UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20212023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________ to __________________________
Commission file number 001-38416
ORGENESIS INC.
(Exact name of registrant as specified in its charter)
Nevada | 98-0583166 | |
State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization | Identification No.) |
20271 Goldenrod Lane, Germantown, MD 20876
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (480) 659-6404
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.0001 per share | ORGS | The NasdaqCapital Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No No☒ ☒
The registrant had shares of common stock outstanding as of March 30, 2022. The aggregate market value of the common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2021)2023) was $109,567,09135,033,921, as computed by reference to the closing price of such common stock on The Nasdaq Capital Market on such date.
The registrant had shares of common stock outstanding as of April 15, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
None.
ORGENESIS INC.
20212023 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company,” “our Company” or “Orgenesis” refer to Orgenesis Inc., a Nevada corporation, and our majority or wholly-owned subsidiaries, Orgenesis Korea Co. Ltd. (the “Korean Subsidiary”);subsidiaries: Orgenesis Belgium SRL, a Belgian-based entity (the “Belgian Subsidiary”); Orgenesis Ltd., an Israeli corporation (the “Israeli Subsidiary”); Orgenesis Maryland Inc., a Maryland corporation (the “U.S. Subsidiary”); Orgenesis Switzerland Sarl, which was incorporated in October 2020 (the “Swiss Subsidiary”); Orgenesis Biotech Israel Ltd. (“OBI”); Koligo Therapeutics Inc., a Kentucky corporation purchased in 2020 (“Koligo”); Orgenesis Germany GmbH which was incorporated in 2021 (the “German Subsidiary”); Orgenesis CA, Inc. which was incorporated in 2021 (the “California Subsidiary”); Masthercell Global Inc.Mida Biotech BV (“Masthercell”Mida”); Orgenesis Italy SRL (the “Italian Subsidiary”), Orgenesis Austria GmbH, an Austrian corporation (“Orgenesis Austria”), Octomera LLC (formerly Morgenesis LLC, a Delaware entity which was renamed to Octomera LLC during 2023) (“Octomera”) and its wholly or majority owned subsidiaries, Cell Therapy Holdings S.A.Orgenesis Korea Co. Ltd., MaSTherCell, S.A.a Korean based entity; Orgenesis Services SRL, a Belgian-based entity; Orgenesis Maryland LLC a Maryland entity; Orgenesis Biotech Israel Ltd. (“MaSTherCell”OBI”), an Israeli entity; Tissue Genesis International LLC (“Tissue Genesis”) a Texas limited liability company; Orgenesis Germany GmbH, a German entity; Orgs POC CA Inc, a Californian entity; Orgenesis Australia PTY LTD an Australian entity, Theracell Laboratories IKE (“Theracell Laboratories”), a Belgian-based subsidiaryGreek company, and OCTO Services LLC, a Contract Development and Manufacturing Organization (“CDMO”) specialized in cell therapy development and manufacturing for advanced medicinal products, and Masthercell U.S., LLC (“Masthercell U.S.”), a U.S.-based CDMO (collectively, “Masthercell”). The Company sold all of its equity interests in Masthercell and its subsidiaries on February 20, 2020.Delaware limited liability company.
Forward-looking statements made in this Annual Report on Form 10-K include statements about:
Corporate and Financial
● | our ability to generate revenue from the commercialization of our point-of-care cell therapy (“ |
● | our ability to achieve profitability; |
● | our ability to manage our research and development programs that are based on novel technologies; |
● | our ability to grow the size and capabilities of our organization through further collaboration and strategic alliances to expand our point-of-care cell therapy business; |
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● | our ability to control key elements relating to the development and commercialization of therapeutic product candidates with third parties; |
● | our ability to manage potential disruptions as a result of the continued impact of the coronavirus outbreak; |
● | our ability to manage the growth of our company; |
● | our ability to attract and retain key scientific or management personnel and to expand our management team; |
● | the accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and needs for additional financing; and |
● | our belief that our therapeutic related developments have competitive advantages and can compete favorably and profitably in the cell and gene therapy industry. |
Cell & Gene Therapy Business (“CGT”)
● | our ability to adequately fund and scale our various collaboration, license, partnership and joint venture agreements for the development of therapeutic products and technologies; |
● | our ability to advance our therapeutic collaborations in terms of industrial development, clinical development, regulatory challenges, commercial partners and manufacturing availability; |
● | our ability to implement our |
● | expectations regarding our ability to obtain |
● | our ability to commercialize products in light of the intellectual property rights of others; |
● | our ability to obtain funding necessary to start and complete such clinical trials; |
● | our ability to further our CGT development projects, either directly or through our JV partner agreements, and to fulfill our obligations under such agreements; |
● | our belief that our systems and therapies are as at least as safe and as effective as other options; |
● | our |
● | the outcome of certain legal proceedings that we are or may become involved in; |
● | our license agreements with other institutions; |
● | expenditures not resulting in commercially successful products; |
● | our dependence on the financial results of our |
● | our ability to complete development, processing and then roll out Orgenesis Mobile Processing Units and Labs (“OMPULs”) |
● | our ability to grow our |
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in this Annual Report on Form 10-K for the year ended December 31, 2021,2023, any of which may cause our Company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks may cause the Company’s or its industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The Company is under no duty to update any forward-looking statements after the date of this report to conform these statements to actual results.
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PART I
ITEM 1. BUSINESS
(All monetary amounts are expressed in thousands of US dollars, unless stated otherwise)
Business Overview
Orgenesis Inc., a Nevada corporation, isWe are a global biotech company working to unlock the potential of cell and gene therapies (“CGTs”) in an affordable and accessible format.
CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products (“ATMP”ATMPs”). We are mostly focused on autologous therapies withthat can be manufactured under processes and systems that are developed for each therapy using a closed and automated processing system approach that is validated for compliant production near the patient for treatment of the patient at the point of care (“POCare”). This approach has the potential to overcome the limitations of traditional commercial manufacturing methods that do not translate well to commercial production of advanced therapies due to their cost prohibitive nature and complex logistics to deliver such treatments to patients (ultimately limiting the number of patients that can have access to, or can afford, these therapies).
To achieve these goals, we have developed a Point of Care Platform (“POCare Platform”) comprised of three enabling components: (i) a pipeline of licensed POCare advanced therapies that are designed to be processed and produced, (ii) automated closed POCare technology systems, and (iii) a collaborative worldwide network of POCare research institutes and hospitals (“POCare Network”).
The POCare Platform relies, in particular, on the development of its own production capacity, known as “POCare Services”, the goal of which is to ensure that therapies are accessible at the point of treatment (the “POCare Center”). POCare Services, which have been expanding worldwide, are based on a global approach and local adaptation that allows replication and expansion. Global harmonization of the POCare Services is ensured by a central quality system, replicability of infrastructure and equipment and centralized monitoring and data management.
The POCare Services include:
POCare Centers are the decentralized hubs that provide harmonized services to customers and partners. We are working to provide a more efficient and scalable pathway for advanced therapies to reach patients more rapidly at lowered costs. The workflow of a POCare Center is designed to allow rapid capacities expansion while integrating new technologies. We also draw upon extensive medical expertise to identify promising new autologous therapies to leverage within the POCare Platform either via ownership or licensing.
The POCare Network brings together patients, doctors and industry partners with a goal of achieving harmonized, regulated clinical development and production of POCare advanced therapies.
We have worked to develop and validate POCare technologies that can be combined within mobile production units for advanced therapies. We have made significant investments in the development of several types of OMPULs with the expectation of use and/or distribution through our POCare Network and/or partners, collaborators, and regional distributors. As of the date of this report, the OMPULs have been adapted for processing of chimeric antigen receptor (CAR) T-cell therapy (“CAR-T”), tumor infiltrating lymphocyte (“TIL”) TILS and mesenchymal stem cell (“MSC”) based products and are in the qualification stage for clinical use in various locations. Additional OMPULs are still in the development stage.
OMPULs are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential or approved advanced therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing of such CGTs in a consistent and standardized manner in all locations. The OMPUL design delivers a potential industrial solution for us to deliver CGTs to practically any clinical institution at the point of care.
We have continued to grow our infrastructure and expand our processing sites into new markets and jurisdictions. In addition, we have continued investing manpower and financial resources to focus on developing, processing and rolling out several types of OMPULs to be used and/or distributed through our POCare Network and/or partners, collaborators, and regional distributors.
POCare Platform Operations via Subsidiaries
We currently conduct our core business operations ourselves and through our subsidiaries which are all wholly-owned except as otherwise stated below (collectively, the “Subsidiaries”). The Subsidiaries are as follows:
United States
Europe
Asia
Discontinued Operations
In February 2020, we and GPP-II Masthercell LLC (“GPP”) sold 100% of the outstanding equity interests of Masthercell Inc. (the “Masthercell Business”), which comprised the majority of our CDMO Business, to Catalent Pharma Solutions, Inc. We determined that the Masthercell Business (“Discontinued Operations”) met the criteria to be classified as a discontinued operation as of the first quarter of 2020. The Discontinued Operation includes the vast majority of the previous CDMO Business, including majority-owned Masthercell Inc and its subsidiaries.
Advanced Therapy Medicinal Products and POCare Overview
ATMP means one of any of the following medicinal products that are developed and commercialized for human use:
● | A somatic cell therapy medicinal product (“STMP”) that contains cells or tissues that have been manipulated to change their biological characteristics or cells or tissues not intended to be used for the same essential functions in the |
● | A tissue engineered product (“TEP”) that contains cells or tissues that have been modified so that they can be used to repair, regenerate, or replace human |
● | A gene therapy medicinal product (“GTMP”) that engineers genes that lead to a therapeutic, prophylactic, or diagnostic effect and, in many cases, work by inserting “recombinant” genes into the body, usually to treat a variety of diseases, including genetic disorders, cancer, or long-term diseases. In this case, a recombinant gene is a stretch of DNA that is created in the laboratory, bringing together DNA from different sources. |
It is important to note that, although STMPs and GTMPs currently dominate the market, in order to access the market potential and trends in the future, other cell products are likely to be essential in all of these categories.
We believe that autologous therapies represent a substantial segment of the ATMP market. Autologous therapies are produced from a patient’s own cells versus allogeneic therapies that are mass-cultivated from donor cells via the construction of master and working cell banks and are then produced on a large scale. Developers and manufacturers of ATMPs (both autologous and allogeneic) currently rely heavily on production using traditional centralized supply chains and manufacturing sites.
CGTs are costly and complex to produce. We also refer to CGTs as “living” drugs“living drugs” since they are based on maintaining the cellscell’s vitality. Therefore, there is no possibility to sterilize the products, since such a process involves killing any living organism. Many of these therapies require sourcing of the patient’s cells, engineering them in a sterile environment and then transplanting them back to the patient (so-called “autologous” CGT). This presents multiple logistic challenges as each patient requires itstheir own production batch, and the current processes involve complex laboratory-based types of manipulations requiring highly trained lab technicians. We are leveraging a unique approach to therapy production using theour POCare Platform to potentially overcome some of the development and supply chain challenges of affordably bringing autologous therapiesCGT to patients.
AllogeneicTo achieve these goals, we have developed a collaborative worldwide network of research institutes and hospitals who are engaged in the POCare model (“POCare Network”), and a pipeline of licensed POCare advanced therapies that can be processed and produced under such closed and automated processes and systems (“POCare Therapies”). We are costlydeveloping our pipeline of advanced therapies and complexwith the goal of entering into out-licensing agreements for these therapies.
We believe that, for this industry to produce because autologousprosper, it must be based on utilizing a standardized platform. Cellular therapies, though defined as drug products, conceptually differ from other drug modalities. The way these drug products are derivedproduced is inherently different from producing existing drugs. They are based on reprogramming of cells sourced from the treated patient or from a donor. They are not composed of purchased chemical components such as typical pharmaceuticals, nor are they harvested in large quantities from genetically engineered cell lines and manufactured throughthen sterilized such as typical biotech products. These “living drug” products are, in most cases, produced per patient individually in a defined protocol before re-administration. We are leveraginghighly sterile and controlled environment, and their efficacy is optimized when administered a unique approachshort time following production as fresh product.
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To advance the execution of our goal of bringing such therapies to therapy production using themarket, we have designed and built our POCare Platform - a scalable infrastructure of technology and services that ensures a central quality system, replicability and standardization of infrastructure and equipment, and centralized monitoring and data management. The platform is constructed on POCare Centers that serve as hubs that implement locally our POCare quality system, Good Manufacturing Practices (“GMP”), training procedures, quality control testing and incoming supply of materials and oversee the actual production in the Orgenesis Mobile Processing Units & Labs (“OMPULs”). The POCare Platform is operated by Octomera (see below). This platform is utilized by other parties, such as biotech companies and hospitals for the supply of their products. Octomera services include adapting the process to the platform and supplying the products (“POCare Services”). These are services for third party companies and for CGTs that are not necessarily based on our POCare Therapies.
We believe that decentralized cell processing offered through our POCare Platform could potentially overcome somedemocratize supply, increase production capacity, simplify logistics and shorten turnaround time. These benefits may significantly lower production costs and potentially allow us to make progress toward its vision of the developmentimproved access and supply chain challenges of bringing autologous therapies to patients affordably.outcomes in healthcare.
POCare Therapies
The global CGT market is growing at a rapid pace, now with over 2,000 active clinical trials (Alliance for Regenerative Medicine (ARM) H1 2022 Report), including 200+ in Phase III and 254 new clinical trials in 2022 (ARM State of the Industry Briefing). Several biotech companies developing CGTs have been acquired by large pharma (Gilead Sciences acquired Kite Pharma, Roche acquired Spark Therapeutics, Bayer acquired AskBio) for several billion dollars before generating their first revenues. According to an article by McKinsey & Company from April 2020, CGT products account for 12 percent of the industry’s clinical and 16 percent of the preclinical pipeline.
This is a relatively new field, developing quickly in the last decade. The initial development of these therapies began at clinical research centers, based on attempts of researchers and clinicians to incorporate the scientific knowledge that accumulated from the biotechnology industry, including advancements in genetic engineering of cells, cell sourcing, tissue engineering and the medical advancements of immunology. In the early years of development, it was not even clear if such therapies would be considered a clinical treatment (such as a bone marrow transplant) or drug product such as a recombinant protean. In the last decade there has been much development in the regulatory framework required to bring such products to market, but still there is vagueness in some markets and unique regulatory pathways (such as the legal framework in the EU for hospital exemption allowing hospitals who wish to provide such therapies to their patients to take responsibility for treating patients). Though the biotech industry has embraced this new modality of drug development, they face many challenges. The pharma and biotech companies are used to centralized production and providing shelf products that can be stored and made available on demand. Their development and production teams are eager to fit these therapies into the existing well-known paradigms. This has proven to be extremely challenging, and the result has been approvals of products such as CAR-Ts for blood cancers and products for treatment of genetic diseases costing hundreds of thousands of dollars, or even over a million dollars per patient. The capacity to produce such products is limited and though they are considered a breakthrough in terms of clinical results, the high cost has been prohibitive of market acceptance.
While the biotech industry struggles to determine the best way to lower cost of goods and enable CGTs to scale, the scientific community continues to advance and push the development of such therapies to new heights. Clinicians and researchers are excited by all the new tools (new generations of industrial viruses, big data analysis for genetic and molecular data) and technologies (CRISPR, mRNA, etc.) available (often at a low cost) to perform advanced research in small labs. Most new therapies arise from academic institutes or small spinouts from such institutes. Though such research efforts may manage to progress into a clinical stage, utilizing lab based or hospital-based production solutions they lack the resources to continue the development of such drugs to market approval.
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Historically, drug/therapeutic development has required investments of hundreds of millions of dollars to be successful. One significant cause for the high cost is that each therapy often requires unique production facilities and technologies that must be subcontracted or built. Further the cost of production during the clinical stage is extremely expensive, and the cost of the clinical trial itself is very high. Given these financial restraints, researchers and institutes hope to out- license their therapeutic products to large biotech companies or spin-out new companies and raise large fundraising rounds. However, in many cases they lack the resources and the capability to de-risk their therapeutic candidates enough to be attractive for such fundings or partnership.
Our POCare Network is an alternative to the traditional pathway of drug development. Orgenesis works closely with many such institutes and is in close contact with researchers in the field. The partnerships with leading hospitals and research institutes gives us a deep insight as to the developments in the field, as well as the market potential, the regulatory landscape and optimal clinical pathway to potentially bring these products to market.
The ability to produce these products at low cost, allows for an expedited development process and the partnership with hospitals around the globe enables joint grants and lower cost of clinical development. The POCare Therapies division reviews many therapies available for out licensing and select the ones which they believe have the highest market potential, can benefit the most from a point of care approach and have the highest chance of clinical success. It assesses such issues by utilizing its global POCare Network and its internal knowhow accumulated over a decade of involvement in the field.
The goal of this in-licensing is to quickly adapt such therapies to a point-of- care approach through regional partnerships, and to out-license the products for market approval in preferred geographical regions. This approach lowers overall development cost, through minimizing pre-clinical development costs incurred by us, and through receiving of the additional funding from grants and/or payments by regional partners.
Our Therapies development subsidiaries are:
● | Koligo Therapeutics, Inc., a Kentucky corporation, which is a regenerative medicine company, specializing in developing personalized cell therapies. It is currently focused on commercializing its metabolic pipeline via the POCare Network throughout the United States and in international markets. |
● | Orgenesis CA, Inc. a Delaware corporation, which is currently focused on development of our technologies and therapies in California. |
● | Orgenesis Belgium SRL which is currently focused on product development. Since its incorporation the subsidiary has received grant awards of over Euro 19 million from the Walloon region for several projects (DGO6 grants). We intend to continue applying for the Walloon Region support of our future pre-clinical and clinical development plans. |
● | Orgenesis Switzerland Sarl, which is currently focused on providing group management services. |
● | MIDA Biotech BV, which is currently focused on research and development activities, was granted a 4 million Euro grant under the European Innovation Council Pathfinder Challenge Program which supports cutting-edge science and technology. The grant is for technologies enabling the production of autologous induced pluripotent stem cells (iPSCs) using microfluidic technologies and artificial intelligence (AI). |
● | Orgenesis Italy SRL which is currently focused on R&D activities. Orgenesis has joined an Italian consortium dedicated to the implementation of a research program in the field of gene therapy and drug development with RNA technology. The program is sponsored by the Italian national recovery and resilience plan “strengthening of research structures and creation of national R&D champions on key enabling technologies. |
● | Orgenesis Ltd., an Israeli subsidiary which is focused on R&D and a provider of R&D management services for out licenced products. Israel as a hub for biotech research and pioneers in this field |
● | Orgenesis Austria GmbH, which is currently focused on the development of the Company’s technologies and therapies. |
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Therapies in Development
Our cell and gene therapies pipeline includes investigational therapies and next-generation technologies that have the power to transform the way cancer and other unmet clinical needs are treated. Our pipeline is predominantly comprised of personalised autologous cell therapies, meaning that patients receive cells that originate from their own body, virtually eliminating the risk of an immune response and rejection.
Our promising pipeline focuses on Advanced Therapy Medicinal Products originating from proprietary internal, joint ventures and in-licensing agreements with both biotech companies and leading research institutions. Our main therapeutic fields encompass cell-based immuno-oncology, cell-based drug delivery platforms, regenerative medicine, anti-viral and autoimmune disease.
The following table summarizes our therapies in development, which are discussed in detail below:
Therapy | Development Stage |
| Indication | |||||||
IND enabling studies | ||||||||||
B-ALL, B-cell Lymphoma | ||||||||||
IND enabling studies | ||||||||||
Solid Tumors | ||||||||||
IND enabling studies | ||||||||||
Pre-clinical | ||||||||||
Pre-clinical | Drug delivery technology, Glioblastoma | |||||||||
Intra Nasal Delivery of Cell based Immunotherapy | Pre-clinical | Drug delivery technology, Glioblastoma | ||||||||
Metabolic Diseases | ||||||||||
KYSLECEL | Market approval in the US | TP-IAT | ||||||||
CellFix | Clinical use | Cartilage Defects | ||||||||
AutoSVF | Clinical development | Systemic ARDS, vascular disorders | ||||||||
MSCP | Pre-clinical | Wound healing | ||||||||
Pre-clinical | ||||||||||
CKD | ||||||||||
KT-DM-103 and KT-CP-203 (3D-Printed Pancreatic Islets) |
Pre-clinical | Type 1 diabetes and chronic pancreatitis |
Products in Clinical Use
Bioxomes RanTop, Ranpirnase Topical Formulation Autovac We are developing a new and advanced anti-CD19 CAR-T therapy for treating During 2023, the OMPUL production site in Israel was qualified to produce clinical batches for the CAR-T CeCART Following the success CAR-T therapy demonstrated in hematological malignancies, the therapeutic potential of CAR-T is employed for solid tumors as well. We are developing a CAR-T therapy for the treatment of solid tumors including pancreatic and colorectal cancers. The CAR is directed against two members of the carcinoembryonic antigen-related cell adhesion molecule (CEACAM) family. These adhesion proteins are involved in tumor growth, invasion, angiogenesis and immune evasion and their expression is correlated with poor prognosis. In pancreatic cancer, these adhesion molecules are overexpressed on tumor cells while expression on healthy tissues is limited making them a promising therapeutic target. The CAR binding domain is based on a T-LOOP (Tumor Infiltrating Lymphocytes (TIL)) During 2023, we have completed methods validation and qualification required for clinical batch production. Moreover, the OMPUL production site in Israel was qualified to produce clinical batches. Agreement on conditions for initiation of clinical study was reached with the Israeli Ministry of Health. MDVAC The patient’s own pancreatic islets, comprised of the cells that secrete insulin to regulate blood sugar, form KYSLECEL, a minimally manipulated autologous cell-based product produced according to current good tissue practices (cGTP). The therapy has been allowed by the U.S. Food and Drug Administration (“FDA”) and is available in the US. The target population of KYSLECEL, as an islet autologous transplant after total pancreatectomy (TP-IAT), is chronic or acute recurrent pancreatitis patients who are in need of insulin secretory capacity preservation. KT-DM-103 and KT-CP-203 (3D-Printed Pancreatic Islets) Through the acquisition of Koligo, we have exclusively licensed patents and technology from the University of Louisville Research Foundation, related to the revascularization and 3D printing of cells and tissues intended for transplantation (“3D-V” technology platform). Utilizing this technology, potential autologous and allogeneic pancreatic islet transplants may be implemented to treat type 1 diabetes (KT-DM-103), and chronic pancreatitis (KT-CP-203). In addition to pancreatic islet transplantation, the 3D-V technology platform may also support improved transplantation of other cell and tissue types. MSCP We are developing a personalized cell-based therapy product for wound Bioxomes as a cell-based delivery product Exosomes are small, membrane-enclosed extracellular vesicles involved in cell-to-cell interactions. They may serve as a valuable therapeutic modality given their ability to transfer a wide variety of therapeutic payloads to cells affecting the cells in multiple ways. The Additionally, preliminary biodistribution studies demonstrated specific organ tropism, as well as enhanced skin penetration, when applied topically. Further biodistribution and bioavailability studies with Bioxomes, encapsulated with selected therapeutic cargos are on-going to confirm efficacy RanTop, Ranpirnase Topical Formulation Following FDA positive pre-IND feedback, preclinical development program was initiated to support human clinical studies in the US. A dermal toxicology feasibility study was conducted, showing that In Ranpirnase was originally isolated from frog oocytes. We have focused on developing of Orgenesis licensing partner, Okogen, Inc., has announced in October 2023 the initiation of a Phase IIb clinical trial in India evaluating OKG-0303 for acute infectious conjunctivitis (“Pink Eye”). OKG-0303 is a combination product containing ranpirnase (OKG-301) as an antiviral active component. Autovac AutoVac is an autologous, pan-antigenic vaccine platform for viral infections. The vaccine is based on the use of a specific target for ex vivo induction of autologous cell-based vaccine that enables rapid response in times of a viral outbreak. As initial proof of concept, we are validating this novel cell-based vaccine platform against Coronavirus disease 2019 (COVID-19). Preliminary in vitro results demonstrated successful immune cell activation, correlated with antigen expression. We have confirmed vaccine platform specificity and robustness by testing additional viral pathogens. We are planning to complete pre-clinical immunogenicity studies and finalize product development toward clinical submissions. Strategic CGT Therapeutics Collaborations Collaborations, partnerships, joint ventures and license agreements are key components of Our POCare technology collaborators and partners include Ori Biotech, Accellix, Columbia University in In addition, we Current POCare Therapies Development Facilities Koligo maintains commercial production facilities for KYSLECEL at an FDA-registered establishment in Indiana. Koligo is also developing new technologies such as bio-degradable 3D structure to deliver islets and other cell/tissues. Koligo also maintains development labs at its Indiana location to support continued development. The Belgian Subsidiary specializes in developing and Mida Mida specializes in developing The Israel Subsidiary The Israel Subsidiary occupies 400 square meters of labs and offices in Nes Ziona, Israel. POCare The POCare Services that we and our affiliated entities perform include: The POCare Services are performed in decentralized hubs that provide harmonized and standardized services to customers (“POCare Centers”). We are working to expand the number and scope of our POCare Centers. We believe that this provides an efficient and scalable pathway for CGT therapies to reach patients rapidly at lowered costs. Our POCare Services are designed to allow rapid capacity expansion while integrating new technologies to bring together patients, doctors and industry partners with a goal of achieving standardized, regulated clinical development and production of therapies. POCare Services Operations via Octomera We currently conduct our core business operations ourselves and through Octomera and its subsidiaries which are all wholly owned except as otherwise stated below (collectively, the “Subsidiaries”). The following is a description of Octomera and its subsidiaries: Octomera LLC In connection with the investment by an affiliate of Metalmark Capital Partners (“Metalmark” or “MM”) in the Company’s subsidiary Octomera LLC (formerly Morgenesis LLC) (“Octomera” or “Morgenesis”) in November 2022 (“the Metalmark Investment”), the Company streamlined its Services related business into Octomera. On June 30, 2023, in connection with an additional $1,000 investment in Octomera, the Company and MM entered into Amendment No. 1 to the Second Amended and Restated Limited Liability Company Agreement (the “LLC Agreement Amendment”) to change the name of Morgenesis to “Octomera LLC” and to amend Morgenesis’ board composition. Pursuant to the LLC Agreement Amendment, the board of managers of Octomera (the “Octomera Board”) became comprised of five managers, two of which were appointed by the Company, one of which was an industry expert appointed by MM, and two of which were appointed by MM. The change was effective immediately. As a result of the amendment to the composition of the Octomera Board pursuant to the LLC Agreement Amendment described above, the Company deconsolidated Octomera from its consolidated financial statements as of June 30, 2023 (“date of deconsolidation”) and recorded its equity interest in Octomera as an equity method investment. On January 29, 2024, the Company and MM entered into a Unit Purchase Agreement (the “UPA”), pursuant to which the Company acquired all of the interests of Octomera that were owned by MM (the “Acquisition”). In consideration for such Acquisition, the Company and MM agreed to the following consideration: Royalty Payments: If Octomera and its subsidiaries generate Net Revenue during the calendar years of 2025, 2026 and 2027, then the Company will pay 5% of Net Revenues to Seller pursuant to the UPA up to $40 million. Milestone Payments: If the Company sells Octomera within ten years from the date of the Closing at a price that is more than $40 million excluding consideration for certain Excluded Assets as per the UPA, the Company shall pay Seller 5% of the net proceeds. Pursuant to the acquisition, MM’s designated members of the Board of Managers of Octomera resigned and the Company amended the Second Amended and Restated Limited Liability Company Agreement of Octomera to be a single member agreement to reflect the transactions contemplated by the UPA so that MM shall no longer (i) be a party to such agreement, (ii) have a right to appoint members of the board of managers of Octomera or (iii) be a member of Octomera. The Company currently owns 100% of Octomera. The Octomera subsidiaries which are all wholly owned except as otherwise stated below (collectively, the “Subsidiaries”) include: Integration of Custom Fit Solutions within the POCare Center Our aim is to provide a pathway to bring ATMPs in the cell and gene therapy industry from research to patients worldwide through our POCare Platform. We define point of care as a process of collecting, processing, and administering cells as close as possible to the clinical setting. We believe that this approach is an attractive proposition for We believe that the existing industry paradigm in which each therapy developer invests in setting up unique infrastructure such as specialized clean rooms and production facilities is inefficient. The cost of construction, regulatory authorization and maintenance of these facilities is not only prohibitive but extremely difficult and lengthy to replicate, allowing no economies of scale. We have based the design of our POCare Platform Integrated closed and automated processing systems require fewer We aim to build value in various aspects of our company ranging from supply related processes including development and distribution systems, clinical and regulatory services, engineering and devices such as OMPULs discussed below and delivery The POCare Platform is a unique globally harmonized and decentralized CGT-processing infrastructure that offers cost-effective processing capacities with ease for scalability and reproducibility. By producing personalized cell and gene therapies (CGTs) utilizing the POCare Platform, we are able to add new capacity within months instead of years. Over time, we have worked to develop and validate POCare Technologies that can be combined within mobile production units for advanced therapies. We have made significant investments in the Above We have finalized or are in the process of finalizing the development of several POCare We have POCare Services Development Facilities OBI OBI is On February 14, 2024, following a claim for payment of past salaries due, by employees of Orgenesis Biotech Israel Limited (“OBI”), the district court in Haifa appointed a trustee to run the affairs of OBI with the intention of rehabilitating OBI to be able to operate and pay OBI’s creditors under an arrangement with them. The Korean Subsidiary The Korean Subsidiary has a particular focus on developing innovative cell The Tissue Genesis TGI includes the integration of our development projects, foremost among them the Control Tower for automation of cGMP cell and gene therapy inside the OMPULs. In 2022 TGI brought this project into the ISO quality system and engaged with contract engineering firms with the requisite experience and that meet our stringent quality assurance standards. Orgenesis Services SRL Orgenesis Services SRL specializes on developing innovative cell therapies Theracell Laboratories Theracell Laboratories, located in Greece, specializes on developing and processing innovative cell therapies for our customers. It was designated as a “Priority Investment of Strategic National Importance” by Enterprise Greece, the official Greek national investment and trade promotion agency, which is responsible for the allocation of Greek government funding. As a result of this designation, Theracell will be inducted into Greece’s fast-track licensing and approval process. This is expected to help advance development and clinical use of our CGT at POCare, subject to regulatory requirements. Notable In As part of our POCare Services, we have developed the relevant GMP processes for a variety of therapies such as CAR-T, TILs TIL, CAR-Ts and MSCs were already produced in the OMPULs for our customers. We have worked closely with technology partners to adapt various systems for closed system production of the above products and continue our collaboration efforts to develop fully automated systems for integration in the OMPULs. We have expanded our collaboration with UC Davis We have We have set up a Collaboration with the Institute of Cell Therapies (“ICT”), which was established as a part of the University Centre for Research and Innovation of the University of Patras. Theracell Laboratories will be responsible for the accreditation and operation of the Institute under GMP. A biomanufacturing unit has been set up in Athens (municipality of Koropi, Attika) The Pursuant to the Priority Investment of Strategic National Importance designation by Enterprise Greece, Theracell Laboratories received an investment grant covering industrial research activities associated with the development and production of Cell and Gene therapies in a Our POCare Services are expanding to additional geographies, and we are providing services to the U.S., EU, and Asia. Revenue Model, Business Development and Licenses We are focused on technology in licensing and therapeutic collaborations, and we Further to revenues generated from We have signed POCare development services Master Services Agreements (“MSAs”) with our Hospital services includes the sale or lease of products and the performance of processing services to our POCare hospitals or other medical providers. We either work directly with hospitals or receive payments through our regional We provide cell process development services in some regions to third party customers. Those services are unique to the customers who retain the ownership of the intellectual property created through the process. We provide distributed cell processing services for third party customers at POCare Centers in close proximity to patients. Our POCare Competition in the Cell Therapy Field The biopharmaceutical industry is intensely competitive. There is continuous demand for innovation and speed, and as the cell-based therapies market evolves, there is always the risk that a competitor may be able to develop other compounds or drugs that are able to achieve similar or better results for indications. Potential competition includes major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions. Many of these competitors have substantially greater financial, technical, and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations with established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Currently, we are not aware of any other companies pursuing a business model similar to what we are developing under our POCare Platform. However, our competitors in the CGT field who are significantly larger and better capitalized than us could undertake strategies similar to what we are pursuing and even develop them at a much more rapid rate. These potential competitors include the same multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions that are operating in the CGT field. In that respect, smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Intellectual Property We will be able to protect our technology and products from unauthorized use by third parties only to the extent it is covered by valid and enforceable claims of our patents or is effectively maintained as trade secrets. Patents and other proprietary rights are thus an essential element of our business. Our success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates, technology, and know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions, and improvements that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain our proprietary position. In addition, we own or have exclusive rights to thirty-two (32) United States patents, We have a granted U.S. patent and a pending U.S. patent application We have granted and pending U.S. patent applications directed, among others, to compositions comprising Ranpirnase and other ribonucleases for the treatment of viral diseases. We have pending U.S. patent applications directed, among others, to therapeutic compositions comprising exosomes, bioxomes, and redoxomes. If issued, any patents based on these applications will expire between 2029 and 2041. Counterpart patents applications were filed in Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Singapore and South Korea. If issued, any patents based on these applications will expire in We have We have a pending International PCT We have granted U.S. patents and a granted AU patent, pending U.S. patent applications, directed, among others, to bioreactors for cell culture and automated devices for supporting cell therapies. The granted U.S. patents will expire in 2027, and the granted AU patent will expire in 2026. If issued, any patents based on these applications will expire in 2042. Counterpart patent applications were filed in Australia, Europe, Israel, and Korea. We have a pending US patent application directed, among others, to tumor infiltrating lymphocytes (TILs) and their use for treating cancer. If issued, patents will expire in 2042, without including any patent term extensions that might be available following the grant of marketing authorizations. We have a pending U.S. We have a pending International PCT application directed, among others, to methods of treating cancer or CNS-related diseases by intranasal administration of an oncolytic virus. If converted into national phase applications and issued, any patents based on these applications will expire in 2043, without including any patent term extensions that might be available following the grant of marketing authorizations. We have two pending U.S. patent application and a pending We have a pending International PCT application and a pending U.S. We have a pending Government Regulation Development Business We are required to comply with the regulatory requirements of various local, state, national and international regulatory bodies having jurisdiction in the countries or localities where we manufacture products, where our OMPULs are established or where we plan to supply products. In particular, we are subject to laws and regulations concerning research and development, testing, manufacturing processes, equipment and facilities, including compliance with GMPs, labeling and distribution, import and export, facility registration or licensing, and product registration and listing. As a result, our facilities are subject to regulation in Israel and South Korea. We are also required to comply with environmental, health and safety laws and regulations, as discussed below. These regulatory requirements impact many aspects of our operations, including manufacturing, developing, labeling, packaging, storage, distribution, import and export and record keeping related to customers’ products. Noncompliance with any applicable regulatory requirements can result in government refusal to approve facilities for manufacturing products or products for commercialization. Certain products manufactured by us involve the use, storage and transportation of toxic and hazardous materials. Our operations are subject to extensive laws and regulations relating to the storage, handling, emission, transportation and discharge of materials into the environment and the maintenance of safe working conditions. We maintain environmental and industrial safety and health compliance programs and training at our facilities. Prevailing legislation tends to hold companies primarily responsible for the proper disposal of their waste even after transfer to third party waste disposal facilities. Other future developments, such as increasingly strict environmental, health and safety laws and regulations, and enforcement policies, could result in substantial costs and liabilities to us and could subject the handling, manufacture, use, reuse or disposal of substances or pollutants at our facilities to more rigorous scrutiny than at present. Our development operations involve the controlled use of hazardous materials and chemicals. Although we believe that our procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we may incur significant additional costs to comply with applicable laws in the future. Also, even if we are in compliance with applicable laws, we cannot completely eliminate the risk of contamination or injury resulting from hazardous materials or chemicals. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our contract manufacturing operations, which could materially harm our business, financial condition and results of operations. The costs associated with complying with the various applicable local, state, national and international regulations could be significant and the failure to comply with such legal requirements could have an adverse effect on our results of operations and financial condition. See “Risk Factors — Risks Related to Development and Regulatory Approval of Our Therapies and Product Candidates — Extensive industry regulation has had, and will continue to have, a significant impact on our business, especially our product development, manufacturing and distribution capabilities.” for additional discussion of the costs associated with complying with the various regulations. POCare Therapies Portfolio Our therapeutic product portfolio pipeline is diverse and addresses various unmet clinical needs. It is predominantly comprised of personalized autologous cell therapies, implying that patients receive cells that originate from their own body, virtually eliminating the risk of an immune response and rejection and thus easing various regulatory hurdles. In addition, by leveraging Regulatory Process in the United States Our potential product candidates are subject to regulation as a biological product under the Public Health Service Act and the Food, Drug and Cosmetic Act. The FDA generally requires the following steps for pre-market approval or licensure of a new biological product: Regulatory Process in Europe In the European Union (“EU”) somatic cell and gene therapy products are called Advanced Therapy Medicinal Product (ATMPs). Since January 2022 the Clinical Trial Regulation (EU) 536/2014 regulates the application of medicinal products including ATMPs to humans immediately effective in all member states. In conjunction with Regulation 536/2014 the EU commission has released two delegated acts regulating manufacturing of investigational as well as marketed AMPs. For products that are regulated as an ATMP, Regulation requires: Exemption from the centralized procedure was introduced into the ATMP Regulation to allow marketing of certain ATMPs in individual EU member states. The so-called “hospital exemption” can only be applied for custom-made ATMPs used in a hospital setting for a specific patient by a treating physician. In addition, a competent authority must authorize hospital exemption for ATMPs. Hospital exemption products must comply with the same national requirements concerning quality, traceability and pharmacovigilance that apply to authorized medicinal products. The “hospital exemption” has to be applied for individually in each EU member state according to national procedures and control measures. Clinical Trials Typically, both in the U.S. and the EU, clinical testing involves a three-phase process, although the phases may overlap. In Phase I, clinical trials are conducted with a small number of healthy volunteers or patients and are designed to provide information about product safety and to evaluate the pattern of drug distribution and metabolism within the body. In Phase II, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In some cases, an initial trial is conducted in diseased patients to assess both preliminary efficacy and preliminary safety and patterns of drug metabolism and distribution, in which case it is referred to as a Phase I/II trial. Phase III clinical trials are generally large-scale, multi-center, comparative trials conducted with patients afflicted with a target disease in order to provide statistically valid proof of efficacy, as well as safety and potency. In some circumstances, the FDA or EMA may require Phase IV or post-marketing trials if it feels that additional information needs to be collected about the drug after it is on the market. During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, as well as clinical trial investigators. An agency may, at its discretion, re-evaluate, alter, suspend, or terminate the testing based upon the data that have been accumulated to that point and its assessment of the risk/benefit ratio to the patient. Monitoring all aspects of the study to minimize risks is a continuing process. All adverse events must be reported to the FDA or EMA. As of December 31, Compensation and Benefits We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. Biotechnology companies both large and small compete for a limited number of qualified applicants to fill specialized positions. To attract qualified applicants, we offer a total rewards package consisting of base salary and cash target bonus, a comprehensive benefit package and equity compensation to select employees. Bonus opportunity and equity compensation increase as a percentage of total compensation based on level of responsibility. Actual bonus payout is based on performance. Diversity, Equity and Inclusion Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels. We believe that our business benefits from the different perspectives a diverse workforce brings, and we pride ourselves on having a strong, inclusive and positive culture based on our shared mission and values. This is reflected in our numbers with our total workforce being approximately 55% women, 12% ethnically diverse and 51% over the age of 40. Environmental, Social and Governance Our commitment to integrating sustainability across our organization begins with our Board of Directors, or the Board. The Nominating and Governance Committee of the Board has oversight of strategy and risk management related to Environmental, Social and Governance, or ESG. All employees are responsible for upholding our core values, including to communicate, collaborate, innovate and be respectful, as well as for adhering to our Code of Ethics and Business Conduct, including our policies on bribery, corruption, conflicts of interest and our whistleblower program. We encourage employees to come to us with observations and complaints, ensuring we understand the severity and frequency of an event in order to escalate and assess accordingly. Our Chief Compliance Officer strives to ensure accountability, objectivity, and compliance with our Code of Conduct. If a complaint is financial in nature, the Audit Committee Chair is notified concurrently, which triggers an investigation, action, and report. We are committed to protecting the environment and attempt to mitigate any negative impact of our operations. We monitor resource use, improve efficiency, and at the same time, reduce our emissions and waste. We are systematically addressing the environmental impacts of the buildings we rent as we make improvements, including adding energy control systems and other energy efficiency measures. Waste in our own operation is minimized by our commitment to reduce both single-use plastics and operating paper-free, primarily in a digital environment. We have safety protocols in place for handling biohazardous waste in our labs, and we use third-party vendors for biohazardous waste and chemical disposal. Corporate and Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are available free of charge though our website (http://www.orgenesis.com) as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). Except as otherwise stated in these documents, the information contained on our website or available by hyperlink from our website is not incorporated by reference into this report or any other documents we file, with or furnish to, the SEC. Our common stock is listed and traded on the Nasdaq Capital Market under the symbol “ORGS.” As used in this Annual Report on Form 10-K and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its Subsidiaries. Unless otherwise specified, all amounts are expressed in United States Dollars. ITEM 1A. RISK FACTORS Summary of Risk Factors Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may affect certain of our operations. We have identified a material weakness in our internal control over financial reporting. Failure to achieve and maintain effective internal controls over financial reporting could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner, which could have an adverse impact on our business. Risk Factors An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this report in evaluating our company and its business before purchasing shares of our company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks. Risks Related to Our Company and Our Our Our management, as of December 31, 2023, and our independent registered public accounting firm, in its report on our financial statements as of and for the fiscal year ended December 31, 2023, have concluded that there is substantial doubt as to our ability to continue as a going concern. Our audited financial statements for the fiscal year ended December 31, 2023 were prepared assuming that we will continue as a going concern. The going concern basis of the presentation assumes that we will continue in operation for the foreseeable future and will be able to realize our assets and satisfy our liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from our inability to continue as a going concern. As of December 31, 2023, our management concluded that, based on expected operating losses and negative cash flows, there is substantial doubt about our ability to continue as a going concern for the twelve months after the date the financial statements were issued. Our ability to continue as a going concern is subject to our ability to raise additional capital through equity offerings or debt financings. However, we may not be able to secure additional financing in a timely manner or on favorable terms, if at all. If we cannot continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that our stockholders may lose some or all of their investment in us. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all. We are not profitable as of December 31, For the 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. Because this is a new approach to treating diseases, developing and commercializing our product candidates subjects us to a number of challenges, including: 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. Kyslecel may not achieve patient or market acceptance, which could have a material adverse effect on our business. Our commercialization strategy for Kyslecel relies on medical specialists, medical facilities and patients adopting TP-IAT with Kyslecel as an accepted treatment for chronic pancreatitis. However, medical specialists are historically slow to adopt new treatments, regardless of perceived merits, when older treatments continue to be supported by established providers. Overcoming such resistance often requires significant marketing expenditure or definitive product performance and/or pricing superiority. The cost of allocating resources for such requirements might severely impact the potential for profitability of Kyslecel. There is no guarantee that physician or patient acceptance of TP-IAT with Kyslecel will be substantial. Further, there is no guarantee that Koligo will be able to achieve patient acceptance or obtain enough customers (clinical providers) to meet its sales objectives. If we do not meet our sales objectives, our business prospects and financial performance will be materially and adversely affected. Further, we are partially reliant on published clinical trials and scientific research conducted by third parties to justify the patient benefit and safety of TP-IAT with Kyslecel and, as such, we rely, in part, on the accuracy and integrity of those third-parties to have reported the results and correctly collected and interpreted the data from all clinical trials conducted to date. If published data turn out to later be incorrect or incomplete, our business prospects and financial performance may be materially and adversely affected. The therapeutic efficacy of Ranpirnase and our other product candidates is unproven in humans, and we may not be able to successfully develop and commercialize Ranpirnase or any of our other product candidates. Ranpirnase and our other product candidates are novel compounds and their potential benefit as antiviral drugs or immunotherapies is unproven. Ranpirnase and our other product candidates may not prove to be effective against the indications for which they are being designed to act and may not demonstrate in clinical trials any or all of the pharmacological effects that have been observed in preclinical studies. As a result, our clinical trial results may not be indicative of the results of future clinical trials. Ranpirnase and our other product candidates may interact with human biological systems in unforeseen, ineffective or harmful ways. If Ranpirnase or any of our other product candidates is associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon the development of such product candidate or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Because of these and other risks described herein that are inherent in the development of novel therapeutic agents, we may never successfully develop or commercialize Ranpirnase or any of our other product candidates, in which case our business will be harmed. We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth. As of December 31, 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 We intend to continue to make investments to support our business growth and Capital and credit market conditions, adverse events affecting our business or industry, the tightening of lending standards, rising interest rates, negative actions by regulatory authorities or rating agencies, or other factors also could negatively impact our ability to obtain future financing on terms acceptable to us or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to support our business growth and respond to business challenges could be significantly limited. In addition, the terms of any additional equity or debt issuances may adversely affect the value and price of our common stock, our results of operations, financial condition and cash flows. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any financing secured by us in the future could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Because we conduct certain operations in the State of Israel, some of our business and operations may be Any hostilities involving Israel, or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect certain of our operations and results of operations and could make it more difficult for us to raise capital. The conflict in Israel could also result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. There have been travel advisories imposed relating to travel to Israel, and restriction on travel, or delays and disruptions as related to imports and exports may be imposed in the future. Additionally, certain members of our management and employees are located and reside in Israel. Shelter-in-place and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing conflict may temporarily disrupt our management and employees’ ability to effectively perform their daily tasks. The It is Currency exchange fluctuations may impact the results of our operations. The results of our operations are affected by fluctuations in currency exchange rates in both sourcing and selling locations. 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. We have entered into collaborations and joint ventures 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 have entered into collaborations and joint ventures and 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: 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. The success of our existing and future collaboration arrangements and strategic partnerships, which include research and development services by our collaborators to improve our intellectual property, will depend heavily on the efforts and activities of our collaborators and may not be successful. 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 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 collaborations with partners, such as a large pharmaceutical organization, that are willing to further develop and commercialize a selected product candidate. To date, we have entered into a number of collaborative arrangements with cell therapy organizations. By entering into any such strategic collaborations, 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 additional collaborations 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. Our business In addition, we currently rely on third parties to, among other things, manufacture raw materials, manufacture our product candidates for our clinical trials, ship investigation drugs and clinical trial samples, perform quality testing and supply other goods and services to run our business. If any such third party in our supply chain for materials is adversely impacted by effects from a resurgence of the COVID-19 pandemic, including staffing shortages, production slowdowns and disruptions in delivery systems, our supply chain may be disrupted and our costs could be increased, limiting our ability to manufacture our product candidates for our clinical trials and planned future clinical trials and conduct our research and development operations as planned. In addition, our business could be significantly adversely affected by other business disruptions to us or our 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 issued patents in the United States, we cannot be certain that the claims 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 among others the bioconjugates comprising sulfated polysaccharides; Ranpirnase and other ribonucleases for treating viral diseases; therapeutic compositions comprising exosomes, bioxomes, and redoxomes; bioreactors for cell culture, automated devices for supporting cell therapies, and point-of-care systems; immune cells, ribonucleases, or antibodies for treating COVID-19; or chimeric antigen receptors (CARs); 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 these inventions issue as patents, the patents protect specific products 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. These types of patents may not be enforced against competitors making and marketing a product that provides 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. 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. Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business. Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties. There is considerable patent and other intellectual property litigation in the pharmaceutical and biotechnology industries. We may become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our technology and product candidates, including interference proceedings, post grant review, inter partes review, and derivation proceedings before the USPTO and similar proceedings in foreign jurisdictions such as oppositions before the European Patent Office. The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. The risks of being involved in such litigation and proceedings may increase if and as our product candidates near commercialization. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of merit. We may not be aware of all such intellectual property rights potentially relating to our technology and product candidates and their uses, or we may incorrectly conclude that third party intellectual property is invalid or that our activities and product candidates do not infringe such intellectual property. Thus, we do not know with certainty that our technology and product candidates, or our development and commercialization thereof, do not and will not infringe, misappropriate or otherwise violate any third party’s intellectual property. Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations or methods, such as methods of manufacture or methods for treatment, related to the discovery, use or manufacture of the product candidates that we may identify or related to our technologies. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that the product candidates that we may identify may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Moreover, as noted above, there may be existing patents that we are not aware of or that we have incorrectly concluded are invalid or not infringed by our activities. If any third-party patents were held by a court of competent jurisdiction to cover, for example, the manufacturing process of the product candidates that we may identify, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Generally, conducting clinical trials and other development activities in the United States is not considered an act of infringement. If and when products are approved by the FDA, that certain third party may then seek to enforce its patents by filing a patent infringement lawsuit against us or our licensee(s). In such lawsuit, we or our licensees may incur substantial expenses defending our rights or our Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize the product candidates that we may identify. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. We may choose to take a license or, if we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, we could also be required to obtain a license from such third party to continue developing, manufacturing and marketing our technology and product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us and could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right and could be forced to indemnify our customers or collaborators. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. In addition, we may be forced to redesign our product candidates, seek new regulatory approvals and indemnify third parties pursuant to contractual agreements. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, financial condition, results of operations and prospects. 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: Because most of our products have not reached commercial stage, we do not currently need to carry clinical trial or extensive product liability insurance. In the future, our inability to obtain additional 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 outside of the United States. 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. We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage. We are subject to laws and regulations covering data privacy and the protection of personal information, including health information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business. In the U.S., numerous federal and state laws and regulations, including state security breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of personal information. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues for us. If we fail to comply with applicable laws and regulations, we could be subject to penalties or sanctions, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a covered entity in a manner that is not authorized or permitted by the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA. Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well. The EU and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. In the EU, for example, effective May 25, 2018, the GDPR replaced the prior EU Data Protection Directive (95/46) that governed the processing of personal data in the European Union. The GDPR imposes significant obligations on controllers and processors of personal data, including, as compared to the prior directive, higher standards for obtaining consent from individuals to process their personal data, more robust notification requirements to individuals about the processing of their personal data, a strengthened individual data rights regime, mandatory data breach notifications, limitations on the retention of personal data and increased requirements pertaining to health data, and strict rules and restrictions on the transfer of personal data outside of the EU, including to the U.S. The GDPR also imposes additional obligations on, and required contractual provisions to be included in, contracts between companies subject to the GDPR and their third-party processors that relate to the processing of personal data. The GDPR allows EU member states to make additional laws and regulations further limiting the processing of genetic, biometric or health data. Adoption of the GDPR increased our responsibility and liability in relation to personal data that we process and may require us to put in place additional mechanisms to ensure compliance. Any failure to comply with the requirements of GDPR and applicable national data protection laws of EU member states, could lead to regulatory enforcement actions and significant administrative and/or financial penalties against us (fines of up to Euro 20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher), and could adversely affect our business, financial condition, cash flows and results of operations. We are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data storage risks. Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit confidential information, and it is critical that we do so in a secure manner in order to maintain the confidentiality and integrity of such confidential information. Our information technology systems are potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners, vendors, or from attacks by malicious third parties. Maintaining the secrecy of this confidential, proprietary, and/or trade secret information is important to our competitive business position. While we have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful access or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination or misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology and/or adversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to us and could have a material effect on our business, financial position, results of operations and/or cash flow. 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. If we are unable to integrate acquired businesses effectively, our operating results may be adversely affected. From time to time, we seek to expand our business through acquisitions. We may not be able to successfully integrate acquired businesses and, where desired, their product portfolios into ours, and therefore we may not be able to realize the intended benefits. If we fail to successfully integrate acquisitions or product portfolios, or if they fail to perform as we anticipate, our existing businesses and our revenue and operating results could be adversely affected. If the due diligence of the operations of acquired businesses performed by us and by third parties on our behalf is inadequate or flawed, or if we later discover unforeseen financial or business liabilities, acquired businesses and their assets may not perform as expected. Additionally, acquisitions could result in difficulties assimilating acquired operations and, where deemed desirable, transitioning overlapping products into a single product line and the diversion of capital and management’s attention away from other business issues and opportunities. The failure to integrate acquired businesses effectively may adversely impact our business, results of operations or financial condition. Risks Related to Our OMPULs We may not be able to operate our OMPULs in all cities or desired locations and the sizes and use of our laboratories in such OMPULs may be restricted due to zoning, environmental, medical waste, or other licensing regulations. We may be subject to local zoning ordinances or other similar restrictions that may limit where the OMPULs can be located and the extent of their size and use. In addition, international, federal, state and local environmental and other administrative and licensing regulations could restrict the ability of the OMPULs to connect with local power, water, sewer, and other infrastructure. Our success depends on our ability to develop and roll out our OMPULs which may become more difficult or more expensive by such applicable regulations. Changes in any of these regulations could require us to close or move our OMPULs which would affect our ability to conduct and grow our business. If our existing OMPULs facilities become damaged or inoperable or if we are required to vacate our existing facilities, our ability to perform our tests and pursue our research and development efforts may be jeopardized. We currently perform a majority of tests relating to our POCare The inability to perform our tests or to reduce the backlog that could develop if our facilities are inoperable, for even a short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation. Furthermore, our OMPUL facilities and the equipment we use to perform our research and development work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild our facilities, or to locate and qualify new facilities. We carry insurance for damage to our property and disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our facility and business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all. Changes in the price and availability of our raw materials could be detrimental to our OMPUL operations. Supply chain issues, including limited supply of certain raw material or supply interruptions, delays or shortages of material may disrupt our daily operations as the OMPULs may be unable to retain an inventory of materials required to maintain operations or to build or repair OMPULs. We are dependent on skilled human capital for our OMPULs. Our ability to innovate and execute is dependent on the ability to hire, replace, and train skilled personnel. The employment market suffers from shortage of candidates that may continue in future years and cause delays and inabilities to execute our plans. Additionally, based on current trends in the US labor market, there could be a shortage of available trained staff for the OMPULs in the United States. Staff retention could also be a significant operational issue. If we are unable to successfully secure our locations and premises, we may be unable to operate out of our OMPULs or keep our employees and laboratory equipment safe. In certain cities and urban markets, homelessness, rising crime rates and decreased police funding, could impact the security of the OMPULs and the safety of employees and patients. If we are unable to successfully secure our OMPULs, our research and development could be negatively impacted. Our OMPULs are operated in a heavily regulated industry, and changes in regulations or violations of regulations may, directly or indirectly, reduce our revenue, adversely affect our results of operations and financial condition, and harm our business. The clinical laboratory testing industry is highly regulated, and there can be no assurance that the regulatory environment in which we operate will not change significantly and adversely to us in the future. Areas of the regulatory environment that may affect our ability to conduct our OMPUL business include, without limitation: Risks Related to Our Trans-Differentiation Technologies for Diabetes and the THM License Agreement THM is entitled to cancel the THM License Agreement. Pursuant to the terms of the THM License Agreement with THM, Orgenesis Ltd, 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. 