In addition, as previously disclosed, our agreements with each of CureCell Co., Ltd. and Atvio Biotech Ltd., our Korea and Israel-based CDMO partners, provide that we can obtain 50% equity ownership in these entities by converting advances made to them into 50% of their outstanding equity capital and also that we can compel the underlying equity holders to transfer their equity holding to us for consideration consisting of our equity shares, thereby allowing us to consolidate these entities into our corporate structure. This lack of long-term experience working together may adversely impact our senior management team’s ability to effectively manage our business and growth.

Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. This lack of long-term experience working together may adversely impact our senior management team’s ability to effectively manage our business and growth.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development, and commercialization goals.

We depend on key personnel who would be difficult to replace, and our business plans will likely be harmed if we lose their services or cannot hire additional qualified personnel.

Our success depends substantially on the efforts and abilities of our senior management and certain key personnel. The competition for qualified management and key personnel, especially engineers, is intense. The loss of services of one or more of our key employees, or the inability to hire, train, and retain key personnel, especially engineers and technical support personnel, could delay the development and sale of our products, disrupt our business, and interfere with our ability to execute our business plan.

Currency exchange fluctuations may impact the results of our operations.

The provision of services by our subsidiary, MaSTherCell,Masthercell Global, are usually transacted in U.S. dollars and European currencies. Our results of operations are affected by fluctuations in currency exchange rates in both sourcing and selling locations. Although we enter into foreign currency exchange forward contracts from time to time to reduce our risk related to currency exchange fluctuation, our results of operations may still be impacted by foreign currency exchange rates, primarily, the euro-to-U.S. dollar exchange rate. In recent years, the euro-to-U.S. dollar exchange rate has been subject to substantial volatility which may continue, particularly in light of recent political events regarding the European Union, or EU. Because we do not hedge against all of our foreign currency exposure, our business will continue to be susceptible to foreign currency fluctuations.

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 Any proposed internal corporate reorganization we may consider and decide to implement at a future date could be subject to various risks and uncertainties and may involve significant time and attention, all of which could disrupt or adversely affect our business.

            Orgenesis is engaged in two separate businesses, the CDMO business and our trans-differentiation technologies to treat diabetes, or what we call as out CT business. The CDMO business is spearheaded by our Belgian-based subsidiary, MaSTherCell, as well as various CDMO joint ventures that we currently have in Korea and Israel. The CT business is carried out at the Israeli Subsidiary level, as well as through Orgenesis SPRL, our Belgian Subsidiary, and Orgenesis Maryland Inc., a Maryland corporation. We may at some point in the future consider and possibly implement a corporate reorganization or restructure of these two separate businesses segments, including without limitation, third party asset transfer, merger or divestiture, spin-off or split-out. While we currently have no definitive plan for any such action, we may, consider any such initiative if our Board of Directors deems it to be in the best interests of our company. Any such initiative, however, will require significant time and attention from management, which may distract management from the operation of our business and the execution of our other initiatives. Additionally, any such initiative may result in unforeseen and adverse tax consequences to us or may result in significant changes to our shareholder base if we are no longer engaged in either one of these business segments. Any such difficulties or developments could potentially have a material adverse effect on our financial condition, results of operations or cash flow.

We have entered into collaborations and may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

We may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners for which the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. Further, collaborations involving our product candidates, such as our collaborations with third-party research institutions, are subject to numerous risks, which may include the following:

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As a result, if we enter into collaboration agreements and strategic partnerships or license our products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition, and results of operations.

Our success depends on our ability to protect our intellectual property and our proprietary technologies.

Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our product candidates, proprietary technologies, and their uses as well as our ability to operate without infringing upon the proprietary rights of others. We can provide no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technologies, nor can there be any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Composition-of-matter patents on the biological or chemical active pharmaceutical ingredients are generally considered to offer the strongest protection of intellectual property and provide the broadest scope of patent protection for pharmaceutical products, as such patents provide protection without regard to any method of use or any method of manufacturing. While we have an issued patent in the United States with a claim for a composition directed to a vector comprising a promoter linked to a pancreatic and duodenal homeobox 1 (PDX-1) polypeptide, and a carrier, we cannot be certain that the claim in our issued patent will not be found invalid or unenforceable if challenged. We cannot be certain that the claims in our issued United States methods of use patents will not be found invalid or unenforceable if challenged. We cannot be certain that the pending applications covering composition-of-matter of our transdifferentiated cell populations will be considered patentable by the United States Patent and Trademark Office (USPTO), and courts in the United States or by the patent offices and courts in foreign countries, nor can we be certain that the claims in our issued patents will not be found invalid or unenforceable if challenged. Even if our patent applications covering populations of transdifferentiated cells issue as patents, the patents protect a specific transdifferentiated cell product and may not be enforced against competitors making and marketing a product that has the same activity. Method-of-use patents protect the use of a product for the specified method or for treatment of a particular indication. This type of patents may not be enforced against competitors making and marketing a product that has cells that may provide the same activity but is used for a method not included in the patent. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement is difficult to prevent or prosecute.

We have exclusive rights to four (4)ten (10) United States (US) patents, one (1) of which is directed, among others, to a composition comprising a vector comprising a promoter linked to PDX-1 and having a term of 2021, and the other three have(3) having a term of 2023 and are directed, among others, to methods of inducing endogenous PDX-1 expression in a human differentiated primary non-pancreatic cell, inducing or enhancing a pancreatic islet cell phenotype in non-pancreatic cells, and increasing PDX-1 induction in non-pancreatic primary cells; one (1) having a term of 2024 and directed, among others, to components of a bioreactor; two (2) having a term of 2026 and directed, among others, to a bioconjugate molecules comprising a sulfated polysaccharide; one (1) having a term of 2027 and directed, among others, to an epithelial organoid; one (1) having a term of 2033 and directed, among others, to methods for producing scaffolds; and one (1) having a term of 2034 and directed, among others, to methods for producing transdifferentiated cells. Further, we have exclusive rights to four (4)nineteen (19) foreign issued patents (1(six (6) patents granted in Europe (validatedAustralia, France, Germany, Israel, Switzerland, and the United Kingdom, having a term between 2025 and 2027, directed among others to compositions comprising sulfated polysaccharide bioconjugate, and to epithelial organoids having liver phenotype; eight (8) patents granted in Australia, Canada, France, Germany, France,Israel, Italy, and Great Britain) withthe United Kingdom, having a term between 2020 and 2024, and directed among others to methods of inducing pancreatic hormone expression, methods of inducing a beta cell phenotype, and methods of producing hydrogel; and five (5) patents granted in Austria, France, Germany, Israel, and the United Kingdom, having a term of 2020; two (2) in Australia with2024 and directed among others to components of a term of 2020 and 2024; and one (1) in Canada with a term of 2020.bioreactor. We also have five (5)nine (9) pending applications in the United States, which if granted would have a term of 2034-2035; and twenty three (23)2036-2038; thirty two (32) pending applications in foreign jurisdictions:jurisdictions, including Europe, Australia, Brazil, Canada, China Columbia,, Eurasia, Israel, Japan, South Korea, Mexico, and Singapore, which if they were to grantbe granted would have a term of 2034-2035,2026-2036; and four (4) International Patent Cooperation Treaty (“PCT”) patent applications, which if filed and granted as national phase applications would have a term of 2028. These pending applications are directed, among others, to the trans-differentiation of cells (including hepatic cells) to cells having pancreatic β-cell phenotype and function, and their use in the treatment of degenerative pancreatic disorders including diabetes, pancreatic cancer, and pancreatitis.pancreatitis; and to scaffolds, including alginate and sulfated alginate scaffolds, polysaccharides thereof, and scaffolds for use for cell propagation, transdifferentiation, and transplantation in the treatment of autoimmune diseases, including diabetes.

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The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:

In addition, we rely on the protection of our trade secrets and proprietary know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, we cannot provide any assurances that all such agreements have been duly executed, and third parties may still obtain this information or may come upon this or similar information independently. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating its trade secrets. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary know-how, our business may be harmed.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

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Because our products have not reached clinical or commercial stage, we do not currently carry clinical trial or product liability insurance. In the future, our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. Such insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage.

It may be difficult to enforce a U.S. judgment against us, our officers and directors and the foreign persons named in this Annual Report on Form 10-K in the United States or in foreign countries , or to assert U.S. securities laws claims in foreign countries or serve process on our officers and directors and these experts.

While we are incorporated in the State of Nevada, currently a majority of our directors and executive officers are not residents of the United States, and the foreign persons named in this Annual Report on Form 10-K are located in Israel and Belgium. The majority of our assets are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or foreign court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in foreign countries in which we operate. Foreign courts may refuse to hear a claim based on a violation of U.S. securities laws on the grounds that foreign countries are not necessary the most appropriate forum in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that foreign law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by foreign countries law. There is little binding case law in foreign countries addressing the matters described above.

Risks Related to Our CDMO Business

While there is an increasing number of product candidates in clinical trials with a smaller number that have reached commercial production, cell therapy is a developing industry and a significant global market for manufacturing services may never emerge.

Cell therapy is in its early stages and is still a developing area of research, with few cell therapy products approved for clinical use. Many of the existing cellular therapy candidates are based on novel cell technologies that are inherently risky and may not be understood or accepted by the marketplace, making it difficult for their own funding to enable them to continue their business. In addition to providing in-house process development and manufacturing expertise for our own product candidates in development, MaSTherCellMasthercell Global provides development and manufacturing of cell and tissue-based therapeutic products in clinical and pre-clinical trials. The number of people who may use cell or tissue-based therapies, and the demand for cell processing services, is difficult to forecast. If cell therapies under development by us or by others to treat disease are not proven safe and effective, demonstrate unacceptable risks or side effects or, where required, fail to receive regulatory approval, our manufacturing business will be significantly impaired. While the therapeutic application of cells to treat serious diseases is currently being explored by a number of companies, to date there are only a handful of approved cell therapy products in the U.S. Ultimately, our success in deriving revenue from manufacturing depends on the development and growth of a broad and profitable global market for cell-, gene- and tissue-based therapies and services and our ability to capture a share of this market through our global CDMO network.

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MaSTherCell'sMasthercell Global's revenues may vary dramatically change from period to period making it difficult to forecast future results.

 MaSTherCell

Masthercell Global (which includes our CDMO subsidiaries) (“Masthercell” or “Masthercell Global”) recorded revenues of approximately $10$22 million for the year ended November 30, 2017,2018, representing an increase of 58%92% over the same period last year. The nature and duration of MaSTherCell's and our joint venture CDMO partners’Masthercell’s contracts with customers often involve regular renegotiation of the scope, level and price of the services we are providing. If our customers reduce the level of their spending on research and development or are unsuccessful in attaining or retaining product sales due to market conditions, reimbursement issues or other factors, our results of operations may be materially impacted. In addition, other factors, including the rate of enrollment for clinical studies, will directly impact the level and timing of the products and services we deliver. As such, the levels of our revenues and profitability can fluctuate significantly from one period to another and it can be difficult to forecast the level of future revenues with any certainty. Furthermore, a dramatic change in our future revenue may result an impairment of our goodwill.

The loss of one or more of MaSTherCell’s major clients or a decline in demand from one or more of these clients could harm MaSTherCell’s business.

MaSTherCell has a limited number of major clients that together account for a large percentage of the total revenues earned. Over the past year, MaSTherCell has increased its client portfolio and diversified source of revenues, but there can be no assurance that such clients will continue to use MaSTherCell’s services at the same level or at all. A reduction or delay in the use of MaSTherCell’s services, including reductions or delays due to market, economic or competitive conditions, could have a material adverse effect on MaSTherCell’s business, operating results and financial condition.

MaSTherCell’s business is subject to risks associated with a single manufacturing facility.

 MaSTherCell’s

The majority of Masthercell Global’s contract manufacturing services are from MaSTherCell S.A., our Belgian subsidiary and are dependent upon aits single fully operational facility located in Gosselies (Belgium). A catastrophic loss of the use of all or a portion of MaSTherCell’sthe manufacturing facility due to accident, fire, explosion, labor issues, weather conditions, other natural disaster or otherwise, whether short or long-term, could have a material adverse effect on MaSTherCell’s customer relationships and financial results. While its global network partners offer alternative manufacturing sites as part of a disaster recovery plan, this may require it to invest significant time and effort in tech transfer.

If MaSTherCell loses electrical power at its manufacturing facility, its business operations may be adversely affected.

If MaSTherCell loses electrical power at its manufacturing facility for more than a few hours, MaSTherCell would be unable to continue its manufacturing operations for an extended period of time. Additionally, MaSTherCell does not have an alternative manufacturing location located nearby. While MaSTherCell implemented remediation measures to address this risk by setting up a back-up generator allowing it to provide for its manufacturing power consumption needs for a few hours and by being granted a priority access to power in case of global power outage, in the industrial park in Belgium where its premises are located, these measures may not prevent a significant disruption in MaSTherCell’s manufacturing operations which could materially and adversely affect its business operations during an extended period of power outage.

The logistics associated with the distribution of materials produced by MaSTherCell for third parties and for us are significant, complex and expensive and may negatively impact our ability to generate and meet future demand for our products and improve profitability.

