TIDMMEDG TIDMMEDU
RNS Number : 8790R
Medgenics Inc
10 November 2011
Press Release 10 November 2011
Medgenics Reports Third Quarter Financial Results
MISGAV, Israel and SAN FRANCISCO (November 10, 2011) -
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 reported financial results for the three
and nine months ended September 30, 2011 and the filing with the
U.S. Securities and Exchange Commission ("SEC") of the Company's
Quarterly Report on Form 10-Q. The Form 10-Q includes unaudited
interim consolidated financial statements containing the
information highlighted below, as well as additional information
regarding the Company. The Form 10-Q is available at www.sec.gov or
www.medgenics.com.
"Throughout the third quarter and in recent weeks we made
important advances with our clinical development program for the
Biopump as outlined in our recent clinical update," said Andrew L.
Pearlman, Ph.D., President and Chief Executive Officer of
Medgenics. "We continue to be encouraged by the growing interest in
our innovative Biopump platform technology among clinicians,
potential investors and potential partners. We hope to build on
this interest by advancing development both internally and through
collaborations."
The Company also announced that Baruch Stern, Ph.D., has stepped
down as Chief Scientific Officer of the Company, effective
immediately, and will be resigning his position with the Company's
wholly-owned subsidiary, Medgenics Medical Israel Ltd., effective
February 9, 2012. Dr. Stern is leaving the Company to pursue other
business opportunities, and the Company expects to enter into an
ongoing consulting agreement with him. In the interim and until the
Company determines its strategy with regard to this position, Dr.
Pearlman will serve as Chief Scientific Officer, a position he held
prior to the appointment of Dr. Stern.
"On behalf of Medgenics and its Board of Directors, we thank Dr.
Stern for his many years of service to our company and for his
valuable contributions to the development of the Biopump,"
commented Dr. Pearlman. "With credit to Dr. Stern, we have an
experienced and talented research and development team in place to
ensure a smooth transition and continuation of all programs."
Third Quarter Financial Results
The Company's net research and development expense for the third
quarter of 2011 was $1.35 million, compared with $0.44 million for
the third quarter of 2010. This increase is due to the use of
materials and sub-contractors in connection with our Phase I/II
EPODURE clinical trial in 2011, increased expenses in developing
our Factor VIII Biopump, and preparations for the clinical trial of
INFRADURE, 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 $0.43 million participation from the
Israeli Office of the Chief Scientist ("OCS") and a third party
recorded during the third quarter 2011, compared with $0.58 million
received from the OCS and a third party during the third quarter of
2010.
General and administrative expense for the third quarter of 2011
decreased to $1.88 million from $2.62 million for the third quarter
of 2010, due primarily to larger stock-based compensation and
fundraising expenses recorded in the 2010 third quarter.
Other income for the three months ended September 30, 2011 was
$0.00 compared with $0.73 million for the same period in 2010. The
income in 2010 was recognized in connection with the Company's
first collaboration agreement signed in October 2009, as the excess
of the recognized amount received from the healthcare company over
the amount of research and development expenses incurred during the
period for that agreement was reflected as other income.
Financial expenses for the third quarter of 2011 decreased to
$0.27 million, from $2.20 million for the same period in 2010,
mainly due to the change in valuation of the warrant liability and
the convertible debentures.
Financial income for the three months ended September 30, 2011
decreased to $0.07 million, from $0.91 million for the same period
in 2010, primarily due to the change in foreign currency exchange
rates.
The net loss for the third quarter of 2011 was $3.42 million or
$0.35 per share, compared with a net loss of $3.61 million or $0.80
per share for the third quarter of 2010.
Nine Month Financial Results
For the nine months ended September 30, 2011, net research and
development expense increased to $3.57 million from $1.13 million
for the comparable prior-year period due to ongoing clinical
development of the Biopump platform, partially offset by increases
to participations in R&D costs from the OCS. General and
administrative expense for the first nine months of 2011 was $3.71
million compared with $3.73 million for the first nine months of
2010. The Company's net loss for the first nine months of 2011 was
$6.09 million or $0.76 per share, compared with a net loss of $3.25
million or $0.79 per share for the same period of 2010.
Medgenics ended the third quarter of 2011 with $7.57 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.
About Medgenics
Medgenics is developing and commercializing Biopump, 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;
-- 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 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 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.