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. We also run the risk that THM may attempt cancel or, at the very least challenge, the License Agreement with Risks Related to Development and Regulatory Approval of Our Therapies and Product Candidates 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. 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. 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 GMP 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. The European Medicines Agency (“EMA”) will regulate our future 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. 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 generated limited revenue from therapeutic product sales, and our ability to generate any significant revenue from product sales and become profitable depends significantly on our success in a number of factors. We have a limited number of therapeutic products approved for commercial sale, and we have generated only limited revenue from product sales. Our ability to generate revenue of more significant scale and achieve profitability depends significantly on our success in many factors, including: Even if more of the product candidates that we develop are 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 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. When we commence any 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 cannot be sure that we will be able to submit an IND, 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: 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: 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. 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. 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 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. 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 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. 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. There can be no assurance that we will be able to further 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. 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 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 We may fail to comply with the continued listing requirements of the Nasdaq Capital Market, such that our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. Our common stock is listed for trading on the Nasdaq Capital Market. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. We received such a notice on September 27, 2023 and thus risk delisting unless we are able to regain compliance in a timely fashion. In accordance with Nasdaq Listing Rules, we were provided an initial period of 180 calendar days to regain compliance with the Minimum Bid Price Requirement. The initial compliance period ended on March 25, 2024 and we did not evidence compliance with the Minimum Bid Price Requirement during the initial compliance period. On March 26, 2024, we received a new letter from the Staff stating that it had determined to grant the Company an extension through September 23, 2024 to evidence compliance with the Minimum Bid Price Requirement. If at any time before September 23, 2024, the closing bid price of our common stock is at least $1.00 per share for a minimum of 10 consecutive business days, the Staff will provide written notification that we have achieved compliance with the Minimum Bid Price Requirement and the common stock will continue to be eligible for listing on the Nasdaq Capital Market. If, however, compliance with the Minimum Bid Price Requirement cannot be demonstrated by September 23, 2024, the Staff will provide written notification that our common stock will be subject to delisting. At that time, we may appeal the Staff’s delisting determination to a Panel. There can be no assurance that, if we do appeal the Staff’s delisting determination to the Panel, such appeal would be successful. There can be no assurance that we will regain compliance with the Minimum Bid Price Requirement, that we will maintain compliant with other Nasdaq listing requirements or that we will be granted a second compliance period. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities. 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 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: 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 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. We have identified a material weakness in our internal control over financial reporting. Failure to achieve and maintain effective internal controls over financial reporting could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner, which could have an adverse impact on our business. Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis has been, and will continue to be, costly and a time-consuming effort. In addition, the rapid changes in our operations and corporate structure have created a need for additional resources within the accounting and finance functions in order to produce timely financial information and to ensure the level of segregation of duties customary for a U.S. public company. Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”). Our management is also required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weakness identified. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement in our annual or interim consolidated financial statements might not be prevented or detected on a timely basis, as occurred with certain of our interim consolidated financial statements in 2023, which were then restated and corrected in amended Quarterly Reports on Form 10-Q prior to the filing of this Annual Report on Form 10-K. As described in Item 9A of this Annual Report on Form 10-K, there was a material weakness identified in our internal control over financial reporting. We are working to remediate our material weakness as soon as practicable. Our remediation plan, which is continuing to be developed, can only be accomplished over time, and these initiatives may not accomplish their intended effects. Failure to maintain our internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis or result in misstatements. Likewise, if our financial statements are not filed on a timely basis, we could be subject to regulatory actions, legal proceedings or investigations by Nasdaq, the SEC or other regulatory authorities, which could result in a material adverse effect on our business and/or we may not be able to maintain compliance with certain of our agreements. Ineffective internal controls could also cause investors to lose confidence in our financial reporting, which could have a negative effect on our stock price, business strategies and ability to raise capital. Even after the remediation of our material weakness, our management does not expect that our internal controls will ever prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. No evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the business will have been detected. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 1C. CYBERSECURITY Cybersecurity We recognize the critical importance of maintaining the trust and confidence of customers, clients, patients, business partners and employees toward our business and are committed to protecting the confidentiality, integrity and availability of our business operations and systems. Our board of directors is actively involved in oversight of our risk management activities, and cybersecurity represents an important element of our overall approach to risk management. Our cybersecurity policies, standards, processes and practices are based on recognized frameworks established by our cybersecurity consultants and other applicable industry standards. In general, we seek to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. Cybersecurity Risk Management and Strategy; Effect of Risk We face risks related to cybersecurity such as unauthorized access, cybersecurity attacks and other security incidents, including as perpetrated by hackers and unintentional damage or disruption to hardware and software systems, loss of data, and misappropriation of confidential information. To identify and assess material risks from cybersecurity threats, we maintain a comprehensive cybersecurity program to ensure our systems are effective and prepared for information security risks, including regular oversight of our programs for security monitoring for internal and external threats to ensure the confidentiality and integrity of our information assets. We consider risks from cybersecurity threats alongside other company risks as part of our overall risk assessment process. We employ a range of tools and services, including regular network and endpoint monitoring, audits, vulnerability assessments, penetration testing, threat modeling and tabletop exercises to inform our risk identification and assessment. As discussed in more detail under “Cybersecurity Governance” below, our board of directors provides oversight of our cybersecurity risk management and strategy processes, which are led by our Chief Executive Officer. We also identify our cybersecurity threat risks by comparing our processes to standards set by the Center for Internet Security (CIS) as well as by engaging experts to attempt to infiltrate our information systems. To provide for the availability of critical data and systems, maintain regulatory compliance, manage our material risks from cybersecurity threats, and protect against and respond to cybersecurity incidents, we undertake the following activities: ● monitor emerging data protection laws and implement changes to our processes that are designed to comply with such laws and implement latest Center for Internet Security benchmarks to comply with up-to-date requirements; ● through our policies, practices and contracts (as applicable), require employees, as well as third parties that provide services on our behalf, to treat confidential information and data with care, including using policies “right to know” and “right to access” with granular access to confidential information; ● employ technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence, including active threat hunting and alerts monitoring by cyber security operators, threat analytics, endpoint management and application evaluations; ● provide regular, mandatory training for our employees and contractors regarding cybersecurity threats as a means to equip them with effective tools to address cybersecurity threats, and to communicate our evolving information security policies, standards, processes and practices; ● conduct regular phishing email simulations for all employees and contractors with access to our email systems to enhance awareness and responsiveness to possible threats, including built-in tools for phishing campaigns and attack simulators and usage of sandbox environment to evaluate threats; ● conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; ● run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; ● leverage the NIST incident handling framework to help us identify, protect, detect, respond and recover when there is an actual or potential cybersecurity incident; and ● carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident. Our processes also address cybersecurity threat risks associated with our use of third-party service providers, including our suppliers and manufacturers or who have access to patient and employee data or our systems. In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers. We perform diligence on third parties that have access to our systems, data or facilities that house such systems or data, and continually monitor cybersecurity threat risks identified through such diligence. Additionally, we generally require those third parties that could introduce significant cybersecurity risk to us to agree by contract to manage their cybersecurity risks in specified ways, and to agree to be subject to cybersecurity audits, which we conduct as appropriate. We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “We are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data storage risks.” which disclosures are incorporated by reference herein. In the last three fiscal years, we have not experienced any material cybersecurity incidents and the expenses we have incurred from cybersecurity incidents were immaterial. This includes penalties and settlements, of which there were none. Cybersecurity Governance; Management Cybersecurity is an important part of our risk management processes and an area of focus for our board of directors and management. In general, our board of directors oversees risk management activities designed and implemented by our management, and considers specific risks, including, for example, risks associated with our strategic plan, business operations, and capital structure. Our board of directors executes its oversight responsibility for risk management both directly and through delegating oversight of certain of these risks to its committees, and our board of directors has authorized our audit committee to oversee risks from cybersecurity threats. Our board of directors receives an annual update, and more often if required, from management of our cybersecurity threat risk management and strategy processes covering topics such as data security posture, results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, our incident response plan, and material cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks. In such sessions, our board of directors generally receives a report that details includes cybersecurity details and other materials discussing current and emerging material cybersecurity threat risks, and describing our ability to mitigate those risks, as well as recent developments, evolving standards, technological developments and information security considerations arising with respect to our peers and third parties, and discusses such matters with our Chief Executive Officer and also receive prompt and timely information regarding any cybersecurity incident that meets establishing reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed. Members of board of directors are also encouraged to regularly engage in conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs. Material cybersecurity threat risks are also considered during separate board meeting discussions of important matters like enterprise risk management, operational budgeting, business continuity planning, mergers and acquisitions, brand management, and other relevant matters. Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our Chief Executive Officer and our external cybersecurity consultants. These are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan. As discussed above, these consultants report to management about cybersecurity threat risks, among other cybersecurity related matters, at least annually. 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: Entity Property Description Orgenesis Inc. Our principal office is located at 20271 Goldenrod Lane, Germantown, MD 20876. Orgenesis Korea Co. Ltd Operational production laboratory and office area located at Gwanggyo business centre 156, Gwanggyo-ro, Yeongtong-gu, Suwon-si, Gyeonggi-do, Republic of Korea. Orgenesis Belgium and Orgenesis Services SRL Laboratories and offices located near Namur, at Novalis Science Park, Belgium 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 Except as described ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information As of 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 Issuer Purchases of Equity Securities Maximum Value that May Yet Be Purchased Under the Plans or Programs ITEM 6. [RESERVED] 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 This discussion should be read in conjunction with our consolidated financial statements for the CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products, To achieve these goals, we have developed a Following the Metalmark Investment in November 2022, we separated our operations into two operating segments namely 1) Octomera and 2) Therapies. Prior to that, we conducted all of our operations as one single segment. The Octomera operations includes mainly POCare Services, and include the results of the subsidiaries transferred to Octomera. The Therapies segment includes our therapeutic development operations. The segment information presented in note 5 of Item 8 of this Annual Report on Form 10-K reflects the results of the subsidiaries that were transferred to Octomera. Therapies segment (POCare Therapies) While the biotech industry struggles to determine the best way to lower cost of goods and enable CGTs to scale, the scientific community continues to advance and push the development of such therapies to new heights. Clinicians and researchers are excited by all the new tools (new generations of industrial viruses, big data analysis for genetic and molecular data) and technologies (CRISPR, mRNA, etc.) available, often at a Historically, drug/therapeutic development has required investments of hundreds of millions of dollars to be successful. One significant cause for the high cost is that each therapy often requires unique production facilities and technologies that must be subcontracted or built. Further the cost of production during the clinical stage is extremely expensive, and the cost of the clinical trial itself is very high. Given these financial restraints, researchers and institutes hope to out-license their therapeutic products to large biotech companies or spin-out new companies and raise large fundraising rounds. However, in many cases they lack the resources and the capability to de-risk their therapeutic candidates enough to be attractive for such fundings or partnership. Our POCare Network is an alternative to the traditional pathway of drug development. We collaborate with academic institutions and entities that have been spun out from such institutions. We are in close contact with researchers who are experts in the field of the drug and also partners with leading hospitals and research The ability to produce these products at low cost allows for an expedited development process, and the partnership with hospitals around the globe enables joint grants and lower cost of clinical development. The POCare The goal of Our therapies development subsidiaries are: Octomera segment (mainly POCare Octomera LLC (“Octomera” or “Morgenesis”) is responsible for most of our POCare The POCare Services are performed in decentralized hubs that provide harmonized and standardized services to customers, We During 2023, we and MM invested $660 and $6,500 respectively into Octomera in During 2023, we and MM loaned $276 and $2,475 respectively to Octomera’s subsidiary, Orgenesis Maryland LLC. The loans bear 10% annual interest and were originally scheduled to be repaid during 2024. Pursuant to an extension agreement signed between us and MM on January 28, 2024, the maturity date of the MM loans was extended to January 28, 2034. . Equity On February 23, 2023, we The As of September 30, 2023, all of the Warrants were exercised using the alternate cashless exercise option described above. On August 31, 2023, we entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which we agreed to issue and sell, in a private placement (the “August 2023 Offering”), 2,000,000 shares of our common stock at a purchase price of $0.50 per share. We received proceeds of $1,000. The August 2023 Offering closed on August 31, 2023. On November 8, 2023, we entered into a Securities Purchase Agreement with an institutional investor named therein, pursuant to which we agreed to issue and sell, in a registered direct offering directly to the investor (the “November 2023 Offering”), (i) 1,410,256 shares of our common stock and (ii) warrants exercisable for 1,410,256 shares of common stock. The combined offering price for each share and accompanying warrant was Loans On July 25, 2023, the Israeli subsidiary received a loan from an offshore investor in the amount of $175. The loan bears 8% annual interest and On August 15, 2023, the Company received a loan from an investor in the amount of $250. The loan bears 8% annual interest and During October and November 2023, the Israeli subsidiary received loans in the amount of $150. The During October through License Agreements In Comparison of the Year Ended December 31, Our financial results for the year ended December 31, Loss from deconsolidation of Octomera (see Note 3) 5,343 - 2,688 Revenues The following table shows our revenues by major revenue streams: Our revenues for the year ended December 31, A breakdown of the revenues per customer that constituted at least 10% of revenues is as follows: Expenses Cost of Revenues Cost of revenues for the year ended December 31, 2023 were $6,255, as compared to $5,133 for the year ended December 31, 2022, representing an increase of 22%. This was due to increased costs including additional salaries, professional fees, and depreciation expenses incurred as a result of increased process development and cell processing revenues mainly in the Octomera segment, which were incurred until the date of deconsolidation. Cost of development services and research and development expenses Cost of development services and research and development for the year ended December 31, 2023 were $10,623, as compared to $21,933 for the year ended December 31, 2022, representing a decrease of 52%. The decrease was mainly attributable to the deconsolidation of the Octomera segment at June 30, 2023, and our decision to reduce investing in subcontracting, professional and consulting service fees and other research and development expenses Selling, General and Administrative Expenses1.Pre-clinicalKYSLECEL® (Autologous Pancreatic Islets)Drug Delivery TechnologyMSPP Pre-clinical Urinary Incontinence Anti-Viral Clinical development Anti-viral/ Immune oncology Pre-clinical Autologous viral vaccine KYSLECEL is made from a patient’s own pancreatic islets – the cells that make insulin to regulate blood sugar. KYSLECEL is intended to preserve insulin secretory capacity in chronic or acute recurrent pancreatitis patients after total pancreatectomy (TP-IAT). KYSLECEL is a minimally manipulated autologous cell-based product available in the United States and regulated by the U.S. Food and Drug Administration (“FDA”). KYSLECEL is produced according to current good tissue practices (cGTP) and in compliance with federal and state regulations. We are planning on initiating an observational study in the US to gain insight into KYSLECEL patient outcomes. Substantial efforts are being invested in promoting the process development and the marketing of KYSLECEL in the European Union. In May 2021 we submitted a request for classification to Committee for Advanced Therapies (Immuno-OncologyCAT) to the European Medicines Agency (EMA), who classified KYSLECEL as not being an Advanced Therapy Medicinal Product (ATMP). We have identified relevant Key Opinion Leaders (KOL) and established contact with islet transplantation/pancreas surgery centers in Germany and Switzerland. We are adjusting the KYSLECEL Good Manufacturing Practice (GMP) for European requirements for the initiation for the first clinical application. We are also monitoring the Chinese market for potential partners. Furthermore, we are training teams who will manage introduction into new markets by supporting the KYSLECEL tech transfer, as well as working on the OMPUlization process so as to manufacture via automated closed systems.2.Tissue Genesis Icellator® for Cell Assisted LipotransferThe Tissue Genesis Icellator is a point-of-care medical device that isolates stromal and vascular fraction cells (“SVF”) from a patient’s own (autologous) adipose tissue (fat). The Icellator is commercially available in Korea through a medical device distributor. The SVF obtained from the Icellator is for use in cell-assisted lipotransfer, a plastic surgery procedure intended to improve fat engraftments.3.Cartil-S Autologous Products for the Treatment of OsteoarthritisCartil-S is a cell therapy for Osteoarthritis. This product is produced by performing a minimally invasive biopsy of adipose (fat) tissue from a patient, followed by isolation and expansion of adipose-derived stem cells (ADSCs), to be injected arthroscopically. The autologous injectable product helps delay/stop the progression of osteoarthritis, involving the patient’s own stem cells.4.Chondroseal Autologous Products for the Treatment of Cartilage Defects (Osteoarthritis)Chondroseal is a cell therapy for cartilage defects. Following collection of adipose tissue by minimally invasive biopsy that is composed of ADSCs, the cells are combined with a natural gel serving as a scaffold for local cartilage regeneration in the joint.Products in Clinical TrialsHiCAR-T (CD 19)5.RanTop, Ranpirnase Topical FormulationWe are currently developing a novel topical formulation of an active RNA-degrading enzyme, called Ranpirnase. Ranpirnase combats viral infections by targeting double-stranded RNA including miRNA precursors, via RNA degradation catalysis. It acts through a dual mechanism: 1) Inhibition of viral replication; and 2) induction of host cell apoptosis. Topical Ranpirnase demonstrated good tolerability and preliminary clinical efficacy in the treatment of HPV-associated external anogenital warts (EGW) in a Phase 2a clinical study conducted in Bolivia.9During 2021 we prepared a detailed pre-IND briefing package and received positive pre-IND feedback from the FDA on the development plan and proposed clinical study under an IND of topical Ranprinase for the treatment of EGW. The FDA generally confirmed that the proposed preclinical development plan should support a Phase 2b study of topical Ranprinase in EGW. The proposed plan included a dermal toxicology study using the gel formulation.We have demonstrated in laboratory experiments the feasibility of Ranprinase encapsulation in the Orgenesis Bioxome delivery platform. Encapsulation enhanced Ranprinase anti-viral activity in an in-vitro test. We have also shown feasibility of producing an active recombinant Ranprinase. Recombinant production could in the future replace the sourced Ranprinase to improve manufacturing scalability, eliminate dependence on procurement of rana pipiens frog oocytes and potentially decrease production cost.6.Tissue Geneseis Icellator® for Erectile Dysfunction and COVID-19 (SVF-CLI-ED)The safety of the Tissue Genesis Icellator, and use of SVF produced by the Icellator, has previously been tested in a number of pilot clinical trials in the United States. Orgenesis has prioritized the clinical development of the Icellator for potential use in the treatment of erectile dysfunction and COVID-19 related respiratory complications. In 2021, the FDA approved our investigational device exemption (IDE) for a Pilot Clinical Trial of the Tissue Genesis Icellator to treat Acute Respiratory Distress Syndrome (ARDS) resulting from COVID-19 infection.The Tissue Genesis Icellator is also being used by research collaborators in FDA-regulated clinical trials to test the use of SVF during rotator cuff surgery.Products in IND Enabling Studies7.Generation of Autologous Insulin-Producing Cells (AIPs) from Adult Liver Cells (“trans-differentiation technology”)Orgenesis Ltd. has trans-differentiation in-vitro technology that has demonstrated in animal models the capacity to induce a shift in the developmental fate of cells from the liver or other tissues, transdifferentiating them into “pancreatic beta cell-like” AIP cells for patients with Type 1 Diabetes (“T1D”), acute pancreatitis and other insulin deficient diseases. For the treatment of diabetes, cells are derived from the liver or other adult tissue and are trans-differentiated to become AIP cells. This technology has shown in relevant animal models that the human derived AIP cells produce insulin in a glucose-sensitive manner. No adverse effects were observed in any of the animal studies. This trans-differentiation technology is licensed by the Israeli Subsidiary and is based on the work of Prof. Sarah Ferber, a researcher at Tel Hashomer Medical Research Infrastructure and Services Ltd. (“THM”) in Israel. The development plan calls for conducting additional pre-clinical safety and efficacy studies with respect to diabetes and other potential indications prior to initiating human clinical trials.With respect to the trans-differentiation technology, we have exclusive rights to eight (8) United States and twenty four (24) foreign issued patents, two (2) pending patent applications in the United States, eleven (11) pending patent applications in foreign jurisdictions, including, Brazil, Canada, Europe, Israel, Panama, South Korea, and Singapore. These patents and patent applications relate, among others, to the trans-differentiation of cells (including hepatic cells) to cells having pancreatic β-cell-like phenotype and function and to their use in the treatment of degenerative pancreatic disorders, including diabetes, pancreatic cancer and pancreatitis.On June 11, 2019, the FDA granted Orphan Drug Designation for our AIP cells as a cell replacement therapy for the treatment of severe hypoglycemia-prone diabetes resulting from total pancreatectomy (“TP”) due to chronic pancreatitis.On April 29, 2019, we received Institutional Review Board (“IRB”) approval to collect liver biopsies from patients at Rambam Medical Center located in Haifa, Israel for a planned study to confirm the suitability of liver cells for personalized cell replacement therapy for patients with insulin-dependent diabetes resulting from total or partial pancreatectomy. The first patients were enrolled during 2020. The goal of the proposed study, entitled “Collection of Human Liver Biopsy and Whole Blood Samples from Type 1 Diabetes Mellitus (T1DM), Total or Partial Pancreatectomy Patients for Potential use as an Autologous Source for Insulin Producing Cells in Future Clinical Studies,” is to confirm the suitability of the liver cells for personalized cell replacement therapy, as well as eligibility of patients to participate in a future clinical study, as defined by successful AIP cell production from their own liver biopsy. The secondary objective of the study is to evaluate patients’ immune response to AIPs based on the patient’s blood samples and followed by subcutaneous implantation into the patients’ arm which would represent the first human trial.10We have invested substantial efforts in the feasibility of upscaling the manufacturing process for expansion of liver cells to the number required for clinical application (i.e. approximately two billion cells). We were successful in developing the expansion protocols while maintaining the liver cells’ viability. However, the resulting cell expansion hampered the ability of the cells to efficiently transdifferentiate, as was determined in pre-clinical studies. Furthermore, combining the liver cells with alginate-based 3D scaffold failed to present significant potential of the scaffolds to support the cells’ survival in pre-clinical studies. We will consider if other indications require a lower number of cells. To date, we have not been successful in in identification of such other relevant therapies.The trans-differentiation technology is from a licensing agreement entered into as of February 2, 2012 by the Israeli Subsidiary and THM pursuant to which the Israeli Subsidiary, Orgenesis Ltd, was granted a worldwide royalty bearing and exclusive license (the “THM License Agreement”). By using therapeutic agents 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 his own therapeutic tissue. While we believe that this provides a major competitive advantage to the cell transformation technology of the Israeli Subsidiary, we also believe that our expanded focus to other therapies and business activities may continue to prompt THM to inquire of such activities as they may relate to our compliance with the terms or direction of the THM License Agreement. While we have not received any notice of cancellation of the THM License Agreement, we have received an allegation regarding the scope of the rights by THM that may present future challenges for our Israeli Subsidiary to continue to develop, manufacture, sell and market the products pursuant to the milestones and time schedule specified in the development plan of the THM License Agreement. In addition, THM has filed a complaint against us in the Tel Aviv District Court relating to the scope of such THM License and the royalties and other payments that THM is entitled to thereunder. See “Legal Proceedings” in this Annual Report on Form 10-K.8.CAR-T CD19ORG-CAR19, Autologous anti CD19 CAR-T Chimeric antigen receptor T cells (known(also known as CAR-T cells) are T cells that have been genetically engineered to expressproduce an artificial T-cell receptor for use in immunotherapy. CAR-T cell therapy uses T cells engineered with CARs for cancer immunotherapy.therapy. The promisepremise of CAR-T immunotherapy is to engineermodify T cells to effectively recognize a specific antigen present on cancer cells in order to more effectively target and destroy those cells.them. Physicians harvest T cells from patients, genetically alter them, then infuse the resulting CAR-T cells into patients to attack their tumors. CAR-T cells can be either derived from theT cells in a patient’s own T cellsblood (autologous) or derived from the T cells of aanother healthy donor (allogeneic). Once isolated from a person, these T cells are genetically engineered to express a specific CAR, which programs them to target an antigen that is present on the surface of tumors. After CAR-T cells are infused into a patient, they act as a “living drug” against cancer cells. When they come in contact with their targeted antigen on a cell, CAR-T cells expressing the target antigen.bind to it and become activated, then proceed to proliferate and become cytotoxic.patients with B-cell malignancies including acuteAcute lymphoblastic leukemia (B-ALL)(ALL) and non-Hodgkin lymphoma. Malignant B cellsother B-cell lymphoma patients. This platform is utilizing a first-in-class processing technology that enables fast delivery of these patients expressthis product at low cost. This CAR-T platform technology can potentially be utilized for multi-indications beyond blood cancer including for autoimmune indications. Based on what management believes to be encouraging real world clinical data generated in an investigator initiated trial, we are prioritizing cGMP production of our proprietary viral vector in order to generate clinical data to support regulatory filings in Europe and the CD19 protein on their surface that is targeted byUS.cells.(CD 19). Agreement on conditions for initiation of clinical study, which would be under a US IND, was reached with the Israeli ministry of health. In addition, Orgenesis anti-CD19engaged the Paul Ehrlich Institute (PEI), which has provided scientific advice needed for initiation of trials in Belgium and Greece for potential EU approval.8 clinically used CAR-T therapy licensed from Kecellitics Biotech.9.Dual Cellular vaccine (DUVAC), Therapy for Pancreatic CancerThe DUVAC cell-based immunotherapy, licensed from Columbia University, is based on autologous dendritic cells and macrophages. These cells are key coordinators of the innate and adaptive immune system and have critical roles in the induction of antitumor immunity. The cells are exposed to whole cancer cells and constitute the most comprehensive source of cancer antigens, which may boost the patient immune system and direct it against the tumor. We believehumanized monoclonal antibody, that a vaccine based on DUVAC vaccine can potentially be developed for a wide range of solid tumors, but our initial focus is on pancreatic cancer.specifically binds specific CEACAM molecules. We have signed a Material Transfer Agreement with a leading medical centeran exclusive license to use this proprietary antibody in CAR-T therapy. Using the US for their clinical grade pancreatic tumor cell lines to be used for proof-of concepthumanized antibody binding domain, we have successfully completed the CAR construct optimization, engineered CAR-T cells using our platform process and demonstrated in vitro efficacy and specificity.1110.Metabolically Optimized T-Cells (MOTC): Therapy for melanoma and lung cancerIn the early stages of cancer, some lymphocytes successfully attack and infiltrate the tumor microenvironment, surround the tumor cells, and mount an anti-tumor response. TIL therapy is a clinically validated personalized cancer treatment based on infusion of autologous TILs expanded ex vivo from tumors. Once expanded, the TILs are infused back into the patient where they attack the cancer cells with a high degree of specificity. We have developed a GMP-compliant, reproducible and efficient production approach that is performed in a fully closed system enabling the generation of functional TILs from various solid tumor biopsies. The expanded TILs lead to a more robust therapeutic response especially for solid tumors such as lung cancer.We have recently licensed new technology to optimize the manufacturing process from the Yeda Research and Development Company Limited. The technology was developed as a synthetic immune niche technology. The technology will support and accelerate the expansion and function of TILs,Products in Pre-Clinical Studies11.Autologous Cell-Based Vaccine for protecting against SARS-CoV-2We continue working on developing a cell-based vaccine platform for the prevention of viral diseases. The initial target for the platform is SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2, the causative agent of COVID-19). This cell-based vaccine platform utilizes an autologous approach. The goal is to enable the COVID-19 engineered cells will have the ability to activate an endogenous immune response and induce the production of neutralizing antibodies as well as cellular response.12.BioxomesExosomes are small, membrane-enclosed extracellular vesicles implicated in cell-to-cell communication. Exosomes may serve as a valuable therapeutic modality because of their ability to transfer a wide variety of therapeutic payloads among cells that can influence a cell in multiple ways, and they can be designed to reach specific cell types. Natural cell membranes (biomimetics) have recently emerged as a new source of materials for molecular delivery systems. Because cell membrane-derived vesicles contain the intrinsic functionalities and signaling networks of their parent cells, they can overcome various obstacles encountered by synthetic liposomes in vivo (including immunogenecity concerns)To this end, we have developed a proprietary manufacturing process for preparationDual vaccine cell-based cancer immunotherapy (MDVAC) is composed of two pre-activated APCs (DCs and Macrophages) loaded with allogenic whole cancer cell lines, which maximize repertoire of cancer antigen presentation. MDVAC harnesses the immune system’s natural exosome-mimetic/liposome, termed BioxomeTM, a large-scale GMP-compatible production protocol that will potentially allow usability to obtain Bioxomerecognize and react to cancer neo-antigens to boost cancer immunotherapy. Parallel cancer antigen presentation promotes improved immune education and tumor recognition in the patient, leading to tumor growth arrest and metastasis decrease. This cell-based immunotherapy, licensed from various cell types, including human adipose cells, fibroblasts, blood cells, as well as plant cells. Various therapeutic cargos (including modified mRNA)Columbia University, can be encapsulated into the Bioxome during its manufacture. Once injected systemically, Bioxomes naturally fusea developed for a wide range of solid tumors. The GMP production process was optimized, specificity and activity tests were successfully developed. We plan to initiate interaction with the cell membrane and release therapeutic cargo.regulatory authorities towards finalization of our clinical strategy.In 2021, we assessed Bioxome biodistribution of the non-loaded Bioxome upon its systemic administration in rodents. This study had demonstrated a rapid and preferential uptake of the Bioxome by the liver, followed (to a lesser extent) by the kidney and lungs. Further biodistribution studies with Bioxome-encapsulated RNAse and Bioxome-encapsulated mRNA are planned for 2022.Metabolic DiseasesIn addition, accelerated anti-COVID19 efficacy was demonstrated for Bioxome-incorporated Ranprinase in an in vitro COVID-19 infection model, and we will conduct further studies to determine if Bioxome can be a vehicle for effective delivery of antiviral compounds.KYSLECEL (Autologous Pancreatic Islets)13..Mesenchymal stem cell Psoriasis (“MSCP”)healing and psoriasis.healing. The product is based on allogeneic Adipose-Derived Stem Cells (ADSCs). Following expansion, the ADSCs are used for the extraction of BioxomeTM. We have established a process for encapsulation of Topiramate, a well-known substrate used in other indications, during the Bioxome manufacture. The Bioxome-encapsulated Topiramate (Biox-Top) will be further formulated in commercially available hyaluronic acid (HA), a well-known dermal filler, for topical application. Regulatory approvalPre-clinical development is required for this process.ongoing following demonstration of anti-inflammatory efficacy in human skins explants.developed manufacture-encapsulation protocol is currently being scaled-up for the future production of the clinical grade Biox-Top for topical administration.exosomes may be designed to reach specific cell types.Promising anti-inflammatoryBioxomes are liposomes that are biocompatible and serve as cGMP/GLP-compliant exosome-like membrane nanostructures that can be produced from various cell types. To this end, we have developed a proprietary large-scale cGMP-compatible manufacturing process for preparation of Bioxomes from the following: human adipose cells, fibroblasts, blood cells, and plant cells.9 ofand safety. Bioxomes may be utilized as the Biox-Top was demonstrated innext generation biological delivery platform for Immuno-Oncology indications. Currently, the human skin explants that were subjectedregulatory strategy is being finalized according to inflammation.US FDA requirements.After demonstrating in vivo efficacy in the animal models of psoriasis, we plan to further advance this product to clinical development.
Anti viral1214.Muscle-derived Mesenchymal Stem Cells for Human Regenerative MedicineAn innovativeWe are developing a novel topical gel formulation of an active RNA-degrading enzyme, called ranpirnase. Ranpirnase combats viral infections by targeting double-stranded RNA including miRNA precursors, via RNA degradation catalysis. Topical ranpirnase demonstrated good tolerability and patented technology licensed frompreliminary clinical efficacy in the treatment of HPV-associated external anogenital warts (EGW) in a licensing partnerPhase 2a clinical study conducted in Bolivia.enables the isolation of pluripotent adult Mesenchymal Stem Cells (MSCs) fromRanTop was well-tolerated in repeated daily topical administration. Systemic exposure following topical administration need to be assessed during preclinical and clinical studies. For this purpose, a minimally invasive muscle micro-biopsy. The isolated autologously undifferentiated muscle-derived MSCs are developed for local administration into the muscle to correct muscle-related clinical indications, such as Stress Urinary Incontinence (SUI).sensitive ranpirnase blood concentration bioanalytical method was established.2021, promising results were obtainedlaboratory experiments, we have demonstrated the feasibility of ranpirnase encapsulation in Orgenesis Bioxome delivery platform. Bioxome encapsulation, enhanced ranpirnase anti-viral activity in an in-vivo modelin vitro test.SUI demonstrating robust therapeutic efficacya recombinant renpirnase, aiming at avoiding use of locally injected human muscle-derived MSCs (MD-MSCs)animal and enabling a scalable cost-effective industrial process that meets regulatory requirements for biological drugs. We have successfully demonstrated feasibility of producing active recombinant ranpirnase using genetically engineered bacterial fermentation. We plan to use the recombinant ranpirnase in reversingfuture development.SUIour POCare strategy.nude rats. Moreover, both nerve regenerationthe City of New York, Caerus Therapeutics Corporation, UC Davis, The Johns Hopkins University, The Weizman Institute of Science and functional restoration of the muscle tissue was observed.others.10 are workinghave collaborations and joint ventures for developing POCare Therapies in jurisdictions throughout the world, including various countries in North America, Europe, Latin America, Asia, and Australia. Such partnerships include in-licensing and out-licensing of therapies, service contracts from the partners under co-development agreements, and development and manufacturing agreements for POCare products supplied regionally. For more information, see note 12, “Collaboration and Licensing Agreements” of the “Notes to establish the regulatory path and are preparing all relevant documentation for potential clinical implementationFinancial Statements” included in Item 8 of MD-MSCs.this Annual Report on Form 10-K.15.Kidney DiseaseWe are also developing multiple proprietary cell and cell derived products therapies for treating kidney failure and End-Stage Renal Disease (ESRD). We have made progress in the establishment of the enrichment process of extracellular vesicles (EV) replacement therapy for chronic kidney disease (CKD) patients.Koligo16.KT-DM-103 and KT-CP-203 (3D-Printed Pancreatic Islets)We, through our Koligo acquisition, have exclusively licensed patentsThe Belgian Subsidiarytechnology from the University of Louisville Research Foundation related to the revascularizationvalidating proprietary and 3D printing ofadvanced cell and tissue for transplant (“3D-V” technology platform). We aregene therapies. The Belgian Subsidiary benefits both from its central position in Europe and its being in the leading Walloon biotech cluster. Located near Namur, at Novalis Science Park, the Belgian Subsidiary collaborates with leading medical and academic facilities which enables it to cover the drug product life cycle from research to clinical stage through pre-clinical and quality control.this technology for potential autologous and allogeneic pancreatic islet transplant to treat type 1 diabetes (KT-DM-103)validating proprietary and chronic pancreatitis (KT-CP-203). The 3D-V technology platform may also support improved transplantation of otherlicensed advanced cell and tissue typesgene therapies such IPS based therapies and AI in additional to pancreatic islets.its development labs in the Netherlands.Platform StrategyServices● Process development of therapies, process adaptation, and optimization inside the OMPULs, or “OMPULization”; ● Adaptation of automation and closed systems to serviced therapies; ● Incorporation of the serviced therapies compliant with GMP in the OMPULs that we designed and built; ● Tech transfers and training of local teams for the serviced therapies at the POCare Centers; ● Processing and supply of the therapies and required supplies under GMP conditions within our POCare Network, including required quality control testing; and ● Contract Research Organization (“CRO”) services for clinical trials. 1311● Orgenesis Maryland LLC, which is the center of POCare Services activity in North America and is currently focused on setting up and providing POCare Services and cell-processing services to the POCare Network. ● Tissue Genesis International LLC, a Texas limited liability company currently focused on development of our technologies and therapies. ● Orgenesis Services SRL, which is currently focused on expanding our POCare Network in Belgium. ● Orgenesis Germany GmbH, which is currently focused on providing CRO services to the POCare Network. ● Orgenesis Korea Co. Ltd., which is a provider of cell-processing and pre-clinical services in Korea. Octomera owns 94.12% of the Korean Subsidiary. ● Orgenesis Biotech Israel Ltd., which is a provider of process development and cell-processing services in Israel. ● Orgenesis Australia PTY LTD, which was transferred to Octomera in January 2023 and is currently focused on the development of our POC Network in Australia. ● Theracell Laboratories IKE (“Theracell Labs”), a Greek company currently focused on expanding our POCare Network. ● ORGS POC CA Inc, incorporated in 2023, which is currently focussed on expanding our POCare Network in California. ● Octo Services LLC, a Delaware entity incorporated in 2023. 12 personalized medicine because of our strategic partnerships with suppliers that help us to customize closed systems into effective mobile clean room facilities.CGT during the clinical development stage and even more so upon market approval therapies. This will potentially help to minimize or eliminate the need for cell transportation, which is a high-risk and costly aspect of the supply chain, further allowing flexible production and patient treatment.treatment and reduce the cost and lengthy timelines associated with building additional clean rooms and complex tech transfers between production sites.is a unique globally harmonizedon the concept of standardizing infrastructure by providing flexible building blocks through the POCare Centers and decentralized CGT-processing infrastructure that offers cost-effective processing capacities with easeOMPULs, which allows for scalability and reproducibility. By producing personalized cell and gene therapies (CGTs)quick expansion at the point of care, we are able to add new capacity within months instead of years.multiple locations.Local decentralization: POCare Centers are set up in preferred regions, based on nearby hospitals’ capacity needs, and support the POCare model by providing POCare Services for the POCare Network.Global harmonization: the POCare Platform overcomes conventional processing challenges by enabling high quality standards and sterile, scalable onsite processing of CGTs orchestrated by the POCare centers to service local hospitals. Processing infrastructure is harmonized and reproducible using the Orgenesis Mobile Processing Unit and Lab technology (“OMPUL”). The use of an OMPUL can shorten implementation time from approximately 18-24 months to approximately 3-9 months, offers a more cost-effective environment and enables local scalability by connecting additional OMPULs. The network structure is supported and connected by the centralization of the harmonized best industry practices and standards to meet the highest quality standards (“QMS”, Quality Management System). Further global harmonization is implemented through standardization of the training programs, centralized data management and a unified supply chain.OMPULization of therapies: strong process development capabilities are critical for any CGT to scale. All therapeutic candidates must undergo some level of process development to move from the discovery phase to the clinical phase, if only to establish the same protocols under GMP. The POCare Platform takes process development to the next level, implementing a process we call OMPULization. OMPULization includes unitizing the process to the exact specifications of the OMPUL so it can be rapidly implemented in OMPULs around the world. In addition, OMPULization incorporates the latest technology solutions to close and automate the process whenever possible.● Local Decentralization: POCare Centers are set up in preferred regions, based on nearby hospitals’ capacity needs, and support the POCare Services model by providing POCare Services. ● Global Harmonization: The POCare Platform overcomes conventional processing challenges by enabling high quality standards and sterile, scalable onsite processing of CGTs orchestrated by the POCare Centers to service local hospitals. Processing infrastructure is harmonized and reproducible using the OMPUL. The use of an OMPUL can shorten implementation time from approximately 18-24 months to approximately 3-9 months, offers a more cost-effective environment and enables local scalability by connecting additional OMPULs. The network structure is supported and connected by the centralization of the harmonized best industry practices and standards to meet the highest quality standards (“QMS”, Quality Management System). Further global harmonization is implemented through standardization of the training programs, centralized data management and a unified supply chain. ● OMPULization of Therapies: Strong process development capabilities are critical for any CGT to scale. All therapeutic candidates must undergo some level of process development to move from the discovery phase to the clinical phase, if only to establish the same protocols under GMP. The POCare Platform takes process development to the next level, implementing a process we call OMPULization. OMPULization includes unitizing the process to the exact specifications of the OMPUL so it can be rapidly implemented in OMPULs around the world. In addition, OMPULization incorporates the latest technology solutions to close and automate the process whenever possible. Full Time Employeesfull-time employees (“FTEs”) to produce GMP batches, resulting in lower COGscost of goods and a process that has the ability to scale in sync with market demand. Full automation may not be necessary for all clinical phases, but it is important to plan for future incorporation. To this end, we have invested time and capital into evaluating relevant technology for CGT processing and have developed proprietary equipment that did not exist in the marketplace.systems, therapies includingsystems. Therapies serviced include immuno-oncology, anti-aging, anti-viral, metabolic, nephrology, dermatology, orthopedic, as well as regenerative technologies.developmentimplementation of several therapy types ofin OMPULs and have made significant progress in the validation, risk analysis, regulatory and other related tasks relating to the OMPULs. We anticipate distributing and usingare setting up the OMPULs through our POCare Network of partners, collaborators, and regional partners.Centers. OMPULs are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential or approved cell and gene therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing of such CGTs in a consistent and standardized manner in all locations. The design delivers a potential industrial solution for us to deliver CGTs to most clinical institutions at the point of care.1413 is a diagramare diagrams of an OMPUL and partial interior for illustrative purposes onlyonly.centersCenters and with the assistance of our partners, we are adapting to the local requirements of each partnerPOCare Center with the target of achieving a capacity to process and supply CGTs per our existing manufacturingproduction contracts. As we expand operations, we expect that the OMPUL setup costs will decline over time. Most of our POCPOCare revenue to date is in support of the implementation of our technologies and therapies in our partners’ POC activities, which we expect will be the basis for future royaltiesOMPULs and supply revenues.production at the POCare Sites.embarked on a strategy of collaborative arrangements with strategically situated regional distributor partners around the world. We believe that these partners have the expertise, experience and strategic location to advance ourestablished POCare Platform.Strategic CGT Therapeutics CollaborationsCollaborations, partnerships, joint ventures and license agreements are a key component of our POC strategy.Our POC technology collaborators and partners include Ori Biotech, Accelix, Columbia UniversityCenters in the City of New York, Caerus Therapeutics Corporation, UC Davis, The Johns Hopkins University, The Weizman Institute of Science and others.In addition,several locations globally, in which we have collaborations and joint ventures for setting up POCare Platform operations facilities in jurisdictions throughout the world, including various countries in North America, Europe, Latin America, Asia, and Australia. Such partnerships include in-licensing and out-licensing of therapies, service contracts from the partners under co-development agreements, andperform process development and manufacturing agreementsactivities for several types of CGT products. For example, in Israel, our POCare products supplied regionally. Such partners/customers include Broaden Bioscience & Technology Corp, Celleska Pty Ltd, Cure Therapeutics, Educell, Image Securities FZC, Med CentreCenter includes process development and QC labs, as well as OMPULs located at a hospital site in the center of Israel and an additional OMPUL in preparation for Genean additional hospital. In these OMPULs, we currently manufacture TILs and Cell Therapy FZ-LLC, MIDA Biotech B.V., Mircod Biotech LLC, Theracell,CAR-T therapies. In Greece, our POCare Center includes three OMPULs installed in place and SBH Sciences.For more information, see Note 11, “Collaboration and Licensing Agreements” of the “Notes to the Financial Statements” includeda process development lab, currently servicing two customers. Our POCare Center in Item 8.15Current Development FacilitiesMaryland, USA, includes an operating process development lab. We are also establishing cleanroom-based facility funded by a government grant. In Spain we have an OMPUL producing a clinical grade product.aour specialized process and technology development wholly ownedwholly-owned subsidiary focused on custom-made process development, upscaling design from lab to industry innovation and automation procedures, which are extremely essential in the cell therapy industry. OBI is located in Bar-Lev Industrial Park utilizing the exclusive Israeli innovative ecosystem and highly experienced and talented associates including Ph.D. holders and biotechnology engineers. The center provides end to end solutions to cell therapy industrialization, process development capabilities and proficiency, custom-made engineering and a unique platform for creative design and process optimization. OBI occupies 13001,300 square meters of labs and offices resulting in an efficient and unique environment for cell therapy development. In connection with the sales of our Masthercell Sale,Global subsidiary (“Masthercell Sale”) completed in 2020, for a period of three years in the European Union and five years in the United States and the rest of the world from the closing date of the Masthercell Sale, we agreed that OBI will not manufacture products on a contract basis for third-party customers in any jurisdiction other than the State of Israel, but it may conduct such CDMO business in the State of Israel, solely for customers located within the State of Israel or with respect to therapies intended for distribution solely within the State of Israel. The Masthercell sale agreement stipulated that OBI may also conduct, worldwide, (i) point-of-care system, point-of-care products, point-of-care systems, point-of-care processing, and point-of-care development services for the development, manufacturing or processing of therapeutics, processes, systems and technologies to treat patients in a point-of-care clinical, hospital or institutional setting, any future point-of-care services substantially related to the foregoing, and advanced therapy medicinal products either proprietary to us or our affiliates or proprietary to a third-party partner (including a joint venture partner) or collaborator, which includes research, development, systems, manufacturing and processing of therapeutic technology products, systems, and processes, methods or services and (ii) research, manufacturing, development and other activities related to the research, development, manufacturing, discovery and commercialization of therapeutic products or technologies, and processes, systems, methods or services thereof for its own account or in order to make such products or services available for the account of their third-party partners (including joint venture partners) or collaborators (including such therapeutic products, processes or technologies in which we or one of our affiliates has an economic interest or any relationship with any third-party or that are created, developed, manufactured or sold by a joint venture, partnership or collaboration between us or any of our affiliates and a third-party (individually and collectively, “Permitted Business”).14 therapies. Together, with promising in-house research programs, the technologies are currently under developmenttherapies for the rapidly growing Korean market offering a favorable environment for the cell therapy industry. Through close collaboration with leading medical and academic facilities, the Korean Subsidiary is accelerating the development of foreign technologies in Korea.our customers. In connection with the Masthercell Sale completed in 2020, for a period of three years in the European Union and five years in the United States and the rest of the world from the closing date of the Masthercell Sale, we agreed that the Korean Subsidiary will not manufacture cell and gene products on a contract basis for third-party customers in any jurisdiction other than South Korea, but it may conduct CDMO business in South Korea, solely for customers located within South Korea and with respect to therapies intended for distribution solely within South Korea, provided that the Korean Subsidiary may conduct Permitted Business.KoligoTissue Genesis InternationalKoligo maintains commercial production facilities for KYSLECEL at an FDA-registered establishment in Indiana. Koligo is also developing new technologies such as bio-degradable 3D structure to deliver islets & other cell/tissue.Icellators, and associated reagents and kits, are made by contract manufacturers and warehoused at our facility in Texas. The Tissue Genesis IcellatorIcellator™ is used to isolate stromal and vascular fraction cells (“SVF”) from a patient’s own (autologous) adipose tissue (fat). The SVF obtained fromTissue Genesis Icellators, associated disposable kits, and our proprietary enzyme Adipase™, are made by contract manufacturers and warehoused at our ISO 13485-certified and FDA-registered facility in Texas. From this facility we fill orders for our customers all around the Icellator is for use in cell-assisted lipotransfer,world and other indication such as orthopedicmaintain research and COVID-19-induced ARDS. Koligo also maintains development labs at its Indiana and Texas locations to support continued product development.16The Belgian SubsidiaryTissue Genesis International (“TGI”) has expanded its development pipeline from the Icellator to additional systems for automation of Cell and Gene Therapy and incorporation of these various platforms into the OMPULs.The Belgian subsidiary specializesOn the Icellator front, in developing2022 TGI continued to service our existing customers both domestically and validating proprietaryabroad, added new customers, increased revenue from sales, extended shelf-life of existing Icellator inventory, continued Adipase development, and licensed advancedengaged in production of a new lot of disposables.such as the Muscle-derived Mesenchymal Stem Cells therapy for the treatment of SUI.our customers. The subsidiary benefits both from its central position in Europe and its being in the leading Walloon biotech cluster. Located near Namur, at Novalis Science Park, the Belgian subsidiary collaborates with leading medical and academic facilities which enables it to cover the drug product life cycle from research to clinical stage through pre-clinical and quality control. It occupies innovative facilities for the development and quality control of therapies in R&D and GMP grades.15 Its talented and highly experienced staff and collaborators, including Ph.D. holders, quality assurance experts and biotechnology manufacturing engineers, contribute to the POCare platform development and roll-out. The subsidiary supports quality assurance and supply activities for the global POCare network.20212023 POCare Services Activities2021,2023, we have focusedcontinued to focus on setting up our regional POCare activities. This included the setup of POCare Centers that oversee regional development and GMP services, local OMPUL deployment and supply of products to the local clinical centers. We are in the process of setting upexpanding the capacity of our POCare Centers in Maryland, Boston, California, Belgium, Greece, Slovenia, Israel, Italy, Spain and Korea. Future set-up plans include potential sites in the U.S. and EU where we already have initial activity such as in Germany and Texas, as well as in Australia and China.NK and MSC based therapies. We have developed OMPULs with the required systems for production of CAR-T, TILs and MSC products, and are working on several other therapies intended for clinical testing.and havehaving completed the first production batch of GMP grade lentivirus to be utilized for clinical gradeclinical-grade production of CAR-Ts.CAR-Ts and the initial engineering batch of a CAR-T based on the Lenti Virus. We have expanded our partnershipintend to establish and validate the decentralized model of OMPUL placement in compliance with Johns Hopkins University and are setting up a GMP facility with the support ofregulatory requirements. UC Davis has received a grant from Maryland. We are providing productsthe California Institute for Regenerative Medicine (CIRM) to several hospitals invalidate the U.S., are working closely with leading hospitals in Spaindecentralized approach based on our platform. In addition, the parties aim to commercialize and Italy and are working closely with clinicians from hospitals in Israel, where we have deployed ourinstall OMPULs to set up additional clinicalat other sites where we can provide POCare Services for our customers and partners. Based onwithin the requestsState of our customers and partners, we have expanded our POCare Services to include CRO services.California.collaborated closelya partnership with our Greek partner, Theracell,Johns Hopkins University that already includes establishment of an analytical lab at FastForward, Johns Hopkins Technology Ventures’ (JHTV) innovation hub, and an agreed upon placement of an OMPUL.. Other activities include the provision of Kyslecel to eight hospitals in the U.S. Finally, we have deployed OMPULs at leading hospitals in Israel, Italy and Spain.partnershippartnerships in Greece focusing on delivering advanced therapies to Greek hospitals.● ICT-University of Patras ● Manufacturing of Cell and Gene Therapies at Athens Point of Care Greek government has granted our Greek joint venture entityunit is staffed by experts in ATMP development, production quality control and release of medicinal products from fully operational OMPULs under GMP principles.“fast track” status and a supportive financialdecentralized manner in Greece. As of the date of this report, no funds have been received. However, once received, the operational costs of the activities described above will be covered by the grant.16 The Orgenesis Point of Care (POCare)Our POCare Platform is comprised of three enabling components: a multitude of licensed cell based POCare TherapeuticsTherapies to be produced in closed, automated POCare Technology systems across a collaborative POCare Network. Our therapies include, but are not limited to, autologous, cell-based immunotherapies, therapeutics for metabolic diseases, anti-viral diseases, and tissue regeneration. We are establishing and positioning the business to bring point-of-care therapies to patients in a scalable way working directly with hospitals and through regional JV partners and JVsorganizations active in autologous cell therapy product development, including facilities in various countries in North America, Europe, Asia, the Middle East, and Australia. TheOur goal through the POCare Platform’s goalPlatform is to enable a rapid, globally harmonized pathway for these therapies to reach large numbers of patients at lowered costs through efficient, and decentralized production. TheOur POCare Network brings together industry partners, research institutes and hospitals worldwide to achieve harmonized, regulated clinical development and production of the therapies.17out licenseout-license therapies marketing rights and manufacturing rights to partners and/or to the JVs.partners. In many cases, the JVspartners are responsible for the preparation of clinical trials, local regulatory approvals and regional marketing activities. Such licensing includes exclusive or nonexclusive, sublicensable, royalty bearing rights and license to the Orgenesis Background IP as required to manufacture, distribute and market and sell Orgenesis products within the relevant territories. In consideration of the rights and the licenses so granted, we receive a royalty in the range of ten percent of the net sales generated by the JV Entitypartners and/or itslicensees or sublicensees (as applicable) with respect to the Orgenesis products.In addition, in many cases, onceOur business model of partnering with regional partners for initial clinical development of licensed POCare Therapies allows us to de-risk our clinical development plans. We have access to the JV entities become profitable,development and clinical data generated by our partners based on which we are entitled (in addition to any of its rightscan make informed decisions as holder of the JV Entity and prior to any other distributions of dividends by the JV Entity to shareholders of the JV Entity) and in addition to any royalties to which of our assets have the most promising value for development in major markets such as the US and EU. Our goal is once we may be entitled pursuant to a Orgenesis License Agreement, to receivehave proof of concept and clinical data from the JV entity royalties at a range of 10 to 15 percent of the JV entity’s audited US GAAP profit after tax.our regional partners, we can focus on developing such therapeutic products.out licensesout-licensing, we generate revenues from POCare Services and sales which is comprised of:● R&D development services provided to out-licensing partners JV partners. In terms of the MSAs, we provide certain broadly defined development services that relate to our licensed therapies designed to develop or enhance the therapy with the objective of preparing it for clinical use. Such services, per therapy, include regulatory services, pre-clinical studies, intellectual property services, development services, and GMP process translation. We also provide support services to our customers.● Hospital supply JV partnerships.