Current cell therapy products and product candidates have a limited shelf life, in certain instances limited to less than 12 hours. Thus, it is necessary to minimize the amount of time between when the cell product is extracted from a patient, arrives at our facility for processing, and is returned for infusion in the patient. To do so, we need our cell therapy facilities to be located in major population centers in which patients are likely to be located and within close proximity of major airports. In the future, it may be necessary to build new facilities or invest into new technologies enabling final formulation at point of care, which would require a significant commitment of capital and may not then be available to us. Even if we are able to establish such new facilities or technologies, we may experience challenges in ensuring that they are compliant with cGMP standards, EMEA requirements, and/or applicable state or local regulations. We cannot be certain that we would be able to recoup the costs of establishing a facility in a given market. Given these risks, we could choose not to expand our cell processing and manufacturing services into new geographic markets which will limit our future growth prospects.

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Product liability and uninsured risks may adversely affect MaSTherCell’s continuing operations and damage its reputation.

MaSTherCell operates in an industry susceptible to significant product liability claims. MaSTherCell may be liable if it manufactures any product that causes injury, illness, or death for intentional or gross fault on its part. Inpart. In addition, product liability claims may be brought against MaSTherCell’s clients, in which case MaSTherCell’s clients or others may seek contribution from MaSTherCell if they incur any loss or expenses related to such claims. These claims may be brought by individuals seeking relief or by groups seeking to represent a class. While MaSTherCell’s liability may be limited to instances where it was grossly negligent, nonetheless, the defense of such claims may be costly and time-consuming and could divert the attention of MaSTherCell’s management and technical personnel.

A breakdown or breach of MaSTherCell’s information technology systems could subject MaSTherCell to liability.

MaSTherCell relies upon its information technology systems and infrastructure for its business. The size and complexity of MaSTherCell’s computer systems make it potentially vulnerable to breakdown and unauthorized intrusion. MaSTherCell could also experience a business interruption, theft of confidential information, or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise MaSTherCell’s system infrastructure or lead to data leakage, either internally or at MaSTherCell’s third-party providers.

Similarly, data privacy breaches by those who access MaSTherCell’s systems may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to MaSTherCell or its employees, clients or other business partners, may be exposed to unauthorized persons or to the public. Even if MaSTherCell runs regular IT security audits by third-parties, there can be no assurance that MaSTherCell’s efforts to protect its data and information technology systems will prevent breakdowns or breaches in MaSTherCell’s systems that could adversely affect its business and result in financial and reputational harm to MaSTherCell.

We face competition from other third party contact manufacturers, as well as more general competition from companies and academic and research institutions that may choose to self-manufacture rather than utilize a contract manufacturer.

We face competition from companies that are large, well-established manufacturers with financial, technical, research and development and sales and marketing resources that are significantly greater than those that we currently possess. In addition, certain of our leading competitors, such as Lonza Group, WuXi AppTec and PCT have international capabilities that we do not currently possess though we are pursuing.

More generally, we face competition inherent in any third-party manufacturer’s business - namely, that potential customers may instead elect to invest in their own facilities and infrastructure, affording them greater control over their products and the hope of long-term cost savings compared to a third party contract manufacturer. To be successful, we will need to convince potential customers that our current and expanding capabilities are more innovative, of higher-quality and more cost-effective than could be achieved through internal manufacturing and that our experience and quality manufacturing and process development expertise are unique in the industry. Our ability to achieve this and to successfully compete against other manufacturers will depend, in large part, on our success in developing technologies that improve both the quality and profitability associated with cell therapy manufacturing. If we are unable to successfully compete against other manufacturers, we may not be able to develop our CDMO business plans which may harm our business, financial condition and results of operations.

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Extensive industry regulation has had, and will continue to have, a significant impact on our CDMO business, and it may require us to substantially invest in our development, manufacturing and distribution capabilities and may negatively impact our ability to generate and meet future demand for our products and improve profitability.

Although we seek to conduct our business in compliance with applicable governmental healthcare laws and regulations, these laws and regulations are exceedingly complex and often subject to varying interpretations. The cell therapy industry is the topic of significant government interest, and thus the laws and regulations applicable to our business are subject to frequent change and/or reinterpretation. As such, there can be no assurance that we will be able, or will have the resources, to maintain compliance with all such healthcare laws and regulations. Failure to comply with such healthcare laws and regulations could result in significant enforcement actions, civil or criminal penalties, which along with the costs associated with such compliance or with enforcement of such healthcare laws and regulations, may have a material adverse effect on our operations or may require restructuring of our operations or impair our ability to operate profitably.

Joint-venture partnerships integration into our global CDMO network would be subject to various risks and uncertainties and may involve significant time and attention, all of which could disrupt or adversely affect our business and harm our reputationreputation.

We need our cell therapy facilities to be located in major population centers in which patients are likely to be located and within close proximity of major airports. To do so, we intend to build up a global CDMO network partnership offering alternative manufacturing sites for our third-party clients currently operating out of Belgium, Korea and Israel. The failure to provide harmonized manufacturing quality standards between the current and any future sites to our clients and compliance with local regulatory agencies requirements could have a material adverse effect on our reputation, business, operating results and financial condition.

We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategystrategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management and on our trained staff turnover. If the staff turnover increases, it could result in additional hiring and training expenses, potentially delays in product development and manufacturing and harm our business and our growth. Competition for skilled personnel is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, some of these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key man” insurance policies on the lives of all of these individuals or the lives of any of our other employees.

Masthercell Global may not receive the future payments pursuant to the Stock Purchase Agreement with GPP-II.

The purchase price for the Masthercell Global Preferred Stock was up to $25 million, subject to certain adjustments, of which $11.8 million was paid in cash at closing. The Stock Purchase Agreement also requires GPP-II to make up to two additional payments to Masthercell Global if certain specified EBITDA (as defined in the Stock Purchase Agreement) and revenue targets are satisfied by Masthercell Global during each of years 2018 and 2019. For each of those fiscal years in which such specified EBITDA and revenue targets are satisfied by Masthercell Global, GPP-II will be obligated to pay an additional $6.6 million, subject to adjustment, to Masthercell Global shortly after the end of that fiscal year.

To earn such contingent payment for the 2018 fiscal year, Masthercell Global must have (i) during any twelve month period ending on or prior to December 31, 2018, generated Net Revenue equal to or greater than €14,100,000 and EBITDA equal to or greater than €1,800,000, and (ii) by December 31, 2018, obtained stockholder approval of the Stockholders’ Agreement Terms in accordance with law the and in a manner that will ensure that GPP-II is able to exercise its rights under the Stockholders’ Agreement without any further action or approval by GPP-II, us, our stockholders, or any other person, which includes the stockholder approval sought in our proxy statement for our annual meeting of stockholders (“Proper Approval”).   In satisfaction of these conditions, Masthercell Global achieved the specified EBITDA and revenues targets in 2018 as described in the SPA and received $6,600,000 of the Future Payments on January 16, 2019 and received approval from the requisite shareholders on October 23, 2018.

To earn such contingent payment for the 2019 fiscal year, Masthercell Global must (i) during any twelve-month period ending on or prior to December 31, 2019, generate Net Revenue equal to or greater than €19,100,000 and EBITDA equal to or greater than €3,900,000, and (ii) by December 31, 2019, obtain Proper Approval, if not already obtained. Accordingly, if our stockholders do not approve the Stockholders’ Agreement Terms and do not meet the applicable Net Revenue and EBITDA targets, Masthercell Global will not be eligible to receive the future payments. In addition, in such event, GPP-II will obtain the right to put to us (or, at our discretion, to Masthercell Global if Masthercell Global shall then have the funds available to consummate the transaction) its shares in Masthercell Global.

GPP-II may force the sale of Masthercell Global which may result in GPP-II receiving a greater value than the Company and its shareholders.

At any time following the earlier to occur of (i) after June 28, 2020 or (ii) Masthercell Global’s failure to generate positive EBITDA for any twelve (12) month period as determined on a quarterly basis prior to June 28, 2020 or its failure to generate at least $1,000,000 of EBITDA during any such twelve (12) month period after June 28, 2020 (collectively, a “Material Underperformance Event”), GPP-II has the right, in its sole discretion, to approve and force the sale of Masthercell Global. While we have the right of first refusal with respect to acquiring Masthercell Global in its entirety, if GPP-II elects to exercise such a right and if we are not in the position to acquire Masthercell Global, GPP-II may cause the sale of Masthercell Global to any third party on terms GPP-II approves on an arm’s length basis and subject to the receipt of a fairness opinion. If this occurs, we are contractually obligated to approve such a sale and execute any documents as required by GPP-II. We must also share in any costs and expenses relating to such a sale on a pro rata basis. Based on this, there may be a situation where GPP-II approves a sale that is more valuable or beneficial to GPP-II than to our Company and our shareholders, and we will not be able to prevent such a transaction. A sale of Masthercell Global could have impacts to the CDMO activities of Orgenesis as conducted through Masthercell Global and to Orgenesis’ overall value as a whole.

GPP-II may, under certain circumstances, assume control of the Board of Directors of our subsidiary, Masthercell Global, which would result in our inability to control and direct the activities of such subsidiary.

Currently, the Board of Directors of Masthercell Global is comprised of seven (7) directors, four (4) of whom are appointed by us (one of whom must be an industry expert (the “Industry Expert Director”)) and three (3) of whom are appointed by GPP-II. In the event the Industry Expert Director is removed or replaced without the prior written approval of GPP-II, or a Material Underperformance Event has occurred after June 28, 2020, GPP-II has the right to increase the size of the Board of Directors of Masthercell Global and appoint additional directors to fill such vacancies so that GPP-II appointments represent a majority of the directors. If this were to occur, GPP-II would control the Board of Directors of Masthercell Global and will be entitled to direct its activities and approve any transactions of Masthercell Global, even if such transactions provide greater value to GPP-II than they do to Orgenesis and its stockholders. This lack of control could diminish the value of Masthercell Global as it relates to Orgenesis’ overall activity and significantly impact CDMO activities of Orgenesis as conducted through Masthercell Global.

GPP-II has the right to buy our shares in Masthercell Global upon the occurrence of certain events resulting in Orgenesis not holding any shares in Masthercell Global.

GPP-II has the right to purchase all of the shares of stock we hold in Masthercell Global if any of the following occurs: (i) there is an Activist Shareholder (as defined in the Stockholders’ Agreement) of the Company; (ii) the Chief Executive Officer and/or Chairman of the Board of Directors of the Company is replaced prior to June 28, 2023; (iii) there is a Change of Control (as defined in the Stockholders’ Agreement) of the Company; or (iv) the Industry Expert Director is removed or replaced without the prior written consent of GPP-II. If any of these events occur, GPP-II, upon notice to the Company, can force the Company to sell all of the securities it holds in Masthercell Global to GPP-II based upon a valuation of Masthercell Global to be determined by one of the top ten (10) independent third-party accounting firms in the United States with experience in performing valuations as selected by GPP-II. This right of GPP-II expires if GPP-II fails to exercise this right within three (3) years from the first occurrence of any of the events listed above. In the event GPP-II does exercise its right following the occurrence of any such event, Orgenesis shall cease to be a stockholder of Masthercell Global and will no longer derive any benefits from this subsidiary or its activities. This would also affect the CDMO activities being conducted by Orgenesis through Masthercell Global.

GPP-II has the right to effectuate a spin-off of our subsidiary, Masthercell Global

In addition to the other rights GPP-II has obtained under the Stockholders’ Agreement, GPP-II also has the right to effectuate a spin-off of Masthercell Global upon the earlier to occur of: (i) any of the four events listed in the section above or (ii) ninety (90) days after GPP-II provides the Company of its intent to exercise this right provided that such notice cannot be delivered by GPP-II before June 28, 2020. Such a spin-off would be based on a valuation of Masthercell Global as determined in accordance with the terms of the Stockholders’ Agreement. If such a spin-off was completed, there is a chance that Masthercell Global would no longer be a subsidiary of Orgenesis, which would result in a significant loss of value to Orgenesis. In addition, without control or ownership of Masthercell Global, Orgenesis’ ability to conduct CDMO activities independently would also be greatly affected in the event such a spin-off is completed.

If GPP-II opts to exchange its Masthercell Global Preferred Stock for shares of our common stock, we could potentially issue a substantial number of shares of our common stock to GPP-II, which may result in significant dilution to our existing stockholders.

The Stockholders’ Agreement provides that GPP-II is entitled, at any time, to convert its share capital in Masthercell Global for our common stock (such exchange option being the “Stock Exchange Option”). Under the Stock Exchange Option, GPP-II is entitled to exchange the Masthercell Global Preferred Stock for our common stock based on an exchange price (as defined in the Stockholders’ Agreement) that is not currently known. If GPP-II opts to exchange its Masthercell Global Preferred Stock for shares of our common stock, we could potentially issue a substantial number of shares of our common stock to GPP-II. The common stock issuable to GPP-II upon exchange of the Masthercell Global Preferred Stock for our common stock could have a depressive effect on the market price of our common stock by increasing the number of shares of common stock outstanding. Such downward pressure could encourage short sales by certain investors, which could place further downward pressure on the price of the common stock. Accordingly, the number of shares of outstanding common stock may increase significantly and the ownership interests and proportionate voting power of the existing stockholders may be significantly diluted.

Risks Related to Our Trans-Differentiation Technologies for Diabetes

THM is entitled to cancel the THM License Agreement.

Pursuant to the terms of the THM License Agreement with THM, the Israeli Subsidiary must develop, manufacture, sell and market the products pursuant to the milestones and time schedule specified in the development plan. In the event the Israeli Subsidiary fails to fulfill the terms of the development plan under the THM License Agreement, THM shall be entitled to terminate the THM License Agreement by providing the Israeli Subsidiary with written notice of such a breach and if the Israeli Subsidiary does not cure such breach within one year of receiving the notice. If THM cancels the THM License Agreement, our CTPT business may be materially adversely affected. THM may also terminate the THM License Agreement if the Israeli Subsidiary breaches an obligation contained in the THM License Agreement and does not cure it within 180 days of receiving notice of the breach. Any termination or cancellation of the THM License Agreement is likely to materially adversely affect our business and prospects.