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
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
James Pinner
Derek Crowhurst
Nomura Code Securities (Joint Broker) Phone: +44 207 776 1219
Jonathan Senior
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
September 30, December
31,
----------------------------
2011 2010 2010
------------- ------------- ----------
(Unaudited)
----------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,570 $ 4,778 $ 2,859
Accounts receivable and prepaid expenses 1,298 468 983
------------- ------------- ----------
Total current assets 8,868 5,246 3,842
------------- ------------- ----------
LONG-TERM ASSETS:
Restricted lease deposits 59 40 46
Severance pay fund 346 276 318
------------- ------------- ----------
Total long-term assets 405 316 364
------------- ------------- ----------
PROPERTY AND EQUIPMENT, NET 428 237 243
------------- ------------- ----------
DEFERRED ISSUANCE EXPENSES - 405 672
------------- ------------- ----------
Total assets $ 9,701 $ 6,204 $ 5,121
============= ============= ==========
The accompanying notes are an integral part of the interim
consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December
September 30, 31,
-------------------
2011 2010 (*) 2010
-------- --------- ---------
(Unaudited)
-------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Trade payables $ 928 $ 780 $ 743
Advance payment - 330 -
Other accounts payable and accrued
expenses 1,413 1,474 1,235
Convertible debentures - 5,251 5,460
-------- --------- ---------
Total current liabilities 2,341 7,835 7,438
-------- --------- ---------
LONG-TERM LIABILITIES:
Accrued severance pay 1,252 1,043 1,087
Liability in respect of warrants 1,429 3,607 3,670
-------- --------- ---------
Total long-term liabilities 2,681 4,650 4,757
-------- --------- ---------
Total liabilities 5,022 12,485 12,195
-------- --------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock - $0.0001 par value;
100,000,000 shares authorized; 9,690,117,
5,147,115
and 5,295,531 shares issued and outstanding
at
September 30, 2011 and 2010 and December
31, 2010,
respectively 1 1 1
Additional paid-in capital 52,172 34,232 34,334
Deficit accumulated during the development
stage (47,494) (40,514) (41,409)
-------- --------- ---------
Total stockholders' equity (deficit) 4,679 (6,281) (7,074)
-------- --------- ---------
Total liabilities and stockholders'
equity (deficit) $ 9,701 $ 6,204 $ 5,121
======== ========= =========
(*) Restated see Note 4
The accompanying notes are an integral part of the interim
consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share and per share data)
Period from
January 27,
2000 (inception)
Nine months ended Three months ended through September
September 30, September 30, 30,
------------------------ ----------------------
2011 2010 (*) 2011 2010 2011
----------- ----------- ---------- ----------
Unaudited
---------------------------------------------------------------------
Research and development expenses $ 4,503 $ 2,377 $ 1 ,785 $ 1,011 $ 28,958
Less - Participation by the Office of the
Chief
Scientist (860) (429) (357) (191) (5,293)
U.S. Government grant - - - - (244)
Participation by third party (75) (817) (75) (385) (1,067)
----------- ----------- ---------- ---------- -------------------
Research and development expenses, net 3,568 1,131 1,353 435 22,354
General and administrative expenses 3,709 3,727 1,877 2,616 25,183
Other income:
Excess amount of participation in research and
development from third party - (2,026) - (734) (2,904)
----------- ----------- ---------- ---------- -------------------
Operating loss 7,277 2,832 3,230 2,317 44,633
Financial expenses 203 1,382 267 2,199 3,523
Financial income (1,398) (962) (74) (910) (309)
----------- ----------- ---------- ---------- -------------------
Loss before taxes on income 6,082 3,252 3,423 3,606 47,847
Taxes on income 3 - 1 - 76
----------- ----------- ---------- ---------- -------------------
Loss $ 6,085 $ 3,525 $ 3,424 $ 3,606 $ 47,923
=========== =========== ========== ========== ===================
Basic and fully diluted loss per share $ 0.76 $ 0.79 $ 0.35 $ 0.80
=========== =========== ========== ==========
Weighted average number of shares of Common
stock
used in computing basic and fully diluted
loss
per share 8,020,348 4,106,997 9,657,659 4,534,545
=========== =========== ========== ==========
(*) Restated see Note 4
The accompanying notes are an integral part of the interim
consolidated financial statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
U.S. dollars in thousands (except 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 January 1, 2010 3,490,512 $ 1 $ 29,523 $ 25 $ (37,262) $ (7,713)
Exercise of warrants 694,145 (*) 559 (25) - 534
Stock based compensation related to
options granted to
consultants and employees - - 1,732 - - 1,732
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, at $4.20 per
