual
Price per and Warrants and Warrants Terms (in
Options / Warrants Share ($) Outstanding Exercisable years)
----------------------------- ----------- -------------- -------------- -----------------
Options:
Granted to Employees
and Directors
2.49 326,206 326,206 3.15
4.10 42,783 32,087 1.65
5.43 49,536 24,768 2.45
7.35 335,713 303,580 1.87
8.19 218,713 - 9.70
-------------- --------------
972,951 686,641
-------------- --------------
Granted to Consultants 2.49 100,663 100,663 0.41
4.20 19,354 6,451 3.92
5.43 19,354 19,354 2.79
7.35 53,176 45,227 1.87
8.19 38,136 - 9.70
--------------
230,683 171,695
-------------- --------------
Total Options 1,203,634 858,336
-------------- --------------
Warrants:
Granted to Employees
and Directors
2.49 905,190 905,190 5.25
-------------- --------------
Granted to Consultants 0.02 34,288 34,288 0.25
2.49 49,522 49,522 0.25
3.19 11,370 11,370 4.70
4.10 29,725 29,725 0.81
5.43 16,976 16,976 1.93
5.74 37,508 37,508 1.69
6.79 102,149 102,149 2.58
8.68 46,071 46,071 4.73
-------------- --------------
327,609 327,609
-------------- --------------
Granted to Investors 0.0002 39,711 39,711 4.77
2.49 654,127 654,127 0.27
4.10 534,755 534,755 0.81
5.74 166,132 166,132 1.71
6.79 50,721 50,721 1.93
8.75 34,804 34,804 1.09
8.68 428,571 428,571 4.73
-------------- --------------
1,908,821 1,908,821
-------------- --------------
Total Warrants 3,141,620 3,141,620
-------------- --------------
Total Options and Warrants 4,345,254 3,999,956
-------------- --------------
h. Summary of options and warrants (cont.):
As of December 31, 2011
-------------------------------------------------------------------
Exercise
Price Options and Options Weighted Average
per Share Warrants and Warrants Remaining Contractual
Options / Warrants ($) Outstanding Exercisable Terms (in years)
---------------------------- ----------- ------------- -------------- -----------------------
Options:
Granted to Employees
and Directors 2.49 182,806 182,806 4.3
3.14 244,857 35,000 9.9
3.64 40,000 - 9.5
3.86 11,429 - 9.7
4.10 42,783 42,783 0.6
5.40 49,536 37,152 1.4
6.55 51,428 - 9.0
7.35 332,046 332,046 0.9
8.19 218,713 65,273 8.7
------------- --------------
1,173,598 695,060
------------- --------------
Granted to Consultants 4.20 19,354 12,903 2.9
5.40 19,354 19,354 1.8
6.65 38,136 12,712 8.9
7.35 46,045 46,045 0.9
8.19 38,136 12,712 8.7
------------- --------------
161,025 103,726
------------- --------------
Total Options 1,334,623 798,786
------------- --------------
Warrants:
Granted to Employees
and Directors 2.49 905,190 905,190 4.3
------------- --------------
Granted to Consultants 3.19 11,370 11,370 3.7
4.01 50,000 50,000 4.5
4.80 150,000 150,000 4.6
4.99 11,310 11,310 4.3
5.15 16,976 16,976 0.9
5.37 37,508 37,508 0.7
5.65 102,149 102,149 1.6
------------- --------------
379,313 379,313
------------- --------------
Granted to Investors 0.0002 35,922 35,922 4.3
4.54 428,571 428,571 3.7
4.99 73,383 73,383 4.3
5.37 166,132 166,132 0.7
5.65 50,721 50,721 0.9
6.00 2,829,000 2,829,000 4.3
8.75 34,804 34,804 0.1
------------- --------------
3,618,533 3,618,533
------------- --------------
Total Warrants 4,903,036 4,903,036
------------- --------------
Total Options and Warrants 6,237,659 5,701,822
------------- --------------
NOTE 9:- CONVERTIBLE DEBENTURES
a. Convertible Debentures Offered in 2009
In May 2009, the Company offered $570 of convertible debentures
(the "2009 Debentures") to accredited investors only, through a
private placement, together with warrants (the "Warrants") to
purchase a number of Common stock equal to 35% of the number of
Common stock issued upon conversion of the 2009 Debentures. The
2009 Debentures bore interest at an annual rate of 10%. The 2009
Debentures were automatically converted into shares of Common stock
upon the closing of the IPO at a price equal to 60% of the price of
the Common stock sold in the IPO, or $2.724 per share. (See Notes
1(a) and 8(d)42).