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Our success will depend on strategic collaborations with third parties to develop and commercialize therapeutic product candidates, and we may not have control over a number of key elements relating to the development and commercialization of any such product candidate.

A key aspect of our strategy is to seek collaboration with a partner, such as a large pharmaceutical organization, that is willing to further develop and commercialize a selected product candidate. To date, we have not entered into any such collaborative arrangement. By entering into any such strategic collaboration, we may rely on our partner for financial resources and for development, regulatory and commercialization expertise. Our partner may fail to develop or effectively commercialize our product candidate because they:

We may not be able to enter into a collaboration on acceptable terms, if at all. We face competition in our search for partners from other organizations worldwide, many of whom are larger and are able to offer more attractive deals in terms of financial commitments, contribution of human resources, or development, manufacturing, regulatory or commercial expertise and support. If we are not successful in attracting a partner and entering into a collaboration on acceptable terms, we may not be able to complete development of or commercialize any product candidate. In such event, our ability to generate revenues and achieve or sustain profitability would be significantly hindered and we may not be able to continue operations as proposed, requiring us to modify our business plan, curtail various aspects of our operations or cease operations.

Third parties to whom we may license or transfer development and commercialization rights for products covered by intellectual property rights may not be successful in their efforts and, as a result, we may not receive future royalty or other milestone payments relating to those products or rights.

If we are unable to successfully acquire, develop or commercialize new products, our operating results will suffer. Our future results of operations will depend to a significant extent upon our ability to successfully develop and commercialize our technology and businesses in a timely manner. There are numerous difficulties in developing and commercializing new technologies and products, including:

As a result of these and other difficulties, products in development by us may or may not receive timely regulatory approvals, or approvals at all, necessary for marketing by us or other third-party partners. If any of our future products are not approved in a timely fashion or, when acquired or developed and approved, cannot be successfully manufactured, commercialized or reimbursed, our operating results could be adversely affected. We cannot guarantee that any investment we make in developing product will be recouped, even if we are successful in commercializing these products.

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Our research and development programs are based on novel technologies and are inherently risky.

We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature of our cell therapy technology creates significant challenges with respect to product development and optimization, manufacturing, government regulation and approval, third-party reimbursement and market acceptance. For example, the FDA and EMA have relatively limited experience with the development and regulation of cell therapy products and, therefore, the pathway to marketing approval for our cell therapy product candidates may accordingly be more complex, lengthy and uncertain than for a more conventional product candidate. The indications of use for which we choose to pursue development may have clinical effectiveness endpoints that have not previously been reviewed or validated by the FDA or EMA, which may complicate or delay our effort to ultimately obtain FDA or EMA approval. Our efforts to overcome these challenges may not prove successful, and any product candidate we seek to develop may not be successfully developed or commercialized.

Extensive industry regulation has had, and will continue to have, a significant impact on our business, especially our product development, manufacturing and distribution capabilities.

All pharmaceutical companies are subject to extensive, complex, costly and evolving government regulation. For the U.S., this is principally administered by the FDA and to a lesser extent by the Drug Enforcement Administration (“DEA”) and state government agencies, as well as by varying regulatory agencies in foreign countries where products or product candidates are being manufactured and/or marketed. The Federal Food, Drug and Cosmetic Act, the Controlled Substances Act and other federal statutes and regulations, and similar foreign statutes and regulations, govern or influence the testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of our future products. Under these regulations, we may become subject to periodic inspection of our facilities, procedures and operations and/or the testing of our future products by the FDA, the DEA and other authorities, which conduct periodic inspections to confirm that we are in compliance with all applicable regulations. In addition, the FDA and foreign regulatory agencies conduct pre-approval and post-approval reviews and plant inspections to determine whether our systems and processes are in compliance with current good manufacturing practice (“cGMP”) and other regulations. Following such inspections, the FDA or other agency may issue observations, notices, citations and/or warning letters that could cause us to modify certain activities identified during the inspection. FDA guidelines specify that a warning letter is issued only for violations of “regulatory significance” for which the failure to adequately and promptly achieve correction may be expected to result in an enforcement action. We may also be required to report adverse events associated with our future products to FDA and other regulatory authorities. Unexpected or serious health or safety concerns would result in labeling changes, recalls, market withdrawals or other regulatory actions.

The range of possible sanctions includes, among others, FDA issuance of adverse publicity, product recalls or seizures, fines, total or partial suspension of production and/or distribution, suspension of the FDA’s review of product applications, enforcement actions, injunctions, and civil or criminal prosecution. Any such sanctions, if imposed, could have a material adverse effect on our business, operating results, financial condition and cash flows. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals. Similar sanctions as detailed above may be available to the FDA under a consent decree, depending upon the actual terms of such decree. If internal compliance programs do not meet regulatory agency standards or if compliance is deemed deficient in any significant way, it could materially harm our business.

 For Europe, the

The European Medicines Agency (“EMA”) will regulate our future products.products in Europe. Regulatory approval by the EMA will be subject to the evaluation of data relating to the quality, efficacy and safety of our future products for its proposed use. The time taken to obtain regulatory approval varies between countries. Different regulators may impose their own requirements and may refuse to grant, or may require additional data before granting, an approval, notwithstanding that regulatory approval may have been granted by other regulators.

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Regulatory approval may be delayed, limited or denied for a number of reasons, including insufficient clinical data, the product not meeting safety or efficacy requirements or any relevant manufacturing processes or facilities not meeting applicable requirements.

Further trials and other costly and time-consuming assessments of the product may be required to obtain or maintain regulatory approval. Medicinal products are generally subject to lengthy and rigorous pre-clinical and clinical trials and other extensive, costly and time-consuming procedures mandated by regulatory authorities. We may be required to conduct additional trials beyond those currently planned, which could require significant time and expense. In addition, even after the technology approval, both in the U.S. and Europe, we will be required to maintain post marketing surveillance of potential adverse and risk assessment programs to identify adverse events that did not appear during the clinical studies and drug approval process. All of the foregoing could require an investment of significant time and expense.

We have never generated any revenue from therapeutic product sales and our ability to generate revenue from product sales and become profitable depends significantly on our success in a number of factors.

We have no therapeutic products approved for commercial sale, have not generated any revenue from product sales, and do not anticipate generating any revenue from product sales until sometime after we have received regulatory approval for the commercial sale of a product candidate. Our ability to generate revenue and achieve profitability depends significantly on our success in many factors, including:

Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the U.S. Food and Drug Administration, or the FDA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays, or to perform clinical, nonclinical, or other types of studies in addition to those that we currently anticipate. If we are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own the commercial rights for that territory. If the number of our addressable disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. If we are not able to generate revenue from the sale of any approved products, we may never become profitable.

We have concentrated our research and development efforts on technology using cell-based therapy, and our future success is highly dependent on the successful development of that technology for diabetes.

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We have developed a technology that demonstrates the capacity to induce a shift in the developmental fate of cells from the liver and differentiating (converting) them into “pancreatic beta cell-like” insulin-producing cells for patients with diabetes. Based on licensed know-how and patents, our intention is to develop our technology to the clinical stage for regeneration of functional insulin-producing cells, thus enabling normal glucose regulated insulin secretion, via cell therapy. By using therapeutic agents (i.e., PDX-1, and additional pancreatic transcription factors in an adenovirus-vector) that efficiently convert a sub-population of liver cells into pancreatic islets phenotype and function, this approach allows the diabetic patient to be the donor of hishis/her own therapeutic tissue and to start producing his/her own insulin in a glucose-responsive manner, thereby eliminating the need for insulin injections. Because this is a new approach to treating diabetes, developing and commercializing our product candidates subjects us to a number of challenges, including:

When we commence our clinical trials, we may not be able to conduct our trials on the timelines we expect.

Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. We expect that our early clinical work will help support the filing with the FDA of an IND for our product in 2018.fiscal 2019. However, we cannot be sure that we will be able to submit an IND in this time-frame, and we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely completion of clinical development include:

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Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to, or we may elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical study delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

Our clinical trial results may also not support approval, whether accelerated approval, conditional marketing authorizations, or regular approval. The results of preclinical and clinical studies may not be predictive of the results of later-stage clinical trials, and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials. In addition, our product candidates could fail to receive regulatory approval for many reasons, including the following:

Further, failure to obtain approval for any of the above reasons may be made more likely by the fact that the FDA and other regulatory authorities have very limited experience with commercial development of our cell therapy for the treatment of Type 1 Diabetes.

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Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

As with most biological drug products, use of our product candidates could be associated with side effects or adverse events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. Any of these occurrences may materially and adversely harm our business, financial condition and prospects.

Research and development of biopharmaceutical products is inherently risky.

We may not be successful in our efforts to use and enhance our technology platform to create a pipeline of product candidates and develop commercially successful products, orproducts. Furthermore, we may expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on product candidates or diseases that may be more profitable or for which there is a greater likelihood of success. If we fail to develop additional product candidates, our commercial opportunity will be limited. Even if we are successful in continuing to build our pipeline, obtaining regulatory approvals and commercializing additional product candidates will require substantial additional funding and are prone to the risks of failure inherent in medical product development. Investment in biopharmaceutical product development involves significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide you any assurance that we will be able to successfully advance any of these additional product candidates through the development process. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development or commercialization for many reasons, including the following:

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, discover, develop, or commercialize additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations.

Our product candidates are biologics and the manufacture of our product candidates is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-out of our manufacturing capabilities.

If we encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure. Our product candidates are biologics and the process of manufacturing our products is complex, highly regulated and subject to multiple risks. The manufacture of our product candidates involves complex processes, including the biopsy of tissue from a patient’s liver, propagation of the patient’s liver cells from that liver tissue to obtain the desired dose, trans-differentiating those cells into insulin-producing cells ex vivo and ultimately infusing the cells back into a patient’s body. As a result of the complexities, the cost to manufacture biologics is generally higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce.

Our manufacturing process will be susceptible to product loss or failure due to logistical issues associated with the collection of liver cells, or starting material, from the patient, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing issues associated with the differences in patient starting materials, interruptions in the manufacturing process, contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, failures in process testing and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If for any reason we lose a patient’s starting material or later-developed product at any point in the process, the manufacturing process for that patient will need to be restarted and the resulting delay may adversely affect that patient’s outcome. If microbial, viral, or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Because our product candidates are manufactured for each particular patient, we will be required to maintain a chain of identity and tractability of all reagents and viruses involved in the process with respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as product candidates are developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials.

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Although we are working to develop commercially viable processes, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. We may ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized.

We expect that continued development of our manufacturing facility via MaSTherCell and our global CDMO network will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins. We may establish multiple manufacturing facilities as we expand our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly. Even if we are successful, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, natural disasters, power failures and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

In addition, the manufacturing process for any products that we may develop is subject to FDA and foreign regulatory authority approval process, and we will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements on an ongoing basis. If we are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CDMO subsidiaries and joint ventures will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and growth prospects.

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The manufacture of biological drug products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up or out, validating the production process, and assuring high reliability of the manufacturing process (including the absence of contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control, including stability of the product, product testing, operator error, availability of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered in our supply of our product candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidate to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to begin new clinical trials at additional expense or terminate clinical trials completely.

Cell-based therapies rely on the availability of reagents, specialized equipment, and other specialty materials, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.

Manufacturing our product candidates will require many reagents and viruses, which are substances used in our manufacturing processes to bring about chemical or biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limited resources and experience to support commercial biologics production. We currently depend on a limited number of vendors for certain materials and equipment used in the manufacture of our product candidates. Some of these suppliers may not have the capacity to support commercial products manufactured under GMP by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. We also do not have supply contracts with many of these suppliers and may not be able to obtain supply contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing.

For some of these reagents, viruses, equipment, and materials, we rely and may in the future rely on sole source vendors or a limited number of vendors. An inability to continue to source product from any of these suppliers, which could be due to regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands, or quality issues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product sales and operating results or our ability to conduct clinical trials, either of which could significantly harm our business.

As we continue to develop and scale our manufacturing process, we expect that we will need to obtain rights to and supplies of certain materials and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms, or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials or find a suitable substitute, it would have a material adverse effect on our business.

We currently have no marketing and sales organization and have no experience in marketing therapeutic products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.

We currently have no sales, marketing, or commercial therapeutic product distribution capabilities and have no experience in marketing products. We intend to develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources, and time. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train, and retain marketing and sales personnel. If we are unable to or decide not to establish internal sales, marketing and commercial distribution capabilities for any or all products we develop, we will likely pursue collaborative arrangements regarding the sales and marketing of our products. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.

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There can be no assurance that we will be able to develop in-house sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any product in the United States or overseas, and as a result, we may not be able to generate product revenue.

A variety of risks associated with operating our business internationally could materially adversely affect our business. We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we, and any potential collaborators in those jurisdictions, will be subject to additional risks related to operating in foreign countries, including:

These and other risks associated with our planned international operations may materially adversely affect our ability to attain or maintain profitable operations.

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

The biopharmaceutical industry, and the rapidly evolving market for developing cell-based therapies is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations as well as established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized, or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products.