● Cell process development revenue ● POCare cell processing 17 therapy revenue is as follows: Years Ended December 31, Revenue stream: 2021 2020 (in thousands) POC and hospital services (Mainly POC) $ 32,819 $ 6,068 Cell process development services 2,683 1,584 Total $ 35,502 $ 7,652 Cost of Services and other Research and Development Expenses, netWe incurred $ 36,644and $83,986 thousand in cost of services and other research and development expenses, net in the fiscal years ended December 31, 2021 and December 31, 2020, respectively, of which $196 thousand was covered by grant funding in the fiscal year ended December 31, 2020. Part of the expense was funded by share issues. Our research and development scope was expanded to the evaluation and development of new cell therapies related technologies in the field of immuno-oncology, liver pathologies and tissue regeneration.18 Years Ended December 31, Revenue stream: 2023 2022 (in thousands) POCare development services $ - $ 14,894 Cell process development services and hospital services 515 11,212 POCare cell processing - 9,919 License fees 15 - Total $ 530 $ 36,025 fifty-seven (57)eighty-seven (87) foreign-issued patents, twenty-six (26)twelve (12) pending patent applications in the United States, fifty-four (54)fifty three (53) pending patent applications in foreign jurisdictions, including Australia, Brazil, Canada, China, Europe, Hong Kong, India, Israel, Japan, Mexico, New Zealand, North Korea, Panama, Russia, Singapore, South Africa, and South Korea, and six (6)fifteen (15) international Patent Cooperation Treaty (“PCT”) patent applications. These patents and patent applications relate, among others, to (1) dendritic cell based (whole cell) vaccines, and their use for treating cancer and viral diseases; (2) compositions comprising Ranpirnase and other ribonucleases and their use for treating viral diseases; (3) tumor infiltrating lymphocytes (TILs) and their use for treating cancer; (4) compositions comprising immune cells, ribonucleases, or antibodies for treating COVID-19; (5) therapeutic compositions comprising exosomes, bioxomes, and redoxomes; (6) bioreactors for cell culture and automated devices for supporting cell therapies and point-of-care systems;therapies; (7) chimeric antigen receptors (CARs); (8) adoptive immunotherapy using neurotransmitters; (9) Mobile Processing Units; (10) Axial Stem Cells; (11)(9) Cell-delivery devices; (12) scaffolds, including alginate and sulfated alginate scaffolds, and bioconjugates comprising sulfated polysaccharides and diverse bioactive peptides, and uses thereof; and (13)(10) skin diseases treatment and anti-aging compositions.18 and pending U.S. provisional patent applications directed, among others, to dendritic cell-based (whole cell) vaccines, and their use for treating cancer and viral diseases. If issued, any patents based on these applications will expire between 2037 and 2043.in 2037. The granted U.S. patent will expire in 2037.IfGranted U.S. patents and if issued, any patents based on these applications will expire between 20312024 and 2040.2042. Counterpart granted patents and patents applications were filed in Australia, Canada, China, Europe, Hong Kong, Japan, Israel, Mexico, New Zealand, South Korea, Russian Federation, Singapore, and South Africa. If issued, any patents based on these applications will expire between 2035 and 2041.2042. These expiration dates do not include any patent term extensions that might be available following the grant of marketing authorizations.2039.2039 and 2041. These expiration dates do not include any patent term extensions that might be available following the grant of marketing authorizations.19a pending International PCT application, pending U.S. patent applications, and pending U.S. provisional patent applications directed, among others, to bioreactors for cell culture, automated devices for supporting cell therapies,compositions comprising ribonucleases and point-of-care systems. If issued, any patents based on these applications will expire between 2035 and 2042.We have pending U.S. provisional patent applications directed, among others, to tumor infiltrating lymphocytes (TILs)antibodies or bioxomes, and their use for treating cancer.viral diseases, including COVID-19. Counterpart patent application was also filed in Israel. If converted into non-provisional applications and issued, any patents based on these applications will expire in 2042, without including any patent term extensions that might be available following the grant of marketing authorizations. A counterpart patent application was filed in Israel.applicationsapplication directed, among others, to compositions comprising immune cells ribonucleases, or antibodies for treating COVID-19. If converted into national phase applications and issued, any patents based on these applications will expire in 2042, without including any patent term extensions that might be available following the grant of marketing authorizations.provisionalpatent application directed, among others, to compositions comprising mesenchymal stem cells, and their use for treating solid tumors. If issued, any patent based on this application would expire in 2040. Counterpart patent applications were filed in China, Europe, and Israel. If issued, any patents based on these applications would expire in 2040. These expiration dates do not include any patent term extensions that might be available following the grant of marketing authorizations.U.S.international patent application, directed, among others, to chimeric antigen receptors (CARs), and their use for treating malignancies. If issued, any patents based on thesethe U.S. applications would expire between 2041 and 2043,in 2040 or 2042, without including any patent term extensions that might be available following the grant of marketing authorizations.19 We have a granted patent and a pending U.S. patent application directed, among others, to adoptive immunotherapy using neurotransmitters. If issued, any patent based on this application would expire in 2039. Counterpart patent applications were filed in Australia, Brazil, Canada, China, Europe, Israel, India, Japan, Russian Federation, Singapore, and South Korea. If issued, any patents based on these applications would expire in 2039. These expiration dates do not include any patent term extensions that might be available following the grant of marketing authorizations. The granted U.S. patent will expire in 2024. provisional patent application directed, among others, to mobile processing laboratories configured for performing there within a cell therapy process. A counterpart patent application was filed in Europe. If converted into non-provisional applications and issued, any patents based on these applications would expire in 2042, without including any patent term extensions that might be available following the grant of marketing authorizations.International PCTU.S. patent application directed, among others, to Axial Stem Cells, their preparation, and uses in treatment or diagnostics of neurodegenerative diseases, bone or cartilage disorders, muscle disorders, and in regenerative treatment of tissues or organs. If converted into national phase applications and issued, any patents based on these applications would expire in 2042, without including any patent term extensions that might be available following the grant of marketing authorizations.Granted U.S. patents, which are directed among others to scaffolds, including alginate and sulfated alginate scaffolds, and to bioconjugates comprising sulfated polysaccharides and diverse bioactive peptides, allowing sustained release of the bioactive polypeptides and their uses will expire between 2025 and 2036. Counterpart patent applications and patents granted in Australia, France, Germany, Israel, Switzerland, and the United Kingdom, will expire between 2026 and 2035.We have a pending U.S. provisional patentPCT application, directed, among others, to a composition comprising topiramate and bioxome, redoxome, HA, extracellular vesicles (EV), or PRP extracellular vesicles and its use for the treatment of a dermatological condition. If converted into national phase applications and issued, any patents based on these applications would expire in 2042 without including any patent term extensions that might be available following the grant of marketing authorizations.20We have pending U.S. provisional patent applications directed, among others, to the use of a combination of natural products, such as anti-aging, anti-photoaging or anti-inflammatory combination. If converted into national phase applications and issued, any patents based on these applications would expire in 2042 and 2043, without including any patent term extensions that might be available following the grant of marketing authorizations.Orgenesis Ltd,The Israeli Subsidiary has exclusive rights to eight (8)seven (7) United States patents, twenty-four (24)thirty (30) foreign-issued patents, two (2) pending patent applications in the United States, and eleven (11)three (3) pending patent applications in foreign jurisdictions, including Australia, Brazil, Canada, China, Europe, Israel, Japan, Mexico, Panama, Singapore, and South Korea.Europe. These patents and patent applications relate, among others, to the trans-differentiation of cells (including hepatic cells) to cells having pancreatic β-cell-like phenotype and function and to their use in the treatment of degenerative pancreatic disorders, including diabetes, pancreatic cancer and pancreatitis. Granted U.S. patents, which are directed to trans-differentiation to pancreatic β-cell-like phenotype and function cells and to their use in the treatment of degenerative pancreatic disorders, including diabetes, pancreatic cancer and pancreatitis, will expire between 2024 and 2035.2040. Counterpart patents granted in Austria, Australia, Belgium, China, Eurasia, France, Germany, Greece, Israel, Switzerland, Japan, Mexico, Panama, Singapore, South Korea, and the United Kingdom, will expire between 2024 and 2035.Orgenesis Ltd, has pending U.S. patent applications directed, among others,We also own IP and related Extracellular Vesicle (“EV”) Technology pursuant to an EV purchase agreement (the “EV Agreement”). Pursuant to the trans-differentiationEV Agreement, we received all of cells,the rights in EV technology purchased. In addition, we received an exclusive worldwide license to cells having pancreatic β-cell-like phenotype and function and to their use in the treatment of degenerative pancreatic disorders, including diabetes, pancreatic cancer and pancreatitis. If issued,EV IP technology for any patents based on these applications will expire between 2038 and 2040. Counterpart patents applications were filed in Australia, Brazil, Canada, China, Europe, Japan, Israel, Mexico, Panama, Singapore, and South Korea. If issued, any patents based on these applications will expire between 2034 and 2039. These expiration dates do not include any patent term extensions that might be available following the grant of marketing authorizations.purpose.OurBoth of our products and our customers’ products must undergo pre-clinical and clinical evaluations relating to product safety and efficacy before they are approved as commercial therapeutic products. The regulatory authorities that have jurisdiction in the countries in which our and our customers’ products are intended to be marketed may delay or put on hold clinical trials, delay approval of a product or determine that the product is not approvable. The regulatory agencies can delay approval of a drug if our manufacturing facilities or OMPULs are not able to demonstrate compliance with cGTPs, pass other aspects of pre-approval inspections (i.e., compliance with filed submissions) or properly scale up to produce commercial supplies. The government authorities having jurisdiction in the countries in which our customers intend to market their products have the authority to withdraw product approval or suspend manufacture if there are significant problems with raw materials or supplies, quality control and assurance or the product is deemed adulterated or misbranded. In addition, if new legislation or regulations are enacted or existing legislation or regulations are amended or are interpreted or enforced differently, we may be required to obtain additional approvals or operate according to different manufacturing or operating standards or pay additional fees. This may require a change in our manufacturing techniques or additional capital investments in our facilities.20 21Orgenesis’our vast experience and proven track record in developing and optimizing cell processing, these selective therapies are adapted to be produced in closed, automated systems, reducing the need for high gradehealth care provider in-house, high-grade and expensive cleanroom environments. The systems enable each stage of the manufacturing process (cell sorting, expansion, genetic modifications, quality control) to be optimized in order to substantially reduce the cost burden for patients and making the therapies widely accessible. Notably, some of our therapeutic pipeline is developed by researchers from our network and areis subsequently out-licensed to the researcher for its territory and validated in multi-center clinical trials conducted across point of care partner sites leveraging the robustness of our POCare Network. Having access to a portfolio of therapeutics, for the Orgenesis network. Once approved these therapies are distributedmost attractive products, the Company intends to leadingthan seek additional regulatory approvals and offer the products for sale to medical institutions globally within our network and thus grantingIn exchange, the inventors will receive a royalty-based commercialization horizon.royalty.21 ● Pre-clinical laboratory and animal tests conducted in compliance with Good Laboratory Practice, or GLP, requirements to assess a drug’s biological activity and to identify potential safety problems, and to characterize and document the product’s chemistry, manufacturing controls, formulation, and stability; ● Submission to the FDA of an Investigational New Drug, or IND, application, which must become effective before clinical testing in humans can start; ● Obtaining approval of Institutional Review Boards, or IRBs, of research institutions or other clinical sites to introduce biologic drug candidates into humans in clinical trials; ● Conducting adequate and well-controlled clinical trials to establish the safety and efficacy of the product for its intended indication conducted in compliance with Good Clinical Practice, or GCP, requirements; ● Compliance with current GMP regulations and standards; ● Submission to the FDA of a Biologics License Application (“BLA”) for marketing that includes adequate results of pre-clinical testing and clinical trials; ● The FDA reviews the marketing application in order to determine, among other things, whether the product is safe, effective and potent for its intended uses; and ● Obtaining FDA approval of the BLA, including inspection and approval of the product manufacturing facility as compliant with GMP requirements, prior to any commercial sale or shipment of the pharmaceutical agent. The FDA may also require post marketing testing and surveillance of approved products or place other conditions on the approvals. 22 the EU ● Compliance with current GMP regulations and standards, as described in the delegated actsacts;● Filing a Clinical Trial Application (“CTA”); ● in EU member states and EEA countries according to regulation 536/2014 via CTIS (Clinical Trial Information System) allowing a harmonized approval process among all member states (including multinational clinical trials); ● Obtaining approval by ethic committees responsible for medical institutions; ● Adequate and well-controlled clinical trials according to GCP standards protecting the well-being of a study participant and establishing the safety and efficacy of the product for its intended use; ● Centralized submission procedure for ATMPs via EMA for Marketing Authorization (“MA”);Authorization; and● Review and approval of the MAA (“Marketing Authorization Application”).Application.As in the U.S., prior to the general regulatory process of a new biologic products, we will prosecute an Orphan Drug Designation for treatment of patients with Established “Diabetes Mellitus” (“DM”) Induced by Total pancreatectomy. In the EU, in order to be qualified, the prevalence must be below 5 per 10,000 of the EU population, except where the expected return on investment is insufficient to justify the investment.Authorized orphan medicines benefit from 10 years of protection from market competition with similar medicines with similar indications once they are approved. Companies applying for designated orphan medicines pay reduced fees for regulatory activities. This includes reduced fees for protocol assistance, marketing-authorization applications, inspections before authorization, applications for changes to marketing authorizations made after approval, and reduced annual fees.2322 The FDA has granted Orphan Drug designation for our AIP cells as a cell replacement therapy for the treatment of severe hypoglycemia-prone diabetes resulting from TP due to chronic pancreatitis. The FDA’s Orphan Drug Designation Program provides orphan status to drugs and biologics which are defined as those intended for the safe and effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people in the United States. Orphan designation qualifies the sponsor of the drug for various development incentives, including eligibility for seven years of market exclusivity upon regulatory approval, exemption from FDA application fees, tax credits for qualified clinical trials, and other potential assistance in the drug development process.EmployeesHuman Capital Resources2021,2023, we, including Octomera, had an aggregate of 151146 employees working at our company and subsidiaries.Subsidiaries. In addition, we retain the services of outside consultants for various functions including clinical work, finance, accounting and business development services. Most of our senior management and professional employees have had prior experience in pharmaceutical or biotechnology companies. None of our employees are covered by collective bargaining agreements. We believe that we have good relations with our employees.23 ● Our POCPOCare business has a limited operating history and an unproven business model and faces significant challenges as the cell therapy industry is rapidly evolving. Our prospects may be considered speculative and any failure to execute our business strategy could adversely impact our business.● Our management, as of December 31, 2023, and our independent registered public accounting firm, in its report on our financial statements as of and for the fiscal year ended December 31, 2023, have concluded that there is substantial doubt as to our ability to continue as a going concern. ● We are not profitable as of December 31, 2023, have limited cash flow and, unless we increase revenues and take advantage of any commercial opportunities that arise to expand our POCare business, the perceived value of our company may decrease and our stock price could be affected accordingly. ● Our research and development efforts on novel technology using cell-based therapy and our future success is highly dependent on the successful development of that technology. 24●We require additional capital to support our business, and this capital may not be available on acceptable terms or at all. ● 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. ● 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. ● Our business is affected by the ongoing COVID-19 pandemic and may be significantly adversely affected as the pandemic continues or if other events out of our control disrupt our business or that of our third party partners.●Our success depends on our ability to protect our intellectual property and our proprietary technologies.● Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business. ● Our success depends on our ability to develop and grow the Octomera business. ● Our success depends on our ability to develop and roll out our OMPULs. ● 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 are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data storage risks. 24 ● 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. ● 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. ● 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. ● 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. ● 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. ● 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. 25● We face significant competition from other biotechnology and pharmaceutical companies, many of which have substantially greater financial, technical and other resources, and our operating results will suffer if we fail to compete effectively. ● We are highly dependent 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. ● Extensive industry regulation has had, and will continue to have, a significant impact on our business, especially our product development, manufacturing and distribution capabilities. ● 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. ● ● POCPOCare BusinessPOCPOCare business has a limited operating history and an unproven business model and faces significant challenges as the cell therapy industry is rapidly evolving. Our prospects may be considered speculative and any failure to execute our business strategy could adversely impact our operations and the price of our common stock.25 POCPOCare business has a limited operating history and an unproven business model. Our plans to continue to grow our POCPOCare cell therapy business and to further the development of ATMPs are subject to significant challenges. Although we have sufficient capital resources for the next 12 months and the foreseeable future, we may not be able to implement our POCPOCare business or commence clinical trials or respond to competitive pressures due to other non-financial factors beyond our control. Our failure to effectively execute our business strategy could adversely affect our ability to successfully grow our POCPOCare business and develop cell therapy product candidates, which could cause the value of your investment in our common stock to decline.20212023, have limited cash flow and, unless we increase revenues and take advantage of any commercial opportunities that arise to expand our POCPOCare business, the perceived value of our company may decrease and our stock price could be affected accordingly.fiscal year ended December 31, 20212023 and as of the date of this report, we assessed our financial condition and concluded that we have sufficientbased on current and projected cash resources and commitments, there is a substantial doubt about the Company’s ability to continue as a going concern to meet the Company’s current operations for the next 12 months from the date of this report. Our auditor’s report for the year ended December 31, 2021 does not include2023 includes a going concern opinion on the matter. However, managementManagement is unable to predict if and when we will be able to generate significant revenues or achieve profitability. Our plan regarding these matters is to continue improving the net results in our POCPOCare business into fiscal year 2022.2024. There can be no assurance that we will be successful in increasing revenues, improving our POCPOCare results or that the perceived value of our companyCompany will increase. In the event that we are unable to generate significant revenues in our POCPOCare business, our stock price could be adversely affected.26● obtaining regulatory approval from the FDA, EMA and other regulatory authorities that have very limited experience with the commercial development of our technology for treating different diseases; 26 ● developing and deploying consistent and reliable processes for removing the cells from the patient engineering cells ex vivo and infusing the engineered cells back into the patient; ● developing processes for the safe administration of these products, including long-term follow-up for all patients who receive our products; ● sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our products; ● developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment; ● establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance; and ● maintaining a system of post marketing surveillance and risk assessment programs to identify adverse events that did not appear during the drug approval process. 2727 2021,2023, we, had 151including Octomera, employed 146 employees. As our development and commercialization plans and strategies develop, we must add a significant number of additional managerial, operational, sales, marketing, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:● identifying, recruiting, integrating, maintaining, and motivating additional employees; ● managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and ● improving our operational, financial and management controls, reporting systems, and procedures. may require additional capital to support our business, and this capital may not be available on acceptable terms or at all.may require additional funds to respond to business challenges and to grow our POCPOCare cell therapy business and to further the development of ATMPs. Accordingly, we maywill need to engage in equity or debt financings to secure additional funds.2828 In addition, on February 24, 2022, Russia launched a large-scale invasion of Ukraine. The conflict may adversely impact macroeconomic conditions and increase volatility in and affect our ability to access capital markets and external financing sources on acceptable terms or at all.OurWe conduct certain of our operations in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may affect certain of our operations.adversely affected by ongoing developmentseconomic, political, geopolitical and military conditions in Israel. In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between Israel and Hezbollah in Lebanon, may escalate in the Ukraine and Russia.future into a greater regional conflict.Company has signed agreements withIsrael Defense Force (the “IDF”), the national military of Israel, is a company whose principal placeconscripted military service, subject to certain exceptions. Several of our employees are subject to military service in the IDF and have been, or may be, called to serve. It is possible that there will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss of institutional knowledge, and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, for example, may have unintended negative effects and adversely impact our results of operations, liquidity or cash flows.in Russia that include collaboration in point of care development in Russia, as well as the development and commercialization of potential key technologies for the Company’s clinical development and manufacturing projects. The United States, EU, UK, Canada and Japan have imposed sanctions against and export controls involving Russia, and other potential retaliatory measures could be taken by the United States and other countries. At this time, we cannotcurrently not possible to predict the outcomeduration or severity of developments in Russianthe ongoing conflict or its effects on our business, operations and the Ukraine on these agreements.financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt certain of our business and operations, among others.● collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration; 29 ● collaborators may not perform their obligations as expected; ● collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities; ● collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing; ● collaborators could fail to make timely regulatory submissions for a product candidate; 29● collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicable regulatory requirements; ● collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; ● product candidates developed in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; ● a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution; ● collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ● disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources; ● collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and ● collaborators may own or co-own intellectual property covering our products that results from our collaborating with them and, in such cases, we would not have the exclusive right to commercialize such intellectual property. ● do not have sufficient resources or decide not to devote the necessary resources due to internal constraints such as limited cash or human resources; 30 ● decide to pursue a competitive potential product developed outside of the collaboration; ● cannot obtain the necessary regulatory approvals; ● determine that the market opportunity is not attractive; or ● cannot manufacture or obtain the necessary materials in sufficient quantities from multiple sources or at a reasonable cost. 30ishas been affected by the ongoing COVID-19 pandemic and may be significantly adversely affected asby a resurgence of the COVID-19 pandemic continues or if other events out of our control disrupt our business or that of our third partythird-party partners.While the extent of the impact of the COVID-19 pandemic on our business and financial results is uncertain, aA continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition and operating results. We have experienced and may in the future experience disruptions from a resurgence of COVID-19 to our business in a number of ways, including: ● Delays in supply chain and manufacturing, including the suspension of cell transport, limitations on transfer of technology, shutdown of manufacturing facilities and delays in delivery of supplies and reagents; ● Delays in discovery and preclinical efforts; ● Changes to procedures or shut down, or reduction in capacity, of clinical trial sites due to limited availability of clinical trial staff, reduced number of inpatient intensive care unit beds for patients receiving cell therapies, diversion of healthcare resources away from clinical trials and other business considerations; ● Limited patient access, enrollment and participation due to travel restrictions and safety concerns, as well as housing and travel difficulties for out of townout-of-town patients and relatives; and ● Changes in regulatory and other requirements for conducting preclinical studies and clinical trials during the pandemic. We may be required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from the COVID-19 virus. For example, in March 2020, the FDA issued a guidance on conducting clinical trials during the pandemic, which was updated in July 2020, January 2021 and August 2021. The guidance describes a number of considerations for sponsors of clinical trials impacted by the pandemic, including the requirement to include in the clinical trial report (or as a separate document) contingency measures implemented to manage the trial and any disruption of the trial as a result of the COVID-19 pandemic; a list of all subjects affected by the COVID-19 pandemic-related trial disruptions by unique subject identifier and by investigational site and a description of how the individual’s participation was altered; and analyses and corresponding discussions that address the impact of implemented contingency measures (e.g., participant discontinuation from investigational product and/or trial, alternative procedures used to collect critical safety and/or efficacy data) on the safety and efficacy results reported for the trial. In its most recent update to this guidance, the FDA addressed questions received from clinical practitioners who are adapting their operations in a pandemic environment. These questions focused on, among other things, when to suspend, continue or initiate a trial and how to submit changes to protocols for INDs and handle remote site monitoring visits. There is no assurance that this guidance governing clinical trials during the pandemic will remain in effect or, even if it does, that it will help address the risks and challenges enumerated above.Other potential impacts of the COVID-19 pandemic on our ongoing clinical trials include patient dosing and trial monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, including quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trial, interruption or delays in the operations of the FDA, or other reasons related to the COVID-19 pandemic.31If the COVID-19 pandemic continues, other aspects of our ongoing clinical trial and future planned clinical trials may be adversely affected, delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials, clinical trial site data monitoring and efficacy, safety and translational data collection, and data analysis. Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from our trials or we may have to pause enrollment or we may choose to or be required to pause enrollment and/or patient dosing in our ongoing or planned clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions could continue. Patients may need to withdraw due to COVID-19 infections or experience increased adverse events and deaths in our clinical trials due to COVID-19 related infections, which may result in increased complications due to immune suppression in some of the patients being treated.We previously closed our offices and requested that most of our personnel, including all of our administrative employees, work remotely, restricted on-site staff to only those personnel and contractors who must perform essential activities that must be completed on-site and limited the number of staff in any given research and development laboratory. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. In addition, this could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors. Further, we and our third-party service providers, the clinical trial sites, our manufacturers and suppliers, may experience staffing shortages.Our employees and contractors conducting research and development activities may not be able to access our laboratory for an extended period of time as a result of the closure of our offices and the possibility that governmental authorities further modify current restrictions. In addition, when our facilities are open, we could encounter delays in connection with implementing precautionary measures to mitigate the risk of exposing our facilities and employees to COVID-19 or otherwise in connection with addressing an actual or potential exposure to COVID-19 (for example, temporarily closing all or a portion of a facility or disinfecting all or a portion of a facility that may have been exposed to COVID-19). As a result, this could delay timely completion of preclinical activities, including completing IND/Clinical Trial Application (CTA)-enabling studies or our ability to select future development candidates, and initiation of additional clinical trials for our other development programs.Health regulatory agencies globally may experience disruptions in their operations as a result of the COVID-19 pandemic. The FDA or foreign health authorities may have slower response times or be under-resourced to continue to monitor our ongoing clinical trial and, as a result, review, inspection, and other timelines may be materially delayed. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trial or delay in regulatory review resulting from such disruptions could materially affect the development of our product candidates.The trading prices for shares of other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the COVID-19 could materially and adversely affect our business and the value of our common stock.The COVID-19 pandemic continues to evolve. The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted, including the duration of the pandemic, additional or modified government actions, and the actions taken to contain COVID-19 or address its impact, among others. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy. We will continue to monitor the situation closely.3231third partythird-party partners or collaborators that could seriously harm our potential future revenue and financial condition and increase our costs and expenses. Our operations, and those of our partners and collaborators, contract manufacturing organizations (CMOs) and other contractors, consultants, and third parties could be subject to other global pandemics, earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and process our product candidates. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.33● the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case; 32 ● patent applications may not result in any patents being issued; ● patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage; ● our competitors, many of whom have substantially greater resources and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate our ability to make, use, and sell our potential product candidates; ● there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and ● countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates. 3433 licenseeslicensees’ rights to commercialize such product candidates, and in connection with such lawsuit and under certain circumstances, it is possible that we or our licensees could be required to cease or delay the commercialization of a product candidate and/or be required to pay monetary damages or other amounts, including royalties on the sales of such products. Moreover, any such lawsuit may also consume substantial time and resources of our management team and board of directors. The threat or consequences of such a lawsuit may also result in royalty and other monetary obligations being imposed on us, which may adversely affect our results of operations and financial condition.35● decreased demand for our products; ● injury to our reputation; ● withdrawal of clinical trial participants and inability to continue clinical trials; ● initiation of investigations by regulators; ● costs to defend the related litigation; 34 ● a diversion of management’s time and our resources; ● substantial monetary awards to trial participants or patients; ● product recalls, withdrawals or labeling, marketing or promotional restrictions; ● loss of revenue; ● exhaustion of any available insurance and our capital resources; ● the inability to commercialize any product candidate; and ● a decline in our share price. 3635 ● differing regulatory requirements in foreign countries, unexpected changes in tariffs, trade barriers, price and exchange controls, and other regulatory requirements; ● economic weakness, including inflation, or political instability in particular foreign economies and markets; ● compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; ● foreign taxes, including withholding of payroll taxes; ● foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; 37● difficulties staffing and managing foreign operations; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign laws; ● challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; ● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and ● business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as the recent outbreak of COVID-19, or the novel coronavirus). 36 servicesServices out of our OMPULs. Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications failure or terrorism, which may render it difficult or impossible for us to operate for some period of time. In addition, since there is no lengthy history of use of OMPULs and the OMPULs are still in the development stage, we are unable to predict the normal wear and tear on such OMPULs or how many years each OMPUL will remain operational.3837
●federal and state laws governing laboratory testing, including CLIA, and state licensing laws;●federal and state laws and enforcement policies governing the development, use and distribution of diagnostic medical devices, including laboratory developed tests, or LDTs;●federal, state and local laws governing the handling and disposal of medical and hazardous waste;●federal and state Occupational Safety and Health Administration rules and regulations; and● European Union GMP approvals, which may be delayed because of the use OMPULs which could then delay manufacturing for clinical trials.● federal and state laws governing laboratory testing, including CLIA, and state licensing laws; ● federal and state laws and enforcement policies governing the development, use and distribution of diagnostic medical devices, including laboratory developed tests, or LDTs; ● federal, state and local laws governing the handling and disposal of medical and hazardous waste; ● federal and state Occupational Safety and Health Administration rules and regulations; and ● European Union GMP approvals, which may be delayed because of the use OMPULs which could then delay manufacturing for clinical trials. Orgenesis Ltd.the Israeli Subsidiary as we continue to expand our focus to other therapies and business activities. We believe that our expanded focus to such other therapies and business activities may continue to prompt THM to inquire of such activities as they may relate to our compliance with the terms or direction of resources toward the THM License Agreement. While we have not received any notice of cancellation of the THM License Agreement, we have received an allegation regarding the scope of the rights by THM that may present future challenges for our Israeli Subsidiary to continue to develop, manufacture, sell and market the products pursuant to the milestones and time schedule specified in the development plan of the THM License Agreement. In addition, THM has filed a complaint against us in the Tel Aviv District Court relating to the scope of such THM license and the royalties and other payments that THM is entitled to thereunder. See “Legal Proceedings” in this Annual Report on Form 10-K. Such complaint may lead to further risk of cancellation of the THM License Agreement.3938Orgenesis Ltd.The Israeli Subsidiary is a licensed 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. 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 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 his/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:● obtaining regulatory approval regulatory authorities that have very limited experience with the commercial development of the trans-differentiating technology for diabetes; ● developing and deploying consistent and reliable processes for engineering a patient’s liver cells ex vivo and infusing the engineered cells back into the patient; ● developing processes for the safe administration of these products, including long-term follow-up for all patients who receive our products; ● sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our products; ● developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment; ● establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance; and ● maintaining a system of post marketing surveillance and risk assessment programs to identify adverse events that did not appear during the drug approval process. ● our platform may not be successful in identifying additional product candidates; ● we may not be able or willing to assemble sufficient resources to acquire or discover additional product candidates; 40● our product candidates may not succeed in preclinical or clinical testing; ● a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria; ● competitors may develop alternatives that render our product candidates obsolete or less attractive; ● product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights; ● the market for a product candidate may change during our program so that the continued development of that product candidate is no longer reasonable; ● a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and ● a product candidate may not be accepted as safe and effective by patients, the medical community or third- party payers, if applicable. 39 4140 ● completing research regarding, and nonclinical and clinical development of, our product candidates; ● obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical studies; ● developing a sustainable and scalable manufacturing process for our product candidates, including establishing and maintaining commercially viable supply relationships with third parties and establishing our own manufacturing capabilities and infrastructure; ● launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor; ● obtaining market acceptance of our product candidates as viable treatment options; ● addressing any competing technological and market developments; ● identifying, assessing, acquiring and/or developing new product candidates; ● negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter; ● maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and ● attracting, hiring, and retaining qualified personnel. 42● the inability to generate sufficient preclinical or other in vivo or in vitro data to support the initiation of clinical studies; ● delays in reaching a consensus with regulatory agencies on study design; ● delays in establishing CMC (Chemistry, Manufacturing, and Controls) which is a cornerstone in clinical study submission and later on, the regulatory approval; ● the FDA not allowing us to use the clinical trial data from a research institution to support an IND if we cannot demonstrate the comparability of our product candidates with the product candidate used by the relevant research institution in its clinical studies; 41 ● delays in obtaining required Institutional Review Board, or IRB, approval at each clinical study site; ● imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons, including after review of an IND application or amendment, or equivalent application or amendment; ● a result of a new safety finding that presents unreasonable risk to clinical trial participants; ● a negative finding from an inspection of our clinical study operations or study sites; ● developments on trials conducted by competitors for related technology that raises FDA concerns about risk to patients of the technology broadly; ● if the FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives; ● delays in recruiting suitable patients to participate in our clinical studies; ● difficulty collaborating with patient groups and investigators; ● failure to perform in accordance with the FDA’s current good clinical practices, or cGCPs, requirements, or applicable regulatory guidelines in other countries; ● delays in having patients complete participation in a study or return for post-treatment follow-up; ● patients dropping out of a study; ● occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; ● changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; ● changes in the standard of care on which a clinical development plan was based, which may require new or additional trials; ● the cost of clinical studies of our product candidates being greater than we anticipate; ● clinical studies of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical studies or abandon product development programs; and ● delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical studies or the inability to do any of the foregoing. 43● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; ● the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; ● we may be unable to demonstrate that our product candidates’ risk-benefit ratios for their proposed indications are acceptable; ● the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ● we may be unable to demonstrate that the clinical and other benefits of our product candidates outweigh their safety risks; ● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ● the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to obtain regulatory approval in the United States or elsewhere; ● the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, our own manufacturing facilities, or our third-party manufacturers’ facilities with which we contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval. 42 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.late stagelate-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.4443 4544 ● differing regulatory requirements in foreign countries, unexpected changes in tariffs, trade barriers, price and exchange controls, and other regulatory requirements; ● economic weakness, including inflation, or political instability in particular foreign economies and markets; ● compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; ● foreign taxes, including withholding of payroll taxes; ● foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; ● difficulties staffing and managing foreign operations; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign laws; ● challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; ● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and ● business interruptions resulting from geo-political actions, including war and terrorism. 4645 46 ● actual or anticipated quarterly variations in our operating results; ● changes in expectations as to our future financial performance or changes in financial estimates, if any; ● announcements relating to our business; ● conditions generally affecting the biotechnology industry; ● the success of our operating strategy; and ● the operating and stock performance of other comparable companies. 47past 52 weeks ended December 31, 2021,2023, our stock price has fluctuated from a low of $2.61$1.23 to a high of $8.08.$3.74. 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.47 48 49 ● Orgenesis Maryland Inc.LLC● FastForward laboratory and office located at 1812 Ashland Ave, Baltimore, Maryland 21205. ● Orgenesis Ltd. ● Laboratory and office located in Nes Ziona, Israel Koligo Therapeutics Inc. ● Production facility and development labs in New Albany, Indiana and medical device maintenanceIndiana.Tissue Genesis International LLC ● Production facility and development labs in Leander, Texas.Texas Orgenesis Biotech Israel Ltd. ● Laboratories and offices located in the Bar Lev Industrial Park M.P. MISGAV, Israel. Orgenesis BelgiumMida Biotech BV● Laboratories and offices located in Leiden, The Netherlands ● Theracell Laboratories ● Laboratory and offices located Koropi, Greece On January 18, 2022, a complaint (the “Complaint”) was filed in the Tel Aviv District Court (the “Court”) against us and our subsidiary Orgenesis Ltd., Prof. Sarah Ferber, Vered Caplan and Dr. Efrat Asa Kunik (collectively, the “defendants”) by plaintiffs the StateSee note 22 of Israel, as the ownerItem 8 of Chaim Sheba Medical Center at Tel HaShomer (“Sheba”), and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (collectively, the “plaintiffs”). In the Complaint, the plaintiffs are seeking that the Court issue a declaratory remedy whereby the defendants are required to pay royalties to the plaintiffs at the ratethis Annual Report on Form 10-K for details of 7% of the sales and 24% of any and all revenues in consideration for sublicenses related to any product, service or process that contain know-how and technology of Sheba and any and all know-how and technology either developed or supervised by Prof. Ferber in the field of cell therapy, including in the category of the point-of-care platform and any and all services and products in relation to the defendants’ CDMO activity. In addition, the plaintiffs seek that the defendants provide financial statements and pay NIS 10 million to the plaintiffs due to the royalty provisions of the license agreement, dated February 2, 2012, between Orgenesis Ltd. and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (the “License Agreement”). The Complaint alleges that Orgenesis Inc. and Orgenesis Ltd. used know-how and technology of Sheba and know-how and technology either developed or supervised by Prof. Ferber while employed by Sheba in the field of cell therapy, including in the category of the point-of-care platform and the services and products in relation to the defendants’ CDMO activity and are entitled to the payment of certain royalties pursuant to the terms of the License Agreement. The defendants are required to file their statement of defense responding to this Complaint by March 20, 2022. We believe that the allegations in this Complaint are without merit and intend to vigorously defend against the claims.pending legal proceedings.above,therein, we are not involved in any pending material legal proceedings.48Until March 13, 2018, our common shares were traded under OTC Market Group’s OTCQB. Since March 13, 2018, our common stock has been listed for trading on the Nasdaq Capital Market (“Nasdaq CM”) under the symbol “ORGS.”March 30, 2022,April 12, 2024, there were 185346 holders of record of our common stock, and the last reported sale price of our common stock on the Nasdaq CMNasdaqCM on March 29, 2022April 12, 2024 was $3.35.$0.49. 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 common stock.50 On December 31, 2021, we issued 25,000 shares of common stock to a service provider. We relied upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) by virtue of Section 4(a)(2) thereof and/or Regulation S promulgated by the SEC under the Act with respect to the issuance of such shares in exchange for service provided to us.None.On May 14, 2020, our Board of Directors approved the stock repurchase plan (the “Stock Repurchase Plan”) pursuant to which we may, from time to time, purchase up to $10 million of our outstanding shares of common stock. The shares may be repurchased from time to time in privately negotiated transactions or the open market, including pursuant to Rule 10b5-1 trading plans, and in accordance with applicable regulations of the SEC. The timing and exact amount of any repurchases will depend on various factors including, general and business market conditions, corporate and regulatory requirements, share price, alternative investment opportunities and other factors. The Repurchase Plan commenced on May 29, 2020 and does not obligate us to acquire any specific number of shares in any period, and may be expanded, extended, modified, suspended or discontinued by the Board of Directors at any time.None.The following table summarizes the share repurchase activity during the three months ended December 31, 2021. Total Number of Shares
Purchased Average Price
Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in thousands) November 2021 24,477 4.32 105,806 8,734 49fiscal years ended December 31, 20212023 and December 31, 20202022 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 year ended December 31, 2021,2023, as compared to the fiscal year ended December 31, 2020.2022.fiscal years ended December 31, 20212023 and December 31, 20202022 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.” (All monetary amounts are expressed in thousands of US dollars, unless stated otherwise)See below for a discussion on the extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition.Corporate OverviewCorporate OverviewOrgenesis Inc., a Nevada corporation, isWe are a global biotech company working to unlock the potential of cell and gene therapies (“CGTs”)CGTs in an affordable and accessible format.(“ATMP”).or ATMPs. We are mostly focused on autologous therapies withthat can be manufactured under processes and systems that are developed for each therapy using a closed and automated processing system approach that is validated for compliant production near the patient for treatment of the patient at the point of care, (“POCare”).or POCare. This approach has the potential to overcome the limitations of traditional commercial manufacturing methods that do not translate well to commercial production of advanced therapies due to their cost prohibitive nature and complex logistics to deliver such treatments to patients (ultimately limiting the number of patients that can have access to, or can afford, these therapies).51 Pointcollaborative worldwide network of Care Platform (“research institutes and hospitals who are engaged in the POCare Platform”) comprised of three enabling components: (i)model, or our POCare Network, and a pipeline of licensed POCare advanced therapies that are designed tocan be processed and produced (ii)under such closed and automated closedprocesses and systems, or POCare technology systems,Therapies. We are developing our pipeline of advanced therapies and (iii)with the goal of entering into out-licensing agreements for these therapies.collaborative worldwide networklow cost, to perform advanced research in small labs. Most new therapies arise from academic institutes or small spinouts from such institutes. Though such research efforts may manage to progress into a clinical stage, utilizing lab based or hospital-based production solutions they lack the resources to continue the development of such drugs to market approval.institutes and hospitals (“POCare Network”).institutes. Based on such collaborations, we enter into in-licensing agreements with relevant institutions for promising therapies with the aim of adapting them to a point-of-care setting through regional or strategic biological partnerships. Based on the results of the collaboration, we are then able to out-license our own therapeutic developments, as well as those therapies developed from in-licensing agreements to out-licensing partners at preferred geographical regions.Platform reliesTherapies division reviews many therapies available for out licensing and select the ones which they believe have the highest market potential, can benefit the most from a point of care approach and have the highest chance of clinical success. It assesses such issues by utilizing its global POCare Network and its internal knowhow accumulated over a decade of involvement in particular on the developmentfield.its own production capacity, known as “POCare Services”, whose goalthis in-licensing is to ensure thatquickly adapt such therapies are accessible atto a point-of-care approach through regional partnerships, and to out-license the point of treatment (the “POCare Center”). POCare Services, which have been expanding worldwide, are based on a globalproducts for market approval in preferred geographical regions. This approach lowers overall development cost, through minimizing pre-clinical development costs incurred by us, and local adaptation that allows replication and expansion. Global harmonizationthrough receiving of the additional funding from grants and/or payments by regional partners.● Koligo Therapeutics, Inc., a Kentucky corporation, which is a regenerative medicine company, specializing in developing personalized cell therapies. It is currently focused on commercializing its metabolic pipeline via the POCare Network throughout the United States and in international markets. 52 ● Orgenesis CA, Inc. a Delaware corporation, which is currently focused on development of technologies and therapies in California. ● Orgenesis Belgium SRL which is currently focused on product development. Since its incorporation, the subsidiary has been awarded grants in excess of 18,000 Euro from the Walloon region for several projects (DGO6 grants). ● Orgenesis Switzerland Sarl, which is currently focused on providing group management services. ● MIDA Biotech BV, which is currently focused on research and development activities, was granted a 4,000 Euro grant under the European Innovation Council Pathfinder Challenge Program which supports cutting-edge science and technology. The grant is for technologies enabling the production of autologous induced pluripotent stem cells (iPSCs) using microfluidic technologies and artificial intelligence (AI). ● Orgenesis Italy SRL which is currently focused on R&D activities. ● Orgenesis Ltd., an Israeli subsidiary which is focused on R&D and a provider of R&D management services for out licenced products. Israel is a hub for biotech research and pioneers in this field. ● Orgenesis Austria GmbH, an Austrian subsidiary, which is focused on R&D activities. Services is ensured by a central quality system, replicability of infrastructure and equipment and centralized monitoring and data management.Services)Centersservices platform. The POCare Services platform is utilized by parties such as biotech companies and hospitals for the supply of their products. Octomera’s services include adapting the process to the platform and supplying the products, or POCare Services. These are the decentralisedservices for third party companies and for CGTs that are not necessarily based on our POCare Therapies. POCare services that we and our affiliated entities perform include:● Process development of therapies, process adaptation, and optimization inside the OMPULs, or “OMPULization”; ● Adaptation of automation and closed systems to serviced therapies; ● Incorporation of the serviced therapies compliant with GMP in the OMPULs that we design and built; ● Tech transfers and training of local teams for the serviced therapies at the POCare Centers; ● Processing and supply of the therapies and required supplies under GMP conditions within our POCare Network, including required quality control testing; and ● Contract Research Organization services for clinical trials. and partners.or POCare Centers. We are working to provide a moreexpand the number and scope of our POCare Centers with the intention of providing an efficient and scalable pathway for advancedCGT therapies to reach patients more rapidly at lowered costs. The workflow of aOur POCare Center isServices are designed to allow rapid capacitiescapacity expansion while integrating new technologies. We also draw on extensive medical expertisetechnologies to identify promising new autologous therapies to leverage within the POCare Platform either via ownership or licensing.The POCare Network bringsbring together patients, doctors and industry partners with a goal of achieving harmonized,standardized, regulated clinical development and production of POCare advanced therapies.50We have worked to develop and validate POCare technologies that can be combined within mobile production units for advanced therapies. We have made significant investments in the development of several types of Orgenesis Mobile Processing Units and Labs (“OMPULs”) with the expectation of use and/or distribution through our POCare Network and/or partners, collaborators, and regional distributors. As of the date of this report, the OMPULs have been adapted for processing of CAR-T, TILS and MSC based products and are in the qualification stage for clinical use in various locations. Additional OMPULs are still in the development stage.OMPULs are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential or approved advanced therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing of such CGTs in a consistent and standardized manner in all locations. The OMPUL design delivers a potential industrial solution for us to deliver CGTs to practically any clinical institution at the point of care.The Chief Executive Officer is our chief operating decision-maker who reviews financial information prepared on a consolidated basis. All of our operations are in one segment, being the point-of-care business via our POCare Platform. Therefore, no segment information has been presented.POCare PlatformServices Operations via Subsidiariescurrently conduct our core businessPOCare operations ourselvesthrough our wholly-owned subsidiary Octomera which was a consolidated subsidiary of the Company until June 30, 2023 and through ourwhich became a consolidated subsidiary again effective January 29, 2024. Octomera’s subsidiaries which are all wholly owned except as otherwise stated below (collectively, the “Subsidiaries”). The Subsidiaries are listed include:● Orgenesis Maryland LLC, which is the center of POCare Services activity in North America and is currently focused on setting up and providing POCare Services and cell-processing services to the POCare Network. ● Tissue Genesis International LLC, a Texas limited liability company currently focused on development of our technologies and therapies. ● Orgenesis Services SRL, which is currently focused on expanding our POCare Network in Belgium. ● Orgenesis Germany GmbH, which is currently focused on providing CRO services to the POCare Network. ● Orgenesis Korea Co. Ltd., which is a provider of cell-processing and pre-clinical services in Korea. Octomera owns 94.12% of the Korean Subsidiary. 53 ● Orgenesis Biotech Israel Ltd., which is a provider of process development and cell-processing services in Israel. ● Orgenesis Australia PTY LTD, which was transferred to Octomera in January 2023 and is currently focused on the development of our POC Network in Australia. ● Theracell Laboratories IKE (“Theracell Labs”), a Greek company currently focused on expanding our POCare Network. ● ORGS POC CA Inc, a Californian entity, is currently focussed on expanding our POCare Network in California. ● Octo Services LLC, a Delaware entity focussed on expanding our POCare network. this annual report in Item 8.exchange for Octomera preferred shares.Discontinued OperationsSignificant Developments During Fiscal 2023Until December 31, 2019,Financing Activitiesoperatedentered into a securities purchase agreement with certain institutional and accredited investors (the “Purchaser”) relating to the POCare Platform as oneissuance and sale of two business separate business segments.1,947,368 shares of our common stock, and warrants to purchase up to 973,684 shares of common stock (the “Warrants”) at a purchase price of $1.90 per share of common stock and accompanying Warrants in a registered direct offering (the “February 2023 Offering”). The February 2023 Offering closed on February 27, 2023.second separate business segmentWarrants have an exercise price of $1.90 per share, were exercisable immediately and will expire five years following the date of issuance. The Warrants had an alternate cashless exercise option (beginning on or after the earlier of (a) the thirty-day anniversary of the date of the Purchase Agreement and (b) the date on which the aggregate composite trading volume of Common Stock following the public announcement of the pricing terms exceeds 13,600,000 shares), to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise and (y) 1.0. The aggregate gross proceeds to us from the February 2023 Offering were $3,700, before deducting placement agent cash fees equal to 7.0% of the gross proceeds received and other expenses from the Offering payable by us.operated as$0.78. The warrants were exercisable immediately following the date of issuance and may be exercised for a Contract Developmentperiod of five years from the initial exercisability date at an exercise price of $0.78 per share. We received proceeds of $1,100. The November 2023 Offering closed on November 9, 2023.54 Manufacturing Organization (“CDMO”) platform, providing third party contract manufacturingis repayable on January 1, 2024. During 2024, the maturity date of the loan was extended by a year.development services for biopharmaceutical companies (the “CDMO Business”).is repayable on January 1, 2024.CDMO platformloans are interest free and repayable between November 30, 2023 and January 1, 2024. During 2024, the maturity date of the loans was historically operated mainlyextended by a year.majority owned Masthercell Global Inc.December 2023, Orgenesis Maryland, LLC received $2,726 of loans which bear 10% annual interest and were originally scheduled to be repaid during 2024. Pursuant to an extension agreement signed between us and MM on January 28, 2024, the maturity dates of the MM loans were extended to January 28, 2034February 2020,addition, during 2023, we continued the development of license agreements previously entered into, as described more fully in notes 12 and GPP-II Masthercell LLC (“GPP”) sold 100% of the outstanding equity interests of Masthercell (the “Masthercell Business”), which comprised the majority of our CDMO Business, to Catalent Pharma Solutions, Inc. for an aggregate nominal purchase price of $315 million, subject to customary adjustments (the “Masthercell Sale”).We determined that the Masthercell Business (“Discontinued Operations” or “Discontinued Operation”) meets the criteria to be classified as a discontinued operation as of the first quarter of 2020. The Discontinued Operation includes the vast majority of the previous CDMO Business, including majority owned Masthercell, including MaSTherCell, Masthercell U.S. and all of the Masthercell Global Subsidiaries.Impact of the COVID-19 PandemicThe COVID-19 pandemic continues to present substantial public health and economic challenges around the world, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures.We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it has and will continue to impact our operations and the operations of our suppliers, vendors and business partners, and may take further precautionary and preemptive actions as may be required by federal, state or local authorities. In addition, we have taken steps to minimize the current environment’s impact on our business and strategy, including devising contingency plans and securing additional resources from third party service providers. For the safety of our employees and families, we have introduced enhanced safety measures in our facilities.51Beyond the impact on our product development efforts, the extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the emergence of new variants, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain COVID-19 or treat its impact, including vaccination campaigns, among others. If we or any of the third parties with whom we engage, however, were to experience any additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on our business, financial condition and results of operations. Although to date, our business has not been materially impacted by COVID-19, it is possible that our clinical development timelines could be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations. See “Risk Factors” for additional discussion of the potential adverse impact of the COVID-19 pandemic on our business, financial condition and results of operations.Developments During Fiscal 2021License, Collaboration and Joint Venture AgreementsDuring 2021, we executed several license, collaboration and joint venture agreements, the most significant of which are summarized below. For a more complete description, see notes 11 and 1213 to our consolidated financial statements included in Item 8 of this annual reportAnnual Report on Form 10-K.DescriptionField / TerritoryNeuro-immunotherapy exclusive license agreementNeuro-immunotherapy.Savicell Collaboration AgreementEvaluation, continued development, validation, and use of Savicell’s platform designed for the early detection and diagnosis of diseases and conditions and for quality control and monitoring purposes, in conjunction with our systems.Stromatis Pharma Inc. Collaboration and Sublicense AgreementCollaboration in refining methods for GMP manufacturing of CAR-T/CAR-NK CT109 and the development and validation of the Stromatis technology as it relates to the CAR-T/CAR-NK CT109 antibody up to and inclusive of filing of Investigational New Drug Application relating to Stromatis’ CAR-T/CAR-NK CT109 antibody.Helmholtz Zentrum München Deutsches Forschungszentrum für Gesundheit und Umwelt (GmbH) Exclusive LicenseExclusive license to us in the field of human stem cells.Celleska LTD Joint Venture AgreementPOCare in Australia.Johns Hopkins University Sublease and Construction AgreementEstablishment of a clinical therapeutic development and point of care center in Maryland.Deep Med IO Ltd Joint Venture AgreementDevelopment and commercialization of an AI-powered system to be used in the manufacturing and/or quality control of CGTs.Theracell Laboratories GrantResults of OperationsIn November 2021, Theracell Laboratories (“Theracell”), our joint venture entity in Greece, was designated as a “Priority Investment of Strategic National Importance” by Enterprise Greece, the official Greek national investment and trade promotion agency, which is responsible for the allocation of Greek government funding. As a result of this designation, Theracell will be inducted into Greece’s fast-track licensing and approval process. This is expected to help advance development and clinical use of Theracell’s CGT at POCare, subject to regulatory requirements.52Theracell has been approved to receive a grant of up to €32 million from the Greek government subject to compliance with budgetary conditions, spread over five years. The proceeds are expected to be used for:●Installation of OMPULs throughout Greece (Point of Care Mode), which includes the completion of industrial research for the operation and automation of OMPULs intended for mass production of cell and gene therapies and experimental development of novel therapies through clinical trials towards regulatory approval.●Clinical development, production and distribution of novel cell and gene therapies such as immunological therapies, CAR-T genetic modification therapies and Mesenchymal Stem Cells (MSCs) based therapies.Revacel Joint VentureDuring 2021, we, together with our joint venture partner, Revitas SA, incorporated our joint venture entity Revacel Srl in Belgium. Revacel will develop products in the field of muscle-derived mesenchymal stem/progenitor cells.Results of Operations20212023 to the Year Ended December 31, 2020.2022.20212023 are summarized as follows in comparison to the year ended December 31, 2020:2022: Years Ended December 31, Years Ended December 31, 2021 2020 2023 2022 (in thousands) (in thousands) Revenues $ 31,646 $ 6,177 $ 530 $ 34,741 Revenues from related party 3,856 1,475 - 1,284 Total revenues 35,502 7,652 $ 530 $ 36,025 Cost of services and other research and development expenses, net 36,644 83,986 Cost of sales 6,255 5,133 Gross profit $ (5,725 ) $ 30,892 Cost of development services and research and development expenses 10,623 21,933 Amortization of intangible assets 948 478 721 911 Selling, general and administrative expenses 14,710 18,973 Selling, general and administrative expenses included credit losses of $24,367 for the year ended December 31, 2023 35,134 15,589 Share in loss of associated company 734 1,508 Impairment of investment 699 - Impairment expenses - 1,061 Operating loss 16,800 95,785 $ 53,636 $ 10,110 Other income (2,278 ) (4 ) (4 ) (173 ) Credit loss on convertible loan receivable - Loss from extinguishment in connection with convertible loan (see note 7 a of Item 8) 1,865 - 283 52 Financial expense, net 1,292 1,061 2,499 1,971 Share in income of associated company 272 (106 ) Loss from continuing operation before income taxes 17,951 96,736 Tax (income) expense 108 (1,609 ) Net loss from continuing operation 18,059 95,127 Net income from discontinued operations, net of tax - (95,706 ) Net loss (income) $ 18,059 $ (579 ) Loss before income taxes $ 64,445 $ 11,960 Tax expense 473 209 Net loss $ 64,918 $ 12,169 5355 Years Ended December 31, Years Ended December 31, 2021 2020 2023 2022 (in thousands) (in thousands) Revenue stream: POC and hospital services (Mainly POC) $ 32,819 $ 6,068 Cell process development services 2,683 1,584 POCare development services $ - $ 14,894 Cell process development services and hospital services 515 11,212 POCare cell processing - 9,919 License fees 15 - Total $ 35,502 $ 7,652 $ 530 $ 36,025 20212023 were $35,502 thousand,$530, as compared to $7,652 thousand$36,025 for the year ended December 31, 2020,2022, representing an increasea decrease of 364%99%. The increase inThis was attributable failure of customers to timely pay for services received and to the deconsolidation of Octomera at June 30, 2023. Almost all of our potential revenues forwas from Octomera. During the year ended December 31, 2021 compared to2023, the year ended December 31, 2020 was attributable to the increase in point-of-care servicesOctomera segment completed revenue as a result of increased activityperformance obligations but did not recognize revenue for such completed performance obligations because certain revenue recognition conditions under master service agreements with our customers.POC services are mainly the result of agreements between us and our joint venture partners (See note 11 in Item 8). Pursuant to the agreements, we provide certain services in support of our joint venture partners’ activity.Of such $32,819 thousand of revenue during the year ended December 31, 2021, we recognized $3,856 thousand of point-of-care development service revenue from a related party as compared to $1,475 thousand during the year ended December 31, 2020, representing an increase of 161%. The increase is attributable to expanded activities and additional services provided in the territory.ASC 606 were not satisfied. Years Ended December 31, 2021 2020 (in thousands) Revenue earned: Customer A (Korea) $ 7,703 $ 2,857 Customer B (United Arab Emirates) 6,969 - Customer C (China) 6,491 1,577 Customer D (India) – related party 3,856 1,475 Customer E (Greece) 4,693 1,412 Years Ended December 31, 2023 2022 (in thousands) Revenue earned: Customer A (United States) $ 280 $ - Customer B (United States) 90 - Customer C (United States) 130 - Customer D (Greece) - 8,936 Customer E (United States) - 8,316 Customer F (United Arab Emirates) - 5,271 Customer G (Korea) - 3,873 Year Ended December 31, 2023 December 31, 2022 Salaries and related expenses $ 2,387 $ 1,689 Stock-based compensation 4 36 Professional fees and consulting services 1,917 968 Raw materials 731 1,173 Depreciation expenses, net 481 354 Other expenses 735 913 Total $ 6,255 $ 5,133 56 Year Ended December 31, 2023 December 31, 2022 Salaries and related expenses $ 4,800 $ 9,517 Stock-based compensation 210 580 Subcontracting, professional and consulting services 3,662 4,687 Lab expenses 377 1,512 Depreciation expenses, net 312 663 Other research and development expenses 1,542 5,097 Less – grant (280 ) (123 ) Total $ 10,623 $ 21,933 Years Ended December 31, 2021 2020 (in thousands) Salaries and related expenses $ 10,977 $ 5,175 Stock-based compensation 729 481 Subcontracting, professional and consulting services 12,796 3,463 Lab expenses 3,513 2,348 Tamir Purchase Agreement (See Note 4) - 19,225 Depreciation expenses, net 874 603 Other research and development expenses 7,755 52,887 Less – grant - (196 ) Total $ 36,644 $ 83,986 Cost of services and other research and development expenses for the year ended December 31, 2021 were $36,644 thousand, as compared to $83,986 thousand for the year ended December 31, 2020, representing a decrease of 56%. this year.The changes contributing to the net decrease were mainly attributable to the following:●We experienced a significant decrease (in the amount of $45.3 million) in other research and development expenses during 2021. In 2020, we made significant investments in the development of several types of OMPULs, accounted for in other research and development expenses, with the expectation of use and/or distribution through our POCare Network of partners, collaborators, and joint ventures. The majority of our OMPUL development work was completed in 2021 and we expect that such OMPULs will be placed into service during 2022.54●Salaries and related expenses increased by $5,802 thousand, as a result of additional staff hired to continue the development of our CGT product pipeline as we expand our POC operations globally. We continue to invest in the development of automated processing units and processes, owned and licensed advanced therapies to enable commercial production, and additional work with partners that address POCare needs.●We experienced an increase in subcontracting, professional and consulting services of $9,333 thousand. As indicated above, we continue to invest in the development of automated processing units and processes, owned and licensed advanced therapies to enable commercial production, and additional work with partners that address POCare needs.
Years Ended December 31, | Years Ended December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Salaries and related expenses | $ | 6,277 | $ | 3,379 | $ | 2,825 | $ | 4,008 | ||||||||
Stock-based compensation | 945 | 1,915 | 249 | 362 | ||||||||||||
Accounting and legal fees | 3,293 | 6,946 | 3,355 | 5,527 | ||||||||||||
Professional fees | 1,107 | 1,571 | 1,891 | 3,080 | ||||||||||||
Rent and related expenses | 249 | 407 | 161 | 199 | ||||||||||||
Business development | 577 | 3,477 | 464 | 474 | ||||||||||||
Depreciation expenses, net | 42 | 101 | 46 | 50 | ||||||||||||
Other general and administrative expenses | 2,220 | 1,177 | 26,143 | 1,889 | ||||||||||||
Total | $ | 14,710 | $ | 18,973 | $ | 35,134 | $ | 15,589 |
Selling, general and administrative expenses for the year ended December 31, 20212023 were $14,710 thousand,$35,134, as compared to $18,973 thousand$15,589 for the year ended December 31, 2020,2022, representing a decreasean increase of 22%125%.
The decreaseincrease was mainly due to increased expenses in the Octomera segment, where selling, general and administrative expense (excluding depreciation) for the year ended December 31, 2021 is primarily attributable to:
Such decreases2023 were countered by$37,878 as compared to $7,762 for the year ended December 31, 2022, representing an increase in salaries and related expenses of $2,898 thousand,388%. The increase was mainly as a result of a discretionary bonus to our Chief Executive Officer, Vered Caplan,an increase of credit losses in the amount of $3.6 million pursuant$29,774 included in other general and administrative expenses.
