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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended
or
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from ___________ to ___________
Commission
file number:
(Exact name of registrant as specified in its charter)
|
|
|
|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbols(s) | Name of each exchange on which registered | ||
|
|
|
The
|
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 preceding 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
|
|
☒ | Smaller reporting company |
|
| Emerging growth company |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 13, 2023, there were shares of registrant’s common stock outstanding.
ORGENESIS INC.
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
TABLE OF CONTENTS
| 2 |
PART I –FINANCIAL INFORMATION
Item 1. Financial Statements
ORGENESIS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
(Unaudited)
| As of | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||
| Restricted cash |
|
|
||||||
| Accounts receivable, net |
|
|
||||||
| Prepaid expenses and other receivables |
|
|
||||||
| Receivables from related parties |
|
|||||||
| Convertible loan to related party |
|
|
||||||
| Inventory |
|
|
||||||
| Total current assets |
|
|
||||||
| NON-CURRENT ASSETS: | ||||||||
| Deposits | $ |
|
$ |
|
||||
| Equity investees |
|
|
||||||
| Loans to associates |
|
|
||||||
| Property, plant and equipment, net |
|
|
||||||
| Intangible assets, net |
|
|
||||||
| Operating lease right-of-use assets |
|
|
||||||
| Goodwill |
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|
||||||
| Deferred tax |
|
|||||||
| Other assets |
|
|
||||||
| Total non-current assets |
|
|
||||||
| TOTAL ASSETS | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
ORGENESIS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Cont’d)
(U.S. Dollars in thousands)
(Unaudited)
| As of | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Liabilities and Equity | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ |
|
$ |
|
||||
| Accounts payable related parties |
|
|||||||
| Accrued expenses and other payables |
|
|
||||||
| Income tax payable |
|
|
||||||
| Employees and related payables |
|
|
||||||
| Other payables related parties |
|
|||||||
| Advance payments on account of grant |
|
|
||||||
| Short-term loans |
|
|||||||
| Current maturities of finance leases |
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|
||||||
| Current maturities of operating leases |
|
|
||||||
| Current maturities of convertible loans |
|
|
||||||
| Total current liabilities |
|
|
||||||
| LONG-TERM LIABILITIES: | ||||||||
| Non-current operating leases | $ |
|
$ |
|
||||
| Convertible loans |
|
|
||||||
| Retirement benefits obligation |
|
|||||||
| Finance leases |
|
|
||||||
| Other long-term liabilities |
|
|
||||||
| Total long-term liabilities |
|
|
||||||
| TOTAL LIABILITIES |
|
|
||||||
| REDEEMABLE NON-CONTROLLING INTEREST | $ | $ |
|
|||||
| EQUITY: | ||||||||
|
Common stock of $ par value: Authorized at September 30, 2023 and December 31, 2022: shares; Issued at September 30, 2023 and December 31, 2022: and shares, respectively; Outstanding at September 30, 2023 and December 31, 2022: and shares, respectively |
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated other comprehensive income (loss) |
|
(
|
) | |||||
| Treasury stock shares as of September 30, 2023 and December 31, 2022 |
(
|
) |
(
|
) | ||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| Equity attributable to Orgenesis Inc. |
|
|
||||||
| Non-controlling interest |
|
|||||||
| Total equity |
|
|
||||||
| TOTAL LIABILITIES REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(U.S. Dollars in thousands, except share and loss per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
September 30,
2023 |
September 30,
2022 |
September 30,
2023 |
September 30,
2022 |
|||||||||||||
| Revenues | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Revenues from related party |
|
|
||||||||||||||
| Total revenues |
|
|
|
|
||||||||||||
| Cost of revenues |
|
|
|
|
||||||||||||
| Gross (loss) profit |
(
|
) |
|
|
|
|||||||||||
| Cost of development services and research and development expenses |
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|
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|
||||||||||||
| Amortization of intangible assets |
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||||||||||||
| Selling, general and administrative expenses |
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||||||||||||
| Share in net loss of associated companies |
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|
||||||||||||
| Operating loss |
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|
|
||||||||||||
| Other (income), loss net |
(
|
) |
|
(
|
) |
(
|
) | |||||||||
| Loss from extinguishment in connection with convertible loan |
|
|||||||||||||||
| Financial expenses, net |
|
|
|
|
||||||||||||
| Profit from deconsolidation of Octomera (see note 3) |
(
|
) | ||||||||||||||
| Loss before income taxes |
|
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|
||||||||||||
| Tax expenses |
|
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|
||||||||||||
| Net loss |
|
|
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|
||||||||||||
| Net (loss) income attributable to non-controlling interests (including redeemable) |
(
|
) |
|
(
|
) | |||||||||||
| Net loss attributable to Orgenesis Inc. | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Loss per share: | ||||||||||||||||
| Basic and diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average number of shares used in computation of Basic and Diluted loss per share: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Other comprehensive (income) loss - translation adjustments |
(
|
) |
|
|
|
|||||||||||
| Release of translation adjustment due to deconsolidation of Octomera |
(
|
) | ||||||||||||||
| Comprehensive loss |
|
|
|
|
||||||||||||
| Comprehensive (loss) income attributed to non-controlling interests |
(
|
) |
|
(
|
) | |||||||||||
| Comprehensive loss attributed to Orgenesis Inc. | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars in thousands, except share amounts)
(Unaudited)
| Common Stock |
|
|||||||||||||||||||||||||||||||||||
| Number |
Par
Value |
Additional
Paid-in Capital |
Accumulated
Other
|
Treasury
Shares |
Accumulated
Deficit |
Equity
Orgenesis Inc. |
Non-Controlling
Interest |
Total | ||||||||||||||||||||||||||||
| Balance at January 1, 2023 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||
| Changes during the nine months ended September 30, 2023: | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - |
|
|
|
||||||||||||||||||||||||||||||||
| Stock-based compensation to service providers | - |
|
|
|
||||||||||||||||||||||||||||||||
| Issuance of shares and warrants net of issuance costs |
|
* |
|
|
|
|||||||||||||||||||||||||||||||
| Issuance of Shares due to exercise of warrants |
|
* | ||||||||||||||||||||||||||||||||||
| Issuance of warrants with respect to convertible loans | - |
|
|
|
||||||||||||||||||||||||||||||||
| Extinguishment in connection with convertible loan restructuring | - |
|
|
|
||||||||||||||||||||||||||||||||
| Deconsolidation of Non-controlling Interests | - |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||||
| Comprehensive income (loss) for the period | - |
|
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ | $ |
|
||||||||||||||||||
| * |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars in thousands, except share amounts)
(Unaudited)
| Common Stock |
|
|||||||||||||||||||||||||||||||||||
| Number |
Par
Value |
Additional
Paid-in Capital |
Accumulated
Other
|
Treasury
Shares |
Accumulated
Deficit |
Equity
to
|
Non-Controlling
Interest |
Total | ||||||||||||||||||||||||||||
| Balance at January 1, 2022 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
|||||||||||||||||
| Changes during the nine months ended September 30, 2022: | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - |
|
|
|
||||||||||||||||||||||||||||||||
| Stock-based compensation to service providers | - |
|
|
|
||||||||||||||||||||||||||||||||
| Exercise of options |
|
* |
|
|
|
|||||||||||||||||||||||||||||||
| Issuance of warrants with respect to convertible loans | - |
|
|
|
||||||||||||||||||||||||||||||||
| Issuance of shares |
|
* |
|
|
|
|||||||||||||||||||||||||||||||
| Issuance of shares related to acquisition of Mida |
|
* |
|
|
|
|||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - |
(
|
) |
(
|
) |
(
|
) |
(
|
) |
(
|
) | |||||||||||||||||||||||||
| Balance at September 30, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||
| * |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars in thousands, except share amounts)
(Unaudited)
| Common Stock |
|
|||||||||||||||||||||||||||||||||||
| Number |
Par
Value |
Additional
Paid-in Capital |
Accumulated OtherComprehensive Income (Loss) |
Treasury
Shares |
Accumulated
Deficit |
Equity
Orgenesis Inc. |
Non-Controlling
Interest |
Total | ||||||||||||||||||||||||||||
| Balance at July 1, 2023 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ | $ |
|
||||||||||||||||||
| Changes during the three months ended September 30, 2023: | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - |
|
|
|
||||||||||||||||||||||||||||||||
| Stock-based compensation to service providers | - |
|
|
|
||||||||||||||||||||||||||||||||
| Issuance of shares |
|
* |
|
|
|
|||||||||||||||||||||||||||||||
| Comprehensive income (loss) for the period | - |
|
(
|
) |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||
| Balance at September 30, 2023 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ | $ |
|
||||||||||||||||||
| * |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 8 |
ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars in thousands, except share amounts)
(Unaudited)
| Common Stock | Receipts on | Accumulated |
Equity
Attributed |
|||||||||||||||||||||||||||||||||||||
| Number |
Par
Value |
Additional
Paid-in Capital |
Account of
Shares to be Allotted |
Other
Comprehensive Loss |
Treasury
Shares |
Accumulated
Deficit |
to
Orgenesis Inc. |
Non-
Controlling Interest |
Total | |||||||||||||||||||||||||||||||
| Balance at July 1, 2022 |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||||
| Changes during the three months ended September 30, 2022: | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - |
|
|
|
||||||||||||||||||||||||||||||||||||
| Stock-based compensation to service providers | - |
|
|
|
||||||||||||||||||||||||||||||||||||
| Issuance of warrants with respect to convertible loans | - |
|
|
|
||||||||||||||||||||||||||||||||||||
| Issuance of shares |
|
* |
|
(
|
) | |||||||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - |
(
|
) |
(
|
) |
(
|
) |
(
|
) |
(
|
) | |||||||||||||||||||||||||||||
| Balance at September 30, 2022 |
|
$ |
|
$ |
|
$ | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
|||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 9 |
ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars in thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation |
|
|
||||||
| Capital gain, net |
(
|
) | ||||||
| Profit from deconsolidation of Octomera |
(
|
) | ||||||
| Share in losses of associated companies, net |
|
|
||||||
| Depreciation and amortization expenses |
|
|
||||||
| Effect of exchange differences on inter-company balances |
|
|
||||||
| Net changes in operating leases |
(
|
) |
(
|
) | ||||
| Interest expenses accrued on loans and convertible loans |
|
|
||||||
| Loss from extinguishment in connection with convertible loan restructuring |
|
|||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
(
|
) |
(
|
) | ||||
| Prepaid expenses and other accounts receivable |
(
|
) |
|
|||||
| Inventory |
(
|
) |
|
|||||
| Other assets |
|
|
||||||
| Accounts payable |
|
(
|
) | |||||
| Accrued expenses and other payables |
|
|
||||||
| Employee and related payables |