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Specifically, we face significant competition from companies in the insulin therapy market. Insulin therapy is widely used for Insulin-Dependent Diabetes Mellitus (IDDM) patients who are not controlled with oral medications. The global diabetes market comprising the insulin, insulin analogues and other anti-diabetic drugs has been evolving rapidly. A look at the diabetes market reveals that it is dominated by a handful of participants such as Novo Nordisk A/S, Eli Lilly and Company, Sanofi-Aventis, Takeda Pharmaceutical Company Limited, Pfizer Inc., Merck KgaA, and Bayer AG. Even if we obtain regulatory approval of our product candidates, we may not be the first to market and that may affect the price or demand for our product candidates. Additionally, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances. Additionally, a competitor could obtain orphan product exclusivity from the FDA with respect to such competitor’s product. If such competitor product is determined to be the same product as one of our product candidates, that may prevent us from obtaining approval from the FDA for such product candidate for the same indication for seven years, except in limited circumstances.

We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our senior management, particularly our chief science officer,Chief Scientific Officer, Prof. Sarah Ferber, and our chief executive officer,Chief Executive Officer, Vered Caplan. The loss of the services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in product development and harm our business. Competition for skilled personnel is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, most these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key man” insurance policies on the lives of all of these individuals or the lives of any of our other employees.

Risks Related to our Common Stock

If we issue additional shares in the future, it will result in the dilution of our existing stockholders.

Our articles of incorporation authorizes the issuance of up to 145,833,334 shares of our common stock with a par value of $0.0001 per share. Our Board of Directors may choose to issue some or all of such shares to acquire one or more companies or products and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change of control of our company.

Our stock price and trading volume may be volatile, which could result in losses for our stockholders.

The equity trading markets have recently experienced high volatility resulting in highly variable and unpredictable pricing of equity securities. If the turmoil in the equity trading markets continues, the market for our common stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:

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Many of these factors are beyond our control, and we cannot predict their potential effects on the price of our common stock. In addition, the stock market is subject to extreme price and volume fluctuations. During the past 52 weeks ended November 30, 2017,2018, our stock price has fluctuated from a low of $2.76$4.50 to a high of $11.76$14.68 (adjusted to account for the 1:12 reverse split implemented in November 2017). This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

No assurance can be provided that a purchaser of our common stock will be able to resell their shares of common stock at or above the price that they acquired those shares. We can provide no assurances that the market price of common stock will increase or that the market price of common stock will not fluctuate or decline significantly.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends, and currently do not intend to pay any dividends for the foreseeable future. The Board of Directors has not directed the payment of any dividends and does not anticipate paying dividends on the shares for the foreseeable future and intends to retain any future earnings to the extent necessary to develop and expand our business. Payment of cash dividends, if any, will depend, among other factors, on our earnings, capital requirements, and the general operating and financial condition, and will be subject to legal limitations on the payment of dividends out of paid-in capital. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen, and investors may lose all of their investment in our company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

We do not own any real property. A description of the leased premises we utilize in several of our facilities is as follows:

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We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if required, suitable alternative or additional space will be available to us on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings that we anticipate would result in a material adverse effect on our business or operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market informationInformation

 Our

Until March 13, 2018, the Company’s common shares were traded under OTC Market Group’s OTCQB. From March 13, 2018 the Company's common stock has been listedbegan trading on the OTCQBNasdaq Capital Market (Nasdaq CM) under the trading symbol “ORGS.”

 The following table shows the quarterly high and low bid prices or sales prices for our common stock over the last two completed fiscal years and subsequent interim periods, as quoted on the OTCQB Platform. The prices represent quotations by dealers without adjustments for retail mark-ups, mark-downs or commissions and may not represent actual transactions.

            The prices have been adjusted to reflect the 1 for 12 reverse stock split of our common stock that became effective on November 16, 2017.

⁽¹⁾ December 1, 2017 – February 27, 2018

As of February 28, 2018,11, 2019, there were 76156 holders of record of our common stock, and the last reported sale price of our common stock on the OTCQBNasdaq CM on February 27, 201812, 2019 was $8.09.$4.88. A significant number of shares of our common stock are held in either nominee name or street name brokerage accounts, and consequently, we are unable to determine the total number of beneficial owners of our stock.

Dividend Policy

To date, we have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We plan to retain all earnings to provide funds for the operations of our company. In the future, our Board of Directors will decide whether to declare and pay dividends based upon our earnings, financial condition, capital requirements, and other factors that our Board of Directors may consider relevant. We are not under any contractual restriction as to present or future ability to pay dividends.

Unregistered Sales of Equity Securities

During the three monthsfiscal year ended November 30, 2017,2018, our financing activities consisted of the following:

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            Between September and November(1) In January 2017, we issued inthe Company entered into definitive agreements with an institutional investor for the private placement of 2,564,115 units of the Company’s securities for aggregate subscription proceeds to accredited or offshorethe Company of $16 million at $6.24 price per unit. Each unit is comprised of one share of the Company’s Common Stock and one warrant, exercisable over a three-years period from the date of issuance, to purchase one additional share of Common Stock at a per share exercise price of $6.24 (“Unit”). The subscription proceeds have been paid to the Company on a periodic basis through October 2018.

In July 2018, the Company entered into definitive agreements with assignees of the aforementioned institutional investor whereby these assignees remitted $4.6 million in respect of the units available under the original subscription agreement that had been subscribed for, entitling such investors 160,265 sharesto 702,307 units, with each unit being comprised of (i) one share of the Company's common stock and (ii) one three-year warrant to purchase up to an additional one share of the Company’s common stock at a per share exercise price of $6.24.

During the year ended November 30, 2018 and 2017, the investor and the assignees remitted to the Company $11.5 and $4.5 million, respectively, and the Company issued 1,813,687 and 721,160 Units, respectively.

(2) During the fiscal year ended November 30, 2018, the Company entered into definitive agreements with accredited and other qualified investors relating to a private placement of 1,237,642 units. Each unit is comprised of (i) one share of the Company’s common stock and (ii) three-year warrant to purchase warrants forup to an additional 160,265 sharesone share of our common stock, exercisablethe Company’s Common Stock at a per share exercise price of $6.24, for aggregate grossproceeds to the Company of approximately $7.7 million.

(3) During the year ended November 30, 2018, investors exercised 136,646 warrants into 136,646 shares of the Company’s Common Stock, for aggregate proceeds of $1,000,053.$853 thousand.

 Between September and

(4) In November 2017,2018, we issued in private placement toentered into unsecured convertible note agreements with accredited or offshore investors our convertible promissory notesfor an aggregate amount of $625 thousand. The loans bear an annual interest rate of 2% and mature in three years unless converted earlier. The holders, at their option, may convert the aggregateoutstanding principal amount of $1.1 million which are convertibleand accrued interest under those notes into closing on $1.1 million, in private placement debt offerings through the issuance our convertible promissory notes with maturity dates of twenty-four months, convertible as of November 30, 2017 into 176,28289,285 shares of our common stock and 176,28289,285 three-year warrants to purchase up to an additional 176,28289,285 shares of our common stock at a per share exercise price of $6.24.$7. In the initial two years, the holders have the right to convert the outstanding principal amount and accrued interest into shares of capital stock of Hemogenyx-Cell, a subsidiary of Hemogenyx Pharmaceuticals Plc, at a price per share based on a pre-money valuation of Hemogenyx-Cell of $12 million (the “Hemogenyx Securities”), pursuant to the collaboration agreement with Hemogenyx Pharmaceuticals Plc.

(5) In November 2018, we entered into unsecured convertible note agreements with accredited or offshore investors for an aggregate amount of $625 thousand. The loan bears an annual interest rate of 2% and matures in three years unless converted earlier. The holders, at their option, may convert the outstanding principal amount and accrued interest under those notes into 89,285 shares of our common stock and 89,285 three-year warrants to purchase up to an additional 89,285 shares of our common stock at a per share exercise price of $7. In the initial two years, the holders have the right to convert the outstanding principal amount and accrued interest into shares of capital stock of Immugenyx, LLC, a subsidiary of Hemogenyx Pharmaceuticals Plc, at a price per share based on a pre-money valuation of Immugenyx of $8 million (the “Immugenyx Securities”), pursuant to the collaboration agreement with Immugenyx, LLC.

All of the securities issued in the transactions described above were issued without registration under the Securities Act in reliance upon the exemptions provided in Section 4(2) of the Securities Act or Regulation S under suchof the Securities Act. Except with respect to securities sold underpursuant to Regulation S, the recipients of securities in each such transaction acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. Appropriate legends were affixed to the share certificates issued in all of the above transactions. Each of the recipients also represented that they were “accredited investors” within the meaning of Rule 501(a) of Regulation D under the Securities Act or had such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in its common stock. All recipients had adequate access, through their relationships with the Company and its officers and directors, to information about the Company. None of the transactions described above involved general solicitation or advertising.

Issuer Purchases of Equity Securities

We do not have a stock repurchase program for our common stock and have not otherwise purchased any shares of our common stock.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the two-year period ended November 30, 2018 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the fiscal year ended November 30, 2018, as compared to the fiscal year ended November 30, 2017. This discussion should be read in conjunction with our consolidated financial statements for the two-year period ended November 30, 2018 and related notes included elsewhere in this Annual Report on Form 10-K. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.”

Corporate Overview

We are a biotechnology company specializing in the development, manufacturing and provision of technologies and services in the cell and gene therapy industry. We operate through two platforms: (i) a point-of-care (“POCare”) cell therapy platform (“PT”) and (ii) a Contract Development and Manufacturing Organization (“CDMO”) platform conducted through our subsidiary, Masthercell Global. Through our PT business, our aim is to further the development of Advanced Therapy Medicinal Products (“ATMPs”) through collaborations and in-licensing with other pre-clinical and clinical-stage biopharmaceutical companies and research and healthcare institutes to bring such ATMPs to patients. We out-license these ATMPs through regional partners to whom we also provide regulatory, pre-clinical and training services to support their activity in order to reach patients in a point-of-care hospital setting. Through our CDMO platform, we are focused on providing contract manufacturing and development services for biopharmaceutical companies.

Our therapeutic development efforts in our PT business are focused on advancing breakthrough scientific achievements in ATMPs, and namely autologous therapies, which have a curative potential. We base our development on therapeutic collaborations and in-licensing with other pre-clinical and clinical-stage biopharma companies as well as direct collaboration with research and healthcare institutes. We are engaging in therapeutic collaborations and in-licensing with other academic centers and research centers in order to pursue emerging technologies of other ATMPs in cell and gene therapy in such areas as cell-based immunotherapies, metabolic diseases, neurodegenerative diseases and tissue regeneration. Each of these customers and collaborations represents a growth opportunity and future revenue potential as we out-license these ATMPs through regional partners to whom we also provide regulatory, pre-clinical and training services to support their activity in order to reach patients in a point-of-care hospital setting.

We carry out our PT business through three wholly-owned and separate subsidiaries. This corporate structure allows us to simplify the accounting treatment, minimize taxation and optimize local grant support. The subsidiaries related to this business are Orgenesis Maryland Inc., in the U.S., Orgenesis SPRL, in the European Union and Orgenesis Ltd. in Israel.

Our subsidiary, Masthercell Global, is a CDMO specialized in cell therapy development for advanced therapeutically products. In the last decade, cell therapy medicinal products have gained significant importance, particularly in the fields of ex-vivo gene therapy and immunotherapy. While academic and industrial research has led scientific development in the sector, industrialization and manufacturing expertise remains insufficient. Masthercell Global plans to fill this gap by providing three types of services to its customers: (i) process and assay development services and (ii) current Good Manufacturing Practices (cGMP) contract manufacturing services and (iii) technology innovation and engineering services. These services offer a double advantage to Masthercell Global’s customers. First, customers can continue allocating their financial and human resources on their product/therapy, while relying on a long-term reliable and trusted partner for their process development/production. Second, through its subsidiaries, it allows customers to benefit from Masthercell Global’s expertise in cell therapy manufacturing and all related aspects.

Masthercell Global’s wholly-owned subsidiaries include MaSTherCell S.A., a Belgian-based subsidiary and a Contract Development and Manufacturing Organization (“CDMO”) specialized in cell therapy development and manufacturing for advanced medicinal products, Atvio Biotech Ltd. (“Atvio”), an Israeli-based CDMO, and CureCell Co. Ltd. (“CureCell”), a Korea-based CDMO.

We operate our CDMO and the notes related to those statements. Some of our discussion is forward-looking and involves risks and uncertainties. For information regarding risk factors that could have a material adverse effect on ourPT businesses as two separate business refer to the “risk factors” section of this annual report.segments.

Corporate History

We were incorporated in the state of Nevada on June 5, 2008 under the name Business Outsourcing Services, Inc. Effective August 31, 2011, we completed a merger with our subsidiary, Orgenesis Inc., a Nevada corporation, which was incorporated solely to effect a change in its name. As a result, the Company changed its name from “Business Outsourcing Services, Inc.” to “Orgenesis Inc.”

 Our strategy is to accelerate the development of breakthrough life-improving medical treatments through a hybrid business model combining proprietary technologies in our CT and CDMO businesses.

On October 11, 2011, we incorporated Orgenesis Ltd. as our wholly-owned subsidiary under the laws of Israel. On February 2, 2012, Orgenesis Ltd. signed and closed a definitive agreement to license from Tel Hashomer - Medical Research, Infrastructure and Services Ltd. (“THM”), a private company duly incorporated under the laws of Israel, patents and know-how related to the development of AIP (Autologous Insulin Producing) cells. Through Orgenesis Ltd., we became engaged in our CT business.

