MY SIZE, INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| þ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the
transition period from
to
Commission File Number: 333-144472
TOPSPIN MEDICAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 510394637 | |
|
(State or Other Jurisdiction of Incorporation or
Organization) |
(I.R.S. Employer Identification No.) |
Derech Hashalom 53
Givataim
Israel 53454
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code: 972-3-9470921
Securities registered pursuant to Section 12(b) of the Act: Not applicable
Securities registered pursuant to Section 12(g) of the Act: Not applicable
Givataim
Israel 53454
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code: 972-3-9470921
Securities registered pursuant to Section 12(b) of the Act: Not applicable
Securities registered pursuant to Section 12(g) of the Act: Not applicable
Indicate by check mark if the registrant is a well-known seasoned, issuer, as defined in Rule 405
of the Securities Act.
Yes
o
No
þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes
þ
No
o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§
229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendments to this Form 10-K.
þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
þ
No
o
As of March 3, 2010, 761,470,882 shares of the registrant’s Common Stock, $0.001 par value per
share, were outstanding. As of such date, the aggregate market value of the common equity held by
non-affiliates of the registrant was approximately NIS 15.2 million ($4.0 million (based upon the
New Israeli Shekel (“
NIS
”)/U.S. Dollar exchange rate of NIS 3.77 for every U.S. Dollar as of March
3, 2010). Such aggregate market value was computed by reference to the closing price of the Common
Stock as reported on the Tel Aviv Stock Exchange on March 1, 2010. For purposes of determining this
amount only, the registrant has defined affiliates as including the executive officers and
directors of the registrant on March 3, 2010.
TABLE OF CONTENTS
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| Exhibit 23.1 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
2
Table of Contents
This Annual Report on Form 10-K of TopSpin Medical, Inc. and its subsidiaries (“
TopSpin
” or
the “
Company
”, or “us”, or “we” or “our”) for the fiscal year ending December 31, 2009 contains
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “
Securities Act
”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “
Exchange Act
”). Those statements are therefore entitled to the protection of the safe harbor
provisions of these laws. These forward-looking statements, which are usually accompanied by words
such as “may,” “might,” “will,” “should,” “could,” “intends,” “estimates,” “predicts,” “potential,”
“continue,” “believes,” “anticipates,” “plans,” “expects” and similar expressions, involve risks
and uncertainties, and relate to, without limitation, statements about our market opportunities,
our strategy, our competition, our projected revenue and expense levels and the adequacy of our
available cash resources. There are important factors that could cause our actual results, level of
activity, performance or achievements to differ materially from those expressed or forecasted in,
or implied by, such forward-looking statements.
Although we believe that the expectations reflected in these forward-looking statements are
based upon reasonable assumptions, no assurance can be given that such expectations will be
attained or that any deviations will not be material. In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form
10-K for the fiscal year ending December 31, 2009 may not occur and our actual results could differ
materially and adversely from those anticipated or implied in the forward-looking statements. We
disclaim any obligation or undertaking to disseminate any updates or revision to any
forward-looking statement contained herein to reflect any change in our expectations with regard
thereto or any change in events, conditions or circumstances on which any such statement is based.
Unless specified otherwise, all U.S. Dollar amounts in this Annual Report on Form 10-K are
calculated using the NIS/U.S. Dollar exchange rate of NIS 3.775 for every U.S. Dollar as of
December 31, 2009. Historical numbers are calculated according to historical exchange rates. Profit
and loss numbers are calculated using average exchange rates for years 2008 and 2009.
Item 1.
Description of Business.
Overview
We were incorporated in Delaware on September 20, 1999. We have conducted all of our business
operations through our wholly-owned Israeli subsidiary, TopSpin Medical (Israel) Ltd. (
TopSpin
Israel
). TopSpin Israel was incorporated on October 5, 1999 to engage in research and development
of MRI technology using miniaturized MRI sensors.
3
Table of Contents
On September 1, 2005, we issued securities to the public in Israel and our shares of common stock
began to trade on the Tel Aviv Stock Exchange (
TASE
). In 2007, we registered some of our securities
with the U.S. Securities and Exchange Commission (
SEC
). Our securities are traded only on the TASE
in NIS. (
See PART II, Item 5. “Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities”—“Market for Common Equity
and Related Stockholder Matters”)
. On February 4, 2010, the Tel Aviv Stock Exchange (TASE) notified
the Company that it does not withstand the preservation regulations due to having equity lower than
NIS 2 million in the last four reporting quarters. The Company was given an extension until June
30, 2010 to increase its equity. If the required increase in equity does not occur until that date,
the TASE Board of Directors will discuss transferring the Company’s shares to the preservation
list.
Until we suspended our activities due to financial considerations in October 2008, we were
engaged through TopSpin Israel, in the design, research, development and manufacture of imaging
devices that utilize MRI technology by means of miniature probes for various body organs. In 1999,
we began researching and developing this technology for use in the diagnosis and therapy guidance
of heart disease and more specifically of heart attacks (the “
IVMRI Catheter
”). During 2006, we
expanded our miniaturized MRI activities and began development of a prostate imaging product that
could potentially be used for diagnosis and therapy guidance to prostate cancer (the “
Urology
Product
”).
In October 2008 we paid NIS 12,513,000 (approximately $3,291,163) as part of a settlement with
holders of our Series A Debentures (
see Part II, Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operation”
). Because the grants due to us for the years 2007 and
2008 from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor
(
OCS
), an Israeli governmental agency, were not received in the expected timeframe, our Company
encountered a challenging financial situation. As a result of the combination of the substantial
outlay of cash in connection with the settlement and the lack of cash inflow from the OCS grants,
on October 27, 2008, we decided to terminate the employment of all of TopSpin Israel’s employees
(excluding the finance department and employees who were pregnant or on maternity leave) and
suspend our operational activities (both with respect to the IVMRI Catheter and the Urology
Product).
We are continuing our efforts to raise financing in order to continue our activities,
including examination of the acquisition of new business lines in consideration for shares of our
Common Stock and/or cash. In February 2009, we raised an aggregate of NIS 900,000 (approximately
$238,410) through the issuance of shares of our Common Stock to support these efforts. We can
provide no assurances however, that we will be successful in identifying and operating such new
business activities or obtaining an adequate level of financing needed for such activities.
On June 2, 2009, the Company entered into an acquisition and investment agreement (the “
Anavid
Agreement
”) with Anavid Insulation Products Kiryat Anavim ACS Ltd. (“
Anavid
”), Kiryat Anavim
Holdings and Development ACS Ltd. (“
Holdings and Development
”) and Kiryat Anavim Silicone Ltd.
(“
the acquiree
”) pursuant to which the Company planned to acquire all of Anavid’s holdings in the
Company. The Anavid Agreement was to be consummated by August 15, 2009, but the parties agreed to
several extensions, eventually deferring the consummation of the Anavid Agreement until October 21,
2009.
4
Table of Contents
On October 26, 2009, Anavid informed the Company that the agreement was cancelled and that the
failure to complete the acquisition transaction by the last agreed upon date constitutes a
fundamental breach of the agreement. The Company rejects these arguments and in accordance with its
legal advisors, claims that the incompletion of the closing process was done properly and in
accordance with the agreement.
Please refer to our current report on Form 8-K filed on October 29, 2009, the content of which is
incorporated by reference herein, for a more detailed description of the termination of the Anavid
Agreement.
On January 27, 2010, the
Company entered into an investment agreement (the “
Medgenesis
Agreement
”) with Medgenesis Partners Ltd., a private company organized under the laws of Israel and
controlled by Ascher Shmulewits (the “
Investor
” and the “
Stockholder
”, respectively). Under the
terms of the Medgenesis Agreement, the Company will issue to the Investor 211,672,857 shares of
common stock of the Company, (ii) a warrant to purchase 122,935,610 shares of Common Stock in
exchange for payment by the Investor in the amount of $211,673 and cancellation and reissuance on a
later date of a certain warrant issued by the Company to the Stockholder pursuant to a certain
agreement, dated February 2, 2009, filed with the Securities and Exchange Commission on February 5,
2009. The consummation of the Transaction is subject to several conditions.
In addition, the Company, Medgenesis Partners Ltd. and the Investor entered into a memorandum
of understanding pursuant to which Medgenesis and the Investor will assist the Company to acquire
interests in commercial and/or industrial biotech companies and/or assets. We are currently
pursuing acquisition options.
We have not generated any revenues to date and have not achieved profitable operations or
positive cash flows from operations. We have an accumulated deficit of NIS 182,117,000
(approximately $48,242,914) as of December 31, 2009, and have incurred a net loss of NIS 1,676,000
(approximately $426,181) and negative cash flow from operating activities in the amount of NIS
3,799,000 (approximately $966,028) for the year ended December 31, 2009.
Expenditures on Research and Development
From the time of our inception in 1999 through December 31, 2009, we invested a total of NIS
135,023,000 (approximately $35,513,677) in gross research and development expenses. We have funded
our research and development expenses from our own resources and from the OCS. Due to the
suspension of our operations in October 2008, we did not engage in any research and development
activities in 2009.
Cardiology
From 2004 through December 31, 2007, the OCS issued approval letters to TopSpin Israel
approving four programs for development of the IVMRI Catheter for imaging the coronary arteries,
totaling NIS 43,300,000 (approximately $11,388,742), under the Israeli Promotion of Research and
Development in Industry Law of 1984. According to these approval letters, TopSpin Israel was
entitled to a grant of 40% of the approved expenses in these programs for research and development.
The OCS has notified us that it approved a total of NIS 10,113,000 (approximately $2,659,916) of
recognized expenses in 2004, NIS 9,371,000 (approximately $2,464,755) of recognized expenses in
2005, NIS 11,500,000 (approximately $3,024,723) of
recognized expenses in 2006 and NIS 10,800,000 (approximately $2,840,610) of recognized
expenses in 2007. As of December 31, 2009, we have actually received funds totaling approximately
NIS 4,021,000 (approximately $1,057,601) for 2004, NIS 3,869,000 (approximately $1,017,622) for
2005, NIS 4,572,000 (approximately $1,202,525) for 2006 and NIS 4,294,000 (approximately
$1,129,406) for 2007.
5
Table of Contents
In April 2008, the OCS issued another approval letter to TopSpin Israel approving the program
for development of the IVMRI Catheter for imaging the coronary arteries, totaling NIS 9,785,000
(approximately $2,573,645). Based on this approval letter, TopSpin Israel was entitled to a grant
of 30% of the approved expenses in this program for research and development. To the best of our
knowledge, we have fulfilled all legal and technical requirements according to the approval, and
therefore believe that we are eligible to receive another NIS 1,600,000 (approximately $420,831)
from the OCS. However, we believe that the probability of receiving these funds is low.
Urology
In 2006, the OCS issued an approval letter to us approving a program for the development of an
endorectal MRI system for the imaging of prostate cancerous tumors under the Israeli Promotion of
Research and Development in Industry Law of 1984. It awarded a total of NIS 3,200,000
(approximately $841,662). According to this approval letter, we were entitled to a grant of 40% of
the approved expenses in this program for research and development. As of December 31, 2009, we
received NIS 1,228,000 (approximately $322,988) from the OCS.
In April 2008, the OCS issued an approval letter to us approving a program for the development
of an endorectal MRI system for the imaging of prostate cancerous tumors under the Israeli
Promotion of Research and Development in Industry Law of 1984. It awarded a total of NIS 5,135,000
(approximately $1,350,605). Based on this approval letter, we were entitled to a grant of 40% of
the approved expenses in this program for research and development. To the best of our knowledge,
we have fulfilled all legal and technical requirements according to the approval, and therefore
believe that we are eligible to receive another NIS 1,600,000 (approximately $420,831) from the
OCS. However, we do not know if and when these funds will be transferred to us.
According to the Israeli Regulations for the Promotion of Research and Development in Industry
(Royalty Rates and Rules of their Application) 1996, we must pay the Chief Scientist royalties
during the commercial stage of the project, that is once marketing of our product begins, at a rate
of 3% of sales during the first three years from the start of repayment and 3.5% of sales from the
fourth year onward until the full repayment of the grants, which are linked to the U.S. Dollar and
bear interest. At this time, we do not expect to pay royalties pursuant to this arrangement because
we do not expect any sales to result from our research and development efforts.
6
Table of Contents
Intellectual Property
As of December 31, 2009, TopSpin Israel owns four registered patents and eight pending patent
applications worldwide for its technology. In the United States, TopSpin Israel holds the
exclusive rights to two patents. U.S. Patent No. 6,704,594 entitled Magnetic Resonance Imaging
Device, issued March 9, 2004 and U.S. Patent No. 6,600,319, entitled Magnetic Resonance Imaging
Device, issued July 29, 2003 concern the basic technology for local MRI imaging from a miniature
imaging probe. They expire on November 6, 2020 and November 30, 2020, respectively. In addition, we
hold the exclusive rights to Patent No. 149945 in Israel and Patent No. 3872431 in Japan, both
which concern our basic technology for local MRI imaging from a miniature probe.
On January 24, 2010, we decided to discontinue the development of our intellectual property
due to management’s assessment that the Company will not be able to complete the development of our
intellectual property or sell products based on such intellectual property.
Employees
Due to financial difficulties, as of December 31, 2009, we have only one full-time employee
and one part-time employee; both employees are in our finance department. We do not have any other
employees.
None of our employees are represented by a collective bargaining agreement, nor have we
experienced any work stoppages. We believe that our relations with our remaining employees are
good. As of December 31, 2009, we have not adopted a code of ethics but intend to do so if and when
we restart our suspended activities or enter into new business activities.
Availability of SEC Reports
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K and other information with the SEC. Members of the public may read and copy materials that
we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Members of the public may also obtain information in the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy
and information statements and other information regarding issuers, including TopSpin, that file
electronically with the SEC. The address of that site is
http://www.sec.gov
.
We are not required to deliver an annual report to our shareholders; electronic copies of such
reports, however, are available on the SEC website described above.
Not applicable.
Not applicable.
7
Table of Contents
From January 2009 to May 2009, we conducted our business from the offices of Top-Notch Capital
Ltd. (
Top-Notch
), located at Derech Hashalom 53, Givataim, Israel, where we used one room free of
charge. One of our directors, Ehud-Moshe Gilboa, was a controlling shareholder of Top-Notch. Since
May 2009, we have conducted our business from the offices of DDG LTD located at Rothschild 65, Tel
Aviv, Israel, where we sublease approximately 20 square meters of office space. Our monthly rent
charges in 2009 were approximately 4,200 NIS (approximately $1,100 USD). This rent payment
includes all taxes, electricity, use of a conference room and use of kitchen supplies and
appliances. We believe that this arrangement is sufficient to meet our current needs. However,
and in the long-term, we will reevaluate the need for additional facilities based on our growth and
future needs with respect to management, administration, marketing and manufacturing requirements.
As of December 31, 2009, we were not a party to any material legal proceeding.
8
Table of Contents
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Common Equity and Related Stockholder Matters
Our shares of Common Stock are listed for trading on the TASE. On February 28, 2008, 22,522
of our outstanding Series 1 Warrants were converted into shares of our Common Stock and all
warrants that remained unexercised as of the close of business of such date expired and were
delisted from TASE. The information below refers to shares of our Common Stock that are currently
traded on TASE under the symbols “TOPMD”. Prior to delisting, our Series 1 Warrants traded on TASE
under the symbol “TOPMD.W1”. Prior to delisting, our Series 2 Warrants and Series 3 Warrants traded
on TASE under the symbols “TOPMED.W2” and “TOPMED.W3”, respectively. Public trading of our shares
of Common Stock and our Series 1 Warrants commenced on September 6, 2005. Public trading of our
Series 2 Warrants and Series 3 Warrants commenced on September 17, 2007 and expired on May 31, 2009
and June 30, 2009, respectively. We have never declared any dividends on any of these securities.
The following tables set forth, for the periods indicated, the range of high and low per share
sale prices for our Common Stock as reported on TASE.