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Share in Net Loss of Associated Company
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Share of Net Loss of Associated Company | $ | 734 | $ | 1,508 | ||||
Total | $ | 734 | $ | 1,508 |
Share in net loss of associated company for the year ended December 31, 2023 was $ 734, as compared to $ 1,508 for the year ended December 31, 2022, representing an decrease of 51%. The decrease in Share in net loss of associated company in the year ended December 31, 2023 compared to the discretionary bonus provisionsyear ended December 31, 2022 is primarily attributable to a decline in Octomera revenues, and credit losses in the year ended December 31, 2023 resulting from higher than previously expected credit losses related to a group of the Personal Employment Agreement between Ms. Caplan and Orgenesis Services Sàrlcustomers that are significantly overdue in Octomera.
FinancialImpairment Expenses net
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Interest expense on convertible loans and loans | 943 | 1,254 | ||||||
Foreign exchange loss, net | 574 | 160 | ||||||
Other income | (225 | ) | (353 | ) | ||||
Total | $ | 1,292 | $ | 1,061 |
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Impairment expenses | $ | 699 | $ | 1,061 |
Impairment expenses for the year ended December 31, 2023 were $699, as compared to $1,061 for the year ended December 31, 2022. These were attributable to the write-off of assets purchased in previous years.
Credit Loss on Convertible loan receivable
Years Ended December 31 | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Credit loss on convertible loan receivable | $ | 2,688 | $ | - |
The credit loss for the year ended December 31, 2023 was $2,688 compared to $0 for the year ended December 31, 2022. This was attributable to a provision created for a credit loss on a loan.
Financial Expenses, net
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Interest expense on convertible loans and loans | 2,167 | 1,824 | ||||||
Foreign exchange loss, net | 325 | 145 | ||||||
Other income | 7 | 2 | ||||||
Total | $ | 2,499 | $ | 1,971 |
Financial expenses, net for the year ended December 31, 20212023 were $1,292 thousand,$2,499, as compared to $1,061 thousand$1,971 for the year ended December 31, 2020,2022, representing an increase of 22%27%. The increase was mainly attributable to increased interest and related expenses on new and existing convertible loans.
Tax expense (income)
Years Ended December 31, | Years Ended December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Tax expense (income) | $ | 108 | $ | (1,609 | ) | |||||||||||
Tax expense | $ | 473 | $ | 209 | ||||||||||||
Total | $ | 108 | $ | (1,609 | ) | $ | 473 | $ | 209 |
Tax expenses (income),income, net for the year ended December 31, 20212023 were $108 thousand,$473, as compared to $1,609 thousand$209 for the year ended December 31, 2020,2022, representing an increase of 107%126%. The increase is mainly attributable to increased tax liabilities in the U.S. Effective for the year endedyears beginning after December 31, 2021, is primarily attributable due toInternal Revenue Code Section 174 changed the releasetax treatment of research and experimentation (R&E) expenditures. While companies have historically deducted such costs for federal income tax purposes, these new rules require capitalization and prescribe cost recovery over a tax asset up to the amountperiod of Koligo’s net tax liabilityfive years for research and development paid or incurred in the year ended December 31, 2020.United States and 15 years for R&E paid or incurred outside of the United States.
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Discontinued Operations
Discontinued operations relate to the Masthercell Business. The following table presents the financial results associated with the Masthercell Business operation as reflected in our Consolidated Comprehensive loss:
OPERATIONS | Year Ended December 31, | |||
2020 | ||||
(in thousands) | ||||
Revenues | $ | 2,556 | ||
Cost of revenues | 1,482 | |||
Cost of services and other research and development expenses, net | 7 | |||
Amortization of intangible assets | 137 | |||
Selling, general and administrative expenses | 1,896 | |||
Operating loss | 966 | |||
Other expenses, net | 305 | |||
Financial income, net | (29 | ) | ||
Loss before income taxes | 1,242 | |||
Tax income | (30 | ) | ||
Net loss from discontinuing operation, net of tax | $ | 1,212 |
Revenues are attributable to the extension of existing customer service contracts with biotechnology clients and from revenues generated from existing manufacturing agreements. Cost of revenues were in line with the growth in revenues and employment of additional operational staff. Selling, general and administrative expenses included additional managerial appointments, increased professional fees, additional rental space including in the U.S., and an increase of business development expenses.
Working Capital
December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Current assets | $ | 25,758 | $ | 50,077 | ||||
Current liabilities | $ | 15,365 | $ | 16,285 | ||||
Working capital | $ | 10,393 | $ | 33,792 |
December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Current assets | $ | 4,076 | $ | 46,318 | ||||
Current liabilities | $ | 16,407 | $ | 15,910 | ||||
Working capital | $ | (12,331 | ) | $ | 30,408 |
Current assets decreased by $24,319 thousand$42,242 between December 31, 20202022 and December 31, 2021, which was primarily attributable2023, due mainly to a decrease inthe deconsolidation of Octomera. The majority of cash and cash equivalents, as the we continued to investrestricted cash, and accounts receivable at December 31, 2022 were part of Octomera. Receivables from related parties in the expansionamount of our POC operations globally and$458 are receivables from Octomera subsidiaries, that were consolidated at December 31, 2022 but not at December 31, 2023. Octomera became a consolidated subsidiary again effective January 29, 2024. In addition we provided a credit loss for a convertible loan in the developmentamount of our CGT product pipeline and development of automated processing units and processes, and owned and licensed advanced therapies$2,688 that was not yet repaid to enable commercial production; and an increase in accounts receivable as a result of increased POC revenues.us.
Current liabilities decreasedincreased by $920 thousand$497 between December 31, 20202022 and December 31, 2021, which was2023, primarily attributabledue to the following: (i) an decreaseincrease in accounts payable and accrued expenses due toin the reductionamount of certain expenses; and (ii)$2,022 as a result of a shortage of funds; an increase in tax payable in the amount of $451 as a result of increased tax in the US; and grants payable in the amount of $602 as a result of a grant received. These increases were offset by a decline in short-term and current maturities of convertible loans.loans in the amount of $1,834 due to the extension of the maturity date of convertible loans to 2026 (see Note 10)
Liquidity and Capital Resources
Years Ended December 31, | Years Ended December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net loss | $ | (18,059 | ) | $ | 579 | $ | (64,918 | ) | $ | (12,169 | ) | |||||
Net cash used in operating activities | (26,866 | ) | (78,046 | ) | (14,837 | ) | (24,924 | ) | ||||||||
Net cash provided by (used in) investing activities | (12,384 | ) | 105,610 | |||||||||||||
Net cash provided by (used in) financing activities | (106 | ) | 5,881 | |||||||||||||
Net cash used in investing activities | (3,707 | ) | (14,133 | ) | ||||||||||||
Net cash provided by financing activities | 13,618 | 39,578 | ||||||||||||||
Net change in cash and cash equivalents and restricted cash | $ | (39,356 | ) | $ | 33,445 | $ | (4,926 | ) | $ | 521 |
During year ended December 31, 2021,2023, we funded our operations from existing funds.operations as well as from proceeds raised from equity and debt offerings.
Net cash used in operating activities for the year ended December 31, 20212023 was approximately $27 million,$14,837, as compared to net cash used in operating activities of approximately $78 million$24,924 for the year ended December 31, 2020. Since the Masthercell Sale, and particularly in2022. The decline was mainly as a result of
a loss of $64,918 for the year ended December 31, 2020, we entered into new joint venture agreements with new partners2023 compared to a loss of $12,169 for the year ended December 31, 2022, which is mainly related a decline in various jurisdictions that allowed us to grow our infrastructure and expand our processing sites into new markets and jurisdictions. In addition, we engaged some of these joint venture partners to perform research and development services to further develop and adapt our systems and devices for specific purposes. We invested manpower and financial resources to focus on developing, manufacturing and rolling out several types of OMPULs to be used and/or distributed through our POCare Network of partners, collaborators, and joint ventures.activity in Octomera.
Net cash used in investing activities for the year ended December 31, 20212023 was approximately $12 million,$3,707, as compared to net cash used in investing activities of approximately $14,133 for the year ended December 31, 2022. The decrease was mainly due to loans granted to associated entities last year not granted this year, reduced investments in OMPULs, and the deconsolidation of Octomera.
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Net cash provided by financing activities for the year ended December 31, 2023 was approximately $13,618, as compared to net cash provided by investingfinancing activities of approximately $106 million$39,578 for the year ended December 31, 2020. The net cash provided in2022. During the year ended December 31, 2020 was mainly attributable to2023 we raised equity investments in the Masthercell Sale.net amount of 5,732, raised proceeds from loans in the amount of 635, raised proceeds from MM in the amount of $5,000 and repaid convertible loans in the amount of $3,000.
Liquidity and Capital Resources Outlook
ThroughAs of December 31, 2021, the Company2023, we had an accumulated deficit of $106.4 million as of December 31, 2021$176,622 and negative operating cashflows of $26.9 million infor the year ended December 31, 2021. The Company’s2023 incurred negative operating cashflows of $14,837. Our activities have been funded by generating revenue, through offerings of the Company’sour securities, and selling its Contract Development and Manufacturing Organization (“CDMO”) business.through proceeds from loans. There is no assurance that the Company’sour business will generate sustainable positive cash flows to fund itsour business. See also note 21 with respect to an investment agreement in the amount of approximately $14.8 million (before deducting related offering expenses), which has been entered into subsequent to December 31, 2021.
Based on its current cash resources and commitments, including such investment agreement discussed in note 21, the Company believes it will be able to maintain its current planned development activities and expected level of expenditures for at least 12 months from the date of the issuance of these financial statements, although no assurance can be given that it will not need additional funds prior to such time.
If there are further increases in operating costs for facilities expansion, research and development, commercial and clinical activity or decreases in revenues from customers, the CompanyWe will need to use mitigating actions such as to seek additional financing, refinance or amend the terms of existing loans or postpone expenses that are not based on firm commitments. In addition, in order to fund the Company’sour operations until such time that the Companywe can generate sustainable positive cash flows, the Company maywe will need to raise additional funds. For the year ended December 31, 2023 and as of the date of this report, we assessed our financial condition and concluded that based on our current and projected cash resources and commitments, as well as other factors mentioned above, there is a substantial doubt about our ability to continue as a going concern. We are planning to raise additional capital to continue our operations and to repay our outstanding loans when they become due, as well as to explore additional avenues to increase revenues and reduce expenditures. There can be no assurance that we will be able to raise additional capital on acceptable terms, or at all.
In December 2018,Our common stock is listed for trading on the Nasdaq Capital Market. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”). If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. We received such a notice on September 27, 2023 and thus risk delisting unless we are able to regain compliance in a timely fashion.
During January 2024, we received extensions on our loan payments as follows:
● | Israeli subsidiary loan from an offshore investor in the amount of $175 originally repayable on January 1, 2024: The maturity date of the loan was extended by a year. | |
● | Israeli subsidiary loans in the amount of $150 repayable between November 30, 2023 and January 1, 2024. During 2024, the maturity date of the loans was extended by a year. | |
● | During October through December 2023, Orgenesis Maryland, LLC received $2,726 of loans which were originally scheduled to be repaid during 2024. Pursuant to an extension agreement signed between us and MM on January 28, 2024, the maturity dates of the MM loans were extended to January 28, 2034. |
On March 3, 2024, we entered into a Controlled Equity Offering Sales Agreement, or SalesSecurities Purchase Agreement with Cantor Fitzgerald & Co., or Cantor,certain accredited investors, pursuant to which we may offeragreed to issue and sell, from time to time through Cantor,in a private placement, 2,272,719 shares of our common stock, havingpar value $0.0001 per share, at a purchase price of $1.03 per share and warrants to purchase up to 2,272,719 shares of Common Stock at an exercise price of $1.50 per share and warrants to purchase up to 2,272,719 shares of Common Stock at an exercise price of $2.00 per share (collectively, the “Warrants”). We received gross proceeds of approximately $2.3 million before deducting related offering expenses.
On April 5, 2024, we entered into an Asset Purchase and Strategic Collaboration Agreement (the “Purchase Agreement”) with Griffin Fund 3 BIDCO, Inc., (“Germfree”), for the sale by us of five OMPULs to Germfree, which will be incorporated into Germfree’s lease fleet and leased back to us or third-party lessees designated by Orgenesis. Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions set forth therein, in consideration for the purchase of the OMPULs, the Orgenesis Quality Management Systems Framework (“OQMSF”) and related intellectual property rights, Germfree will pay us an aggregate offeringpurchase price of up$8,340 subject to $25.0 million. We will pay Cantor a commission rate equal to 3.0% ofany final adjustment through the aggregate gross proceeds from each sale. Shares sold underverification mechanism as set forth in 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 SalesPurchase Agreement.
Pursuant to the Agreement, Germfree paid us $750 on February 27, 2024 and $5,538 during April 2024.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies and Estimates
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 December 31, 2021.2023. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.
Income Taxes
Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of 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.
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Revenue from Contracts with Customers
Our agreements are primarily service contracts that range in duration. We recognize revenue when control of these services is transferred to the customer for an amount, referred to as the transaction price, which reflects the consideration to which we are expected to be entitled in exchange for those goods or services.
A contract with a customer exists only when:
● | the parties to the contract have approved it and are committed to perform their respective obligations; |
● | we can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”); |
● | we can determine the transaction price for the goods or services to be transferred; and |
● | the contract has commercial substance, and it is probable that we will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. |
Nature of Revenue Streams
We have twothree main revenue streams, being POCwhich are POCare development services, which includescell process development services, including hospital supplies, and POCare cell process development services.processing.
POCPOCare Development Services
Revenue recognized under contracts for POCPOCare development services may, in some contracts, represent multiple performance obligations (where promises to the customers are distinct) in circumstances in which the work packages are not interrelated or the customer is able to complete the services performed.
For arrangements that include multiple performance obligations, the transaction price is allocated to the identified performance obligations based on their relative standalone selling prices.
We recognize revenue when, or as, it satisfies a performance obligation. At contract inception, we determine whether the services are transferred over time or at a point in time. Performance obligations that have no alternative use and that we have the right to payment for performance completed to date, at all times during the contract term, are recognized over time. All other Performance obligations are recognized as revenues by us at point of time (upon completion).
Included in POC development services is hospital supplies revenue which is derived principally from the sale or lease of products and the performance of services to hospitals or other medical providers. Revenue is earned and recognized when product and services are received by the customer.
Significant Judgement and Estimates
Significant judgment is required to identifying the distinct performance obligations and estimating the standalone selling price of each distinct performance obligation and identifying which performance obligations create assets with alternative use to us, which results in revenue recognized upon completion, and which performance obligations are transferred to the customer over time.
Cell Process Development Services
Revenue recognized under contracts for cell process development services may, in some contracts, represent multiple performance obligations (where promises to the customers are distinct) in circumstances in which the work packages and milestones are not interrelated or the customer is able to complete the services performed independently or by using our competitors. In other contracts when the above circumstances are not met, the promises are not considered distinct, and the contract represents one performance obligation. All performance obligations are satisfied over time, as there is no alternative use to the services it performs, since, in nature, those services are unique to the customer, which retain the ownership of the intellectual property created through the process.
For arrangements that include multiple performance obligations, the transaction price is allocated to the identified performance obligations based on their relative standalone selling prices. For these contracts, the standalone selling prices are based on our normal pricing practices when sold separately with consideration of market conditions and other factors, including customer demographics and geographic location.
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We measure the revenue to be recognized over time on a contract by contractcontract-by-contract basis, determining the use of either a cost-based input method or output method, depending on whichever best depicts the transfer of control over the life of the performance obligation.
Included in Cell Process Development Services is hospital supplies revenue which is derived principally from the sale or lease of products and the performance of services to hospitals or other medical providers. Revenue is earned and recognized when product and services are received by the customer.
Revenue from POCare Cell processing
Revenues from POCare Cell processing representperformance obligations which are recognized either over, or at a point of time. The progress towards completion will continue to be measured on an output measure based on direct measurement of the value transferred to the customer (units produced).
Concentration of Credit Risk
Financial instruments that potentially subject us to concentration of credit risk consist of principally cash and cash equivalents, bank deposits and certain receivables. We held these instruments with highly rated financial institutions, and we have not experienced any significant credit losses in these accounts and does not believe the we are exposed to any significant credit risk on these instruments, except for accounts receivable. We perform ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for doubtful accounts.
Our accounts receivable accounting policy until December 31, 2022, prior to the adoption of the new Current Expected Credit Losses (“CECL”) standard, created bad debts when objective evidence existed of inability to collect all sums owed it under the original terms of the debit balances. Material customer difficulties, the probability of their going bankrupt or undergoing economic reorganization and insolvency, material delays in payments and other objective considerations by management that indicate expected risk of payment were all considered indicative of reduced debtor balance value. Effective January 1, 2023, we adopted the new CECL standard.
We maintain the allowance for estimated losses resulting from the inability of our customers to make required payments. We consider historical collection experience for each of its customers and when revenue and accounts receivable are recorded. We also recognize estimated expected credit losses over the life of the accounts receivables. The estimate of expected credit losses considers not only historical information, but also current and future economic conditions and events.
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 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
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Our management, with the participation of our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Actend of the period covered by this Annual Report. Based upon that evaluation and regulations promulgated thereunder) as of December 31, 2021, orsubject to the Evaluation Date. Based on such evaluation,foregoing, our Chief Executive Officerprincipal executive officer and Chief Financial Officer haveprincipal financial officer concluded that, as of the Evaluation Date,end of the period covered by this Annual Report, the design and operation of our disclosure controls and procedures are effective.were not effective due to the material weakness in our internal control over financial reporting described below.
Management’s Report on Internal Control over Financial Reporting
Our management, under the supervision of the Chief Executive Officer and Chief Financial Officer,, is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’scompany’s assets that could have a material effect on the financial statements.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2021.2023. In making this evaluation, our management used the criteria set forth in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
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Based on this evaluation, management concluded
Management has determined that we had the following material weakness in our internal control over financial reporting was effective as of December 31, 2021 based2023:
We did not perform appropriate analyses related to our internal control over financial reporting in the accounting for whether it is probable we will collect substantially all the consideration to which we are entitled for revenue services provided, as well as our estimated credit losses during 2023. As a result, we identified a deficiency in the operating effectiveness of our internal control over financial reporting related to our accounting for revenues, credit losses and the related impacts related to that, which resulted in the restatement of our unaudited condensed consolidated financial statements for the three months ended March 31, 2023, the three and six months ended June 30, 2023 and the three and nine months ended September 30, 2023.
As of December 31, 2023, such weakness has not been remediated. Management’s plans for remediation, which will occur during 2024, include a thorough credit assessment of all new customers, analysis of payment history for existing customers as well as an analysis on those criteria.expected credit losses by customer.
This annual reportAnnual Report on Form 10-K does not include an attestation report of our registered public accounting firm on internal control over financial reporting because we are a smaller reporting company and non-accelerated filer.
Changes in Internal Control Over Financial Reporting
ThereExcept as described above, there were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 20212023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth certain information regarding our each of our current Directors and Executive Officers as of March 30, 2022.April 15, 2024.
Name | Age | Position | ||
Vered Caplan | Chief Executive Officer and Chairperson of the Board of Directors | |||
|
| Chief Financial Officer, Secretary and Treasurer
| ||
David Sidransky (1) (2) (4) | Director | |||
Guy Yachin (1) (2) (3) (4) | Director | |||
Yaron Adler (2) (3) | Director | |||
Ashish Nanda (3) | Director | |||
Mario Philips (1) |
54 | Director |
(1) | A member on the audit committee. |
(2) | A member on the compensation committee. |
(3) | A member on the nominating and corporate governance committee. |
(4) | A member of the research and development committee. |
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Our Executive Officers
Vered Caplan – Chief Executive Officer and Chairperson of the Board of Directors
Ms. Caplan has served as our CEO and Chairperson of the Board of Directors since August 14, 2014, prior to which she served as Interim President and CEO commencing on December 23, 2013. She joined our Board of Directors in February 2012. She has 26 years of industry experience, previously holding positions as CEO of Kamedis Ltd. from 2009 to 2014, CEO of GammaCan International Inc. from 2004 to 2007. She also served as a director of the following companies: Opticul Ltd., Inmotion Ltd., Nehora Photonics Ltd., Ocure Ltd., Eve Medical Ltd., and Biotech Investment Corp. Ms. Caplan holds a M.Sc. in biomedical engineering from Tel Aviv University specializing in signal processing; management for engineers from Tel Aviv University specializing in business development; and a B.Sc. in mechanical engineering from the Technion– Israel Institute of Technology specialized in software and cad systems.
Neil ReithingerVictor Miller – Chief Financial Officer, Secretary and Treasurer
Mr. Reithinger wasOn December 28, 2023, we appointed Victor Miller as our Chief Financial Officer, Secretary and Treasurer on August 1, 2014.effective January 2, 2024. Mr. Reithinger is the FounderMiller previously served as Chief Financial Officer and PresidentSecretary at Hycor Biomedical LLC. (“HYCOR”), an in vitro allergy diagnostic company, from 2014 to May 2023. Mr. Miller has over 30 years of Eventus Advisory Group, LLC, a private, CFO-services firm incorporated in Delaware, which specializes in capital advisoryhealthcare and SEC compliance for publicly-traded and emerging growthfinance industry experience, including 14 years leading finance functions at early-stage life science companies. He is also the President of Eventus Consulting, P.C. Prior to forming Eventus, Mr. Reithinger was Chief Operating Officer & CFO from MarchFrom 2009 to December2014, prior to joining HYCOR, Mr. Miller led the Finance function at Neos Therapeutics, an early-stage specialty pharmaceutical company. From 2000 to 2009, Mr. Miller developed broad healthcare functional experience with roles in Corporate Development, Business Development, Marketing and Strategy while working for Baxter Healthcare and Giles & Associates. From 1996 to 2000, Mr. Miller gained significant transaction experience as an investment banker in London for Bankers Trust and Merrill Lynch. Mr. Miller holds a Bachelor of New Leaf Brands, Inc., a branded beverage company, CEO of Nutritional Specialties, Inc.Science in Economics from April 2007 to October 2009, a nationally distributed nutritional supplement company that was acquired by Nutraceutical International, Inc., Chairman, CEO, President and director of Baywood International, Inc. from January 1998 to March 2009, a publicly-traded nutraceutical company and Controller of Baywood International, Inc. from December 1994 to January 1998. Mr. Reithinger earned a B.S. in Accounting from theThe Wharton School, University of ArizonaPennsylvania and is a Certified Public Accountant. He is a Member of the American Institute of Certified Public Accountants and the Arizona Society of Certified Public Accountants.Chartered Financial Analyst.
Efrat Assa-Kunik – Chief Development Officer
Dr. Assa-Kunik was appointed as our Chief Development Officer in December 2021. Dr. Assa-Kunik joined the Company in September 2016 as Head of Pre-Clinical Development. In August 2017, she was appointed General Manager of the Israeli subsidiary. Dr Assa-Kunik earned her PhD at the Weizmann Institute of Science in the fields of genetics and developmental biology and a Masters from the Ben-Gurion University in immunology and cancer research. Additionally, Dr Assa-Kunik was a postdoctoral fellow at the Weizmann Institute in the department of neural biology. After completing her postdoc, Dr. Assa-Kunik joined BioGenCell as a Senior Scientist. In 2012, she joined Pharmaseed as the director of the Business Development Unit, VP business development and manager of the business development activity in USA.
Our Directors
Dr. David Sidransky – Director
Dr. Sidransky has served as a director since his appointment on July 18, 2013. Dr. Sidransky is a renowned oncologist and research scientist named and profiled by TIME magazine in 2001 as one of the top physicians and scientists in America, recognized for his work with early detection of cancer. Since 1994, Dr. Sidransky has been the Director of the Head and Neck Cancer Research Division at Johns Hopkins University School of Medicine’s Department of Otolaryngology and Professor of Oncology, Cellular & Molecular Medicine, Urology, Genetics, and Pathology at the John Hopkins University School of Medicine. Dr. Sidransky is one of the most highly cited researchers in clinical and medical journals in the world in the field of oncology during the past decade, with over 600 peer reviewed publications. Dr. Sidransky is a founder of a number of biotechnology companies and holds numerous biotechnology patents. Dr. Sidransky has served as Vice Chairman of the board of directors, and was, until the merger with Eli Lilly, a director of ImClone Systems, Inc., a global biopharmaceutical company committed to advancing oncology care. He is currently on the board of Directors of Ascentage Pharma, Galmed and Champions Oncology. and chairs the board of directors of Advaxis and Ayala. Dr. Sidransky served as Director from 2005 until 2008 of the American Association for Cancer Research (AACR). He was the chairperson of AACR International Conferences during the years 2006 and 2007 on Molecular Diagnostics in Cancer Therapeutic Development: Maximizing Opportunities for Personalized Treatment. Dr. Sidransky is the recipient of a number of awards and honors, including the 1997 Sarstedt International Prize from the German Society of Clinical Chemistry, the 1998 Alton Ochsner Award Relating Smoking and Health by the American College of Chest Physicians, and the 2004 Richard and Hinda Rosenthal Award from the American Association of Cancer Research. Dr. Sidransky received his BS in Chemistry from Brandies University and his medical degree from Baylor College of medicine where he also completed his residency in internal medicine. His specialty in Medical Oncology was completed at Johns Hopkins University and Hospital.
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We believe Dr. Sidransky is qualified to serve on our Board of Directors because of his education, medical background, experience within the life science industry and his business acumen in the public markets.
Guy Yachin – Director
Mr. Yachin has served as a director since his appointment on April 2, 2012. Mr. Yachin serves, since November 2020, as the executive chairman of Xerient Pharma which develops a drug for the treatment of abdominal cancers. He served as the President and CEO of Serpin Pharma, a clinical stage Virginia-based company focused on the development of anti-inflammatory drugs, from April 2013 until October 2020. Prior to that, Mr. Yachin was the CEO of NasVax Ltd., a company focused on the development of improved immunotherapeutics and vaccines. Prior to joining NasVax, Mr. Yachin served as CEO of MultiGene Vascular Systems Ltd (a.k.a. Vessl), a cell therapy company focused on blood vessels disorders, leading the company through clinical studies in the U.S. and Israel, financial rounds, and a keystone strategic agreement with Teva Pharmaceuticals Industries Ltd. He was CEO and founder of Chiasma Inc., a biotechnology company focused on the oral delivery of macromolecule drugs, where he built the company’s presence in Israel and the U.S., concluded numerous financial rounds, and guided the company’s strategy and operation for over six years. Earlier, he was CEO of Naiot Technological Center Ltd., and provided seed funding and guidance to more than a dozen biomedical startups such as Remon Medical Technologies Ltd., Enzymotec Ltd. and NanoPass Technologies Ltd. He holds a BSc. in Industrial Engineering and Management and an MBA from the Technion – Israel Institute of Technology.
We believe Mr. Yachin is qualified to serve on our Board of Directors because of his education, experience within the life science industry and his business acumen in the public markets.
Yaron Adler – Director
Mr. Adler has served as a director since his appointment on April 17, 2012. Mr. Adler is the co-founder of a startup incubator, We Group Ltd. In 1999, Mr. Adler co-founded IncrediMail Ltd. and served as its CEO until 2008 and President until 2009. In 1999, prior to foundingAfter IncrediMail, Mr. Adler consulted Israeli startup companies regarding Internet products, services and technologies. Mr. Adler served as a product manager from 1997 to 1999, and as a software engineer from 1994 to 1997, at Tecnomatix Technologies Ltd., a software company that develops and markets production engineering solutions to complex automated manufacturing lines that fill the gap between product design and production, and which was acquired by UGS Corp. in April 2005. In 1993, Mr. Adler held a software engineer position at Intel Israel Ltd. He has a B.A. in computer sciences and economics from Tel Aviv University.
We believe Mr. Adler is qualified to serve on our Board of Directors because of his education, success with early-stage enterprises and his business acumen in the public markets.
Ashish Nanda – Director
Mr. Nanda has served as a director since his appointment on February 22, 2017. Since 1998, Mr. Nanda has been the Managing Director of Innovations Group, one of the largest outsourcing companies in the financial sector that employs close to 14,000 people working across various financial sectors. Since 1992, Mr. Nanda has served as the Managing Partner of Capstone Insurance Brokers LLC and, since 2009, has served as Managing Partner of Dive Tech Marine Engineering Services L.L.C. From 1991 to 1994, Mr. Nanda held the position of Asst. Manager Corporate Banking at Emirates Banking Group where he was involved in establishing relationships with business houses owned by UAE nationals and expatriates in order to set up banking limits and also where he managed portfolios of USD $26 billion. Mr. Nanda holds a Chartered Accountancy from the Institute of Chartered Accountants from India.
We believe that Mr. Nanda is qualified to serve on our Board of Directors because of his business experience and strategic understanding of advancing the valuation of companies in emerging industries.
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There are no family relationships between any of the above executive officers or directors or any other person nominated or chosen to become an executive officer or a director.
Pursuant to an agreement entered into between us and Image Securities fzc. (“Image”), for so long as Image’s ownership of our company is 10% or greater, it was granted the right to nominate a director to our Board of Directors. Mr. Nanda was nominated for a directorship at the 2017 annual meeting in compliance with our contractual undertakings. Although Image is no longer a beneficial owner of 10% or greater of our common stock, Mr. Nanda remains as a member of our Board of Directors.
Mario Philips – Director
Mr. Philips has served as a director since his appointment on January 9, 2020. Since November 2020, Mr. Philips has been Chief Executive Officer of Polyplus, a leading Biotech supplier of transfection reagents for cell & gene therapy as well as the research life sciences market. MarioHe is also chairmen of the Board of PLL Therapeutics, a drug company based in France that has developed a diagnostic platform technology for neurodegenerative diseases in combination with a therapy to cure neurodegenerative diseases such as ALS and Parkinson’s.
Prior to that, MarioMr. Philips acted as VP/GM for Danaher Pall Biotech business with full P&L responsibility for a $1,3B$1.3 billion business unit. MarioMr. Philips joined Pall in February 2014, as part of the Pall acquisition of ATMI Life Sciences, and was appointed to Vice President and General Manager to lead the Single-Use Technologies BU. In this role he was responsible for leading and executing an aggressive investment and growth strategy.
MarioMr. Philips joined ATMI in 1999 with ATMI’s acquisition of MST Analytics, Inc., serving as European Sales Manager for ATMI Analytical Systems. In 2004, Mariohe was appointed to General Manager of ATMI Packaging, a role he held through 2010 when he was promoted to the position of Senior Vice President and General Manager, ATMI Life Sciences. In that role, he was responsible for developing and executing all business strategies, including the introduction of new products and service solutions for the Life Sciences industry. A strong leading innovative IP portfolio was created, Pall acquired the business in 2014.
MarioMr. Philips also held in the past several board member positions in the life sciences industry with Clean Biologics, Austar Life Sciences (China), Disposable Lab (France) and Artelis (Belgium).
We believe that Mr. Philips is qualified to serve on our Board of Directors because of his business experience and strategic understanding of advancing the valuation of companies in emerging industries.
There are no family relationships between any of the above executive officers or directors or any other person nominated or chosen to become an executive officer or a director.
Board of Directors
Our Board of Directors currently consists of six (6) members. All directors hold office until the next annual meeting of stockholders. At each annual meeting of stockholders, the successors to directors whose terms then expire are elected to serve from the time of election and qualification until the next annual meeting following election.
Management has been delegated the responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on our business in the ordinary course, managing cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board of Directors exercises its supervision over management by reviewing and approving long-term strategic, business and capital plans, material contracts and business transactions, and all debt and equity financing transactions and stock issuances.
Director Independence
Our Board of Directors is comprised of a majority of independent directors. In determining director independence, we use the definition of independence in Rule 5605(a)(2) of the listing standards of The Nasdaq Stock Market.
The Board has concluded that each of Dr. Sidransky, and Messrs. Yachin, Adler, Philips and Nanda is “independent” based on the listing standards of the Nasdaq Stock Market, having concluded that any relationship between such director and our company, in its opinion, does not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Board Committees
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, with each comprised of independent directors in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations. The members of the Audit Committee are Dr. Sidransky and Messrs. Yachin and Philips. The members of the Compensation Committee are Dr. Sidransky and Messrs. Adler and Yachin. The members of the Nominating and Corporate Governance Committee are Messrs. Nanda, Adler and Yachin. We have also established a Research and Development Committee. The members of the Research and Development Committee are Mr. Yachin and Dr. Sidransky. We have also established a Research and Development Committee.
Each committee operates under a written charter that has been approved by our Board of Directors. Copies of our committee charters are available on the investor relations section of our website, which is locatedlocated at http://www.orgenesis.com.www.orgenesis.com.
Audit Committee
The Audit Committee (a) assists the Board of Directors in fulfilling its oversight of: (i) the quality and integrity of our financial statements; (ii) our compliance with legal and regulatory requirements relating to our financial statements and related disclosures; (iii) the qualifications and independence of our independent auditors; and (iv) the performance of our independent auditors; and (b) prepares any reports that the rules of the SEC require be included in our proxy statement for our annual meeting.
The Audit Committee held 74 meetings in fiscal 2021.2023. In addition, the Audit Committee reviewed and approved various corporate items by way of written consent during the fiscal year 2021.2023. The Board has determined that each member of the Audit Committee is an independent director in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations. In addition, the Board has determined that Dr. Sidransky is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K and has designated him to fill that role. See “Directors, Executive Officers and Corporate Governance – Directors” above for descriptions of the relevant education and experience of each member of the Audit Committee.
At no time since the commencement of our most recently completed fiscal year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board of Directors.
The Audit Committee is responsible for the oversight of our financial reporting process on behalf of the Board of Directors and such other matters as specified in the Audit Committee’s charter or as directed by the Board of Directors. Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged by us for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us (or to nominate the independent registered public accounting firm for stockholder approval), and each such registered public accounting firm must report directly to the Audit Committee. Our Audit Committee must approve in advance all audit, review and attest services and all non-audit services (including, in each case, the engagement and terms thereof) to be performed by our independent auditors, in accordance with applicable laws, rules and regulations.
Compensation Committee
The Compensation Committee (i) assists the Board of Directors in discharging its responsibilities with respect to compensation of our executive officers and directors, (ii) evaluates the performance of our executive officers, and (iii) administers our stock and incentive compensation plans and recommends changes in such plans to the Board as needed.
The Compensation Committee held 54 meetings in fiscal 2021.2023. In addition, the Compensation Committee reviewed and approved various corporate items by way of written consent during the fiscal year 2021.ended December 31, 2023. The Board of Directors has determined that each member of the Compensation Committee is an independent director in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assists the Board in (i) identifying qualified individuals to become directors, (ii) determining the composition of the Board and its committees, (iii) developing succession plans for executive officers, (iv) monitoring a process to assess Board effectiveness, and (v) developing and implementing our corporate governance procedures and policies.
The Nominating and Corporate Governance Committee held 4 meeting2 meetings in fiscal 2021.2023. In addition, the Nominating and Corporate Governance Committee reviewed and approved various corporate items by way of written consent during the fiscal year 2021.ended December 31, 2023. The Board has determined that each member of the Nominating and Corporate Governance Committee is an independent director in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations.
Research and Development Committee
The Research and Development Committee assists the Board in fulfilling the Board’s responsibilities to oversee our research and development programs, and strategies.
The Research and Development Committee was established in January 2021. The Research and Development Committee held 3 meeting in fiscal 2021.approved various corporate items by way of written consent during the year ended December 31, 2023.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our officers and directors and persons who beneficially own more than ten percent (10%) of the Common Stock outstanding to file initial statements of beneficial ownership of Common Stock (Form 3) and statements of changes in beneficial ownership of Common Stock (Forms 4 or 5) with the SEC. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all such forms they file.
Our records reflect that all reports which were required to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, were filed on a timely basis, except that three reports, covering an aggregate of five transactions, were filed late by David Sidransky, one report on Form 3 was filed late by Efrat Assa-Kunik, one report was filed late by Yaron Adler, one report was filed late by Mario Philips, one report was filed late by Guy Yachin, and one report was filed late by Ashish Nanda.basis.
Corporate Code of Conduct and EthicsCORPORATE CODE OF CONDUCT AND ETHICS
Our Board of Directors has adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Copies of our corporate code of conduct and ethics are available, without charge, upon request in writing to Orgenesis Inc., 20271 Goldenrod Lane, Germantown, MD, 20876, Attn: Secretary and are posted on the investor relations section of our website, which is located at www.orgenesis.com. The inclusion of our website address in this Annual Report on Form 10-K does not include or incorporate by reference the information on our website into this Annual Report on Form 10-K. We also intend to disclose any amendments to the Corporate Code of Conduct and Ethics, or any waivers of its requirements, on our website.
ITEM 11. EXECUTIVE COMPENSATION
The following table shows the total compensation paid or accrued during the last two fiscal years ended December 31, 2021 to2023 and 2022. Our named executive officers consist of (1) our Chief Executive Officer, (2) our former Chief Financial Officer and (3) our former Chief Development Officer. As of December 31, 2021,2023, there were no other executive officers who earned more than $100,000 during the fiscal year ended December 31, 20212023 and were serving as executive officers as of such date (the “nameddate. The table includes two additional executive officers”).officers who would have been among the three most highly compensated executive officers except for the fact that they were not serving as executive officers of the Company as of the end of 2023.
Summary Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensa- tion ($) | Non-qualified Deferred Compensation Earnings ($) | All Other Compensa- tion ($) (2) | Total ($) | |||||||||||||||||||||||||
Vered Caplan | 2021 | 264,483 | 3,600,000 | - | - | - | - | 112,345 | 3,976,828 | |||||||||||||||||||||||||
CEO(3) | 2020 | 250,000 | 400,000 | - | 171,349 | - | - | 215,640 | 1,036,98 | |||||||||||||||||||||||||
Neil Reithinger | 2021 | 239,670 | - | - | - | - | - | - | 239,670 | |||||||||||||||||||||||||
CFO, Treasurer & Secretary | 2020 | 255,231 | 200,000 | - | 30,238 | - | - | - | 485,469 | |||||||||||||||||||||||||
Efrat Assa-Kunik, Chief Development Officer | 2021 | 169,533 | - | - | - | - | - | 46,387 | 215,919 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensa- tion ($) | Non-qualified Deferred Compensation Earnings ($) | All Other Compensa- tion ($) (2) | Total ($) | |||||||||
Vered Caplan | 2023 | 259,029 | - | - | - | - | - | 82,355 | 341,384 | |||||||||
CEO | 2022 | 243,868 | - | - | 107,941 | - | - | 92,100 | 443,909 | |||||||||
Elliot Maltz Former CFO, Treasurer & Secretary(3) | 2023 | 111,667 | - | - | 81,883 | - | - | - | 193,550 | |||||||||
Efrat Assa-Kunik, | 2023 | 129,633 | - | - | - | - | - | 18,690 | 148,323 | |||||||||
Former Chief Development Officer(4) | 2022 | 162,316 | - | - | 19,048 | - | - | 44,467 | 225,831 |
(1) | In accordance with SEC rules, the amounts in this column reflect the fair value on the grant date of the option awards granted to the named executive, calculated in accordance with ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense for us that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our Common Stock on the date of exercise. For a discussion of the assumptions made in the valuation of the stock options, see Note 15 to this Annual Report on Form 10-K for the year ended December 31, |
(2) | For |
(3) | Mr. Maltz resigned from his position at the Company effective December 31, 2023. |
(4) | Ms. Assa Kunik resigned from her position at the Company effective August 8, 2023. |
All Other Compensation
The following table provides information regarding each component of compensation for fiscalthe years 2021ended December 31, 2023 and 20202022 included in the All Other Compensation column in the Summary Compensation Table above. Represents amounts paid in New Israeli Shekels (NIS) or Swiss Franks and converted at average exchange rates for the year.
Name | Year | Automobile and Communication Related Expenses $ (1) | Social Benefits $ (2) | Total $ | ||||||||||||
Vered Caplan | 2021 2020 | - 13,172 | 112,345 202,468 | 112,345 215,640 | ||||||||||||
Efrat Assa Kunik | 2021 | 924 | 45,462 | 46,387 |
Name | Year | Automobile and Communication Related Expenses $ | Social Benefits $ (1) | Total $ | ||||||||||||
Vered Caplan | 2023 | 2,627 | 79,728 | 82,355 | ||||||||||||
2022 | 2,536 | 89,564 | 92,100 | |||||||||||||
Efrat Assa Kunik | 2023 | 377 | 18,313 | 18,690 | ||||||||||||
2022 | 436 | 44,031 | 44,467 |
(1) | |
These are comprised of contributions by us to savings, health, severance, pension, disability and insurance plans generally provided in Israel and Switzerland, including health, education, managerial insurance funds, and redeemed vacation pay. This amount represents Israeli and Swiss severance fund payments, managerial insurance funds, disability insurance, supplemental education fund contribution and social securities. See discussion below under “Narrative Disclosure to Summary Compensation Table – Vered Caplan.” |
Outstanding Equity Awards at December 31, 20212023
The following table summarizes the outstanding equity awards held by each named executive officer of our company as of December 31, 2021.2023.
Name | Grant Date | Number of Shares Underlying Unexercised Options (#) Exercisable | Number of Shares Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Grant Date | Number of Shares Underlying Unexercised Options (#) Exercisable | Number of Shares Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||||||||||||
Vered Caplan | 02-Feb-12(1) | 278,191 | - | 0.012 | 02-Feb-22 | 22-Aug-14(1) | 230,189 | - | 0.0012 | 22-Aug-24 | ||||||||||||||||||||||
22-Aug-14(1) | 230,189 | - | 0.0012 | 22-Aug-24 | 09-Dec-16(1) | 166,667 | - | 4.80 | 09-Dec-26 | |||||||||||||||||||||||
09-Dec-16(1) | 166,667 | - | 4.80 | 09-Dec-26 | 06-Jun-17(1) | 83,334 | - | 7.20 | 06-Jun-27 | |||||||||||||||||||||||
06-Jun-17(1) | 83,334 | - | 7.20 | 06-Jun-27 | 28-Jun-18(1) | 250,001 | - | 8.36 | 28-Jun-28 | |||||||||||||||||||||||
28-Jun-18(1) | 250,000 | - | 8.36 | 28-Jun-28 | 22-Oct-18(1) | 85,000 | - | 5.99 | 22-Oct-28 | |||||||||||||||||||||||
22-Oct-18(2) | 63,750 | 21,250 | 5.99 | 22-Oct-28 | 19-Mar-20(1) | 85,000 | - | 2.99 | 18-Mar-30 | |||||||||||||||||||||||
19-Mar-20(1) | 85,000 | - | 2.99 | 18-Mar-30 | 14-Jun-22(2) | 63,750 | 21,250 | 2.00 | 13-Jun-32 | |||||||||||||||||||||||
Neil Reithinger | 09-Dec-16(1) | 83,334 | - | 4.80 | 09-Dec-26 | |||||||||||||||||||||||||||
08-Mar-19(1) | 25,000 | - | 5.07 | 08-Mar-29 | ||||||||||||||||||||||||||||
19-Mar-20(1) | 15,000 | - | 2.99 | 18-Mar-30 | ||||||||||||||||||||||||||||
Elliot Maltz | 04-Sep-23 | 25,000 | - | 2.00 | 13-Jun-32 | |||||||||||||||||||||||||||
Efrat Assa Kunik | 09-Dec-16(1) | 16,667 | - | 4.8 | 09-Dec-26 | 09-Dec-16(1) | 16,667 | - | 4.8 | 09-Dec-26 | ||||||||||||||||||||||
22-Oct-18(2) | 11,250 | 3,750 | 5.99 | 22-Oct-28 | 22-Oct-18(1) | 15,000 | - | 5.99 | 22-Oct-28 | |||||||||||||||||||||||
19-Mar-20(1) | 15,000 | - | 2.99 | 18-Mar-30 | 19-Mar-20(1) | 15,000 | - | 2.99 | 18-Mar-30 | |||||||||||||||||||||||
14-Jun-22(2) | 7,500 | - | 2.00 | 13-Jun-32 |
(1) | The options were fully vested as of December 31, |
(2) | The options vest on a quarterly basis over a period of |
There were no optionOption Exercises and Stock Vested in 2023
The following table shows information regarding exercises of options to purchase our common stock and vesting of stock awards held by oureach executive officer named executive officersin the Summary Compensation Table during our fiscalthe year ended December 31, 20202023.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||
Vered Caplan | - | - | - | - |
(1) Amounts shown in this column do not necessarily represent actual value realized from the sale of the shares acquired upon exercise of options because in many cases the shares are not sold on exercise but continue to be held by the executive officer exercising the option. The amounts shown represent the difference between the option exercise price and 2021.the market price on the date of exercise, which is the amount that would have been realized if the shares had been sold immediately upon exercise.
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Narrative Disclosure to Summary Compensation Table and Employment Agreements
Vered Caplan
On August 14, 2014, our Board of Directors confirmed that Ms. Vered Caplan, who had served as our President and Chief Executive Officer on an interim basis since December 23, 2013, was appointed as our President and Chief Executive Officer.
On March 30, 2017, we and Ms. Caplan entered into an employment agreement replacing a previous employment agreement dated August 22, 2014 (the “Amended Caplan Employment Agreement”). Under the Amended Caplan Employment Agreement, which took effect April 1, 2017, Ms. Caplan’s annual salary continued at $160,000 per annum, subject to adjustment to $250,000 per annum upon the listing of the Company’s securities on an Exchange. On May 10, 2017, we and Ms. Caplan further amended the Amended Caplan Employment Agreement pursuant to which Ms. Caplan became entitled to a grant under the 2017 of options (the “Initial Option”) to purchase 83,334 shares of the Company’s common stock at a per share exercise price equal to the Fair Market Value (as defined in our 2017 Equity Incentive Plan (the “2017 Plan”)) of the Company’s common stock on the date of grant. The amendment further provided that beginning in fiscal 2018, subject to approval by the compensation committee, Ms. Caplan became entitled to an additional option (the “Additional Option”; together with the Initial Option, the “Options”) under the 2017 Plan for up to 250,000 shares of common stock of the Company to be awarded in such amounts per fiscal year as shall be consistent with the Plan, in each case at a per share exercise price equal to the Fair Market Value (as defined in the Plan) of the Company’s common stock on the date of grant. In 2018, following the listing of the Company’s securities on Nasdaq, Ms. Caplan’s annual salary was raised to $250,000.
For additional information regarding Ms. Caplan’s stock options awards, see the Outstanding Equity Awards table above.
On November 19, 2020, we and Ms. Caplan entered into an executive directorship agreement, effective as of October 1, 2020 (the “Executive Directorship Agreement”), that supersedessuperseded and replaces the Amended Caplan Employment Agreementreplaced a previous employment agreement (the “Prior Agreement”). Pursuant to the Executive Directorship Agreement, Ms. Caplan will continue to serve the Company as its Chairperson of the Board of Directors (the “Board”) and shall receive in consideration for her serving as Chairperson of the Board an annual regular Board fee in the amount of $75,000 payable by the Company in equal quarterly installments in advance. In addition, Ms. Caplan may be eligible for non-recurring special Board fees as reviewed and approved by the Compensation Committee of the Board (the “Compensation Committee”) and then reviewed and ratified by the Board. In addition, Ms. Caplan may be granted option awards from time to time at the discretion of the Compensation Committee.
Ms. Caplan’s position as Chairperson of the Board under the Executive Directorship Agreement may be terminated for any reason by either Ms. Caplan or the Company upon 90 days prior written notice (the “Notice Period”), provided that the Company may terminate such appointment as Chairperson at any time during the Notice Period subject to certain conditions. Such termination as Chairperson of the Board will be deemed a termination even if Ms. Caplan remains as a regular director of the Board. Upon termination by the Company of Ms. Caplan’s employment other than for cause or by Ms. Caplan for any reason whatsoever, in addition to any Accrued Obligations (as defined therein) she shall be entitled to receive a lump sum payment equal to the sum of (i) the annual regular Board fee (the “Board Fee”) and (ii) the greater of actual or target annual performance bonus to which she may have been entitled to as of the termination date (in each case, less all customary and required taxes and related deductions).
Ms. Caplan’s position under the Executive Directorship Agreement may be terminated in the event of a Change of Control (as defined therein) by the Company other than for cause or by Ms. Caplan for any reason whatsoever. In the event of a Change of Control and if, within one year following such Change of Control, employment under the Executive Directorship Agreement is terminated by the Company other than for cause or by Ms. Caplan for any reason whatsoever, in addition to any Accrued Obligations, she shall be entitled to receive a lump sum payment equal to one and a half times the sum of (i) the Board Fee and (ii) the target annual performance remuneration to which she may have been entitled as of the termination date (in each case, less all customary and required taxes and related deductions).
In addition, on November 19, 2020, Orgenesis Services Sàrl, a Swiss corporation and wholly-owned, direct subsidiary of the Company (“Orgenesis Services”), and Ms. Caplan entered into a personal employment agreement (the “Swiss Employment Agreement” and together with the Executive Directorship Agreement, the “Agreements”), pursuant to which Ms. Caplan will serve as Chief Executive Officer, President and Chairperson of the Board of Directors of Orgenesis Services and will be a material provider of services to the Company pursuant to a services agreement between the Company and Orgenesis Services. The Swiss Employment Agreement provides that Ms. Caplan is entitled to a monthly base salary of CHF 13,345.05 (equivalent to $14,583 based on the current exchange rate at signing), and an annual representation fee of CHF 24,000 (equivalent to $26,226 based on the current exchange rate at signing), payable in monthly installments of CHF 2,000. Ms. Caplan is eligible to receive a bonus at the absolute discretion of Orgenesis Services and its compensation committee. Ms. Caplan may also be granted option awards from time to time, as per the recommendation of the compensation committee of Orgenesis Services as reviewed and approved by the Compensation Committee. Under the Swiss Employment Agreement, Ms. Caplan is entitled to be paid annual vacation days, monthly travel allowance, sick leave, expenses reimbursement and a mobile phone. The Swiss Employment Agreement hashad an effective date as of October 1, 2020.
Employment under the Swiss Employment Agreement may be terminated for any reason by Ms. Caplan or by Orgenesis Services other than for just cause (as defined therein) upon six months prior written notice or by Orgenesis Services other than for just cause in the event of a Change of Control (as defined therein) of the Company upon at least 12 months prior written notice. Upon termination by Orgenesis Services of Ms. Caplan’s employment without just cause or by Ms. Caplan for any reason whatsoever, in addition to any Accrued Obligations (as defined therein), she shall be entitled to receive a lump sum payment equal to the sum of (i) her Base Salary (as defined therein) at the rate in effect as of the termination date and (ii) the greater of actual or target annual performance bonus to which she may have been entitled to for the year in which employment terminates (in each case, less all customary and required taxes and employment-related deductions). In the event of a Change of Control and if, within one year following such Change of Control, employment is terminated by Orgenesis Services other than for cause or by Ms. Caplan for any reason whatsoever, in addition to any Accrued Obligations she shall be entitled to receive a lump sum payment equal to one and a half times the sum of (i) her Base Salary and (ii) the target annual performance bonus to which she may have been entitled to for the year in which employment terminates (in each case, less all customary and required taxes and employment-related deductions).
The Swiss Employment Agreement provides for customary protections of Orgenesis’ confidential information and intellectual property.
Ms. Caplan received an aggregate salary and board fee of $264,483$259,029 during 2021. On November 19, 2020,2023. As of December 31, 2023, the Compensation Committee approved a special remuneration of $400,000 to$150,000 chairperson fee for 2022 and 2023 was unpaid, but accrued, per agreement by Ms. Caplan. In addition, in 2022 Ms. Caplan for her outstanding service in the business developmentwas awarded options to purchase 85,000 shares of the Company and its affiliates. The payment of such remuneration was made at the time of entry into the Agreements. On July 28, 2021, the Compensation Committee approved a discretionary bonus to common stock.
Ms. Caplan received reimbursement for automobile and communication related expenses in the amount of $3.6 million pursuant$2,627 in 2023 and $2,536 in 2022. In addition, the Company contributed to the discretionary bonus provisions of the Personal Employment Agreement between Ms. Caplansavings, health, severance, pension, disability and Orgenesis Services Sàrl. The bonus was paid during September 2021.insurance plans generally provided in Switzerland, including health, education, managerial insurance funds, and redeemed vacation pay in an amount equivalent to $79,728 in 2023 and $89,564 in 2022. These amounts represent Swiss severance fund payments, managerial insurance funds, disability insurance, supplemental education fund contribution and social securities.
Neil ReithingerElliot Maltz, former CFO, Secretary and Treasurer
Mr. ReithingerMaltz was appointed Chief Financial Officer, Treasurer and Secretary on AugustSeptember 1, 2014.2023. Pursuant to Mr. Reithinger’sMaltz’s personal employment agreement stipulates a monthly(the “Employment Agreement”) with the Company he is entitled to receive an annual base salary of $1,500; payment of$335,000 and an annual cash bonus as determined byof up to 40% of his then-current base salary (the “Annual Performance Bonus”). The Annual Performance Bonus, if any, will be based upon the achievement of certain corporate and individual performance objectives. Additionally, pursuant to the Employment Agreement Mr. Maltz was granted 200,000 stock options (the “Stock Award”). The Stock Award will vest quarterly from the grant date over four years subject to Mr. Maltz’s continued employment through each such vesting date. Mr. Maltz resigned his position at the Company in its sole discretion, participation in the Company’s pension plan; granteffective December 31, 2023. Mr. Maltz base salary of stock options as determined by the Company; and reimbursement of expenses. In addition, on August 1, 2014, the Company entered into a financial consulting agreement with Eventus Consulting, P.C., an Arizona professional corporation, of which Mr. Reithinger is the sole shareholder (“Eventus”), pursuant to which Eventus has agreed to provide financial consulting services to the Company. In consideration for Eventus’ services, the Company agreed to pay Eventus according to its standard hourly rate structure. The term of the consulting agreement was for a period of one year from August 1, 2014 and automatically renews for additional one-year periods upon the expiration of the term unless otherwise terminated. Eventus is owned and controlled by Mr. Reithinger. On December 16, 2020, the Compensation Committee of the Board of Directors of the Company, approved a special one-time bonus of $200,000 that$111,667 earned during 2023 was paid prior to December 31, 2020. As of December 31, 2021, Eventus was owed $56 thousand for accruedhim as per his employment and unpaid services under the financial consulting agreement.we have no further obligations due to him.
Efrat Assa-Kunik
Ms. Assa-Kunik was appointed Chief Development Officer in December 2021. According to the terms of Ms. Assa-Kunik’s Employment Agreement, Ms. Assa Kunik is entitled to a monthly salary of 45 thousand New Israeli Shekels, customary contributions to a pension and training fund, participation in cellphone expenses, and annual leave of 24 days. In 2022, Ms. Assa-Kunik was awarded options to purchase 15,000 shares of common stock. Ms. Assa Kunik resigned her position at the Company effective August 2023.
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Ms. Assa-Kunik received an aggregate salary of $126,933 during 2023 and $162,316 in 2022. In addition, in 2022 Ms. Assa-Kunik was awarded options to purchase 15,000 shares of common stock.
Ms. Assa-Kunik received reimbursement for automobile and communication related expenses in the amount of $377 in 2023 and $436 in 2022. In addition, the Company contributed to savings, health, severance, pension, disability and insurance plans generally provided in Israel, including health, education, managerial insurance funds, and redeemed vacation pay in an amount equivalent to $18,313 in 2023 and $44,031 in 2022. These amounts represent Israeli severance fund payments, managerial insurance funds, disability insurance, supplemental education fund contribution and social securities.
Potential Payments upon Change of Control or Termination following a Change of Control
Our employment agreements with our named executive officers provide incremental compensation in the event of termination, as described herein. Generally, we currently do not provide any severance specifically upon a change in control nor do we provide for accelerated vesting upon change in control. Termination of employment also impacts outstanding stock options.above.
Due to the factors that may affect the amount of any benefits provided upon the events described below, any actual amounts paid or payable may be different than those shown in this table. Factors that could affect these amounts include the basis for the termination, the date the termination event occurs, the base salary of an executive on the date of termination of employment and the price of our common stock when the termination event occurs.
The following table sets forth the compensation that would have been received by each of our executive officers had they been terminated as of December 31, 2021.2023.