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On November 6, 2014 we entered into an agreement with the shareholders of MaSTherCell S.A. to acquire MaSTherCell S.A. On March 2, 2015, we closed on the acquisition of MaSTherCell whereby it became a wholly-owned subsidiary of Orgenesis. Through MaSTherCell, we became engaged in the CDMO business. Currently, most of the Company’s revenues are generated through MaSTherCell.

On June 28, 2018, the Company, Masthercell Global, Great Point Partners, LLC, a manager of private equity funds focused on growing small to medium sized heath care companies (“Great Point”), and certain of Great Point’s affiliates, entered into a series of definitive strategic agreements intended to finance, strengthen and expand Orgenesis’ CDMO business. In connection therewith, the Company, Masthercell Global and GPP-II Masthercell, LLC, a Delaware limited liability company (“GPP-II”) and an affiliate of Great Point, entered into a Stock Purchase Agreement (the “SPA”) pursuant to which GPP-II purchased 378,000 shares of newly designated Series A Preferred Stock of Masthercell Global (the “Masthercell Global Preferred Stock”), representing 37.8% of the issued and outstanding share capital of Masthercell Global, for cash consideration to be paid into Masthercell Global of up to $25 million, subject to certain adjustments (the “Consideration”). Orgenesis holds 622,000 shares of Masthercell Global’s Common Stock, representing 62.2% of the issued and outstanding equity share capital of Masthercell Global. An initial cash payment of $11.8 million of the Consideration was remitted at closing by GPP-II, with a follow up payment of $6,600,000 to be made in each of years 2018 and 2019 (the “Future Payments”), or an aggregate of $13.2 million, if (a) Masthercell Global achieves specified EBITDA and revenues targets during each of these years, and (b) the Orgenesis’ shareholders approve certain provisions of the Stockholders’ Agreement referred to below on or before December 31, 2019. None of the future Consideration amounts, if any, will result in an increase in GPP-II’s equity holdings in Masthercell Global beyond the 378,000 shares of Series A Preferred Stock issued to GPP-II at closing.

Contemporaneous with the execution of the SPA, Orgenesis and Masthercell Global entered into a Contribution, Assignment and Assumption Agreement pursuant to which Orgenesis contributed to Masthercell Global the Orgenesis’ assets relating to the CDMO Business (as defined below), including the CDMO subsidiaries (the “Corporate Reorganization”). In furtherance thereof, Masthercell Global, as Orgenesis’ assignee, acquired all of the issued and outstanding share capital of Atvio, the Company’s Israel based CDMO partner since May 2016, and 94.12% of the share capital of CureCell, the Company’s Korea based CDMO partner since March 2016. Orgenesis exercised the” call option” to which it was entitled under the joint venture agreements with each of these entities to purchase from the former shareholders their equity holding. The consideration for the outstanding share equity in each of Atvio and CureCell consisted solely of Orgenesis common stock. In respect of the acquisition of Atvio, Orgenesis issued to the former Atvio shareholders an aggregate of 83,965 shares of Orgenesis common stock. In respect of the acquisition of CureCell, Orgenesis Inc. issued to the former CureCell shareholders an aggregate of 202,846 shares of Orgenesis Common Stock subject to a third-party valuation. Together with MaSTherCell S.A., Atvio and CureCell are directly held subsidiaries under Masthercell Global (collectively, the “Masthercell Global Subsidiaries”).

Corporate OverviewMaterial Developments During Fiscal 2018

 We are

Funding from SFPI

On November 15, 2017, we, MaSTherCell and the Belgian Sovereign Funds Société Fédérale de Participations et d'Investissement (“SFPI”) entered into a serviceSubscription and research companyShareholders Agreement (the “ SFPI Agreement”) pursuant to which SFPI completed an equity investment in MaSTherCell in the fieldaggregate amount of €5 million (approximately $5.9 million), for approximately 16.7% of MaSTherCell. The equity investment commitment included the conversion of the regenerative medicine industryoutstanding loan and accrued interest of Euro 1.07 million (approximately $1.18 million), previously made by SFPI to MaSTherCell.

Following the SFPI investment in MaSTherCell, in November 2017, MaSTherCell announced the expansion by 600m² of its facility in Belgium with a focusdedicated, late-stage clinical and commercial cGMP unit, which was opened in the first quarter of 2019. This new expansion enables MaSTherCell to augment its commercial capabilities in Europe with five state-of-the-art advanced manufacturing units and extended GMP-accredited quality control (QC) laboratories. On June 13, 2018, SPFI has paid the balance of Euro 1.9 million (approximately $2.3 million) to MaSTherCell.

Consolidation of CDMO Entities and Strategic Funding

On June 28, 2018, the Company, Masthercell Global Inc., a Delaware company and a newly formed subsidiary of the Company that holds our business relating to the third party contract manufacturing for cell therapy companies (CDMO) (“Masthercell Global”), Great Point Partners, LLC, a manager of private equity funds focused on growing small to medium sized heath care companies (“Great Point”), and certain of Great Point’s affiliates, entered into a series of definitive strategic agreements intended to finance, strengthen and expand Orgenesis’ CDMO business. In connection therewith, the Company, Masthercell Global and GPP-II Masthercell, LLC, a Delaware limited liability company (“GPP-II”) and an affiliate of Great Point entered into Stock Purchase agreement (the “SPA”) pursuant to which GPP-II purchased 378,000 shares of newly designated Series A Preferred Stock of Masthercell Global (the “Masthercell Global Preferred Stock”), representing 37.8% of the issued and outstanding share capital of Masthercell Global, for cash consideration to be paid into Masthercell Global of up to $25 million, subject to certain adjustments (the “Consideration”). Orgenesis holds 622,000 shares of Masthercell Global’s Common Stock, representing 62.2% of the issued and outstanding equity share capital of Masthercell Global. An initial cash payment of $11.8 million of the Consideration was remitted at closing, with a follow up payment of $6,600,000 to be made in each of years 2018 and 2019 (the “Future Payments”), or an aggregate of $13.2 million, if (a) Masthercell Global achieves specified EBITDA and revenues targets during each of these years, and (b) the Orgenesis’ shareholders approve certain provisions of the Stockholders’ Agreement referred to below on or before December 31, 2019. None of the future Consideration amounts, if any, will result in an increase in GPP-II’s equity holdings in Masthercell Global beyond the 378,000 shares of Series A Preferred Stock issued to GPP-II at closing. The proceeds of the investment will be used to fund the activities of Masthercell Global and its consolidated subsidiaries. Notwithstanding the foregoing, GPP-II may, in its sole discretion, elect to pay all or a portion of the future Consideration amounts even if the financial targets described above have not been achieved and the Orgenesis Stockholder Approval has not been obtained. In satisfaction of the first of the two conditions described above, Masthercell Global achieved the specified EBITDA and revenues targets in 2018 as described in the SPA and received $6,600,000 of the Future Payments on January 16, 2019.

In connection with the entry into the SPA described above, each of the Company, Masthercell Global and GPP-II entered into the Masthercell Global Inc. Stockholders’ Agreement (the “Stockholders’ Agreement”) providing for certain restrictions on the disposition of Masthercell Global securities, the provisions of certain options and rights with respect to the management and operations of Masthercell Global, certain favorable, preferential rights to GPP-II (including, without limitation, a tag right, drag right and certain protective provisions), a right to exchange the Masthercell Global Preferred Stock for shares of Orgenesis common stock and certain other rights and obligations. In addition, after the earlier of the second anniversary of the closing or certain enumerated circumstances, GPP-II is entitled to effectuate a spinoff of Masthercell Global and the Masthercell Global Subsidiaries (the “Spinoff”). The Spinoff is required to reflect a market value determined by one of the top ten independent accounting firms in the U.S. selected by GPP-II, provided that under certain conditions, such market valuation shall reflect a valuation of Masthercell Global and the Masthercell Global Subsidiaries of at least $50 million. In addition, upon certain enumerated events as described below, GPP-II is entitled, at its option, to put to the Company (or, at Company’s discretion, to Masthercell Global if Masthercell Global shall then have the funds available to consummate the transaction) its shares in Masthercell Global or, alternatively, purchase from the Company its share capital in Masthercell Global at a purchase price equal to the fair market value of such equity holdings as determined by one of the top ten independent accounting firms in the U.S. selected by GPP-II, provided that the purchase price shall not be greater than three times the price per share of Masthercell Global Preferred Stock paid by GPP-II and shall not be less than the price per share of Masthercell Global Preferred Stock paid by GPP-II . GPP-II may exercise its put or call option upon the occurrence of any of the following: (i) there is an Activist Shareholder of the Company; (ii) the Chief Executive Officer and/or Chairman of the board of directors of the Company resigns or is replaced, removed, or terminated for any reason prior to June 28, 2023; (iii) there is a Change of Control event of the Company; or (iv) the industry expert director appointed to the board of directors of Masthercell Global is removed or replaced (or a new such director is appointed) without the prior written consent of GPP-II. For the purposes of the foregoing, the following definitions shall apply: (A) “Activist Shareholder” shall mean any Person who acquires shares of capital stock of the Company who either: (x) acquires more than a majority of the voting power of the Company, (y) actively takes over and controls a majority of the board of directors of the Company, or (z) is required to file a Schedule 13D with respect to such Person’s ownership of the Company and has described a plan, proposal or intent to take action with respect to exerting significant pressure on the management of or directors of, the Company; and (B) “Change of Control” shall mean any of: (a) the acquisition, directly or indirectly (in a single transaction or a series of related transactions) by a Person or group of Persons of either (I) a majority of the common stock of the Company (whether by merger, consolidation, stock purchase, tender offer, reorganization, recapitalization or otherwise), or (II) all or substantially all of the assets of the Company and its Subsidiaries (but only if such transaction includes the transfer of Securities held by the Company), (b) if any four (4) of the directors of the Company as of June 28, 2018 are removed or replaced or for any other reason cease to serve as directors of the Company, (c) the filing of a petition in bankruptcy or the commencement of any proceedings under bankruptcy laws by or against the Company, provided that such filing or commencement shall be deemed a Change of Control immediately if filed or commenced by the Company or after sixty (60) days if such filing is initiated by a creditor of the Company and is not dismissed; (d) insolvency of the Company that is not cured by the Company within thirty (30) days; (e) the appointment of a receiver for the Company, provided that such appointment shall constitute an Change of Control immediately if the appointment was consented to by the Company or after sixty (60) days if not consented to by the Company and such appointment is not terminated; or (f) or dissolution of the Company .

The Stockholders’ Agreement further provides that GPP-II is entitled, at any time, to convert its share capital in Masthercell Global for the Company’s common stock in an amount equal to the lesser of (a)(i) the fair market value of GPP-II’s shares of Masthercell Global Preferred Stock to be exchanged, as determined by one of the top ten independent accounting firms in the U.S. selected by GPP-II and the Company, divided by (ii) the average closing price per share of Orgenesis Common Stock during the thirty (30) day period ending on the date that GPP-II provides the exchange notice (the “Exchange Price”) and (b)(i) the fair market value of GPP-II’s shares of Masthercell Global Preferred Stock to be exchanged assuming a value of Masthercell Global equal to three and a half (3.5) times the revenue of Masthercell Global during the last twelve (12) complete calendar months immediately prior to the exchange divided by (ii) the Exchange Price; provided, that in no event will (A) the Exchange Price be less than a price per share that would result in Orgenesis having an enterprise value of less than $250,000,000 and (B) the maximum number of shares of Orgenesis Common Stock to be issued shall not exceed 2,704,247 shares of outstanding Orgenesis Common Stock (representing approximately 19.99% of then outstanding Orgenesis Common Stock), unless Orgenesis obtains shareholder approval for the issuance of such greater amount of shares of Orgenesis Common Stock in accordance with the rules and regulations of the Nasdaq Stock Market. Such shareholder approval for a greater number was obtained on October 23, 2018.

Great Point and Masthercell Global entered into an advisory services agreement pursuant to which Great Point is to provide management services to Masthercell Global for which Great Point will be compensated at an annual base compensation equal to the greater of (i) $250,000 per each 12 month period or (ii) 5% of the EBITDA for such 12 month period, payable in arrears in quarterly installments; provided, that these payments will (A) begin to accrue immediately, but shall not be paid in cash to Great Point until such time as Masthercell Global generates EBITDA of at least $2,000,000 for any 12 month period or the sale of or change in control of Masthercell Global, and (B) shall not exceed an aggregate annual amount of $500,000. Such compensation accrues but is not owed to Great Point until the earlier of (i) Masthercell Global generating EBITDA of at least $2 million for any 12 months period following the date of the agreement or (ii) a Sale of the Company or Change of Control of the Company (as both terms are defined therein).

GPP Securities, LLC, a Delaware limited liability company and an affiliate of Great Point and Masthercell Global entered into a transaction services agreement pursuant to which GPP Securities, LLC is to provide certain brokerage services to Masthercell Global for which GPP Securities LLC will be entitled to a certain Exit Fee and Transaction Fee (as both terms are defined in the agreement), such fees not to be less than 2 percent of the applicable transaction value.