Common Stock
| 2008 | ||||||||||||
| High | Low | |||||||||||
|
First Quarter
|
NIS | 0.377 | NIS | 0.218 | ||||||||
|
Second Quarter
|
NIS | 0.233 | NIS | 0.022 | ||||||||
|
Third Quarter
|
NIS | 0.110 | NIS | 0.020 | ||||||||
|
Fourth Quarter
|
NIS | 0.028 | NIS | 0.010 | ||||||||
| 2009 | ||||||||||||
| High | Low | |||||||||||
|
First Quarter
|
NIS | 0.014 | NIS | 0.01 | ||||||||
|
Second Quarter
|
NIS | 0.053 | NIS | 0.01 | ||||||||
|
Third Quarter
|
NIS | 0.034 | NIS | 0.025 | ||||||||
|
Fourth Quarter
|
NIS | 0.03 | NIS | 0.018 | ||||||||
Series 1 Warrants
| 2008 | ||||||||||||
| High | Low | |||||||||||
|
First quarter From January 1, 2008
through February 28, 2008
|
NIS | 0.015 | NIS | 0.010 | ||||||||
9
Table of Contents
Series 2 Warrants
| 2008 | ||||||||||||
| High | Low | |||||||||||
|
First Quarter
|
NIS | 0.093 | NIS | 0.021 | ||||||||
|
Second Quarter
|
NIS | 0.034 | NIS | 0.010 | ||||||||
|
Third Quarter
|
NIS | 0.012 | NIS | 0.010 | ||||||||
|
Fourth Quarter
|
NIS | 0.010 | NIS | 0.010 | ||||||||
| 2009 | ||||||||||||
| High | Low | |||||||||||
|
First Quarter
|
NIS | 0.01 | NIS | 0.01 | ||||||||
|
Second Quarter From April 1, 2009 through
May 31, 2009
|
NIS | 0.01 | NIS | 0.01 | ||||||||
Series 3 Warrants
| 2008 | ||||||||||||
| High | Low | |||||||||||
|
First Quarter
|
NIS | 0.139 | NIS | 0.049 | ||||||||
|
Second Quarter
|
NIS | 0.080 | NIS | 0.010 | ||||||||
|
Third Quarter
|
NIS | 0.018 | NIS | 0.010 | ||||||||
|
Fourth Quarter
|
NIS | 0.010 | NIS | 0.010 | ||||||||
| 2009 | ||||||||||||
| High | Low | |||||||||||
|
First Quarter
|
NIS | 0.01 | NIS | 0.01 | ||||||||
|
Second Quarter
|
NIS | 0.01 | NIS | 0.01 | ||||||||
Recent Sales of Unregistered Securities
Stock Options
During the fiscal year ended December 31, 2009, a total of 4,600,000 unregistered options
under our 2003 Israeli Stock Option Plan were exercised by 2 of our former employees with gross
proceeds of NIS 18,860 ($4,600), for 4,600,000 shares of our Common Stock.
Holders of Securities
As of December 31, 2009, we had 35 stockholders.
Dividends
Holders of the common stock are entitled to equal ratable rights to dividends and
distributions with respect to the common stock, as may be declared by the Board of Directors out
of funds legally available. We have never declared any dividends on any of our securities, and
do not intend to do so in the foreseeable future.
10
Table of Contents
Securities Authorized For Issuance Under the Equity Compensation Plans
The following table sets forth the aggregate number of securities to be issued upon the
exercise of outstanding options, warrants and rights under our equity compensation plans, and the
number of securities remaining available for future issuance under our equity compensation plans as
of December 31, 2009:
Equity Compensation Plan Information
| Number of securities | ||||||||||||
| remaining available for | ||||||||||||
| future issuance under | ||||||||||||
| Number of securities to be | Weighted-average | equity compensation | ||||||||||
| issued upon exercise of | exercise price of | plans (excluding | ||||||||||
| outstanding options, | outstanding options, | securities reflected in | ||||||||||
| warrants and rights | warrants and rights | column (a)) | ||||||||||
| Plan category | (a) | (b) | (c) | |||||||||
|
Equity compensation plans approved by security holders
|
0 | 0 | 0 | |||||||||
|
Equity compensation plans not approved by security holders
|
13,023,823 | NIS | 0.018 | 13,832,438 | ||||||||
|
|
||||||||||||
|
Total
|
13,023,823 | NIS | 0.096 | 13,832,438 | ||||||||
Use of Proceeds from Best-Efforts, Direct Public Offering
Our registration statement on Form SB-2 (Commission File No. 333-142242) covering our
best-efforts, direct public offering of up to 26,500,000 Units (each Unit consisting of (i) two
shares of our Common Stock and (ii) one Series 3 Warrant to purchase one share of our Common Stock)
was declared effective by the SEC on June 4, 2007. The offering commenced on June 5, 2007. In June
2007, we sold 12,199,201 Units and have not sold any additional Units since then. As of June 4,
2008, the offering for the remaining 14,300,799 Units expired.
The Units were offered through certain of our executive officers and directors, to whom no
commissions or other compensation will be paid on account of such activities. This offering was
conducted without any involvement of underwriters or selling agents.
We registered 26,500,000 Units (which in the aggregate consists of (i) 53,000,000 shares of
Common Stock and (ii) 26,500,000 Series 3 Warrants, of which Series 3 Warrants there are 26,500,000
underlying shares of Common Stock) at an offering price of NIS 1.586 per Unit, yielding an
aggregate, registered offering price of approximately NIS 42,029,000. As of December 31, 2009, we
had sold 12,199,201 Units, and the aggregate offering price of such sold amount is NIS 19,347,933.
On June 30, 2009 Series 3 Warrants traded on TASE expired.
11
Table of Contents
From June 4, 2007 to December 31, 2009, we incurred the following expenses in connection with
our best-efforts, direct public offering in the following amounts (as approximated, in thousands):
|
Underwriting discounts and commissions
|
||||||||
|
Finders’ fees
|
||||||||
|
Expenses paid to or for our underwriters
|
||||||||
|
Other expenses
|
NIS | 1,012 | ||||||
|
|
||||||||
|
Total expenses
|
NIS | 1,012 | ||||||
No payments for any of the foregoing expenses were made directly or indirectly to (i) any of
our directors, officers or their associates, (ii) any person(s) owning 10% or more of any class of
our equity securities or (iii) any of our affiliates.
Net proceeds to us from the sale of 12,199,201 Units based on the offering price of NIS 1.586
per Unit, after deducting the aforementioned expenses of approximately NIS 1,012,000 payable by us,
were approximately NIS 18,336,000 (approximately $4,822,725).
From January 1, 2009 to December 31, 2009, the following net proceeds have been used by us for
the purposes and in the amounts set out below (as approximated):
|
Construction of plant, building and facilities
|
— | |||||||
|
Purchase and installation of machinery and equipment
|
NIS | 6,700 | ||||||
|
Purchase of real estate
|
— | |||||||
|
Acquisition of other business
|
— | |||||||
|
Repayment of indebtedness
|
— | |||||||
|
Working capital
|
NIS | 3,799,000 | ||||||
|
Temporary investments
|
— | |||||||
|
Consulting fees in connection with the debenture settlement
|
— | |||||||
|
|
||||||||
|
Total
|
NIS | 3,805,000 | ||||||
Other than the payment in July 2007 of NIS 2,102,000 in principal and interest for a bridge
loan granted to us by the Pitango Group, the Giza Group and Israel Seed IV, L.P., each of whom was
a holder of more than 10% of our Common Stock until October 2008 (except for Israel Seed IV, L.P.
that held more than 5% of our Common Stock and who had a representative on our board of directors
until October 2008), no payments for any of the foregoing amounts were made directly or indirectly
to (i) any of our directors, officers or their associates, (ii) any person(s) owning 10% or more of
any class of our equity securities or (iii) any of our affiliates.
12
Table of Contents
Not applicable.
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our Financial Statements and Notes and the other financial
information included elsewhere in this Annual Report on Form 10-K for the fiscal year ending
December 31, 2009. In addition to historical information, this discussion and analysis contains
forward-looking statements based on current expectations that involve risks, uncertainties and
assumptions, such as our plans, objectives, expectations and intentions. Our actual results and the
timing of events may differ materially from those anticipated in these forward-looking statements
as a result of various factors.
Overview
Until suspension of our business activities due to financial considerations in October 2008,
we, through our subsidiary, TopSpin Israel, were engaged in the design, research, development and
manufacturing of imaging devices that utilize MRI technology by means of miniature probes that
image various body organs. In 1999, we began researching and developing this technology for use in
the diagnosis and therapy guidance of heart disease and more specifically of heart attacks. During
2006, we started to develop a product that combines our MRI technology with an endorectal
ultrasound for imaging prostate cancer.
Until 2008, our main product was an intravascular MRI, or IVMRI, catheter system for imaging
and characterizing the tissue composition of coronary plaque during a conventional cardiac
catheterization procedure. We have completed the development of a first generation IVMRI catheter
and an advanced generation IVMRI catheter, which represents a further technological advancement in
the miniaturization of the imaging probe and also integrates a number of probes in the catheter,
enabling the imaging of longer vessel segments simultaneously.
As previously disclosed in current reports on Form 8-K filed on September 25, 2008, September
29, 2008 and October 16, 2008, we executed a supplemental indenture with Wilmington Trust Company
(in its capacity as Trustee for our Series A Debentures) and the Ziv Haft Trust Company Ltd. (in
its capacity as Co-Trustee of our Series A Debentures) which
supplemented the original indenture governing the Series A Debentures and provided for the
conversion of each NIS 1.00 of principal amount of Series A Debentures held by eligible bondholders
into nine (9) shares of our common stock and NIS 0.25 in cash.
13
Table of Contents
As contemplated by the supplemental indenture and the settlement agreement, dated July 13,
2008, between the Company and the Co-Trustee, on October 12, 2008, all of the outstanding NIS
50,000,000 of the Series A Debentures were converted into 450,000,000 shares of our Common Stock.
Upon the completion of this conversion, all of our outstanding Series A Debentures were removed
from trading on the TASE. We issued the cash payment contemplated by the settlement agreement on
October 26, 2008 in the amount of NIS 12,513,000 (approximately $3,291,162).
This payment significantly reduced our cash resources, and, together with the delay in receipt
of grants from the OCS, materially and adversely affected our business and the cash we have
available to maintain research and development, marketing, and other activities conducted in the
ordinary course of our business. Our reduced cash position caused us to suspend our activities as
of October 27, 2008. We were forced to terminate all of our employees except three employees in our
finance department and three employees who were on maternity leave at the time (each of whose
employment was terminated prior to March 31, 2009), and we have incurred termination fees in
connection with the early termination of our property and motor vehicle lease. As of December 2009,
we employ only one full-time and one part-time employee—both in our finance department.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based on
our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities and expenses and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates based on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Some of the Company’s options granted to employees, directors and consultants are exercisable at
a U.S. Dollar denominated exercise price. The functional currency of the Company and the currency
in which the employees are paid is NIS. Accordingly, as of January 1, 2006, the fair value of the
vested portion of the options was classified as a liability and remeasured at each reporting date
until the date of settlement. Compensation cost for each period until settlement shall be based on
the change in the fair value of the options for each reporting period based on the binomial method.
Options granted to employees with a NIS denominated exercise price are classified as equity. The
fair value of the options is measured based on binominal method on grant date.
The Company recognizes compensation expenses for the value of its options based on the accelerated
method over the requisite service period of the options.
The Company applies ASC718 (formerly SFAS 123(R)) “Stock compensation” and ASC505-50 (formerly EITF
96-18) “Equity based payment to non-employees”, with respect to options issued to non-employees.
ASC718 requires the use of option valuation models to measure the fair value of the options and
warrants. The Company uses the binomial model to measure the fair value of options granted to
non-employees.
14
Table of Contents
Warrants with exercise price linked to the Consumer Price Index (“CPI”) in Israel are classified as
a liability and measured at fair value with changes in fair value recognized in earnings.
The embedded conversion feature and the convertible bonds are classified as liabilities and
measured in their entirety at fair value with changes in fair value recognized in earnings in
accordance with the provisions of ASC 825(formerly SFAS 159) “Financial Instruments”.
In February 2007, the FASB issued ASC 825, which permits entities to choose to measure many financial
instruments and certain other items at fair value to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge accounting
provisions. ASc 825 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement attributes for similar
types of assets and liabilities. ASc 825 is effective for financial statements issued for fiscal
periods beginning after November 15, 2007. ASc 825 was effective for us beginning January 1, 2008,
and as a result the Company recorded an increase in retained earnings in the amount of NIS 5,379 as
the embedded conversion feature in convertible debentures, embedded derivative related to issuance
expenses and convertible debentures, net of deferred issuance expenses, was remeasured at a total
fair value in the amount of NIS 31,639.
Results of Operations
Years Ended December 31, 2009 and 2008
Years Ended December 31, 2009 and 2008
Revenues.
We did not have any revenues in 2009 or 2008.
Research and Development
. We had no research and development expenses in 2009 due to
suspension of operations in October 2008, as compared to NIS 15,387,000 (approximately $4,288,701)
in 2008 prior to such suspension. Gross research and development expenses in 2008 were NIS
15,896,000 (approximately $4,430,570), but were offset by the receipt of a research and development
grants from the OCS.
Marketing and Sales.
We had no marketing and sales expenses in 2009 due to suspension of
operations in October 2008, as compared to NIS 570,000
(
approximately $158,872) in 2008.
General and Administrative
. General and administrative expenses consist primarily of
professional fees, rent, office maintenance, payroll related expenses, consulting fees and
directors’ fees. General and administrative expenses decreased by approximately 75% to NIS
1,930,000 (approximately $490,769) in 2009 from NIS 7,731,000 (approximately $2,154,802) in 2008.
This decrease was the result of decrease in business activity and termination of nearly all of our
employees.
Financial Income, Net.
In 2009, our financial income decreased by 95% to NIS 254,000
(approximately $64,588) as compared to financial income of NIS 4,882,000 (approximately $1,360,722)
in 2008. This decrease is attributable to the bond settlement and offset by the decrease in the
market value of undertakings recorded in our financial statements that took place in 2008.
15
Table of Contents
Taxes on income
. Since its formation, the Company has had no income from operations and has no
deferred tax liabilities. As a result of the settlement with our bondholders in 2008, we recorded a
reserve in the amount of NIS 1,344,000 (approximately $374,603) for possible tax payments.
Net Loss.
Our net loss for 2009 was NIS 1,676,000 (approximately $426,181) compared to a net
loss of NIS 20,150,000 (approximately $5,616,255) in 2008, a decrease of approximately 90% which is
attributable to a reduction in almost all our expenses due to cost saving efforts.
Liquidity and Capital Resources
We have not had any revenues from operations since our inception in September 1999. We have
financed our operations principally through private and public sales of equity securities,
convertible notes and through grants from the Office of the Chief Scientist of the Israeli Ministry
of Industry, Trade and Labor, an Israeli governmental agency. In November 2006, we raised net
proceeds of NIS 40,635,000 (approximately $10,687,796) through the sale of Series A Debentures and
Series 2 Warrants in a private placement. In June 2007, we raised net proceeds of NIS 18,336,000
(approximately $4,822,725) through the sale of Common Stock and Series 3 Warrants. In February
2009, we raised net proceeds of NIS 900,000 (approximately $236,717) through the sale of
120,000,000 shares of our Common Stock and options to purchase up to an additional 58,064,516
shares of our common stock of the Company with an exercise price of NIS 0.01 per share and will be
exercisable from the date of issuance until four years following the date of issuance.
As of December 31, 2009, our assets were approximately NIS 1,312,000 (approximately $347,550),
of which cash and cash equivalents were approximately NIS 1,002,000 (approximately $265,430). As of
December 31, 2009, our liabilities were approximately NIS 2,488,000 (approximately $659,073).
We believe that our cash resources are insufficient for our operations at current levels for the
next twelve months. Our assessment of our cash needs constitutes an estimate based on the pace of
our cash expenses, and the expected receipt of grants still payable by the OCS for the period
through December 31, 2009. We continue to examine the possibility of expanding our operations into
other fields of activity, including through commercial arrangements with companies or acquisition
of new businesses in consideration for shares of our Common Stock and/or cash, and we are
continuing our efforts to raise financing in order to carry out these activities. There are no
assurances however, that we will be successful in obtaining an adequate level of financing needed
for the long term development and commercialization of our planned products. There is uncertainty
about the Company’s ability to generate revenues or raise
sufficient funds, if any, in the near term. These factors, among other factors raise substantial
doubt about the Company’s ability to continue as a going concern.
16
Table of Contents
We may not be able to raise additional funds required to resume our regular business
operations or to engage in new fields of business that we may decide to pursue. The global stock
and credit markets are experiencing significant price volatility, dislocations and liquidity
disruptions, which have caused market prices of many stocks to fluctuate substantially and the
spreads on prospective debt financings to widen considerably. These circumstances have materially
impacted liquidity in the financial markets, making terms for certain financings less attractive,
and in certain cases have resulted in the unavailability of certain types of financing. Continued
uncertainty in the stock and credit markets may negatively affect our ability to raise necessary
additional funds. In addition, we are experiencing challenges in increasing our capital stock as
the result of lacking a quorum at the meetings of stockholders called for that purpose.
Off-Balance Sheet Arrangements
TopSpin Israel has obtained grants from the OCS for participation in research and development
and, in return, is obligated to pay royalties amounting to 3% of sales during the first three years
from the start date of the repayments and 3.5% of sales from the fourth year until the full
repayment of the grants. The grants are linked to the exchange rate of the dollar and bear interest
of LIBOR per annum. As of December 31, 2009, we have written off the entire liability to the OCS as
it is no longer considered the OCS will have grounds to collect this liability. The royalties would
have been due should we have had sales due to the research and development projects approved by the
OCS. We expect no sales from those projects, and therefore expect no royalties to be paid to the
OCS.
Office Lease Commitments
During 2009, the Company signed a lease agreement with a new landlord, DDG, for one year. The
agreement will end in the beginning of May 2010. Lease payments are 4200 NIS (approximately $1,100)
per month approximately. Beginning in January 2010, lease payments increased to 1,900 NIS ($500).
Credit Card Commitment
We have pledged a bank deposit of NIS 31,000 (approximately $8,212) as security for
commitments on credit cards issued to us.
Bank Guarantee for Offices Lease
Pursuant to the office lease agreement that we terminated in November 2008, we pledged a bank
deposit, which is used as a guarantee, amounting to approximately NIS 436,000 (approximately
$114,676) as of December 31, 2008 to secure payments under the lease agreements. At the beginning
of 2009, the guarantee was decreased to NIS 108,000
(approximately $28,609). Subsequently, and upon the restoration of the premises their
original condition after the Company’s departure the guarantee was cancelled completely.