|
|
||||||
| Deferred taxes liability |
|
|||||||
| Net cash used in operating activities | $ |
(
|
) | $ |
(
|
) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Repayment of convertible loan to related party partners |
|
|||||||
| Increase in loan to associates entities |
(
|
) | ||||||
| Repayment of loan granted |
|
|||||||
| Sale of property and equipment |
|
|||||||
| Purchase of property, plant and equipment |
(
|
) |
(
|
) | ||||
| Cash acquired from acquisition of Mida |
|
|||||||
| Impact to cash resulting from deconsolidation (see note 3) |
(
|
) | ||||||
| Investment in Octomera (see note 3) |
(
|
) | ||||||
| Investment in long-term deposits |
(
|
) |
(
|
) | ||||
| Net cash used in investing activities | $ |
(
|
) | $ |
(
|
) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of shares due to exercise of options and warrants (net of transaction costs) |
|
|
||||||
| Proceeds from issuance of convertible loans |
|
|
||||||
| Proceeds from transaction with redeemable non-controlling interest that do not acquire control of a subsidiary, see note 3 |
|
|||||||
| Repayment of convertible loans and convertible bonds |
(
|
) |
(
|
) | ||||
| Repayment of short and long-term debt |
(
|
) |
(
|
) | ||||
| Proceeds from issuance of loans payable |
|
|||||||
| Grant received in respect of third party |
|
|||||||
| Transfer of the grant received to third party |
(
|
) | ||||||
| Net cash provided by financing activities | $ |
|
$ |
|
||||
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $ |
(
|
) | $ |
(
|
) | ||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ |
|
$ |
|
||||
| SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||||||
| Right-of-use assets obtained in exchange for new operation lease liabilities | $ |
|
$ |
|
||||
| Increase (decrease) in accounts payable related to purchase of property, plant and equipment | $ |
|
$ |
(
|
) | |||
| Issuance of common stocks for the acquisition of Mida | $ | $ |
|
|||||
| Extinguishment in connection with convertible loan restructuring | $ |
|
$ | |||||
| CASH PAID DURING THE YEAR FOR: | ||||||||
| Interest | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 10 |
ORGENESIS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2023 and 2022
(U.S. Dollars in thousands, except share amounts)
(Unaudited)
NOTE 1 – DESCRIPTION OF BUSINESS
| a. | General |
Orgenesis Inc. (the “Company”) is a global biotech company working to unlock the potential of Cell and Gene Therapies (“CGTs”) in an affordable and accessible format. CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products (“ATMPs”). The Company is mostly focused on the development of autologous therapies that can be manufactured under processes and systems that are developed for each therapy using a closed and automated approach that is validated for compliant production near the patient for treatment of the patient at the point of care (“POCare”).
In connection with the investment by an affiliate of Metalmark Capital Partners (“Metalmark” or “MM”) in the Company’s subsidiary Octomera LLC (formerly Morgenesis LLC) (“Octomera” or “Morgenesis”) in November 2022 (“the Metalmark Investment”), the Company separated its operations into two operating segments: the operations of Octomera (the “Morgenesis” or “Octomera” segment) and therapies related activities (the “Therapies” segment).
On
June 30, 2023, in connection with an additional $
The
Company currently owns approximately
These consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries.
The
Company’s common stock, par value $
per share (the “Common Stock”), is listed and traded on the Nasdaq Capital
Market under the symbol “ORGS.” The Company must satisfy Nasdaq’s continued listing requirements, including, among
other things, a minimum closing bid price requirement of $
As used in this report and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its Subsidiaries. Unless otherwise specified, all amounts are expressed in United States Dollars.
| 11 |
| b. | Liquidity |
Through
September 30, 2023, the Company had an accumulated deficit of $
If there are further reductions in revenues or increases in operating costs for facilities expansion, research and development, commercial and clinical activity or decreases in revenues from customers, the Company will need to use mitigating actions such as to seek additional financing or postpone expenses that are not based on firm commitments. In addition, in order to fund the Company’s operations until such time that the Company can generate sustainable positive cash flows, the Company will need to raise additional funds.
The Company expects its current and projected cash resources and commitments will not be sufficient to meet the Company’s obligations for the next 12 months, raising a substantial doubt about the Company’s ability to continue as a going concern. Management plans include raising additional capital to fund the Company’s operations and to repay the Company’s outstanding loans when they become due, as well as exploring additional avenues to increase revenue and reduce capital expenditures. See note 1 a. The Company’s ability to fund the completion of its ongoing and planned activities may be substantially dependent upon whether the Company can obtain sufficient funding at acceptable terms. If the Company is unable to raise sufficient additional capital or meet revenue targets, it may have to reduce or eliminate certain activities and reduce its headcount.
The estimation and execution uncertainty regarding the Company’s future cash flows and management’s judgments and assumptions in estimating these cash flows is a significant estimate. Those assumptions include reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash.
NOTE 2 - BASIS OF PRESENTATION
a. Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the financial statements reflect all normal and recurring adjustments necessary to fairly state the financial position and results of operations of the Company. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on March 22, 2023. The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2022, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included in this Quarterly Report on Form 10-Q.
b. Significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year except as described below:
Use of Estimates in the Preparation of Financial Statements
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, judgments, and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity, the amount of revenues and expenses and the determination of the fair value of the retained interest of equity investment as of the deconsolidation. Actual results could differ from those estimates.
| 12 |
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for Smaller Reporting Companies (SRCs, as defined by the SEC) for the fiscal year beginning on January 1, 2023, including interim periods within that year. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08 “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. The guidance results in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance is to be applied prospectively to acquisitions that occur on or after the effective date. The guidance is currently effective for fiscal years that began after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Recently issued accounting pronouncements, not yet adopted
On August 23, the FASB issued guidance requiring a joint venture to initially measure all contributions received upon its formation at fair value. This accounting will largely be consistent with ASC 805, Business Combinations, although there are some specific exceptions. Before the ASU, there was no authoritative guidance in US GAAP that addressed how a joint venture should recognize contributions received. As a result, there has been diversity in practice, with some joint ventures accounting for contributions received at carry over basis and others at fair value. This new guidance is intended to reduce diversity in practice and provide users of the joint venture’s financial statements with more decision-useful information. It may also reduce the amount of basis differences that an investor in a joint venture needs to track. The new guidance should be applied prospectively and is effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the prior year’s financial statements to conform to the current year presentation. These reclassifications had no net effect on previously reported results of operations.
NOTE 3 – REDEEMABLE NON-CONTROLLING INTEREST AND DECONSOLIDATION
Additional Investments in Octomera LLC
During 2023, the Company and MM entered into various amendments to the Unit Purchase Agreement, dated November 4, 2022 (the “UPA”). Pursuant to such amendments, MM or the Company as the case may be, agreed to pay certain amounts in exchange for Class A Preferred Units of Octomera to support the continued expansion of Orgenesis’ POCare Services (the “Subsequent Investment”), all as detailed in the table below. In the case of MM investments, the investment amount of the First Future Investment (as defined in the UPA) was reduced by the amount of the Subsequent Investment.
| Date | Investing party | Amendment # | Amount |
Class A Preferred
units obtained |
|||||||||
| May 5, 2023 | MM | 1 | $ |
|
|||||||||
| June 30, 2023 | MM | 2 | $ |
|
|||||||||
| August 22, 2023 | MM | 3 | $ |
|
|||||||||
| August 29, 2023 | Company | 4 | $ |
|
|||||||||
| September 6, 2023 | MM | 5 | $ |
|
|||||||||
| September 13, 2023 | MM | 6 | $ |
|
|||||||||
| September 28, 2023 | MM | 7 | $ |
|
|||||||||
| October 12, 2023 | Company | 8 | $ |
|
|||||||||
| November 9, 2023 | Company | 9 | $ |
|
|||||||||
During
October 2023, MM loaned an Octomera subsidiary $
| 13 |
As
a result of the deconsolidation (see note 1a), the Company recorded a net profit of $
| Fair value of the retained interest in Octomera | $ |
|
||
| Net assets deconsolidated |
|
|||
| Other related items deconsolidated, net |
(
|
) | ||
| Net profit | $ |
|
||
The change in board composition does not constitute a strategic shift from the Company’s perspective and therefore the Company did not treat the deconsolidation as a discontinued operation.
Following
the Amendment No. 2, the Company accounted for its investment in Octomera according to the equity method in accordance with ASC Topic
323, as it has retained the ability to exercise significant influence but does not control the entity. The Company thus recognized an
equity method investment in a total amount of $
The
preliminary allocation of the purchase price (“PPA”) to net assets acquired and liability assumed resulted in the recognition
of intangible asset of $
In evaluating the fair value of the Octomera Equity Investment under the income approach, the Company used a discounted cash flow model of the business, adjusted to the Company’s share in the investment. Key assumptions used to determine the estimated fair value included: (a) internal cash flows forecasts for 5 years following the assessment date, including expected revenue growth, costs to produce, operating profit margins and estimated capital needs; (b) an estimated terminal value using a terminal year long-term future growth determined based on the growth prospects of the reporting units; and (c) a discount rate which reflects the weighted average cost of capital adjusted for the relevant risk associated with the Company’s reporting unit operations and the uncertainty inherent in the Company’s internally developed forecasts. The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of other intangible assets, net, which comprised of technology. The useful life of the technology for amortization purposes was determined by considering the period of expected cash flows generated by the assets used to measure the fair value of the intangible assets, adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic, or other factors that may limit the useful life of intangible assets.