Name | Salary Continuation | |||
Vered Caplan | $ | * |
(*) Termination by Company without cause: $250,000
Termination without cause following a change in control: $375,000
Director Compensation
The following table sets forth for each non-employee director that served as a director during the year ended December 31, 2021:2023:
Year Ended December 31, 20212023
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) (1) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) (1) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
Guy Yachin | 100,000 | - | 34,518 | (2) | - | - | - | 134,518 | 100,000 | - | 6,067 | (2) | - | - | - | 106,067 | ||||||||||||||||||||||||||||||||||||||||
Yaron Adler | 60,000 | - | 26,417 | (3) | - | - | - | 86,417 | 60,000 | - | 4,643 | (3) | - | - | - | 64,643 | ||||||||||||||||||||||||||||||||||||||||
Dr. David Sidransky | 105,000 | - | 36,015 | (4) | - | - | - | 141,015 | 105,000 | - | 6,330 | (4) | - | - | - | 111,330 | ||||||||||||||||||||||||||||||||||||||||
Ashish Nanda | 65,000 | - | 27,914 | (5) | - | - | - | 92,914 | 65,000 | - | 4,907 | (5) | - | - | - | 69,907 | ||||||||||||||||||||||||||||||||||||||||
Mario Philips | 50,000 | - | 24,216 | (6) | - | - | - | 74,216 | 50,000 | - | 4,256 | (6) | - | - | - | 54,256 |
(1) | In accordance with SEC rules, the amounts in this column reflect the fair value on the grant date of the option awards granted to the named executive, calculated in accordance with ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense for us that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our common stock on the date of exercise. For a discussion of the assumptions made in the valuation of the stock options, see Note 15 (Stock Based Compensation) to our financial statements, which are included in this Annual Report on Form 10-K. |
73 |
(2) | In respect of 19,600 options which will vest on December |
(3) | In respect of 15,000 options which will vest on December |
(4) | In respect of 20,450 options which will vest on December |
(5) | In respect of 15,850 options which will vest on December |
(6) | In respect of 13,750 options which will vest on December |
All directors receive reimbursement for reasonable out of pocket expenses in attending Board of Directors meetings and for participating in our business.
Compensation Policy for Non-Employee Directors.
In January 2021, the Board of Directors adopted an updated compensation policy for non-employee directors which replaced the previous non-employee director compensation terms, and which became effective January 2021. Under the policy, each director is to receive an annual cash compensation of $40,000 and the Chairman or lead director is paid an additional $20,000 per annum. Each committee member will be paid an additional $10,000 per annum and the committee chairman of the Audit and Research and Development committees is to receive $20,000 per annum while the chairman of the other committees is to receive $15,000 per annum. Cash compensation will be made on a quarterly basis.
All newly appointed directors also receive options to purchase up to 6,250 shares of our common stock. All directors are entitled to an annual bonus of options for 12,500 shares and each committee member is entitled to a further option to purchase up to 1,250 shares of common stock and each committee chairperson to options for an additional 2,100 shares of common stock. In addition, the Chairman and Vice Chairman shall be granted an option to purchase 4,200 shares of our ordinary shares.common stock. In all cases, the options are granted at a per share exercise price equal to the closing price of our publicly traded stock on the date of grant and the vesting schedule is determined by the compensation committee at the time of grant.
Compensation Committee Interlocks and Insider Participation
None of our executive officers has served as a member of the Board of Directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our Board of Directors or Compensation Committee during the fiscal year ended December 31, 2021.2023.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 30, 2022April 15, 2024 for (a) the named executive officers, (b) each of our directors, (c) all of our current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of March 30, 2022April 15, 2024 pursuant to the exercise of options or warrants to be outstanding for the purpose of computing the percentage ownership of such individual or group but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 24,820,75634,338,782 shares of common stock outstanding on March 30, 2022.April 15, 2024.
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Security Ownership of Greater than 5% Beneficial Owners
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent(1) | Amount and Nature of Beneficial Ownership (1) | Percent(1) | ||||||||||||
Image Securities fzc. 2310, 23rd floor, Tiffany Towers, JLT Dubai, UAE | 2,070,919 | (2) | 8.34 | % | ||||||||||||
Jacob Safier c/o The Wolfson Group, One State Street Plaza, 29th Floor New York, NY 10004 | 4,988,000 | (2) | 14.53 | % | ||||||||||||
Yehuda Nir c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 2,182,164 | (3) | 8.79 | % | 11,297,179 | (3) | 24.75 | % |
Security Ownership of Directors and Executive Officers
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent(1) | Amount and Nature of Beneficial Ownership (1) | Percent(1) | ||||||||||||
Vered Caplan c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 1,167,756 | (4) | 4.70 | % | 1,252,757 | (4) | 3.55 | % | ||||||||
Neil Reithinger 14201 N. Hayden Road, Suite A-1 Scottsdale, AZ 85260 | 123,334 | (5) | <1% | |||||||||||||
Elliot Maltz c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 25,000 | (5) | <1% | |||||||||||||
Efrat Assa Kunik c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 44,792 | (6) | <1% | 54,167 | (7) | <1% | ||||||||||
Guy Yachin c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 150,934 | (7) | <1% | 150,867 | (8) | <1% | ||||||||||
Dr. David Sidransky c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 133,401 | (8) | <1% | 153,467 | (9) | <1% | ||||||||||
Yaron Adler c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 232,629 | (9) | <1% | 203,721 | (10) | <1% | ||||||||||
Ashish Nanda c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 66,700 | (10) | <1% | 98,400 | (11) | <1% | ||||||||||
Mario Philips c/o Orgenesis Inc. 20271 Goldenrod Lane Germantown, MD 20876 | 30,417 | (11) | <1% | 60,000 | (12) | <1% | ||||||||||
Directors & Executive Officers as a Group (8 persons) | 1,949,963 | 7.86 | % | 1,998,379 | 5.82 | % |
75 |
Notes:
(1) | Percentage of ownership is based on |
(2) | Consists of |
(3) | Consists of (i) 10,016 |
(4) | Consists of (i) 278,191 |
(5) | Consists of |
(6) | |
(6) | Consists of (i) 16,667 |
76 |
(7) | Consists of (i) 41,667 shares of common stock issuable upon exercise of outstanding options at a price of $4.80 per share, (ii) 28,750 shares of common stock issuable upon exercise of outstanding options at a price of $5.99 per share, (iii) 25,000 shares of common stock issuable upon exercise of outstanding options at a price of $2.99 per share, (iv) 16,250 shares of common stock issuable upon exercise of outstanding options at a price of $4.60 per share, (v) 19,600 shares of common stock issuable upon exercise of outstanding options at a price of $2.89 per share. and(v) 19,600 shares of common stock issuable upon exercise of outstanding options at a price of $1.86 per share. Does not include |
(8) | Consists of (i) |
(9) | Consists of (i) 63,304 |
(10) | Consists of (i) 27,100 |
(11) | Consists of (i) |
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Securities Authorized for Issuance Under Existing Equity Compensation Plans
The following table summarizes certain information regarding our equity compensation plans as of December 31, 2021:2023:
Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding Options |
Weighted-Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted-Average Exercise Price of Outstanding Options and RSUs | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||||||||||||||
(a) | (b) | (c) | (a) | (b) | (c) | |||||||||||||||||||
Equity compensation plans approved by security holders (1) | 3,030,916 | $ | 4.23 | 969,084 | 2,944,865 | 3.66 | 2,046,646 | |||||||||||||||||
Equity compensation plans not approved by security holders | 726,780 | $ | 4.68 | - | 491,671 | 4.80 | - | |||||||||||||||||
Total | 3,757,696 | $ | 4.31 | 1,347,778 | 3,436,536 | 3.82 | 2,046,646 |
(1) | Consists of the 2017 Equity Incentive Plan and the Global Share Incentive Plan (2012). For a short description of those plans, see Note 15 to our |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Except as set out below, as of December 31, 2021,2023, there have been no transactions, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:
● | any director or executive officer of our company; |
● | any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; |
● | any promoters and control persons; and |
● | any member of the immediate family (including spouse, parents, children, siblings and in laws) of any of the foregoing persons. |
Pursuant to a financial consulting agreement with Eventus Consulting, P.C., an Arizona professional corporation, of which Mr. Reithinger is the sole shareholder (“Eventus”), dated as of August 1, 2014, Mr. Reithinger received $240 thousand during the year ended December 31, 2021 and $255 thousand during the year ended December 31, 2020 for financial consulting services. Such amounts are included in Mr. Reithinger’s executive compensation presented in the Summary Compensation Table in Item 11 of this Annual Report on Form 10-K. Eventus has agreed to provide financial consulting services to the Company and in consideration for Eventus’ services, the Company agreed to pay Eventus according to its standard hourly rate structure. The term of the consulting agreement was for a period of one year from August 1, 2014 and automatically renews for additional one-year periods upon the expiration of the term unless otherwise terminated. Eventus is owned and controlled by Mr. Reithinger
Pursuant to an agreement entered into between us and Image Securities fzc. (“Image”), so long as Image’s ownership of our Common Stock is 10% or greater, it is entitled to nominate a director to our Board of Directors. Mr. Nanda was nominated for a directorship at the 2018 annual meeting in compliance with our contractual undertakings.
Pursuant to agreements with Image, we procured services from Image in the amount of $4.8 million during the year ended December 31, 2020, and earned revenues from Image in the amount of $3.9 million and $1.5 million for the years ended December 31, 2021 and December 31, 2020, respectively. In addition, we earned interest income in the amount of $64 thousand and $169 thousand for the years ended December 31, 2021 and December 31, 2020, respectively.
On August 24, 2021, we entered into a convertible loan agreement with Image whereby, pursuant to the terms of the Image joint venture agreement, we agreed to loan Image up to $5 million. The loan bears interest at the rate of 6% and is subject to repayment by August 21, 2022, unless we agree to an extension or the loan is converted into shares of Image or, if established, Image’s Indian joint venture. As of December 31, 2021, we transferred $3 million to Image under the loan agreement, and this has been reflected as a short-term asset on our balance sheet. Such loan is senior to any and all other indebtedness of Image or, after its establishment, Image’s joint venture entity. The Company shall have a first priority security interest on all of Image’s or, if established, Image’s joint venture entity’s, present and future assets.
Pursuant to our Audit Committee charter adopted in March 2017, the Audit Committee is responsible for reviewing and approving, prior to our entry into any such transaction, all transactions in which we are a participant and in which any parties related to us have or will have a direct or indirect material interest.
Named Executive Officers and Current Directors
For information regarding compensation for our named executive officers and current directors, see “Executive Compensation.”
Director Independence
See “Directors, Executive Officers and Corporate Governance – Director Independence” and “Directors, Executive Officers and Corporate Governance – Board Committees” in Item 10 above.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our Board of Directors has appointed Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited (“PwC”) as our independent registered public accounting firm for the fiscal yearyears ended December 31, 2021.2023 and 2022. The following table sets forth the fees billed to us for professional services rendered by PwC for the years ended December 31, 20212023 and December 31, 2020:2022:
Years Ended December 31, | Years Ended December 31, | |||||||||||||||
Services: | 2021 | 2020 | 2023 | 2022 | ||||||||||||
Audit Fees (1) | $ | 228,188 | $ | 267,231 | $ | 225,000 | $ | 288,705 | ||||||||
Audit-Related Fees (2) | 16,634 | 67,405 | 42,000 | 6,405 | ||||||||||||
Tax Fees (3) | 29,863 | 12,500 | ||||||||||||||
All Other Fees | - | 10,000 | ||||||||||||||
Total fees | $ | 274,685 | $ | 357,136 | $ | 267,000 | $ | 295,110 |
(1) | Audit fees consisted of audit work performed in the preparation of financial statements, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits. |
(2) | Audit related fees consisted principally of audits of employee benefit plans and special procedures related to regulatory filings in |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Public Accountant
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.
Prior to engagement of an independent registered public accounting firm for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.
1. Audit services include audit work performed in the preparation of financial statements, as well as work that generally only an independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
2. Audit-Relatedservices are for assurance and related services that are traditionally performed by an independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
3. Taxservices include all services performed by an independent registered public accounting firm’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.
4. Other Fees are those associated with services not captured in the other categories. We generally do not request such services from our independent registered public accounting firm.
Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted, and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
79 |
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a) |
c. | Financial Statements |
Our consolidated financial statements are set forth in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.
d. | Financial Statement Schedules |
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not applicable or are not required or because the information is otherwise included herein.
e. | Exhibits required by Regulation S-K |
81 |
*Filed herewith
**Furnished herewith
ITEM 16. FORM 10-K SUMMARY
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ORGENESIS INC.
By: | /s/ Vered Caplan | |
Vered Caplan | ||
Chief Executive Officer and Chairperson of the Board of Directors (Principal Executive Officer) | ||
Date: |
By: | /s/ | |
Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) | ||
Date: |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Vered Caplan | |
Vered Caplan | ||
Chief Executive Officer and Chairperson of the Board of Directors (Principal Executive Officer) | ||
Date: |
By: | /s/ | |
Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) | ||
Date: |
By: | /s/ Guy Yachin | |
Guy Yachin | ||
Director | ||
Date: |
By: | /s/ David Sidransky | |
David Sidransky | ||
Director | ||
Date: |
By: | /s/ Yaron Adler | |
Yaron Adler | ||
Director | ||
Date: |
By: | /s/ Ashish Nanda | |
Ashish Nanda | ||
Director | ||
Date: |
By: | /s/ Mario Philips | |
Mario Philips | ||
Director | ||
Date: |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ORGENESIS INC.
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 20212023
TABLE OF CONTENTS
Page | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB name: Kesselman & Kesselman C.P.A.s; PCAOB ID: 1309) | F-2 |
CONSOLIDATED FINANCIAL STATEMENTS: | |
Consolidated Balance Sheets | |
Consolidated Statements of Comprehensive Loss (Income) | |
Consolidated Statements of Changes in Equity | |
Consolidated Statements of Cash Flows | |
Notes to Consolidated Financial Statements |
F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and shareholders of Orgenesis Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Orgenesis Inc.Inc and its subsidiaries (the “Company”) as of December 31, 20212023 and 2020,2022, and the related consolidated statements of comprehensive loss (income), changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
Changes in Accounting Principle
As discussed in note 2(x) to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1b to the consolidated financial statements, the Company has suffered recurring losses from operations and has incurred cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1b. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2 |
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
LiquidityRevenue recognition and accounts receivables – collectability criteria
As discusseddescribed in Note 1 tonote 2 and 17 of the consolidated financial statements, the Company had an accumulated deficit of $106.4 million as of December 31, 2021 and negative operating cashflows of $26.9 million intotal revenue recognized for the year ended December 31, 2021.2023 was $530 thousand. The Company’s activities have been funded by generatingaccount receivable balance as of December 31, 2023 was $88 thousand and the related credit losses for the year then ended was $24,388 thousand. The Company recognizes revenue through offeringsfrom services to its customers when control of the Company’s securitiesservices is transferred to the customer for an amount, referred to as the transaction price, which reflects the consideration to which the Company is expected to be entitled in exchange for those goods or services. The Company applies the revenue guidance to contracts when it is probable that the Company will collect substantially all of the consideration to which it is entitled to in exchange for the goods and sellingservices it transfers to the customer. The Company considers historical collection experience for each of its Contract Developmentcustomers and Manufacturing Organization (“CDMO”) business.when revenue and accounts receivable are recorded. The Company also recognizes estimated expected credit losses over the life of the accounts receivables. The estimate of expected credit losses considers not only historical information, but also current and future economic conditions and events.
The principal considerations for our determination that performing procedures relatedrelating to liquidity isrevenue recognition and accounts receivables – collectability criteria are a critical audit matter are the estimation and execution uncertainty regarding the Company’s future cash flows and management’s judgments and assumptions in estimating these cash flows to conclude the Company would have sufficient liquidity to fund its operations for at least the next 12 months form the date of the issuance of the financial statements. This in turn led to a high degree of auditor subjectivityjudgement and judgmenteffort in performing procedures to evaluate management’s assumptions of the audit evidence supporting the liquidity conclusions.collectability criteria.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our auditThese procedures included, among others, testing management’s process for evaluating the reasonablenesscollectability criteria, and the relevance of historical billing and collection data as an input to the forecastedanalysis as well as current and future economic conditions and events; testing the accuracy of a sample of revenue operating expenses,transactions and uses and sourcesa sample of cash collections from the historical billing data and the historical collection which is used in management’s assessmentanalysis; and performing a retrospective comparison of whether the Company has sufficient liquidity to fund operations for at least the next 12 months form the date of the issuance of the financial statements. This testing included assessing the appropriateness of forecast assumptions by comparing prior period forecasts to actual results, comparing forecasted revenue to recent historical financial information and signed contracts, inquiring of management regarding the mitigating actions to reduce costs and manage cash flows and assessing whether the mitigating actions were within the Company’s control, testing the underlying data generated to prepare the forecast scenarios and determining whether there was adequate support for the assumptions underlying the forecast, considering the terms of the Company’s existing convertible loans, and evaluating management’s analysis of the impact of the above assumptions on the forecasted cash flows.
We assessed the adequacy of the Company’s liquidity disclosures included in Note 1collected to the consolidated financial statements.
/s/ Kesselman & Kesselmanprior year estimate of net accounts receivable.
Certified Public Accountants (Isr.)
Kesselman & Kesselman | |
Certified Public Accountants (Isr.) | |
A member of PricewaterhouseCoopers International Limited |
Tel-Aviv,Haifa, Israel
April 15, 2024
March 30, 2022
We have served as the Company’s auditor since 2012.
Kesselman & Kesselman, 146 Derech Menachem Begin St. Tel-Aviv 6492103,Building 25, MATAM, P.O BOX 15084 Haifa, 3190500, Israel,
P.O Box 7187 Tel-Aviv 6107120,
Telephone: +972 -3- 7954555,-4- 8605000, Fax:+972 -3- 7954556, +972 -4- 8605001, www.pwc.com/il
ORGENESIS INC.
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars, in thousands, except share and per share amounts)
2021 | 2020 | 2023 | 2022 | |||||||||||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
Assets | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 5,473 | $ | 44,923 | $ | 837 | $ | 5,311 | ||||||||
Restricted cash | 501 | 645 | 642 | 1,058 | ||||||||||||
Accounts receivable, net | 15,245 | 3,085 | ||||||||||||||
Accounts receivable, net of credit losses of $0 | 88 | 36,183 | ||||||||||||||
Prepaid expenses and other receivables | 1,188 | 1,070 | 2,017 | 958 | ||||||||||||
Convertible Loan to related parties | 3,064 | - | ||||||||||||||
Grants receivable | 169 | 169 | ||||||||||||||
Receivables from related parties | 458 | - | ||||||||||||||
Convertible loan | - | 2,688 | ||||||||||||||
Inventory | 118 | 185 | 34 | 120 | ||||||||||||
Total current assets | 25,758 | 50,077 | 4,076 | 46,318 | ||||||||||||
NON CURRENT ASSETS: | ||||||||||||||||
Deposits | $ | 363 | $ | 296 | $ | 38 | $ | 331 | ||||||||
Investments in associates, net | 152 | 175 | ||||||||||||||
Loan to associates | 432 | - | ||||||||||||||
Loans receivable | 821 | - | ||||||||||||||
Equity investees | 8 | 39 | ||||||||||||||
Loans to associates | - | 96 | ||||||||||||||
Property, plants and equipment, net | 10,271 | 3,073 | 1,475 | 22,834 | ||||||||||||
Intangible assets, net | 11,821 | 13,023 | 7,375 | 9,694 | ||||||||||||
Operating lease right-of-use assets | 1,015 | 1,474 | 351 | 2,304 | ||||||||||||
Goodwill | 8,403 | 8,745 | 1,211 | 8,187 | ||||||||||||
Deferred tax | - | 103 | ||||||||||||||
Other assets | 805 | 821 | 18 | 1,022 | ||||||||||||
Total non-current assets | 34,083 | 27,607 | 10,476 | 44,610 | ||||||||||||
TOTAL ASSETS | $ | 59,841 | $ | 77,684 | $ | 14,552 | $ | 90,928 |
ORGENESIS INC.
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars, in thousands, except share and per share amounts)
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
Liabilities and equity | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable | $ | 5,238 | $ | 8,649 | $ | 6,451 | $ | 4,429 | ||||||||
Accounts payable related Parties | 133 | - | ||||||||||||||
Accounts payable | 133 | - | ||||||||||||||
Accrued expenses and other payables | 485 | 792 | 2,218 | 2,648 | ||||||||||||
Income tax payable | 54 | 7 | 740 | 289 | ||||||||||||
Employees and related payables | 1,907 | 1,463 | 1,079 | 1,860 | ||||||||||||
Other payable related parties | 52 | - | ||||||||||||||
Advance payments on account of grant | 1,238 | 692 | 2,180 | 1,578 | ||||||||||||
Short-term loans and current maturities of long-term loans | - | 145 | ||||||||||||||
Contract liabilities | 59 | 59 | ||||||||||||||
Short-term loans | 650 | - | ||||||||||||||
Current maturities of finance leases | 18 | 19 | 18 | 60 | ||||||||||||
Current maturities of operating leases | 481 | 485 | 216 | 542 | ||||||||||||
Current maturities of convertible loans | 5,885 | 3,974 | ||||||||||||||
Short-term and current maturities of convertible loans | 2,670 | 4,504 | ||||||||||||||
TOTAL CURRENT LIABILITIES | 15,365 | 16,285 | 16,407 | 15,910 | ||||||||||||
LONG-TERM LIABILITIES: | ||||||||||||||||
Non-current operating leases | $ | 561 | $ | 1,020 | $ | 96 | $ | 1,728 | ||||||||
Convertible loans | 4,854 | 7,200 | 18,967 | 13,343 | ||||||||||||
Retirement benefits obligation | 101 | 74 | - | 163 | ||||||||||||
Long-term debt and finance leases | 41 | 64 | ||||||||||||||
Finance leases | 4 | 95 | ||||||||||||||
Other long-term liabilities | 288 | 313 | 61 | 415 | ||||||||||||
TOTAL LONG-TERM LIABILITIES | 5,845 | 8,671 | 19,128 | 15,744 | ||||||||||||
TOTAL LIABILITIES | 21,210 | 24,956 | 35,535 | 31,654 | ||||||||||||
EQUITY: | ||||||||||||||||
Common stock of $ Authorized at December 31, 2021 and December 31, 2020: shares; Issued at December 31, 2021 and December 31, 2020: and shares, respectively; Outstanding at December 31, 2021 and December 31, 2020: and shares, respectively. par value: | 3 | 3 | ||||||||||||||
REDEEMABLE NON-CONTROLLING INTEREST | - | 30,203 | ||||||||||||||
EQUITY (CAPITAL DEFICIENCY): | ||||||||||||||||
Common stock of $ | par value: Authorized at December 31, 2023 and December 31, 2022: shares; Issued at December 31, 2023 and December 31, 2022: and shares, respectively; Outstanding at December 31, 2023 and December 31, 2022: and shares, respectively.3 | 3 | ||||||||||||||
Additional paid-in capital | 145,916 | 140,397 | 156,837 | 150,355 | ||||||||||||
Accumulated other comprehensive income | 207 | 748 | ||||||||||||||
Treasury stock shares and as of December 31, 2021 and December 31, 2020 | (1,266 | ) | (250 | ) | ||||||||||||
Accumulated other comprehensive income (loss) | 65 | (270 | ) | |||||||||||||
Treasury stock | shares as of December 31, 2023 and December 31, 2022(1,266 | ) | (1,266 | ) | ||||||||||||
Accumulated deficit | (106,372 | ) | (88,319 | ) | (176,622 | ) | (121,261 | ) | ||||||||
Equity attributable to Orgenesis Inc. | 38,488 | 52,579 | (20,983 | ) | 27,561 | |||||||||||
Non-controlling interests | 143 | 149 | - | 1,510 | ||||||||||||
TOTAL EQUITY | 38,631 | 52,728 | ||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | 59,841 | $ | 77,684 | ||||||||||||
TOTAL EQUITY (CAPITAL DEFICIENCY) | (20,983 | ) | 29,071 | |||||||||||||
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY (CAPITAL DEFICIENCY) | $ | 14,552 | $ | 90,928 |
The accompanying notes are an integral part of these consolidated financial statements.
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (INCOME)
(U.S. Dollars, in thousands, except share and per share amounts)
2021 | 2020 | |||||||
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
Revenues | $ | 31,646 | $ | 6,177 | ||||
Revenues from related party | 3,856 | 1,475 | ||||||
Total revenues | 35,502 | 7,652 | ||||||
Cost of services and other research and development expenses, net | 36,644 | 83,986 | ||||||
Amortization of intangible assets | 948 | 478 | ||||||
Selling, general and administrative expenses | 14,710 | 18,973 | ||||||
Operating loss | 16,800 | 95,785 | ||||||
Other income, net | (2,278 | ) | (4 | ) | ||||
Loss from extinguishment in connection with convertible loan | 1,865 | - | ||||||
Financial expenses, net | 1,292 | 1,061 | ||||||
Share in net loss (income) of associated companies | 272 | (106 | ) | |||||
Loss from continuing operation before income taxes | 17,951 | 96,736 | ||||||
Tax (income) expense | 108 | (1,609 | ) | |||||
Net loss from continuing operation | 18,059 | 95,127 | ||||||
Net income from discontinued operations, net of tax | - | (95,706 | ) | |||||
Net loss (income) | $ | 18,059 | $ | (579 | ) | |||
Net loss attributable to non-controlling interests from continuing operation | (6 | ) | (39 | ) | ||||
Net loss attributable to non-controlling interests from discontinued operations | - | (492 | ) | |||||
Net loss (income) attributable to Orgenesis Inc. | $ | 18,053 | $ | (1,110 | ) | |||
Loss (income) per share: | ||||||||
Basic and diluted from continuing operation | $ | 0.74 | $ | 4.46 | ||||
Basic and diluted from discontinued operation | $ | - | $ | (4.75 | ) | |||
Basic and diluted | $ | 0.74 | $ | (0.29 | ) | |||
Weighted average number of shares used in computation of Basic and Diluted loss per share: | ||||||||
Basic and diluted | 24,273,658 | 21,320,314 | ||||||
Comprehensive loss (income): | ||||||||
Net loss from Continuing Operation | $ | 18,059 | $ | 95,127 | ||||
Net loss income from Discontinued Operation, Net of Tax | - | (95,706 | ) | |||||
Other Comprehensive (income) loss – Translation adjustment | 541 | (341 | ) | |||||
Release of translation adjustment due to sale of subsidiary | - | (194 | ) | |||||
Comprehensive loss (income) | $ | 18,600 | $ | (1,114 | ) | |||
Comprehensive loss attributed to non-controlling interests | (6 | ) | (39 | ) | ||||
Comprehensive loss attributed to non-controlling interests from discontinued operations | - | (492 | ) | |||||
Comprehensive loss (income) attributed to Orgenesis Inc. | $ | 18,594 | $ | (1,645 | ) |
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
Revenues | $ | 530 | $ | 34,741 | ||||
Revenues from related party | - | 1,284 | ||||||
Total revenues | - | 1,284 | ||||||
Total revenues | $ | 530 | $ | 36,025 | ||||
Cost of revenues | 6,255 | 5,133 | ||||||
Gross (loss) profit | $ | (5,725 | ) | $ | 30,892 | |||
Cost of development services and research and development expenses | 10,623 | 21,933 | ||||||
Amortization of intangible assets | 721 | 911 | ||||||
Selling, general and administrative expenses included credit losses of $24,367 for the year ended December 31, 2023 | 35,134 | 15,589 | ||||||
Share in net loss of associated companies | 734 | 1,508 | ||||||
Impairment of investment | 699 | - | ||||||
Impairment of intangible assets | - | 1,061 | ||||||
Operating loss | $ | 53,636 | $ | 10,110 | ||||
Loss from deconsolidation of Octomera (see Note 3) | 5,343 | - | ||||||
Other income, net | (4 | ) | (173 | ) | ||||
Credit loss on convertible loan receivable | 2,688 | - | ||||||
Loss from extinguishment in connection with convertible loan | 283 | 52 | ||||||
Financial expenses, net | 2,499 | 1,971 | ||||||
Loss before income taxes | $ | 64,445 | $ | 11,960 | ||||
Tax expense | 473 | 209 | ||||||
Net loss | $ | 64,918 | $ | 12,169 | ||||
Net (loss) income attributable to non-controlling interests | (9,557 | ) | 2,720 | |||||
Net loss attributable to Orgenesis Inc. | $ | 55,361 | $ | 14,889 | ||||
Loss per share: | ||||||||
Basic and diluted | $ | $ | ||||||
Weighted average number of shares used in computation of Basic and Diluted loss per share: | ||||||||
Basic and diluted | ||||||||
Comprehensive loss: | ||||||||
Net loss | $ | 64,918 | $ | 12,169 | ||||
Other Comprehensive loss – Translation adjustment | 49 | 477 | ||||||
Release of translation adjustment due to deconsolidation of Octomera | (384 | ) | - | |||||
Comprehensive loss | $ | 64,583 | $ | 12,646 | ||||
Comprehensive (loss) income attributed to non-controlling interests | (9,557 | ) | 2,720 | |||||
Comprehensive loss attributed to Orgenesis Inc. | $ | 55,026 | $ | 15,366 |
The accompanying notes are an integral part of these consolidated financial statements.
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CAPITAL DEFICIENCY)
(U.S. Dollars, in thousands, except share amounts)
Number | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Treasury Shares | Accumulated Deficit | Equity Attributable | Non- Controlling Interest | Par Value | ||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||
Number | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Treasury Shares | Accumulated Deficit | Equity Attributable | Non- Controlling Interest | Par Value | ||||||||||||||||||||||||||||
Balance at January 1, 2020 | 16,140,962 | $ | 2 | $ | 94,691 | $ | 213 | $ | - | $ | (89,429 | ) | $ | 5,477 | $ | 601 | $ | 6,078 | ||||||||||||||||||
Changes during the Year ended December 31, 2020: | ||||||||||||||||||||||||||||||||||||
Stock-based compensation to employees and directors | - | - | 1,470 | - | - | - | 1,470 | - | 1,470 | |||||||||||||||||||||||||||
Stock-based compensation to service providers | **270,174 | 1 | 1,376 | - | - | - | 1,377 | - | 1,377 | |||||||||||||||||||||||||||
Stock-based compensation for Tamir purchase agreement (See Note 4) | 3,400,000 | -* | 17,748 | - | - | - | 17,748 | - | 17,748 | |||||||||||||||||||||||||||
Exercise of options | 83,334 | -* | 300 | - | - | - | 300 | - | 300 | |||||||||||||||||||||||||||
Beneficial conversion feature of convertible loans | - | - | 42 | - | - | - | 42 | - | 42 | |||||||||||||||||||||||||||
Issuance of shares and warrants | 2,200,000 | - | 8,438 | - | - | - | 8,438 | - | 8,438 | |||||||||||||||||||||||||||
Issuance of shares related to acquisition of Koligo | 2,128,623 | -* | 11,172 | - | - | - | 11,172 | - | 11,172 | |||||||||||||||||||||||||||
Sale of subsidiaries | - | - | - | - | - | - | - | (413 | ) | (413 | ) | |||||||||||||||||||||||||
Adjustment to redemption value of redeemable non-controlling interest | - | - | 5,160 | - | - | - | 5,160 | - | 5,160 | |||||||||||||||||||||||||||
Extinguishment in connection with convertible loan restructuring | ||||||||||||||||||||||||||||||||||||
Issuance of Shares due to exercise of warrants | ||||||||||||||||||||||||||||||||||||
Issuance of Shares due to exercise of warrants, shares | ||||||||||||||||||||||||||||||||||||
Repurchase of treasury stock | (55,309 | ) | - | - | - | (250 | ) | - | (250 | ) | - | (250 | ) | |||||||||||||||||||||||
Comprehensive income (loss) for the period | - | - | - | 535 | - | 1,110 | 1,645 | (39 | ) | 1,606 | ||||||||||||||||||||||||||
Balance at December 31, 2020 | 24,167,784 | $ | 3 | $ | 140,397 | $ | 748 | $ | (250 | ) | $ | (88,319 | ) | $ | 52,579 | $ | 149 | $ | 52,728 |
Number | Par Value | Additional Paid-in Capital | Other Comprehensive Income (loss) | Treasury Shares | Accumulated Deficit | to | Non- Controlling Interest | Total | ||||||||||||||||||||||||||||
Common Stock | Accumulated | Equity Attributable | ||||||||||||||||||||||||||||||||||
Number | Par Value | Additional Paid-in Capital | Other Comprehensive Income (loss) | Treasury Shares | Accumulated Deficit | to | Non- Controlling Interest | Total | ||||||||||||||||||||||||||||
Balance at January 1, 2023 | 25,545,755 | $ | 3 | $ | 150,355 | $ | (270 | ) | $ | (1,266 | ) | $ | (121,261 | ) | $ | 27,561 | $ | 1,510 | $ | 29,071 | ||||||||||||||||
Changes during the Year ended December 31, 2023: | ||||||||||||||||||||||||||||||||||||
Stock-based compensation to employees and directors | - | - | 415 | - | - | - | 415 | - | 415 | |||||||||||||||||||||||||||
Stock-based compensation to service providers | - | - | 48 | - | - | - | 48 | - | 48 | |||||||||||||||||||||||||||
Issuance of shares and warrants net of issuance costs | 5,357,624 | -* | 5,283 | - | - | - | 5,283 | - | 5,283 | |||||||||||||||||||||||||||
Issuance of Shares due to exercise of warrants | 973,684 | -* | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Issuance of warrants with respect to convertible loans | - | - | 449 | - | - | - | 449 | - | 449 | |||||||||||||||||||||||||||
Extinguishment in connection with convertible loan restructuring | - | - | 287 | - | - | - | 287 | - | 287 | |||||||||||||||||||||||||||
Deconsolidation of Octomera | - | - | 9,406 | 384 | - | - | 9,790 | (1,360 | ) | 8,430 | ||||||||||||||||||||||||||
Adjustment to redemption value of redeemable non-controlling interest | - | - | (9,406 | ) | - | - | - | (9,406 | ) | - | (9,406 | ) | ||||||||||||||||||||||||
Comprehensive income (loss) for the period | - | - | - | (49 | ) | - | (55,361 | ) | (55,410 | ) | (150 | ) | (55,560 | ) | ||||||||||||||||||||||
Balance at December 31, 2023 | 31,877,063 | 3 | 156,837 | 65 | (1,266 | ) | (176,622 | ) | (20,983 | ) | - | (20,983 | ) |
* | Represents an amount lower than $1 |
The accompanying notes are an integral part of these consolidated financial statement
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars, in thousands, except share amounts)
Common Stock | ||||||||||||||||||||||||||||||||||||
Number | Par Value | Additional Paid-in Capital | Accumulated Other Comprehensive Income (loss) | Treasury Shares | Accumulated Deficit |
Equity Attributable | Non- Controlling Interest | Par Value | ||||||||||||||||||||||||||||
Balance at January 1, 2021 | 24,167,784 | $ | 3 | $ | 140,397 | $ | 748 | $ | (250 | ) | $ | (88,319 | ) | $ | 52,579 | $ | 149 | $ | 52,728 | |||||||||||||||||
Changes during the Year ended December 31, 2021: | ||||||||||||||||||||||||||||||||||||
Stock-based compensation to employees and directors | - | - | 1,349 | - | - | - | 1,349 | - | 1,349 | |||||||||||||||||||||||||||
Stock-based compensation to service providers | 25,000 | - * | 396 | - | - | - | 396 | - | 396 | |||||||||||||||||||||||||||
Exercise of options | 13,750 | - * | 64 | - | - | - | 64 | - | 64 | |||||||||||||||||||||||||||
Extinguishment in connection with convertible loan restructuring | - | - | 1,848 | - | - | - | 1,848 | - | 1,848 | |||||||||||||||||||||||||||
Issuance of Shares due to exercise of warrants | 305,523 | * | 1,862 | - | - | - | 1,862 | - | 1,862 | |||||||||||||||||||||||||||
Repurchase of treasury stock | (231,258 | ) | - | - | - | (1,016 | ) | - | (1,016 | ) | - | (1,016 | ) | |||||||||||||||||||||||
Comprehensive loss for the period | - | - | - | (541 | ) | - | (18,053 | ) | (18,594 | ) | (6 | ) | (18,600 | ) | ||||||||||||||||||||||
Comprehensive income (loss) for the period | - | - | - | (541 | ) | - | (18,053 | ) | (18,594 | ) | (6 | ) | (18,600 | ) | ||||||||||||||||||||||
Balance at December 31, 2021 | 24,280,799 | $ | 3 | $ | 145,916 | $ | 207 | $ | (1,266 | ) | $ | (106,372 | ) | $ | 38,488 | $ | 143 | $ | 38,631 |
Common Stock | Accumulated Other | Equity Attributable | ||||||||||||||||||||||||||||||||||
Number | Par Value | Additional Paid-in Capital | Comprehensive Income (loss) | Treasury Shares | Accumulated Deficit | to | Non- Controlling Interest | Total | ||||||||||||||||||||||||||||
Balance at January 1, 2022 | 24,280,799 | $ | 3 | $ | 145,916 | $ | 207 | $ | (1,266 | ) | $ | (106,372 | ) | $ | 38,488 | $ | 143 | $ | 38,631 | |||||||||||||||||
Balance | 24,280,799 | $ | 3 | $ | 145,916 | $ | 207 | $ | (1,266 | ) | $ | (106,372 | ) | $ | 38,488 | $ | 143 | $ | 38,631 | |||||||||||||||||
Changes during the Year ended December 31, 2022: | ||||||||||||||||||||||||||||||||||||
Stock-based compensation to employees and directors | - | - | 916 | - | - | - | 916 | - | 916 | |||||||||||||||||||||||||||
Stock-based compensation to service providers | - | - | 66 | - | - | - | 66 | - | 66 | |||||||||||||||||||||||||||
Exercise of options | 510,017 | -* | 6 | - | - | - | 6 | - | 6 | |||||||||||||||||||||||||||
Issuance and modification of warrants with respect to convertible loans | 950 | 950 | 950 | |||||||||||||||||||||||||||||||||
Extinguishment in connection with convertible loan restructuring | - | - | 226 | - | - | - | 226 | - | 226 | |||||||||||||||||||||||||||
Issuance of Shares | 724,999 | -* | 2,175 | - | - | - | 2,175 | - | 2,175 | |||||||||||||||||||||||||||
Issuance of shares related to acquisition of Mida | 29,940 | -* | 100 | - | - | - | 100 | - | 100 | |||||||||||||||||||||||||||
Non- Controlling Interest arising from a business combination | - | - | - | - | - | - | - | (1,353 | ) | (1,353 | ) | |||||||||||||||||||||||||
Comprehensive income (loss) for the period | - | - | - | (477 | ) | - | (14,889 | ) | (15,366 | ) | 2,720 | (12,646 | ) | |||||||||||||||||||||||
Balance at December 31, 2022 | 25,545,755 | 3 | 150,355 | (270 | ) | (1,266 | ) | (121,261 | ) | 27,561 | 1,510 | 29,071 | ||||||||||||||||||||||||
Balance | 25,545,755 | 3 | 150,355 | (270 | ) | (1,266 | ) | (121,261 | ) | 27,561 | 1,510 | 29,071 |
* | Represents an amount lower than $1 |
The accompanying notes are an integral part of these consolidated financial statements.
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS(*)
(U.S. Dollars, in thousands)
2021 | 2020 | |||||||
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | (18,059 | ) | $ | 579 | |||
Adjustments required to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Stock-based compensation | 1,745 | 2,847 | ||||||
Stock-based compensation for Tamir Purchase Agreement (See Notes 4) | - | 17,048 | ||||||
Capital loss (gain), net | 25 | 22 | ||||||
Gain on disposal of subsidiaries | - | (96,918 | ) | |||||
Share in loss (income) of associated company | 272 | (106 | ) | |||||
Depreciation and amortization expenses | 1,864 | 1,435 | ||||||
Effect of exchange differences on inter-company balances | 341 | (618 | ) | |||||
Net changes in operating leases | (4 | ) | 14 | |||||
Interest expense accrued on loans and convertible loans (including amortization of beneficial conversion feature) | 482 | 927 | ||||||
Loss from extinguishment in connection with convertible loan restructuring | 1,865 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in accounts receivable | (12,178 | ) | (1,350 | ) | ||||
Decrease (increase) in inventory | 55 | (84 | ) | |||||
Increase in other assets | (18 | ) | (24 | ) | ||||
Increase in prepaid expenses, other accounts receivable | (173 | ) | (1,073 | ) | ||||
Increase (decrease) in accounts payable | (3,755 | ) | 1,985 | |||||
Decrease in accrued expenses and other payable | (248 | ) | (1,156 | ) | ||||
Increase (decrease) in employee and related payables | 487 | (170 | ) | |||||
Decrease in contract liabilities | - | (166 | ) | |||||
Change in advance payments and receivables on account of grant, net | 433 | 140 | ||||||
Decrease in deferred taxes | - | (1,378 | ) | |||||
Net cash used in operating activities | $ | (26,866 | ) | $ | (78,046 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Increase in loan to JV partner, a related party | - | (500 | ) | |||||
Repayment in loan to JV partner, a related party | - | 3,000 | ||||||
Investment in convertible loan to related party | (3,000 | ) | - | |||||
Loan to associate | (430 | ) | - | |||||
Loan granted | (818 | ) | - | |||||
Sale of property, plants and equipment | - | 7 | ||||||
Purchase of property, plants and equipment | (7,866 | ) | (1,525 | ) | ||||
Acquisition of Koligo, net of cash acquired (See Note 4) | - | (955 | ) | |||||
Proceed from sale of subsidiaries, net | - | 105,634 | ||||||
Investment in associated company | (242 | ) | (69 | ) | ||||
Investment in deposits | (28 | ) | - | |||||
Repayment from deposits | - | 18 | ||||||
Net cash provided by (used in) investing activities | $ | (12,384 | ) | $ | 105,610 | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repurchase of treasury stock | (1,016 | ) | (250 | ) | ||||
Proceeds from issuance of shares, warrants and exercise of options (net of transaction costs) | 1,926 | 8,738 | ||||||
Proceeds from issuance of convertible loans (net of transaction costs) | - | 250 | ||||||
Repayment of convertible loans and convertible bonds | (1,000 | ) | (2,400 | ) | ||||
Repayment of short and long-term debt | (16 | ) | (457 | ) | ||||
Net cash provided by financing activities | $ | (106 | ) | $ | 5,881 | |||
NET CHANGE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | (39,356 | ) | 33,445 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | $ | (238 | ) | $ | 82 | |||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | $ | 45,568 | $ | 12,041 | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR | $ | 5,974 | $ | 45,568 | ||||
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||||||
Finance Leases of property, plant and equipment | $ | - | $ | 366 | ||||
Right-of-use assets acquired in exchange for right-of-use liabilities | $ | - | $ | 967 | ||||
Purchase of property, plant and equipment included in accounts payable | $ | 331 | $ | 241 | ||||
Acquisition of other asset in exchange for common stocks | $ | - | $ | 700 | ||||
Issuance of common stocks in connection with the acquisition of Koligo | $ | - | $ | 11,172 | ||||
Extinguishment in connection with convertible loan restructuring | 1,848 | $ | - |
(*) See Note 3 for information regarding the discontinued operations.
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (64,918 | ) | $ | (12,169 | ) | ||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | 463 | 982 | ||||||
Capital gain, net | - | (170 | ) | |||||
Loss from deconsolidation of Octomera | 5,343 | - | ||||||
Share in loss of associated companies, net | 734 | 1,508 | ||||||
Depreciation and amortization expenses | 1,560 | 1,978 | ||||||
Credit loss on convertible loan receivable | 2,688 | |||||||
Impairment of investment | 699 | - | ||||||
Impairment expenses of intangible assets | - | 1,061 | ||||||
Effect of exchange differences on inter-company balances | 227 | 502 | ||||||
Net changes in operating leases | (50 | ) | (61 | ) | ||||
Interest expense accrued on loans and convertible loans | 1,508 | 1,372 | ||||||
Loss from extinguishment in connection with convertible loan restructuring | 283 | 52 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 30,060 | (21,051 | ) | |||||
Prepaid expenses, other accounts receivable | 432 | 391 | ||||||
Inventory | (389 | ) | (7 | ) | ||||
Other assets | 13 | 26 | ||||||
Related parties, net | (439 | ) | - | |||||
Accounts payable | 5,516 | (1,321 | ) | |||||
Accrued expenses and other payable | 1,013 | 2,302 | ||||||
Employee and related payables | 411 | (216 | ) | |||||
Deferred taxes, net | 9 | (103 | ) | |||||
Net cash used in operating activities | $ | (14,837 | ) | $ | (24,924 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Repayment of convertible loan to related party partners | - | 538 | ||||||
Decrease in loan to associate entities | 55 | - | ||||||
Increase in loan to associate entities | - | (4,131 | ) | |||||
Repayment of loan granted | - | 782 | ||||||
Sale of property, plants and equipment | - | 246 | ||||||
Purchase of property, plants and equipment | (2,096 | ) | (12,416 | ) | ||||
Investment in associated company | (660 | ) | - | |||||
Cash acquired from acquisition of Mida | - | 702 | ||||||
Impact to cash resulting from deconsolidation (see Note 3) | (973 | ) | - | |||||
Increase in cash from business combinations of TLABS and Orgenesis Austria | - | 160 | ||||||
Investment in long-term deposits | (33 | ) | (14 | ) | ||||
Net cash used in investing activities | $ | (3,707 | ) | $ | (14,133 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of shares due to exercise of options and warrants (net of transaction costs) | 5,283 | 2,181 | ||||||
Proceeds from issuance of convertible loans | 5,735 | 19,150 | ||||||
Proceeds from transaction with redeemable non-controlling interest that do not result in a loss of control, see note 3 | 5,000 | 20,000 | ||||||
Repayment of convertible loans and convertible bonds | (3,000 | ) | (2,300 | ) | ||||
Repayment of short and long-term debt | (35 | ) | (46 | ) | ||||
Proceeds from issuance of loans payable | 635 | - | ||||||
Grant received in respect of third party | - | 1,396 | ||||||
Transfer of the grant received to third party | - | (803 | ) | |||||
Net cash provided by financing activities | $ | 13,618 | $ | 39,578 | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | (4,926 | ) | 521 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | $ | 36 | $ | (126 | ) | |||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | $ | 6,369 | $ | 5,974 | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR | $ | 1,479 | $ | 6,369 | ||||
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||||||
Right-of-use assets obtained in exchange for new finance lease liabilities | $ | - | $ | 136 | ||||
Right-of-use assets obtained in exchange for new operation lease liabilities | $ | 752 | $ | 432 | ||||
Increase (decrease) in accounts payable related to purchase of property, plant and equipment | $ | 14 | $ | (383 | ) | |||
Loan conversion for Redeemable non-controlling interest (See note 3) | $ | - | $ | 10,203 | ||||
Issuance of common stocks in connection with the acquisition of Mida | $ | - | $ | 100 | ||||
Extinguishment in connection with convertible loan restructuring | 287 | $ | 226 | |||||
CASH PAID DURING THE YEAR FOR: | ||||||||
Interest | $ | 785 | $ | 458 |
The accompanying notes are an integral part of these consolidated financial statements.
ORGENESIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(US Dollars in Thousands)
NOTE 1 – DESCRIPTION OF BUSINESS
a. | General |
a. General
Orgenesis Inc., a Nevada corporation, (the “Company”) is a global biotech company working to unlock the potential of cellCell and gene therapiesGene Therapies (“CGTs”) in an affordable and accessible format.
CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products (“ATMP”ATMPs”). The Company is mostly focused on the development of autologous therapies withthat can be manufactured under processes and systems that are developed for each therapy using a closed and automated processing system approach that is validated for compliant production near the patient for treatment of the patient at the point of care (“POCare”). This approach has
In connection with the potential to overcomeinvestment by an affiliate of Metalmark Capital Partners (“Metalmark” or “MM”) in the limitationsCompany’s subsidiary Octomera LLC (formerly Morgenesis LLC) (“Octomera” or “Morgenesis”) in November 2022 (“the Metalmark Investment”), the Company separated its operations into two operating segments: the operations of traditional commercial manufacturing methods that do not translate well to commercial production of advancedOctomera (the “Morgenesis” or “Octomera” segment) and therapies due to their cost prohibitive nature and complex logistics to deliver such treatments to patients (ultimately limiting the number of patients that can have access to, or can afford, these therapies)related activities (the “Therapies” segment).
To achieve these goals,On June 30, 2023, in connection with an additional $1,000 investment in Octomera, the Company has developed a Pointand MM entered into Amendment No. 1 to the Second Amended and Restated Limited Liability Company Agreement (the “LLC Agreement Amendment”) to change the name of Care Platform (“POCare Platform”Morgenesis to “Octomera LLC” and to amend Morgenesis’ board composition. Pursuant to the LLC Agreement Amendment, the board of managers of Octomera (the “Octomera Board”) will be comprised of three enabling components: (i)five managers, two of which will be appointed by the Company, one of which will be an industry expert appointed by MM, and two of which will be appointed by MM. The change was effective immediately. As a pipelineresult of licensed POCare advanced therapies that are designedthe amendment to be processedthe composition of the Octomera Board pursuant to the LLC Agreement Amendment described above, the Company deconsolidated Octomera from its consolidated financial statements as of June 30, 2023 (“date of deconsolidation”) and produced, (ii) automated closed POCare technology systems, and (iii) a collaborative worldwide network of POCare research institutes and hospitals (“POCare Network”).recorded its equity interest in Octomera as an equity method investment, see note 3.
The POCare Platform relies in particular onOn January 29, 2024, the development of its own production capacity, known as “POCare Services”Company and MM entered into a Unit Purchase Agreement (the “UPA”), whose goal ispursuant to ensure that therapies are accessible atwhich the point of treatment (the “POCare Center”). POCare Services, which have been expanding worldwide, are based on a global approach and local adaptation that allows replication and expansion. Global harmonizationCompany acquired all of the POCare Services is ensuredpreferred units of Octomera owned by a central quality system, replicability of infrastructure and equipment and centralized monitoring and data management.
The POCare Services include:
POCare Centers areMM (the “Acquisition”). Accordingly, the decentralised hubs that provide harmonized services to customers and partners. The Company is working to provide a more efficient and scalable pathway for advanced therapies to reach patients more rapidly at lowered costs. The workflow of a POCare Center is designed to allow rapid capacities expansion while integrating new technologies. The Company also draws on extensive medical expertise to identify promising new autologous therapies to leverage within the POCare Platform either via ownership or licensing.currently owns 100
The POCare Network brings together patients, doctors and industry partners with a goal of achieving harmonized, regulated clinical development and production of POCare advanced therapies.
The Company has worked to develop and validate POCare technologies that can be combined within mobile production units for advanced therapies. The Company has made significant investments in the development of several types of Orgenesis Mobile Processing Units and Labs (“OMPULs”) with the expectation of use and/or distribution through the Company’s POCare Network and/or partners, collaborators, and regional distributors. As% of the dateequity interests of this report, the OMPULs have been adapted for processing of CAR-T (chimeric antigen receptor T-cell) therapy, TIL (tumor infiltrating lymphocyte) and MSC (mesenchymal stem cell) based products, and are in the qualification stage for clinical use in various locations. Additional OMPULs are still in the development stage.Octomera.
OMPULs are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential or approved advanced therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing of such CGTs in a consistent and standardized manner in all locations. The OMPUL design delivers a potential industrial solution for us to deliver CGTs to practically any clinical institution at the point of care.
The Company has continued to grow its infrastructure and expand its processing sites into new markets and jurisdictions. In addition, the Company has continued investing manpower and financial resources to focus on developing, processing and rolling out several types of OMPULs to be used and/or distributed through its POCare Network and/or partners, collaborators, and regional distributors.
The Chief Executive Officer is the Company’s chief operating decision-maker who reviews
financial information prepared on a consolidated basis. All of our continuing operations are in one segment, being the point-of-care business via our POCare Platform. Therefore, no segment information has been presented.
The Company currently conducts its core CGT business operations through itself and its subsidiaries which are all wholly owned except as otherwise stated (collectively, the “Subsidiaries”). The Subsidiaries are as follows:
These consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries including the Discontinued Operations.subsidiaries.
The Company’s common stock, par value $1.00 per share for 30 consecutive business days. Because the Company’s Common Stock has traded for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq has sent a deficiency notice to the Company, which was received on September 27, 2023, advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. On March 26, 2024, Nasdaq extended the “compliance period” to September 23, 2024. per share (the “Common Stock”), is listed and traded on the Nasdaq Capital Market under the symbol “ORGS.” The Company must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $
As used in this report and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its Subsidiaries. Unless otherwise specified, all amounts are expressed in United States Dollars.
b. | Liquidity |
Through December 31, 2021,2023, the Company had an accumulated deficit of $106.4176,622 million as of December 31, 2021 and negative operating cashflows of $26.9 million in. For the year ended December 31, 2021.2023, the Company incurred negative cash flows from operating activities of $14,837. The Company’s activities have recently been funded primarily by generating revenue, through offerings of the Company’sits equity securities, loans, and selling its Contract Development and Manufacturing Organization (“CDMO”) business.convertible loans. There is no assurance that the Company’s business will generate sustainable positive cash flows to fund its business. See also note 21 with respect to an investment agreement in the amount of approximately $14.8business operations. million (before deducting related offering expenses), which has been entered into subsequent to December 31, 2021.
F-10 |
Based on its current cash resources and commitments, including such investment agreement discussed in note 21, the Company believes it will be able to maintain its current planned development activities and expected level of expenditures for at least 12 months from the date of the issuance of these financial statements, although no assurance can be given that it will not need additional funds prior to such time. If there are further reductions in revenues or increases in operating costs for facilities expansion, research and development, commercial and clinical activity or decreases in revenues from customers, the Company will need to use mitigating actions such as to seek additional financing or postpone expenses that are not based on firm commitments. In addition, in order to fund the Company’s operations until such time that the Company can generate sustainable positive cash flows, the Company maywill need to raise additional funds.
The Company expects its current and projected cash resources and commitments will not be sufficient to meet the Company’s obligations for the next 12 months, raising a substantial doubt about the Company’s ability to continue as a going concern. Management plans include raising additional capital to fund the Company’s operations and to repay the Company’s outstanding loans when they become due, as well as exploring additional avenues to increase revenue and reduce capital expenditures. The Company’s ability to fund the completion of its ongoing and planned activities may be substantially dependent upon whether the Company can obtain sufficient funding at acceptable terms. If the Company is unable to raise sufficient additional capital or meet revenue targets, it may have to reduce or eliminate certain activities and reduce its headcount.
The estimation and execution uncertainty regarding the Company’s future cash flows and management’s judgments and assumptions in estimating these cash flows to conclude that the Company would have sufficient liquidity to fund its operations for at least the next 12 months is a significant estimate. Those assumptions include reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”).
a.Use of Estimates in the Preparation of Financial Statements
The preparation of ourthe Company’s consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate ourthe Company evaluates its estimates, judgments and methodologies. We base ourThe Company bases its estimates on historical experience and on various other assumptions that we believeit believes are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity, the amount of revenues and expenses, determination of loss on deconsolidation, valuation of investments, goodwill impairment, and determining whether an acquisition is a business combination or a purchaseassessment of asset.credit losses. Actual results could differ from those estimates.
The full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We examined the impact of COVID-19 on our financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.b.Business Combination
The Company allocates the purchase pricefair value of anconsideration transferred in a business combination to the assets acquired, liabilities assumed, and non-controlling interests in the acquired business to the tangible and intangible assets acquired and liabilities assumed based uponon their estimated fair values onat the acquisition date. Any excess of the purchase price over the fair value of the netAll assets acquired is recorded as goodwill. Acquired in-process backlog, customer relations, technology, IPR&D, brand name and know howliabilities are recognized atin fair value. The purchase price allocation process requires management 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 excess of the fair value of the consideration transferred plus the fair value of any non-controlling interest in the acquiree over the fair value of the assets acquired, liabilities assumed in the acquired business is recorded as goodwill. 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. The cumulative impact of revisions during the measurement period is recognized in the reporting period in which the revisions are identified. The Company includes the results of operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire 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.