17
Table of Contents
Motor Vehicles Lease Commitment
TopSpin Israel leases motor vehicles under operating lease agreements for 36 months. The
monthly lease payments were approximately NIS 2,800 (approximately $742) as of December 31, 2008.
The Company deposited NIS 8,000 (approximately $2,119) covering rental payments for the last three
months in respect of these contracts. During the year ended December 31, 2009, we paid NIS 29,000
(approximately $7,682) in early termination penalties.
Not applicable.
18
Table of Contents
TOPSPIN MEDICAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009
AS OF DECEMBER 31, 2009
19
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009
INDEX
| Page | ||||
| 21 | ||||
|
|
||||
| 22 | ||||
|
|
||||
| 23 | ||||
|
|
||||
| 24 | ||||
|
|
||||
| 25-26 | ||||
|
|
||||
| 27-46 | ||||
20
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
TOPSPIN MEDICAL, INC.
We have audited the accompanying consolidated balance sheets of Topspin Medical, Inc. (“the
Company”) and its subsidiary as of December 31, 2008 and 2009, and the related consolidated
statements of operations, changes in shareholders’ deficiency and cash flows for each of the two
years in the period ended December 31, 2009. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal control over
financial reporting. Our audit included considerations of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company and its subsidiary as of
December 31, 2008 and 2009 and the consolidated results of their operations and their cash flows
for each of the two years in the period ended December 31, 2009, in conformity with accounting
principles generally accepted in the United States.
Without qualifying our opinion, we draw attention to the matter discussed in Note 1b and 1c to
the consolidated financial statements. In the last quarter of 2008, the Company terminated the
employment of most of its employees and suspended its operational activities. The Company has
incurred losses in the amount of NIS 1,676 thousand during the year ended December 31, 2009 and has
an accumulated deficit in the amount of NIS 182,117 thousand as of that date. These factors, among
other factors described in that Note, raise substantial doubt about the Company’s ability to
continue as a going concern. The financial statements do not include any adjustments relating to
the carrying amounts and classification of assets and liabilities that might result should the
Company be unable to continue to operate as a going concern.
| Tal Aviv, Israel | KOST FORER GABBAY & KASIERER | |
| March 16, 2010 | A Member of Ernst & Young Global |
21
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NIS in thousands (except share and per share data)
NIS in thousands (except share and per share data)
| December 31, | ||||||||||
| Note | 2008 | 2009 | ||||||||
|
ASSETS
|
||||||||||
|
|
||||||||||
|
CURRENT ASSETS:
|
||||||||||
|
Cash and cash equivalents
|
3 | 3,385 | 1,002 | |||||||
|
Other receivables and prepaid expenses
|
4 | 434 | 242 | |||||||
|
Restricted deposits
|
8d | 562 | 59 | |||||||
|
|
||||||||||
|
|
||||||||||
|
|
4,381 | 1,303 | ||||||||
|
|
||||||||||
|
|
||||||||||
|
PROPERTY AND EQUIPMENT, NET
|
5 | 10 | 9 | |||||||
|
|
||||||||||
|
|
||||||||||
|
|
4,391 | 1,312 | ||||||||
|
|
||||||||||
|
|
||||||||||
|
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
|
||||||||||
|
|
||||||||||
|
CURRENT LIABILITIES:
|
||||||||||
|
Trade payables
|
6 | 455 | 140 | |||||||
|
Other payables and accrued expenses
|
7 | 2,821 | 1,011 | |||||||
|
Liability in respect of warrants (series 2)
|
10 | 250 | — | |||||||
|
Liabilities in respect of options to employees and
consultants- short-term
|
11 | 10 | 1 | |||||||
|
Accrued severance pay
|
270 | — | ||||||||
|
Tax provision
|
13 | — | 1,334 | |||||||
|
|
||||||||||
|
|
||||||||||
|
|
3,806 | 2,486 | ||||||||
|
|
||||||||||
|
LONG-TERM LIABILITIES:
|
||||||||||
|
Tax provision
|
13 | 1,344 | — | |||||||
|
Liabilities in respect of options to employees and consultants
|
11 | 38 | 2 | |||||||
|
|
||||||||||
|
|
||||||||||
|
|
1,382 | 2 | ||||||||
|
|
||||||||||
|
|
||||||||||
|
CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES
|
8 | |||||||||
|
|
||||||||||
|
SHAREHOLDERS’ DEFICIENCY:
|
9 | |||||||||
|
Share capital:
|
||||||||||
|
Common shares of $0.001 par value:
|
||||||||||
|
Authorized 1,000,000,000 shares as of December 31, 2008
and 2009; Issued and outstanding 636,870,882 and
761,470,882 shares as of December 31, 2008 and 2009,
respectively
|
2,457 | 2,975 | ||||||||
|
Additional paid-in capital
|
177,187 | 177,966 | ||||||||
|
Accumulated deficit
|
(180,441 | ) | (182,117 | ) | ||||||
|
|
||||||||||
|
|
||||||||||
|
|
(797 | ) | (1,176 | ) | ||||||
|
|
||||||||||
|
|
||||||||||
|
|
4,391 | 1,312 | ||||||||
|
|
||||||||||
22
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
NIS in thousands (except share and per share data)
NIS in thousands (except share and per share data)
| Year ended | ||||||||||
| December 31, | ||||||||||
| Note | 2008 | 2009 | ||||||||
|
|
||||||||||
|
Research and development expenses
|
15,896 | — | ||||||||
|
Less — participation by the Office of the Chief Scientist
|
509 | — | ||||||||
|
|
||||||||||
|
Research and development expenses, net
|
15,387 | — | ||||||||
|
Selling and marketing expenses
|
570 | — | ||||||||
|
General and administrative expenses
|
7,731 | 1,930 | ||||||||
|
|
||||||||||
|
Operating loss
|
(23,688 | ) | (1,930 | ) | ||||||
|
Financial income, net
|
12 | 4,882 | 254 | |||||||
|
|
||||||||||
|
Loss before income taxes
|
(18,806 | ) | (1,676 | ) | ||||||
|
Income taxes
|
1,344 | — | ||||||||
|
|
||||||||||
|
Net loss
|
(20,150 | ) | (1,676 | ) | ||||||
|
|
||||||||||
|
|
||||||||||
|
Basic and diluted net loss per Common share
|
(0.07 | ) | (0.002 | ) | ||||||
|
|
||||||||||
|
Weighted average number of Common shares outstanding
used in basic and diluted net loss per share calculation
|
285,339,247 | 748,641,841 | ||||||||
|
|
||||||||||
23
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
NIS in thousands (except share data)
NIS in thousands (except share data)
| Number of | ||||||||||||||||||||
| outstanding | Share | Additional | Total | |||||||||||||||||
| shares | capital | paid-in | Accumulated | shareholders’ | ||||||||||||||||
| Common | capital | deficit | deficiency | |||||||||||||||||
|
|
||||||||||||||||||||
|
Balance as of January 1, 2008
|
186,206,798 | 837 | 163,790 | (165,670 | ) | (1,043 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Cumulative effect of the
adoption of ASC 825 (formerly
SFAS 159)
|
— | — | — | 5,379 | 5,379 | |||||||||||||||
|
Exercise of options
|
641,562 | 2 | 20 | — | 22 | |||||||||||||||
|
Exercise of warrants (series 1)
|
22,522 | (*) - | 20 | — | 20 | |||||||||||||||
|
Classification of liability
into equity in respect of
exercise of options
|
— | — | 125 | — | 125 | |||||||||||||||
|
Settlement with convertible
bond holders
|
450,000,000 | 1,618 | 13,232 | — | 14,850 | |||||||||||||||
|
Net loss
|
— | — | — | (20,150 | ) | (20,150 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Balance as of December 31, 2008
|
636,870,882 | 2,457 | 177,187 | (180,441 | ) | (797 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Exercise of options
|
4,600,000 | 19 | — | — | 19 | |||||||||||||||
|
Issuance of Common shares and
warrants (series 3)
|
120,000,000 | 499 | 401 | — | 900 | |||||||||||||||
|
Classification of liability
into equity in respect of
exercise of options
|
— | — | 161 | — | 161 | |||||||||||||||
|
Stock-based compensation
expense
|
— | — | 217 | — | 217 | |||||||||||||||
|
Net loss
|
— | — | — | (1,676 | ) | (1,676 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Balance as of December 31, 2009
|
761,470,882 | 2,975 | 177,966 | (182,117 | ) | (1,176 | ) | |||||||||||||
|
|
||||||||||||||||||||
| (*) | Less than NIS 1. |
24
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NIS in thousands
| Year ended | ||||||||
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Cash flows from operating activities:
|
||||||||
|
|
||||||||
|
Net loss
|
(20,150 | ) | (1,676 | ) | ||||
|
Adjustments to reconcile net loss to net cash used in operating activities (a)
|
(5,248 | ) | (2,123 | ) | ||||
|
|
||||||||
|
|
||||||||
|
Net cash used in operating activities
|
(25,398 | ) | (3,799 | ) | ||||
|
|
||||||||
|
|
||||||||
|
Cash flows from investing activities:
|
||||||||
|
|
||||||||
|
Change in restricted deposits, net
|
3 | 503 | ||||||
|
Purchase of property and equipment
|
(154 | ) | (6 | ) | ||||
|
Proceeds from sale of property and equipment
|
427 | — | ||||||
|
|
||||||||
|
|
||||||||
|
Net cash provided by investing activities
|
276 | 497 | ||||||
|
|
||||||||
|
|
||||||||
|
Cash flows from financing activities:
|
||||||||
|
|
||||||||
|
Exercise of stock options and warrants
|
42 | 19 | ||||||
|
Proceeds from issuance of shares and warrants (series 3), net of issuance
expenses
|
— | 900 | ||||||
|
Settlement with convertible bond holders
|
(12,513 | ) | — | |||||
|
|
||||||||
|
|
||||||||
|
Net cash provided by (used in) financing activities
|
(12,471 | ) | 919 | |||||
|
|
||||||||
|
|
||||||||
|
Decrease in cash and cash equivalents
|
(37,593 | ) | (2,383 | ) | ||||
|
Cash and cash equivalents at the beginning of the year
|
40,978 | 3,385 | ||||||
|
|
||||||||
|
|
||||||||
|
Cash and cash equivalents at the end of the year
|
3,385 | 1,002 | ||||||
|
|
||||||||
25
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NIS in thousands
NIS in thousands
| Year ended | ||||||||
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
(a) Adjustments to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
|
||||||||
|
Depreciation
|
1,204 | 7 | ||||||
|
Impairment of property and equipment
|
1,270 | — | ||||||
|
Capital gain
|
(65 | ) | — | |||||
|
Interest on restricted deposits
|
(10 | ) | — | |||||
|
Change in fair value of liability in respect of warrants (series 2)
|
(725 | ) | (250 | ) | ||||
|
Change in fair value of convertible bonds
|
(3,786 | ) | — | |||||
|
Change in fair value of embedded derivative
|
325 | (500 | ) | |||||
|
Stock-based compensation
|
— | 217 | ||||||
|
Change in fair value and amortization of stock options classified as a
liability
|
(2,195 | ) | 115 | |||||
|
Accrued severance pay, net
|
(327 | ) | (270 | ) | ||||
|
Decrease in other receivables and prepaid expenses (including
long-term receivables)
|
2,373 | 192 | ||||||
|
Decrease in trade payables
|
(1,636 | ) | (315 | ) | ||||
|
Decrease in other payables and accrued expenses
|
(1,676 | ) | (1,319 | ) | ||||
|
|
||||||||
|
|
||||||||
|
Total adjustments
|
(5,248 | ) | (2,123 | ) | ||||
|
|
||||||||
|
|
||||||||
|
(b) Supplemental disclosure of cash flow activities:
|
||||||||
|
|
||||||||
|
Cash paid during the year for:
|
||||||||
|
|
||||||||
|
Taxes paid due to non-deductible expenses
|
71 | — | ||||||
|
|
||||||||
|
|
||||||||
|
(c) Supplemental disclosure of non cash flows activities:
|
||||||||
|
|
||||||||
|
Classification of liabilities into equity
|
125 | 161 | ||||||
|
|
||||||||
26
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| a. | TopSpin Medical, Inc. (“the Company”) and its subsidiary, TopSpin Medical (Israel) Ltd. (“the subsidiary”) (collectively “the Group”) were engaged in research and development of a medical MRI technology. |
In October 2008, the Company suspended its activities as described in c below and
in Note 15.
The Company was incorporated and commenced operation in September 1999 as a private
company registered in Delaware, U.S. On September 1, 2005, the Company issued
securities to the public in Israel and became publicly traded on the Tel Aviv Stock
Exchange (“TASE”). In 2007, the Company listed some of its securities with the U.S.
Securities and Exchange Commission (“SEC”). The Company’s shares are traded only in
Israel in NIS.
| b. | Since its inception and through the Company’s suspension of its activity, the Company has devoted substantially most of its efforts to business planning, research and development, marketing, recruiting management and technical staff, acquiring assets and raising capital. Accordingly, in prior years, the Company was considered to be in the development stage, as defined in ASC 915, “Development Stage Entities” (formerly SFAS No. 7) and the financial statements were presented accordingly. Commencing December 31, 2009, the Company ceased its efforts related to the technology developed in prior years and as such the Company is no longer considered to be in the development stage. |
| c. | In October 2008, the Company terminated the employment of all of its subsidiary’s employees (excluding two employees from the finance department) and suspended its operational activities. |
| d. | The Group has not generated any revenues and has not achieved profitable operations or positive cash flows from operations. The Company has an accumulated deficit of NIS 182,117 as of December 31, 2009, and it incurred a net loss of NIS 1,676 and negative cash flows from operating activities in the amount of NIS 3,799 for the year ended December 31, 2009. |
There is uncertainty about the Company’s ability to generate revenues or raise
sufficient funds in the near term, if any. These factors, among other factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Subsequent to the balance sheet date, the Company entered into an agreement with an
investor for an investment in the amount $212, from which an amount of $54 was
received as of the date of the financial statements (see also Note 15b).
The Company is operating to get the necessary funds.
| e. | On June 2, 2009, the Company entered into an acquisition and investment agreement with Anavid Insulation Products Kiryat Anavim ACS Ltd. (“Anavid”), Kiryat Anavim Holdings and Development ACS Ltd. (“Holdings and Development”) and Kiryat Anavim Silicone Ltd. (“the acquiree”) according to which the Company will acquire all of Anavid’s holdings in the Company, representing 89% of Ordinary share capital (65.93% on a fully diluted basis). |
It was decided that the agreement would be signed by August 15, 2009 and may be
extended at the request of either party by another 60 days. The Company has
addressed the other parties with a request to extend the closing date to October
15, 2009 and since the agreement was not signed on the extended date, the parties
agreed to defer the signing to October 21, 2009.
27
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
On October 26, 2009, Anavid informed the Company that the agreement was cancelled
and that the failure to complete the acquisition transaction by the last agreed
upon date constitutes a fundamental breach of the agreement. The Company rejects
these arguments and in accordance with its legal advisors, claims that the
incompletion of the closing process was done properly and in accordance with the
agreement.
| f. | With regards to the Company not withstanding the Tel Aviv Stock Exchange preservation rules, see Note 15d. |
The consolidated financial statements have been prepared in accordance with generally
accepted accounting principles in the United States (“U.S. GAAP”), applied on a
consistent basis, as follows:
| a. | Financial statements in NIS: |
A majority portion of the Company’s costs and expenses are incurred in New Israeli
Shekels (“NIS”). In addition, the Company finances its operations from mainly NIS
denominated resources, mainly from equity raisings.
The Company’s management believes that the NIS is the primary currency of the
economic environment in which the Company operates. Thus, the functional currency
of the Company is the NIS.
Accordingly, monetary accounts maintained in currencies other than the NIS are
re-measured into NIS in accordance with ASC 830 (formerly — SFAS No. 52), “Foreign
Currency Matters”.
All transaction gains and losses of the re-measured monetary balance sheet items
are reflected in the statement of operations as financial income or expenses, as
appropriate.
Substantially all the operations and assets of the Company are conducted in NIS in
Israel and it has no assets and operations in the US. The Company’s stocks are
traded in Israel in NIS. As such the Company’s management believes that the
functional and reporting currency is NIS.
| b. | Use of estimates: |
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported and disclosure of contingent assets and liabilities in
the financial statements and accompanying notes. Actual results could differ from
those estimates.
| c. | Principles of consolidation: |
The consolidated financial statements include the accounts of the subsidiary over
which the Company exercises control. Significant inter-company balances and
transactions between the two companies have been eliminated in the consolidated
financial statements.
28
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| d. | Cash equivalents: |
Cash equivalents are short-term highly liquid investments that are readily
convertible to cash with maturities of three months or less at the date of
acquisition.
| e. | Property and equipment: |
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated by the straight-line method over the estimated useful
lives of the assets at the following annual rates:
| % | ||||
|
|
||||
|
Computers and software
|
33 | |||
|
Office furniture and equipment
|
7 - 15 | |||
| f. | Impairment of long-lived assets: |
The Company’s long-lived assets are reviewed for impairment in accordance with ASC
360 (formerly SFAS 144), “Property, Plant and Equipment”, 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 asset is considered to be
impaired, the impairment to be recognized is measured as the amount by which the
carrying amount of the asset exceeds its fair value. For the year ended December
31, 2009, no impairment losses on its property and equipment were recorded. For the
year ended December 31, 2008, the Company recorded NIS 1,270 as impairment losses
on its property and equipment.
| g. | Severance pay: |
The Company’s liability for severance pay to the Israeli employees of the
subsidiary is calculated pursuant to Israeli severance pay law based on the most
recent salary of the employees multiplied by the number of years of employment, as
of the balance sheet date. Employees are entitled to one month’s salary for each
year of employment or a portion thereof. The Company’s liability for all of its
employees is partially provided 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 include profits accumulated up to the balance sheet date. 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 surrendered value of these policies, and
includes immaterial profits.