The following table represents the deconsolidated amounts from the Company’s Balance Sheet at the date of deconsolidation:
| ASSETS: | ||||
| Cash and cash equivalents |
|
|||
| Other current assets |
|
|||
| Non-current assets |
|
|||
| TOTAL ASSETS |
|
|||
| LIABILITIES: | ||||
| Current liabilities |
|
|||
| Long-term liabilities |
|
|||
| TOTAL LIABILITIES |
|
|||
| REDEEMABLE NON-CONTROLLING INTEREST |
|
|||
| NET ASSETS DECONSOLIDATED |
|
| 14 |
NOTE 4 – EQUITY-METHOD INVESTMENTS
As
of September 30, 2023, and December 31, 2022, the balances of our equity-method investments were
Octomera LLC
The
Company currently owns approximately
As
of September 30, 2023, the balance of our equity-method investment related to Octomera was approximately $
Our
equity-method investment in Octomera is considered a significant investee as our proportionate share of its income is greater than
| Three-Months Ended | ||||
|
September 30,
2023 |
||||
| Total revenue | $ |
|
||
| Gross loss | $ |
|
||
| Net loss | $ |
|
||
NOTE 5 – SEGMENT INFORMATION
The Octomera operations segment includes mainly POCare Services, while the Therapies segment includes the Company’s therapeutic development operations. The segment information includes all the results of the Octomera segment up to the effective date of deconsolidation.
Because the Company conducted all its operations as one segment prior to the Metalmark Investment, the above changes were reflected through retroactive revision of prior period segment information based on the subsidiaries that were transferred to Octomera. Certain activities of these subsidiaries have changed after they were transferred to the Octomera operations segment.
The Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), reviews financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the two identified reportable segments to make decisions about resources to be allocated to the segments and assess their performance.
The Company does not review assets by segment. Therefore, the measure of assets has not been disclosed for each segment.
| 15 |
Segment data for the nine months ended September 30, 2023 is as follows:
| Octomera | Therapies | Eliminations | Consolidated | |||||||||||||
| Revenues | $ |
|
|
$ |
(
|
) | $ |
|
||||||||
| Cost of revenues * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Gross profit |
|
(
|
) |
(
|
) |
|
||||||||||
| Cost of development services and research and development expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Operating expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Share in net income of associated companies |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Other income, net |
|
|
|
|||||||||||||
| Depreciation and amortization |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Loss from extinguishment in connection with convertible loan |
(
|
) |
(
|
) | ||||||||||||
| Financial Expenses, net |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Profit from deconsolidation of Octomera |
|
|
||||||||||||||
| Income (loss) before income taxes | $ |
(
|
) |
(
|
) | $ |
|
$ |
(
|
) | ||||||
| * |
|
Segment data for the nine months ended September 30, 2022 is as follows:
| Octomera | Therapies | Eliminations | Consolidated | |||||||||||||
| Revenues | $ |
|
|
$ |
(
|
) | $ |
|
||||||||
| Revenues from related party |
|
|
||||||||||||||
| Total revenues |
|
|
(
|
) |
|
|||||||||||
| Cost of revenues * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Gross profit |
|
|
(
|
) |
|
|||||||||||
| Cost of development services and research and development expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Operating expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Share in net income of associated companies |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Other income, net |
|
|
|
|||||||||||||
| Depreciation and amortization |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Financial Expenses, net |
(
|
) |
|
(
|
) | |||||||||||
| Income (loss) before income taxes | $ |
|
$ |
(
|
) | $ | $ |
(
|
) | |||||||
| * |
|
Segment data for the three months ended September 30, 2023 is as follows:
| Octomera | Therapies | Eliminations | Consolidated | |||||||||||||
| Revenues | $ |
|
|
$ |
(
|
) | $ |
|
||||||||
| Cost of revenues * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Gross profit |
|
(
|
) |
(
|
) |
(
|
) | |||||||||
| Cost of development services and research and development expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Operating expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Share in net income of associated companies |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Other income |
|
|
||||||||||||||
| Depreciation and amortization |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Financial Expenses, net |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Income (loss) before income taxes | $ |
(
|
) |
(
|
) | $ |
|
$ |
(
|
) | ||||||
| * |
|
| 16 |
Segment data for the three months ended September 30, 2022 is as follows:
| Octomera | Therapies | Eliminations | Consolidated | |||||||||||||
| Revenues | $ |
|
|
$ |
(
|
) | $ |
|
||||||||
| Revenues from related party |
|
|
||||||||||||||
| Total revenues |
|
|
(
|
) |
|
|||||||||||
| Cost of revenues * |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Gross profit |
|
|
(
|
) |
|
|||||||||||
| Cost of development services and research and development expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Operating expenses * |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
| Share in net income of associated companies |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Other income (loss), net |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Depreciation and amortization |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Financial Expenses, net |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Income (loss) before income taxes | $ |
|
$ |
(
|
) | $ | $ |
(
|
) | |||||||
| * | Excluding Depreciation, amortization expenses |
NOTE 6 – EQUITY
On
February 23, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional
and accredited investors (the “Purchaser”) relating to the issuance and sale of
shares (the “Shares”)
of common stock, par value $
per share (the “Common Stock”), and warrants to purchase up to
As of September 30, 2023, all of the warrants were exercised using the alternate cashless exercise option described above.
On
August 31, 2023, the Company entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which the Company
agreed to issue and sell, in a private placement (the “Offering”),
shares of the Company’s common stock,
par value $
per share, at a purchase price of $
per share. The Company received proceeds of $
| 17 |
NOTE 7 – LOANS
On
July 25, 2023, one of the Company’s subsidiaries received a loan from an offshore investor in the amount of $
On
August 15, 2023, the Company received a loan from an investor in the amount of $
During
October 2023, the Company’s subsidiaries received loans in the amount of $
NOTE 8 – CONVERTIBLE LOANS
Convertible loans outstanding as of September 30, 2023 and December 31, 2022 are as follows:
|
Principal
Amount |
Issuance
Date (Year) |
Current
Interest Rate % |
Current
Maturity (Year) |
Current
Conversion Price $ |
||||||||||||||
| Convertible Loans Outstanding as of September 30, 2023 | ||||||||||||||||||
| $ |
|
|
|
% |
|
|
||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
** |
|
|
% |
|
|
||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
* | |||||||||||||
| $ |
|
|||||||||||||||||
| * |
|
|
| ** |
|
| Convertible Loans Outstanding as of December 31, 2022 | ||||||||||||||||||
| $ |
|
|
|
% |
|
|
||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
|
|
|
|
% |
|
|
|||||||||||||
| $ |
|
|||||||||||||||||
Convertible Loans Entered into in 2023
On
January 10, 2023 (the “Effective Date”), the Company entered into the following agreements: (i) a convertible loan agreement
(the “NewTech Convertible Loan Agreement”) with NewTech Investment Holdings, LLC (the “NewTech Lender”), pursuant
to which the NewTech Lender loaned the Company $
| 18 |
The
terms of the NewTech Convertible Loan Agreement and the Malik Loan Agreement are identical. Interest is calculated at
At
any time prior to or on the Maturity Date, any Lender may provide the Company with written notice to convert all or part of the Outstanding
Amount into shares of our Common Stock equal to the quotient obtained by dividing (x) the Outstanding Amount by (y) a price equal to
$
Under the terms of the Convertible Loan Agreements, the Company used the proceeds from the Loan Amount to (i) redeem the loan amount from the previously disclosed Convertible Loan Agreement, dated as of May 19, 2022 between Orgenesis and Ricky Steven Neumann, as amended by the previously disclosed certain Convertible Loan Extension Agreement, dated as of October 23, 2022, by and between Orgenesis and Ricky Steven Neumann, and (ii) for general corporate purposes. Pursuant to the terms, the Company repaid said loan upon receipt of the Loan Amount.
In
connection with such loan, the Company agreed to issue the NewTech Lender warrants representing the right to purchase
Koligo Convertible Loan
On
March 27, 2023, the Company’s subsidiary Koligo Therapeutics Inc. (“Borrower”), entered into a convertible loan agreement
(the “Convertible Loan Agreement”) with Yehuda Nir (the “Lender,” and together with the Borrower, the “Parties”),
pursuant to which the Lender agreed to loan the Borrower up to $
The
Parties agreed that the Lender shall have the option to assign $
| 19 |
Under
the terms of the Koligo Convertible Loan Agreement, the Borrower agreed to use the Loan Amount to fund working capital and ongoing operations
and for no other purposes unless the Lender agrees in writing. As of September 30, 2023, Koligo received $
On
September 29, 2023, Borrower entered into another convertible loan agreement (the “Sai Convertible Loan Agreement”) with
Sai Traders (the “Lender,” and together with the Borrower, the “Parties”), pursuant to which the Lender agreed
to loan the Borrower up to $
Under
the terms of the Sai Convertible Loan Agreement, at the option of the Lender at the Maturity Date or any time prior, the Outstanding
Amount may be convertible, in whole or in part, into the number of shares of Common Stock of the Company equal to the quotient obtained
by dividing (x)
As of September 30, 2023, and as of the date of this report, the Initial Installment was not received, and was therefore not reflected in the Consolidated Balance sheet of September 30, 2023.