F-11 |
Upon divestiture of a business, the Company classifies such business as a discontinued operations, if the divested business represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. For disposals other than by sale such as abandonment, the results of operations of a business would not be recorded as a discontinued operations until the period in which the business is actually abandoned.c.Cash Equivalents
The Masthercell Business divestiture qualifies as a discontinued operations and therefore has been presented as such.
The results of businesses that have qualified as a discontinued operations have been presented as such for all reporting periods. Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations. Any loss or gain that arose from the divestiture of a business that qualifies as discontinued operations is included within the results of the discontinued operations. The Company included information regarding cash flows from discontinued operations (See Note 3).
The Company considers cash equivalents to be all short-term, highly liquid investments, which include money market instruments, that are not restricted as to withdrawal or use, and short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.
d.Cost of development services and research and development expenses
Cost of development services and other research and development expenses net include costs directly attributable to the conduct of research and development activities, including the cost of salaries, stock-based compensation expenses, payroll taxes and other employees’ benefits, lab expenses, consumable equipment, courier fees, travel expenses, professional fees and consulting fees. All costs associated with research and developments are expensed as incurred. Participation from government departments and from research foundations for development of approved projects is recognized as a reduction of expense as the related costs are incurred. Research and development in-process acquired as part of an asset purchase, which has not reached technological feasibility and has no alternative future use, is expensed as incurred.
e.Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its Subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
f.Non-Marketable Equity Investments
The Company’s investments in certain non-marketable equity securities in which it has the ability to exercise significant influence, but it does not control through variable interests or voting interests. These are accounted for under the equity method of accounting and presented as Investment in associates, net, in the Company’s consolidated balance sheets. Under the equity method, the Company recognizes its proportionate share of the comprehensive income or loss of the investee. The Company’s share of income and losses from equity method investments is included in share in losses of associated company.
The Company periodically reviews its investments accounted for under the equity method investments for possible impairment which generally involves an analysis of the facts andin value whenever events or changes in circumstances influencingindicate that the investments.carrying amount of such investments may not be recoverable. The Company will record an impairment charge to the extent that the estimated fair value of an investment is less than its carrying value and the Company determines the impairment is other-than-temporary. Impairment charges, if applicable, are recorded in “Share in net (losses) profits of associated companies”.
For other investments, the Company applies the measurement alternative upon the adoption of ASU 2016-01 and elected to record equity investments without readily determinable fair values at cost, less impairment, adjusted for subsequent observable price changes. In this measurement alternative method, changes in the carrying value of the equity investments are reflected in current earnings. Changes in the carrying value of the equity investment are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer.
g.Fair value measurement
The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable inputs that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.
F-12 |
h.Functional Currency
The currency of the primary economic environment in which the operations of the Company and part of its Subsidiaries are conducted is the U.S. dollar (“$” or “dollar”). The functional currency of the Belgian SubsidiariesSubsidiary is the Euro (“€” or “Euro”). The functional currency of Orgenesis Korea is the Won (“KRW”). Most of the Company’s expenses are incurred in dollars, and the source of the Company’s financing has been provided in dollars. Thus, the functional currency of the Company and its other subsidiaries is the dollar. Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in foreign currencies are translated into dollars using historical and current exchange rates for nonmonetary and monetary balances, respectively. For foreign transactions and other items reflected in the statements of operations, the following exchange rates are used: (1) for transactions – exchange rates at transaction dates or average rates and (2) for other items (derived from nonmonetary balance sheet items such as depreciation) – historical exchange rates. The resulting transaction gains or losses are recorded as financial income or expenses. The financial statements of the Belgian Subsidiaries and Orgenesis Korea areSubsidiary is included in the consolidated financial statements, translated into U.S. dollars. Assets and liabilities are translated at year-end exchange rates, while revenues and expenses are translated at yearly average exchange rates during the year. Differences resulting from translation of assets and liabilities are presented as other comprehensive income.
i.Inventory
The Company’s inventory consists of raw material for use for the services provided. The Company periodically evaluates the quantities on hand. Cost of the raw materials is determined using the weighted average cost method. The inventory is recorded at the lower of cost or net realizable value.
j.Property, Plants and Equipment
Property, plantplants and equipment are recorded at cost and depreciated by the straight-line method over the estimated useful lives of the related assets.
Annual rates of depreciation are presented in the table below:
SCHEDULE OF ANNUAL DEPRECIATION RATES, PROPERTY AND EQUIPMENT
Weighted Average Useful Life (Years) | ||||
Production facility | 3 - 5 | |||
Laboratory equipment | ||||
Office equipment and computers | 3 |
k.Intangible assets
Intangible assets and their useful lives are as follows:
SCHEDULE OF INTANGIBLE ASSETS AND THEIR USEFUL LIVE
Useful Life (Years) | Amortization Recorded at Comprehensive Loss Line Item | |||
Amortization of intangible assets | ||||
Intangible assets are recorded at acquisition less accumulated amortization and impairment. Definite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. The Company capitalizes IPR&D projects acquired as part of a business combination. On successful completion of each project, IPR&D assets are reclassified to developed technology and amortized over their estimated useful lives.
F-13 |
l.Goodwill
Goodwill represents the excess of consideration transferred over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Goodwill is allocated to reporting units expected to benefit from the business combination. Goodwill is not amortized but rather tested for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. FollowingBefore the sale of MasthercellOctomera deconsolidation, the Company managesreallocated its goodwill into two identified operating units: Octomera and Therapies. Subsequent to the business as oneOctomera deconsolidation, the goodwill allocated to Octomera was derecognized. As of December 31, 2023 - goodwill is solely allocated to Therapies operating segment and one reporting unit. Goodwill impairment is recognized when the quantitative assessment results in the carrying value exceeding the fair value, in which case an impairment charge is recorded to the extent the carrying value exceeds the fair value.
There were 0no impairment charges to goodwill during the periods presented.
m.Impairment of Long-lived Assets
The Company reviews its property, plants 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 value of the asset; an adverse change in 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 0 impairment charges in the years ended December 31, 2021 and 2020. For indefinite life intangible assets, Thethe Company performs an impairment test annually in the fourth quarter and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company determines the fair value of the asset based on discounted cash flows and records an impairment loss if its book value exceeds fair value.
Impairment charges of IPR&D during the year ended December 31, 2022 were $1,061.
Impairment charges of other investment during the year ended December 31, 2023 were $699.
n.Income Taxes
1) With respect to deferred taxes, income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future.
2) The Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates that it is more likely than not that the position will be sustained on examination. If this threshold is met, the second step is to measure the tax position as the largest amount that is greater than 50%50% likely of being realized upon ultimate settlement.settlement.
3) Taxes that would apply in the event of disposal of investment in Subsidiaries and associated companies have not been taken into account in computing the deferred income taxes, as it is the Company’s intention to hold these investments and not realize them.
The Company recognizes stock-based compensation for the estimated fair value of share-based awards. The Company measures compensation expense for share-based awards based on estimated fair values on the date of grant using the Black-Scholes option-pricing model. This option pricing model requires estimates as to the option’s expected term and the price volatility of the underlying stock. The Company amortizes the value of share-based awards to expense over the vesting period on a straight-line basis.
F-14 |
p.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. Redeemable non-controlling interests are measured at the greater of the initial carrying amount adjusted for the non-controlling interest’s share of comprehensive income or loss or its redemption value. 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 through additional paid-in capital.
Basic net loss (income) per share is computed by dividing the net loss (income) for the period by the weighted average number of shares of common stock outstanding for each period. Diluted net loss (income)income per share is based upon the weighted average number of common shares and of common shares equivalents outstanding when dilutive. Common share equivalents include: (i) outstanding stock options, RSUs and warrants which are included under the treasury share method when dilutive, and (ii) common shares to be issued under the assumed conversion of the Company’s outstanding convertible loans and debt, which are included under the if-converted method when dilutive (See Note 14).
r.Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of principally cash and cash equivalents, bank deposits and certain receivables. The Company held these instruments with highly rated financial institutions and the Company has not experienced any significant credit losses in these accounts and does not believe the Company is exposed to any significant credit risk on these instruments apart of accounts receivable. The Company performs ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for doubtful accounts. An appropriate allowance for doubtful accounts is included in the accounts and netted against accounts receivable. In the year ended December 31, 2021 the Company has not experienced any material credit losses in these accounts and does not believe it is exposed to significant credit risk on these instruments.
Bad debt allowance isThe Company’s accounts receivable accounting policy until December 31, 2022, prior to the adoption of the new Current Expected Credit Losses (“CECL”) standard, created bad debts when objective evidence existsexisted of inability to collect all sums owed it under the original terms of the debit balances. Material customer difficulties, the probability of their going bankrupt or undergoing economic reorganization and insolvency, material delays in payments and other objective considerations by management that indicate expected risk of payment arewere all considered indicative of reduced debtor balance value. Effective January 1, 2023, the Company adopted the new CECL standard.
The Company maintains the allowance for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company considers historical collection experience for each of its customers and when revenue and accounts receivable are recorded. The Company also recognizes estimated expected credit losses over the life of the accounts receivables. The estimate of expected credit losses considers not only historical information, but also current and future economic conditions and events.
The Company repurchases its ordinary sharescommon stock from time to time on the open market and holds such shares as treasury stock. The Company presents the cost to repurchase treasury stock as a reduction of shareholders’ equity. The Company did not reissue nor cancel treasury shares during the year ended December 31, 20212023 and December 31, 2020.2022.
When the Company issues convertible debt, if the stock price is greater than the effective conversion price (after allocation of the total proceeds) on the measurement date, the conversion feature is considered “beneficial” to the holder. If there is no contingency, this difference is treated as issued equity and reduces the carrying value of the host debt; the discount is accreted as deemed interest on the debt (See Note 7).t.Other Comprehensive Loss
Other comprehensive loss represents adjustments of foreign currency translation.
u.
Revenue from Contracts with Customers |
The Company recognizes revenue from contracts with customers according to ASC 606, Revenue from Contracts with Customers and the related amendments (“New Revenue Standard”) to all contracts.
The Company’s agreements are primarily service and processing contracts, thatthe performance obligations of which range in duration from a few months to one year. The Company recognizesapplies the revenue guidance to contracts when control of thesethe services is transferred to the customer for an amount, referred to as the transaction price, which reflects the consideration to which the Company is expected to be entitled in exchange for those goods or services.services and when it is probable that the Company will collect substantially all of the consideration to which it is entitled in exchange for the goods and services it transfers to the customer.
A contract with a customer exists only when:
The Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between the time of transfer of the promised goods or services to the customer and the time the customer pays for these goods or services to be generally one year or less. The Company’s credit terms to customers are in average between thirty and one hundred and fifty days.
Nature of Revenue Streams
The Company’s main revenue streams from continuing operations are POC development services and Cell Process Development Services.
POCThe Company has four main revenue streams, which are License fees, POCare development services, cell process development services, including hospital supplies, and POCare cell processing.
License fees
Revenue recognized under license fees are recognized upon the confirmation of licensee of milestones completed and certainty of payment of the license fee.
POCare Development Services
Revenue recognized under contracts for POCPOCare development services may, in some contracts, represent multiple performance obligations (where promises to the customers are distinct) in circumstances in which the work packages are not interrelated or the customer is able to complete the services performed.
For arrangements that include multiple performance obligations, the transaction price is allocated to the identified performance obligations based on their relative standalone selling prices.
The Company recognizes revenue when, or as, it satisfies a performance obligation. At contract inception, the Company determines whether the services are transferred over time or at a point in time. Performance obligations that have no alternative use and that the Company has the right to payment for performance completed to date, at all times during the contract term, are recognized over time. All other performance obligations are recognized as revenues by the Company at a point of time (upon completion). In addition, during 2021, the Company started providingRevenues from support services provided to its customers. These revenuesthe Company’s customers are recognized as and when the services are provided, because the customer simultaneously receives and consumes the benefits provided.
Also included in POC development services is Hospital supplies revenue which is derived principally from the performance of services to hospitals or other medical providers. Revenue is earned and recognized when product and services are received by the customer.
Significant Judgement and Estimates
Significant judgment is required to identifying the distinct performance obligations and estimating the standalone selling price of each distinct performance obligation and identifying which performance obligations create assets with alternative use to the Company, which results in revenue recognized upon completion, and which performance obligations are transferred to the customer over time.time, and the estimate of credit losses.
F-16 |
Cell Process Development Services
Revenue recognized under contracts for cell process development services may, in some contracts, represent multiple performance obligations (where promises to the customers are distinct) in circumstances in which the work packages and milestones are not interrelated or the customer is able to complete the services performed independently or by using competitors of the Company. In other contracts when the above circumstances are not met, the promises are not considered distinct, and the contract represents one performance obligation. All performance obligations are satisfied over time, as there is no alternative use to the services it performs, since, in nature, those services are unique to the customer, which retain the ownership of the intellectual property created through the process. Additionally, due to the non-refundable upfront payment feature which may exist in certain contracts and which the customer pays together with the payment term and cancellation fine, Company has a right to payment (which includes a reasonable margin), at all times, for work completed to date, which is enforceable by law.
For arrangements that include multiple performance obligations, the transaction price is allocated to the identified performance obligations based on their relative standalone selling prices. For these contracts, the standalone selling prices are based on the Company’s normal pricing practices when sold separately with consideration of market conditions and other factors, including customer demographics and geographic location.
The Company measures the revenue to be recognized over time on a contract-by-contract basis, determining the use of either a cost-based input method or output method, depending on whichever best depicts the transfer of control over the life of the performance obligation.
Included in cell process development services is hospital supplies revenue, which is derived principally from the performance of services to hospitals or other medical providers. Revenue is earned and recognized when product and services are received by the customer.
POCare Cell Processing
Revenues from POCare Cell processing representperformance obligations which are recognized either over, or at a point of time. The progress towards completion is measured on an output measure based on direct measurement of the value transferred to the customer (units produced).
Change Orders
Changes in the scope of work are common and can result in a change in transaction price, equipment used and payment terms. Change orders are evaluated on a contract-by-contract basis to determine if they should be accounted for as a new contract or as part of the existing contract. Generally, services from change orders are not distinct from the original performance obligation. As a result, the effect that the contract modification has on the contract revenue, and measure of progress, is recognized as an adjustment to revenue when they occur.
v.
Leases |
The Company recognizes lease expenses according to the lease standard ASC 842 and related amendments.
The Company determines if an arrangement is a lease at inception. Lease classification is governed by five criteria in ASC 842-10-25-2. If any of these five criteria is met, The Company classifies the lease as a finance lease; otherwise, the Company classifies the lease as an operating lease. When determining lease classification, the Company’s approach in assessing two of the mentioned criteria is: (i) generally 75% or more of the remaining economic life of the underlying asset is a major part of the remaining economic life of that underlying asset; and (ii) generally 90% or more of the fair value of the underlying asset comprises substantially all of the fair value of the underlying asset.asset.
Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheet.
Finance leases are included in property, plants and equipment, net and finance lease liabilities in the consolidated balance sheet.
ROU assets represent Orgenesis’ right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments.
F-17 |
The standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12 months. This means that for those leases, the Company does not recognize ROU assets or lease liabilities including not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition, but recognizes lease expenses over the lease term on a straight-line basis.
Lease terms will include options to extend or terminate the lease when it is reasonably certain that Orgenesis will exercise or not exercise the option to renew or terminate the lease.
w.Segment reporting
Since the Metalmark Investment, the Company’s business includes two reporting segments: Octomera and Therapies. See note 5.
x.Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses—Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance will be effective for Smaller Reporting Companies (SRCs, as defined by the SEC) for the fiscal year beginning on January 1, 2023, including interim periods within that year. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company expects to apply modified retrospective basis adoption of this guidance which willdid not have a significant impact on the Company’s consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). The guidance is effective for the Company on January 1, 2022. The Company expects that this guidance, will not have a significantmaterial impact on the Company’s consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08 “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. The guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The guidance should be applied prospectively to acquisitions occurring on or after the effective date. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company is currently evaluatingadoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
y.Recently issued accounting pronouncements, not yet adopted
On August 23, 2023, the FASB issued guidance requiring a joint venture to determineinitially measure all contributions received upon its formation at fair value. This accounting will largely be consistent with ASC 805, Business Combinations, although there are some specific exceptions. Before the ASU, there was no authoritative guidance in US GAAP that addressed how a joint venture should recognize contributions received. As a result, there has been diversity in practice, with some joint ventures accounting for contributions received at carry over basis and others at fair value. This new guidance is intended to reduce diversity in practice and provide users of the joint venture’s financial statements with more decision-useful information. It may also reduce the amount of basis differences that an investor in a joint venture needs to track. The new guidance should be applied prospectively and is effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. The adoption of this guidance will not have a material impact it may have on itsthe Company’s consolidated financial statements.
In November 2021,2023, the FASB issued ASU 2021-10 “Government Assistance (Topic 832)”, which requires annual2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that increaseare regularly provided to the transparencychief operating decision maker and included within each reported measure of transactions involving government grants, including (1) the typessegment profit or loss, an amount and description of transactions, (2) the accountingits composition for those transactions,other segment items, and (3) the effectinterim disclosures of those transactions ona reportable segment’s profit or loss and assets. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2021. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.statements related disclosures.
F-18 |
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.
NOTE 3 – DISCONTINUED OPERATIONREDEEMABLE NON-CONTROLLING INTEREST AND DECONSOLIDATION
Metalmark Investment in Octomera LLC
On February 2, 2020,November 4, 2022, the Company and MM OS Holdings, L.P. (“MM”), an affiliate of Metalmark Capital Partners (“Metalmark”), entered into a Purchase Agreement with GPP, Masthercellseries of definitive agreements (“MM agreement”) intended to finance, strengthen and expand the Buyer. Company’s POCare Services business (the “Metalmark Investment”).
Pursuant to the terms and conditions of theUnit Purchase Agreement Sellers(the “UPA”), MM agreed to sellpurchase Class A Preferred Units of Octomera (the “Class A Units”), which represented 22.31% of the outstanding equity interests of Masthercell to BuyerOctomera following the initial closing, for an aggregate nominala purchase price of $31530,196 million.thousand, comprised of (i) $20,000 thousand of cash consideration and (ii) the conversion of $10,200 thousand of MM’s then-outstanding senior secured convertible loans previously entered into with MM pursuant to that certain Senior Secured Convertible Loan Agreement, dated as of August 15, 2022, between MM, Octomera and the Company. The investment was made at a pre-money valuation of $125,000,000, subject to customary adjustments for debt and accounts receivable and an adjustment related to a certain intercompany loan and closed on November 14, 2022. Following the initial closing, the Company has determined thatheld 77.69% of the Masthercell Business meets the criteria to be classified as discontinued operations.issued and outstanding equity interests of Octomera.
On February 10, 2020,If (a) Octomera and its subsidiaries generate Net Revenue (as defined in the Masthercell Sale was consummatedUPA) equal to or greater than $30,000,000 during the twelve month period ending December 31, 2022 (the “First Milestone”) and/or equal to or greater than $50,000,000 during the twelve month period ending December 31 2023 (the “Second Milestone”), and (b) the Company’s shareholders approve the LLC Agreement Terms (as defined below under “Principal Terms of the LLC Agreement”) on the earlier of (x) the date that is seven (7) months following the initial closing date and (y) the date of the Company’s 2023 annual meeting of its shareholders (such stockholder approval hereafter being the “Orgenesis Stockholder Approval” and such Orgenesis Stockholder Approval deadline hereafter being the “Stockholder Approval Deadline”), in accordance with applicable law and in a manner that will ensure that MM is able to exercise its rights under the termsLLC Agreement (as defined below) without any further action or approval by MM, then MM will pay up to $10,000,000 in cash in exchange for additional Class A Units if the First Milestone is achieved and $10,000,000 in cash in exchange for Class B Units Preferred Units of Octomera (the “Class B Units”) if the Purchase Agreement. After accounting for GPP’s liquidation preference and equity stake in Masthercell, as well as SFPI – FPIM’s interest in MaSTherCell, distributions to Masthercell option holders and transaction costs, the Company received approximately $126.7 million at the closing of the Masthercell Sale, of which $7.2 million was used for the repayment of intercompany loans and payables, including $4.6 million of payables to MaSTherCell.
Due to the sale of the controlling interest in Masthercell, the Company retrospectively reclassified the assets and liabilities of these entities as assets and liabilities of discontinued operations and included the financial results of these entities as discontinued operations in the Company’s consolidated financial statements.
Discontinued operations relate to the Masthercell Business. The comprehensive loss and balance sheet for this operation are separately reported as discontinued operations for all periods presented.Second Milestone is achieved.
The financial resultsCompany’s stockholders approved the LLC agreement terms at its annual meeting of stockholders held in June 2023. However, Octomera and its subsidiaries did not meet the Net Revenue milestones for either of the Masthercell Business are presentedyears ended December 31, 2022 and 2023. During 2023, the Company and MM entered into various amendments to the Unit Purchase Agreement, dated November 4, 2022 (the “UPA”). Pursuant to such amendments, MM or the Company as income (loss) from discontinued operations, netthe case may be, agreed to pay certain amounts in exchange for Class A Preferred Units of income taxes onOctomera to support the Company’s consolidated statementcontinued expansion of comprehensive loss. The following table presentsOrgenesis’ POCare Services (the “Subsequent Investment”). In the financial results associated withcase of MM investments, the Masthercell Business operation as reflectedinvestment amount of the First Future Investment (as defined in the Company’s Consolidated Comprehensive loss (in thousands):UPA) was reduced by the amount of the Subsequent Investment. MM invested $6,500 for additional Class A units during 2023, and the Company, pursuant to agreement with MM also invested $660 for additional Class A units during 2023.
SCHEDULE OF DISCONTINUED FINANCIAL STATEMENTS
Year Ended December 31, | ||||
OPERATIONS | 2020 | |||
Revenues | $ | 2,556 | ||
Cost of revenues | 1,482 | |||
Cost of services and other research and development expenses, net | 7 | |||
Amortization of intangible assets | 137 | |||
Selling, general and administrative expenses | 1,896 | |||
Operating loss | 966 | |||
Other expenses, net | 305 | |||
Financial income, net | (29 | ) | ||
Loss before income taxes | 1,242 | |||
Tax income | (30 | ) | ||
Net loss from discontinuing operation, net of tax | $ | 1,212 | ||
DISPOSAL | ||||
Gain on disposal before income taxes | $ | 96,918 | ||
Provision for income taxes | - | |||
Gain on disposal | $ | 96,918 | ||
Net profit from discontinuing operation, net of tax | $ | 95,706 |
F-19 |
The following table represents the components of the cash flows from discontinued operations (in thousands):
Year Ended December 31, | ||||
2020 | ||||
Net cash flows used in operating activities | $ | (2,409 | ) | |
Net cash flows used in investing activities | $ | (579 | ) | |
Net cash flows used in financing activities | $ | (51 | ) |
Disaggregation of Revenue
The following table disaggregates the Company’s revenues by major revenue streams related to discontinued operations (in thousands):
SCHEDULE OF DISAGGREGATION OF REVENUE RELATED TO DISCONTINUED OPERATIONS
Year Ended December 31, | ||||
2020 | ||||
Revenue stream: | ||||
Cell process development services | $ | 2,556 | ||
Total | $ | 2,556 |
Redeemable Non-Controlling InterestThe Preferred Units have voting rights, may be converted into ordinary shares, and are prioritized over ordinary shares in case of Discontinued Operations
On November 15, 2017,dividend or redemption. The Company considers the provisions of Accounting Standards Codification Distinguishing Liabilities from Equity (“ASC 480”) in order to determine whether the Preferred Units should be classified as a liability. If the instrument is not within the scope of ASC 480, the Company MaSTherCell and SFPI entered intofurther analyzes the instrument’s characteristics in order to determine whether it should be classified within temporary equity (mezzanine) or within permanent equity in accordance with the provisions of ASC 480-10-S99. The preferred units are not mandatorily or currently redeemable. However, they include a Subscription and Shareholders Agreement (“SFPI Agreement”) pursuant to which SFPI made an equity investment in MaSTherCell.
Due to the embeddedliquidation or deemed liquidation event that would constitute a redemption featureevent that is outside of the SFPI agreement whose settlement was not at the Company discretion, the Company had accounted for the investment made by GPP as aCompany’s control. As such, all redeemable non-controlling interest.
On June 28, 2018, the Company, Masthercell Global GPP, and certainpreferred units have been presented outside of GPP’s affiliates, entered into a series of definitive strategic agreements intended to finance, strengthen and expand Orgenesis’ CDMO business.
Due to the embedded redemption feature of the GPP agreement whose settlement was not at the Company discretion, the Company had accounted for the investment made by GPPpermanent equity as a redeemable non-controlling interest.
The Company further analyzed and concluded that the future Preferred Units investments are considered embedded in the initial Preferred Units that were issued and are considered clearly and closely related to the host instrument and therefore should not be bifurcated.
As a result of the deconsolidation (see Note 1a), the Company recorded a net loss of $5,343, representing the difference between the fair value of the retained interest in Octomera and the net assets deconsolidated in the transaction as follows:
SCHEDULE OF FAIR VALUE OF RETAINED EARNINGS
(in thousands) | ||||
Fair value of the retained interest in Octomera | $ | - | ||
Net assets deconsolidated | 4,959 | |||
Release of translation adjustment | 384 | |||
Net profit | $ | 5,343 |
The change in board composition does not constitute a strategic shift from the Company’s perspective and therefore the Company did not treat the deconsolidation as a discontinued operation.
Following the Amendment No. 2, the Company accounted for its investment in Octomera according to the equity method in accordance with ASC Topic 323, as it has retained the ability to exercise significant influence but does not control the entity. The Company thus recognized an equity method investment in a total amount of $0 comprised of the assumed fair value of the Octomera shares held by the Company. Following the deconsolidation, the Company recognized related party balances that are disclosed on the face of the Company’s balance sheet.
In evaluating the fair value of the Octomera Equity Investment under the income approach, the Company used a discounted cash flow model of the business, adjusted to the Company’s share in the investment. Key assumptions used to determine the estimated fair value included: (a) internal cash flows forecasts for 5 years following the assessment date, including expected revenue growth, costs to produce, operating profit margins and estimated capital needs; (b) an estimated terminal value using a terminal year long-term future growth determined based on the growth prospects of the reporting units; and (c) a discount rate which reflects the weighted average cost of capital adjusted for the relevant risk associated with the Company’s reporting unit operations and the uncertainty inherent in the Company’s internally developed forecasts. The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of other intangible assets, net, which comprised of technology. The useful life of the technology for amortization purposes was determined by considering the period of expected cash flows generated by the assets used to measure the fair value of the intangible assets, adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic, or other factors that may limit the useful life of intangible assets.
F-20 |
The following table represents the deconsolidated amounts from the Company’s Balance Sheet at the date of deconsolidation:
SCHEDULE OF NET ASSETS DECONSOLIDATED
(in thousands) | ||||
ASSETS: | ||||
Cash and cash equivalents | 973 | |||
Other current assets | 9,087 | |||
Non-current assets | 31,935 | |||
TOTAL ASSETS | 41,995 | |||
LIABILITIES: | ||||
Current liabilities | 6,566 | |||
Long-term liabilities | 2,313 | |||
TOTAL LIABILITIES | 8,879 | |||
REDEEMABLE NON-CONTROLLING INTEREST | 26,797 | |||
NON-CONTROLLING INTEREST | 1,360 | |||
NET ASSETS DECONSOLIDATED | 4,959 |
On January 29, 2024, the Company and MM entered into a Unit Purchase Agreement (the “UPA”), pursuant to which the Company acquired all of the equity interests of Octomera that were owned by MM (the “Acquisition”). In consideration for such Acquisition, the Company and MM agreed to the following consideration:
Royalty Payments: If Octomera and its subsidiaries generate Net Revenue during the three year period (2025-2027), then the Company will pay 5% of Net Revenues to MM pursuant to the UPA.
Milestone Payments: If the Company sells Octomera within ten years from the date of the Closing at a price that is more than $40 million excluding consideration for certain Excluded Assets as per the UPA, the Company shall pay Seller 5% of the net proceeds.
Pursuant to the acquisition, MM’s designated members of the Board of Managers of Octomera resigned and the Company amended the Second Amended and Restated Limited Liability Company Agreement of Octomera to be a single member agreement to reflect the transactions contemplated by the UPA so that MM shall no longer (i) be a party to such agreement, (ii) have a right to appoint members of the board of managers of Octomera or (iii) be a member of Octomera.
In addition, the outstanding indebtedness payable from Orgenesis Maryland LLC to MM pursuant to an aggregate of 10 secured promissory notes (the “Notes”) with a collective original principal amount of $2,600, were amended to, among other things, extend the maturity thereof to January 29, 2034 and to terminate the security interest granted by Orgenesis Maryland in favor of MM that secured the obligations under the Notes.
NOTE 4 – ACQUISITIONEQUITY INVESTMENTS AND REORGANIZATIONLOANS TO ASSOCIATES
Tamir Biotechnology, Inc.As of December 31, 2023, and December 31, 2022, the balances of our equity-method investments were $8 and $39, respectively, and are as follows:
a. | Octomera LLC |
On April 7,The Company owned approximately 75% of Octomera as of December 31, 2023. As at the date of the filing of this report the Company owns 100% of Octomera.
As of December 31, 2023, the balance of our equity-method investment related to Octomera was approximately $0. Through December 31, 2023, the Company’s share in Octomera’s net loss was $660. The Company did not provide for additional losses once the investment was reduced to zero since the Company did not guarantee obligations of Octomera and is not otherwise committed to provide further financial support to Octomera. Losses not provided for accumulated to $9,355.
F-21 |
The following table presents summarized results of operations for the six months since the date of deconsolidation:
SUMMARY OF RESULTS OF OPERATIONS
Six-Months Ended | ||||
December 31, 2023 | ||||
Total revenue | $ | 53 | ||
Gross loss | $ | 5,010 | ||
Net loss | $ | 20,145 |
b. | Butterfly Biosciences Sarl |
During 2020, the Company and Kidney Cure (“KC”), pursuant to the Kidney Cure JVA incorporated the KC JV Entity known as Butterfly Biosciences Sarl (“BB”) in Switzerland. BB will be involved in the (i) implementation of a point-of-care strategy; (ii) assessment of the options for development and manufacture of various cell-based types (including kidney derived cells, MSC cells, exosomes, gene therapies) development; and (iii) development of protocols and tests for kidney therapies. The Company holds a 49% participating interest in BB and Kidney Cure holds the remaining 51%. Due to the Company’s significant influence over the JVE the Company applies the equity method of accounting. During the twelve months ended December 31, 2023, no significant developments were made under the KC JV and KC and the Company decided to terminate the KC JVA and liquidate BB. As of December 31, 2023, BB was not yet liquidated.
c. | RevaCel |
During 2021, the Company and Revatis S.A (“Revatis”), pursuant to the Revatis JVA (See Note 11) incorporated the Revatis JV Entity known as RevaCel Srl (“RevaCel”) in Belgium. RevaCel will develop products in the field of muscle-derived mesenchymal stem/progenitor cells. The Company holds a 51% participating interest in RevaCel and Revatis holds the remaining 49% and is entitled to appoint 2 of the 5 members of RevaCel’s board. Due to the Company’s significant influence over the JVE, the Company applies the equity method of accounting and is treated as an associated company. As part of the Revatis JVA, the Company and Revacel, the Company agreed to loan Revacel up to 2 million Euro at an annual interest rate of 8%. The loan is repayable in January 2025, and if not repaid, may be converted into shares of Revacel. As of the date of this Annual Report on Form 10-K, the Company had not made any transfers under the Revacel loan.
The table below sets forth a summary of the changes in the investments and loans for the years ended December 31, 2023 and December 31, 2022
SCHEDULE OF CHANGES IN INVESTMENTS AND LOAN
2023 | 2022 | |||||||
December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Opening balance | $ | 135 | $ | 584 | ||||
Investments during the period | 660 | - | ||||||
Loan granted to associates | - | 4,131 | ||||||
Repayment of loan | (55 | ) | - | |||||
Business Combinations | - | (3,156 | ) | |||||
Fair value of the retained interest in Octomera (see Note 3) | - | - | ||||||
Interest from loans to associates | - | 161 | ||||||
Share in net loss of associated companies | (734 | ) | (1,508 | ) | ||||
Exchange rate differences | 2 | (77 | ) | |||||
Total | $ | 8 | $ | 135 |
F-22 |
NOTE 5 – SEGMENT INFORMATION
The Octomera operations segment includes mainly POCare Services, while the Therapies segment includes the Company’s therapeutic development operations. The segment information includes all the results of the Octomera segment up to the effective date of deconsolidation.
Because the Company conducted all its operations as one segment prior to the Metalmark Investment, the above changes were reflected through retroactive revision of prior period segment information based on the subsidiaries that were transferred to Octomera. Certain activities of these subsidiaries have changed after they were transferred to Octomera operations segment.
The Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), reviews financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the two identified reportable segments, namely Octomera and Therapies, to make decisions about resources to be allocated to the segments and assess their performance.
The Company does not review assets by segment. Therefore, the measure of assets has not been disclosed for each segment.
Segment data for the year ended December 31, 2023 is as follows:
SCHEDULE OF SEGMENT REPORTING
Octomera | Therapies | Eliminations | Consolidated | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues | $ | 68 | $ | 515 | $ | (53 | ) | $ | 530 | |||||||
Cost of revenues* | (9,505 | ) | (690 | ) | 4,421 | (5,774 | ) | |||||||||
Gross profit (loss) | (9,437 | ) | (175 | ) | 4,368 | (5,244 | ) | |||||||||
Cost of development services and research and development expenses* | (9,211 | ) | (5,811 | ) | 4,711 | (10,311 | ) | |||||||||
Operating expenses* | (37,878 | ) | (7,102 | ) | 9,892 | (35,088 | ) | |||||||||
Impairment of investment | - | (699 | ) | - | (699 | ) | ||||||||||
Share in net income of associated companies | - | (74 | ) | (660 | ) | (734 | ) | |||||||||
Profit from deconsolidation | - | - | (5,343 | ) | (5,343 | ) | ||||||||||
Other income, net | 1 | 3 | - | 4 | ||||||||||||
Depreciation and amortization | (1,765 | ) | (782 | ) | 987 | (1,560 | ) | |||||||||
Credit loss on convertible loan receivable | - | (2,688 | ) | - | (2,688 | ) | ||||||||||
Loss from extinguishment in connection with convertible loan | - | (283 | ) | - | (283 | ) | ||||||||||
Financial Expenses, net | (573 | ) | (2,004 | ) | 78 | (2,499 | ) | |||||||||
Income (loss) before income taxes | $ | (58,863 | ) | $ | (19,615 | ) | $ | 14,033 | $ | (64,445 | ) |
* | Excluding Depreciation, amortization and impairment expenses |
F-23 |
Segment data for the year ended December 31, 2022 is as follows:
Octomera | Therapies | Eliminations | Consolidated | |||||||||||||
(in thousands) | ||||||||||||||||
Revenues | $ | 33,884 | $ | 6,432 | $ | (5,575 | ) | $ | 34,741 | |||||||
Revenues from related party | 1,284 | - | - | 1,284 | ||||||||||||
Total revenues | 35,168 | 6,432 | (5,575 | ) | 36,025 | |||||||||||
Cost of revenues* | (4,048 | ) | (1,088 | ) | (356 | ) | (5,492 | ) | ||||||||
Gross profit (loss) | 31,120 | 5,344 | (5,931 | ) | 30,533 | |||||||||||
Cost of development services and research and development expenses* | (13,325 | ) | (12,262 | ) | 4,319 | (21,268 | ) | |||||||||
Operating expenses* | (7,762 | ) | (8,678 | ) | 900 | (15,540 | ) | |||||||||
Impairment expenses | (420 | ) | (641 | ) | - | (1,061 | ) | |||||||||
Share in net income of associated companies | (1,352 | ) | (156 | ) | - | (1,508 | ) | |||||||||
Other income, net | 168 | 5 | - | 173 | ||||||||||||
Depreciation and amortization | (1,006 | ) | (972 | ) | - | (1,978 | ) | |||||||||
Loss from extinguishment in connection with convertible loan | - | (52 | ) | - | (52 | ) | ||||||||||
Financial Expenses, net | (1,748 | ) | (223 | ) | - | (1,971 | ) | |||||||||
Income (loss) before income taxes | $ | 5,675 | $ | (17,635 | ) | $ | - | $ | (11,960 | ) |
* | Excluding Depreciation, amortization and impairment expenses |
NOTE 6 – EQUITY
a. | Financings |
In March 2022, the Company entered into the Tamira Securities Purchase Agreement (the “Purchase Agreement) with Tamir,certain investors (collectively, the “Investors”), pursuant to which the Company agreed to acquire certain assetsissue and liabilities of Tamir relatedsell to the discovery, developmentInvestors, in a private placement (the “Offering”), shares of the Company’s Common Stock at a purchase price of $ per share and testingwarrants to purchase shares of therapeutic products forCommon Stock at an exercise price of $4.50 per share. The warrants were not exercisable until after six months and expire three years from the treatmentdate of diseases and conditions in humans, including all rights to Ranprinase and use for antiviral therapy.issuance. The Tamir Transaction closed on April 23, 2020.
As aggregate consideration for the acquisition, the Company paidreceived proceeds of $2.52.175 million in cashfrom the Offering and issued an aggregate of shares (the “Shares”) of Common Stock and warrants to Tamir resulting inpurchase 146,959 shares of Common Stock pursuant to the Purchase Agreement. In connection with the Purchase Agreement, the Company and the Investors entered into a total consideration of $20.2 million based onRegistration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the Company’s share price atCompany has agreed to register the closing date. $4.5 millionresale of the consideration was attributable to researchShares and development related inventory and most of the remaining amount reflected the cost of intangible assets. TheUnderlying Shares were registered for resale by the Company in November 2020.
The Company’s acquired right to Tamir’s intellectual property representson a single identifiable asset sourced from the agreement. Because substantially all (more than 90%registration statement on Form S-3 (the “Registration Statement”) of the fair value of the gross assets acquired are concentrated in a single asset being the right to Tamir’s intellectual property and related assets (“IPR&D”), the Company determined that the acquisition is not considered a business in accordance with ASC 805-10-55-5A. Therefore, the Company accounted the transaction as an asset acquisition. The fair value associated with Tamir’s IPR&D in the amount of $19.5 million was charged to research and development expenses under ASC 730. The remaining amount was attributed to the above-mentioned share in a private company, which is presented in the balance sheet as long term “other assets”.
Included in the purchased assets of Tamir was the assumption by us of a worldwide license to a private company of certain Tamir technologies in the field of treatment, amelioration, mitigation or prevention of diseases or conditions of the eye and its adnexa in return for certain development and sales milestone payments to be paid to Tamir. We also received a less than 10% share interest in said private company in addition tofiled with the license feeUnited States Securities and right to receive future milestone paymentsExchange Commission (the “SEC”). See note 6 b (Amendment, Consent and royalties.
Koligo Therapeutics Acquisition
On September 26, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) by and among the Company, Orgenesis Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), Koligo Therapeutics Inc., a Kentucky corporation (“Koligo”), the shareholders of Koligo (collectively, the “Shareholders”), and Long Hill Capital V, LLC (“Long Hill”), solely in its capacity as the representative, agent and attorney-in-fact of the Shareholders. The Merger Agreement provides for the acquisition of Koligo by the Company through the merger of Merger Sub with and into Koligo, with Koligo surviving as a wholly-owned subsidiary of the Company (the “Merger”). The acquisition was completed on October 15, 2020 (the “Effective Time”)Waiver Agreement).
Koligo wasOn February 23, 2023, the Company entered into a privately-held US regenerative medicine company. Koligo’s first commercial product is KYSLECEL® (autologous pancreatic islets) for chronicsecurities purchase agreement with certain institutional and acute recurrent pancreatitis. Koligo’s 3D-V technology platform incorporatesaccredited investors relating to the useissuance and sale of advanced 3D bioprinting techniques shares of Common Stock and vascular endothelial cellswarrants to support developmentpurchase up to 973,684 shares of transformational cellCommon Stock (the “Warrants”) at a purchase price of $1.90 per share of Common Stock and tissue products for serious diseases.accompanying Warrants in a registered direct offering (the “February 2023 Offering”). The February 2023 Offering closed on February 27, 2023.
PursuantThe Warrants had an exercise price of $1.90 per share, were exercisable immediately and were to expire five years following the date of issuance.The Warrants had an alternate cashless exercise option (beginning on or after the earlier of (a) the thirty-day anniversary of the date of the Purchase Agreement and (b) the date on which the aggregate composite trading volume of Common Stock following the public announcement of the pricing terms exceeds 13,600,000 shares), to receive an aggregate number of shares equal to the termsproduct of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise and (y) 1.0. The aggregate gross proceeds to the Company from the Offering were $3,700, before deducting placement agent cash fees equal to 7.0% of the Merger Agreement, atgross proceeds received and other expenses payable by the Effective Time, the shares of capital stock of Koligo that were issued and outstanding immediately prior to the Effective Time were automatically cancelled and converted into the right to receive, subject to customary adjustments, an aggregate of shares of Company common stock which have been issued to Koligo’s accredited investors (with certain non-accredited investors being paid solely in cash in the amount of approximately $20 thousand). In addition, the Company issued shares to Maxim Group LLC for advisory services in connection with the Merger. The share price was $ at the day of the closing.
As partial security forAll of the indemnificationWarrants were exercised using the alternate cashless exercise option described above.
On August 31, 2023, the Company entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which the Company agreed to issue and purchase price adjustment obligations of Koligo shareholders under the Merger Agreement, $7 thousandsell, in cash anda private placement (the “August 2023 Offering”), shares of the Company’s Common Stock at a purchase price of $ per share. The Company common stockreceived proceeds of $1,000. The August 2023 Offering closed on August 31, 2023.
On November 8, 2023, the Company entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the investor (the “November 2023 Offering”), (i) 1,410,256 shares of Common Stock. The combined offering price for each share and accompanying warrant was $0.78. The warrants will be exercisable immediately following the date of issuance and may be exercised for a period of five years from the initial exercisability date at an exercise price of $0.78 per share. The exercise prices and numbers of shares of Common Stock issuable upon exercise of the merger consideration otherwise payablewarrants will be subject to adjustment in the Merger toevent of stock dividends, stock splits, reorganizations or similar events affecting the Shareholders were placed in a third party escrow account until April 2022.Company’s Common Stock. The aggregate indemnification obligationsCompany received net proceeds of $942 after deducting $158 related transaction fees. The November 2023 Offering closed on November 9, 2023. shares of Common Stock, and (ii) warrants exercisable for
F-24 |
On March 8, 2024, the institutional investor exercised 25,000 warrants at the $0.78 exercise price.
b. | Warrants |
A summary of the Koligo shareholders underCompany’s warrants granted to investors and as finder’s fees as of December 31, 2023, and December 31, 2022 and changes for the Mergerperiods then ended is presented below:
SCHEDULE OF WARRANTS ACTIVITY
December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Number of Warrants | Weighted Average Exercise Price $ | Number of Warrants | Weighted Average Exercise Price $ | |||||||||||||
Warrants outstanding at the beginning of the period | 5,381,460 | 4.41 | 3,042,521 | 6.09 | ||||||||||||
Changes during the period: | ||||||||||||||||
Issued | 2,891,245 | 1.46 | 2,978,575 | 3.16 | ||||||||||||
Exercised | (973,684 | ) | 1.90 | - | - | |||||||||||
Expired | (1,456,979 | ) | 5.63 | (639,636 | ) | 6.58 | ||||||||||
Warrants outstanding and exercisable at end of the period* | 5,842,042 | 3.06 | 5,381,460 | 4.41 |
Amendment, Consent and Waiver Agreement is capped at the amounts in escrow, subject to certain limited exceptions.
In addition, accordingOctober and November 2022, the Company and certain investors that were parties to the agreement betweenSecurities Purchase Agreement of March 2022 (the “SPA”) and the parties,Registration Rights Agreement of March 2022 (the “RRA”), entered into an Amendment, Consent and Waiver Agreement (the “RRA Amendment”). Pursuant to the RRA Amendment, the Company fundedand the investors agreed to an extension of the date for filing the Registration Statement to register the Registrable Securities (as defined in the RRA) to April 3, 2023 and the effective date of such Registration Statement as provided for in the RRA Amendment; and (to) waive any potential damages or claims under the RRA with respect to the Company’s obligations under the RRA or SPA and release the Company therefrom. In consideration for such consent, agreement, waiver and release, the Company agreed to issue additional cash considerationwarrants to purchase an aggregate of shares of Common Stock to the investors (the “Additional PIPE Warrants”) and such Additional PIPE Warrants shall have an exercise price of $5002.50 thousand (with $100 thousandper share of such reducingCommon Stock, be exercisable beginning six months and one day after the ultimate consideration payable to Koligo) forapplicable effective date and ending 36 months after the acquisition ofapplicable effective date and be in the assets of Tissue Genesis, LLC (“Tissue Genesis”) by Koligo that was consummated on October 14, 2020. The Tissue Genesis assets includesame form as the entire inventory of Tissue Genesis Icellator® devices, related kits and reagents, a broad patent portfolio to protect the technology, registered trademarks, clinical data, and existing business relationships for commercial and development stage use of the Icellator technology.
In connection with the Merger Agreement, the Company, Long Hill and Maxim Group LLC (“Maxim”) entered into a Registration Rights and Lock-Up Agreement. All of the shares required to be registered by the Companyoriginal Warrants issued pursuant to the Registration Rights and Lock-Up Agreement were registered by the Company in November 2020.SPA.
In addition, pursuant to separate Lock-Up Agreements entered into by the Shareholders other than Long Hill with the Company (the “Shareholders Lock-Up Agreement”), such Shareholders agreed that they will not transfer any of their shares received in the Merger except in accordance with the following lock-up release schedule whereby one fifth of such holder’s respective shares will be released from such restriction every six months, starting six months from the closing of the Merger. Each holder’s sales of such shares are subject to a resale limit of its pro rata portion of 10% of the average daily trading volume, allocated to the Shareholders other than Long Hill pro-rata.
The acquisition was accounted in accordance with Accounting Standards Codification Topic 805, “Business Combinations”. 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. The Company includes the results of operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.
Fair Value of Consideration Transferred
The following table summarizes the allocation of purchase price to the fair values of the assets acquired and liabilities assumed as of the transaction date:
SUMMARY OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(in thousands) | ||||
Fair value of % of shared issued * | 11,172 | |||
Fair value of % of shared issued * | 11,172 | |||
Cash payment | 1,115 | |||
Total consideration transferred | $ | 12,287 |
Total assets acquired: | ||||
Cash and cash equivalents | $ | 8 | ||
Restricted Cash | 152 | |||
Accounts Receivable | 228 | |||
Inventory | 34 | |||
Other assets | 25 | |||
Property, plants and equipment, net | 482 | |||
Kyslecel Technology (a) | 9,340 | |||
IPR&D (a) | 641 | |||
Other intangible assets | 641 | |||
Operating lease right-of-use assets | 238 | |||
Goodwill (b) | 3,704 | |||
Goodwill | 3,704 | |||
Total assets | 14,852 | |||
Total liabilities assumed: | ||||
Operating leases | 238 | |||
Accounts Payable | 216 | |||
Accrued Expenses | 4 | |||
Orgenesis Inc loan | 651 | |||
Deferred taxes | 1,293 | |||
Notes Payable | 162 | |||
Other liabilities | 1 | |||
Total liabilities | 2,565 | |||
Total consideration transferred | $ | 12,287 |
These intangible assets were estimated using a discounted cash flow method with the application of the multi-period excess earnings method. Under this method, an intangible asset’s fair value is equalDuring February 2022, pursuant to the present value of the incremental after-tax cash flows attributable only to the subject intangible asset after deducting contributory asset charges. An income and expenses forecast were built based upon revenue and expense estimates.
Pro forma Impact of Business Combination
The unaudited pro forma financial results have been prepared using the acquisition method of accounting and are based on the historical financial information of the Company and Koligo. The unaudited pro forma condensed financial results have been preparedMida Biotech BV (“Mida”), the Company purchased all the issued shares of Mida for illustrative purposes only and do not purporta consideration of $100 thousand. In lieu of cash, the consideration was paid via Company shares of Common Stock issued to be indicative of the results of operations that actually would have resulted hadMida Biotech BV’s shareholders. In connection with the acquisition of Koligo occurred at the beginning of the fiscal year, or of future results of the combined entities. The unaudited pro forma condensed financial information does not reflect any operating efficiencies and expected realization of cost savings or synergies associated with the acquisition.
Unaudited supplemental pro forma combined results of operations (in thousands):
SCHEDULE OF UNAUDITED SUPPLEMENTAL PRO FORMA
Year ended December 31, | ||||
2020 | ||||
Revenues | $ | 8,239 | ||
Net loss | $ | 318 | ||
Loss per share: | ||||
Basic | $ | 0.05 |
Koligo’s related actual results from the date of acquisition to December 31, 2020 resulted in a loss of $513 thousand.
Koligo’s Acquisition-related Costs
Acquisition-related expenses consist of transaction costs which represent external costs directly related to the acquisition of Koligo and primarily include expenditures for professional fees such as legal, accounting and other directly related incremental costs incurred to close the acquisition by bothMida, the Company and Koligo.issued Common Stock to Mida’s shareholders.
Acquisition-related expenses for the year ended December 31, 2020 were $682 thousand. These expenses were recorded to selling and general administrative expense in the consolidated statements of comprehensive loss.
Extracellular Vesicle (“EV”) Technology License
During the third quarter of 2020, the Company purchased IP and related EV technology pursuant to an EV agreement (the “EV agreement”). According to the EV agreement, the Company received all of the rights in the EV technology purchased, in the amount of $500 thousand, which was paid during 2020 and 2021. The $500 thousand was recorded in R&D expenses. In addition, the Company received an exclusive worldwide license to use the EV IP technology for any purpose.
NOTE 57 – PROPERTY, PLANTS AND EQUIPMENT
The following table represents the components of property, plants and equipment:
SCHEDULE OF COMPONENTS OF PROPERTY, PLANTSPLANT AND EQUIPMENT
2021 | 2020 | 2023 | 2022 | |||||||||||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Cost: | ||||||||||||||||
Production facility | $ | 4,040 | $ | 2,801 | $ | 55 | $ | 3,944 | ||||||||
Office furniture and computers | 555 | 697 | 242 | 589 | ||||||||||||
Lab equipment | 2,435 | 1,483 | 1,061 | 4,811 | ||||||||||||
Advance payment | 6,181 | 281 | 692 | 17,442 | ||||||||||||
Subtotal | 13,211 | 5,262 | 2,050 | 26,786 | ||||||||||||
Less – accumulated depreciation | (2,940 | ) | (2,189 | ) | (575 | ) | (3,952 | ) | ||||||||
Total | $ | 10,271 | $ | 3,073 | $ | 1,475 | $ | 22,834 |
F-25 |
Depreciation expense for the years ended December 31, 20212023 and December 31, 20202022 were $916839 thousand and $7051,067 thousand, respectively.
Property, plants and equipment, net by geographical location were as follows:
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT BY GEOGRAPHICAL LOCATIONAXIS
2021 | 2020 | 2023 | 2022 | |||||||||||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Belgium | $ | 1,149 | $ | 358 | $ | 29 | $ | 1,095 | ||||||||
Greece | - | 858 | ||||||||||||||
Netherlands | 289 | 380 | ||||||||||||||
Korea | 694 | 839 | - | 466 | ||||||||||||
Israel | 2,602 | 1,386 | 56 | 2,284 | ||||||||||||
U.S. | 5,826 | 490 | 1,101 | 17,751 | ||||||||||||
Total | $ | 10,271 | $ | 3,073 | $ | 1,475 | $ | 22,834 | ||||||||
Property, plants and equipment, net | $ | 10,271 | $ | 3,073 | $ | 1,475 | $ | 22,834 |
NOTE 68 – INTANGIBLE ASSETS AND GOODWILL
Changes in the carrying amount of the Company’s goodwill for the years ended December 31, 20212023 and 20202022 are as follows:
SCHEDULE OF GOODWILL
(in thousands) | (in thousands) | |||||||
Goodwill as of December 31, 2019 | $ | 4,812 | ||||||
Goodwill as acquired, (Koligo) see note 4 | 3,704 | |||||||
Goodwill as of December 31, 2021 | $ | 8,403 | ||||||
Translation differences | 229 | (216 | ) | |||||
Goodwill as of December 31, 2020 | $ | 8,745 | ||||||
Goodwill as of December 31, 2022 | $ | 8,187 | ||||||
Deconsolidation of Octomera | (6,815 | ) | ||||||
Translation differences | (342 | ) | (161 | ) | ||||
Goodwill as of December 31, 2021 | $ | 8,403 | ||||||
Goodwill as of December 31, 2023 | $ | 1,211 |
Goodwill Impairmentimpairment assessment for the year ended December 31, 2023
As of December 31, 2022, the Company performed an impairment analysis for its reporting units. Based on the Company’s assessment, it was concluded that the fair value of each of the Octomera and Therapies reporting units exceeded their carrying amounts and therefore no goodwill impairment was required. As of December 31, 2023 the fair value of the Therapies reporting unit exceeded its carrying amount and therefore no goodwill impairment was required.
In evaluating the fair value of reporting units under the income approach, the Company used a discounted cash flow model. Key assumptions used to determine the estimated fair value included: (a) internal cash flows forecasts for 5 years following the assessment date, including expected revenue growth, costs to produce, operating profit margins and estimated capital needs; (b) an estimated terminal value using a terminal year long-term future growth determined based on the growth prospects of the reporting units; and (c) a discount rate which reflects the weighted average cost of capital adjusted for the relevant risk associated with the Company’s reporting unit operations and the uncertainty inherent in the Company’s internally developed forecasts.
Actual results may differ from those assumed in the Company’s valuation method. It is reasonably possible that the Company’s assumptions described above could change in future periods. If any of these were to vary materially from the Company’s plans, it may record impairment of goodwill allocated to any of these reporting units in the future.
F-26 |
See Note 2(l) for the Company’s goodwill impairment analysis.
Other Intangible Assets
Other intangible assets consisted of the following:
SCHEDULE OF OTHER INTANGIBLE ASSETS
2021 | 2020 | 2023 | 2022 | |||||||||||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Gross Carrying Amount: | ||||||||||||||||
Know How | $ | 2,904 | $ | 3,170 | $ | - | $ | 2,735 | ||||||||
Customer relationships | 811 | 886 | - | 345 | ||||||||||||
Kyslecel Technology | 9,340 | 9,340 | ||||||||||||||
IPR&D | 641 | 641 | ||||||||||||||
Technology | 9,340 | 9,340 | ||||||||||||||
Subtotal | 13,696 | 14,037 | 9,340 | 12,420 | ||||||||||||
Less – Accumulated amortization | (1,875 | ) | (1,014 | ) | (1,965 | ) | (2,726 | ) | ||||||||
Net carrying amount of other intangible assets | $ | 11,821 | $ | 13,023 | $ | 7,375 | $ | 9,694 |
Intangible assets amortization expenses were approximately $948721 thousand and $478911 thousand for the years ended December 31, 20212023 and December 31, 2020,2022, respectively.
Estimated aggregate amortization expenses for the five succeeding years ending on December 31st are as follows:
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSES
2022 | 2023 to 2026 | |||||||
(in thousands) | ||||||||
Amortization expenses | $ | 323 | $ | 1,390 |
2024 | 2025 to 2028 | |||||||
(in thousands) | ||||||||
Amortization expenses | $ | 612 | $ | 2,450 |
NOTE 9 –LOANS
On July 25, 2023, the Israeli subsidiary received a loan from an offshore investor in the amount of $175. The loan bears 8% annual interest and is repayable on January 1, 2024. The investor lent the subsidiary a further $150 interest free during October and November 2023. In January 2024, the Company and Lender agreed to extend the maturity date of the loan amount to December 31, 2024. The Company awarded warrants to purchase of the Company’s Common Stock at a price of $ per share and granted Lender the right to convert any part of the Outstanding amount into Common Stock of the Company at the conversion rate of $0.85 per share.