Commencing 2009, the Company has defined deposited funds for all of its employees,
pursuant to section 14 to the Severance Pay Law, under which, the Company pays
fixed contributions and will have no legal or constructive obligations to pay
further contributions upon termination of employees.
Severance pay expenses for the years ended December 31, 2008 and 2009 amounted to
approximately NIS 503 and NIS 54, respectively.
29
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| h. | Research and development expenses, net: |
Research and development expenses, are charged to the statement of operations as
incurred.
Royalty-bearing grants from the Government of Israel for funding approved research
and development projects are recognized at the time the Company is entitled to such
grants, on the basis of the costs incurred and applied as a deduction from research
and development expenses.
| i. | Stock-based compensation |
On January 1, 2006, the Company adopted ASC 718 (formerly SFAS 123(R)), “Stock
Compensation”, which requires the measurement and recognition of compensation
expense based on estimated fair values for all share-based payment awards made to
employees and directors. ASC 718 requires companies to estimate the fair value of
equity-based payment awards on the date of grant using an option-pricing model. The
value of the portion of the award that is ultimately expected to vest is recognized
as an expense over the requisite service periods in the Company’s consolidated
statements of operations.
The Company adopted ASC 718 using the modified prospective transition method, which
requires the application of the accounting standard starting from January 1, 2006.
The Company’s shares are traded in Israel.
Some of the Company’s options granted to employees, directors and consultants are
exercisable with a U.S. Dollar denominated exercise price. The functional currency
of the Company and the currency in which the employees are paid is NIS.
Accordingly, as of January 1, 2006, the fair value of the vested portion of the
options was classified as a liability and remeasured at each reporting date until
the date of settlement. Compensation cost for each period until settlement shall be
based on the change in the fair value of the options for each reporting period
based on the binomial method.
Options granted to employees with a NIS denominated exercise price are classified
as equity. The fair value of the options is measured based on binominal method on
grant date.
The Company recognizes compensation expenses for the value of its options based on
the accelerated method over the requisite service period of the options.
As of December 31, 2009 and 2008, the Company estimates the fair value of stock
options granted using the Binomial model with the following assumptions:
| Binomial model | 2008 | 2009 | ||
|
|
||||
|
Dividend yield
|
0% | 0% | ||
|
Expected volatility
|
97.96% | 113%-136.4% | ||
|
Risk-free interest rate
|
2.25% | 4.5% | ||
|
Suboptimal exercise factor
|
3.09 for employees,
3.56 for officers |
3.09 for employees,
3.56 for officers |
30
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Risk-free interest rates are based on the yield from U.S. Treasury zero-coupon
bonds with a term equivalent to the contractual life of the options; Expected
volatilities are based on historical volatilities from traded stock of the Company
and of similar companies. The Company uses historical data to estimate option
exercise and employee termination 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 Company has historically not paid dividends and has no foreseeable plans to
declare dividends.
The Company applies ASC 718 and ASC 505-50 (formerly EITF 96-18), “Equity-Based
Payment to Non-employees”, with respect to options issued to non-employees. ASC 718
requires the use of option valuation models to measure the fair value of the
options and warrants. The Company uses the Binomial model to measure the fair value
of options granted to non-employees. In 2009, no options were granted to
non-employees.
| j. | Fair value of financial instruments: |
The carrying amount reported in the consolidated balance sheet for cash and cash
equivalents, other receivables and prepaid expenses, trade payables and other
payables approximate their fair values due to the short-term maturities of such
instruments.
| k. | Basic and diluted net loss per share: |
Basic net loss per share is computed based on the weighted average number of Common
shares outstanding during each year. Diluted net loss per share is computed based
on the weighted average number of Common shares outstanding during each period,
plus dilutive potential Common shares considered outstanding during the year in
accordance with ASC 260 (formerly SFAS 128), “Earning per Share”. All outstanding
stock options have been excluded from the calculation of the diluted loss per
Common share because all such securities are anti-dilutive for each of the periods
presented.
| l. | Concentration of credit risks: |
Financial instruments that potentially subject the Group to concentrations of
credit risk consist principally of cash and cash equivalents and other receivables.
The Group’s cash and cash equivalents are invested in NIS and U.S. dollar
instruments of major banks in Israel and in the United States. Management believes
that the financial institutions that hold the Company’s investments are financially
sound and, accordingly, minimal credit risk exists with respect to these
investments. The Company and its subsidiary have no significant off-balance sheet
concentration of financial instruments subject to credit risk such as foreign
exchange contracts, option contracts or other hedging arrangements.
31
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| m. | Income taxes: |
The Group accounts for income taxes in accordance with ASC 740 (formerly SFAS 109),
“Income Taxes”. This Statement prescribes the use of the liability method, whereby
deferred tax assets and liability account balances are calculated for temporary
differences between financial reporting and tax bases of assets and liabilities and
net operating loss carryforward. The deferred tax assets and liabilities are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The Company and its subsidiary provide a valuation allowance if necessary, to
reduce deferred tax assets to their estimated realizable value.
As for tax uncertainties (formerly addressed under FIN 48), the Statement
establishes a single model to address accounting for uncertain tax positions. The
Statement clarified the accounting for income taxes by prescribing the minimum
recognition threshold a tax position is required to meet before being recognized in
the financial statements. The Statement also provides guidance on recognition,
measurement, classification, interest and penalties, accounting in interim periods,
disclosure and transition. The Company elected to classify interest expenses and
penalties recognized in the financial statements as income taxes. For the years
2008 and 2009, no penalties were recognized.
| n. | Liability in respect of warrants to investors: |
Warrants with exercise price linked to the Consumer Price Index (“CPI”) in Israel
are classified as a liability and measured at fair value with changes in fair value
recognized in earnings.
| o. | Convertible bonds and related embedded feature: |
The embedded conversion feature and the convertible bonds are classified as
liabilities and measured in their entirety at fair value with changes in fair value
recognized in earnings in accordance with the provisions of ASC 825, “Financial
Instruments” (formerly SFAS 159).
In February 2007, the FASB issued ASC 825 which permits entities to choose to
measure many financial instruments and certain other items at fair value to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting provisions. ASC 825
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. ASC 825 is effective for financial
statements issued for fiscal periods beginning after November 15, 2007. ASC 825 was
effective for the Company beginning January 1, 2008, and as a result the Company
recorded an increase in retained earnings in the amount of NIS 5,379 as the
embedded conversion feature in convertible debentures, embedded derivative related
to issuance expenses and convertible debentures, net of deferred issuance expenses,
was remeasured at a total fair value in the amount of NIS 31,639.
32
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| p. | Impact of recently issued Accounting Standards: |
In June 2009, the Financial Accounting Standards Board (FASB) Accounting Standards
Codification (Codification) became the single source of authoritative U.S. GAAP.
The Codification did not create any new GAAP standards but incorporated existing
accounting and reporting standards into a new topical structure with a new
referencing system to identify authoritative accounting standards, replacing the
prior references to Statement of Financial Accounting Standards (SFAS), Emerging
Issues Task Force (EITF), FASB Staff Position (FSP), etc. Authoritative standards
included in the Codification are designated by their Accounting Standards
Codification (ASC) topical reference, and new standards will be designated as
Accounting Standards Updates (ASU), with a year and assigned sequence number.
Beginning with this interim report for the third quarter of 2009, references to
prior standards have been updated to reflect the new referencing system.
In June 2009, the FASB concurrently issued amendments to ASC 860, “Transfers and
Servicing” (formerly SFAS No. 166), and ASC 810, “Consolidation” (formerly SFAS No.
167), that change the way entities account for securitizations and other transfers
of financial instruments. In addition to increased disclosure, these amendments
eliminate the concept of qualifying special purpose entities and change the test
for consolidation of variable interest entities. These amendments will be effective
for the Company as of January 1, 2010. The Company has evaluated these amendments
and believes they will have no impact on its financial condition or results of
operations.
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
In New Israeli Shekels
|
3,020 | 978 | ||||||
|
In other currencies (mainly in U.S. dollars)
|
365 | 24 | ||||||
|
|
||||||||
|
|
||||||||
|
|
3,385 | 1,002 | ||||||
|
|
||||||||
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Prepaid expenses and suppliers advances
|
192 | 8 | ||||||
|
Government of Israel — VAT refund
|
17 | 45 | ||||||
|
Deduction of tax
|
175 | 175 | ||||||
|
Prepaid lease fees and other
|
50 | 14 | ||||||
|
|
||||||||
|
|
||||||||
|
|
434 | 242 | ||||||
|
|
||||||||
33
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Cost:
|
||||||||
|
|
||||||||
|
Computers and software
|
30 | 36 | ||||||
|
Office furniture and equipment
|
18 | 17 | ||||||
|
Consoles
|
388 | — | ||||||
|
|
||||||||
|
|
||||||||
|
|
436 | 53 | ||||||
|
|
||||||||
|
|
||||||||
|
Accumulated depreciation:
|
||||||||
|
|
||||||||
|
Computers and software
|
22 | 29 | ||||||
|
Office furniture and equipment
|
16 | 15 | ||||||
|
Consoles
|
388 | — | ||||||
|
|
||||||||
|
|
||||||||
|
|
426 | 44 | ||||||
|
|
||||||||
|
|
||||||||
|
|
10 | 9 | ||||||
|
|
||||||||
Depreciation expenses amounted to NIS 1,204 and NIS 7 for the years ended December 31,
2008 and 2009, respectively.
During 2008, the Company re-evaluated the future use of the fixed assets. As the Company
believes some fixed assets will not have any future use to the Company due to the change
in design of its product, the Company has recorded an impairment loss of NIS 1,270 (as
additional depreciation) to write-off the fixed assets’ unamortized cost.
In accordance with the Company’s board of director’s decision to suspend its activity,
as described in Note 1c, the Company sold NIS 362 net value of its fixed assets.
During 2009, the Company disposed of its consoles since the consoles were fully
depreciated at the time, no expense or profit was recorded in respect of the
transaction.
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Open accounts (1)
|
429 | 98 | ||||||
|
Notes payable
|
26 | 42 | ||||||
|
|
||||||||
|
|
||||||||
|
|
455 | 140 | ||||||
|
|
||||||||
| (1) | Includes approximately NIS 8 to a related party in 2008. |
34
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Provision for payroll and related expenses
|
471 | 49 | ||||||
|
Vacation pay and recreation pay
|
115 | 11 | ||||||
|
Accrued expenses
|
2,235 | 951 | ||||||
|
|
||||||||
|
|
||||||||
|
|
2,821 | 1,011 | ||||||
|
|
||||||||
| a. | Commitments to pay royalties to the Chief Scientist: |
The subsidiary had obtained from the Office of the Chief Scientist of the State of
Israel (“OCS”) grants for participation in research and development and, in return,
the subsidiary is obligated to pay royalties amounting to 3% of the sales in the
first three years from the beginning of the repayment and 3.5% of the sales from
the fourth year up to the amount of the grant. The grant is linked to the exchange
rate of the dollar and bears interest of Libor per annum. Through December 31,
2009, total grants obtained amount to approximately NIS 17,985.
The Company demands to receive from the OCS grants on behalf of expenses recorded
in the year 2008 in the amount of approximately NIS 3,200. As there is uncertainty
regarding receiving the aforementioned amount the Company did not record an asset
in its financial statements. During 2009, the Company did not receive any grants
from the OCS. The Company assumes the probability of receiving these grants is low.
| b. | Commitments: |
During 2009, the Company signed a lease agreement with a new lessor for one year.
The agreement will end in the beginning of May 2010.
| c. | The subsidiary pledged a bank deposit which is used as a bank guarantee amounting to NIS 436 to secure its payments under the lease agreement which was terminated in November 2008. The deposit bears average annual interest of approximately 4% and is presented at cost plus accrued interest. In 2009, after the Company’s departure and after restoring the premises to their original condition, the guarantee was cancelled completely. |
| d. | The subsidiary pledged a bank deposit which is used as a bank guarantee amounting to NIS 31 to secure its payments in accordance with the credit limits given to it by the credit card companies. |
| e. | The subsidiary leases motor vehicles under operating lease agreements for 36 months. The monthly lease payments are approximately NIS 3. As of December 31, 2009, the Company has deposited NIS 8 covering rental payments for the last three months in respect of these contracts. The deposit is linked to the CPI and bears no interest. |
As of December 31, 2009 future rental commitments under the existing lease
agreement, whose cancellation involves a penalty, are as follows:
|
First year
|
34 | |||
|
Second year
|
6 | |||
|
Third year
|
— | |||
|
|
||||
|
|
||||
|
|
40 | |||
|
|
||||
35
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
| a. | On November 21, 2006, the Company issued in a private placement NIS 50,000,000 par value of bonds (series A) (“the bonds (series A)” or “the convertible debentures”) and 25,000,000 warrants (series 2) (“the warrants” or “the warrants (series 2)”) such that each issuance of two bonds (series A) entitled the holder of bonds (series A) to receive from the Company, at no consideration, one warrant (series 2). |
The warrants (series 2) are convertible into 25,000,000 Common shares of the
Company, par value $0.001, such that each warrant is exercisable into one Common
share of the Company in consideration of NIS 0.84 linked to the Israeli Consumer
Price Index.
The bonds (series A) were offered at a purchase price equaling 95% of their par
value and for total consideration of NIS 47,500 and issuance costs of approximately
NIS 5,000. The warrants (series 2) were offered at no consideration. The share’s
quoted market price at November 21, 2006, was NIS 0.752.
| b. | On September 11, 2007, a registration statement pursuant to the United States Securities Act of 1933 (“the registration statement”) with the U.S. Securities and Exchange Commission (“SEC”) for the registration of the bonds (series A), warrants (series 2) and the shares underlying the conversion of the bonds (series A) and the exercise of the warrants (series 2) became effective. | ||
| c. | On September 17, 2007, the bonds (series A) and the warrants (series 2) and the shares underlying the conversion of the bonds (series A) and the exercise of the warrants (series 2) were listed for trade on the TASE. | ||
| d. | On July 13, 2008, the Company and Ziv Haft Trust Company, the Co-Trustee acting on behalf of the holders of the Series A Convertible Bonds (the “Co-Trustee”, the “Bondholders” and the “Series A Bonds”, respectively), executed a settlement agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, and subject to its terms and the approval of an Israeli court (the “Israeli Court”), the Indenture will be amended such that in consideration of each NIS 1 par value of the Series A Bonds, each Bondholder will be entitled to receive 9 shares of Common stock of the Company and the sum of NIS 0.25 in cash. Pursuant to this arrangement, the Bondholders will be paid an aggregate amount of NIS 12,500 in cash, and will be issued Common stock such that following the execution of the arrangement, the Bondholders will hold 71% of the issued and outstanding capital of the Company. Pursuant to the Settlement Agreement, the Company deposited within 3 days following the execution of the Settlement Agreement NIS 12,500 in an account on behalf of the Co-Trustee. |
By September 25, 2008, the above mentioned amounts were deposited and all of the
conditions for amending the Indenture were satisfied.
| e. | On October 12, 2008, following the settlement, the bonds were converted into 450,000,000 shares of Common stock (see also Note 10b2). On October 26, 2008, the amount was paid in such a manner that each bond was exercisable into one share of Common stock of the Company, in consideration for a cash payment of NIS 0.0.250263. | ||
| f. | According to ASC 470-50, “Debt — Modifications and Extinguishments” (formerly: EITF 96-19 and EITF 06-6), the Company determined that the terms of the convertible debentures do not constitute a substantial change compared to the original terms. Consequently, a new effective interest rate was determined based on the carrying amount of the original debt instrument, adjusted for an increase in the fair value of an embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) resulting from the modification, and the revised cash flows. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
| g. | Series 2 expired on May 31, 2009. As a result, the entire liability in the amount of NIS 250 on account of series 2 was written off against finance expenses. | ||
| h. | Due to the implementation of the Settlement Agreement, the Company recorded NIS 1,344 as tax provision in its financial statements (see Note 13). | ||
| i. | The Company had 22,800,000 registered options (series 1) which were exercisable into 22,800,000 Common shares of $0.001 par value with an exercise price of NIS 1.1 per share, linked to the changes in the dollar/NIS exchange rate from August 25, 2005. The options were exercisable up to February 28, 2008. On February 2008, 22,522 options (series 1) have been exercised and the rest have been forfeited. |
| a. | Composition of share capital: |
The Company’s authorized Common stock consists of 1,000,000,000 shares with a par
value of $0.001 per share. All shares have equal voting rights and are entitled to
one non-cumulative vote per share in all matters to be voted upon by shareholders.