The 84,693 Warrants issued upon the conversion of the 2009
Debentures are exercisable at $4.99. They are immediately
exercisable and expire five years from the date of issuance.
The Company irrevocably elected to initially and subsequently
measure the 2009 Debentures entirely at fair value (with changes in
fair value recognized in earnings) in accordance with ASC 825-10
thus the Company did not separate the embedded derivative
instrument from the host contract and account for it as a
derivative instrument pursuant to ASC 825.
As of December 31, 2010, the fair value of the 2009 Debentures
amounted to $1,140. In 2010, the Company recorded financial expense
in the amount of $127 as a result of the change in fair value of
the 2009 Debentures.
b. Convertible Debentures Offered in 2010
In September 2010, the Company offered, in a private placement,
$4 million of convertible debenture (the "2010 Debentures"). The
2010 Debentures bore interest at 4% per annum and were
automatically converted into shares of Common stock upon the
closing of the IPO at a conversion
price equal 75% of the price of the Common stock sold in the
IPO. As a result, we calculated the conversion price for the 2010
Debentures to be $3.405 per share. (See Notes 1(a) and 8(d)
42.)
In September 2010, purchasers of the 2010 Debentures also
received warrants to purchase 428,571 shares of Common stock. Such
warrants are immediately exercisable, have a 5 year term and have
an initial exercise price of $4.54. (See Note 8(d) 34.)
According to ASC 815-40-15-7I, the Company classified the
warrants as a liability at their fair value. The warrants liability
will be remeasured at each reporting period until exercised or
expired. Changes in the fair value of the warrants are reported in
the statements of operations as financial income or expense.
The Company irrevocably elected to initially and subsequently
measure the 2010 Debentures entirely at fair value with changes in
fair value recognized in earnings in accordance with ASC
815-15.
The Company allocated the gross amount received of $4,001 to the
liability in respect of the warrants issued ($1,027) and the
remaining portion was allocated to the 2010 Debentures. The fair
value of the 2010 Debentures at issuance date was $4,143. As such,
the Company recorded financial expenses of $1,169.
As of December 31, 2010, the fair value of the 2010 Debentures
amounted to $4,320 and the fair value of the warrants amounted to
$1,155. As such, in 2010, the Company recorded additional financial
expenses in the amount of $177 as a result of the change in fair
value of the 2010 Debentures.
As of December 31, 2011, the fair value of the warrants amounted
to $476.
NOTE 10:- TAXES ON INCOME
a. Tax laws applicable to the companies:
1. The Company is taxed under U.S. tax law.
2. The Subsidiary is taxed under the Israeli income Tax
Ordinance and the Income Tax (Inflationary Adjustments) Law, 1985:
(the "law").
Results of the Subsidiary for tax purposes are measured and
reflected in nominal NIS. The financial statements are presented in
U.S. dollars.
The difference between the rate of change in nominal NIS value
and the rate of change in the NIS/U.S. dollar exchange rate causes
a difference between taxable income or loss and the income or loss
before taxes reflected in the financial statements. In accordance
with ASC 740-10 (or paragraph 9(f) of FAS 109), the Company has not
provided deferred income taxes on this difference between the
reporting currency and the tax bases of assets and liabilities.
b. Tax assessments:
The Company files income tax returns in the U.S. federal
jurisdiction and state jurisdiction. The U.S. tax authorities have
not conducted an examination in respect of the Company's U.S.
federal income tax returns since inception. The Subsidiary has tax
assessments, deemed final under the law, up to and including the
year 2007.
c. Tax rates applicable to the Company and the Subsidiary:
1. The Subsidiary:
The Israeli corporate tax rate was 25% in 2010 and 24% in
2011.