Corporate Reorganization

Contemporaneous with the execution of the SPA and the Stockholders’ Agreement, Orgenesis and Masthercell Global entered into a Contribution, Assignment and Assumption Agreement pursuant to which Orgenesis contributed to Masthercell Global the Orgenesis’ assets relating to the CDMO Business (as defined below), including the CDMO subsidiaries (the “Corporate Reorganization”). In furtherance thereof, Masthercell Global, as Orgenesis’ assignee, acquired all of the issued and outstanding share capital of Atvio, the Company’s Israel based CDMO partner since May 2016, and 94.12% of the share capital of CureCell, the Company’s Korea based CDMO partner since March 2016. Orgenesis exercised the” call option” to which it was entitled under the joint venture agreements with each of these entities to purchase from the former shareholders their equity holding. The consideration for the outstanding share equity in each of Atvio and CureCell consisted solely of Orgenesis common stock. In respect of the acquisition of Atvio, Orgenesis issued to the former Atvio shareholders an aggregate of 83,965 shares of Orgenesis common stock. In respect of the acquisition of CureCell, Orgenesis Inc. issued to the former CureCell shareholders an aggregate of 202,846 shares of Orgenesis Common Stock subject to a third-party valuation. Together with MaSTherCell S.A., Atvio and CureCell are directly held subsidiaries under Masthercell Global (collectively, the “Masthercell Global Subsidiaries”).

Masthercell Global, through the Masthercell Global Subsidiaries, will be engaged in the business of providing manufacturing and development services to third parties related to cell therapy products, and the creation and development of technology, and optimizations in connection with such manufacturing and development services for third parties (the “CDMO Business”). Under the terms of the Stockholders’ Agreement, Orgenesis has agreed that so long as it owns equity in Masthercell Global and for two years thereafter it will not engage in the CDMO Business, except through Masthercell Global (but may continue to engage in its other areas of business). In addition, except for certain limited circumstances, each of Orgenesis and GPP-II agreed in the Stockholders’ Agreement to not recruit or solicit or hire any officer or employee of Masthercell Global that was or is involved in the CDMO Business.

We intend, through our direct subsidiaries, to continue to engage in the manufacturing, researching, marketing, developing, selling and commercializing (either alone or jointly with third parties) products that are not directly related to the CDMO business, including, joint ventures, collaboration, partnership or similar arrangement with a third party.

Change of Fiscal Year

On October 22, 2018, the Board of Directors of the Company approved a change in the Company’s fiscal year end from November 30 to December 31 of each year. This change to the calendar year reporting cycle began January 1, 2019. As a result of the change, the Company will have a December 2018 fiscal month transition period, the results of which will be separately reported in the Company’s Quarterly Report on Form 10-Q for the calendar quarters ending March 31, 2019, June 30, 2019 and September 30, 2019, and in the Company’s Annual Report on Form 10-K for the calendar year ending December 31, 2019.

Collaboration Agreements with Immugenyx and Hemogenyx

On October 16, 2018, we entered into a collaboration agreement with Immugenyx, LLC (“Immugenyx”), a wholly owned subsidiary of Hemogenyx Pharmaceuticals Plc (“Hemogenyx”). Immugenyx will collaborate with the Company to further the development and commercialization of its advanced hematopoietic chimeras (“AHC”). AHC, a new type of humanized mouse with a functional human immune system, is being developed by Immugenyx as an in vivo platform for disease modelling, drug and cell therapy development. Pursuant to the terms of the agreement, we shall receive the worldwide rights to market the products and shall serve as a global distributor of Immugenyx’s products. Immugenyx will retain exclusive rights to manufacture, make and supply to the Company or our affiliates all the Immugenyx technology and/or licensed products that are marketed, sold or otherwise commercialized by the Company. In consideration for the license, we and/or our affiliates will advance to Immugenyx a convertible loan in an amount of no less than $1.0 million for advancing the development of humanized mice models and related antibody development. We also agreed to pay a royalty of 12% of our net revenues resulting from the sale or licensing of products involving the use of Immugenyx’s AHC technology. As of November 30, 2018, we have funded $0.5 million.

On October 18, 2018, we entered into a collaboration agreement with Hemogenyx Pharmaceuticals Plc to collaborate on the development and commercialization of Hemogenyx’s Human Postnatal Hemogenic Endothelial (“Hu-PHEC”) technology. Hu-PHEC is a cell replacement product candidate that is being designed to generate cancer-free, patient-matched blood stem cells after transplantation into the patient. Pursuant to the terms of the agreement, we shall manufacture and supply all Hu-PHEC related products both during and following completion of clinical trials. We shall also receive the worldwide rights to market the products and shall serve as a global distributor of Hemogenyx’s Hu-PHEC related products. In consideration for the license, we and/or our affiliates will advance to Hemogenyx a convertible loan in an amount of no less than $1.0 million for advancing the development of the Hu-PHEC technology. We also agreed to pay a royalty of 12% of our net revenues resulting from the sale or licensing of products involving the use of Hemogenyx’s Hu-PHEC technology. As of November 30, 2018, we have funded $0.5 million.

Convertible Note Agreements

During November 2018, we entered into private placement subscription agreements (the “Hemogenyx-Cell Subscription Agreement”) with certain accredited investors (the “Investors”), pursuant to which we agreed to sell an aggregate principal amount of $625,000 in a 2% Unsecured Convertible Note (the “Hemogenyx Convertible Note”), which is convertible, at the discretion of the Investor, into either (i) units, each unit consisting of one share of common stock of the Company, par value $0.0001 per share (“Common Stock”) and one three-year warrant to purchase one share of Common Stock at an exercise price of $7.00 per share, at a conversion price of $7.00 per unit (the “Units”) or (ii) shares of capital stock of Hemogenyx-Cell, a subsidiary of Hemogenyx, at a price per share based on a pre-money valuation of Hemogenyx-Cell of $12,000,000 (the “Hemogenyx Securities”) pursuant to the previously disclosed collaboration agreement with Hemogenyx.

In addition, on such same month, we entered into a private placement subscription agreement (the “Immugenyx Subscription Agreement”) with the Investors, pursuant to which we agreed to sell an aggregate principal amount of $625,000 in a 2% Unsecured Convertible Note (the “Immugenyx Convertible Note ”).  The Investors may convert all or any portion of the outstanding principal amount of the Immugenyx Convertible Note, plus accrued interest thereon, into the, at the discretion of the Investors, either (i) units, each unit consisting of one share of common stock of the Company, par value $0.0001 per share (“Common Stock”) and one three-year warrant to purchase one share of Common Stock at an exercise price of $7.00 per share, at a conversion price of $7.00 per unit (the “Units”) or (ii) shares of capital stock of Immugenyx , at a price per share based on a pre-money valuation of Immugenyx of $8,000,000 (the “Immugenyx Securities”) pursuant to the previously disclosed collaboration agreement with Immugenyx.

The entire principal amount, plus accrued interest thereon, shall automatically convert into Units if at any time from and after the date hereof, the closing price of the Company’s Common Stock on the Nasdaq Capital Market (or other national stock exchange or market on which the Common Stock is then listed or quoted) equals or exceeds $20.00 per share (which amount may be adjusted for certain capital events, such as stock splits) for thirty (30) consecutive trading days.

The Convertible Notes contain standard and customary events of default including, but not limited to, failure to make payments when due, failure to observe or perform covenants or agreements contained in the Convertible Notes, the breach of any material representation or warranty contain therein or the bankruptcy or insolvency of the Company. If any event of default occurs, subject to any cure period, the full principal amount, together with interest (including default interest of 12% per annum) and other amounts owing in respect thereof to the date of acceleration shall become, at the Investor’s election, immediately due and payable in cash.

The Warrants included in the Units expire three years from the date of issuance and have an exercise price of $7.00 per share. If at any time from and after the date of issuance, the closing price of our Common Stock on the Nasdaq Capital Market (or other national stock exchange or market on which the Common Stock is then listed or quoted) equals or exceeds $20.00 per share (which amount may be adjusted for certain capital events, such as stock splits, as described herein) for thirty (30) consecutive trading days, then the Company shall have the right to require the holder to exercise all or any portion of the Warrant still unexercised for a cash exercise into shares of Common Stock in accordance with the terms of the Warrant.

Results of Operations

Comparison of the year ended November 30, 2018 to the year ended November 30, 2017

Our financial results for the year ended November 30, 2018 are summarized as follows in comparison to the year ended November 30, 2017:

Revenues

All our revenues were derived from the CDMO segment, most of which were generated from our Belgian Subsidiary, MaSTherCell S.A. We believe that revenue diversification by source in the CDMO segment, together with a leading position in immunotherapy and, in particular, CAR T-cell therapy development and manufacturing, for advanced medicinal products servingstrengthened MaSTherCell’s resilience in the regenerative medicine industry. In addition, we are focused on developing novel and proprietary cell therapy trans-differentiation technologies

Our revenues for the treatment of diabetes, with a revenue generating contract development and manufacturing service businessyear ended November 30, 2018 were $18,655 thousand, as compared to serve the regenerative medicine industry.

            Our vertically integrated manufacturing capabilities are being used to serve to emerging technologies of other cell therapy markets in such areas as cell-based cancer immunotherapies and neurodegenerative diseases and also to optimize our abilities to scale-up our technologies for clinical trials and eventual commercialization of our proposed diabetes treatment. Our hybrid business model of combining our own proprietary cell therapy trans-differentiation technologies$10,089 thousand for the treatmentcorresponding period in 2017, representing an increase of diabetes and a revenue-generating contract development and manufacturing service business provides us with unique capabilities and supports our mission of accelerating85%. The increase in revenues for the development and ultimate marketing of breakthrough life-improving medical treatments.

            We seek to differentiate our company from other cell therapy companies through MaSTherCell and a world-wide network of CDMO joint venture partners who have built a unique and fundamental base platform of know-how and expertise for manufacturing in a multitude of cell types. The goal is to industrialize cell therapy for fast, safe and cost-effective production in order to provide rapid therapies for any market around the world. All these services are already compliant with GMP requirements, ensuring identity, purity, stability, potency and robustness of cell therapy products for clinical phase I, II, III through commercialization.

            We have leveraged the recognized expertise and experience in cell process development and manufacturing of MaSTherCell, and our international joint ventures, in Israel and Korea, to build a global and fully integrated bio-pharmaceutical company in the cell therapy development and manufacturing area. We believe that cell therapy companies need to be global in order to truly succeed. In furtherance of that belief, we intend to expand our establishment of CDMO facilitiesyear ended November 30, 2018 compared to the United States and other international markets. We target the international manufacturing market as a key priority through joint-venture agreements that provide development capabilities, along with manufacturing facilities and experienced staff. All of these capabilities offeredcorresponding period in 2017 is attributable to third-parties will be mobilized for our internal development projects, allowing us to be in a position to bring new products to the patients faster and in a cost-effective way.

            Our trans-differentiation technologies for treating diabetes, which we refer to as our cellular therapy (“CT”) business, is based on a technology licensed by our Israeli Subsidiary, that demonstrates the capacity to induce a shift in the developmental fate of cells from the liver and transdifferentiating them into “pancreatic beta cell-like” Autologous Insulin Producing (“AIP”) cells for patients with Type 1 Diabetes. Moreover, those cells were found to be resistant to autoimmune attack and to produce insulin in a glucose-sensitive manner in relevant animal models which significantly broadens the potential of the technology for other therapeutics areas. Our trans-differentiation technology for diabetes is from the work of Prof. Sarah Ferber, our Chief Science Officer and a researcher at Tel Hashomer Medical Research Infrastructure and Services Ltd. (“THM”) in Israel. Our development plan calls for conducting additional preclinical safety and efficacy studies with respect to diabetes and other potential indications prior to initiating clinical trials. In parallel, we work on establishing the GMP manufacturing process which development is already accomplished.

            We operate our CDMO and the CT business as two separate business segments.

Revenue History

            Companies developing cell therapies need to make a decision early on in their approach to the transition from the lab to the clinic regarding the manufacturing and production of the cells necessary for their respective treatments. Of the companies active in this market, only a small number have established their own GMP manufacturing facilities due to the high costs and expertise required to develop and maintain such production centers. In addition to the limitations imposed by a limited number of trained personnel and high infrastructure/operational costs, we believe that the industry faces a need for custom innovative process development and manufacturing solutions. In this context, we have grown total revenue from $6.4 million in our fiscal year 2016 to $10.1 million for fiscal year 2017. The increased revenues derive from an increase in the volume of the servicesprojects provided by our CDMO segment, namely our Belgian-based subsidiary, MaSTherCell through itsS.A, resulting primarily from the extension of existing customer service contracts with existing customers and the entry into new customer service contracts with leading biotech companies,biotechnology clients, as well as from revenues generated from existing manufacturing agreements.

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BacklogIn addition, we acquired all the issued and outstanding share capital of Atvio, our Israel-based CDMO partner since August 2016, and 94.12% of the share capital of CureCell, our Korea-based CDMO partner since March 2016, which are both reflected in the increase in our revenues from services provided of $1,174 thousand during the year ended November 30, 2018.

Backlog

We define our backlog as products that we are obligated to deliver or services to be rendered based on firm commitments relating to purchase orders received from customers. As of November 30, 2017,2018, MaSTherCell S.A. had a backlog of approximately $9.5$12.6 million, consisting of services that we expect to deliver into fiscal year 2018. 2019.However, no assurance can be provided that such contracts will not be cancelled, in which case we will not be authorized to deliver and record the anticipated revenues.