The shares have no preemptive, subscription, conversion or redemption rights and
may be issued only as fully paid and non-assessable shares. Holders of the Common
stock are entitled to equal ratable rights to dividends and distributions with
respect to the Common stock, as may be declared by the Board of Directors out of
funds legally available. The Common stock are listed and publicly traded on the
Tel-Aviv Stock Exchange (“TASE”).
| b. | Share capital: |
| 1. | On April 19, 2007, the Company filed a registration statement pursuant to the United States Securities Act of 1933 (“the registration statement” and “Securities Act”, respectively) with the U.S. Securities and Exchange Commission (“SEC”) regarding the sale of shares of Common stock and warrants (series 3) and the shares resulting from the exercise of the warrants (series 3). On June 4, 2007, the registration statement became effective. |
Based on the registration statement, the Company is entitled to offer up to
53,000,000 shares of Common stock and 26,500,000 warrants (series 3), offered
in 26,500,000 Units (each consisting of 2 Common shares and 1 warrant (series
3)), for a period of one year from the date the registration statement became
effective.
On June 6, 2007, the Company issued 24,398,402 shares of Common stock which
are listed for trade on the TASE together with 12,199,201 warrants C (series
3) that are listed for trade on the TASE since September 17, 2007. The issued
securities were issued in consideration for NIS 1.586 in cash per Unit. The
total net proceeds from the issuance amounted to approximately NIS 18,336
(net of issuance expenses of NIS 1,013).
Each warrant (series 3) was exercisable into one share of Common stock of the
Company until June 30, 2009, in consideration for a cash payment of NIS 0.84.
On June 30, 2009, no warrants (series 3) were exercised and all were
forfeited.
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
| 2. | On October 12, 2008, the Company issued 450,000,000 shares of Common stock following the settlement with convertible bond holders (see Note 9e). | ||
| 3. | On February 2, 2009, the Company entered into a private placement agreement with an investor. According to the agreement the Company issued 120,000,000 Common shares of $0.001 par value and 58,064,516 warrants exercisable into Common shares of the Company for total consideration of NIS 900,000. Each warrant is exercisable into one Common share for the exercise price of NIS 0.01 for a period of 4 years following the issuance date. According to the Binomial model, with 92.96% volatility and 3.39% risk-free interest rate, the fair value of the warrants amounted to approximately NIS 401,000. | ||
| 4. | On July 15, 2009, the Board of Directors decided to obtain the approval of the shareholders of the Company to increase the registered capital of the Company by 500,000,000 shares of Common stock and to amend the corporation’s certificate of incorporation whereby the total number of authorized shares of Common stock shall be increased by 500,000,000 shares. | ||
| A shareholders’ meeting was set for September 3, 2009. Since a sufficient quorum was not present at the shareholders’ meeting, the number of authorized shares of the Company was not increased. As of December 31, 2009, the increase in the Company’s number of authorized shares has not been approved. |
| a. | The Company grants options to its employees, directors and consultants under the 2001 and 2003 Share Option Plans. As of December 31, 2009, there are 13,832,438 options available for future grant. Any options, which are canceled or forfeited before the expiration date, become available for future grants. | ||
| b. | On February 26, 2009, the Board of Directors approved an increase of an additional 25,000,000 shares of Common stock to be granted under the 2003 Israeli Share Option Plan. On January 24, 2010, the Board of Directors cancelled this decision. | ||
| c. | On December 30, 2008, the Board of Directors approved agreements with the former CEO, Yaron Tal, and the former CFO, Eyal Kolka, (see Note 14c) which include a modification to their option terms. According to the agreements: |
| 1. | The exercise price of the 2,500,000 vested options out of all the options granted to Yaron Tal was reduced to $0.001 and will be exercisable until December 30, 2010. All the unvested options were canceled. The compensation resulting from the modification amounted to approximately NIS 17. | ||
| 2. | The exercise price of the 2,100,000 options from the 2003 Option Plan granted to Eyal Kolka was reduced to $0.001, 862,500 out of the 2,100,000 options which were unvested will become immediately vested and all of the aforementioned options will be exercisable until November 30, 2010. The compensation resulting from the modification amounted to approximately NIS 14. |
Both Yaron Tal and Eyal Kolka exercised their above mentioned options during 2009.
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 11:- STOCK-BASED COMPENSATION (Cont.)
According to ASC 718, modifications of the expiration date and reduction in the
exercise price of the options are treated as an exchange of the original award,
resulting in additional compensation expenses based on the differences between the
fair value of the new award and the original award immediately before modification.
Compensation expenses were recognized immediately as the modified options were
fully vested. As a result of the modification, the Company recorded additional
compensation expenses in the amount of approximately NIS 31 in 2008, using the
Binominal model.
| d. | Options to employees: |
A summary of the Company’s share option activities for options granted to employees
under the plans excluding performance base options is as follows:
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | terms | intrinsic | ||||||||||||||
| Number | price (*) | (in years) | Value | |||||||||||||
|
|
||||||||||||||||
|
Options outstanding at January 1, 2009
|
7,213,251 | 0.241 | ||||||||||||||
|
Options granted
|
26,000,000 | 0.014 | ||||||||||||||
|
Options exercised
|
(4,100,000 | ) | 0.004 | |||||||||||||
|
Options forfeited
|
(17,880,438 | ) | 0.106 | |||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Options outstanding at December 31, 2009
|
11,232,813 | 0.015 | 1.44 | 0.8 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Options vested and expected to vest at
December 31, 2009
|
11,232,813 | 0.015 | 1.44 | 0.8 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Options exercisable at December 31, 2009
|
9,732,813 | 0.015 | 0.22 | 0.8 | ||||||||||||
|
|
||||||||||||||||
| (*) | Exercise prices for options granted before 2009 were denominated in U.S. dollars, while exercise prices for options granted in 2009 were denominated in NIS. |
The weighted-average grant-date fair value of options granted to employees during
the year ended December 31, 2009 and 2008 was NIS 0.02 and NIS 0.24 per option,
respectively.
The aggregate intrinsic value in the tables above represents the total intrinsic
value (the difference between the Company’s closing stock price on the last trading
day of December 2009 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, 2009. This amount changes
based on the fair market value of the Company’s stock. Total intrinsic value of
options exercised by employees for the year ended December 31, 2009 and 2008 was
NIS 0 and NIS 125, respectively.
As of December 31, 2009, there was NIS 7 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted to employees
under the Company’s stock option plans. That cost is expected to be recognized over
a weighted-average period of 3 years.
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 11:- STOCK-BASED COMPENSATION (Cont.)
On December 10, 2009 two of the Company’s directors resigned. As a result 9,500,000
of their unvested options were forfeited. On March 10, 2010 the remaining
9,500,000 of the directors vested options became forfeited.
A summary of the activity under the performance share-based options granted to
employees is as follows:
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | terms | intrinsic | ||||||||||||||
| Number | price | (in years) | value | |||||||||||||
|
|
||||||||||||||||
|
Options
outstanding at
January 1, 2009
|
2,390,000 | 0.419 | ||||||||||||||
|
Options exercised
|
(500,000 | ) | 0.004 | |||||||||||||
|
Options forfeited
|
(1,890,000 | ) | (0.528 | ) | ||||||||||||
|
|
||||||||||||||||
|
Options
outstanding at
December 31, 2009
|
— | — | ||||||||||||||
|
|
||||||||||||||||
Compensation expenses (income) related to options granted to employees were
recorded to research and development expenses and general and administrative
expenses, as follows:
| Year ended December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Research and development expenses
|
(1,039 | ) | (8 | ) | ||||
|
General and administrative expenses
|
(587 | ) | 340 | |||||
|
|
||||||||
|
|
||||||||
|
|
(1,626 | ) | 332 | |||||
|
|
||||||||
| e. | Options to non-employees: |
A summary of the Company’s share option activities for options granted to
non-employees under the plans excluding performance-based options is as follows:
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | terms | intrinsic | ||||||||||||||
| Number | price | (in years) | value | |||||||||||||
|
|
||||||||||||||||
|
Options
outstanding at
January 1, 2009
|
1,378,510 | 0.71 | ||||||||||||||
|
Options forfeited
|
(812,500 | ) | 0.29 | |||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Options
outstanding,
vested and
expected to vest
at December 31,
2009
|
566,010 | 1.31 | 4.04 | — | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Options
exercisable at
December 31, 2009
|
566,010 | 1.31 | 4.04 | — | ||||||||||||
|
|
||||||||||||||||
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
The Company accounted for its options to non-employees under the fair value method
in accordance of ASC 718 (formerly SFAS 123(R)) and ASC 505 (formerly EITF 96-18).
The fair value for options granted to non-employees was estimated according to the
principles determined in ASC 718 based on binomial option pricing model and amounts
to approximately NIS 4. For the weighted-average assumptions see Note 2i.
A summary of the activity under the performance share-based options granted to
non-employees is as follows:
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | terms | intrinsic | ||||||||||||||
| Number | price | (in years) | value | |||||||||||||
|
|
||||||||||||||||
|
Options
outstanding at
January 1, 2009
and December 31,
2009
|
900,000 | 0.42 | 6.7 | — | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Options
exercisable at
December 31, 2009
|
300,000 | 0.42 | 6.7 | — | ||||||||||||
|
|
||||||||||||||||
In accordance with the suspension of the Company’s activities as mentioned in Note
1c, the Company assumes that the milestones set in the option agreement will not be
achieved.
Compensation expenses (income) related to options granted to non-employees were
recorded to research and development expenses and general and administrative
expenses, as follows:
| Year ended December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Research and development expenses
|
(365 | ) | — | |||||
|
General and administrative expenses
|
(204 | ) | — | |||||
|
|
||||||||
|
|
(569 | ) | — | |||||
|
|
||||||||
| Year ended December 31, | ||||||||
| 2008 | 2009 | |||||||
|
|
||||||||
|
Bank commissions
|
(71 | ) | (7 | ) | ||||
|
Interest income
|
752 | 3 | ||||||
|
Change in fair value of liability in respect of warrants
|
725 | 250 | ||||||
|
Change in fair value of embedded derivative
|
(325 | ) | — | |||||
|
Change in fair value of convertible bonds
|
15,399 | — | ||||||
|
Foreign currency translation adjustments
|
2 | (2 | ) | |||||
|
Loss due to bonds’ settlement
|
(11,600 | ) | — | |||||
|
Gain on short-term deposits
|
— | 10 | ||||||
|
|
||||||||
|
|
||||||||
|
|
4,882 | 254 | ||||||
|
|
||||||||
41
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| a. | Tax laws applicable to the companies: |
| 1. | The Company is taxed under U.S. tax laws. | ||
| 2. | The subsidiary is taxed under the Israeli Income Tax Ordinance and the Income Tax (Inflationary Adjustments) Law, 1985 (“the law”). | ||
| According to the law, until 2007, the results for tax purposes were adjusted for the changes in the Israeli CPI. | |||
| In February 2008, the “Knesset” (Israeli parliament) passed an amendment to the Income Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law starting 2008 and thereafter. Since 2008, the results for tax purposes are measured in nominal values, excluding certain adjustments for changes in the Israeli CPI carried out in the period up to December 31, 2007. Adjustments relating to capital gains such as for sale of property (betterment) and securities continue to apply until disposal. Since 2008, the amendment to the law includes, among others, the cancellation of the inflationary additions and deductions and the additional deduction for depreciation. |
| b. | Tax assessments: |
The Company has not received final tax assessments since its incorporation. The
subsidiary has tax assessments considered as final through 2005.
| c. | Tax rates applicable to the Group: |
| 1. | The subsidiary: | ||
| The rate of the Israeli corporate tax is as follows: 2008 — 27%, 2009 — 26%, 2010 — 25%. Tax at a reduced rate of 25% applies on capital gains arising after January 1, 2003, instead of the regular tax rate. In July 2009, the Israeli Parliament (the Knesset) passed the Economic Efficiency Law 2009 (Amended Legislation for Implementing the Economic Plan for 2009 and 2010) which prescribes, among other things, an additional gradual reduction in Israeli corporate tax rate starting from 2011 to the following tax rates: 2011 — 24%, 2012 — 23%, 2013 — 22%, 2014 — 21%, 2015 — 20%, 2016 and thereafter — 18%. | |||
| The Company estimates that the Economic Efficiency Law is not expected to affect the Company’s consolidated financial statements. | |||
| 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%, including State tax and Local tax which rates are dependent on the country and city in which the Company will conduct its business. |
42
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| According to the tax laws applicable to Israeli residents, dividend received from a foreign resident company is subject to tax in Israel at the rate of 25% by its recipient. According to the tax laws applicable in the U.S., tax at the rate of 30% is withheld and, based on the treaty for the avoidance of double taxation of Israel and the U.S., it may be reduced to either 25% or 12.5% (dependent on the identity of the shareholder). To enjoy the benefits of the tax treaty, certain procedural requirements need to be satisfied. |
| d. | Carryforward losses for tax purposes: |
In the year ended December 31, 2009, the main reconciling items from the statutory
tax rate of the Company (26%) to the effective tax rate (0%) are carryforward tax
losses for which a full valuation allowance was provided.
Carryforward tax losses of the Company amount to approximately NIS 39,800 as of
December 31, 2009. According to the tax laws in the U.S., these losses may be
gradually carried forward until 2025. Carryforward tax losses of the subsidiary in
Israel, which may be carried forward for an indefinite period, total approximately
NIS 132,000 as of December 31, 2009. Deferred tax assets relating to these
carryforward losses were not recorded due to the uncertainty of their utilization
and as a result, the Company provided a valuation allowance on the total amount of
the deferred assets.
| e. | Deferred tax assets: |
Significant components of the Company’s deferred tax assets are as follows:
| December 31, | ||||
| 2009 | ||||
|
|
||||
|
Tax assets with respect to tax loss carryforwards
|
9,952 | |||
|
Less — valuation allowance
|
(9,952 | ) | ||
|
|
||||
|
|
||||
|
Net deferred tax assets
|
— | |||
|
|
||||
Realization of deferred tax assets is depended on generating sufficient taxable
income in the period that the deferred tax assets are realized. Based upon all
available information and because the Company’s lack of earnings history, deferred
tax assets have been fully offset by a valuation allowance.
The Company has not been assessed for tax purposes since
incorporation.
| f. | Tax provision: |
In 2008, as a result of the Settlement Agreement (see Note 9d), the Company
recorded taxable income. The Company believes it has reasonable arguments to enable
it to offset the taxable income against taxable losses from other sources. Due to
uncertainties with respect to this matter and in accordance with ASC 740, “Income
Taxes”, the Company has provided NIS 1,344 for the potential tax exposure. The
subsidiary filed its tax return in the U.S. during 2009.