On December 5, 2011, the Israeli Parliament (the Knesset) passed
the Law for Tax Burden Reform (Legislative Amendments), 2011 ("the
Law") which, among others, cancels effective from 2012, the
scheduled progressive reduction in the corporate tax rate. The Law
also increases the corporate tax rate to 25% in 2012. In view of
this increase in the corporate tax rate to 25% in 2012, the real
capital gains tax rate and the real betterment tax rate were also
increased accordingly.
The effect of the abovementioned changes did not have an effect
on the net deferred tax asset.
2. The Company:
The tax rates applicable to the Company whose place of
incorporation is the U.S. are corporate (progressive) tax at the
rate of up to 35%, excluding state tax, which rates depend on the
state in which the Company will conduct its business.
d. Carryforward losses for tax purposes:
As of December 31, 2011, the Company had U.S. federal net
operating loss carryforward for income tax purposes in the amount
of approximately $29,900. Net operating loss carryforward arising
in taxable years beginning after January 2000 (inception date) can
be carried forward and offset against taxable income for 20 years
and expiring between 2020 and 2031. As of December 31, 2011 the
Company had net operating loss carryforward for state franchise tax
purposes of approximately $28,400 which can be carried forward and
offset against taxable income for 10-20 years, expiring between
2012 and 2031.
Utilization of U.S. net operating losses may be subject to
substantial annual limitations due to the "change in ownership"
provisions of the Internal Revenue Code of 1986 and similar state
provisions. The annual limitation may result in the expiration of
net operating losses before utilization.
The Subsidiary has accumulated losses for tax purposes as of
December 31, 2011, in the amount of approximately $6,000, which may
be carried forward and offset against taxable income and capital
gain in the future for an indefinite period.
e. Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax
assets are as follows:
December 31,
----------------------------
2010 2011
------------- -------------
Deferred tax assets:
Net operating loss carryforward $ 5,505 $ 7,413
Allowances and reserves 277 305
------------- -------------
Total deferred tax assets before
valuation allowance 5,782 7,718
------------- -------------
Valuation allowance (5,782) (7,718)
------------- -------------
Net deferred tax asset $ - $ -
------------- -------------
As of December 31, 2011, the Company and the Subsidiary have
provided valuation allowances in respect of deferred tax assets
resulting from tax loss carryforward and other temporary
differences, since they have a history of operating losses and
current uncertainty concerning its ability to realize these
deferred tax assets in the future. Management currently believes
that it is more likely than not that the deferred tax regarding the
loss carryforward and other temporary differences will not be
realized in the foreseeable future.
In 2010 and 2011, the main reconciling item of the statutory tax
rate of the Company and the Subsidiary (25% to 35% in 2010 and 24%
to 35% in 2011) to the effective tax rate (0%) is tax loss
carryforwards and other deferred tax assets for which a full
valuation allowance was provided.