share 39,080 (*) 164 - - 164
Issuance of warrants in September
2010
to a consultant - - 36 - - 36
Loss (**) - - - - (3,252) (3,252)
---------- ------- ------------ ------------ ------------- ---------------
Balance as of September 30, 2010
(unaudited)
(**) 5,147,115 $ 1 $ 34,232 $ - $ (40,514) $ (6,281)
========== ======= ============ ============ ============= ===============
(*) Represents an amount lower than $1
(**) Restated see Note 4
The accompanying notes are an integral part of the interim
consolidated financial statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
U.S. dollars in thousands (except share data)
Deficit
accumulated
Additional during the Total
paid-in development stockholders'
Common stock capital stage deficit
-------------------- ------------ ------------- ---------------
Shares Amount
---------- --------
Balance as of January 1, 2011 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 2,624,100 (*) 10,389 - 10,389
Issuance of Common stock upon conversion of
debentures 1,407,898 (*) 5,577 - 5,577
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 350,088 (*) 961 - 961
Stock based compensation related to options
and warrants
granted to consultants and employees - - 307 - 307
Loss - - - (6,085) (6,085)
---------- -------- ------------ ------------- ---------------
Balance as of September 30, 2011 (unaudited) 9,690,117 $ 1 $ 52,172 $ (47,494) $ 4,679
========== ======== ============ ============= ===============
(*) Represents an amount lower than $1
The accompanying notes are an integral part of the interim
consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Period from
January 27,
2000 (inception)
through
Nine months ended September
September 30, 30,
---------------------
2011 2010 (*) 2011
--------- --------- -----------------
Unaudited
-----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss $ (6,085) $ (3,252) $ (47,923)
Adjustments to reconcile loss to net cash used
in operating activities:
Depreciation 65 90 1,047
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 307 1,732 7,074
Interest and amortization of beneficial conversion
feature of convertible note - - 759
Change in fair value of convertible debentures
and warrants (1,282) 360 2,296
Accrued severance pay, net 137 38 907
Exchange differences on a restricted lease
deposit (4) 2 (5)
Exchange differences on a long term loan - - 3
Increase (decrease) in trade payables 789 (167) 1,532
Decrease (increase) in accounts receivable,
prepaid expenses and deferred issuance expenses 357 (790) (1,298)
Increase (decrease) in other accounts payable,
accrued expenses and advance payment 259 (290) 2,041
Net cash used in operating activities (5,457) (2,276) (33,221)
--------- --------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (250) (24) (1,980)
Proceeds from disposal of property and equipment - - 173
Increase in restricted lease deposit and prepaid
lease payments (9) (4) (54)
--------- --------- -----------------
Net cash used in investing activities $ (259) $ (28) $ (1,861)
--------- --------- -----------------
(*) Restated see Note 4
The accompanying notes are an integral part of the interim
consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Period from
January 27,
2000 (inception)
through
Nine months ended September
September 30, 30,
-------------------
2011 2010 (*) 2011
--------- -------- -----------------
Unaudited
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares and warrants,
net $ 10,389 $ 2,077 $ 34,501
Proceeds from exercise of options and warrants,
net 38 534 986
Repayment of a long-term loan - - (73)
Proceeds from long term loan - - 70
Issuance of a convertible debenture and warrants - 4,001 7,168
Net cash provided by financing activities 10,427 6,612 42,652
--------- -------- -----------------
Increase in cash and cash equivalents 4,711 4,308 7,570
Balance of cash and cash equivalents at the
beginning of the period 2,859 470 -
--------- -------- -----------------
Balance of cash and cash equivalents at the
end of the period $ 7,570 $ 4,778 $ 7,570
========= ======== =================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 49 $ 94 $ 242
========= ======== =================
Taxes $ 1 $ 15 $ 98
========= ======== =================
Supplemental disclosure of non-cash flow information:
Issuance expenses paid with shares $ - $ - $ 310
========= ======== =================
Issuance of Common stock upon conversion of
convertible debentures $ 5,577 $ - $ 8,422
========= ======== =================
Issuance of Common stock and warrants to consultants $ 604 $ 341 $ 1,151
========= ======== =================
Classification of liability in respect of
warrants into equity due to exercise of warrants $ 834 $ - $ 834
========= ======== =================
(*) Restated see Note 4
The accompanying notes are an integral part of the interim
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.