Extension of Existing Loan Agreements
On
January 12, 2023, the Company entered into (i) a Convertible Credit Line and Unsecured Convertible Note Extension #2 Agreement with Yosef
Dotan (the “Dotan Extension Agreement”), (ii) a Convertible Credit Line Extension Agreement with Aharon Lukach (the “Lukach
Extension Agreement”) and (iii) a Convertible Loans and Unsecured Convertible Notes Extension #2 Agreement with Yehuda Nir (the
“Nir Extension Agreement”), each which extended the maturity date of the convertible loans under their respective loan agreements
(as described below) to January 31, 2026. The aggregate principal amount of loans extended was $
| 20 |
The
Dotan Extension Agreement related to a Convertible Credit Line Agreement dated as of October 3, 2019, as amended, of which $
The
Lukach Extension Agreement related to a Convertible Credit Line Agreement dated as of October 3, 2019, as amended, of which $
The
Nir Extension Agreement related to
| a. | Options Granted to Employees |
| No. of Options Granted | Exercise Price | Vesting Period | Fair Value at Grant | Expiration Period | ||||||||||||
| Employees |
|
$ | $ |
|
years | |||||||||||
|
During the Period from
January 1, 2023 to September 30, 2023 |
||||
| Value of one common share | $ -$ | |||
| Dividend yield |
|
% | ||
| Expected stock price volatility | %- | % | ||
| Risk free interest rate | %- | % | ||
| Expected term (years) | - | |||
| b. | Options Granted to Non-Employees |
|
No. of Options Granted |
Exercise Price |
Vesting Period |
Fair Value at Grant
|
Expiration Period |
||||||||||||
| Non-employees |
|
$ |
|
$ |
|
years | ||||||||||
| 21 |
|
During the Period from
January 1, 2023 to September 30, 2023 |
||||
| Value of one common share | $ | |||
| Dividend yield |
|
% | ||
| Expected stock price volatility | % | |||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 |
September 30,
2022 |
September 30, 2023 |
September 30,
2022 |
|||||||||||||
| Basic and diluted: | ||||||||||||||||
| Net loss attributable to Orgenesis Inc. | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Net loss per share | $ | $ | $ | $ | ||||||||||||
For the nine months ended September 30, 2023 and September 30, 2022, all outstanding convertible notes, options and warrants have been excluded from the calculation of the diluted net loss per share since their effect was anti-dilutive.
Diluted loss per share does not include shares underlying outstanding options and warrants and shares upon conversion of convertible loans for the nine months ended September 30, 2023, because the effect of their inclusion in the computation would be antidilutive. Diluted loss per share does not include shares underlying outstanding options and warrants and shares upon conversion of convertible loans for the three months ended September 30, 2023, because the effect of their inclusion in the computation would be antidilutive.
Diluted loss per share does not include shares underlying outstanding options and warrants and shares upon conversion of convertible loans for the nine months ended September 30, 2022, because the effect of their inclusion in the computation would be antidilutive. Diluted loss per share does not include shares underlying outstanding options and warrants and shares upon conversion of convertible loans for the three months ended September 30, 2022, because the effect of their inclusion in the computation would be antidilutive.
NOTE 11 – REVENUES
Disaggregation of Revenue
The following table disaggregates the Company’s revenues by major revenue streams:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Revenue stream: | ||||||||||||||||
| POC development services | $ | $ |
|
$ | $ |
|
||||||||||
| Cell process development services and hospital services |
|
|
|
|
||||||||||||
| POC cell processing |
|
|
|
|||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| 22 |
A breakdown of the revenues per customer constituted at least 10% of revenues is as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Revenue earned: | ||||||||||||||||
| Customer A (United States) | $ | $ | $ |
|
$ | |||||||||||
| Customer B (United States) | $ | $ | $ |
|
$ | |||||||||||
| Customer C (Greece) | $ | $ |
|
$ |
|
$ |
|
|||||||||
| Customer D (United States) | $ | $ |
|
$ |
|
$ |
|
|||||||||
| Customer E (Korea) | $ | $ |
|
$ | $ |
|
||||||||||
| Customer F (United Arab Emirates) | $ | $ |
|
$ | $ |
|
||||||||||
Contract Assets and Liabilities
Contract assets are mainly comprised of trade receivables net of allowance for doubtful debts, which includes amounts billed and currently due from customers.
The activity for trade receivables is comprised of:
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Balance as of beginning of period | $ |
|
$ |
|
||||
| Elimination of acquisition receivables |
(
|
) | ||||||
| Additions |
|
|
||||||
| Collections |
(
|
) |
(
|
) | ||||
| Exchange rate differences |
(
|
) |
(
|
) | ||||
| Deconsolidation of Octomera |
(
|
) | ||||||
| Balance as of end of period | $ |
|
$ |
|
||||
* The activity of the related party included in the trade receivables activity above is comprised of:
| Nine Months Ended | ||||
| September 30, 2022 | ||||
| Balance as of beginning of period | $ |
|
||
| Additions |
|
|||
| Collections |
(
|
) | ||
| Balance as of end of period | $ |
|
||
The activity for contract liabilities is comprised of:
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Balance as of beginning of period | $ |
|
$ |
|
||||
| Additions |
|
|
||||||
| Deconsolidation of Octomera |
(
|
) | ||||||
| Balance as of end of period | $ |
|
$ |
|
||||
| 23 |
NOTE 12 – OTHER SIGNIFICANT TRANSACTIONS AND AGREEMENTS DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2023
In January 2023, the Company entered into updated joint venture (JV) agreements (JVAs) with Theracell Advanced Biotechnology SA, Broaden Bioscience and Technology Corp, Image Securities FZC, Cure Therapeutics, and Med Centre for Gene and Cell Therapy FZ-LLC and assigned certain rights and obligations under its JVAs to Texas Advanced Therapies LLC, a Delaware Limited Liability company (“Texas AT”) not related to the Company. Texas AT will receive the Company’s option to require the incorporation of the JV entity, Company’s share in the JV Entity, if and when the latter are incorporated, an option to invest additional funding in the JV Entity, and board and veto rights on certain critical decisions in the JV Entity. The Company has retained the call option to acquire the JV partner’s share in the JVE, to receive a royalty and a right to conclude the Manufacturing and Service Agreement with the JV entity. Pursuant to the JVAs, the Company will no longer be entitled to the additional share of fifteen percent of the JVE’s GAAP profit after tax granted as per the previous version of the JVAs. The Company also has no further obligation to provide any additional funding to the JV entities. As of September 30, 2023, no JV entities were incorporated pursuant to the JVAs.
On
July 25, 2023, the Company and Mircod LLC (“Mircod”) entered into a settlement and release agreement pursuant to which they
agreed to terminate the joint venture and loan agreement between themselves. Also, pursuant to the agreement, Mircod agreed to deliver
all the related deliverables to the Company, and the Company agreed to pay Mircod consideration in the amount of $
On July 25, 2023, the Company, a Sub-licensee, and the equity interest owner of that Sub-licensee (“Sub-licensee Owner”), entered into agreements whereby:
| 1) | the Company sub-licensed certain of its therapies to Sub-licensee in return for royalties on future sales and payments upon the successful completion of certain milestones; | |
| 2) |
subject
to the fulfilment certain conditions and milestones, none of which have been fulfilled to
date, the Sub-licensee Owner granted the Company a call option to purchase his interests
in Sub-licensee at a valuation to be determined by a third-party valuation firm of not less
than $
|
|
| 3) |
subject
to the fulfilment of certain conditions and milestones, none of which have been fulfilled
to date, the Sub-licensee Owner was granted a put option to cause the Company to purchase
his equity interest in Sub-licensee at a valuation to be determined by a third-party valuation
firm of not less than $
|
The
Company has received $
On September 14, 2023, the Company informed Yeda Research and Development Company Limited of its intention to terminate the license and research agreement entered into during 2022. The termination will take effect on November 13, 2023.
| 24 |
NOTE 13 – LEGAL PROCEEDINGS
On
January 18, 2022, a complaint (the “Complaint”) was filed in the Tel Aviv District Court (the “Court”) against
the Company, Orgenesis LTD (“the Israeli Subsidiary”), Prof. Sarah Ferber, Vered Caplan and Dr. Efrat Asa Kunik (collectively,
the “defendants”) by plaintiffs the State of Israel, as the owner of Chaim Sheba Medical Center at Tel Hashomer (“Sheba”),
and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (collectively, the “plaintiffs”).
It
has been brought to the Company’s attention, that, on September 6, 2023, a claim (the “Claim”) was filed in the Tel Aviv District Court
(the “Court”) against the Company, the Israeli Subsidiary, Octomera LLC, Orgenesis Biotech Israel LTD, Theracell Laboratories
Private Company, and Vered Caplan (collectively, the “defendants”) by Ehud Almon (Plaintiff) for certain finders’ fees
and / or royalties related to sales made by an Octomera subsidiary to a Greek entity in the amount of $
On
October 26, 2023, a complaint was filed in the Supreme Court of the State of New York by plaintiffs Southern Israel Bridging Fund Two
LP and Mr. Amir Hasidim, against the Company, seeking the payment of $
NOTE 14 – SUBSEQUENT EVENTS
Recent developments
The Company conducts certain of its operations in the State of Israel and some of our business and operations may be affected by economic, political, geopolitical and military conditions in Israel. In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between Israel and Hezbollah in Lebanon, may escalate in the future into a greater regional conflict. The current war military operations may affect certain of the Company’s activities, business and operations although it is currently not possible to predict such effect.