43
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands
NIS in thousands
| a. | Regarding the agreement with Mr. Ascher Shmuelevich, see Note 10b(3). | ||
| b. | On December 17, 2009, the Company’s Board of Directors (“BOD”) nominated Mr. Fufi Fatal as chairman of the BOD. In consideration for the services he provides, Mr. Fatal will be entitled to a monthly fee of approximately NIS 34 plus value added tax (approximately $9,000), and the Company will pay up to 50% of all fixed and variable maintenance costs of the cellular phone used by him starting March 2010. Mr. Fatal will be granted options, approximately 10% of the Company’s equity under certain conditions. | ||
| c. | On April 19, 2009, the Company’s BOD nominated Mr. Ehud Gilboa, the chairman of the Group Board of Directors, to serve as a temporary Chief Executive Officer (“CEO”) of the Group and entered into a Consulting Agreement to that end with him. On May 5, 2009, the Board of Directors amended the agreement to reflect that Mr. Ehud Gilboa will provide consulting services only, and that he will not act as the Group’s temporary CEO. In consideration for the services he provides, Mr. Gilboa is entitled to a monthly fee of approximately NIS 34 plus value added tax (approximately $9,000), and the Company will pay up to 50% of all fixed and variable maintenance costs of the cellular phone used by the Consultant retroactively from January 1, 2009. On November 15, 2009, Mr. Ehud Gilboa notified the Board regarding his resignation from his duties as chairman of the Board and as a Board member. | ||
| d. | On September 25, 2007, the Board of Directors of the Company approved the appointment of Mr. Yaron Tal to serve as President and CEO of the Company and of the subsidiary effective October 1, 2007. | ||
| The subsidiary and Mr. Tal entered into an employment agreement (“the Employment Agreement”). Under the Employment Agreement, Mr. Tal will receive a monthly gross salary of NIS 65 (“the Salary”), linked to, and adjusted on a quarterly basis in accordance with, the Israeli Consumer Price Index. In addition, Mr. Tal would be eligible for other benefits as detailed in the Employment Agreement. | |||
| In addition, Mr. Tal is eligible to receive options from the Company. See Note 11c. | |||
| e. | On October 19, 2008, the Company’s Board of Directors accepted the resignation of Mr. Yaron Tal, the Company’s Chief Executive Officer. On December 30, 2008, the Company and Mr. Tal reached agreements regarding his termination as CEO and President of the Company and its subsidiary. See also Note 11c. | ||
| On September 25, 2007, Mr. Erez Golan signed a notice stating that Mr. Golan will cease to act as President and CEO of the Company effective October 1, 2007, and his employment with the subsidiary will be terminated on December 25, 2007 (“the Termination”) and on September 25, 2007, the subsidiary and Mr. Golan entered into a consulting agreement pursuant to which Mr. Golan will serve as a consultant to the subsidiary and perform consulting services reasonably requested by the subsidiary commencing on December 26, 2007 until December 26, 2009. | |||
| On May 19, 2008, the Company’s Board of Directors approved an amendment to Mr. Erez Golan’s (director) Consulting Agreement. Effective as of August 15, 2008, the Company agreed to pay the Consultant a fee of NIS 6.2 per each day of services actually provided, plus value added tax. Both parties decided to terminate the Consulting Agreement on October 22, 2008. On December 31, 2009, all of Mr. Golan’s outstanding options were forfeited. |
44
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
| f. | On May 1, 2003, the Company signed a consulting agreement with the then acting chairman of the Board of Directors Mr. Michael Berman. As part of the agreement, Mr. Berman was to give the Company consulting services for approximately two full working days a month for $2,000 a day. In addition, the Company granted Mr. Berman 650,000 options to purchase 650,000 Common shares. On November, 13, 2008, Mr. Berman resigned from his position as chairman of the Board of Directors and in 2009 his options were forfeited. |
| a. | On January 25, 2010, the Company decided to discontinue the development of its intellectual property due to management’s assessment from December 2009 that the Company will not be able to finalize the development of its intellectual property or sell products based on such intellectual property. | ||
| b. | On January 27, 2010, the Company entered into an investment agreement (“the Agreement”) with Medgenesis Partners Ltd. (“Medgenesis”), a private company incorporated under the laws of Israel and controlled by Mr. Ascher Shmuelevich (“the Investor” and “the Stockholder”, respectively). Under the terms of the Agreement, the Company will issue to the Investor (i) 211,672,857 shares (“the Shares”) of Common stock of the Company, par value $0.001; (ii) a warrant to purchase 122,935,610 shares of Common stock (“the Investment Warrant”); and (iii) a warrant to purchase 58,064,516 shares of Common stock (“the Substituted Warrant”, and together with the Shares and the Investment Warrant, “the Securities”) in exchange for payment by the Investor of the amount of $211,673 and the cancellation of a certain warrant issued by the Company to the Stockholder pursuant to a certain agreement, dated February 2, 2009, filed with the Securities and Exchange Commission on February 5, 2009 (“the Cancelled Warrant”) (collectively, “the Transaction”). The Common stock and the Investment Warrant will constitute 33.25% of the Company’s fully diluted equity. In total, the investor will hold privately and through Medgenesis 43.4% of the Company’s fully diluted equity. All the Securities issued in connection with the Agreement will be subject to certain transfer restrictions in compliance with U.S. and Israeli securities laws. | ||
| The consummation of the Transaction is subject to several conditions. | |||
| In addition, the Company, Medgenesis and the Investor signed an understanding agreement according to which the last two would assist the Company to acquire a commercial and industrial bio-tech activity. | |||
| c. | On February 2, 2010, the Company called for a general shareholders’ meeting to be held on March 11, 2010. The meeting’s purpose is to approve the above mentioned private placement which would provide the Investor with 25% of the Company’s voting rights. Should the conditions for the grant to the Investor not exist, the Company would be able to approve a private placement of up to 58,804,000 shares under certain Israeli rules. The private placement would provide the Investor 25% of the voting rights in return for paying for the placement. On March 11, 2010 a legal quorum of 33% of the shareholders was not present in the general shareholders’ meeting and so the meeting was postponed to March 18, 2010 | ||
| d. | On February 4, 2010, the Tel Aviv Stock Exchange (TASE) notified the Company that it does not withstand the preservation regulations due to having equity lower than NIS 2 million in the last four reporting quarters. The Company was given an extension until June 30, 2010 to increase its equity. If the required increase in equity does not occur until that date, the TASE Board of Directors will discuss transferring the Company’s shares to the preservation list. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
| e. | On March 2, 2010, the Board of Directors approved to grant Mr. Zvi Linkovski, director in the Company, 10 million options which are exercisable into 10 million Common shares of $0.001 par value each which make up 1.19% of the Company’s fully diluted equity. The options’ exercise price is NIS 0.0143. 50% of the options would vest on February 16, 2011 and after then, every quarter 6.25% of the options would vest. The grant is conditional on enlarging the option pool as part of increasing the Company’s issued stock, changing the Company’s status from a shell company (as defined in the ‘Securities Exchange Act of 1934’) into an active one. | ||
| f. | On March 2, 2010, the Board of Directors approved that following the grant of the options to Mr. Fatal (new chairman of the Board), options would be granted to the Finance Manager so that his total share of the Company’s fully diluted equity would be 0.5%. It was further resolved that after January 1, 2011, the Company would grant additional options to the Finance Manager so that his total share of the Company’s fully diluted equity would be 0.75%. This second grant to the Finance Manager is subject to all the following conditions: (1) the first grant to him mentioned here (0.5%) (2) performance of the Company’s Rights Offer and (3) receiving all the legally required approvals. | ||
| g. | With regards to forfeited options to directors, please see Note 11d. |
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Not applicable.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”) that are
designed to provide reasonable assurance that the information required to be disclosed in the
reports we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission rules, and that such
information is accumulated and communicated to our management to allow timely decisions regarding
required disclosure.
The Company’s principal executive officer and its principal financial officer evaluated the
effectiveness of the Company’s disclosure controls and procedures, as of the end of the period
covered by this report. Based on that evaluation, the principal executive officer and the principal
financial officer concluded that our disclosure controls and procedures were effective as of
December 31, 2009.
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f) or Exchange Act Rule 15d-15(f).
Under the supervision and with the participation of our management, including the Chairman of our
Board of Directors who is currently acting as our Principal Executive Officer and our Finance
Manager, we carried out an evaluation of the effectiveness of our internal control over financial
reporting as of December 31, 2009 based on the Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our
management concluded that our internal control over financial reporting was effective as of
December 31, 2009.
This annual report does not include an attestation report of the Company’s registered public
accounting firm regarding internal control over financial reporting. Management’s report was not
subject to attestation by the Company’s registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting during the
quarter ended December 31, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
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Table of Contents
On March 2, 2010 the Board of Directors approved a grant of 10 million options to our
director, Zvi Lindorski, which options are exercisable into 10,000,000 shares of our common stock,
$0.001 par value per share; these options constitute 1.19% of the Company’s fully diluted equity.
The exercise price for these options is 0.0143 NIS (approximately $[· ]); half of the options
will vest on February 16, 2011 and thereafter, 6.25% of the options will vest at the end of each
fiscal quarter. The option grant is conditioned on (i) enlarging the option pool by increasing the
Company’s authorized capital stock and (ii) transitioning the Company from a shell company to an
operating company.
On March 2, 2010 the Board of Directors also approved a grant of options to Mr. Yehiely, our
Finance Manager, such that , after giving effect to the options granted to Mr. Fatal, Mr. Yehiely’s
total share of the Company’s fully diluted equity would be 0.5%. In addition, the Board approved a
grant to Mr. Yehiely, to be effective January 1, 2011, such that his total share of the Company’s
fully diluted equity would be 0.75%. This second grant is subject to certain performance and other
conditions, including the consummation of the first grant mentioned and the receipt of all legally
required approvals.
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Table of Contents
Management
As of December 31, 2009, our directors and executive officers, their ages and positions held,
are as follows:
| Name | Age | Position | ||
|
Fufi Fatal
|
50 | Chairman of the Board of Directors, Acting Principal Executive Officer | ||
|
Ran Ben-Or (1)(2)(3)(4)
|
46 | Director | ||
|
Zvi Linkovsy (2)(3)
|
59 | Director | ||
|
Shlomit Oren (1)
|
30 | Director | ||
|
Eran Feldhay (1)(2)(4)
|
37 | Director | ||
|
Eldad Yehiely (5)
|
53 | Finance Manager |
| (1) | Directors were elected at the annual general meeting on December 10, 2008, and will serve until the next annual general meeting of the stockholders. | |
| (2) | Member of the Audit Committee. | |
| (3) | Audit Committee financial expert. | |
| (4) | Independent Directors. | |
| (5) | On May 6 2009, Mr. Eldad Yehiely began to serve as the Finance Manager (our most senior financial officer) of both TopSpin and TopSpin Israel, as well as the Secretary of TopSpin. |
The following is a brief account of the education and business experience during the past five
years of each director, executive officer and key employee, indicating the principal occupation
during that period of time, and the name and principal business of the organization in which such
occupation and employment were carried out:
Fufi Fatal
has served as Chairman of the Board and Acting Principal Executive Officer of the Company since December 17, 2009. Mr.
Fatal has served as the chairman of the board of directors of Galil Deposits, CLAL Finance,
Underwriting and Issuance Ltd. since 2008. Between 2004 and 2007, Mr. Fatal acted as General
Manager of Harel Underwriting and Issuance Ltd. (a part of the Harel Insurance Holding Ltd. Group).
Prior to 2004, Mr. Fatal worked in the underwriting industry in various capacities, including in
business development roles. Mr. Fatal holds a B.A. in Business Management and Economics from
Tel-Aviv University. Mr. Fatal brings to the Board a deep background in finance, which we anticipate will be of great use in structuring any future acquisition.
Ran Ben-Or
has served as a director of the Company since March 25, 2008. From 1994 to 2004,
Mr. Ben-Or was a partner in Prof. Itzhak Swary & Co. Since 2004, he has served as the Chief
Executive Officer and Founder of Bagira Investments Ltd. and also as it’s Chief Executive Officer.
Since 2005 he has served as a Managing Partner of the Tene Private Equity Funds. Mr. Ben-Or also
serves as a director of Hanita Coating RCA, Cidav Printed Circles Ltd., Omen Die Casting RCA,
Teldor Cables & Systems Ltd., Blue I Technologies Ltd., Gazit Industries RCA and Macabident Ltd.
Mr. Ben-Or received a B.Sc. in Computer Science and Accounting and an M.B.A. from the Hebrew
University of Jerusalem. Mr. Ben-Or is also a licensed Israeli C.P.A. Mr. Ben-Or’s
accounting and investment experience will assist the Board in identifying, valuing and accounting for any future acquisition.
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Table of Contents
Zvi Linkovsky
has served as a director of the Company since December 17, 2009. Since 2000, Mr.
Linkovsky has been the CEO of Tapuz and main representative and advisor to
Kuohwa in Israel. Since 2001, Mr. Linkovsky has also served as a Director of Rabintex
Industries Ltd, and since 2002, he also served as the director of Mandarin, Israel. Mr. Linkovsky
holds a B.Sc. in Textile Technologies from Shenkar College. Mr. Linkovski brings to the Board substantial experience with multinational
corporations and will be able to guide the Company in developing future operations both inside and beyond Israel.
Shlomit Oren
has served as a director of the Company since December 10, 2008. From 2002 Ms.
Oren has worked as an analyst and portfolio manager in Maoz Everest Funds Management Ltd. Ms. Oren
received a B.A. in Economics and Communications from the Tel-Aviv University, and an M.B.A. from
the Interdisciplinary Center in Hertzlya. Ms. Oren’s substantial experience as an investment
analyst will assist the Board in evaluating future acquisition opportunities.
Eran Feldhay
has served as a director of the Company since December 10, 2008. From 1998 to
2004, Dr. Feldhay served as the Product Manager of Medcon Systems (1993) Ltd.; from 2004 to 2006 he
served as the VP of Marketing of Medcon Systems (1993) Ltd.; and from 2006 he served as the General
Manager of Medcon Systems (1993) Ltd. Dr. Feldhay received a B.Sc and an M.D. from the Tel-Aviv
University. Mr. Feldhay brings to the Board expertise in product development, which will serve the
Board well in developing product lines acquired in the course of any future acquisitions.
Eldad Yehiely
has served as the Company’s Finance Manager since May 2009. From 2006 to 2009,
he served as the CFO of Golden Point LTD, a holding company. From 2003 to 2006, Mr. Yehiely was
self-employed as a financial consultant Mr. Yehieli has a BA in accounting from Adelphi University.
and an Executive MBA from the Hebrew University.
Beneficial Ownership Reporting Compliance
As none of our securities have been registered as a class under Section 12 of the Exchange
Act, none of our directors, executive officers and beneficial owners of more than ten percent of
any class of our equity securities are required to file reports of ownership and changes in
ownership with the SEC on Forms 3, 4 or 5.
Code of Ethics
As of December 31, 2009, we have not adopted a code of ethics but intend to do so if and when
we restart our suspended activities or enter into new business activities.
Corporate Governance
We are not listed as an issuer, nor have we applied to be listed as an issuer, on any national
securities exchange or inter-dealer quotation system in the United States. For the purposes of
compliance with applicable securities rules, our Board of Directors affirmatively determines the
independence of each of our directors using the independence standards required by a national
securities exchange, the NASDAQ Stock Market, including the consideration of any relationship
which, in the opinion of the Board of Directors, would interfere with the exercise of independent
judgment in carrying out the director’s responsibilities as a member of our Board of Directors.
During its annual review of director independence, our Board of Directors determined that Mr. Ben-Or and Mr. Feldhay are
each independent under the director independence standards of the NASDAQ Stock Market, Inc. as of
December 31, 2009.
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Table of Contents
Although our Board of Directors has not separately designated a nominating committee
or a committee performing similar functions, our Board of Directors determined that Ran Ben-Or
and Eran Feldhay, each would be independent under the NASDAQ nominating committee independence
standards.
Our board has a separately-designated standing audit committee composed of the following
directors: Ran Ben-Or, Eran Feldhay and Zvi Linkovski. Under the independence standards required
by a national securities exchange, the NASDAQ Stock Market for audit committee members, as of
December 31, 2009, Ran Ben-Or and Eran Feldhay were independent.
Our Board of Directors determined that as of December 31, 2009, the Company had at least two audit
committee financial experts serving on the Company’s Audit Committee: Zvi Linkovski and Ran Ben-Or.
Executive Compensation
Summary Compensation Table
The following table sets forth the aggregate cash compensation paid during the 2009 fiscal
year to (i) all individuals who served as our Chief Executive Officer during the fiscal year ending
December 31, 2008, (ii) our two most highly compensated executive officers other than our CEOs who
were serving as executive officers as of December 31, 2009, whose annual salary and bonuses
exceeded $100,000 for the applicable years, and (iii) up to two additional individuals whose
compensation would have been disclosed but for the fact that they were not employed with the
Company on December 31, 2009 (collectively, the “Named Executive Officers”).
| Name of Named | Option | All Other | ||||||||||||||||||||||
| Executive Officer and | Salary | Bonus | Awards | Compensation | Total | |||||||||||||||||||
| Principal Position | Year | ($)(1) | ($)(1) | ($)(1)(2) | ($)(1) | ($)(1) | ||||||||||||||||||
|
Ehud-Moshe Gilboa(3)
|
2009 | — | — | — | 106,024 | 106,024 | ||||||||||||||||||
|
|
2008 | — | — | — | 0 | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Fufi Fatal (4)
|
2009 | — | — | — | — | — | ||||||||||||||||||
|
|
2008 | — | — | — | — | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Tami Sharbit Bachar (5)
|
2009 | 88,981 | — | (6,907 | ) | 5,267 | 87,341 | |||||||||||||||||
|
Former Chief Financial
|
2008 | 128,505 | 6,328 | 12,756 | 147,589 | |||||||||||||||||||
|
Officer and Secretary
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Eldad Yehiely (6)
|
2009 | 64,579 | 889 | 10,806 | 76,274 | |||||||||||||||||||
|
Finance Manager
|
2008 | — | — | — | — | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| (1) | All compensation received by the executives of TopSpin and TopSpin Israel is paid in NIS. For the purpose of completing this table in U.S. Dollars, we have used the average NIS/U.S. Dollar exchange rate for compensation received by the executive officer in 2009 which was 3.9326. |
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| (2) | Prior to January 1, 2006, we applied the intrinsic value method of accounting for stock options as prescribed by APB No. 25, whereby compensation expense is equal to the excess, if any, of the fair value price of the stock over the exercise price at the grant date of the award. In 2006, 2007 and 2008, we estimated the fair value of stock options granted using the Binomial model. | |
| In addition, until December 31, 2005, we considered all option plans as variable plans and thus the intrinsic value of all vested options is remeasured at each reporting date until the date of settlement. As of January 1, 2006, the fair value of the vested portion of the options was classified as a liability and remeasured at each reporting date until the date of settlement. In addition, we recorded in 2006 the cumulative effect of the change in accounting principle. Compensation costs in 2006 and 2007 are based on the change in the fair value of the options for each reporting period. We recognize compensation expenses for the value of our options based on the accelerated method over the requisite service period of each of the options. | ||
| Because we classified the vested portion of the options as a liability, we re-valued the options at the end of each accounting period. If the value of an option increased from the previous accounting period due to an increase in the market price of our Common Stock, the option holder would be deemed to have increased compensation and we would recognize an expense. If the value of an option had decreased from the previous accounting period due to a decrease in the market price of our Common Stock, the option holder’s compensation would be reduced and we would recognize income for cases where the total value of the vested portion of the options of an option holder decreased with respect to the previous period. | ||
| (3) | Ehud Moshe Gilboa served as the Company’s Chairman of Board from December 30, 2008 and until November 15, 2009. Throughout this period Mr. Gilboa served as the Company’s consultant and received consulting fees as compensation for his services. | |
| (4) | Fufi Fatal joined the Company’s Board of directors as its chairman on December 17, 2009. | |
| (5) | Tami Sharbit-Bachar served as the controller of the Company from March 2003 until July 1, 2008, when she became our Director of Finance as well as the Secretary of TopSpin. Ms. Sharbit-Bachar received a B.A. in economics and accounting from Ben Gurion University and is a licensed CPA in Israel. | |
| (6) | Eldad Yehiely has served as the Company’s Finance Manager since May 6, 2009. As part of his employment agreement, he was granted 1,500,000 options under our 2003 Israeli Stock Option Plan |
Employment Agreements
Fufi Fatal
On January 28, 2010, the Company entered into a consulting agreement with Nichsey F.N. Fatal
Ltd., a private company organized under the laws of Israel and controlled by Mr. Fufi Fatal, who
serves as a director of the Company with an effective date of March 1, 2010.