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 3(b)6).
On the closing date of the IPO, $570 of 2009 Debentures and
$4,000 of 2010 Debentures were automatically converted into Common
stock (see Note 3(b)7).
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.
In addition, the exercise price of certain warrants which were
initially issued with round-down 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 during the nine month period ended September 30,
2011 of $6,085 and had a negative cash flow from operating
activities of $5,457 during the nine-months period ended September
30, 2011. The Company and the Subsidiary have not yet generated
revenues from product sale. The Company has begun generating income
from partnering on development programs and expects to continue to
expand its partnering activity. 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. 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
(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;
II. an annual license fee in arrears of $10 rising to $50
following the grant by the Company of a sublicense 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. sublicense fees at an initial rate of 6% of sublicensing
revenues, reducing by a percentage point at predetermined
thresholds to 4% upon cumulative sublicensing 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.
d.
On October 22, 2009 ("Effective Date") the Company signed a
preclinical development and option agreement which was amended in
December 2009 (the "Agreement"), with a major international
healthcare company (the "Healthcare company") that is a market
leader in the field of hemophilia. The Agreement included funding
for preclinical development of the Company's Biopump protein
technology to produce and deliver the clotting protein Factor VIII
("FVIII") for the sustained treatment of hemophilia.
Under the terms of the Agreement, the Company was entitled to
receive up to $4,100 to work exclusively with the Healthcare
company for one year ended October 22, 2010 ("Standstill period")
to develop a Biopump to test the feasibility of continuous
production and delivery of this clotting protein. An additional
payment of $2,500 was payable in the event of the Healthcare
company's exercise of an option to extend the exclusivity through
an additional period to negotiate terms to commercialize the
Biopunp technology for FVIII.
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.
The Company estimated the value of the option to negotiate a
future definitive agreement for the continuation of the development
or for a sale, license or other transfer of the FVIII Biopump
technology as immaterial.
Through December 31, 2010, payments totaling $3,590 were
received from the Healthcare company. An additional amount of $306
was received in February 2011. Subsequent to the balance sheet
date, in October 2011, an additional amount of $75 was
received.
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.
During the original term of the agreement and the first extension
period, the Healthcare company had the exclusive option to
negotiate a definitive agreement regarding a transaction related to
the FVIII Biopump technology taking into account the relative
contributions of the parties, upon payment to the Company of a
$2,500 option fee. Under the second extension, confirmatory studies
were conducted implanting Factor VIII Biopumps in mice. The
Healthcare company agreed to bear $75 of the costs of these
studies. The Agreement, as extended, expired on September 30, 2011.
The Company is in active discussions with the Healthcare company
regarding the terms for possible further collaboration.
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.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited interim financial statements of
Medgenics, Inc., a development stage company, have been prepared in
accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and
Exchange Commission and should be read in conjunction with the
audited financial statements and notes thereto contained in
Medgenics's Registration Statement (File No: 333-170425). In the
opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim
periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of
the results to be expected for the full year. Notes to the
financial statements that would substantially duplicate the
disclosure contained in the audited financial statements for the
most recent fiscal year as reported in the Registration Statement
(File No: 333-170425) have been omitted.
Recently Announced Accounting Pronouncements
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.
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.
NOTE 3:- STOCKHOLDERS' EQUITY
a. 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.
b. Issuance of shares, options and warrants to investors
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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 redeemable Common Stock purchase 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.
7. On the closing date of the IPO (April 13, 2011) the 2009
Debentures were automatically converted at a conversion price of
$2.724 per share of Common stock into an aggregate 209,656 shares
of Common stock and the Company issued 5-year warrants to purchase
84,693 shares of Common stock (of which warrants to purchase 11,310
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. On the same date, 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.
8. 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.
9. Subsequent to the balance sheet date, 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.
Also in October 2011, unexercised warrants held by an investor
to purchase a total of 76,398 shares of Common stock expired.
c. Issuance of shares, stock options, warrants and restricted shares to
employees and directors
1. In January 2011, the Company granted options to purchase
12,857 shares of Common stock under its 2006 Stock Incentive Plan,
as amended (the "Stock Incentive Plan"), 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.
2. 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.
3. In May and June 2011, unexercised options held by two
employees to purchase a total of 34,135 shares of Common stock
expired.
4. 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.
5. 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 Incentive Plan.
6. 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 Incentive Plan.
7. 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.