Registered Direct Offering
On
November 8, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional
investor named therein (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering
by the Company directly to the Investor (the “Offering”), (i)
shares (the “Shares”) of common stock,
par value $
per share, of the Company (“Common Stock”), and (ii) warrants exercisable for
The Offering closed on November 9, 2023, and the
Company received net proceeds of approximately $
Equity Line of Credit
On
November 8, 2023, the Company also agreed to enter into an Equity Line of Credit Agreement (the “ELOC Agreement”) with the
Investor pursuant to which the Company may sell and issue to the Investor, and the Investor is obligated to purchase from the Company,
up to $
| 25 |
I tem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2023. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Other factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company,” “our Company” or “Orgenesis” refer to Orgenesis Inc., a Nevada corporation, and our majority or wholly-owned subsidiaries or subsidiaries of Octomera LLC (whose name was changed on June 30, 2023, from Morgenesis LLC), Orgenesis Korea Co. Ltd. (the “Korean Subsidiary”); Orgenesis Belgium SRL, a Belgian-based entity (the “Belgian Subsidiary”); Orgenesis Services SRL, a Belgian-based entity (“Orgenesis Services SRL”); Orgenesis Ltd., an Israeli corporation (the “Israeli Subsidiary”); Orgenesis Maryland LLC (formerly Orgenesis Maryland Inc.), a Maryland limited liability company (the “U.S. Subsidiary”); Orgenesis Switzerland Sarl, (the “Swiss Subsidiary”); Orgenesis Biotech Israel Ltd. (“OBI”); Koligo Therapeutics Inc., a Kentucky corporation (“Koligo”); Tissue Genesis International LLC (“Tissue Genesis”) a Texas limited liability company; Orgenesis Germany GmbH (the “German Subsidiary”); Orgenesis CA, Inc. (the “California Subsidiary”); Mida Biotech BV (the “Dutch Subsidiary”) which was purchased in 2022; Orgenesis Australia PTY LTD (the “Australian Subsidiary”); Orgenesis Italy SRL (the “Italian Subsidiary”); Theracell Laboratories Private Company (“Theracell Laboratories”), a Greek company; Orgenesis Austria GmbH, an Austrian company; ORGS POC CA Inc., a Delaware company incorporated in 2023; and Octomera LLC, a Delaware limited liability company (“Morgenesis” or “Octomera”).
| 26 |
Corporate Overview
We are a global biotech company working to unlock the potential of CGTs in an affordable and accessible format. CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products, or ATMPs. We are mostly focused on the development of autologous therapies that can be manufactured under processes and systems that are developed for each therapy using a closed and automated approach that is validated for compliant production near the patient for treatment of the patient at the point of care, or POCare. This approach has the potential to overcome the limitations of traditional commercial manufacturing methods that do not translate well to commercial production of advanced therapies due to their cost prohibitive nature and complex logistics to deliver such treatments to patients, ultimately limiting the number of patients that can have access to, or can afford, these therapies.
To achieve these goals, we have developed a collaborative worldwide network of research institutes and hospitals who are engaged in the POCare model, or our POCare Network, and a pipeline of licensed POCare advanced therapies that can be processed and produced under such closed and automated processes and systems, or POCare Therapies. We are developing our pipeline of advanced therapies and with the goal of entering into out-licensing agreements for these therapies. Our cellular therapies, though defined as drug products, conceptually differ from other drug modalities in that they are based on reprogramming of cells sourced from the patient or from a donor. In most cases, they are individually produced per patient in a highly sterile and controlled environment, and their efficacy is optimized when administered a short time following production as fresh product.
To advance the execution of our goal of bringing such therapies to market, we have designed and built our POCare Platform - a scalable infrastructure of technology and services that ensures a central quality system, replicability and standardization of infrastructure and equipment, and centralized monitoring and data management. The platform is constructed on POCare Centers that serve as hubs that locally implement our quality system, Good Manufacturing Practices, training procedures, quality control testing, incoming supply of materials and oversee the actual production in the Orgenesis Mobile Processing Units & Labs, or OMPULs.
In connection with the investment by an affiliate of Metalmark Capital Partners (“Metalmark” or “MM”) in November 2022, we separated our operations into two operating segments: the operations of Octomera LLC (the “Morgenesis” segment which we have renamed the “Octomera” segment following the change of name of Morgenesis LLC to Octomera LLC) and therapies related activities (the “Therapies” segment). Prior to that, we conducted all our operations as one single segment. The Octomera segment includes mainly POCare Services and includes the results of the subsidiaries transferred to Octomera and all of the operations of Octomera LLC. The Therapies segment includes our therapeutic development operations. The segment information presented in note 3 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q reflects the results of the subsidiaries that were transferred to Octomera.
On June 30, 2023, in connection with an additional $1 million investment in Octomera, we and MM entered into Amendment No. 1 to the Second Amended and Restated Limited Liability Company Agreement (the “LLC Agreement Amendment”) to change the name of Morgenesis to “Octomera LLC” and to amend Octomera’s board composition. Pursuant to the LLC Agreement Amendment, the board of managers of Octomera (the “Octomera Board”) will be comprised of five managers, two of which will be appointed by us, one of which will be an industry expert appointed by MM, and two of which will be appointed by MM. However, as a result of the amendment to the composition of the Octomera Board pursuant to the LLC Agreement Amendment described above, we deconsolidated Octomera from our consolidated financial statements as of June 30, 2023 (the “effective date of deconsolidation”) and recorded our equity interest in Octomera as an equity method investment.
We currently own approximately 75% of Octomera LLC.
Therapies segment (POCare Therapies)
While the biotech industry struggles to determine the best way to lower cost of goods and enable CGTs to scale, the scientific community continues to advance and push the development of such therapies to new heights. Clinicians and researchers are excited by all the new tools (new generations of industrial viruses, big data analysis for genetic and molecular data) and technologies (CRISPR, mRNA, etc.) available, often at a low cost, to perform advanced research in small labs. Most new therapies arise from academic institutes or small spinouts from such institutes. Though such research efforts may manage to progress into a clinical stage, utilizing lab based or hospital-based production solutions they lack the resources to continue the development of such drugs to market approval.
| 27 |
Historically, drug/therapeutic development has required investments of hundreds of millions of dollars to be successful. One significant cause for the high cost is that each therapy often requires unique production facilities and technologies that must be subcontracted or built. Further the cost of production during the clinical stage is extremely expensive, and the cost of the clinical trial itself is very high. Given these financial restraints, researchers and institutes hope to out-license their therapeutic products to large biotech companies or spin-out new companies and raise large fundraising rounds. However, in many cases they lack the resources and the capability to de-risk their therapeutic candidates enough to be attractive for such fundings or partnership.
Our POCare Network is an alternative to the traditional pathway of drug development. We collaborate with academic institutions and entities that have been spun out from such institutions. We are in close contact with researchers who are experts in the field of the drug and also partners with leading hospitals and research institutes. Based on such collaborations, we enter into in-licensing agreements with relevant institutions for promising therapies with the aim of adapting them to a point-of-care setting through regional or strategic biological partnerships. Based on the results of the collaboration, we are then able to out-license our own therapeutic developments, as well as those therapies developed from in-licensing agreements to out-licensing partners at preferred geographical regions.
The ability to produce these products at low cost allows for an expedited development process, and the partnership with hospitals around the globe enables joint grants and lower cost of clinical development. The POCare Therapies division reviews many therapies available for out licensing and select the ones which they believe have the highest market potential, can benefit the most from a point of care approach and have the highest chance of clinical success. It assesses such issues by utilizing its global POCare Network and its internal knowhow accumulated over a decade of involvement in the field.
The goal of this in-licensing is to quickly adapt such therapies to a point-of-care approach through regional partnerships, and to out-license the products for market approval in preferred geographical regions. This approach lowers overall development cost, through minimizing pre-clinical development costs incurred by us, and through receiving of the additional funding from grants and/or payments by regional partners.
Our therapies development subsidiaries are:
| ● | Koligo Therapeutics, Inc., a Kentucky corporation, which is a regenerative medicine company, specializing in developing personalized cell therapies. It is currently focused on commercializing its metabolic pipeline via the POCare Network throughout the United States and in international markets. |
| ● | Orgenesis CA, Inc. a Delaware corporation, which is currently focused on development of technologies and therapies in California. |
| ● | Orgenesis Belgium SRL which is currently focused on product development. Since its incorporation, the subsidiary has been awarded grants in excess of 18,000 Euro from the Walloon region for several projects (DGO6 grants). |
| ● | Orgenesis Switzerland Sarl, which is currently focused on providing group management services. |
| ● | MIDA Biotech BV, which is currently focused on research and development activities, was granted a 4,000 Euro grant under the European Innovation Council Pathfinder Challenge Program which supports cutting-edge science and technology. The grant is for technologies enabling the production of autologous induced pluripotent stem cells (iPSCs) using microfluidic technologies and artificial intelligence (AI). |
Orgenesis Italy SRL which is currently focused on R&D activities.
| ● | Orgenesis Ltd., an Israeli subsidiary which is focused on R&D and a provider of R&D management services for out licenced products. Israel is a hub for biotech research and pioneers in this field. |
| ● | Orgenesis Austria GmbH, an Austrian subsidiary, which is focused on R&D activities. |
| 28 |
Octomera segment (mainly POCare Services)
Octomera LLC (“Octomera” or “Morgenesis”) is responsible for most of our POCare services platform. The POCare Services platform is utilized by parties such as biotech companies and hospitals for the supply of their products. Octomera’s services include adapting the process to the platform and supplying the products, or POCare Services. These are services for third party companies and for CGTs that are not necessarily based on our POCare Therapies. POCare services that we and our affiliated entities perform include:
| ● | Process development of therapies, process adaptation, and optimization inside the OMPULs, or “OMPULization”; |
| ● | Adaptation of automation and closed systems to serviced therapies; |
| ● | Incorporation of the serviced therapies compliant with GMP in the OMPULs that we design and built; |
| ● | Tech transfers and training of local teams for the serviced therapies at the POCare Centers; |
| ● | Processing and supply of the therapies and required supplies under GMP conditions within our POCare Network, including required quality control testing; and |
| ● | Contract Research Organization services for clinical trials. |
The POCare Services are performed in decentralized hubs that provide harmonized and standardized services to customers, or POCare Centers. We are working to expand the number and scope of our POCare Centers with the intention of providing an efficient and scalable pathway for CGT therapies to reach patients rapidly at lowered costs. Our POCare Services are designed to allow rapid capacity expansion while integrating new technologies to bring together patients, doctors and industry partners with a goal of achieving standardized, regulated clinical development and production of therapies.