Pursuant to the terms of Mr. Fatal’s consulting agreement, the Company engages him to provide
certain consulting services to the Company as may reasonably be requested by the Board. Mr. Fatal
is required to provide at least 80 hours of services to the Company per month, which services shall
be provided solely by Mr. Fatal. In exchange for these services, the Company will pay Mr. Fatal a
monthly fee equal to NIS 34,105 (approximately $9,100) beginning on March 1, 2010. In addition to
this monthly fee, we will issue to Mr. Fatal (subject to requisite approvals) options to purchase
shares of the Common Stock representing ten percent (10%) of issued and outstanding shares of
Common Stock immediately preceding such option issuance. The grant of these options is subject to:
(i) execution of an investment in the Company by a third party (or, if earlier to occur, a rights
offering), and (ii) the increase of the registered share capital of the Company. The options will
vest as follows: (i) fifty percent (50%) of the Consultant Options will vest on December 17, 2010,
and (ii) the remaining fifty percent (50%) will vest on December 17, 2011. The options will expire,
if unexercised, on the earlier of the
occurrence of a “merger or acquisition event” (as such term is defined in the consulting
agreement) and the date that is seven (7) years after the date of grant. Unvested options will be
cancelled and will cease to vest only upon termination of the agreement by Mr. Fatal or termination
of the agreement by the Company for cause. The options issued in connection with the agreement will
be subject to certain transfer restrictions in compliance with U.S. and Israeli securities laws.
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Table of Contents
Ehud Moshe Gilboa
On May 5, 2009, we entered into a consulting agreement with Top-Notch Consultancy 2009 Ltd.,
an entity of which Mr. Ehud Moshe Gilboa, the former Chairman of our Board, is the controlling
shareholder, pursuant to which Mr. Gilboa provided consulting services to the Company. The
agreement, which is governed by Israeli law, became effective under Israeli law upon the execution
of an amendment on May 5, 2009 to an earlier agreement between the Company and Top-Notch dated
April 19, 2009. The agreement sets forth the terms upon which Mr. Gilboa, through Top-Notch,
provided consulting services as reasonably requested by the Board for at least 80 hours per month.
The agreement provided that Mr. Gilboa be paid a monthly fee of 34,105 NIS (approximately $8,300);
Mr. Gilboa was entitled to receive such fees retroactively from January 1, 2009. In addition, the
Company paid for up to 50% of all fixed and variable maintenance costs of Mr. Gilboa’s cellular
phone. Under the terms of the agreement, the consulting relationship was terminable by either party
at any time upon 45 days’ written notice, and by the Company in certain cases involving a breach of
the agreement by Mr. Gilboa. The agreement includes customary non-compete and confidentiality
obligations. The agreement was terminated effective December 30, 2009, upon Mr. Gilboa’s
resignation from his positions at the Company.
Eldad Yehiely
On May 6, 2009, the Company entered into an employment agreement with Eldad Yehiely, pursuant
to which Mr. Yehiely, 53, serves as the Finance Manager of the Company. The agreement with Mr.
Yehiely provides for a monthly salary of 25,000 NIS (approximately $6,100). The Company also pays
for a car and a cellular phone to be used by Mr. Yehiely in connection with his employment by the
Company. The agreement may be terminated by either party at any time upon 45 days’ written notice,
and by the Company in certain cases involving a breach of the agreement by Mr. Yehiely; we also
have the option of terminating Mr. Yehiely’s employment at any time (without satisfying the 45
days’ prior written notice described above) upon payment of the monthly salary amount. The
agreement also provides for the grant of 1,500,000 options to purchase share of the Company’s
common stock; 750,000 of the 1,500,000 options have an exercise price of 0.011 NIS/share
(approximately $0.003/share) while the remaining 750,000 options may be exercised at a price of
0.022 NIS/share (approximately $0.005/share).
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Table of Contents
Tami Sharbit Bachar
Pursuant to an amended employment agreement entered into with Tami Sharbit-Bachar effective
July 1, 2008, Ms. Sharbit-Bachar served as our Director of Finance and as Secretary of the Company.
The amended employment agreement provided that as of July 1,
2008, Ms. Sharbit-Bachar’s monthly salary was equal to 32,000 NIS (approximately $8,477), and
that the Company’s contributions towards an education fund equaled 7.5% of Ms. Sharbit-Bachar’s
salary. In addition, pursuant to a letter dated as of April 28, 2008, Ms. Sharbit-Bachar was
entitled to a cash bonus of 80,000 (NIS) provided that she remained an employee of the Company as
of March 31, 2009, and a grant of options to purchase 300,000 shares of the Company’s common stock
subject to the approval of the Board. Ms. Bachar left the company on May 31, 2009 and was paid all
payments she was entitled by her employment agreement.
Outstanding Equity Awards at Fiscal-Year End Table
The following table sets forth information regarding unexercised options, unvested shares of Common
Stock and any awards under an equity incentive plan as of December 31, 2009 for each of our Named
Executive Officers:
| Equity |
Equity
Incentive Plan Awards: Number Market |
|||||||||||||||||||||||||||||||||||
| Incentive | or | |||||||||||||||||||||||||||||||||||
| Plan | Payout | |||||||||||||||||||||||||||||||||||
| Equity | Awards: | Value of | ||||||||||||||||||||||||||||||||||
| Incentive | Number of | Unearned | ||||||||||||||||||||||||||||||||||
| Plan | Unearned | Shares, | ||||||||||||||||||||||||||||||||||
| Awards: | Number | Market | Shares, | Units, or | ||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | of Shares | Value of | Units or | other | ||||||||||||||||||||||||||||||
| Securities | Securities | Securities | or Units | Share or | other | Rights | ||||||||||||||||||||||||||||||
| Name of | Underlying | Underlying | Underlying | Option | of Stock | Units that | Rights | that | ||||||||||||||||||||||||||||
| Named | Unexercised | Unexercised | Unexercised | Exercise | Option | that have | have not | that | have not | |||||||||||||||||||||||||||
| Executive | Options (#): | Options (#): | Unearned | Price | Expiration | not | Vested | have not | Vested | |||||||||||||||||||||||||||
| Officer | Exercisable | Unexercisable | Options (#) | ($) (1) | Date | Vested (#) | ($) | Vested (#) | ($) | |||||||||||||||||||||||||||
|
Ehud-Moshe Gilboa
|
||||||||||||||||||||||||||||||||||||
|
Fufi Fatal
|
||||||||||||||||||||||||||||||||||||
|
Eldad Yehiely
|
0 | — | — | 0.003 | 5/2019 | 750,000 | 15,000 | — | — | |||||||||||||||||||||||||||
|
|
0 | — | — | 0.006 | 5/2019 | 750,000 | 15,000 | — | — | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Tami Sharbit-Bachar
|
232,813 | — | — | 0.0156 | 5/2011 | — | — | — | — | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| (1) | The exercise price for Mrs. Sharbit is an average one. |
54
Table of Contents
Compensation of Directors
The following table sets forth information regarding the compensation paid to each individual
who served as our director during the 2009 fiscal year other than Ehud-Moshe Gilboa who also acted
as our principal executive officer during such fiscal year:
| Fees | Nonqualified | |||||||||||||||||||||||||||
| Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
| or Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
| Cash | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
|
Gideon Even-Sturlesi (1)
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Elchanan Maoz (2)
|
— | — | 22.886 | — | — | — | 22,886 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Avi Molcho (3)
|
— | — | 31,468 | — | — | — | 31,468 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Fufi Fatal (4)
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Ran Ben-Or
|
14,911 | — | — | — | — | — | 14,911 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Eran Feldhay
|
14,562 | — | — | — | — | — | 14,911 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Shlomit Oren
|
12,325 | — | — | — | — | — | 12,325 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Zvi Linkovsky
|
— | — | — | — | — | — | — | |||||||||||||||||||||
| (1) | Resigned from our Board of Directors on September 21, 2009; All granted options were forfeited as none vested as of resignation date. | |
| (2) | Resigned from our Board of Directors on December 9, 2009. | |
| (3) | Resigned from our Board of Directors on December 10, 2009. | |
| (4) | Initially appointed to our Board of Directors on December 17, 2009., no compensation has yet been granted. |
Narrative to Director Compensation Table
Mr. Gideon Strulesi, Mr. Elchanan Maoz and Mr. Avi Molcho resigned from our board of directors
on the dates listed in the table above. All of them received option awards as compensation for
their services. Dr. Feldhay and Mr. Ben-Or, each an “external director”, received compensation for
their services according to the Israeli regulations concerning payment to external directors.
Pursuant to our board’s decision, Shlomit Oren also received compensation according to the Israeli
regulations concerning payment to external directors despite not being considered an “external
director” under these regulations. No other directors currently receive any compensation.
On November 15, 2009 Mr. Zvi Linkovsky was appointed a director in our board of
Directors.
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Table of Contents
Director and Officer Indemnification
In January 2004 and August 2005, we undertook to indemnify our officers and directors to the
fullest extent permitted by Delaware law for any liabilities that they may incur for any action
taken as an officer or director or in any other joint venture, partnership or enterprise. The
indemnification includes any monetary liability imposed on the officer or director because of a
verdict, fine, penalty, settlement agreement or any other reasonable amount expense accrued by the
office or director in connection with any threat, activity, pending procedure, claim or civil,
criminal or administrative proceeding or investigation, including any activity by or on behalf of
us in which the officer or director is an interested party or is liable to an interested party, or
where the officer or director has been threatened that he will become an interested party due to
his being an officer of director. We will compensate an officer or director in advance for any
reasonable amount that he has paid for any claim against him (including litigation costs and the
costs of preparing an adequate defense) after the director or officer agrees that he will bear the
detailed costs himself if it is found that the officer or director is not entitled to receive
compensation under the agreement or our Certificate of Incorporation. The conclusion of any
proceeding with a judgment, order, settlement agreement, indictment or similar conclusion against a
director or officer will not give rise to the assumption that the officer or director acted in a
manner other than in our best interests or, in respect to a criminal charge, had no reasonable
grounds for assuming that his actions were illegal.
In a number of circumstances, an officer or director will not be entitled to indemnification
or advance reimbursement for expenditures if: (1) a competent court of law has made a final verdict
or order that a claim or claims against an officer or director arose out of deception or bad faith
or that the officer or director was misled or, that the indemnification is not permitted under
prevailing law; (2) the verdict or order by the court stemmed from a claim regarding infringement
of the Exchange Act, or other federal or state laws; (3) an act or omission occurred for which the
officer or director is not entitled to receive compensation under Delaware law; (4) the proceedings
or claims were initiated by the officer or director that were not in self-defense other than
proceedings brought to pay compensation or where our Board of Directors has approved of the
proceedings and the decision to file them; (5) expenditures or obligations of any kind were paid
directly to the officer or director by the insurance company under the directors and officers
liability policy; or (6) the claim relates to abuse of information that is not available to the
public by the officer or director in all matters pertaining to the purchase and/or sale of our
Common Stock. We will not be obligated to compensate an officer or director for every amount paid
in the framework of a settlement agreement that was drawn up by the officer or director without our
written consent. We will not sign any settlement agreement that would affect any proceedings
against an officer or director without his written consent.
During the fiscal year ended December 31, 2009, we maintained directors’ and officers’
liability insurance for the purpose of paying these types of claims in an amount of up to
$3,000,000 per event for a year. We may decide to cancel our indemnification agreements with our
officers and directors, but we will still be obligated to compensate an officer or director for any
claims resulting from actions prior to the cancellation of the indemnification agreement.
Currently, we have indemnification agreements with all present or past officers and directors of
both us and our subsidiaries.
56
Table of Contents
TopSpin Medical, Inc. 2001 Israeli Stock Option Plan
In accordance with resolutions adopted by our board of directors in February 2000, we adopted
an option plan in 2001 for the allocation of up to 300,000 shares of our Common Stock to our
directors, employees and consultants and the directors, employees and consultants of our
subsidiaries. Options granted under this plan can be exercised into shares of our Common Stock at
either $2.00 or $12.00. As of December 31, 2009, 280,910 options have been issued to employees,
directors and consultants. Only 14,010 of those options are currently outstanding and exercisable
for shares of Common Stock and 266,900 options have expired and are no longer exercisable. Our
Board of Directors has resolved not to issue any additional options under this plan. The options
under the 2001 Israeli Stock Option Plan are not registered for trading on TASE, but however, have
been registered under the Securities Act pursuant to a Form S-8 registration statement that we
filed with the SEC on October 15, 2007.
TopSpin Medical, Inc. 2003 Israeli Stock Option Plan
General Provisions
Our Board of Directors passed resolutions in January 2003, September 2003, August 2005 and
September 2007, under which it adopted the 2003 Israeli Stock Option Plan to allocate up to
37,000,000 shares of our Common Stock to our directors, employees and consultants and the
directors, employees and consultants of our subsidiaries. The plan is administered by the Board of
Directors and any committee that the Board of Directors may appoint for such purpose. The appointed
committee may grant four types of options under this plan: Approved 102 Capital Gains Options,
which are granted only to employees of our subsidiaries and qualify for capital gains tax
treatments, Approved 102 Ordinary Income Options, which qualify for ordinary income tax treatment,
Unapproved 102 Options, and 3(9) Options, which are non-qualified stock options which are granted
mostly to non-employees of our subsidiaries. The number of shares authorized to be issued under
this plan will be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, combination or
reclassification of the stock or the payment of a stock dividend with respect to the Common Stock
or any other increase or decrease in the number of issued shares of Common Stock effected without
receipt of consideration.
The existing outstanding options are exercisable at prices between $0.001 and $0.1819,
depending on the individual grant. Unless stated otherwise in the individual grant, most grants of
options vest and become exercisable according to the following schedule: 25% on the first
anniversary of the option grant, and 6.25% at the end of each subsequent quarter over the course of
the following three years. The committee, though, may, in its absolute discretion and on such terms
and conditions as it deems appropriate, accelerate or otherwise change the time at which such
option or any portion of an option will vest. The option grant may also contain performance goals
and measures and the provisions in one option grant need not be identical to any other option
grant. All options will expire ten years from the date of grant unless terminated earlier. If an
individual option grant expires and has not been exercised, our Board of Directors has the
authority to allocate those options to other employees, directors or consultants.
57
Table of Contents
An option may not be exercised unless the grantee is then employed by us or providing services
to us or our affiliate. Following the termination of a grantee’s position with us or a subsidiary,
other than for cause, death, disability or retirement, the grantee may still exercise his or her
vested options for ninety days following the date of termination. If a grantee dies or is disabled
during his or her employment or service, then his or her heirs will be entitled to exercise the
options for twelve months after the grantee’s death or disability. Also, if the grantee terminates
his or her employment on account of retirement, he or she will have twelve months to exercise his
or her options.
Termination of an Option
Subject to the Board of Director’s approval, the committee administering this option plan may,
from time to time, cancel all or any portion of an option granted under the plan and our obligation
will be discharged with respect to that option through either (i) payment to the grantee of an
amount in cash equal to the excess, if any, of the fair market value of the cancelled option at the
date of such cancellation over the aggregate exercise price of the option, (ii) the issuance or
transfer to the grantee of Common Stock with a fair market value at the date of such transfer equal
to any such excess, or (iii) a combination of cash and shares with a combined value equal to any
such excess, as determined by the committee, in its sole discretion.
Also, in the event of our voluntary liquidation, merger, acquisition, or reorganization, we
must notify the grantees at least fifteen days prior to the transaction. All options will then
expire prior to the consummation of the transaction if they are not exercised by the notified
grantees. In the event of a merger with another company, however, our Board of Directors is
entitled to exchange the options for the securities of the surviving corporation or to pay the fair
market value of the options to the grantees.
Outstanding Grants
As of December 31, 2009, we have issued 67,392,125 options under the 2003 Israeli Stock Option
Plan with 12,684,813 options outstanding. During 2009, 4,600,000 options have been exercised for
shares of Common Stock and 44,563,573 options have expired and are no longer outstanding. As
permitted under the plan, we have, from time to time, reissued these expired options in subsequent
option grants as permitted by the plan. The options under the 2003 Israeli Stock Option Plan are
not registered for trading on TASE, but however, have been registered under the Securities Act
pursuant to a Form S-8 registration statement that we filed with the SEC on October 15, 2007.