8. 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 $55 for the
period of nine months ended September 30, 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
September 30, 2011 57,142 -
============ ============
9. A summary of the Company's activity for options and warrants
granted to employees and directors is as follows:
Nine months ended September 30, 2011
----------------------------------------------------------
Weighted
Number Weighted average
of average remaining Aggregate
options exercise contractual intrinsic
and warrants price terms (years) value price
-------------- ---------- --------------- -------------
Outstanding at January
1, 2011 1,878,141 $ 4.13
Granted 102,857 5.15
Expired 34,135 3.01
Exercised 112,932 2.49
Outstanding at September
30, 2011 1,833,931 $ 4.31 4.55 $ 2,246
============== ========== =============== =============
Exercisable at September
30, 2011 1,534,035 $ 3.80 3.86 $ 2,204
============== ========== =============== =============
Vested and expected
to vest at
September 30, 2011 1,815,919 $ 4.29 4.51 $ 2,244
============== ========== =============== =============
As of September 30, 2011, there was $636 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 2.3 years.
The aggregate intrinsic value represents the total intrinsic
value (the difference between the Company's Common stock fair value
as of September 30, 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 September 30, 2011.
Calculation of aggregate intrinsic value is based on the closing
price of the Company's Common stock as of September 30, 2011 ($4.50
per share) as reported on the close of trading on the NYSE
Amex.
d. Issuance of shares, stock options and warrants to consultants
1. 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.
2. 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.
3. 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.
4. In March 2011, the Company granted options to purchase 19,068
shares of Common stock under the Stock Incentive Plan 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. The fair
value of these options at the grant date was $2.51 per option.
5. In March 2011, unexercised warrants held by a consultant to
purchase 15,234 shares of Common stock expired.
6. 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.
7. In April 2011, unexercised options held by a consultant to
purchase 3,056 shares of Common stock expired.
8. In June and July 2011, unexercised options held by a
consultant to purchase an aggregate 19,355 shares of Common stock
expired.
9. In May and June 2011, three consultants exercised warrants 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. The
consultants were issued a total of 30,553 shares.
10. In July 2011, the Company issued warrants to purchase 50,000
shares of Common stock at an exercise price of $4.01 to consultants
in compensation for financial advisory services.
11. In August 2011, the Company issued warrants to purchase
150,000 shares of Common stock at an exercise price of $4.80 to a
consultant in compensation for financial advisory services.
12. In September 2011, the Company issued 12,500 shares of
Common stock to a consultant 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.
13. Subsequent to the balance sheet date, 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. The consultants were
issued a total of 1,896 shares.
14. A summary of the Company's activity for warrants and options
granted to consultants under the stock option plan is as
follows:
Nine months ended September 30, 2011
----------------------------------------------------------
Weighted
Number Weighted average
of average remaining Aggregate
options exercise contractual intrinsic
and warrants price terms (years) value price
-------------- ---------- --------------- -------------
Outstanding at January
1, 2011 558,292 $ 5.04
Granted 249,446 4.93
Exercised 153,959 1.94
Cancelled or expired 83,716 6.46
-------------- ----------
Outstanding at September
30, 2011 570,063 $ 5.41 3.77 $ 65
============== ========== =============== =============
Exercisable at September
30, 2011 485,654 $ 5.16 3.13 $ 61
============== ========== =============== =============
The weighted-average grant-date fair value of warrants and
options granted to consultants during the three months period ended
September 30, 2011 was $2.79. As of September 30, 2011, there was
$230 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 1.9 years.
Calculation of aggregate intrinsic value is based on the closing
price of the Company's stock as of September 30, 2011 ($4.50 per
share) as reported on the close of trading on NYSE Amex.