POCare Services Operations Subsidiaries
We conduct our core POCare operations through Octomera (of which we currently own approximately 75%) and which was a consolidated subsidiary of the Company until June 30, 2023. The Octomera subsidiaries which are all wholly owned except as otherwise stated below (collectively, the “Subsidiaries”) include:
| ● | Orgenesis Maryland LLC, which is the center of POCare Services activity in North America and is currently focused on setting up and providing POCare Services and cell-processing services to the POCare Network. |
| ● | Tissue Genesis International LLC, a Texas limited liability company currently focused on development of our technologies and therapies. |
| ● | Orgenesis Services SRL, which is currently focused on expanding our POCare Network in Belgium. |
| ● | Orgenesis Germany GmbH, which is currently focused on providing CRO services to the POCare Network. |
| ● | Orgenesis Korea Co. Ltd., which is a provider of cell-processing and pre-clinical services in Korea. Octomera owns 94.12% of the Korean Subsidiary. |
| ● | Orgenesis Biotech Israel Ltd., which is a provider of process development and cell-processing services in Israel. |
| ● | Orgenesis Australia PTY LTD, which was transferred to Octomera in January 2023 and is currently focused on the development of our POC Network in Australia. |
| ● | Theracell Laboratories private company (“Theracell Labs”), a Greek company currently focused on expanding our POCare Network. |
| ● | ORGS POC CA Inc, incorporated in 2023, which is currently focussed on expanding our POCare Network in California. |
During 2023, we and MM invested $836 thousand and $ 6.5 million respectively into Octomera in exchange for Octomera preferred shares.
Developments During the Nine Months Ended September 30, 2023
In January 2023, we entered into updated joint venture (JV) agreements (the “JVAs”) with Theracell Advanced Biotechnology SA, Broaden Bioscience and Technology Corp, Image Securities FZC, Cure Therapeutics, and Med Centre for Gene and Cell Therapy FZ-LLC and assigned certain rights and obligations under its JVAs to Texas Advanced Therapies LLC, a Delaware Limited Liability company (“Texas AT”) not related to us. Texas AT will receive our option to require the incorporation of the JV Entity, our share in the JV Entity if and when the latter are incorporated, an option to invest additional funding in the JV Entity, and board and veto rights on certain critical decisions in the JV Entity. We have retained the call option to acquire the JV partner’s share in the JVE, to receive a royalty and a right to conclude the Manufacturing and Service Agreement with the JV entity. We have no further obligation to provide any additional funding to the JV entities. As of September 30, 2023, no JV entities were incorporated as per the JVAs.
| 29 |
On January 10, 2023 (“Effective Date”), we entered into convertible loan agreements (the “CLAs”) with lenders pursuant to which we received convertible loans totaling $5 million. Interest on the CLAs is calculated at 8% per annum (based on a 365-day year); provided, that if an Event of Default (as defined in the Convertible Loan Agreements) has occurred and is continuing, the Outstanding Amount (as defined herein) will be calculated at 15.0% per annum. The Loan Amount and all accrued but unpaid interest thereon (collectively, the “Outstanding Amount”) shall either (i) be repaid in cash or (ii) convert to shares of our common stock, par value $0.0001 per share (“Common Stock”), on the third anniversary of the Effective Date (the “Maturity Date”). At any time prior to or on the Maturity Date, Lender may provide us with written notice to convert all or part of the Outstanding Amount into shares of our Common Stock equal to the quotient obtained by dividing (x) the Outstanding Amount by (y) a price equal to $2.464 per share (subject to adjustment for certain capital events, such as stock splits) (the “Conversion Price”).
Under the terms of the CLAs, we may use the proceeds from the Loan Amount to (i) redeem the loan amount from the previously disclosed Convertible Loan Agreement, dated as of May 19, 2022 between Orgenesis and Ricky Steven Neumann, as amended by the previously disclosed certain Convertible Loan Extension Agreement, dated as of October 23, 2022, by and between Orgenesis and Ricky Steven Neumann, and (ii) for general corporate purposes. Pursuant to the terms, we repaid said loan upon receipt of the Loan Amount. In connection with the CLAs, we agreed to issue Lender warrants representing the right to purchase 507,305 shares of our Common Stock, at an exercise price of $2.50 per share.
On February 23, 2023, we entered into a securities purchase agreement with certain institutional and accredited investors relating to the issuance and sale of 1,947,368 shares of common stock, par value $0.0001 per share and warrants to purchase up to 973,684 shares of Common Stock at a purchase price of $1.90 per share of Common Stock and accompanying Warrants in a registered direct offering. The offering closed on February 27, 2023 and the Company received approximately $3.7 million, before deducting the placement agent’s cash fee equal to 7% of the proceeds. The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes, including the Company’s therapy related activities. The offering was made pursuant to an effective registration statement on Form S-3 (Registration Statement No. 333-254806), as previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) on April 7, 2021, a base prospectus included as part of the registration statement, and a final prospectus supplement filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended.
On March 27, 2023, our subsidiary Koligo Therapeutics Inc. (“Borrower”), entered into a convertible loan agreement (the “Convertible Loan Agreement”) with Yehuda Nir (the “Lender,”), pursuant to which the Lender agreed to loan the Borrower up to $5 million (the “Loan Amount”). Interest is calculated at 8% per annum (based on a 365-day year) and is payable, along with the principal, on or before January 1, 2024.
If prior to December 31, 2023, the Borrower issues equity securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Borrower of at least $5,000 (excluding conversion of the Loan Amount) (a “Qualified Financing”), then the outstanding principal amount of the Loan Amount, and any and all accrued but unpaid interest thereon, will automatically convert into such Equity Securities issued pursuant to the Qualified Financing at a price per share equal to fifty percent (50%) of the price per share paid for each share of the Equity Securities purchased for cash by the investors in the Qualified Financing.
As of September 30, 2023, we borrowed $660 thousand pursuant to the Convertible Loan Agreement.
On July 25, 2023, our Israeli Subsidiary received a loan from an offshore investor in the amount of $175 thousand. The loan bears 8% annual interest and is repayable on January 1, 2024.
| 30 |
On August 15, 2023, we received a loan from an investor in the amount of $250 thousand. The loan bears 8% annual interest and is repayable on January 1, 2024 .
On August 31, 2023, we entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which we agreed to issue and sell, in a private placement (the “Offering”), 2,000,000 shares of our common stock, par value $0.0001 per share, at a purchase price of $0.50 per share. We received gross proceeds of $1 million before deducting related offering expenses. The Offering closed on August 31, 2023.
On September 29, 2023, Borrower entered into another convertible loan agreement (the “Sai Convertible Loan Agreement”) with Sai Traders (the “Lender,” and together with the Borrower, the “Parties”), pursuant to which the Lender agreed to loan the Borrower up to $25 million (the “Sai Convertible Loan”). The Sai Convertible Loan shall consist of an Initial Installment of $1.5 million (“Initial Installment”), and at the election of the Borrower thereafter while the Sai Convertible Loan remains outstanding, Borrower may issue up to an additional $23.5 million (“Subsequent Installments”). The Sai Convertible loan bears transaction costs of 8%. Interest is calculated at 10% per annum (based on a 365-day year) of all outstanding principal borrowings and is payable, along with the principal (collectively the “Outstanding Amount”), on or before December 1, 2027 (the “Maturity Date”). The Loan Amount may be prepaid by the Borrower in whole or in part at any time without penalty.
Under the terms of the Sai Convertible Loan Agreement, at the option of the Lender at the Maturity Date or any time prior, the Outstanding Amount may be convertible, in whole or in part, into the number of shares of Common Stock of the Company equal to the quotient obtained by dividing (x) the Outstanding Amount by (y) the Conversion Price. The “Initial Installment Conversion Price” for the Outstanding Amount relating to the Initial Installment shall be a price per share of Common Stock equal to $2.50. The “Subsequent Installment Conversion Price” for the Outstanding Amount relating to the Subsequent Installment(s) shall be a price per share of Common Stock equal to $3.50. Lender agrees that it shall not deliver a notice of conversion that upon effect results in the holder to beneficially own more than 19.99% of the then outstanding shares of Company’s Common Stock. Lender may elect to, instead of the conversion of the Outstanding Amount into Common shares of Company, convert the entire Outstanding Amount into the securities of Borrower pursuant to a the first issuance of equity of the Borrower under which the Borrower raises at least $5 million in gross proceeds (“Qualified Financing”) at a price per share equal to 75% of the price per share paid for each share of the equity securities purchased for cash by the investors in such a Qualified Financing. In the event of the Borrower being listed on a public securities exchange, Lender shall have the option to convert the Outstanding Amount at a 25% premium to the volume weighted average price of the Borrower’s equity over the preceding five (5) days as reported by Bloomberg (“5-Day VWAP”), provided that any such conversion shall not result in the Lender to beneficially own more than 19.99% of the then beneficial shares of the Borrower. In the event of an acquisition of the Borrower (“Acquisition”), prior to the closing of such acquisition, Lender shall have the option to convert the Outstanding Amount into equity securities of the Borrower at a price equivalent to seventy five percent (75%) of the price paid by such buyer to acquire the Borrower.
As of September 30, 2023 and the date of this report, the Initial Installment was not received, and was therefore not reflected in the Consolidated Balance sheet of September 30, 2023.
During October 2023, certain of our subsidiaries borrowed an aggregate of $140 thousand at annual interest rates varying between 0% and 10%. The loans are repayable between November 30, 2023 and January 1, 2024.
Results of Operations
The results of our operations include all of the results of Octomera LLC and its subsidiaries (the Octomera segment) up to the effective date of deconsolidation.
| 31 |
Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022.