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Table of Contents
The following table sets forth information regarding the shares of our Common Stock
beneficially owned (including options exercisable within 60 days) as of March 1, 2010 by: (i) each
of our Named Executive Officers and our directors, (ii) all directors and executive officers as a
group and (iii) by each person known by us to beneficially own five percent (5%) or more of the
outstanding shares of our Common Stock. Unless otherwise indicated, the address of each of the
persons listed in this table is as follows: 65 Rothschild, Tel Aviv, Israel.
| Total Number of | ||||||||
| Shares | ||||||||
| Beneficially | Percentage | |||||||
| Name and Address of Beneficial Owner | Owned | of Class(1) | ||||||
|
Named Executive Officers and Directors
|
— | — | ||||||
|
Ehud-Moshe Gilboa
|
— | — | ||||||
|
Gideon Even-Sturlesi
|
— | — | ||||||
|
Elchanan Maoz
|
— | — | ||||||
|
Avi Molcho
|
— | — | ||||||
|
Ran Ben-Or
|
— | — | ||||||
|
Eldad Yehiely
|
— | — | ||||||
|
|
||||||||
|
Beneficial Owners of Five Percent or More
|
||||||||
|
Asher Shmulewits(1)
|
||||||||
|
Lehi 27, Brak, Israel
|
178,064,516 | 21.39 | % | |||||
| (1) | Includes 58,064,516 shares of Common Stock underlying options, which Mr. Shmulewits has the right to acquire within 60 days of the date of March 1, 2010. Assumes the full exercise of all options and warrants that are exercisable by the holder within 60 days from March 1, 2010. Based on 761,470,882 shares of Common Stock outstanding as of March 1, 2010. |
Except for our compensation arrangement with our former Chairman and Acting Principal
Executive Officer, Ehud-Moshe Gilboa, pursuant to which we paid Mr. Gilboa 417,000 NIS
(approximately $106,000), during the fiscal year ended December 31, 2009, there has not been, nor
is there currently proposed, any transaction or series of similar transactions to which we were a
party or are a party in which:
| • | the amounts involved exceeded or will exceed the lesser of $120,000 or 1% of our average total assets at year-end for the last two completed fiscal years; and |
| • | a director, executive officer, holder of more than 5% of our Common Stock or any member of their immediate family had or will have a direct or indirect material interest. |
59
Table of Contents
Audit Fees
The aggregate fees billed for the years ended December 31, 2009 and December 31, 2008 for the
professional services rendered by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,
our independent public accounting firm, for the audit of the Company’s annual financial statements,
review of financial statements or services that are normally provided by our independent public
accounting firm in connection with statutory and regulatory filings or engagements for such fiscal
years, and tax advisory and assistance in the preparation of tax returns and general tax research
and planning equaled to NIS 278,000 (approximately $73,642) and NIS 318,000 (approximately
$83,640,), respectively.
Audit-Related Fees
There were no fees billed for the years ended December 31, 2008 and December 31, 2009, for
assurance and related services by Kost Forer Gabbay & Kasierer that are reasonably related to audit
or review of the Company’s financial statements not reported under “Audit Fees” above.
Tax Fees
The aggregate fees billed for the years ended December 31, 2008 and December 31, 2009 for
professional services rendered by Kost Forer Gabbay & Kasierer for tax compliance, tax advice and
tax planning equaled NIS 92,000 ($24,371) and NIS 127,000 (approximately $33,403), respectively,
and consisted of assistance in the preparation of tax returns and general tax research and
planning.
All Other Fees
No other fees were billed by Kost Forer Gabbay & Kasierer to the Company during the years
ended December 31, 2009 and December 31, 2008.
Pre-Approval Policies and Procedures
During fiscal year 2009, all services provided by Kost Forer Gabbay & Kasierer were pre-approved by
our Audit Committee, which concluded that the provision of such services by Kost Forer Gabbay &
Kasierer was compatible with the maintenance of that firm’s independence in the conduct of its
auditing functions. On March 15, 2009, our Audit Committee adopted a pre-approval policy for
services provided by the independent registered public accounting firm. Under that adopted
pre-approval policy, our Audit Committee will pre-approve the provision by
the independent registered public accounting firm of services that fall within specified categories
(such as statutory audits or financial audit work for subsidiaries, services associated with SEC
registration statements and consultations by management as to accounting interpretations) but only
up to specified dollar amounts. Any services that exceed the pre-approved dollar limits, or any
services that fall outside of the general pre-approved categories, require specific pre-approval by
the Audit Committee. If our Audit Committee delegates pre-approval authority to one or more of its
members, the member would be required to report any pre-approval decisions to our Audit Committee
at its next meeting. All our audit fees were preapproved by our Audit Committee.
60
Table of Contents
| Exhibit No. | Description of Document | |||
| 3.1 |
Amended and Restated Certificate of Incorporation (Incorporated by
reference to the Company’s Quarterly Report on Form 10-Q (File No.
333-144472) filed on August 14, 2008)
|
|||
|
|
||||
| 3.2 |
Amended and Restated By-Laws, as amended effective November 8, 2007
(Incorporated by reference to the Company’s Form 10-QSB filed on
November 8, 2007)
|
|||
|
|
||||
| 4.1 |
TopSpin Medical, Inc. Convertible Bond Certificate No. 2 dated as
of July 10, 2007 (Incorporated by reference to the Company’s
Registration Statement on Form SB-2 (File No. 333-144472) filed on
July 11, 2007)
|
|||
|
|
||||
| 4.2 |
Series 2 Warrant Certificate No. 1 dated as of November 21, 2006
(translated from Hebrew) (Incorporated by reference to the
Company’s Amendment No. 2 to Registration Statement on Form SB-2
(File No. 333-142242) filed on May 30, 2007)
|
|||
|
|
||||
| 4.3 |
Series 2 Warrant Certificate Amendment dated as of April 30, 2007
(translated from Hebrew) (Incorporated by reference to the
Company’s Amendment No. 2 to Registration Statement on Form SB-2
(File No. 333-142242) filed on May 30, 2007)
|
|||
|
|
||||
| 4.4 |
Series 2 Warrant Certificate Amendment dated as of July 10, 2007
(translated from Hebrew) (Incorporated by reference to the
Company’s Registration Statement on Form SB-2 (File No.
333-144472) filed on July 11, 2007)
|
|||
|
|
||||
| 4.5 |
Trust Deed dated as of November 21, 2006 (translated from Hebrew)
(Incorporated by reference to the Company’s Amendment No. 2 to
Registration Statement on Form SB-2 (File No. 333-142242) filed on
May 30, 2007)
|
|||
|
|
||||
| 10.1 | # |
TopSpin Medical, Inc. 2001 Israeli Stock Option Plan
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
||
|
|
||||
| 10.2 (i) | # |
TopSpin Medical, Inc. 2003 Israeli Stock Option Plan
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
||
|
|
||||
| 10.2 (ii) | # |
TopSpin Medical, Inc. 2003 Stock Option Plan,
as amended on February 26, 2009 (Incorporated by reference to our quarterly report on Form 10-Q filed May 15, 2009)
|
||
|
|
||||
| 10.3 | # |
Form of Option Agreement (Incorporated by reference to the
Company’s Registration Statement on Form SB-2 (File No.
333-142242) filed on April 20, 2007)
|
||
|
|
||||
| 10.4 (i) | * |
Distribution Agreement with Top Medical B.V. dated as of October
3, 2006
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
||
|
|
||||
| 10.4 (ii)* |
Termination Agreement with Top Medical B.V. dated as of August 28,
2008
(Incorporated by reference to the Company’s Form 8-K filed on
September 3, 2008)
|
|||
|
|
||||
| 10.5 | * |
Research and Development Agreement with Technion Development
Foundation Ltd. dated September 13, 2006 (Incorporated by
reference to the Company’s Registration Statement on Form SB-2
(File No. 333-142242) filed on April 20, 2007)
|
||
61
Table of Contents
| Exhibit No. | Description of Document | |||
| 10.7 | # |
Form of TopSpin Medical, Inc. Indemnification Agreement
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
||
|
|
||||
| 10.8 | # |
Form of Employment Agreement (Incorporated by reference to the
Company’s Registration Statement on Form SB-2 (File No.
333-142242) filed on April 20, 2007)
|
||
|
|
||||
| 10.9(i) |
Form of Non-Disclosure Agreement (Incorporated by reference to the
Company’s Registration Statement on Form SB-2 (File No.
333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.9(ii) |
Form of Mutual Non-Disclosure Agreement (Incorporated by reference
to the Company’s Registration Statement on Form SB-2 (File No.
333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.10(i) |
Intercompany Loan Agreement dated as of June 21, 2001 between
TopSpin Medical, Inc. and TopSpin Medical (Israel) Ltd.
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.10(ii) |
Letter regarding Intercompany Loan Agreement dated as of December
29, 2005 between TopSpin Medical, Inc. and TopSpin Medical
(Israel) Ltd.
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.10(iii) |
First Supplement to Intercompany Loan Agreement dated as of April
6, 2006 between TopSpin Medical, Inc. and TopSpin Medical (Israel)
Ltd.
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.10(iv) |
Second Supplement to Intercompany Loan Agreement dated as of
February 15, 2007 between TopSpin Medical, Inc. and TopSpin
Medical (Israel) Ltd.
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.11 |
Series 1 Warrant Certificate to Purchase 22,800,000 share of
TopSpin Medical, Inc. Common Stock dated as of September 1, 2005
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.12 |
American Friends of Tmura, Inc. Warrant to Purchase 324,820 Shares
of TopSpin Medical, Inc. Common Stock dated as of January 29, 2004
(Incorporated by reference to the Company’s Registration Statement
on Form SB-2 (File No. 333-142242) filed on April 20, 2007)
|
|||
|
|
||||
| 10.13 |
Tmura — The Israeli Public Service Venture Fund Warrant to
Purchase 180 Shares of TopSpin Medical, Inc. Common Stock dated as
of December 9, 2002 (Incorporated by reference to the Company’s
Registration Statement on Form SB-2 (File No. 333-142242) filed on
April 20, 2007)
|
|||
|
|
||||
| 10.14 |
Trust Deed and Agreement dated as of July 4, 2004 between Yuli
Yardeni, TopSpin Medical, Inc. and TopSpin Medical (Israel) Ltd.
(translated from Hebrew) (Incorporated by reference to the
Company’s Registration Statement on Form SB-2 (File No.
333-142242) filed on April 20, 2007)
|
|||
62
Table of Contents
| Exhibit No. | Description of Document | |||
| 10.15 |
Loan Agreement dated as of April 5, 2007 between TopSpin Medical,
Inc., Pitango Venture Capital Fund III (USA), L.P., Pitango
Principals Fund III (USA) LP, Pitango Venture Capital Fund III
(USA) Non-Q L.P., Pitango Venture Capital Fund (Israeli Investors)
L.P., Pitango Venture Capital Fund III Trusts 2000 L.P., Giza GE
Venture Fund III, LP, Giza Venture Fund III, Limited Partnership,
Giza Alpinvest Venture Fund III, LP, Giza Executive Venture Fund
III, LP, Giza Gmulot Venture Fund III Limited Partnership and
Israel Seed IV, L.P. (Incorporated by reference to the Company’s
Registration Statement on Form SB-2 (File No. 333-142242) filed on
April 20, 2007)
|
|||
|
|
||||
| 10.16 |
Credit Line Agreement dated as of April 30, 2007 between TopSpin
Medical, Inc. and Poalim IBI — Managing and Underwriting Ltd.
(Incorporated by reference to the Company’s Amendment No. 1 to
Registration Statement on Form SB-2 (File No. 333-142242) filed on
May 11, 2007)
|
|||
|
|
||||
| 10.17 |
TopSpin Medical, Inc. Series 3 Warrant Certificate No. 1 dated as
of June 6, 2007 (Incorporated by reference to the Company’s
Registration Statement on Form SB-2 (File No. 333-144472) filed on
July 11, 2007)
|
|||
|
|
||||
| 10.18 |
Form of Series A Convertible Bonds and Series 2 Warrants
Subscription Agreement (Incorporated by reference to the Company’s
Amendment No. 1 to Registration Statement on Form SB-2 (File No.
333-144472) filed on August 14, 2007)
|
|||
|
|
||||
| 10.19 |
Investment Agreement with Asher Shmulewitz dated as of February 2,
2009
(Incorporated by reference to the Company’s quarterly report on Form
10-Q filed on May 15, 2009)
|
|||
|
|
||||
| 10.20 | # |
Consulting Agreement between TopSpin Medical (Israel) and
Top-Notch Consultancy, dated April 19, 2009 (Incorporated by reference to the Company’s current report on Form 8-K filed May 11, 2009)
|
||
|
|
||||
| 10.21 | # |
Letter agreement between TopSpin Medical (Israel) and Top-Notch Consultancy, dated May 5, 2009
(Incorporated by reference to the Company’s current report on Form 8-K filed May 11, 2009)
|
||
|
|
||||
| 10.22 | # |
Employment Agreement by and between TopSpin
Medical, Inc. and Eldad Yehieli, dated May 6, 2009
(Incorporated by reference to the Company’s quarterly report on Form 10-Q filed May 15, 2009)
|
||
|
|
||||
| 10.23 | # |
Form of Director Indemnification
Director by and between TopSpin Medical, Inc. and each of its Directors (Incorporated by reference to the
Company’s quarterly report on Form 10-Q filed May 15, 2009)
|
||
|
|
||||
| 10.24 |
Share Purchase and Investment Agreement by and among TopSpin
Medical (Israel), Ltd., Kiryat Anavim — Silicon Technologies,
Ltd., Anavid Insulation Products Kiryat Anavim Agricultural
Cooperative Ltd., and Ahzakot Upituach Qiryat Anavim Agudah
Shitufit Haklait Ltd., dated June 2, 2009 (Incorporated by
reference to the Company’s current report on Form 8-K filed on
June 8, 2009)
|
|||
|
|
||||
| 21.1 |
Subsidiaries of TopSpin Medical, Inc. (Incorporated by reference
to the Company’s Registration Statement on Form SB-2 (File No.
333-144472) filed on July 11, 2007)
|
|||
|
|
||||
| 23.1 |
Consent of Kost Forer Gabbay & Kasierer
|
|||
|
|
||||
| 31.1 |
Certification by Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a)
|
|||
|
|
||||
| 31.2 |
Certification by Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a)
|
|||
|
|
||||
| 32.1 |
Certification Furnished pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|||
| # | Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 13 of this Annual Report on Form 10-K for the fiscal year ending December 31, 2009. | |
| * | An application has been submitted to the Securities and Exchange Commission for confidential treatment, pursuant to Rule 406 of the Securities Act of 1933, of portions of this exhibit. These portions have been omitted from this exhibit, and have been filed separately with the Securities and Exchange Commission. |
63
Table of Contents
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
TOPSPIN MEDICAL, INC.
|
||||
| Date: March 23, 2010 | By: | /s/ Fufi Fatal | ||
| Fufi Fatal | ||||
| Chairman of the Board of Directors and Acting Principal Executive Officer | ||||
In accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURES | DATE | |||
|
|
||||
|
By:
|
/s/ Eldad Yehiely | March 23, 2010 | ||
|
|
||||
|
|
Finance Manager | |||
|
|
(Principal Financial and Accounting Officer) | |||
|
|
||||
|
By:
|
/s/ Fufi Fatal | March 23, 2010 | ||
|
|
||||
|
|
Fufi Fatal | |||
|
|
Chairman of the Board of Directors | |||
|
|
and Principal Executive Officer | |||
|
|
||||
|
By:
|
/s/ Eran Feldhay | March 23, 2010 | ||
|
|
||||
|
|
Eran Feldhay | |||
|
|
Director | |||
|
|
||||
|
By:
|
/s/ Shlomit Oren | March 23, 2010 | ||
|
|
||||
|
|
Shlomit Oren | |||
|
|
Director | |||
|
|
||||
|
By:
|
/s/ Ran Ben-Or | March 23, 2010 | ||
|
|
||||
|
|
Ran Ben-Or | |||
|
|
Director | |||
|
|
||||
|
By:
|
/s/ Zvi Linkovski | March 23, 2010 | ||
|
|
||||
|
|
Zvi Linkovski | |||
|
|
Director | |||
64
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description of Document | |||
|
|
||||
| 23.1 |
Consent of Kost Forer Gabbay & Kasierer
|
|||
|
|
||||
| 31.1 |
Certification by Principal Executive Officer pursuant
to Rule 13a-14(a)/15d-14(a)
|
|||
|
|
||||
| 31.2 |
Certification by Principal Financial Officer pursuant
to Rule 13a-14(a)/15d-14(a)
|
|||
|
|
||||
| 32.1 |
Certification Furnished pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|||
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TABLE OF CONTENTS
Part IItem 1. Description Of BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. ReservedPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1:- GeneralNote 1:- General (cont.)Note 2:- Significant Accounting PoliciesNote 2:- Significant Accounting Policies (cont.)Note 3:- Cash and Cash EquivalentsNote 4:- Other Receivables and Prepaid ExpensesNote 5:- Property and Equipment, NetNote 6:- Trade PayablesNote 7:- Other Payables and Accrued ExpensesNote 8:- Contingent Liabilities, Commitments and ChargesNote 9:- Convertible Debentures and WarrantsNote 9:- Convertible Debentures and Warrants (cont.)Note 10:- Shareholders DeficiencyNote 10:- Shareholders Deficiency (cont.)Note 11:- Stock-based CompensationNote 11:- Stock-based Compensation (cont.)Note 12:- Financial Income, NetNote 13:- Income TaxesNote 13:- Income Taxes (cont.)Note 14:- Related Party TransactionsNote 14:- Related Party Transactions (cont.)Note 15:- Subsequent EventsNote 15:- Subsequent Events (cont.)Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9a(t). Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesItem 15. Exhibits and Financial Statement Schedules