Recent Developments

 Following

Expenses

Cost of Revenues

Cost of revenues for the SFPI investmentyear ended November 30, 2018 were $10,824 thousand, as compared to $6,807 thousand during the same period in MaSTherCell2017, representing an increase of 59%. The increase for the year ended November 30, 2018 as compared to the corresponding period in November 2017 MaSTherCell decidedis primarily attributed to expand its facilities with a dedicated, late-stage clinical and commercial unit, anticipated to be operational by the end of 2018. This new asset will provide the most up-to-date commercial capabilities in Europe with five state-of-the-art advanced therapy manufacturing units and extended Good Manufacturing Practice (GMP)-accredited quality control (QC) laboratories.following:

 Additionally,

Research and Development Expenses

The increase in research and development expenses reflects management’s determination to move transdifferentiating technology to the next the stage towards clinical studies. In the fiscal year ended 2018, we announced a strategic organizational regroupingfocused primarily on combining the in vitro research to increase insulin production and secretion with pre-clinical studies aiming to evaluate the efficacy and safety of the product in rodents' model. In addition, we evaluated new transplantation methods during this period. Sourcing of the starting material (liver sampling and cell collection) and upscaling of virus production and cell propagation using advanced technologies complement this effort with the target to establish start to end production capabilities.

The scope of research and development expenses was also expanded to the evaluation and development of new cell therapies related technologies in the field of immunoncology, liver pathologies and others. In furtherance of these developments, salaries and related expenses increased for the year ended November 30, 2018 compared to 2017, primarily due to the expansion of our CDMO global manufacturing services offerings. The planned CDMO regrouping will utilize the global MaSTherCell brand, except for At-Vio Biotech Ltd. (“At-Vio”), for its unique technology and innovation activity locateddevelopment team in Israel and servingBelgium.

Research and development expenses (net) for the fiscal year ended November 30, 2018 were $6,464 thousand, as compared to $2,478 thousand for the same period in 2017, representing an increase of 160%. The increase in research and development, net expenses in the year ended November 30, 2018 is primarily attributable to the following:

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the fiscal year ended November 30, 2018 were $16,303 thousand, as compared to $9,189 thousand for the same period in 2017, representing an increase of 77%. The increase is primarily attributable to:

Financial Expenses, net

Financial expenses, net for the fiscal year ended November 30, 2018, increased by $670 thousand, compared to the same period in 2017. The increase in financial expenses is primarily attributable to:

Tax expenses (income)

Tax expenses for the fiscal year ended November 30, 2018, increased by $2,647 thousand, compared to the same period in 2017. The increase in tax expenses is mainly due to a decrease in deferred taxes related to carryforward losses in MaSTherCell S.A.

Working Capital

Current assets increased by $23,002 thousand, which was primarily attributable to the following: (i) an increase in cash and cash equivalents due to proceeds from private placements of debt and equity securities and a cash payment and receivable of $16.9 million from GPP-II to our subsidiary, Masthercell Global; (ii) an increase in inventory and accounts receivable due to the acquisition of CureCell and (iii) higher sales of MaSTherCell.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily through private placements and debt instruments and through revenues generated from the activities of MaSTherCell S.A., our Belgian Subsidiary. As of November 30, 2018, we had positive working capital of $13.2 million, including cash and cash equivalents and restricted cash of $16.5 million.

Net cash used in operating activities was approximately $15.7 million for the fiscal year ended November 30, 2018, as compared with net cash used in operating activities of approximately $3.8 million for the same period in 2017. We expanded our pre-clinical studies in the U.S., Israel, Belgium and South Korea. The increase reflects management’s focus on moving our trans-differentiation technology with first indication in Type 1 Diabetes to the next stage towards clinical trials. We also expanded our global cell and gene therapy markets. The primary purposeactivity of the strategic regrouping isCDMO business with Masthercell Global, while maintaining the same level of cash used in operating activities as a result of the increased revenues at our subsidiaries MaSTherCell, Cure Cell and Atvio, thereby increasing gross profit and generating cash to create a more efficient CDMO corporate organizationpay our ongoing operating expenses. Additionally, we improved payment terms to our service providers.

Net cash used in investing activities for the fiscal year ended November 30, 2018 was approximately $6.3 million, as compared with approximately $3.4 million for the same period in 2017. Net cash used in investing activities was primarily for additions to fixed assets at our subsidiaries, MaSTherCell, CureCelland Atvio.

During the year ended November 30, 2018, our financing activities consisted of proceeds from private placements of our equity securities, warrants exercise and equity-linked instruments in the net amount of approximately $21.5 million and $12.6 million from SFPI and GPP.

Liquidity and Capital Resources Outlook

We believe that our business plan will provide sufficient liquidity to fund our operating needs for the next 12 months. However, there are factors that can optimally utilize resourcesimpact our ability continue to fund our operating needs, including:

If we cannot effectively manage these factors, we may need to raise additional capital before such date to fund our operating needs.

From December 1, 2017 to the date of this Annual Report on Form 10-K, we funded our operations primarily from the parent, Orgenesis Inc., and more efficiently broaden, streamline and harmonize the CDMO service offerings on a global basis utilizing the quality and standardsproceeds from private placements of our flagship Belgian-basedequity securities and convertible debt and from revenues generated by Masthercell Global, mainly revenues generated from MaSTherCell. From December 1, 2017 through November 30, 2018, we received, through MaSTherCell, proceeds of approximately $17.3 million in revenues and accounts receivable from customers, $12.6 million from SFPI and GPP-II and $21.5 million from private placements to accredited investors of our equity and convertible debt, net of finders’ fees, and exercise of warrants. In addition, from December 1, 2018 through February 13, 2019, we raised $0.25 million from the private placement of our equity-linked securities, $6.6 million from GPP and proceeds of approximately $4.7 million in accounts receivable from customers of MaSTherCell.

We believe that the investment consummated in June 2018 by an affiliate of GPP in our newly formed subsidiary, MaSTherCell S.A.Masthercell Global, which has included to the date of this report a total net amount of $16.9 million and, subject to meeting certain specified financial targets and other conditions over the course of 2019, an additional $6.6 million, should cover the costs associated with the current business plan of Masthercell Global.

In December 2018, we entered into a Controlled Equity Offering Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which we may offer and sell, from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $25.0 million. We will pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement will be offered and sold pursuant to our Shelf Registration Statement on Form S-3 (Registration No. 333-223777) that was declared effective by the Securities and Exchange Commission on March 28, 2018, or the Shelf Registration Statement, and a prospectus supplement and accompanying base prospectus that we filed with the Securities and Exchange Commission on December 20, 2018. We have not yet sold any shares of our common stock pursuant to the Sales Agreement.

Critical Accounting Policies and Use of Estimates

            The discussion

Our significant accounting policies are more fully described in the notes to our financial statements included in this Annual Report on Form 10-K for the fiscal year ended November 30, 2018. We believe that the accounting policies below are critical for one to fully understand and analysis ofevaluate our financial condition and results of operationsoperations.

Fair Value Measurement

The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in the valuation of an asset or liability. It establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are based upon our financial statements, whichdescribed below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

We did not have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingentany Level 1 or Level 2 assets and liabilities. On an on-going basis,liabilities as of November 30, 2018 and 2017.

The derivative liabilities are Level 3 fair value measurements; we evaluate our estimates, including those related to revenue recognition, bad debts, investments, intangibledid not have any Level 3 assets and income taxes. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.liabilities as of November 30, 2018.

 We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.

Business Combination

 We allocated

The Company allocates the purchase price of thean acquired business we acquired to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. Acquired in-process backlog, customer relations, brand name and know how are recognized at fair value. The purchase price allocation process requires from usmanagement to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Direct transaction costs associated with the business combination are expensed as incurred. The allocation of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. We includedThe Company includes the results of operations of the business that weit has acquired in theits consolidated results prospectively from the date of acquisition when control was obtained.

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Intangible Assetsacquisition.

 Intangible assets

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.

Redeemable Non-controlling Interest

Non-controlling interests with embedded redemption features, whose settlement is not at the Company’s discretion, are considered redeemable non-controlling interest. Redeemable non-controlling interests are considered to be temporary equity and are therefore presented as a mezzanine section between liabilities and equity on the Company's consolidated balance sheets. Subsequent adjustment of the amount presented in temporary equity is required only if the Company's management estimates that it is probable that the instrument will become redeemable. Adjustments of redeemable non-controlling interest to its redemption value are recorded at acquisition cost less accumulated amortizationthrough additional paid-in capital.

Revenue Recognition

The Company recognizes revenue for services linked to cell process development and impairment. Definite lived intangible assetscell manufacturing services based on individual contracts in accordance with Accounting Standards Codification (“ASC”) 605,Revenue Recognition,when the following criteria have been met: persuasive evidence of an arrangement exists; delivery of the processed cells has occurred or the services that are amortized over their estimated useful life usingmilestones based have been provided; the straight-line method over their estimated periodprice is fixed or determinable and collectability is reasonably assured. The Company determines that persuasive evidence of useful life,an arrangement exists based on written contracts that define the terms of the arrangements. In addition, the Company determines that services have been delivered in accordance with the arrangement. The Company assesses whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Service revenues are recognized as the services are provided. In addition, as part of the services, the Company recognizes revenue based on use of consumables, which is determined by identifying the period over which the cash flows are expected to be generated.it received as reimbursement on a cost-plus basis on certain expenses.

Goodwill

Goodwill represents the excess of the purchase price of an acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually (at November 30), at the reporting unit level or more frequently if events or changes in circumstances indicate that the goodwillasset might be impaired. The goodwill impairment test is applied by performing a qualitative assessment before calculating the fair value of the reporting unit. If, on the basis of qualitative factors, it is considered not more likely than not that the fair value of the reporting unit is less than the carrying amount, further testing of goodwill for impairment would not be required. Otherwise, goodwill impairment is tested using a two-step approach.

The first step involves comparing the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit is determined to be greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is determined to be greater than the fair value, the second step must be completed to measure the amount of impairment, if any. The second step involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of the goodwill in this step is compared to the carrying value of goodwill. If the implied fair value of the goodwill is less than the carrying value of the goodwill, an impairment loss equivalent to the difference is recorded.

 As

Income Taxes

Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of November 30,assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

In addition, our management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing our income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorities. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes.

On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact us. The Tax Reform Law reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018. We have analyzed the provisions of the Tax Reform Law to assess the impact on our consolidated financial statements.

Impairment of LongLived Assets

We will periodically evaluate the carrying value of longlived assets to be held and used when events and circumstances warrant such a review and at least annually. The carrying value of a longlived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the reporting unit, our CDMO, exceededlonglived asset. Fair value is determined primarily using the carrying value by approximately $10.4 million. A decreaseanticipated cash flows discounted at a rate commensurate with the risk involved. Losses on longlived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the terminal year growth ratecost to dispose.

Recently Issued Accounting Standards

In January 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on recognition and measurement of 1%financial assets and an increase infinancial liabilities (ASU No. 2016-01) that will supersede most current guidance. Changes to the discount rate of 1% would reduceU.S. GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities, is largely unchanged. The classification and measurement guidance became effective as of December 1, 2018. We do not expect the implementation of this new pronouncement to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“Topic 606”) that will supersede most current revenue recognition guidance, including industry specific guidance. Under the new standard, a good or service is transferred to the customer when (or as) the customer obtains control of the reporting unit by approximately $1.1 milliongood or service, which differs from the risk and $2.3 million, respectively. These changes would not result in an impairment. Givenrewards approach under current guidance. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of the small amount that the fair value exceeded the carryingtime value of the reporting unit, a negative changemoney in the futuretransaction price and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the income approach based on discountednature, amount, timing and uncertainty of revenue and cash flows of a number of assumptions (includingarising from an entity’s contracts with customers. The guidance is effective in annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  The Company will implement the expected cash flows, discount rate, growth rateguidance for our annual period ending on December 31, 2019 and terminal rate)interim periods within such annual periods, using the modified retrospective method and will result in an impairment. Given thatadjust the reporting unit is still in its growth stage, there can be no assurance that an impairment may not occur in the near future.

Impairment of Long-lived Assets

            We are reviewing the propertyaccumulated deficit and equipment, intangible assets subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable. Indicators of potential impairment include an adverse change in legal factors or in the business climate that could affect the valuedeferred revenue as of the asset; an adverse change inadoption date. 

Under current GAAP, the extent or manner in which the asset is used or is expected to be used, or in its physical condition; and current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of the asset. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted cash flows. There were no indicators for impairment charges in 2017 and 2016 and, therefore, no fair value assessment was performed.

Revenue Recognition

            We recognize theCompany recognizes revenue for services linked to cell process development based on both the input and output methods of measurement. The Company has evaluated the application of the requirements of ASC 606 to ‘recognize revenue when or as the entity satisfies a performance obligation to its business. The Company has several types of revenue contracts:

The Company has concluded that under the revised standard, contracts for cell process development services are in some cases a single performance obligation (where promises offered to customers are not distinct within the context of the contract), and in other cases have multiple performance obligations (where promises to the customers are distinct). In all cases the performance obligations are satisfied over time. Under the new standard, the Company will recognize revenue over time using either a cost-based input method or output method, whichever fairly depicts the transfer of control over the life of the performance obligation, as appropriate.

Regarding revenues from cell manufacturing services, the Company concluded that these comprised a single performance obligation. The progress towards completion will continue to be measured on an output measure based on individual contracts in accordance with Accounting Standards Codification (“ASC”) 605,Revenue Recognition, when the following criteria have been met: persuasive evidence of an arrangement exists; deliverydirect measurement of the processed cellsvalue transferred to the customer (units produced).

The Company has occurred orconcluded that under the revised standard, contracts for Tech Transfer services that are milestonesconsidered a single performance obligation and will be measured over time using a cost based have been provided; the price is fixed or determinable and collectability is reasonably assured. We determine that persuasive evidence of an arrangement exists based on written contracts that define the terms of the arrangements. In addition, we determine that services have been delivered in accordance with the arrangement. We assess whether the fee is fixed or determinable basedinput method where progress on the payment terms associated withperformance obligation is measured by the proportion of actual costs incurred to the total costs expected to complete the contract.