The following table presents our results of operations for the three months ended September 30, 2023 and 2022 (dollars in thousands in the table and discussion thereafter):
| Three-Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Revenues | $ | 110 | $ | 7,841 | ||||
| Revenues from related party | - | 147 | ||||||
| Total revenues | 110 | 7,988 | ||||||
| Cost of revenues | 139 | 983 | ||||||
| Gross profit | (29 | ) | 7,005 | |||||
| Cost of development services and research and development expenses | 808 | 3,683 | ||||||
| Amortization of intangible assets | 153 | 225 | ||||||
| Selling, general and administrative expenses | 1,245 | 3,104 | ||||||
| Share in net loss of associated company | 9,518 | 274 | ||||||
| Operating loss | 11,753 | 281 | ||||||
| Other income, net | (2 | ) | 2 | |||||
| Financial expenses, net | 508 | 1,100 | ||||||
| Loss before income taxes | 12,259 | 1,383 | ||||||
| Tax expense | 394 | 25 | ||||||
| Net loss | $ | 12,653 | $ | 1,408 | ||||
Revenues
During the three months ended September 30, 2023, we recognized revenue in the amount of $110, as compared to $7,988 during the three months ended September 30, 2022, representing a decrease of 99%. This was attributable to the deconsolidation of Octomera as of June 30, 2023. The majority of our revenues are from Octomera.
During the three months ended September 30, 2023, the Octomera segment recognized revenue in the amount of $2,704, as compared to $7,903 during the three months ended September 30, 2022, representing a decrease of 66%. This was mainly attributable to performance obligations not having been completed during the three months ended September 30, 2023 in cell processing and cell process development contracts, and which are expected to be competed in the fourth quarter of 2023.
Expenses
Cost of Revenues
| Three-Months Ended | ||||||||
|
September 30,
2023 |
September 30,
2022 |
|||||||
| Salaries and related expenses | $ | 94 | $ | 386 | ||||
| Stock-based compensation | 1 | 1 | ||||||
| Professional fees and consulting services | 4 | 244 | ||||||
| Raw materials | 5 | 117 | ||||||
| Depreciation expenses, net | 5 | 102 | ||||||
| Other expenses | 30 | 133 | ||||||
| Total | $ | 139 | $ | 983 | ||||
Cost of revenues for the three months ended September 30, 2023 were $139, as compared to $983 for the three months ended September 30, 2022, representing a decrease of 86%. This was attributable to the deconsolidation of Octomera at June 30, 2023. The majority of our cost of revenues are from Octomera.
In the Octomera segment, cost of revenues for the three months ended September 30, 2023 were $1,875 as compared to $664 for the three months ended September 30, 2022, representing an increase of 182%. The increase was due to increased costs, including additional salaries, professional fees, raw materials and depreciation expenses incurred mainly related to higher costs of revenues of process development and POC cell processing.
| 32 |
Cost of Development Services and Research and Development Expenses
| Three-Months Ended | ||||||||
|
September 30,
2023 |
September 30,
2022 |
|||||||
| Salaries and related expenses | $ | 669 | $ | 2,377 | ||||
| Stock-based compensation | 24 | 117 | ||||||
| Subcontracting, professional and consulting services | (38 | ) | 357 | |||||
| Lab expenses | 22 | 221 | ||||||
| Depreciation expenses, net | 29 | 146 | ||||||
| Other research and development expenses | 171 | 485 | ||||||
| Less – grant | (69 | ) | (20 | ) | ||||
| Total | $ | 808 | $ | 3,683 | ||||
Cost of development services and research and development for the three months ended September 30, 2023 were $808, as compared to $3,683 for the three months ended September 30, 2022, representing a decrease of 78%. This was mainly attributable to the deconsolidation of Octomera at June 30, 2023. Cost of development services and research and development declined in both the Octomera and Therapies segments because costs that were related to POC development services were no longer required due to the conclusion of the POC development revenue contracts, and our decision to reduce subcontracting, professional and consulting service fees, and other research and development expenses.
Selling, General and Administrative Expenses
| Three-Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Salaries and related expenses | $ | 259 | $ | 764 | ||||
| Stock-based compensation | 53 | 76 | ||||||
| Accounting and legal fees | 460 | 1,436 | ||||||
| Professional fees | 134 | 146 | ||||||
| Rent and related expenses | 13 | 60 | ||||||
| Business development | 60 | 114 | ||||||
| Depreciation expenses, net | 4 | 15 | ||||||
| Other general and administrative expenses | 262 | 493 | ||||||
| Total | $ | 1,245 | $ | 3,104 | ||||
Selling, general and administrative expenses for the three months ended September 30, 2023 were $1,245, as compared to $3,104 for the three months ended September 30, 2022, representing a decrease of 60%. The decrease in selling, general and administrative expenses in the three months ended September 30, 2023 compared to the three months ended September 30, 2022 is primarily attributable to the deconsolidation of Octomera as of June 30, 2023.
In the Octomera segment, selling, general and administrative expense (excluding depreciation) for the three months ended September 30, 2023 were $9,706 as compared to $1,385 for the three months ended September 30, 2022, representing an increase of 601%. The increase was mainly as a result of an increase in an allowance for doubtful debts.
Share in Net Loss of Associated Company
Share in net loss of associated company for the three months ended September 30, 2023 was $9,518, as compared to $274 for the three months ended September 30, 2022, representing a increase of 3,374%. The increase in share in net loss of associated company in the three months ended September 30, 2023 compared to the three months ended September 30, 2022 is primarily attributable to credit losses in the period resulting from higher than previously expected credit losses related to a group of customers that are significantly overdue in Octomera.
| 33 |
Financial Expenses, net
| Three-Months Ended | ||||||||
|
September 30, 2023 |
September 30, 2022 |
|||||||
| Interest expense on convertible loans and loans | $ | 575 | $ | 589 | ||||
| Foreign exchange loss (income), net | (69 | ) | 512 | |||||
| Other expenses (income) | 2 | (1 | ) | |||||
| Total | $ | 508 | $ | 1,100 | ||||
Financial expenses, net for the three months ended September 30, 2023 were $508, as compared to $1,100 for the three months ended September 30, 2022, representing a decrease of 54%. The decrease was mainly due to foreign exchange losses incurred in the three months ended September 30, 2022 in the Octomera segment.
Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022.
The following table presents our results of operations for the nine months ended September 30, 2023 and 2022 (dollars in thousands in the table and discussion thereafter):
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Revenues | $ | 14,129 | $ | 21,117 | ||||
| Revenues from related party | - | 1,284 | ||||||
| Total revenue | 14,129 | 22,401 | ||||||
| Cost of revenues | 6,093 | 2,760 | ||||||
| Gross profit | 8,036 | 19,641 | ||||||
| Cost of development services and research and development expenses | 7,616 | 18,172 | ||||||
| Amortization of intangible assets | 568 | 686 | ||||||
| Selling, general and administrative expenses | 8,621 | 8,758 | ||||||
| Share in net loss of associated company | 9,517 | 1,189 | ||||||
| Operating loss | 18,286 | 9,164 | ||||||
| Other income, net | (4 | ) | (6 | ) | ||||
| Loss from extinguishment in connection with convertible loan | 283 | - | ||||||
| Financial expenses, net | 1,807 | 1,702 | ||||||
| Profit from deconsolidation of Octomera | (411 | ) | - | |||||
| Loss before income taxes | 19,961 | 10,860 | ||||||
| Tax expense | 614 | 37 | ||||||
| Net loss | $ | 20,575 | $ | 10,897 | ||||
Revenues
Our revenues for the nine months ended September 30, 2023 were $14,129, as compared to $22,401 for the nine months ended September 30, 2022, representing a decrease of 37%. This was attributable to the deconsolidation of Octomera at June 30, 2023. The majority of our revenues are from Octomera and were included in our revenues until the date of deconsolidation.
| 34 |
During the nine months ended September 30, 2023, the Octomera segment recognized revenue in the amount of $16,483, as compared to $21,989 during the nine months ended September 30, 2022, representing a decrease of 25%. This was mainly attributable to our not having completed certain performance obligations in cell processing and process development contracts, which we expect to complete in the fourth quarter of 2023.
Expenses
Cost of Revenues
| Nine Months Ended | ||||||||
| September 30, 2023 |
September 30,
2022 |
|||||||
| Salaries and related expenses | $ | 2,298 | $ | 1,201 | ||||
| Stock-based compensation | 4 | 27 | ||||||
| Professional fees and consulting services | 1,882 | 287 | ||||||
| Raw materials | 715 | 218 | ||||||
| Depreciation expenses, net | 477 | 271 | ||||||
| Other expenses | 717 | 756 | ||||||
| Total | $ | 6,093 | $ | 2,760 | ||||
Cost of revenues for the nine months ended September 30, 2023 were $6,093, as compared to $2,760 for the nine months ended September 30, 2022, representing an increase of 121%. The increase was due to increased costs including additional salaries, professional fees, raw materials and depreciation expenses incurred as a result of increased process development and cell processing revenues mainly in the Octomera segment, which were incurred mainly until the date of deconsolidation.
Cost of Development Services and Research and Development Expenses
| Nine Months Ended | ||||||||
| September 30, 2023 |
September 30,
2022 |
|||||||
| Salaries and related expenses | $ | 4,153 | $ | 7,802 | ||||
| Stock-based compensation | 187 | 414 | ||||||
| Subcontracting, professional and consulting services | 1,563 | 3,740 | ||||||
| Lab expenses | 326 | 1,439 | ||||||
| Depreciation expenses, net | 285 | 470 | ||||||
| Other research and development expenses | 1,312 | 4,327 | ||||||
| Less – grant | (210 | ) | (20 | ) | ||||
| Total | $ | 7,616 | $ | 18,172 | ||||
Cost of development services and research and development for the nine months ended September 30, 2023 were $7,616, as compared to $18,172 for the nine months ended September 30, 2022, representing a decrease of 58%. The decrease was mainly attributable to the deconsolidation of the Octomera segment at June 30, 2023, and our decision to reduce investing in subcontracting, professional and consulting service fees and other research and development expenses this year.