NOTE 11:- FINANCIAL INCOME (EXPENSE)
Period from
January 27,
2000 (inception)
Year ended December through
31, December
------------------------------- ------------------
2010 2011 31, 2011
-------------- -------------- ------------------
Financial income (expense),
net:
Financial income:
Foreign currency remeasurement
adjustments (*) $ 30 $ 28 $ 85
Warrant valuation (*) 840 2,061 399
Interest on cash equivalents,
short-term
bank deposits and others 3 8 221
Others - - 49
-------------- -------------- ------------------
873 2,097 754
-------------- -------------- ------------------
Financial expenses:
Bank charges (15) (17) (89)
Interest expenses (174) (71) (380)
Interest and amortization
of beneficial
conversion feature of convertible
note - - (759)
Convertible debentures valuation (1,473) (125) (2,040)
Others (2) (1) (12)
-------------- -------------- ------------------
(1,664) (214) (3,280)
-------------- -------------- ------------------
$ (791) $ 1,883 $ (2,526)
-------------- -------------- ------------------
(*) Reclassified
NOTE 12:- DIRECTOR COMPENSATION
2010 Director Compensation
-----------------------------------
Fees Earned
or Paid
in Cash
Option Awards Stock Awards Total
------------ -------------- ------------- --------
Gary Allan Brukardt $ 6 $ 52 (4) $ - $ 58
Joel Stephen Kanter $ 11 $ 52 (4) $ - $ 63
Stephen Devon McMurray,
M.D. $ 8 $ 52 (4) $ - $ 60
Alastair Clemow, Ph.D. $ 7 $ 23 (5) $ - $ 30
Isaac Blech $ - $ - $ - $ -
Eugene Bauer, M.D. $ 4 $ 52 (4) $ 285 (6) $ 341
Andrew L. Pearlman, Ph.D. $ - $ 1,426 (7) $ - $ 1,426
------------ -------------- ------------- --------
$ 36 $ 1,657 $ 285 $ 1,978
============ ============== ============= ========
2011 Director Compensation
-----------------------------------
Fees Earned
or Paid
in Cash
Option Awards Stock Awards Total
------------ -------------- ------------- -------
Gary Allan Brukardt $ 11 $ 26 (1) $ - $ 37
Joel Stephen Kanter $ 16 $ 26 (1) $ - $ 42
Stephen Devon McMurray,
M.D. $ 14 $ 26 (1) $ - $ 40
Alastair Clemow, Ph.D. $ 14 $ 26 (1) $ - $ 40
Isaac Blech $ 7 $ - (2) $ - $ 7
Eugene Bauer, M.D. $ - $ - $ - $ -
Andrew L. Pearlman, Ph.D. $ - $ 128 (3) $ - $ 128
------------ -------------- ------------- -------
$ 62 $ 232 $ - $ 294
============ ============== ============= =======
(1) Represents the fair value of options to purchase 12,857
shares of Common stock under our 2006 Stock Option Plan at an
exercise price of $6.55 per share. Such options have a 10-year term
and vest in equal installments over three years.
(2) Prior to his election as a director in June 2011, Mr. Blech
had served as a member of our Strategic Advisory Board. As of
December 31, 2011, Mr. Blech held options to purchase 19,068 shares
of common stock issued in connection with his appointment to the
Strategic Advisory Board
(3) Represents the fair value of options to purchase 80,000
shares of Common stock under the2006 Stock Option Plan at an
exercise price of $3.14 per share. Such options have a 10-year term
and vest in equal installments over four years.
(4) Represents the fair value of options to purchase 28,571
shares of Common stock under our 2006 Stock Option Plan at an
exercise price of $8.19 per share. Such options have a 10-year term
and vest in equal installments over three years.
(5) Represents the fair value of options to purchase 12,857
shares of Common stock under our 2006 Stock Option Plan at an
exercise price of $8.19 per share. Such options have a 10-year term
and vest in equal installments over three years.
(6) Represents the fair value of 57,142 shares of restricted
stock.
(7) Represents the fair value of the extension of the expiry
date of certain warrants and options from March 31, 2011 to March
31, 2016.
NOTE 13:- SUBSEQUENT EVENTS
a.Subsequent to the balance sheet date, the Company's stock
price has increased significantly from $2.50 which was the price at
the end of December 31, 2011 ($4.91 as of February 24, 2012). The
Company has approximately 620,000 warrants which are recorded as a
liability in the amount of $478, based on their fair value at the
end of each reporting period. Increases in the fair value of the
warrant liability are recorded as a financial expense. If the
market price at the end of the first quarter of 2012 remains
significantly higher than $2.50 the Company will record a
significant financial expense based on the increase of the fair
value of the warrants.
a. Also see Notes 8(d)47 and 8(e)20.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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