On August 15, 2023, the Company received a loan from an investor in the amount of $250. The loan bears 8% annual interest and is repayable on January 1, 2024.
During October and November 2023, the Koligo subsidiary received loans in the amount of $60. The loans bear interest at annual interest rates of 10%, and are repayable between November 30, 2023 and January 1, 2024. As of the date of this report, $40 of the outstanding amount had not yet been repaid.
In February 2024, Koligo received a loan from a lender in the amount of the $57 at an annual interest rate of 10%. The loan is repayable by May 1, 2024.
On March 26, 2024, Koligo received a loan from a lender in the amount of $250 at an annual interest rate of 10%. The loan is repayable by June 26, 2024. The Company issued a warrant to the lender for the purchase of shares of Common Stock of the Company at an exercise price of $ per share exercisable immediately and expiring on March 26, 2029
During April 2024 Koligo and the Israeli subsidiary received one month 10% annual simple interest loans from offshore investors in the amounts of $175 and $125 respectively. The investors received a total of 375,000 warrants for the purchase of shares of Common Stock of the Company at an exercise price of $0.80 per share exercisable immediately and expiring on October 6, 2024.
F-27 |
NOTE 710 – CONVERTIBLE LOANS
a. | Long-Term Convertible Loans |
The tables below summarize the Company’s outstanding convertible loans as of December 31, 2023 and December 31, 2022 respectively:
SCHEDULE OF LONG TERM CONVERTIBLE LOANSNOTES
Principal | Issuance Date | Current Interest Rate | Current Maturity | Current Conversion Price of loan into equity | ||||||||||||||
Amount | (Year) | % | (Year) | $ | ||||||||||||||
Convertible Loans Outstanding as of December 31, 2023 | ||||||||||||||||||
$ | 750 | 2018 | 10 | % | 2026 | 2.50 | ||||||||||||
1,500 | 2019 | 10 | % | 2026 | 2.50 | |||||||||||||
100 | 2019 | 8 | % | 2024 | 2.50 | |||||||||||||
5,000 | 2019 | 10 | % | 2026 | 2.50 | |||||||||||||
100 | 2020 | 8 | % | 2024 | 7.00 | |||||||||||||
5,000 | 2022 | 10 | % | 2026 | 2.50 | |||||||||||||
1,150 | 2022 | 6 | % | **2023 | 4.50 | |||||||||||||
5,000 | 2023 | 8 | % | 2026 | 2.46 | |||||||||||||
735 | 2023 | 8 | % | 2024 | -* | |||||||||||||
$ | 19,260 |
** | Was not yet paid by December 31, |
Principal Amount | Issuance Year | Interest Rate | Maturity Period | Exercise Price | NOTE | BCF | ||||||||||||||||||||
(in thousands) | (Years) | |||||||||||||||||||||||||
Convertible Loans Outstanding as of December 31, 2021 | ||||||||||||||||||||||||||
$ | 750 | *2018 | 2 | % | 5 | 7.00 | (1)+(4) | 39 | ||||||||||||||||||
8,750 | *2019 | 6%-8 | % | 3-5 | 7.00 | (2)+(4) | - | |||||||||||||||||||
250 | *2020 | 8 | % | 3 | 7.00 | (3 | ) | - | ||||||||||||||||||
$ | 9,750 |
Convertible Loans Outstanding as of December 31, 2020 | ||||||||||||||||||||||||||
$ | 1,000 | 2018 | 2 | % | 3 | 7.00 | (1)+(4) | 71 | ||||||||||||||||||
9,500 | 2019 | 6%-8 | % | 2-5 | 7.00 | (2)+(4) | - | |||||||||||||||||||
250 | 2020 | 8 | % | 2 | 7.00 | (3 | ) | - | ||||||||||||||||||
$ | 10,750 |
Convertible Loans repaid during the year ended December 31, 2021 | ||||||||||||||||||||
Principal Amount | Issuance Year | Interest Rate | Maturity Period | Exercise Price | BCF | |||||||||||||||
750 | 2019 | 8 | % | 2 | $ | 7 | 31 | |||||||||||||
250 | 2018 | 2 | % | 3 | 7 | - | ||||||||||||||
1,000 |
Convertible Loans repaid during the year ended December 31, 2020 | ||||||||||||||||||||||
Principal Amount | Issuance Year | Interest Rate | Maturity Period | Exercise Price | BCF | |||||||||||||||||
500 | 2018 | 2 | % | 2 | $ | 7 | 53 | |||||||||||||||
500 | 2019 | 6 | % | 2 | 7 | - | ||||||||||||||||
1,400 | 2019 | 8 | % | 3 | 7 | - | ||||||||||||||||
2,400 |
$ | 750 | 2018 | 2 | % | 2023 | 7.00 | ||||||||||||
1,600 | 2019 | 8 | % | 2024 | 7.00 | |||||||||||||
5,000 | 2019 | 6 | % | 2023 | 7.00 | |||||||||||||
100 | 2020 | 8 | % | 2023 | 7.00 | |||||||||||||
8,000 | 2022 | 10 | % | 2024 | 2.50 | |||||||||||||
1,150 | 2022 | 6 | % | 2023 | 4.50 | |||||||||||||
$ | 16,600 |
Convertible Loans repaid during the year ended December 31, 2023
Principal Amount | Issuance Year | Interest Rate | Maturity Period | Exercise Price | ||||||||||||||
3,000 | 2022 | 10 | % | 1 | $ | 2.5 |
Convertible Loans repaid during the year ended December 31, 2022
Principal Amount | Issuance Year | Interest Rate | Maturity Period | Exercise Price | ||||||||||||||
150 | 2019 | 8 | % | 2.5 | $ | 7 | ||||||||||||
50 | 2019 | 6 | % | 3 | 7 | |||||||||||||
150 | 2020 | 8 | % | 2.5 | 7 | |||||||||||||
1,950 | 2019 | 6%-8 | % | 3 | 4.5-7 | |||||||||||||
2,300 |
Apart from the items mentioned below there were no repayments of convertible loans during the fiscal years ended December 31, 2020 and December 31, 2021. In addition, there were no conversions during the fiscal years ended December 31, 2020 and December 31, 2021.
Convertible Loans Entered into in 2023
The Company concluded that the change in the terms (including for the credit line investors extension) does not constitute a troubled debt restructuring. The Company therefore applied the guidance in ASC 470-50, Modifications and Extinguishments. The accounting treatment is determined by whether terms of the new debt and original debt are substantially different. The new debt and the old debt are considered “substantially different” pursuant to ASC 470-50 when the change in the fair value of the embedded conversion option is at least On January 10,% of the carrying amount of the original debt instrument immediately before the modification or exchange or the value of the cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument (including the incremental fair value resulting from issuing new warrants held by the lender). If the original and new debt instruments are substantially different, the original debt is derecognized and the new debt should be initially recorded at fair value, with the difference recognized as an extinguishment gain or loss. Based on the analysis, the Company concluded that the change in terms should be accounted for as an extinguishment. The extinguishment resulted in a loss of $1,865 thousand. The Company concluded that, since the warrants cannot be exercised prior to the expiry date of the Early Redemption Option, the warrants are considered embedded in the convertible loan and not freestanding instruments. It also concluded that the prepayment option and the embedded warrants should not be bifurcated from the debt host. In accordance with ASC 470-20-25-13, if a convertible debt instrument is issued at a substantial premium, there is a presumption that such premium represents paid-in capital. Since the fair value of the new convertible loan instrument issued as part of the change in terms are higher than the par value of the loan and the premium is substantial, the Company allocated the premium to paid in capital and the reminder to the convertible loan.
The fair value of the conversion feature was estimated using the binomial model. The total fair value of the new instruments is $4.4M (including the credit line agreements).
Following are the main estimates and assumptions that were used for the valuation of the new instruments as of the valuation date:
SCHEDULE OF ESTIMATES AND ASSUMPTIONS OF NEW INSTRUMENTS OF VALUATION DATE
Parameter | 8% Note | 2% Note | Warrants | |||||||||
Notional (USD) | 1,500,000 | 750,000 | 926,413 | |||||||||
Accrued Coupon (USD) | 224,603 | 41,945 | - | |||||||||
Coupon Rate | 8.00 | % | 2.00 | % | - | |||||||
Conversion Ratio (USD) | 7.00 | 7.00 | - | |||||||||
Exercise Price (USD) | - | - | 6.24 | |||||||||
Stock Price (USD) | 5.02 | 5.02 | 5.02 | |||||||||
Expected Term (years) | 1.79 | 1.79 | 1.79 | |||||||||
Risk Free Rate | 0.20 | % | 0.20 | % | 0.20 | % | ||||||
Volatility | 72.84 | % | 72.84 | % | 72.84 | % | ||||||
Yield | 7.87 | % | 7.84 | % | - |
b. During May 2019, 2023 (the “Effective Date”), the Company entered into the following agreements: (i) a private placement subscriptionconvertible loan agreement (the “NewTech Convertible Loan Agreement”) with an investor for $5 million. The lender shall be entitled, at any time priorNewTech Investment Holdings, LLC (the “NewTech Lender”), pursuant to or no later thanwhich the maturity date, to convert the outstanding amount, into units of (1) shares of common stock ofNewTech Lender loaned the Company at$4,000 (the “NewTech Loan Amount”), and (ii) a conversion price per share equal to $7.00 and (2) warrants to purchase an equal number of additional shares ofconvertible loan agreement (the “Malik Convertible Loan Agreement”, together with the Company’s common stock at a price of $7.00 per share.
The transaction costs were approximately $497 thousand, out of which $ thousand are stock-based compensation due to issuance of warrants.
c. In June 2019,NewTech Convertible Loan Agreement, the Company entered into private placement subscription agreements with investors for an aggregate amount of $2 million. The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the outstanding amount, into units of (1) shares of common stock of the Company at a conversion price per share equal to $7.00 and (2) warrants to purchase an equal number of additional shares of the Company’s common stock at a price of $7.00 per share.
d. During October 2019, the Company entered into a Private Placement Subscription Agreement and Convertible Credit Line Agreement (collectively, the “Credit Line“Convertible Loan Agreements”) with four non-U.S. investorsAriel Malik (the “Malik Lender”, together with the NewTech Lender, the “Lenders”), pursuant to which the Lenders furnished toMalik Lender loaned the Company access to an aggregate $5.01,000 million credit line (which consists of $1.25 million from each Lender) (collectively,(the “Malik Loan Amount”, together with the “Credit Line”NewTech Loan Amount, the “Loan Amount”). Pursuant to the Credit Line Agreements, the Company was entitled to draw down an aggregate of $1 million (consisting of $250 thousand from each Lender) of the Credit Line in each of October 2019 and November 2019. In each of December 2019, January 2020 and February 2020, the Company may draw down an additional aggregate of $1 million (consisting of $250 thousand from each Lender), until the total amount drawn down under the Credit Line reaches an aggregate of $5 million (consisting of $1.25 million from each Lender), subject to the approval of the Lenders.
Pursuant to theThe terms of the Credit Line AgreementsNewTech Convertible Loan Agreement and the Notes,Malik Loan Agreement are identical. Interest is calculated at 8% per annum (based on a 365-day year); provided, that if an Event of Default (as defined in the total loan amount,Convertible Loan Agreements) has occurred and is continuing, the Outstanding Amount (as defined herein) will be calculated at 15.0% per annum. The Loan Amount and all accrued but unpaid interest thereon became due and payable(collectively, the “Outstanding Amount”) shall either (i) be repaid in cash or (ii) convert to shares of common stock, par value $ per share (“Common Stock”), of the Company on the secondthird anniversary of the Effective Date (the “Maturity Date”). The Maturity Date may be extended by eachthe Lender in its sole discretion and shallupon the written consent of the Lender. The Outstanding Amount may be in writing signedprepaid by the Company andin whole or in part at any time with the Lender. Interest on any amount that has been drawn down underprior approval of the Credit Line accrues at a per annum rate of eight percent (Lender.
8%).
At any time prior to or on the Maturity Date, by providingany Lender may provide the Company with written notice to the Company, eachconvert all or part of the Lenders is entitled to convert its respective drawdown amounts and all accrued interest,Outstanding Amount into shares of our Common Stock equal to the Company’s common stock, par value $ per share (the “Common Stock”), atquotient obtained by dividing (x) the Outstanding Amount by (y) a conversion price equal to $7.002.464 per share.share (subject to adjustment for certain capital events, such as stock splits) (the “Conversion Price”).
Furthermore, uponUnder the drawdown of $500 thousand from each Lender and, together with the other Lenders, a drawdown of an aggregate of $2 million under the Credit Line, the existing warrantsterms of the LendersConvertible Loan Agreements, the Company used the proceeds from the Loan Amount to (i) redeem the loan amount from the previously disclosed Convertible Loan Agreement, dated as of May 19, 2022 between Orgenesis and Ricky Steven Neumann, as amended by the previously disclosed certain Convertible Loan Extension Agreement, dated as of October 23, 2022, by and between Orgenesis and Ricky Steven Neumann, and (ii) for general corporate purposes. Pursuant to the terms, the Company repaid said loan upon receipt of the Loan Amount.
In connection with such loan, the Company agreed to issue the NewTech Lender warrants representing the right to purchase shares of Common Stock shall be amended to extend their exercise date to June 30, 2021 and the Company will issued to each of the Lenders warrants to purchase 50,000405,844 shares of Common Stock, at an exercise price of $7.002.50 per share and the Malik Lender warrants representing the right to purchase 101,461 shares of Common Stock, at an exercise price of $2.50 per share. The new warrantsSuch Warrants will be exercisable for three (3) years fromat any time beginning six months and one day after closing and ending 36 months after the Effective Date. During October 2019, such drawdown was reached and the warrants were issued.
During the year ended December 2020, the Company repaid principal amount of $2,400 thousand and a total interest amount of $372 thousand to certain of the credit line investors.
During the year ended December 2021, the company repaid principal amount of $1,000 thousand and a total interest amount of $140 thousand to certain of the credit line investors.closing date.
See note 7 (a) (4) regarding the extension of certain of the Credit Line Agreements.Koligo Convertible Loan
e. In December 2019,On March 27, 2023, the CompanyCompany’s subsidiary Koligo Therapeutics Inc. (“Borrower”), entered into private placement subscription agreementsa convertible loan agreement (the “Convertible Loan Agreement”) with investors for an aggregate amount ofYehuda Nir (the “Lender,” and together with the Borrower, the “Parties”), pursuant to which the Lender agreed to loan the Borrower up to $2505,000 thousand.(the “Loan Amount”). Interest is calculated at 8% per annum (based on a 365-day year) and is payable, along with the principal, on or before January 1, 2024 (the “Maturity Date”). The lendersMaturity Date may be extended by the Lender in the Lender’s sole and absolute discretion and any such extension(s) shall be entitled,in writing signed by the Parties. The Loan Amount may be prepaid by the Borrower in whole or in part at any time with the prior written approval of the Lender.
If prior to December 31, 2023, the Borrower issues equity securities (“Equity Securities”) in a transaction or no later thanseries of related transactions resulting in aggregate gross proceeds to the maturity date, to convertBorrower of at least $5,000 (excluding conversion of the Loan Amount) (a “Qualified Financing”), then the outstanding principal amount into units of 1 share of common stock of the CompanyLoan Amount, and any and all accrued but unpaid interest thereon (collectively, the “Outstanding Amount”), will automatically convert into such Equity Securities issued pursuant to the Qualified Financing at a conversion price per share equal to fifty percent (50%) of the price per share paid for each share of the Equity Securities purchased for cash by the investors in the Qualified Financing (the “Mandatory Conversion”). The per share price for the Mandatory Conversion shall be calculated on a fully diluted basis (including equity underlying all outstanding options, warrants, and other convertible securities, but excluding the Equity Securities issuable upon the Mandatory Conversion). As of the date of the issue of these financial statements, the Qualified Financing had not occurred.
F-29 |
The Parties agreed that the Lender shall have the option to assign $7.001,500. In addition, of the Loan Amount due to the Lender under that certain convertible loan agreement between the Lender and the Company granteddated April 21, 2022, as amended, (collectively the investors“Original Loan”), to the Borrower (the “Loan Assignment”). The terms of the Loan Assignment will be the same as under the Original Loan, including a maturity date of 183,481January 31, 2026 and an annual interest rate of 10%. The Loan Assignment will be subject to the Mandatory Conversion as described above. As of the date of the issue of these financial statements, said assignment has not occurred.
Under the terms of the Koligo Convertible Loan Agreement, the Borrower agreed to use the Loan Amount to fund working capital and ongoing operations and for no other purposes unless the Lender agrees in writing. As of December 31, 2023, Koligo received $735 under the Koligo Convertible Loan Agreement.
In January 2024, the Company and Lender agreed to extend the maturity date of the loan amount to December 31, 2026. The Company awarded warrants to purchase an equal number840,000 of additional shares ofthe Company’s Common Stock at a price of $ per share, and granted Lender the right to convert any part of the Outstanding amount into Common Stock of the Company at the conversion rate of $0.85 per share.
On September 29, 2023, Borrower entered into another convertible loan agreement (the “Sai Convertible Loan Agreement”) with Sai Traders (the “Lender,” and together with the Borrower, the “Parties”), pursuant to which the Lender agreed to loan the Borrower up to $25,000 (the “Sai Convertible Loan”). The fair valueSai Convertible Loan shall consist of an Initial Installment of $1,500 (“Initial Installment”), and at the election of the Borrower thereafter while the Sai Convertible Loan remains outstanding, Borrower may issue up to an additional $23,500 (“Subsequent Installments”). The Sai Convertible loan bears transaction costs of 8%. Interest is calculated at 10% per annum (based on a 365-day year) of all outstanding principal borrowings and is payable, along with the principal (collectively the “Outstanding Amount”), on or before December 1, 2027 (the “Maturity Date”). The Loan Amount may be prepaid by the Borrower in whole or in part at any time without penalty.
Under the terms of the Sai Convertible Loan Agreement, at the option of the Lender at the Maturity Date or any time prior, the Outstanding Amount may be convertible, in whole or in part, into the number of shares of Common Stock of the Company equal to the quotient obtained by dividing (x) the Outstanding Amount by (y) the Conversion Price. The “Initial Installment Conversion Price” for the Outstanding Amount relating to the Initial Installment shall be a price per share of Common Stock equal to $2.50. The “Subsequent Installment Conversion Price” for the Outstanding Amount relating to the Subsequent Installment(s) shall be a price per share of Common Stock equal to $3.50. Lender agrees that it shall not deliver a notice of conversion that upon effect results in the holder to beneficially own more than 19.99% of the then outstanding shares of Company’s Common Stock. Lender may elect to, instead of the conversion of the Outstanding Amount into Common shares of Company, convert the entire Outstanding Amount into the securities of Borrower pursuant to a the first issuance of equity of the Borrower under which the Borrower raises at least $5,000 in gross proceeds (“Qualified Financing”) at a price per share equal to 75% of the price per share paid for each share of the equity securities purchased for cash by the investors in such a Qualified Financing. In the event of the Borrower being listed on a public securities exchange, Lender shall have the option to convert the Outstanding Amount at a 25% premium to the volume weighted average price of the Borrower’s equity over the preceding five (5) days as reported by Bloomberg (“5-Day VWAP”), provided that any such conversion shall not result in the Lender to beneficially own more than 19.99% of the then beneficial shares of the Borrower. In the event of an acquisition of the Borrower (“Acquisition”), prior to the closing of such acquisition, Lender shall have the option to convert the Outstanding Amount into equity securities of the Borrower at a price equivalent to seventy five percent (75%) of the price paid by such buyer to acquire the Borrower.
As of the date of this report, no part of the Loan was received, and was therefore not reflected in the Consolidated Balance sheet of December 31, 2023.
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Extension of Existing Loan Agreements
On January 12, 2023, the Company entered into (i) a Convertible Credit Line and Unsecured Convertible Note Extension #2 Agreement with Yosef Dotan (the “Dotan Extension Agreement”), (ii) a Convertible Credit Line Extension Agreement with Aharon Lukach (the “Lukach Extension Agreement”) and (iii) a Convertible Loans and Unsecured Convertible Notes Extension #2 Agreement with Yehuda Nir (the “Nir Extension Agreement”), each which extended the maturity date of the convertible loans under their respective loan agreements (as described below) to January 31, 2026. The aggregate principal amount of loans extended was $12,000 and the interest rate on the extended loans varied between 2% and 10%. In consideration for the extensions, (i) the interest rate on such principal amount of such loans was increased to 10% per annum commencing on February 1, 2023 (except for the Nir Convertible Loan Agreement dated as of April 12, 2022, which already had a 10% per annum interest rate), (ii) the conversion price of the loans was reduced from $7.00 to $2.50 (except for the Nir Convertible Loan Agreement dated as of April 12, 2022, which already had a $2.50 conversion price), (iii) the exercise price of the warrants was $124 thousand using the fair valueissuable upon conversion of the shares on2% Notes and the grant date. During 2021,Nir Convertible Loan Agreement dated as of May 17, 2019 was reduced to $2.50 per share and the term of such warrants was extended to January 31, 2026.
The Dotan Extension Agreement related to a Convertible Credit Line Agreement dated as of October 3, 2019, as amended, of which $750 principal amount plus interest is outstanding as of September 30, 2023, and 2% Notes purchased from the Company and the investors agreed to extend the maturityon November 3, 2018, of the loans to December 2022.which $250 principal amount plus interest is outstanding. Based on theits analysis, the Company concluded that the change in terms referred to Convertible Credit Line Agreement and the 2% Notes should be accounted for as a modification and an extinguishment respectively.
The Lukach Extension Agreement related to a Convertible Credit Line Agreement dated as of October 3, 2019, as amended, of which $750 principal amount plus interest is outstanding as of September 30, 2023. Based on its analysis, the Company concluded that the change in terms referred to above should be accounted for as a modification.
f. On January The Nir Extension Agreement related to 2 2020,% Notes purchased from the Company entered into private placement subscription agreements with investors for an aggregateon November 3, 2018, as amended, of which $500 principal amount plus interest is outstanding as of September 30, 2023, a Convertible Loan Agreement dated as of May 17, 2019, of which $2505,000 thousandprincipal amount plus interest is outstanding, and a Convertible Loan Agreement dated as of convertible loans. The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the outstandingApril 12, 2022, as amended, of which $5,000 principal amount into shares of Common Stock of the Company at a conversion price per share equal to $7.00. In addition, the Company granted the investors 151,428 warrants to purchase an equal number of additional shares of Common Stock at a price of $7.00 per share. During 2021, the Company and the investors agreed to extend the maturity of the loans to December 2022.plus interest is outstanding. Based on theits analysis, the Company concluded that the change in terms referred to the 2% Notes and Convertible Loan Agreement should be accounted for as an extinguishment and a modification.
h .. On November 2, 2016, the Company entered into unsecured convertible note agreements with accredited or offshore investors for an aggregate amount of NIS 1 million ($280 thousand). The loan bears a monthly interest rate of 2% and mature on May 1, 2017, unless converted earlier. On April 27, 2017 and November 2, 2017, the Company entered into extension agreements through November 2, 2017 and May 2, 2018,modification respectively.
InOn March 2018,6, 2024, the investor submitted a noticeIsraeli subsidiary and Koligo each received loans in the amount of its intention$37.5 from offshore lenders. The loans bear 10% annual interest and are repayable on June 7, 2024. The lenders will each have the right to convert into sharesthe entire amount of the Company’s common stock the principal amount and accrued interest of approximately $383 thousand outstanding. A related party of such investor at the same time, exercised warrants issued in November 2016 to purchase shares of the Company’s Common Stock. The exercise price of the warrants and conversion price were fixed at $0.52 per share (pre-reverse stock split implemented by the Company in November 2017). There is a significant disagreement between the Company and these two entities as to the number of shares of Common Stock issuable to these entities, and they contend that the number of shares of Common Stock issuable to them should not consider the reverse stock split. The Company rejects these contentions in their entirety and, based on the advice of specially retained counsel, believes that these claims are without legal merit and not made in good faith. The Company intends to vigorously defend its interests and pursue other avenues of legal address. Through its counsel, the Company has advised these entities that unless they withdraw their request within a specified period, the Company will cancel the above referenced agreements and these parties’ right to receive any shares of the Company’s Common Stock. In April 2018, the Company withdrew the agreements and deposited the shares in total amount of issued under those agreements and the principal amount and accrued interestunpaid portion of the loan in escrow account. The depositinto Common Stock of the principal amount and accrued interest presented as restricted cash inCompany at the balance sheet asconversion rate of December 31, 2021.$1.03
NOTE 8 – LOANS per share.
Terms of Short-term Loans
SCHEDULE OF LOANS
Currency | Interest Rate | 2021 | 2020 | |||||||||||
December 31, | ||||||||||||||
Currency | Interest Rate | 2021 | 2020 | |||||||||||
(in thousands) | ||||||||||||||
Short term loans | USD | 1.00 | % | - | 145 | |||||||||
Total loans | $ | - | $ | 145 |
NOTE 911 – LEASES
The Company leases research and development facilities, equipment and offices under finance and operating leases. For leases with terms greater than 12 months, the Company recordrecords the related asset and obligation at the present value of lease payments over the term. Many of the leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate.
The Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company estimated the incremental borrowing rate to discount the lease payments based on information available at lease commencement.
Manufacturing facilities
The Company leases space for its manufacturing facilities in Israel under operating lease agreements. The leasing contracts are for a period of 3 – 5 years.years ..
F-31 |
Research and Development facilities
The Company leases space for its research and development facilities in South Korea under an operating lease agreement.agreements. The leasing contracts are for a period of 23 – 5 years.years .
Offices
The Company leases space for offices in Israel under operating leases. The leasing contracts are valid for terms of 5 years. These contracts are considered as operational leasing and under operating lease right-of-use assets.years .
Lease Position
The table below presents the lease-related assets and liabilities recorded on the balance sheet:
SCHEDULE OF LEASE-RELATED ASSETS AND LIABILITIES
2021 | 2020 | |||||||
December 31, | ||||||||
2021 | 2020 | |||||||
Assets | ||||||||
Operating Leases | ||||||||
Operating lease right-of-use assets | $ | 1,015 | $ | 1,474 | ||||
Finance Leases | ||||||||
Property, plants and equipment, gross | 91 | 99 | ||||||
Accumulated depreciation | (33 | ) | (17 | ) | ||||
Property and equipment, net | $ | 58 | $ | 82 | ||||
Liabilities | ||||||||
Current liabilities | ||||||||
Current maturities of operating leases | $ | 481 | $ | 485 | ||||
Current maturities of long-term finance leases | $ | 18 | $ | 19 | ||||
Long-term liabilities | ||||||||
Non-current operating leases | $ | 561 | $ | 1,020 | ||||
Long-term finance leases | $ | 41 | $ | 64 | ||||
Weighted Average Remaining Lease Term | ||||||||
Operating leases | 2.3 years | 3.4 years | ||||||
Finance leases | 3.2 years | 4.2 years | ||||||
Weighted Average Discount Rate | ||||||||
Operating leases | 6.9 | % | 6.7 | % | ||||
Finance leases | 2.0 | % | 2.0 | % |
2023 | 2022 | |||||||
December 31, | ||||||||
2023 | 2022 | |||||||
Assets | ||||||||
Operating Leases | ||||||||
Operating lease right-of-use assets | $ | 351 | $ | 2,304 | ||||
Finance Leases | ||||||||
Property, plants and equipment, gross | 89 | 222 | ||||||
Accumulated depreciation | (65 | ) | (68 | ) | ||||
Property and equipment, net | $ | 24 | $ | 154 | ||||
Liabilities | ||||||||
Current liabilities | ||||||||
Current maturities of operating leases | $ | 216 | $ | 542 | ||||
Current maturities of long-term finance leases | $ | 18 | $ | 60 | ||||
Long-term liabilities | ||||||||
Non-current operating leases | $ | 96 | $ | 1,728 | ||||
Long-term finance leases | $ | 4 | $ | 95 | ||||
Weighted Average Remaining Lease Term | ||||||||
Operating leases | 1.1 years | 4.7 years | ||||||
Finance leases | 1.2 years | 2.4 years | ||||||
Weighted Average Discount Rate | ||||||||
Operating leases | 7.5 | % | 8.0 | % | ||||
Finance leases | 2.0 | % | 6.4 | % |
Lease Costs
The table below presents certain information related to lease costs and finance and operating leases:
SCHEDULE OF LEASE COSTS
2021 | 2020 | 2023 | 2022 | |||||||||||||
Years ended December 31, | Years ended December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
Operating lease cost: | $ | 514 | 547 | $ | 561 | 546 | ||||||||||
Finance lease cost: | ||||||||||||||||
Amortization of leased assets | 20 | 17 | 46 | 43 | ||||||||||||
Interest on lease liabilities | 1 | 3 | 5 | 7 | ||||||||||||
Total finance lease cost | $ | 21 | 20 | $ | 51 | 50 |
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The table below presents supplemental cash flow information related to lease:
SCHEDULE OF SUPPLEMENTAL CASHFLOW INFORMATION
Years ended December 31, | Years ended December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in Thousands) | (in Thousands) | |||||||||||||||
Cash paid for amounts included in the measurement of leases liabilities: | ||||||||||||||||
Operating leases | $ | 526 | $ | 515 | $ | 573 | $ | 559 | ||||||||
Finance leases | $ | 20 | $ | 42 | $ | 44 | $ | 43 | ||||||||
Right-of-use assets obtained in exchange for lease obligations: | ||||||||||||||||
Operating leases | $ | - | $ | 967 | $ | 752 | $ | 432 | ||||||||
Finance leases | - | 366 | - | 136 |
Undiscounted Cash Flows
The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet.
SCHEDULE OF FINANCE LEASE LIABILITIES AND OPERATING LEASE LIABILITIES
Operating Leases | Finance Leases | Operating Leases | Finance Leases | |||||||||||||
Year ended December 31, | ||||||||||||||||
2022 | $ | 516 | $ | 19 | ||||||||||||
2023 | 338 | 19 | ||||||||||||||
2024 | 181 | 19 | $ | 231 | $ | 18 | ||||||||||
2025 | 54 | 4 | 99 | 4 | ||||||||||||
2026 | - | - | ||||||||||||||
2027 | - | - | ||||||||||||||
2028 | - | - | ||||||||||||||
Thereafter | - | - | ||||||||||||||
Total minimum lease payments | 1,089 | 61 | 330 | 22 | ||||||||||||
Less: amount of lease payments representing interest | (47 | ) | (2 | ) | (18 | ) | - | |||||||||
Present value of future minimum lease payments | 1,042 | 59 | 312 | 22 | ||||||||||||
Less: Current leases obligations | (481 | ) | (18 | ) | (216 | ) | (18 | ) | ||||||||
Long-term leases obligations | $ | 561 | $ | 41 | $ | 96 | $ | 4 |
Right-of-useOperating lease right-of-use assets by geographical location were as follows:
SCHEDULE OF RIGHT-OF-USE ASSETS BY GEOGRAPHICAL LOCATION
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Greece | $ | - | $ | 1,368 | ||||||||||||
Korea | $ | 432 | $ | 683 | - | 218 | ||||||||||
Israel | 365 | 496 | 292 | 580 | ||||||||||||
U.S. | 218 | 295 | 59 | 138 | ||||||||||||
Total | $ | 1,015 | $ | 1,474 | $ | 351 | $ | 2,304 |
F-33 |
NOTE 1012 – COMMITMENTS AND LICENSE AGREEMENTS
See Note 1113 for additional commitments for funding of the ventures of the company.related to Collaborations.
a. | Tel Hashomer Medical Research, Infrastructure and Services Ltd (“THM”) |
On February 2, 2012, the Company’s Israeli Subsidiary entered into a licensing agreement with THM. According to the agreement, the Israeli Subsidiary was granted a worldwide, royalty bearing, exclusive license to trans-differentiation of cells to insulin producing cells, including the population of insulin producing cells, methods of making this population, and methods of using this population of cells for cell therapy or diabetes treatment developed by Dr. Sarah Ferber of THM.
As consideration for the license, the Israeli Subsidiary will pay the following to THM:
1) | A royalty of |
2) |
3) | An annual license fee of $15 |
4) | Milestone payments as follows: |
a. | $50 |
b. | $50 |
c. | $150 |
d. | $750 |
e. | $2 million when worldwide net sales of Products (as defined in the agreement) have reached the amount of $150 million for the first time, (the “Sales Milestone”). |
As of December 31, 2021,2023, the Israeli Subsidiary had not reached any of these milestones.
In the event of closing of an acquisition of all of the issued and outstanding share capital of the Israeli Subsidiary and/or consolidation of the Israeli Subsidiary or the Company into or with another corporation (“Exit”), the THM shall be entitled to choose whether to receive from the Israeli Subsidiary a one-time payment based, as applicable, on the value of either shares of common stock of the Company at the time of the Exit or the value of shares of common stock of the Israeli Subsidiary at the time of the Exit.
b. Department De La Gestion Financiere Direction De L’analyse Financiere (“DGO6”)
b. | Department De La Gestion Financiere Direction De L’analyse Financiere (“DGO6”) |
(1) On November 17, 2014, the Belgian Subsidiary received the formal approval from the DGO6 for a Euro 2 million ($2.4 million) support program for the research and development of a potential cure for Type 1 Diabetes. The financial support was composed of Euro 1.085 million (7070%% of budgeted costs) grant for the industrial research part of the research program and a further recoverable advance of Euro 930 thousand (6060%% of budgeted costs) of the experimental development part of the research program. In December 2014, the Belgian Subsidiary received advance payment of Euro 1.209 million under the grant. The grants are subject to certain conditions with respect to the Belgian Subsidiary’s work in the Walloon Region. In addition, the DGO6 is also entitled to a royalty upon revenue being generated from any commercial application of the technology. In 2017 the Company received by the DGO6 final approval for Euro 1.8 million costs invested in the project out of which Euro 1.2 million funded by the DGO6. As of December 31, 2021,2023, the Company repaid to the DGO6 a total amount of approximately $145 thousand$167 in recoverable grants and an amount of $264 thousand was$243was recorded in other payables.advance payments on account of grant.
(2) In April 2016, the Belgian Subsidiary received the formal approval from DGO6 for a Euro 1.3 million ($1.5 million) support program for the development of a potential cure for Type 1 Diabetes. The financial support was awarded to the Belgium Subsidiary as a recoverable advance payment at 5555%% of budgeted costs, or for a total of Euro 717 thousand ($($800 thousand)). The grant will be paid over the project period. The Belgian Subsidiary received advance payment of Euro 438 thousand ($537 thousand)). Up through December 31, 2021,2023, an amount of Euro 358438 thousand ($406537 thousand)) was recorded as deduction of research and development expenses and an amount of Euro 74 thousand was74was recorded as advance payments on account of grant. This program was terminated in December 2023.
F-34 |
(3) On October 8, 2016, the Belgian Subsidiary received the formal approval from the DGO6 for a Euro 12.3 million ($12.8 million) support program for the GMP production of AIP cells for two clinical trials that will be performed in Germany and Belgium. The project will bewas to have been conducted during a period of three years commencing January 1, 2017.2017, and is currently on hold pending approval for an extension. The financial support is awarded to the Belgium subsidiary at 5555%% of budgeted costs, a total of Euro 6.8 million ($7 million). The grant will be paid over the project period. On December 19, 2016, the Belgian Subsidiary received a first payment of Euro 1.7 million ($2 million). As of December 31, 2021 the program is pending for extension approval.
(4) In December 2020, the Belgian Subsidiary received the formal approval from DGO6 for a Euro 2.9 million ($3.5 million) support program for research on Dermatitis Treatments and Wound Healing Using Cell Regenerative Technologies. The financial support was awarded to the Belgium Subsidiary as a recoverable advance payment at 6060%% of budgeted costs, or for a total of Euro 1.7 million ($2.1 million). The grant will be paid over the project period. The Belgian Subsidiary received advance payments of Euro 301 thousand ($($366 thousand)) in 2020 and of Euro 392 thousand ($445 thousand)) in 2021. The research program started in 2021. Up through December 31, 2023, an amount of Euro 965($1.047) was recorded in research and development expenses and have been submitted for approval to the Walloon region.
c. Israel-U.S. Binational Industrial Research and Development Foundation (“BIRD”)
c. | Israel-U.S. Binational Industrial Research and Development Foundation (“BIRD”) |
On September 9, 2015, the Israeli Subsidiary entered into a pharma Cooperation and Project Funding Agreement (CPFA) with BIRD and Pall Corporation, a U.S. company. BIRD awarded a conditional grant of up to $400 thousand each (according to terms defined in the agreement), for a joint research and development project for the use of Autologous Insulin Producing (AIP) Cells for the Treatment of Diabetes (the “Project”). Company received a total of $299 thousand under the grant. The project was completed in 2019. The grant is to be repaid at the rate of 55%% of gross sales generated from the Project. To date no sales have been generated.
d. Korea-Israel Industrial Research and Development Foundation (“KORIL”)
d. | Korea-Israel Industrial Research and Development Foundation (“KORIL”) |
On May 26, 2016, the Israeli Subsidiary and the Orgenesis Korean Subsidiary(an Octomera subsidiary), entered into a pharma Cooperation and Project Funding Agreement (CPFA) with KORIL. KORIL will make a conditional grant of up to $400 thousand to each company (according to terms defined in the agreement), for a joint research and development project for the use of AIP Cells for the Treatment of Diabetes (the “Project”). The Project started on June 1, 2016. The project was completed in 2021 and the Company is currently awaiting the grant audit report from KORIL.2021. The grant is to be repaid at the yearly rate of 2.52.5%% of gross sales. To date no sales have been generated. As of December 31, 2021,2023, the Israeli Subsidiary and the Korean SubsidiaryOrgenesis Korea received $440597 thousand under the grant.
e. BIRD Secant
e. | BIRD Secant |
On July 30, 2018, Orgenesis Inc and OBI entered into a collaboration agreement with Secant Group LLC (“Secant”). Under the agreement, Secant will engineer and prototype 3D scaffolds based on novel biomaterials and technologies involving bioresorbable polymer microparticles, while OBI will provide expertise in cell coatings, cell production, process development and support services. Under the agreement, Orgenesis is authorized to utilize the jointly developed technology for its autologous cell therapy platform, including its Autologous Insulin Producing (“AIP”) cell technology for patients with Type 1 Diabetes, acute pancreatitis and other insulin deficient diseases. In 2018, OBI entered into a Cooperation and Project Funding Agreement (CPFA) with the BIRD fund, which provided certain grant funding, and Secant.
As of December 31, 2021,2023, OBI had received a total amount of $425 thousand under the grant and the project was completed. The grant is to be repaid at the yearly rate of 55%% of gross sales. To date no sales have been generated.
f. |
On October 18, 2018, the Company and Hemogenyx Pharmaceuticals PLC., a corporation with its registered office in the United Kingdom and Hemogenyx-Cell (“H-Cell”), a corporation with its registered office in Belgium (together “Hemo”), who are engaged in the development of cell replacement bone marrow therapy technology, entered into a Collaboration Agreement (the “Hemo Agreement”) pursuant to which the parties will collaborate in the funding, continued development, and commercialization of the Hemo technology via Hemo. Pursuant to the Hemo agreement the Company and Hemogenyx LLC (“Hemo-LLC”) (a wholly owned US subsidiary of Hemo) entered into a loan agreement on November 7, 2018 according to which the Company agreed to loan Hemo-LLC not less than $1 million by way of a convertible loan. On November 25, 2018 the Company and Hemo entered into a License and Distribution agreement according to which Company received the worldwide rights to market the products under the agreement in consideration for the payment of a 12% royalty all subject to the terms of the agreement. As of December 31, 2021, no royalty incurring sales were made. On November 25, 2018, the Company and H-Cell signed an Exclusive Manufacturing agreement according to which the Company will receive the exclusive right to manufacture certain of H-Cell products. The Company recorded the loan amounts as research and development expenses under ASC 730-10-50 and 20-50 in 2018 and 2019. The loan amounts were repaid in 2021 and presented as other income.
g. Immugenyx LLC.
On October 16, 2018, the Company and Immugenyx LLC., a corporation with its registered office in the USA (“Immu”), which is engaged in the development of technology related to the production and use of humanized mice entered into a Collaboration Agreement (the “Immu Agreement”) pursuant to which the parties will collaborate in the funding, continued development, and commercialization of the Immu technology. Pursuant to the agreement, the Company received the worldwide rights to market the products under the agreement in consideration for the payment of a 12% royalty all subject to the terms of the agreement. As of December 31, 2021 no royalty incurring sales were made. Pursuant to the Immu agreement the Company and Immu entered into a loan agreement on November 7, 2018 according to which the Company agreed to loan Immu not less than US$1 million by way of a convertible loan. The Company recorded the loan amounts as research and development expenses under ASC 730-10-50 and 20-50 in 2018 and 2019. The loan amounts were repaid in 2021 and were presented as other income.
h. BG Negev Technologies and Applications (“BGN”).
On August 2, 2018, Company entered into a licensing agreement with BGN. According to the agreement, the Company was granted a worldwide, royalty bearing, exclusive license to develop and commercialize a novel alginate scaffold technology for cell transplantation focused on autoimmune diseases.
On November 25, 2018, the Company entered into a further licensing agreement with BGN. According to the agreement, the U.S. Subsidiary was granted a worldwide, royalty bearing, exclusive license to develop and commercialize technology directed to RAFT modification of polysaccharides and use of a bioreactor for supporting cell constructs.
As of December 31, 2021 no royalty incurring sales were made.
In January 2022, the Company terminated both of the licensing agreements with BGN effective April 26, 2022.
i. Sponsored Research and Exclusive License Agreement with Columbia University
Effective April 2, 2019, the Company and The Trustees of Columbia University in the City of New York, a New York corporation, (“Columbia”) entered into a Sponsored Research Agreement (the “SRA”) whereby the Company will provide financial support for studying the utility of serological tumor marker for tumor dynamics monitoring. Under the terms of the SRA, the Company shall pay $300 thousand per year for three years, or for a total of $900 thousand, with payments of $150 thousand due every six months.
Effective April 2, 2019, the Company and Columbia entered into an Exclusive License Agreement (the “Columbia License Agreement”) whereby Columbia granted to the Company an exclusive license to discover, develop, manufacture, sell, and otherwise distribute certain product in the field of cancer therapy. In consideration of the licenses granted under the Columbia License Agreement, the Company shall pay to Columbia (i) a royalty of 55%% of net sales of any product sold which incorporates a licensed Columbia patent and (ii) 2.52.5%% of net sales of other products. In addition, the Company shall pay a flat $100 thousand fee to Columbia upon the achievement of each regulatory milestone. As of December 31, 2021,2023, no royalty incurring sales were made.
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j. Regents of the University of California
g. | Regents of the University of California |
In December 2019, the Company and the Regents of the University of California (“University”) entered into a joint research agreement in the field of therapies and processing technologies according to an agreed upon work plan. According to the agreement, the Company will pay the University royalties of up to 55%% (or up to 2020%% of sub-licensing sales) in the event of sales that includes certain types of University owned IP. As of December 31, 2021,2023, no royalty incurring sales were made.
h. | Caerus Therapeutics Inc |
k. Caerus Therapeutics Inc
In October 2019, the Company and Caerus Therapeutics (“Caerus”), a Virginia company, concluded a license agreement whereby Caerus granted the Company an exclusive license to all Caerus IP relating to Advance Chemeric Antigen Vectors for Targeting Tumors for the development and/or commercialization of certain licensed products. In consideration for the License granted to the Company under this Agreement, the Company shall pay Caerus annual maintenance fees and royalties of sales of up to 55%% and up to 1818%% of sub-license fees. As of December 31, 2021,2023, no royalty incurring sales were made.
l. Tissue Genesis, LLC (“Tissue Genesis”)
i. | Tissue Genesis LLC |
Included in the Koligo acquisition (See Note 4)of 2020 were the assets of Tissue Genesis.Genesis LLC. The Company is committed to paying the previous owners of Tissue Genesis LLC or their assignees up to $500 thousand upon the achievement of certain performance milestones and earn-out payments on future sales provided that in no event will the aggregate of the earn-out payments exceed $4 million. To date, no performance milestones have been reached.
m. University of Louisville research foundation (“ULRF”)
j. | University of Louisville research foundation (“ULRF”) |
Koligo had exclusively licensed patents and technology from the ULRF related to the revascularization and 3D printing of cell and tissue for transplant (“ULRF licensed products”). The Company is committed to utilizing commercial reasonable efforts to achieving certain milestones regarding the ULRF licensed products. Pursuant to the license, Company will pay ULRF royalties of 3.5% of sales and certain performance milestones. During the year ended December 31, 2021, Company paid $40 thousand under its obligations.
n. Neuro-Immunotherapy Exclusive License Agreement
k. | Savicell |
During the twelve months ended December 31, 2021, the Company entered into an exclusive license agreement in the field of neuro-immunotherapy. Pursuant to the agreement, the Company received an exclusive, worldwide, sublicensable, royalty-bearing license of certain technology and patents for the purpose of developing, manufacturing, using, and commercializing the licenced technology. Royalties of between 0.5% and 5% on royalty-bearing sales are payable for up to 15 years from the date of first sale in any country in which licensed products are sold, and sublicense fees are payable at the rate of 12% on sublicense income (but no less than two percent (2.0%) of sublicenses’ net sales). Pursuant to the agreement, the Company is required to invest within thirty-six (36) months of the effective date an aggregate amount of at least $2 million in its efforts to develop the licensed technology.
o. Savicell
On June 14, 2021, the Company and Savicell Ltd (“Savicell”) entered into a collaboration agreement (the “Savicell Agreement”) to collaborate in the evaluation, continued development, validation, and use of Savicell’s platform designed for the early detection and diagnosis of diseases and conditions and for quality control and monitoring purposes, in conjunction with the Company’s systems. Pursuant to the Savicell Agreement, the Company will provide to Savicell funding for the performance of certain tasks agreed upon by the parties in a work plan. In consideration for such funding, Savicell will supply the Company with products developed under the Savicell Agreement at preferential rates and grant to the Company a worldwide exclusive licence to sell such products in the Company’s point-of-care network of hospitals, clinics and institutions for quality control and monitoring of manufacturing and processing of autologous immune cells manipulated by cell and gene therapies. The Company will be required to pay a 1010%% royalty for all gross sales of such products developed under the Savicell Agreement. As of December 31, 2021,2023, no royalty incurring sales were made.
Stromatis Pharma |
p. Stromatis Pharma
On June 15,During 2021, the Company and Stromatis Pharma Inc. (“Stromatis”) entered into a Collaboration and Sublicense Agreement (the “Stromatis Agreement”) to collaborate in refining methods for GMP manufacturing of CAR-T/CAR-NK CT109; and the development and validation of the Stromatis technology as it relates to the CAR-T/CAR-NK CT109 antibody up to and inclusive of filing of Investigational New Drug Application relating to Stromatis’ CAR-T/CAR-NK CT109 antibody (“Licensed Product”), in accordance with the agreed project plan (“Project”). The Company will fund the Project by providing Stromatis an amount of $1.2 million such funding to be provided based on approved projects. Stromatis will grant the Company certain perpetual, irrevocable royalty free and fully paid-up exclusive rights to manufacture, process and supply the Licensed Product (“Manufacturing Rights”) and perpetual, irrevocable, royalty bearing exclusive rights to market and sell and offer for sale the Licensed Product within the Company’s point of care network (“Marketing Rights”). As of December 31, 2021,2023, no royalty incurring sales were made.
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Stromatis has the option to convert the exclusive Manufacturing Rights to non-exclusive rights subject to repayment by Stromatis of an amount equal to funding provided by the Company and an additional payment by Stromatis of an ongoing revenue share of five percent (%) of revenues of any kind received by Stromatis or its affiliates from the sale or transfer of Licensed Products or license of rights under the licensed technology in relation to the Licensed Products. The Company shall pay Stromatis in consideration for the Marketing Rights and royalties equal to 1212%% of net revenues of Licensed Products received by the Company. The Company advanced to Stromatis an initial sum of $500 thousand under the Stromatis Agreement, which was recorded as costCost of revenues, development services and other research and development expenses, net.expenses.
m. | Helmholtz Zentrum München Deutsches Forschungszentrum für Gesundheit und Umwelt (GmbH)) (“HMGU”)- |
q. Helmholtz Zentrum München Deutsches Forschungszentrum für Gesundheit und Umwelt (GmbH)) (“HMGU”)
During September 2021, HMGU granted an exclusive licence under HGMU owned patent rights and non-exclusive license under HGMU know how and licensed materials, to the Company in the field of certain human stem cells. The Company incurred a one-time up-front payment of approximately $60 thousand and annual license maintenance fees of between $18 thousand and $36 thousand. In addition, payments will be due by the Company upon certain milestones. The agreement also includes payment of royalties of between 33%% and 44%% on net sales of licensed product (with a minimum annual royalty of Euro 200,000, creditable against royalties on net sales incurred during such contract year) and 55%% in service revenues and payment of between 1010%% and 1818%% on sublicense revenues.
n. | License and research agreement with Yeda Research and Development Company Limited |
On January 25, 2022, the Company and Yeda Research and Development Company Limited (“Yeda”), an Israeli company, entered into a license and research agreement. No royalty bearing sales were made and the Company terminated this agreement during 2023.
o. | European Innovation Council and SMEs Executive Agency (“EISMEA”) |
During the year ended December 31, 2022, the Dutch Subsidiary, together with a consortium of other entities (“Consortium”) and EISMEA entered into a grant funding agreement for the funding of the development of an artificial intelligence guided microfluidic device that standardizes the GMP production of autologous induced pluripotent stem cells (iSPSCs) at greatly reduced costs (“iPSC project”). The total grant amount is Euro 3.999 million of which the Dutch subsidiary is eligible to receive up to Euro 1.179 million. The project started on September 1, 2022 and is expected to end on August 31, 2026. The Dutch subsidiary is the consortium leader for the iPSC project. During the year ended 31 December 2022, the subsidiary received initial working capital in the amount of Euro 1.920 million of which Euro 1.338 million was received on behalf of the other members of the Consortium and recorded in restricted cash, and Euro 582 for the use of the subsidiary as per the grant agreement. As at December 31, 2023, the restricted cash related to the iPSC project was $184. During the year ended December 31, 2023, the Company recognized grant income of $259 which was offset against research and development expenses.
p. | Walloon region ATMP PIT |
In December 2023, the Belgian Subsidiary received Euro 738 ($801) as an advance grant from the Walloon region ATMP PIT for the Exofasttrack project. This project is focused on manufacturing, loading, analytical methods, and quality control of Therapeutic Exosomes. The amount was recorded in advance payments on account of grant.
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NOTE 1113 – COLLABORATIONS
a. | Adva Biotechnology Ltd. |
a. Adva Biotechnology Ltd.
On January 28, 2018, the Company and Adva Biotechnology Ltd. (“Adva”), entered into a Master Services Agreement (“MSA”), pursuant to which the Company and/or its affiliates provided certain services relating to development of products for Adva.
In consideration for and subject to the fulfillment by the Company of certain funding commitments which were completed in 2019, Adva agreed that upon completion of the development of the products, the Company and/or its affiliates and Adva shall enter into a supply agreement pursuant to which for a period of eight (8) years following execution of such supply agreement, the Company and/or its affiliates (as applicable) is entitled (on a non-exclusive basis) to purchase the products from Adva at a specified discount pricing from their then standard pricing. The Company and/or its affiliates were also granted a non-exclusive worldwide right to distribute such products, directly or indirectly. The MSA shall remain in effect for 10 years unless earlier terminated in accordance with its terms.
Revised and restated joint venture agreements |
b. IRB Approval for Liver Cell Collection
On April 29, 2019, the Company received Institutional Review Board (“IRB”) approval to collect liver biopsies from patients at Rambam Medical Center located in Haifa, Israel for a planned study to confirm the suitability of liver cells for personalized cell replacement therapy for patients with insulin-dependent diabetes resulting from total or partial pancreatectomy. The liver cells are intended to be bio-banked for potential future clinical use.
The goal of the proposed study, entitled “Collection of Human Liver Biopsy and Whole Blood Samples from Type 1 Diabetes Mellitus (T1DM), Total or Partial Pancreatectomy Patients for Potential use as an Autologous Source for Insulin Producing Cells in Future Clinical Studies,” is to confirm the suitability of the liver cells for personalized cell replacement therapy, as well as eligibility of patients to participate in a future clinical study, as defined by successful AIP cell production from their own liver biopsy. The secondary objective of the study is to evaluate patients’ immune response to AIPs based on the patient’s blood samples and followed by subcutaneous implantation into the patients’ arm which would represent the first human trial. The Company has developed a novel technology based on technology licensed from Tel Hashomer Medical Research Infrastructure and Services Ltd., utilizing liver cells as a source for AIP cells as replacement therapy for islet transplantation.
During the study, liver samples will be collected and then processed and stored in specialized, clinical grade, tissue banks for potential clinical use. The propagated cells will be maintained in a tissue bank and are intended to be utilized in a future clinical study, in which the cells will be transdifferentiated and administered back to the patients as a potential treatment. This personalized autologous process will be performed under our POC platform in which the patient liver samples are processed, cryopreserved and potentially re-injected, all in the medical center under clinical grade/GMP level conditions.
In June 2019,January 2023the Company entered into updated joint venture (JV) agreements (JVAs) with Theracell Advanced Biotechnology SA, Broaden Bioscience and Technology Corp, Image Securities FZC, Cure Therapeutics, and Med Centre for Gene and Cell Therapy FZ-LLC and assigned certain rights and obligations under its JVAs to Texas Advanced Therapies LLC, a Delaware Limited Liability company (“Texas AT”) not related to the Company received additional Institutional Review Board (“IRB”) approval to collect liver biopsies from patients at a leading medical center in USA for a planned study to confirm the suitability of liver cells for personalized cell replacement therapy for patients with insulin-dependent diabetes resulting from total pancreatectomy (the granted Orphan Drug Designation indication). Two liver samples have been processed and stored for potential clinical use.
c. FDA Approval for Orphan Drug Designation for AIP Cells
On June 11, 2019, the FDA granted Orphan Drug Designation forCompany. Texas AT will receive the Company’s AIP cells asoption to require the incorporation of the JV entity, Company’s share in the JV Entity, if and when the latter are incorporated, an option to invest additional funding in the JV Entity, and board and veto rights on certain critical decisions in the JV Entity. The Company has retained the call option to acquire the JV partner’s share in the JVE, to receive a cell replacement therapy forroyalty and a right to conclude the treatment of severe hypoglycemia-prone diabetes resulting from total pancreatectomy (“TP”) due to chronic pancreatitis.
d. Johns Hopkins University
DuringManufacturing and Service Agreement with the year ended December 31, 2021, the Company and Johns Hopkins University entered into a sublease and construction agreement for the establishment of a clinical therapeutic development and point of care center in Maryland of approximately 6,830 rentable square feet.JV entity. Pursuant to the agreement,JVAs, the Company will pay for certain leasehold improvements inno longer be entitled to the premises according to plans and specifications to be agreed upon.additional share of fifteen percent of the JVE’s GAAP profit after tax granted as per the previous version of the JVAs. The Company advanced an initial $510 thousand for this purpose. The costsalso has no further obligation to provide any additional funding to the JV entities. As of the leasehold improvements will be offset by up to $5 millionDecember 31, 2023, no JV entities were incorporated pursuant to a grant from the Board of Public Works of the State of Maryland to Johns Hopkins University. The annual base rent is initially $260 thousand per year, increasing to $324 thousand per year over the 10-year initial lease term. The Company has an option to renew the sublease for two additional periods of five years each under the same terms and conditions. The Company is expected to gain occupancy of the premises during the second quarter of 2022.
e. Joint venture agreements
The Company has entered into joint venture agreements (“JVAs”) with its joint venture partners (Company and partner are referred to as “Parties”) to facilitate the collaboration in the field of CGT development and development of the Company’s worldwide POCare network. During 2021, the Company and / or JV partner continued the POCare network expansion in each of the territories as relevant. The provisos and the table below summarize the major agreements. CGT and POCare activities covered by the JVAs include the development, marketing, clinical development, and commercialization of the Company’s and / or partner’s products within defined territories. The extent of the collaboration is set out in each agreement.