e. Compensation expenses
Compensation expense related to warrants, options and restricted
shares granted to employees, directors and consultants was recorded
in the Statement of Operations in the following line items:
Nine months ended Three months ended
September 30, September 30,
-------------------- ---------------------
2011 2010 2011 2010
-------- ---------- -------- -----------
Research and development
(income)
expenses $ 76 $ 154 $ 21 $ 95
General and administrative
(income)
expenses 231 1,578 75 1,437
-------- ---------- -------- -----------
$ 307 $ 1,732 $ 96 $ 1,532
======== ========== ======== ===========
f. Summary of options and warrants:
A summary of all the options and warrants outstanding as of
September 30, 2011 is presented in the following table:
As of September 30, 2011
--------------------------------------------------------------
Weighted Average
Remaining
Exercise Options Options Contractual
Price and Warrants and Warrants Terms (in
Options / Warrants per Share Outstanding Exercisable years)
---------------------------- ----------- -------------- -------------- -----------------
Options:
Granted to Employees
and Directors $2.49 182,806 182,806 4.5
$3.64 40,000 - 9.8
$3.86 11,429 - 9.9
$4.10 42,783 42,783 0.9
$5.47 49,536 37,152 1.7
$6.55 51,428 - 9.3
$7.35 332,046 300,831 1.1
$8.19 218,713 65,273 9.0
-------------- --------------
928,741 628,845
-------------- --------------
Granted to Consultants $4.20 19,354 6,451 3.2
$5.47 19,354 19,354 2.0
$6.65 38,136 - 9.1
$7.35 46,045 38,099 1.1
$8.19 38,136 12,712 9.0
-------------- --------------
161,025 76,616
-------------- --------------
Total Options 1,089,766 705,461
-------------- --------------
Warrants:
Granted to Employees
and Directors $2.49 905,190 905,190 4.5
-------------- --------------
Granted to Consultants $3.19 11,370 11,370 4.0
$3.85 29,725 29,725 0.1
$4.01 50,000 50,000 4.8
$4.80 150,000 150,000 4.8
$4.99 11,310 11,310 4.5
$5.22 16,976 16,976 1.2
$5.37 37,508 37,508 0.9
$5.65 102,149 102,149 1.8
-------------- --------------
409,038 409,038
-------------- --------------
Granted to Investors $0.0002 35,922 35,922 4.5
$3.85 397,238 397,238 0.1
$4.54 428,571 428,571 4.0
$4.99 73,383 73,383 4.5
$5.37 166,132 166,132 1.0
$5.65 50,721 50,721 1.2
$6.00 2,829,000 2,829,000 4.6
$8.75 34,804 34,804 0.3
4,015,771 4,015,771
-------------- --------------
Total Warrants 5,329,999 5,329,999
-------------- --------------
Total Options and Warrants 6,419,765 6,035,460
============== ==============
NOTE 4:- RESTATEMENT
In 2010, the Company noted that in connection with certain
warrants (the "Warrants") issued to investors through the years
2006 and 2007 in the event of equity issuance below exercise price
of the Warrants the investors shall be extended full-ratchet
anti-dilution protection on the exercise price of the Warrants.
According to ASC 815-40-15 "Derivatives and Hedging", such Warrants
should be classified as liability and measured at fair value, with
changes in fair value recognized in earnings. ASC 815-40-15 became
effective on January 1, 2009. Therefore, the cumulative effect of
the change in accounting principle should have been recognized as
an adjustment to the opening balance of the appropriate component
of equity. The cumulative-effect adjustment is the difference
between the amounts recognized in the statement of financial
position before initial application of this guidance and the
amounts recognized in the statement of financial position at
initial application of this guidance. The fair value of the
Warrants at December 31, 2009 and September 30, 2010 amounted to
$3,373 and $4,510, respectively.
Based on these facts, the Company has restated the September 30,
2010 consolidated balance sheet and the related statement of
operations, changes in stockholders' deficit and cash flows for the
period then ended within these financial statements, as
follows:
Sept. 30,
Sept. 30, 2010 2010
as reported Adjustment restated
-------------- ---------- ----------
Consolidated Balance Sheet:
Liability in respect of warrants $ 1,137 $ 2,470 $ 3,607
Total long-term liabilities $ 2,180 $ 2,470 $ 4,650
Total liabilities $ 10,015 $ 2,470 $ 12,485
Additional paid-in capital $ 35,066 $ (834) $ 34,232
Deficit Accumulated $ (38,918) $ (1,596) $ (40,514)
Total stockholders' deficit $ (3,811) $ (2,470) $ (6,281)
Nine months Nine months
ended Sept. ended Sept.
30, 2010 30, 2010
as reported Adjustment restated
------------ ---------- ------------
Consolidated Statement of
Operations:
Financial income $ 59 $ 903 $ 962
Income (loss) before taxes
on income $ (4,155) $ 903 $ (3,252)
Net income (loss) $ (4,155) $ 903 $ (3,252)
Net income (loss) attributable
to Common
Stockholders $ (4,155) $ 903 $ (3,252)
Basic and fully diluted earnings
(loss) per
share of Common stock $ (1.05) $ 0.26 $ (0.79)
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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