Selling, General and Administrative Expenses
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Salaries and related expenses | $ | 2,520 | $ | 2,589 | ||||
| Stock-based compensation | 197 | 251 | ||||||
| Accounting and legal fees | 2,804 | 3,355 | ||||||
| Professional fees | 1,020 | 650 | ||||||
| Rent and related expenses | 127 | 170 | ||||||
| Business development | 421 | 365 | ||||||
| Depreciation expenses, net | 36 | 36 | ||||||
| Other general and administrative expenses | 1,496 | 1,342 | ||||||
| Total | $ | 8,621 | $ | 8,758 | ||||
| 35 |
Selling, general and administrative expenses for the nine months ended September 30, 2023 were $8,621, as compared to $8,758 for the nine months ended September 30, 2022, representing a decrease of 2%. The decrease was mainly as a result of the deconsolidation of Octomera as of June 30, 2023.
In the Octomera segment, selling, general and administrative expense (excluding depreciation) for the nine months ended September 30, 2023 were $13,329 as compared to $2,822 for the nine months ended September 30, 2022, representing an increase of 372%. The increase was mainly as a result of increases in salaries and related expenses, professional fees, and other general and administrative expenses as a result of ramped up activities, and an increase in an allowance for doubtful debts.
Share in Net Loss of Associated Company
Share in net loss of associated company for the nine months ended September 30, 2023 was $9,517, as compared to $1,189 for the three months ended September 30, 2022, representing a increase of 700%. The increase in Share in net loss of associated company in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is primarily attributable to credit losses in the three months ended September 30, 2023 resulting from higher than previously expected credit losses related to a group of customers that are significantly overdue in Octomera.
Financial Expenses, net
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Interest expense on convertible loans and loans | $ | 1,629 | $ | 953 | ||||
| Foreign exchange loss, net | 173 | 743 | ||||||
| Other expenses (income) | 5 | 6 | ||||||
| Total | $ | 1,807 | $ | 1,702 | ||||
Financial expenses, net for the nine months ended September 30, 2023 were $1,807, as compared to $1,702 for the nine months ended September 30, 2022, representing an increase of 6%.
Working Capital
(dollars in thousands)
| As of | ||||||||
| September 30, 2023 |
December 31, 2022 |
|||||||
| Current assets | $ | 8,776 | $ | 46,318 | ||||
| Current liabilities | 14,302 | 15,910 | ||||||
| Working capital | $ | (5,526 | ) | $ | 30,408 | |||
Current assets decreased by $37,542 between December 31, 2022 and September 30, 2023 due mainly to the deconsolidation of Octomera. The majority of cash and cash equivalents, restricted cash, and accounts receivable at December 31, 2023 were part of Octomera. Prepaid expenses and other receivables increased by $3,073 from December 31, 2022 to September 30, 2023 mainly as a result of prepayments in development contracts. Receivables from related parties in the amount of $1,052 are receivables from Octomera subsidiaries, that were consolidated at December 31, 2022 and not at September 30, 2023.
| 36 |
Current liabilities decreased by $1,608 between December 31, 2022 and September 30, 2023 primarily as a result of the deconsolidation of Octomera. Accounts payable not related to Octomera increased as a result of a shortage of funds. Other payables related parties in the amount of $132 are payables to Octomera subsidiaries, that were consolidated at December 31, 2022 and not at September 30, 2023. Short-term and current maturities of convertible loans increased by $430 for representing an increase of $430 mainly as a result new loans taken.
Liquidity and Financial Condition
(dollars in thousands)
| Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Net loss | $ | (20,575 | ) | $ | (10,897 | ) | ||
| Net cash used in operating activities | (14,335 | ) | (14,163 | ) | ||||
| Net cash used in investing activities | (3,645 | ) | (7,458 | ) | ||||
| Net cash provided by financing activities | 12,393 | 20,095 | ||||||
| Decrease in cash and cash equivalents | $ | (5,587 | ) | $ | (1,526 | ) | ||
During the nine months ended September 30, 2023, we funded our operations from existing funds, and equity and loan financings.
Net cash used in operating activities for the nine months ended September 30, 2023 was approximately $14,335, as compared to net cash used in operating activities of approximately $14,163 for the nine months ended September 30, 2022. This is mainly attributable to:
| ● | An increase in the share of losses of associated companies in the amount of $8,328 mainly related to an increase in the provision for doubtful debts in Octomera. | |
| ● | The deconsolidation of Octomera. The majority of accounts receivable and inventory as at December 31, 2023 were part of Octomera. | |
| ● | An increase in prepaid expenses and other accounts receivable in the amount of $1,906 mainly as a result of prepayments of development contracts. | |
| ● | An increase in accounts payable not related to Octomera, as a result of our not having sufficient funds to pay vendors. |
Net cash used in investing activities for the nine months ended September 30, 2023 was approximately $3,645, as compared to net cash used in investing activities of approximately $7,458 for the nine months ended September 30, 2022. The decrease was mainly due to loans granted to associated entities last year not granted this year, reduced investments in OMPULs, and the deconsolidation of Octomera.
Net cash provided by financing activities for the nine months ended September 30, 2023 was approximately $12,393, as compared to net cash provided by financing activities of approximately $20,095 for the nine months ended September 30, 2022. During the nine months ended September 30, 2023 we raised equity investments in the net amount of $4,341 (see Note 4), raised proceeds from loans in the amount of $5,660 (see Note 5), raised proceeds from MM in the amount of $5,000 see note 3 and repaid convertible loans in the amount of $3,000 (see Note 5).
| 37 |
Liquidity & Capital Resources Outlook
Our activities have recently been funded primarily by offerings of our equity securities, loans, and convertible loans. There is no assurance that our business will generate sustainable positive cash flows to fund our business operations.
If there are further reductions in revenues or increases in operating costs for facilities expansion, research and development, commercial and clinical activity or decreases in revenues from customers, we will need to use mitigating actions such as to seek additional financing or postpone expenses that are not based on firm commitments. In addition, in order to fund our operations until such time that we can generate sustainable positive cash flows, we will need to raise additional funds.
We expect that our current and projected cash resources and commitments will not be sufficient to meet our obligations for the next 12 months, raising a substantial doubt about our ability to continue as a going concern. Our management plans include raising additional capital to fund our operations and to repay our outstanding loans when they become due, as well as exploring additional avenues to increase revenue and reduce capital expenditures. Our ability to fund the completion of our ongoing and planned activities may be substantially dependent upon whether we can obtain sufficient funding at acceptable terms. If we are unable to raise sufficient additional capital or meet revenue targets, we may have to reduce or eliminate certain activities and reduce our headcount.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
| 38 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is available in Note 13 to the condensed consolidated financial statements in this Report.
Except as described above, we are not involved in any pending material legal proceedings.
ITEM 1A. RISK FACTORS
An investment in the Company’s Common Stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 22, 2023, in addition to other information contained in our reports and in this quarterly report in evaluating the Company and its business before purchasing shares of our Common Stock. Except as set forth below, there have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2022. The Company’s business, operating results and financial condition could be adversely affected due to any of those risks.
We may fail to comply with the continued listing requirements of the Nasdaq Capital Market, such that our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
Our common stock is listed for trading on the Nasdaq Capital Market. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. We received such notice on September 27, 2023 and thus risk delisting unless we are able to regain compliance in a timely fashion.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until March 25, 2024, to regain compliance with the Minimum Bid Price Requirement. Compliance can be achieved automatically and without further action if the closing bid price of our stock is at or above $1.00 for a minimum of 10 consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify us of our compliance and the matter will be closed. If, however, we do not achieve compliance with the Minimum Bid Price Requirement by March 25, 2024, we may be eligible for additional time to comply. In order to be eligible for such additional time, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and must notify Nasdaq in writing of our intention to cure the deficiency during the second compliance period. There can be no assurance that we will regain compliance with the Minimum Bid Price Requirement, that we will maintain compliant with other Nasdaq listing requirements or that we will be granted a second compliance period.
A delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities.
| 39 |
We conduct certain of our operations in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may affect certain of our operations.
Because we conduct certain operations in the State of Israel, some of our business and operations may be affected by economic, political, geopolitical and military conditions in Israel. In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between Israel and Hezbollah in Lebanon, may escalate in the future into a greater regional conflict.
Any hostilities involving Israel, or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect certain of our operations and results of operations and could make it more difficult for us to raise capital. The conflict in Israel could also result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. There have been travel advisories imposed relating to travel to Israel, and restriction on travel, or delays and disruptions as related to imports and exports may be imposed in the future. Additionally, certain members of our management and employees are located and reside in Israel. Shelter-in-place and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing conflict may temporarily disrupt our management and employees’ ability to effectively perform their daily tasks.
The Israel Defense Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Several of our employees are subject to military service in the IDF and have been, or may be, called to serve. It is possible that there will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss of institutional knowledge, and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, for example, may have unintended negative effects and adversely impact our results of operations, liquidity or cash flows.
It is currently not possible to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt certain of our business and operations, among others.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
Item 5. Other Information
None.
| 40 |
Item 6. Exhibits
Exhibits required by Item 601 of Regulation S-K
| No. | Description | |
| (10) | Material Contracts | |
| 10.1 | Securities Purchase Agreement, dated August 31, 2023, by and among the Company and a certain investor. | |
| 10.2 | Convertible Loan Agreement dated September 29, 2023, by and among the Borrower and Sai Traders. | |
| (31) | Rule 13a-14(a)/15d-14(a) Certification | |
| 31.1* | Certification Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 | |
| 31.2* | Certification Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 | |
| (32) | Section 1350 Certification | |
| 32.1* | Certification Statement of the Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 | |
| 32.2* | Certification Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 | |
| (101)* | Interactive Data Files | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |
|
* Filed herewith. |
||
| 41 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ORGENESIS INC. | |
| By: | |
| /s/ Vered Caplan | |
| Vered Caplan | |
| President & Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 13, 2023 | |
| /s/ Elliot Maltz | |
| Elliot Maltz | |
| Chief Financial Officer, Treasurer and Secretary | |
| (Principal Financial Officer and Principal Accounting Officer) | |
| Date: November 13, 2023 |
| 42 |