Unless otherwise stated in the table below the JVAs include the following provisos (“Provisos”):JVAs.
Mircod | ||||
| ||||
| ||||
| ||||
On July 25, 2023, the Company and Mircod LLC (“Mircod”) entered into a settlement and release agreement pursuant to which they agreed to terminate the joint venture and loan agreement between themselves. Also, pursuant to the agreement, Mircod agreed to deliver all the related deliverables to the Company, and the Company agreed to pay Mircod consideration in the amount of $1,000, of which half will be paid in cash, and one half in Orgenesis shares, upon receipt of the deliverables. As of December 31, 2023, Mircod invoiced the Company $300 in respect of deliverables that it claims were delivered and this amount is included in accounts payable.
On July 25, 2023, the Company, a Sub-licensee, and the equity interest owner of that Sub-licensee (“Sub-licensee Owner”), entered into agreements whereby:
2) | subject to the |
The Company has received $215 from Sub-licensee as an advance on account of future license fees. No milestones have been completed to date.
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NOTE 12 – INVESTMENTS IN ASSOCIATES, NET
a. Theracell Laboratories Private Company
During 2020, the CompanyIn November 2021, Deep Med IO Ltd (“Deep Med”) and Theracell, pursuant to the Greek JVA (See Note 11) incorporated the Greek JVA entity known as Theracell Laboratories Private Company (“TLABS”). The Theracell Project activities will be run through TLABS. The Company and Theracell each hold a 50% participating interest in TLABS. Due to the Company’s significant influence over the JVE the Company applies the equity method of accounting.
b. Butterfly Biosciences Sarl
During 2020, the Company and Kidney Cure (“KC”), pursuant to the Kidney Cure JVA (See Note 11) incorporated the KC JV Entity known as Butterfly Biosciences Sarl (“BB”) in Switzerland. BB will be involved in the (i) implementation of a point-of-care strategy; (ii) assessment of the options for development and manufacture of various cell-based types (including kidney derived cells, MSC cells, exosomes, gene therapies) development; and (iii) development of protocols and tests for kidney therapies (the “BB Project”). The Company holds a 49% participating interest in BB and Kidney Cure holds the remaining 51%. Due to the Company’s significant influence over the JVE the Company applies the equity method of accounting.
c. RevaCel
During 2021, the Company and Revatis S.A (“Revatis”), pursuant to the Revatis JVA (See Note 11) incorporated the Revatis JV Entity known as RevaCel Srl (“RevaCel”) in Belgium. RevaCel will develop products in the field of muscle-derived mesenchymal stem/progenitor cells. The Company holds a 51% participating interest in RevaCel and Revatis holds the remaining 49% and is entitled to appoint 2 of the 5 members of RevaCel’s board. Due to the Company’s significant influence over the JVE the Company applies the equity method of accounting.
d. The table below sets forth a summary of the changes in the investments for the years ended December 31, 2021 and December 31, 2020:
SCHEDULE OF CHANGES IN INVESTMENTS
2021 | 2020 | |||||||
December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Opening balance | $ | 175 | $ | - | ||||
Investments during the period | 260 | 69 | ||||||
Share in net loss of associated companies | (272 | ) | 106 | |||||
Exchange rate differences | (11 | ) | - | |||||
Total | $ | 152 | $ | 175 | ||||
Ending balance | $ | 152 | $ | 175 |
NOTE 13 – EQUITY
a. Financings
On January 20, 2020, the Company entered into a Securities Purchase Agreement (the “January Purchase Agreement”) with certain investors pursuantJVA. The Parties agreed to whichcollaborate in the Company issueddevelopment and sold,commercialization of an AI-powered system to be used in a private placement (the “Offering”), sharesthe manufacturing and/or quality control of Common Stock at a purchase price of $ per share (the “Shares”) and warrants to purchase up to 1,000,000 shares of Common Stock at an exercise price of $5.50 per share (the “Warrants”) which are exercisable between June 2021 and January 2023.CGTs. The Company received gross proceeds of approximately $9.24 million before deducting related offering expenses in the amount of $0.8 million. The fair value of those warrants as of the date of grant using the Black-Scholes valuation model was $1.911 million.
b. Tamir Biotechnology, Inc.
For the acquisition of Tamir, see Note 4.
As aggregate consideration for the acquisition, the Company issued an aggregate of shares of Common Stock to Tamir.
c. Koligo Therapeutics Inc.
For the acquisition of Koligo, see Note 4.
Pursuant to the terms of the Merger Agreement, at the Effective Time, the shares of capital stock of Koligo that were issued and outstanding immediately prior to the Effective Time were automatically cancelled and converted intohas the right to receive, subjectfinance its activities under the Deep Med JVA by procuring services, advancing funds under a convertible loan agreement, or by an equity investment. The Deep Med convertible loan bears interest at the annual rate of 6% and is repayable after 5 years. The Company has the right to customary adjustments, an aggregate of convert its holdings under the loan into shares of Company common stock which have been issued to Koligo’s accredited investors (with certain non-accredited investors being paid solely in cash in the amount of approximately $20 thousand). In addition, the Company issued Deep Med, or into shares to Maxim Group LLC for advisory services in connection with the Merger.
d. Warrants
A summary of the Company’s warrants granted to investors and as finder’s fees as of December 31, 2021, and December 31, 2020 and changes for the periods then ended is presented below:
SCHEDULE OF WARRANTS ACTIVITY
December 31, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
Number of Warrants | Weighted Average Exercise Price $ | Number of Warrants | Weighted Average Exercise Price $ | |||||||||||||
Warrants outstanding at the beginning of the period | 7,070,241 | 6.20 | 6,010,087 | 6.35 | ||||||||||||
Changes during the period: | ||||||||||||||||
Issued | 926,413 | 6.24 | 1,344,606 | 5.64 | ||||||||||||
Exercised | (319,811 | ) | 6.19 | - | - | |||||||||||
Expired | (4,634,323 | ) | 6.29 | (284,452 | ) | 6.53 | ||||||||||
Warrants outstanding and exercisable at end of the period* | 3,042,521 | 6.09 | 7,070,241 | 6.20 |
Deep Med JV entity once established. During the yeartwelve months ended December 31, 2021,2022, the Company received approximatelytransferred $1.9 million fromto Deep Med as part of its commitment under the exercise of warrants forDeep Med JVA. The Company recorded the purchase ofamounts paid to Deep Med under the Company’s Common Stock at a weighted average price of $,Deep Med JVA as research and shares were issued accordingly.
As of December 31, 2021 and December 31, 2020, there are no warrants that are subject to exercise price adjustments.
e. Treasury shares
development expenses under ASC 730. During the yeartwelve months ended December 31, 2021,2023, the Company repurchased its sharesand Deep Med suspended all work under a stock repurchasethe work plan (the “Stock Repurchase Plan”). The following table summarizes the share repurchase activity pursuant to the Stock Repurchase Plan during the year ended December 31, 2021.
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Value that May Yet Be Purchased Under the Plans or Programs | |||||||||||||
(in thousands) | ||||||||||||||||
January 2021 | 2,306 | $ | 4.45 | $ | 10,255 | $ | 9,740 | |||||||||
April 2021 | 8,850 | 4.49 | 39,730 | 9,699 | ||||||||||||
May 2021 | 195,625 | 4.34 | 848,234 | 8,841 | ||||||||||||
November 2021 | 24,477 | 4.32 | 105,806 | 8,734 | ||||||||||||
231,258 | $ | 4.34 | $ | 1,004,025 | $ | 8,734 |
The following table summarizes the share repurchase activity from the inception of the Stock Repurchase Plan through December 31, 2020.pending further discussions.
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Value that May Yet Be Purchased Under the Plans or Programs | |||||||||||||
(in thousands) | ||||||||||||||||
October 2020 | $ | 8,807 | $ | 4.47 | $ | 8,807 | $ | 9,960 | ||||||||
November 2020 | 101 | 4.50 | 101 | 9,960 | ||||||||||||
December 2020 | 46,401 | 4.47 | 46,401 | 9,750 | ||||||||||||
55,309 | $ | $ | 4.47 | $ | 55,309 | $ | 9,750 |
SCHEDULE OF BASIC AND DILUTED LOSS PER SHARE
2021 | 2020 | |||||||
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands, except per share data) | ||||||||
Basic and diluted: | ||||||||
Net loss from continuing operations attributable to Orgenesis Inc. | $ | 18,053 | $ | 95,088 | ||||
Net income from discontinued operations attributable to Orgenesis Inc. for loss per share | - | (96,198 | ) | |||||
Adjustment of redeemable non-controlling interest to redemption amount | - | (5,160 | ) | |||||
Basic: Net income (loss) available to common stockholders | - | (101,358 | ) | |||||
Net (income) loss attributable to Orgenesis Inc. for loss per share | 18,053 | (6,270 | ) | |||||
Weighted average number of common shares outstanding | 24,273,658 | 21,320,314 | ||||||
Loss per common share from continuing operations | $ | 0.74 | $ | 4.46 | ||||
Net income common share from discontinued operations | $ | - | $ | (4.75 | ) | |||
Net (income) loss per share | $ | 0.74 | $ | (0.29 | ) |
2023 | 2022 | |||||||
Years ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands, except per share data) | ||||||||
Basic and diluted: | ||||||||
Net loss attributable to Orgenesis Inc | $ | 55,361 | $ | 14,889 | ||||
Weighted average number of common shares outstanding | ||||||||
Net loss per share | $ | $ |
For the year ended December 31, 2021,2023, and December 31, 2020,2022, all outstanding convertible notes, options, RSUs and warrants have been excluded from the calculation of the diluted net loss per share since their effect was anti-dilutive. Diluted loss per share does not include shares underlying outstanding options, RSUs and warrants and shares upon conversion of convertible loans for the year ended December 31, 2021,2023, because the effect of their inclusion in the computation would be anti-dilutive. Diluted loss per share does not include shares underlying outstanding options and warrants and shares upon conversion of convertible loans for the year ended December 31, 2020,2022, because the effect of their inclusion in the computation would be antidilutive.
a. | Global Share Incentive Plan |
The Company’s stockholders have approved the 2017 Equity Incentive Plan (the “2017 Plan”) under which, the Company had reserved a pool of shares of the Company’s common stock, which may be issued at the discretion of the Company’s board of directors from time to time. Under this Plan, each option is exercisable into one share of common stock of the Company. The options may be exercised after vesting and in accordance with the vesting schedule that will be determined by the Company’s board of directors for each grant. The maximum contractual life term of the options is years. As of December 31, 2021,2023, total options granted under this plan are and the total options that are available for grants under this plan are .
On May 23, 2012, the Company’s board of directors adopted the Global Share Incentive Plan 2012 (the “2012 Plan”) under which, the Company had reserved a pool of shares of the Company’s common stock, which may be issued at the discretion of the Company’s board of directors from time to time. Under this plan, each option is exercisable into one share of common stock of the Company. The options may be exercised after vesting and in accordance with the vesting schedule that will be determined by the Company’s board of directors for each grant. The maximum contractual life term of the options is years. As of December 31, 2021,2023, total options granted under this plan are and the total options that are available for grants under this plan are .
F-39 |
b. | Options Granted to Employees and Directors |
Below is a table summarizing all of the options grants to employees and Directors made during the years ended December 31, 2021,2023, and December 31, 2020:2022:
SCHEDULE OF EMPLOYEE STOCK OWNERSHIP PLAN DISCLOSURES
Year Ended | No. of options granted | Exercise price | Vesting period | Fair value at grant (in thousands) | Expiration period | Year Ended | No. of options granted | Exercise price | Vesting period | Fair value at grant (in thousands) | Expiration period | |||||||||||||||||||||||||||||
Employees | December 31, 2021 | 277,000 | $ | -$ | Quarterly over a period of | $ | 812 | years | December 31, 2023 | 318,000 | $ -$ | 51% Quarterly over a period of two years and the rest quarterly over a period of | 148 | years | ||||||||||||||||||||||||||
Directors | December 31, 2021 | 84,650 | $ | 2.89 | $ | 149 | years | December 31, 2023 | 84,650 | $ | 0.45 | 26 | years | |||||||||||||||||||||||||||
Employees | December 31, 2020 | 531,450 | $ | -$ | Quarterly over a period of t | $ | 1,312 | years | December 31, 2022 | 440,250 | $ -$ | Quarterly over a period of | $ | 559 | years | |||||||||||||||||||||||||
Directors | December 31,2020 | 145,050 | $ | -$ | 96% on the one-year anniversary, and the remaining 4% in three equal instalments on the first, second and third year anniversaries | $ | 377 | years | December 31, 2022 | 84,650 | 1.86 | $ | 100 | years |
The fair value of each stock option grant is estimated at the date of grant using a Black Scholes option pricing model. The volatility is based on the historical volatility of the Company, by statistical analysis of the weekly share price for past periods based on expected term. The expected option term is calculated using the simplified method, as the Company concludes that its historical share option exercise experience does not provide a reasonable basis to estimate its expected option term. The fair value of each option grant is based on the following assumptions:
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
Value of one common share | $ -$ | $ -$ | ||||||
Dividend yield | 0 | % | 0 | % | ||||
Expected stock price volatility | %- | % | %- | % | ||||
Risk free interest rate | %- | % | %- | % | ||||
Expected term (years) | - | - |
Years Ended December 31, | ||||
2023 | 2022 | |||
Value of one common share | $ | -$$ | -$||
Dividend yield | 0% | 0% | ||
Expected stock price volatility | %- % | %- % | ||
Risk free interest rate | %- % | %- % | ||
Expected term (years) | - | - |
SCHEDULE OF STOCK OPTIONS ACTIVITY
Years Ended December 31 | ||||||||||||||||
2021 | 2020 | |||||||||||||||
Number of Options | Weighted Average Exercise Price $ | Number of Options | Weighted Average Exercise Price $ | |||||||||||||
Options outstanding at the beginning of the period | 2,917,667 | 4.05 | 2,465,522 | 4.44 | ||||||||||||
Changes during the period: | ||||||||||||||||
Granted | 361,650 | 4.19 | 676,500 | 3.74 | ||||||||||||
Exercised | *(13,750 | ) | 4.63 | - | - | |||||||||||
Expired | (20,813 | ) | 5.67 | (11,876 | ) | 7.88 | ||||||||||
Forfeited | (34,749 | ) | 4.67 | (57,042 | ) | 4.52 | ||||||||||
Cancelled | - | - | (155,437 | ) | 8.38 | |||||||||||
Options outstanding at end of the period | 3,210,005 | 4.05 | 2,917,667 | 4.05 | ||||||||||||
Options exercisable at end of the period | 2,777,563 | 4.00 | 2,299,937 | 4.03 |
Years Ended December 31 | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Number of Options | Weighted Average Exercise Price $ | Number of Options | Weighted Average Exercise Price $ | |||||||||||||
Options outstanding at the beginning of the period | 3,035,465 | 4.17 | 3,210,005 | 4.05 | ||||||||||||
Changes during the period: | ||||||||||||||||
Granted | 402,650 | 0.64 | 524,900 | 1.98 | ||||||||||||
Exercised* | - | - | (510,017 | ) | 0.01 | |||||||||||
Expired | (178,837 | ) | 4.92 | (125,426 | ) | 8.8 | ||||||||||
Forfeited | (231,809 | ) | 1.04 | (63,997 | )- | 4.13 | ||||||||||
Options outstanding at end of the period | 3,027,469 | 3.89 | 3,035,465 | 4.17 | ||||||||||||
Options exercisable at end of the period | 2,740,382 | 4.18 | 2,565,919 | 4.51 |
* | During the year ended December 31, |
F-40 |
SCHEDULE OF STOCK OPTIONS EXERCISABLE
Exercise Price $ | Number of Outstanding Options | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value $ |
Number of Exercisable Options | Aggregate Exercisable Options Value $ | |||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||
0.0012 | 230,189 | 663 | 230,189 | - | ||||||||||||||||||
0.012 | 510,017 | 1,463 | 510,017 | 6 | ||||||||||||||||||
2.89 | 84,650 | - | - | - | ||||||||||||||||||
2.96 | 63,500 | - | - | - | ||||||||||||||||||
2.99 | 432,200 | - | 431,638 | 1,291 | ||||||||||||||||||
3.14 | 2,500 | - | 2,500 | 8 | ||||||||||||||||||
4.42 | 50,000 | - | 50,000 | 221 | ||||||||||||||||||
4.5 | 34,000 | - | 34,000 | 153 | ||||||||||||||||||
4.6 | 174,800 | - | 112,488 | 517 | ||||||||||||||||||
4.7 | 6,250 | - | 2,083 | 10 | ||||||||||||||||||
4.8 | 483,337 | - | 483,337 | 2,320 | ||||||||||||||||||
5.02 | 78,500 | - | - | - | ||||||||||||||||||
5.07 | 52,500 | - | 52,500 | 266 | ||||||||||||||||||
5.1 | 60,500 | - | 44,750 | 228 | ||||||||||||||||||
5.99 | 327,050 | - | 297,425 | 1,782 | ||||||||||||||||||
6 | 16,667 | - | 16,667 | 100 | ||||||||||||||||||
6.84 | 15,125 | - | 12,453 | 85 | ||||||||||||||||||
7.2 | 83,334 | - | 83,334 | 600 | ||||||||||||||||||
8.36 | 250,001 | - | 250,001 | 2,090 | ||||||||||||||||||
8.91 | 15,000 | - | 15,000 | 134 | ||||||||||||||||||
9 | 20,834 | - | 20,834 | 187 | ||||||||||||||||||
9.48 | 58,908 | - | 58,908 | 558 | ||||||||||||||||||
10.2 | 39,267 | - | 39,267 | 401 | ||||||||||||||||||
3,210,005 | 2,126 | 2,777,563 | 11,111 |
Exercise Price $ | Number of Outstanding Options | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value $ |
Number of Exercisable Options | Aggregate Exercisable Options Value $ | |||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||
0.0012 | 230,189 | 0.64 | 115 | 230,189 | - | |||||||||||||||||
0.45 | 149,150 | 9.97 | 7 | - | - | |||||||||||||||||
1.86 | 84,650 | 8.99 | - | 84,650 | 157 | |||||||||||||||||
2.89 | 84,650 | 7.96 | - | 84,650 | 245 | |||||||||||||||||
2 | 321,878 | 7.67 | - | 249,566 | 499 | |||||||||||||||||
2.01 | 71,563 | 8.29 | - | 38,563 | 78 | |||||||||||||||||
2.96 | 47,250 | 5.03 | - | 47,250 | 140 | |||||||||||||||||
2.99 | 401,950 | 5.69 | - | 401,950 | 1,202 | |||||||||||||||||
3.14 | 2,500 | 5.91 | - | 2,500 | 8 | |||||||||||||||||
4.5 | 22,500 | 4.86 | - | 22,500 | 101 | |||||||||||||||||
4.6 | 140,800 | 6.96 | - | 140,800 | 648 | |||||||||||||||||
4.7 | 6,250 | 6.03 | - | 6,250 | 29 | |||||||||||||||||
4.8 | 483,337 | 2.94 | - | 483,337 | 2,320 | |||||||||||||||||
5.02 | 42,625 | 4.60 | - | 42,625 | 214 | |||||||||||||||||
5.07 | 49,500 | 5.19 | - | 49,500 | 251 | |||||||||||||||||
5.1 | 32,500 | 4.51 | - | 32,500 | 166 | |||||||||||||||||
5.12 | 97,375 | 6.40 | - | 97,375 | 499 | |||||||||||||||||
5.99 | 312,050 | 4.47 | - | 312,050 | 1,868 | |||||||||||||||||
6 | 16,667 | 0.59 | - | 16,667 | 100 | |||||||||||||||||
6.84 | 12,000 | 6.38 | - | 12,000 | 82 | |||||||||||||||||
7.2 | 83,334 | 3.43 | - | 83,334 | 600 | |||||||||||||||||
8.36 | 250,001 | 4.50 | - | 250,001 | 2,090 | |||||||||||||||||
8.91 | 15,000 | 4.46 | - | 15,000 | 134 | |||||||||||||||||
3,027,469 | 5.23 | 122 | 2,740,382 | 11,462 |
Costs incurred with respect to stock-based compensation for employees and directors for the years ended December 31, 20212023 and December 31, 20202022 were $ thousand and $ thousand, respectively, out of which $ thousand related to options granted to employees of Masthercell Global, for the years ended December 31, 2020, and presented as part of net loss from discontinued operations in the consolidated statements of comprehensive loss.respectively. As of December 31, 2021,2023, there was $ thousand of unrecognized compensation costs related to non-vested employees and directors stock options, to be recorded over the next years.
Options Granted to Consultants and service providers |
c. Options Granted to Consultants and service providers
SCHEDULE OF STOCK OPTIONS GRANTED TO CONSULTANTS
Year of grant | No. of options granted | Exercise price | Vesting period | Fair value at grant (in thousands) | Expiration period | Year of grant | No. of options granted | Exercise price | Vesting period | Fair value at grant (in thousands) | Expiration period | |||||||||||||||||||||||||
Non-employees | 2021 | 7,500 | $ | Quarterly over a period of years | $ | 22 | years | 2023 | 8,335 | $ | 1.36 | Annually over a period of | years$ | 9 | years | |||||||||||||||||||||
Non-employees | 2020 | 62,500 | $ | -$ | Quarterly over a period of years | $ | 209 | years | 2022 | 28,335 | $ | 2 | Quarterly over a period of | years$ | 48 | years |
F-41 |
The fair value of options granted during 20212023 and 20202022 to consultants and service providers, was computed using the Black-Scholes model. The fair value of each stock option grant is estimated at the date of grant using a Black Scholes option pricing model. The volatility is based on the historical volatility of the Company, by statistical analysis of the weekly share price for past periods based on the expected term period, the expected term is the contractual term of each grant. The underlying data used for computing the fair value of the options are as follows:
Years Ended December 31, | Years Ended December 31, | |||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||
Value of one common share | $ | $ | -$ | $ | $ | |||||||
Dividend yield | % | % | 0% | 0% | ||||||||
Expected stock price volatility | % | %- % | % | % | ||||||||
Risk free interest rate | % | %- % | % | %- % | ||||||||
Expected term (years) |
SCHEDULE OF STOCK OPTIONS ACTIVITY
Years Ended December 31, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
Number of Options | Weighted Average Exercise Price $ | Number of Options | Weighted Average Exercise Price $ | |||||||||||||
Options outstanding at the beginning of the year | 549,141 | 5.89 | 598,310 | 5.76 | ||||||||||||
Changes during the year: | ||||||||||||||||
Granted | 7,500 | 2.96 | 62,500 | 3.97 | ||||||||||||
Exercised | - | - | (83,334 | ) | 3.60 | |||||||||||
Forfeited | (8,950 | ) | 3.88 | (8,335 | ) | 5.99 | ||||||||||
Cancelled | - | - | (20,000 | ) | 5.30 | |||||||||||
Options outstanding at end of the year | 547,691 | 5.89 | 549,141 | 5.89 | ||||||||||||
Options exercisable at end of the year | 467,689 | 6.20 | 450,972 | 6.28 |
Years Ended December 31, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Number of Options | Weighted Average Exercise Price $ | Number of Options | Weighted Average Exercise Price $ | |||||||||||||
Options outstanding at the beginning of the year | 517,175 | 4.88 | 547,691 | 5.89 | ||||||||||||
Changes during the year: | ||||||||||||||||
Granted | 8,335 | 1.36 | 28,335 | 2.00 | ||||||||||||
Expired | (23,334 | ) | 6.04 | (58,851 | ) | 12.85 | ||||||||||
Forfeited | (235,109 | ) | 4.42 | - | - | |||||||||||
Options outstanding at end of the year | 267,067 | 5.07 | 517,175 | 4.88 | ||||||||||||
Options exercisable at end of the year | 206,062 | 5.71 | 453,005 | 5.11 |
SCHEDULE OF STOCK OPTIONS EXERCISABLE
Exercise Price $ | Number of Outstanding Options | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value* $ |
Number of Exercisable Options |
Aggregate Exercisable Options Value $ | |||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||
2.96 | 7,500 | - | - | - | ||||||||||||||||||
2.99 | 35,000 | - | - | - | ||||||||||||||||||
3.14 | 11,250 | - | 11,250 | 35 | ||||||||||||||||||
3.36 | 136,775 | - | 136,775 | 459 | ||||||||||||||||||
4.09 | 25,000 | - | 25,000 | 102 | ||||||||||||||||||
4.42 | 5,125 | - | 5,125 | 23 | ||||||||||||||||||
4.5 | 13,335 | - | 5,000 | 23 | ||||||||||||||||||
4.6 | 20,000 | - | 4,000 | 18 | ||||||||||||||||||
4.8 | 16,668 | - | 16,668 | 80 | ||||||||||||||||||
5.07 | 5,000 | - | 1,000 | 5 | ||||||||||||||||||
5.3 | 15,000 | - | 15,000 | 80 | ||||||||||||||||||
5.99 | 16,670 | - | 16,670 | 100 | ||||||||||||||||||
6 | 90,000 | - | 90,000 | 540 | ||||||||||||||||||
6.84 | 7,500 | - | - | - | ||||||||||||||||||
7 | 70,000 | - | 70,000 | 490 | ||||||||||||||||||
7.32 | 8,334 | - | 8,334 | 61 | ||||||||||||||||||
8.34 | 8,600 | - | 8,600 | 72 | ||||||||||||||||||
8.43 | 8,333 | - | 6,666 | 56 | ||||||||||||||||||
11.52 | 8,334 | - | 8,334 | 96 | ||||||||||||||||||
16.8 | 39,267 | - | 39,267 | 660 | ||||||||||||||||||
547,691 | - | 467,689 | 2,900 |
Exercise Price $ | Number of Outstanding Options | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value $ |
Number of Exercisable Options | Aggregate Exercisable Options Value $ | |||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||
2 | 28,335 | 8.46 | - | - | - | |||||||||||||||||
2.96 | 7,500 | 7.96 | - | 7,500 | 22 | |||||||||||||||||
2.99 | 20,000 | 6.22 | - | 20,000 | 60 | |||||||||||||||||
4.09 | 25,000 | 5.76 | - | 25,000 | 102 | |||||||||||||||||
4.42 | 5,125 | 3.93 | - | 5,125 | 23 | |||||||||||||||||
4.5 | 13,335 | 5.53 | - | 5,000 | 23 | |||||||||||||||||
4.6 | 20,000 | 6.96 | - | 4,000 | 18 | |||||||||||||||||
4.8 | 8,334 | 2.94 | - | 8,334 | 40 | |||||||||||||||||
5.07 | 5,000 | 5.19 | - | 5,000 | 25 | |||||||||||||||||
5.3 | 15,000 | 4.70 | - | 15,000 | 80 | |||||||||||||||||
5.99 | 16,670 | 4.81 | - | 16,670 | 100 | |||||||||||||||||
6.84 | 7,500 | 6.38 | - | 7,500 | 51 | |||||||||||||||||
7 | 70,000 | 5.83 | - | 70,000 | 490 | |||||||||||||||||
8.34 | 8,600 | 4.52 | - | 8,600 | 72 | |||||||||||||||||
8.43 | 8,333 | 4.05 | - | 8,333 | 70 | |||||||||||||||||
267,067 | 6.03 | - | 206,062 | 1,176 |
Costs incurred with respect to options granted to consultants and service providers for the years ended December 31, 20212023 and December 31, 20202022 were $ thousand and $ thousand,, respectively. As of December 31, 2021,2023, there was $ thousands of unrecognized compensation costs related to non-vested consultants and service providers, to be recorded over the next years.
d.
F-42 |
Warrants and Shares Issued to Non-Employees
d. | Restricted Stock Units (“RSUs”) Granted to Employees |
SCHEDULE OF STOCK OPTIONS GRANTED TO EMPLOYEES
Year Ended | No. of options granted | Vesting period | Fair value at grant (in thousands) | |||||||||
Employees | December 31, 2023 | 142,000 | Quarterly over a period of | years$ | 50 |
The fair value of Common Stock issued waseach RSUs grant is estimated based on the share pricemarket value of the shares issuedunderlying stock at the daydate of grant.
1) On January 2, 2020, the Company entered into private placement subscription agreements with investors for an aggregate amount of $250 thousand of convertible loans. The lenders shall be entitled, at any time prior to or no later than the maturity date, to convert the outstanding amount, into shares of Common Stock of the Company at a conversion price per share equal to $7.00. In addition, the Company granted the investors 151,428 warrants to purchase an equal number of additional sharesA summary of the Company’s Common Stock at a price of $7.00 per share. The fair value of those warrantsRSUs granted to employees as of the date of grant using the Black-Scholes valuation model was $210 thousand.
2) During the year ended December 31, 2020, the Company granted to several consultants warrants each exercisable between $3.14 and $5.34 per share for three years. The fair value of those options as of the date of grant using the Black-Scholes valuation model was $ thousand, out of which $ thousand2023 is related to warrants granted as a success fee with respect to the issuance of the convertible notes and private Investment.presented below:
3) DuringSCHEDULE OF STOCK OPTIONS ACTIVITY GRANTED TO EMPLOYEES
Years Ended December 31 | ||||
2023 | ||||
Number of RSUs | ||||
Options outstanding at the beginning of the period | - | |||
Changes during the period: | ||||
Granted | 142,000 | |||
Expired | - | |||
Forfeited | - | |||
Options outstanding at end of the period | 142,000 |
SCHEDULE OF STOCK OPTIONS EXERCISABLE
Number of Outstanding RSUs | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value $ |
Number of Exercisable RSUs | Aggregate Exercisable RSUs Value $ | ||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||
142,000 | 9.99 | 71 | - | - |
No costs incurred with respect to RSUs compensation for employees for the years ended December 31, 2021, the Company issued shares of common stock to a service provider.2023. As of December 31, 2021, 2023, there was $ shares have restrictions on transfer until such services have been provided.of unrecognized compensation costs related to non-vested employees RSUs, to be recorded over the next years.
F-43 |
NOTE 16 – TAXES
a. | Corporate taxation in the U.S. |
a. Corporate taxation in the U.S.
The corporate U.S. Federal Income tax rate applicable to the Company and its US subsidiaries is 21%.
As of December 31, 2021,2023, the Company has an accumulated tax loss carryforward of approximately $2936 million (as of December 31, 2020,2022, approximately $1822 million).
For U.S. federal income tax purposes, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, the Internal Revenue Code of 1986, as amended (the “Code”) limits the ability to utilize NOL carryforwards to 80% of taxable income in tax years beginning after December 31, 2020.2020. In addition, NOLs arising in tax years ending after December 31, 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation, and NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year carryback and twenty-year carryforward period. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOL is expected to be utilized. The changes in the carryforward/carryback periods as well as the new limitation on use of NOLs may significantly impact the Company’s valuation allowance assessments for NOLs generated after December 31, 2017.
In addition, utilization of the NOLs may be subject to substantial annual limitation under Section 382 of the Code due to an “ownership change” within the meaning of Section 382(g) of the Code. An ownership change subjects pre-ownership change NOL carryforwards to an annual limitation, which significantly restricts the ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law. The CARES Act is aimed at providing emergency relief and health care for individuals and businesses affected by the COVID-19 pandemic. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferral of the employer portion of social security payments, expanded net operating loss application, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES act allowed the Company to utilize 100% of NOLs arising in tax years after December 31, 2017 and before January1, 2021. The Company has assessed all other provisions of the CARES Act and notes no other material impact to the Company.
b. Corporate taxation in Israel
b. | Corporate taxation in Israel |
The Israeli Subsidiaries are taxed in accordance with Israeli tax laws. The corporate tax rate applicable to 20212023 and 20202022 are 23%.
As of December 31, 2021,2023, the Israeli SubsidiariesSubsidiary has an accumulated tax loss carryforward of approximately $1110 million (as of December 31, 2020,2022, approximately $1110 million). Under the Israeli tax laws, carryforward tax losses have no expiration date.
Corporate taxation in Belgium |
c. Corporate taxation in Belgium
The Belgian Subsidiary areis taxed according to Belgian tax laws. The corporate tax rates applicable to 2021, 20202023, 2022 are 25%25%.
As of December 31, 2021,2023, the Belgian Subsidiary has an accumulated tax loss carryforward of approximately $8 million (€7 million), (as of December 31, 20202022 $87 million). Under the Belgian tax laws there are limitation on accumulated tax loss carryforward deductions of Euro 1 million per year.
d. Corporate taxation in Korea
F-44 |
The basic Korean corporate tax rates are currently: 10% on the first KRW 200 million of the tax base, 20% up to KRW 20 billion, 22% up to KRW 300 billion and 25% for tax base above KRW 300 billion. In addition, the local income tax rate is 1% on the first KRW 200 million of taxable income, 2% on taxable income over KRW 200 million up to KRW 20 billion, 2.2% of taxable income over KRW 20 billion up to 300 billion and 2.5% on taxable income over KRW 300 billion.
As of December 31, 2021, the Korean subsidiary has an accumulated tax loss carryforward of approximately $3 million (KRW 3,023 million), (as of December 31, 2020, approximately $4 million). Under the Korean tax laws accumulated tax loss can be carry forwarded for 15 years.
e. Deferred Taxes
e. | Deferred Taxes |
The following table presents summary of information concerning the Company’s deferred taxes as of the years ending December 31, 20202023 and December 31, 2020 (in thousands):2022:
SCHEDULE OF DEFERRED TAX ASSETS
2021 | 2020 | 2023 | 2022 | |||||||||||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(U.S. dollars in thousands) | (U.S. dollars in thousands) | |||||||||||||||
Deferred tax assets (liabilities), net: | ||||||||||||||||
Net operating loss carry forwards | $ | 11,451 | $ | 9,606 | $ | 12,331 | $ | 10,387 | ||||||||
Research and development expenses | 1,273 | 1,684 | 3,932 | 1,893 | ||||||||||||
Equity compensation | 2,631 | 2,747 | 1,563 | 1,616 | ||||||||||||
Employee benefits | 197 | 252 | 70 | 191 | ||||||||||||
Property, plant and equipment | (206 | ) | - | |||||||||||||
Property, plants and equipment | (26 | ) | (55 | ) | ||||||||||||
Leases asset | 186 | 533 | 66 | 191 | ||||||||||||
Lease liability | (134 | ) | (324 | ) | (67 | ) | (132 | ) | ||||||||
Loans | 26 | - | - | 50 | ||||||||||||
Partnership Investment | 8,627 | 2,582 | ||||||||||||||
Intangible assets | (2,738 | ) | (2,863 | ) | (1,629 | ) | (2,252 | ) | ||||||||
Bad debt allowance | 575 | - | ||||||||||||||
Other | 119 | 297 | 1,088 | 385 | ||||||||||||
Total | 12,805 | 11,932 | ||||||||||||||
Deferred tax assets gross | 26,530 | 14,856 | ||||||||||||||
Valuation allowance | (12,805 | ) | (11,932 | ) | (26,530 | ) | (14,753 | ) | ||||||||
Net deferred tax liabilities | $ | - | $ | - | $ | - | $ | 103 |
Realization of deferred tax assets is contingent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards losses are expected to be available to reduce taxable income. As the achievement of required future taxable income is not considered more likely than not achievable, the Company and all its subsidiaries except the Korean Subsidiary have recorded full valuation allowance.
The changes in valuation allowance are comprised as follows:
SCHEDULE OF VALUATION ALLOWANCE ACTIVITY
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(U.S dollars in thousands) | (U.S dollars in thousands) | |||||||||||||||
Balance at the beginning of year | $ | (11,932 | ) | $ | (14,939 | ) | $ | (14,753 | ) | $ | (12,805 | ) | ||||
Deconsolidation of Octomera | 1,252 | - | ||||||||||||||
Change during the year | (873 | ) | 3,007 | (13,029 | ) | (1,948 | ) | |||||||||
Balance at end of year | $ | (12,805 | ) | $ | (11,932 | ) | $ | (26,530 | ) | $ | (14,753 | ) |
f. Reconciliation of the Theoretical Tax Expense to Actual Tax Expense
f. | Reconciliation of the Theoretical Tax Expense to Actual Tax Expense |
The main reconciling item between the statutory tax rate of the Company and the effective rate is the provision for valuation allowance with respect to tax benefits from carry forward tax losses.
g. Uncertain Tax Provisions
g. | Uncertain Tax Provisions |
ASC Topic 740, “Income Taxes” requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the operating results of the Company. As of December 31, 2021,2023, the Company has not accrued a provision for uncertain tax positions.
NOTE 17 – REVENUES
Disaggregation of Revenue
The following table disaggregates the Company’s revenues by major revenue streams.
SCHEDULE OF DISAGGREGATION OF REVENUE
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Revenue stream: | ||||||||
POC and hospital services (Mainly POC) | $ | 32,819 | $ | 6,068 | ||||
Cell process development services | 2,683 | 1,584 | ||||||
Total | $ | 35,502 | $ | 7,652 |
POC development services are the result of agreements between Company and its partners (See Note 11).
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Revenue stream: | ||||||||
POCare development services | $ | - | $ | 14,894 | ||||
Cell process development services and hospital services | 515 | 11,212 | ||||||
POCare cell processing | - | 9,919 | ||||||
License fees | 15 | - | ||||||
Total | $ | 530 | $ | 36,025 |
A breakdown of the revenues per customer what constituted at least 10% of revenues is as follows:
SCHEDULE OF BREAKDOWN OF REVENUES PER CUSTOMER
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Revenue earned: | ||||||||
Customer A (Korea) | $ | 7,703 | $ | 2,857 | ||||
Customer B (United Arab Emirates) | 6,969 | - | ||||||
Customer C (China) | 6,491 | 1,577 | ||||||
Customer D (India) – related party | 3,856 | 1,475 | ||||||
Customer E (Greece) | 4,693 | 1,412 |
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Revenue earned: | ||||||||
Customer A (United States) | 280 | - | ||||||
Customer B (United States) | 90 | - | ||||||
Customer C (United States) | 130 | - | ||||||
Customer D (Greece) | - | 8,936 | ||||||
Customer E (United States) | - | 8,316 | ||||||
Customer F (United Arab Emirates) | - | 5,271 | ||||||
Customer G (Korea) | - | 3,873 | ||||||
Revenue earned | - | 3,873 |
Contract Assets and Liabilities
Contract assets are mainly comprised of trade receivablesaccounts receivable net of allowance for doubtful debts, which includes amounts billed and currently due from customers.
The activity for trade receivablesaccounts receivable is comprised of:
SCHEDULE OF ACTIVITY FOR TRADE RECEIVABLES
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Balance as of beginning of period | $ | 3,085 | $ | 1,831 | ||||
Acquisition of Koligo | - | 228 | ||||||
Additions | 34,570 | 6,997 | ||||||
Collections | (22,333 | ) | (5,982 | ) | ||||
Exchange rate differences | (77 | ) | 11 | |||||
Balance as of end of period | $ | 15,245 | $ | 3,085 |
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Balance as of beginning of period | $ | 36,183 | $ | 15,245 | ||||
Deconsolidation of Octomera | (5,985 | ) | - | |||||
Business combination TLABS | - | (1,339 | ) | |||||
Additions | 560 | 35,103 | ||||||
Collections | (6,230 | ) | (12,728 | ) | ||||
Allowances for credit losses | (24,388 | ) | - | |||||
Exchange rate differences | (52 | ) | (98 | ) | ||||
Ceased to be a related party | - | (2,186 | ) | |||||
Balance as of end of period | $ | 88 | $ | 36,183 |
The activity of the related party included in the trade receivablesaccounts receivable activity above is comprised of:
2022 | ||||
Years Ended December 31, | ||||
2022 | ||||
Balance as of beginning of period | $ | 1,972 | ||
Additions | 1,284 | |||
Collections | (1,070 | ) | ||
Ceased to be a related party | (2,186 | ) | ||
Balance as of end of period | $ | - |
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Balance as of beginning of period | $ | 744 | $ | - | ||||
Additions | 3,856 | 1,244 | ||||||
Collections | (2,628 | ) | (500 | ) | ||||
Balance as of end of period | $ | 1,972 | $ | 744 |
F-46 |
The activity for contract liabilities is comprised of:
SCHEDULE OF ACTIVITY FOR CONTRACT LIABILITIES
2023 | 2022 | |||||||||||||||
Years Ended December 31, | Years Ended December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Balance as of beginning of period | $ | 59 | $ | 325 | $ | 70 | $ | 59 | ||||||||
Deconsolidation of Octomera | (106 | ) | - | |||||||||||||
Additions | - | 597 | 236 | 11 | ||||||||||||
Realizations | - | (862 | ) | |||||||||||||
Exchange rate differences | - | (1 | ) | |||||||||||||
Balance as of end of period | $ | 59 | $ | 59 | $ | 200 | $ | 70 |
The activity of the related party included in the contract liabilities activity above is comprised of:
NOTE 18 – COST OF DEVELOPMENT SERVICES AND OTHER RESEARCH AND DEVELOPMENT EXPENSES NET
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Total expenses | $ | 36,644 | $ | 84,182 | ||||
Less grants | - | (196 | ) | |||||
Total | $ | 36,644 | $ | 83,986 |
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Salaries and related expenses | $ | 4,800 | $ | 11,206 | ||||
Stock-based compensation | 210 | 616 | ||||||
Subcontracting, professional and consulting services | 3,662 | 5,655 | ||||||
Lab expenses | 377 | 2,685 | ||||||
Depreciation expenses | 312 | 1,017 | ||||||
Other research and development expenses | 1,542 | 6,010 | ||||||
Less – grant | (280 | ) | (123 | ) | ||||
Total | $ | 10,623 | $ | 27,066 |
NOTE 19 – FINANCIAL EXPENSES, NET
SCHEDULE OF FINANCIAL EXPENSES
2021 | 2020 | |||||||
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Interest expense on convertible loans | $ | 943 | $ | 1,254 | ||||
Foreign exchange loss, net | 574 | 160 | ||||||
Other income | (225 | ) | (353 | ) | ||||
Total | $ | 1,292 | $ | 1,061 |
2023 | 2022 | |||||||
Years Ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Interest expense on convertible loans | $ | 2,167 | $ | 1,824 | ||||
Foreign exchange loss, net | 325 | 145 | ||||||
Other expense | 7 | 2 | ||||||
Total | $ | 2,499 | $ | 1,971 |
F-47 |
NOTE 20 – RELATED PARTIES TRANSACTIONS
a. | Related Parties presented in the consolidated statements of comprehensive loss |
SCHEDULE OF RELATED PARTY TRANSACTIONS
Years ended December 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Continuing operations: | ||||||||
Stock-based compensation expenses to executive officers | $ | 247 | $ | 221 | ||||
Stock-based compensation expenses to Board Members | $ | 265 | $ | 209 | ||||
Compensation of executive officers | $ | 4,422 | $ | 1,321 | ||||
Management and consulting fees to Board Members | $ | 380 | $ | 264 | ||||
Revenues from customer | $ | 3,856 | $ | 1,475 | ||||
Cost of services and other research and development expenses, net | $ | - | $ | 4,772 | ||||
Financial income | $ | 64 | $ | 169 |
Years ended December 31, | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
Stock-based compensation expenses to executive officers | $ | 78 | $ | 111 | ||||
Stock-based compensation expenses to Board Members | $ | 99 | $ | 152 | ||||
Compensation of executive officers | $ | 690 | $ | 669 | ||||
Management and consulting fees to Board Members | $ | 380 | $ | 380 | ||||
Revenues from customer | $ | - | $ | 1,284 | ||||
Financial income | $ | - | $ | 126 |
b. | Related Parties presented in the consolidated balance sheets |
b. Related Parties presented in the consolidated balance sheets
SCHEDULE OF RELATED PARTIES PRESENTED IN CONSOLIDATED BALANCE SHEETS
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2023 | 2022 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Executive officers’ payables | $ | 51 | $ | 170 | $ | 150 | $ | 80 | ||||||||
Non-executive directors’ payable | $ | 178 | $ | 13 | $ | 938 | $ | 558 | ||||||||
Loan to Related Party | $ | 3,064 | $ | - | ||||||||||||
Accounts receivable, net | $ | 1,972 | $ | 744 |
NOTE 21 – LEGAL PROCEEDINGS
On January 18, 2022, a complaint (the “Complaint”) was filed in the Tel Aviv District Court (the “Court”) against the Company, Orgenesis LTD (“the Israeli Subsidiary”), Prof. Sarah Ferber, Vered Caplan and Dr. Efrat Asa Kunik (collectively, the “defendants”) by plaintiffs the State of Israel, as the owner of Chaim Sheba Medical Center at Tel Hashomer (“Sheba”), and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (collectively, the “plaintiffs”). In the Complaint, the plaintiffs are seeking that the Court issue a declaratory remedy whereby the defendants are required to pay royalties to the plaintiffs at the rate of 7% of the sales and 24% of any and all revenues in consideration for sublicenses related to any product, service or process that contain know-how and technology of Sheba and any and all know-how and technology either developed or supervised by Prof. Ferber in the field of cell therapy, including in the category of the point-of-care platform and any and all services and products in relation to the defendants’ CDMO activity. In addition, the plaintiffs seek that the defendants provide financial statements and pay NIS 10,000 to the plaintiffs due to the royalty provisions of the license agreement, dated February 2, 2012, between the Israeli subsidiary and Tel Hashomer Medical Research, Infrastructure and Services Ltd. (the “License Agreement”). The Complaint alleges that the Company and the Israeli subsidiary used know-how and technology of Sheba and know-how and technology either developed or supervised by Prof. Ferber while employed by Sheba in the field of cell therapy, including in the category of the point-of-care platform and the services and products in relation to the defendants’ CDMO activity and are entitled to the payment of certain royalties pursuant to the terms of the License Agreement. The defendants have filed their statements of defense responding to this Complaint, the Plaintiffs filed their response and the parties are now conducting disclosure proceedings in accordance with Israel’s civil regulations. In accordance with Israel’s civil regulations, the parties considered alternative means to resolve at least some of the disputes and have consented to engage the services of a mutually agreeable mediator. The mediation is scheduled to take place in the coming months. According to management’s estimation, since a loss is not considered probable, no provision was made in the financial statements.
On September 6, 2023, a claim (the “Claim”) was filed in the Tel Aviv District Court (the “Court”) against the Company, the Israeli Subsidiary, Octomera LLC, Orgenesis Biotech Israel LTD, Theracell Laboratories Private Company and Vered Caplan (collectively, the “defendants”) by Ehud Almon (Plaintiff) for certain finders’ fees and / or royalties related to sales made by an Octomera subsidiary to a Greek entity in the amount of $896K and also for other means of compensation. The Israeli Subsidiary and Vered Caplan filed their statement of defense on January 28, 2024 claiming, inter alia, that the Plaintiff did not serve as a broker, but rather served as the Greek entity’s representative and as such he is not entitled to compensation of any kind from the defendants. It was also clarified that the defendants did not enter into a finder’s agreement with the Plaintiff. Additionally, The Israeli subsidiary and Vered Caplan claimed that the Plaintiff concealed material information from the court, including the signed partnership agreement between the Greek entity’s owner and the Plaintiff, as well as certain criminal charges brought against him in Greece. On February 22, 2024, the Plaintiff filed a request for service of process to deliver the Claim to the Company and the other defendants incorporated outside of Israel. This request was denied on the same day. As such, the Claim has yet to be legally delivered to the defendants incorporated outside of Israel (including the Company). According to management’s estimation, since the likelihood of Plaintiff winning the case is less than fifty percent, no provision was made in the financial statements.
On October 26, 2023, a complaint was filed in the Supreme Court of the State of New York by plaintiffs Southern Israel Bridging Fund Two LP and Mr. Amir Hasidim, against the Company, seeking the payment of $1,150 together with interest in the amount of 6%. In the Complaint plaintiff’s alleged the amount provided to the Company was based on a Convertible Loan Agreement dated May 17, 2022, which provided for a loan amount of $5,000. Notwithstanding the Convertible Loan Agreement, on August 21, 2023, Company sent the plaintiffs an offset notice in light of the plaintiffs’ breach of obligations under the Convertible Loan Agreement and the damages caused to the Company as a result of said breach. The Company counter sued as well, seeking damages for Plaintiff’s breach of contract, fraud and harassment. Accordingly, the Company disputes whether it owes plaintiffs the amount sought in the Complaint.
On November 1, 2023, a claim (the “Claim”) was filed in the Tel Aviv District Court (the “Court”) against the Company, the Israeli Subsidiary, and Vered Caplan (collectively, the “defendants”) by Fidelity Venture Capital Ltd. and Dror Atzmon (together – “the Plaintiffs”). The claim is based on two agreements the Company entered into with the Plaintiffs on November 2, 2016: (a) an unsecured convertible note agreements for an aggregate amount of NIS 1 million ($280 thousand). The loan bears a monthly interest rate of 2% and will mature on May 1, 2017, unless converted earlier and (b) a consultation agreement which awarded the Plaintiffs 800 thousand warrants. The exercise price of the warrants and conversion price were fixed at $0.52 per share (pre-reverse stock split implemented by the Company in November 2017). On April 27, 2017, and November 2, 2017, the Company entered into extension agreements through November 2, 2017 and May 2, 2018, respectively, in connection with the convertible note agreements. In March 2018, the Plaintiffs submitted a notice of their intention to convert into shares the Company’s common stock, the principal amount of the loan, and accrued interest of approximately $383 thousand outstanding. In addition, the Plaintiffs exercised all the warrants awarded in the consultation agreement. In light of the reverse stock split which took place in November 2017, the Company disagreed with the plaintiffs’ calculations regarding the number of issuable shares of Common Stock. The Company responded to the notice and rejected these contentions in their entirety. In April 2018, the Company terminated the agreements based on several claims, including mistake, intentional misrepresentation and bad faith. Therefore, the Company deposited the shares in total amount of issued under those agreements and the principal amount and accrued interest of the loan in an escrow account. The deposit of the principal amount and accrued interest presented as restricted cash in the balance sheet as of December 31, 2023. Based on the calculation difference, in their Claim, the Plaintiffs request damages in the amount of NIS 40.14M, and the issuance of shares of the Company. The defendants have yet to file their statement of defense. According to management’s estimation, since the likelihood of Plaintiff winning the case is less than fifty percent, no provision was made in the financial statements.
On February 14, 2024, following a claim for payment of past salaries due, by employees of Orgenesis Biotech Israel Limited (“OBI”), the district court in Haifa appointed a trustee to run the affairs of OBI with the intention of rehabilitating OBI to be able to operate and pay OBI’s creditors under an arrangement with them.
Except as described above, the Company is not involved in any pending material legal proceedings.
F-49 |
NOTE 2122 – SUBSEQUENT EVENTS
Private Placement Offering
On January 25, 2022,March 3, 2024, the Company and Yeda Research and Development Company Limited (“Yeda”), an Israeli corporation, entered into a license and research agreement. PursuantSecurities Purchase Agreement with certain accredited investors, pursuant to the agreement, Yeda granted towhich the Company agreed to issue and sell, in a private placement, shares of the Company’s common stock, par value $ per share, at a purchase price of $ per share and warrants to purchase up to 2,272,719 shares of Common Stock at an exclusive, worldwide licenseexercise price of $1.50 per share and warrants to its licensed information andpurchase up to 2,272,719 shares of Common Stock at an exercise price of $2.00 per share (collectively, the licensed patents, for the development, manufacture, use, offer for sale, sale and import of products in the Field a field of tumor-infiltrating lymphocytes (TIL) and Chimeric antigen receptor (CAR) T cell immunotherapy platforms (excluding CAR-Cytokine Induced Killer cell immunotherapy)“Warrants”). The Company undertakes to make commercially reasonable efforts to develop and commercialize products in the field, and to achieve certain milestones. In consideration for the grantreceived gross proceeds of the License, the Company shall pay Yeda:approximately $2.3 million before deducting related offering expenses. The Offering closed on March 5, 2024.
A non-refundable annual license feeThe Warrants entitle the holders to purchase up to an aggregate of 2,272,719 shares of Common Stock at an exercise price of $101.50 thousand;per share and up to an aggregate of 2,272,719 shares of Common Stock at an exercise price of $2.00 per share. The Warrants are exercisable immediately and expire five years from the date of issuance.
Royalties of up to 2% on sales of licensed products;Asset purchase agreement
25%On April 5, 2024, Orgenesis Maryland entered into an Asset Purchase and Strategic Collaboration Agreement (the “Purchase Agreement”) with Griffin Fund 3 BIDCO, Inc., (“Germfree”), for the sale by Orgenesis Maryland of all Other Receipts received in respect of a Sublicense first grantedfive OMPUL to Germfree, which will be incorporated into Germfree’s lease fleet and leased back to Orgenesis Maryland or an assignment of rights made priorthird-party lessees designated by Orgenesis. Pursuant to the achievementPurchase Agreement, and upon the terms and subject to the conditions set forth therein, in consideration for the purchase of the dosingOMPULs, the Orgenesis Quality Management Systems Framework (“OQMSF”) and related intellectual property rights, Germfree will pay Orgenesis Maryland an aggregate purchase price of a first patient$8,340 subject to any final adjustment through the verification mechanism as set forth in a Phase I Clinical Trial; and (ii) 12.5% of all Other Receipts received in respect of a Sublicense first granted or an assignment of rights made on or after the date described in subclause (i)Purchase Agreement.
Milestone Events payments:Pursuant to the Agreement, Germfree paid Orgenesis Maryland $750 on February 27, 2024 and $5,538 during April 2024.
$50 thousand upon the dosing of a first patient in a Phase I Clinical Trial;Strategic Advisor Agreement
$500 thousand uponOn March 7, 2024 (the “Effective Date”), the receipt of FDA marketing approval in respect ofCompany entered into a product 350 thousand upon receipt of marketing approval from a non-FDA regulatory agency in a major market territory (namely, a regulatory agency in Europe, Japan, China or Canada);
$250 thousand upon receipt of marketing approval fromstrategic advisor agreement with an additional non-FDA major regulatory agency (namely, a regulatory agency in Europe, Japan, China or Canada);
Patent fees already incurred by Yeda in connection with the Licensed Patents in the amount of $27 thousand, and all future costs and feesindividual relating to the filing, prosecution,provision of strategic advice and maintenanceassistance to the Company for a term of 12 months, subject to earlier termination or extension for an additional 12 months at the request of the Licensed Patents, Research related expenses based on an agreed research budget.
On January 26, 2022, the Company and Proterna, Inc. a Delaware corporation, (“Proterna”) (together, the “Parties”), entered into a joint venture agreement (“JVA”). Pursuant to the JVA, the Parties agreed to collaborate with each other and expand their activities in the development and commercialization of mRNA based vaccines and cellular immunotherapies for respiratory diseases, including, without limitation, COVID-19. The JVA provides that Proterna will grant to the JV Entity (“JVE”), under a separate license agreement, an exclusive, sublicensable right and license to its background IP as required to carry out the terms of the JVA including to develop, manufacture, distribute and market and sell mRNA vaccines and cellular immunotherapies for respiratory diseases, including COVID-19.advisor. In consideration for such license,services, the JVE willCompany agreed to (i) pay Proterna a such individual $575,000 % royaltyper quarter, (ii) issue shares to such individual on sales. Thethe 90th day after the Effective Date if such individual is providing services to the Company will provide funding for the joint venture ofat such time and (iii) issue to such individual warrants to purchase up to $5500,000 million, based on a work plan to be approved, of which $2.5 million will be in the form of services to be procured from Proterna. Until the JVE is formed, the activities of the collaboration will be performed by Proterna. The Parties will each hold 50% of the JVE. In addition, once JVE is profitable, Company shall have the rights to additional profit share. The Board of the JVE will be comprised of three directors, one to be appointed by the Company, one to be appointed by Proterna, and a third board member to be appointed upon mutual agreement of the Parties. Company shall have the right to purchase all of Proterna’s then issued and outstanding equity interests in the JVE in return for, at Company’s option: payment of cash and/or issuance of shares of common stockCommon Stock at an exercise price of Company. In$1.03, which vests one third on the event that Company seeks to exercise this right, JVE’s valuation shall be determined by an independent third-party expert to be mutually selected byEffective Date, one third on the Parties, provided that in no event may such valuation be lower than US $2,000,000. As at90th day after the date of this reportEffective Date and one third on the JVE has not been incorporated.180th day after the Effective Date.