The cost-based and output methods of revenue recognition require the Company to make estimates of costs to complete its projects and the percentage of completeness on an ongoing basis. Significant judgment is required to evaluate assumptions related to these estimates. The effect of revisions to estimates related to the transaction and whetherprice (including variable consideration relating to reimbursement on a cost-plus basis on certain expenses) or costs to complete a project are recorded in the sales priceperiod in which the estimate is subject to refund or adjustment. Service revenues are recognized as the services are provided.

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            In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”) "Revenue from Contracts with Customers." ASU 2014-09 will supersede most current revenue recognition guidance, including industry-specific guidance.revised. The underlying principle is that an entity will recognize revenue upon the transferadoption of goods or services to customers in an amount that the entity expects to be entitled to in exchange for those goods or services. On July 9, 2015, the FASB deferred the effective date of the standard by one year, which results in the new standard being effective foris not expected to result in a material effect on the Company at the beginningtotal stockholders’ equity as of its first quarter of fiscal yearDecember 1, 2018.

In addition, during March, April and MayNovember 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus of the FASB Emerging Issues Task Force) (“ASU 2016-18”), ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, respectively, which clarified the guidance on certain items such as reporting revenue as a principal versus agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability and presentation of sales taxes. The FASB also agreed to allowrequires entities to chooseinclude amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual reporting periods (including interim periods within those annual reporting periods) beginning after December 15, 2017. The Company adopted this standard during the year ended November 30, 2018.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to adoptrecognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the standard asdate of the original effective date. As applicable for the Company, the effective date for adoptinginitial application, with an option to elect to use certain transition relief. We expect to apply the ASU is forwithout adjusting the year ending November 30, 2019. The Company iscomparative periods and, if applicable, recognizing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. We are currently evaluating the impact of adoptingthis new standard on our consolidated financial statements.

In June 2016, the FASB issued ASU 2014-09 on its2016-13, “Financial Instruments-Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 requires that financial position, resultsassets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of operationscredit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and related disclosuresreasonable and has not yet determined whethersupportable forecasts that affect the effectcollectability of the revenue portionreported amount. Credit losses relating to available-for-sale debt securities will be material.

            We also incur revenue from selling of some consumables which are incidentalrecorded through an allowance for credit losses rather than as a direct write-down to the security. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We do not expect the implementation of this new pronouncement to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which gives direction on which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting in Accounting Standard Codification (“ASC”) Topic 718. In general, entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We do not expect the implementation of this new pronouncement to have a material impact on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that expands the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services provided as foreseenfrom nonemployees. An entity should apply the requirements of ASC Topic 718 to nonemployee awards except for certain exemptions specified in the clinical services contracts. Such revenueamendment. The guidance is recognized upon deliveryeffective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We do not expect the processed cells in which they were consumed.

Resultsimplementation of Operations

Comparison of the Year Ended November 30, 2017this new pronouncement to the Year Ended November 30, 2016have a material impact on our consolidated financial statements.

 Our loss before income tax for the year ended November 30, 2017 are summarized as follows in comparison to our expenses for the year ended November 30, 2016:

Revenues

            Our revenues for the year ended November 30, 2017 are summarized as follows in comparison to its revenues for the year ended November 30, 2016:

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            All revenues were derived from our subsidiary, MaSTherCell. Manufacturing activities increased by $3,692 thousand, or 58%, reflecting our revenue diversification by source in the CDMO segment. We believe this reflects the market recognition of our CDMO business and our expertise and responsiveness to industry needs. Considering the vertical integration of research and manufacturing segments, the revenues from other group companies related to manufacturing activities for its CT business were $1,395 thousand.

            In 2017, MaSTherCell benefited from the extension of manufacturing activities with its existing clients, together with agreements with leading pharmaceutical companies like Servier and CRISPR. In January 2017, MaSTherCell signed a master service agreement with ServierFASB issued Accounting Standards Update (ASU) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminated the developmentcalculation of implied goodwill fair value. Instead, companies will record an impairment charge based on the excess of a manufacturing platform for allogeneic cell therapies. Under the master service agreement, MaSTherCell is developing a CAR-T cell therapy manufacturing platform, which will enable industrial and commercial manufacturing of Servier's cell therapy products. This is a critical step in the development of these products for later stage clinical trials.

            In June 2017, MaSTherCell signed an agreement with CRISPR to develop and manufacture allogeneic CAR-T therapies. MaSTherCell will be responsible for the development and cGMP manufacturing of CTX101 for use in clinical studies. CTX101 is an allogeneic CAR T-cell therapy currently in development by CRISPR Therapeutics for the treatment of CD19 positive malignancies.

Expenses

Cost of Revenues

            As with our revenues, all costs of revenues are derived from our Belgian Subsidiary, MaSTherCell. Cost of revenues for the year ended November 30, 2017 decreased by 11%, or $850 thousand, compared to 2016. This decrease is driven by the salaries and related expenses for the year ended November 30, 2017 in anreporting unit’s carrying amount of $2,624 thousand,goodwill over its fair value. This guidance simplifies the accounting as compared to $3,356 thousand duringprior GAAP. The guidance is effective for fiscal years beginning after December 15, 2019. The Company does not expect the same periods in 2016. It is primarily attributable to a decrease in salaries and related expenses associated with an internal transformation program implemented in MaSTherCell in the second quarter of 2017 to evolve from an organization based on project to a matrix organization supported by transversal departments focusing on value creation. As part of the program, we changed the business positions of certain employees from laboratory managers to general manager positions in order to reflect the current period’s business activity. Subsequently, these changes in business positions resulted in a shift of costs into general and administration expenses.

            Raw materials for the year ended November 30, 2017 increased by 52%, or $923 thousand, compared to the year ended November 30, 2016. This was due to the increase in the volume of our manufacturing and process development services.

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            Amortization and depreciation expenses for the year ended November 30, 2017 decreased by 24%, or $313 thousand, as compared to the year ended November 2016. This was primarily attributable to the increase in the production facility useful life from 10 to 20 years and due to an increase in the classification of depreciation expenses to research and development expenses related to assets used in our CT business. We increased the level of investment in tangible assets of MaSTherCell in 2017 by $1,038 thousand, including $326 thousand in assets related to the expansion plan of its facilities.

Research and Development Expenses

            We are a vertically integrated biopharmaceutical company combining proprietary technologies and manufacturing services. If process development and manufacturing activities are primarily reflected in revenues and costs of revenues, the research and development of our proprietary technologies are accounted as specific expenses. Our research and development expenses for the year ended November 30, 2017 are summarized as follows in comparison to our research and development expenses for the year ended November 30, 2016:

            The increase in research and development expenses reflects management’s determination to move transdifferentiating technology to the next the stage towards clinical studies. In the year ended 2017, we focused our CT business on two major developments of our proprietary technology platform: (i) three-dimensional (3D) cell culture systems and (ii) process development of our technology for the sourcing of the starting material (liver sampling and cell collection) for the development of the autologous insulin producing (AIP) cells. In furtherance of these two developments, salaries and related expenses increased for the year ended November 30, 2017 compared to 2016, primarily due to the expansion of our development team in Israel and Belgium.

            Our success depends substantially on the efforts and abilities of our senior management and certain key personnel. The competition for qualified management and key personnel, especially engineers, is intense. We believe that we will be able to retain qualified personnel through, among other things, the issuance of stock-based compensation. Stock-based compensation for the year ended November 30, 2017 increased by $384 thousand compared to the same period in 2016, due to new grants of stock options to employees during fiscal year 2017.

Selling, General and Administrative Expenses

            Our selling, general and administrative expenses for the year ended November 30, 2017 are summarized as follows in comparison to our selling, general and administrative expenses for the year ended November 30, 2016:

            Selling, general and administrative expenses increased by $2,949, or 47%, in year ended November 30, 2017, primarily attributable to (i) a decrease in stock based compensation in the 2017 periods attributable to the termination of the vesting period of options and shares awarded to executive officers and consultants in 2016; (ii) an increase in corporate governance costs in order to remediate specific material weaknesses; (iii) an increase in salaries and related expenses resulting from the retention of new senior management at our Belgian Subsidiary and new accounting staff in our financial department in our Israeli Subsidiary; (iv) an increase in professional fees resulting from the appointment of an independent third party to assess our risk management framework to manage enterprise risk and work on corporate governance; (v) and increase in accounting and legal expenses associated with exploring new strategic collaboration arrangements, new capital raising initiatives, repayment of bonds issued by MaSTherCell; (vi) an increase in legal expenses associated with the preparation of applications for new patents under our CT business; (vii) an increase in expenses related to expanding our CDMO network, namely expenses related to a joint venture which primarily consisted of salary expenses and set up related cost of the new production facility in Korea under our joint venture with CureCell Co. Ltd.

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Financial Expenses, net

            Financial income for the year ended November 30, 2017 increased by $1,188 thousand or 94%, compared to the same period in 2016. The increase in financial expenses is mainly attributable to an increase (i) of $1.3 million in the Stock-based compensation related to restricted shares and warrants issued in accordance with the terms of the convertible loan agreements (ii) of 0.5 million in interest expense on loans and convertible loans due to $6.2 million new convertible loans invested in our company during the year ended 2017. In addition, the increase was partly offset due to a decrease in fair value of embedded derivative following total repayments of $1.8 million principal amount and accrued interest of convertible loan during the year ended 2017.

Working Capital Deficiency

           Current assets increased by $3 million, which was primarily attributable to an increase of $2.3 million in cash mainly derived from SFPI investment and $0.7 million in receivables from a related party due to advance payments under services agreements for virus production by Atvio.

            Current liabilities increased by $2.4 million, which was primarily attributable to an increase (i) of $1.5 million in advanced payments on account of grant in connection with the new grant approved by the DGO6 to support a clinical study in Germany and Belgium (ii) of $2.3 million in deferred income paid upfront by our customers under new agreements signed in the CDMO segment. The increase in deferred income is a result of a greater number of customer contracts during the fiscal year and, as a result, a greater number of required upfront payments from customers. The increase was partly offset by (i) a net decrease of $2.5 million due to repayments of loans and convertible bonds and loans received (ii) a decrease of $0.5 million in accounts payable due to repayments to old debtors and (iii) $1.3 million in employees and related payables.

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Liquidity and Financial Condition

            Since inception, we have funded our operations primarily through the sale of our securities and, more recently, through revenue generated from the activities of MaSTherCell, our Belgian Subsidiary. As of November 30, 2017, we had negative working capital of $9.6 million, including cash and cash equivalents of $3.5 million.

            Net cash used in operating activities was approximately $3.8 million for the year ended November 30, 2017, we successfully expanded our global activity of the CDMO division while maintaining the same level of cash used in operating activities as a result of the increased revenues at our subsidiary, MaSTherCell, thereby significantly increasing gross profit and generating cash to pay our ongoing operating expenses.

            Net cash used in investing activities for the year ended November 30, 2017 increased by $1.9 million, or 122%, compared to the same period in 2016, mainly due to completion of our obligation under the JV’s agreements with Atvio and CureCell in total amount of $2.4 million.

            During the fiscal year ended November 30, 2017, our financing activities consisted of (i) closing on $5.3 million net of transaction costs in private placement equity offerings through the issuance of 828,409 units. Each unit is comprised of (i) one share of the Company’s common stock and (ii) three-year warrant to purchase up to an additional one share of the Company’s Common Stock at a per share exercise price of $6.24 or $7.68 and (ii) closing on $5.9 million in private placement debt offerings consisting of convertible promissory notes with maturity dates of between six and twenty-four months.

Liquidity & Capital Resources Outlook

            We believe that our business plan will provide sufficient liquidity to fund our operating needs for the next 12 months. However, there are factors that can impact our ability continue to fund our operating needs, including:

            If we cannot effectively manage these factors, we may need to raise additional capital in order to fund our operating needs.

            From December 1, 2017 to the dateimplementation of this reportnew pronouncement to have a material impact on Form 10-K, we raised an aggregate of $3 million in private placements of our securities with accredited investors. In addition, $720,000 was raised through convertible loans which are convertible at any time by the holders into units of our securities at a conversion price per unit of $6.24, with each unit comprised of one share of common stock and a warrant for an additional share of common stock exercisable for three years from the date of issuance at a per share exercise price of $6.24.

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            For the fiscal year ended November 30, 2017, we had been funding operations primarily from the proceeds from private placements of our convertible debt and equity securities and from revenues generated by MaSTherCell. From December 2016 through November 2017, we received, through MaSTherCell, proceeds of approximately $8.9 million in revenues and accounts receivable from customers and $11.4 million from the private placement to accredited investors of our equity and equity linked securities and convertible loans, out of which $4.5 million is from the institutional investor with whom we entered into definitive agreements in January 2017 for the private placement of units of our securities for aggregate subscription proceeds to us of $16 million. The subscription proceeds are payable on a periodic basis through August 2018.its consolidated financial statements.

 The equity investment in November 2017 by SFPI in MaSTherCell of €5.9 million (approximately $6 million), which includes the conversion of €1 million in an outstanding loan by SFPI to MaSTherCell, will cover costs associated with an expansion of MaSTherCell’s manufacturing and production capabilities.

Off-Balance Sheet Arrangements

 The Company has

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’sour financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is included following the “Index to Financial Statements” on page F-1 contained in this annual reportAnnual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures