If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]     No [X].

As of October 16, 2017,12, 2018, there were 121,779,25215,570,973 shares of registrant’s common stock outstanding.

12

ORGENESIS INC.
FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 2018 AND 2017AND 2016

TABLE OF CONTENTS

23

PART I – UNAUDITED FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ORGENESIS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in Thousands)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

ORGENESIS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in Thousands)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

ORGENESIS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Cont’d)

(U.S. Dollars in Thousands)

(Unaudited)

(U.S. Dollars in thousands, except share and loss per share amounts)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ORGENESIS INC.
CONDENSEDCONSOLIDATEDSTATEMENTS OFCHANGES INEQUITY
(U.S.Dollars inthousands, except shareamounts)
(Unaudited)

*Including outstanding contingent shares.

Theaccompanying notes are anintegral part of these condensedconsolidatedfinancialstatements.

6

ORGENESIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars in thousands)
(Unaudited)
* represent an amount lower than $ 1 thousand

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

ORGENESIS INC.The accompanying notes are an integral part of these condensed consolidated financial statements.

8

NOTE 1 - GENERAL AND BASIS OF PRESENTATION

Orgenesis Inc., a Nevada corporation (“Orgenesis” or the “Company”), is a biopharmaceuticalservice and research company in the field of the regenerative medicine industry with expertise and experience ina focus on cell therapy development and manufacturing specializing in cell therapy development for advanced medicinal products serving the regenerative medicine industry.

products. In addition, the Company is focused on developing a novel and proprietary cell therapy trans-differentiation technologies for the treatment of diabetes. The consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries, including those of the Masthercell Global group, a contract development and manufacturing organization, or CDMO, specializing in cell therapy technologydevelopment and manufacturing for advanced medicinal products in the USA, Belgium, Korea and Israel (See Note 4 for explanation that during the third fiscal quarter that the Company gained control of Atvio and CureCell); Orgenesis SPRL (the “Belgian Subsidiary”), a Belgian-based subsidiary which is engaged in development and manufacturing activities together with clinical development studies in Europe; Orgenesis Maryland Inc. (the “U.S. Subsidiary”), a Maryland corporation; and Orgenesis Ltd., an Israeli corporation, (the “Israeli Subsidiary”).

The Company’s goal is to industrialize cell therapy for fast, safe and cost-effective production in order to provide rapid therapies for any market around the world through a world-wide network of CDMO joint venture partners. The Company’s trans-differentiation technologies for treating diabetes, which will be referred to as the cellular therapy (“CT”) business, is based on the research work of Prof. Sarah Ferber, the Company's Chief Science Officer and a researcher attechnology licensed by Tel Hashomer Medical Research (“THM”), a leading medical hospital and research center in Israel, who established a proof of concept to the Israeli Subsidiary that demonstrates the capacity to induce a shift in the developmental fate of cells from the liver and transdifferentiatingtrans-differentiating (converting) them into “pancreatic beta cell-like” insulin-producing cells.

            The combination of proprietary cell therapy trans-differentiation technologies for the treatment of diabetes and a revenue-generating contract development and manufacturing service business provides the Company with unique capabilities.

As used in this report and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its subsidiaries (“Subsidiaries”). Unless otherwise specified, all amounts are expressed in United States dollars.Dollars.

BasisOn November 16, 2017, the Company implemented a reverse stock split of Presentationits outstanding shares of common stock at a ratio of 1-for-12 shares. The reverse stock split has been reflected in these condensed consolidated financial statements.

On March 13, 2018, the Company's common stock began to be listed and traded on the Nasdaq Capital Market under the symbol “ORGS.”

Consolidation of CDMO Entities and Strategic Funding

On June 28, 2018, the Company, Masthercell Global Inc. (a newly formed Delaware subsidiary of Orgenesis Inc being the Company that holds the Company’s CDMO business (“Masthercell Global”)), Great Point Partners, LLC, a manager of private equity funds focused on growing small to medium sized heath care companies (“Great Point”), and certain of Great Point’s affiliates, entered into a series of definitive strategic agreements intended to finance, strengthen and expand Orgenesis’ CDMO business. In connection therewith, the Company, Masthercell Global and GPP-II Masthercell, LLC, a Delaware limited liability company (“GPP-II”) and an affiliate of Great Point entered into Stock Purchase agreement (the “SPA”) pursuant to which GPP-II purchased 378,000 shares of newly designated Series A Preferred Stock of Masthercell Global (the “Masthercell Global Preferred Stock”), representing 37.8% of the issued and outstanding share capital of Masthercell Global, for cash consideration to be paid into Masthercell Global of up to $25 million, of which $13.2 million is subject to certain contingencies described below (the “Consideration”). Orgenesis holds 622,000 shares of Masthercell Global’s Common Stock, representing 62.2% of the issued and outstanding equity share capital of Masthercell Global. An initial cash payment of $11.8 million of the Consideration was remitted at closing by GPP-II to Masthercell Global. $1.5 Million of the initial capital contributed to Masthercell Global was used to reimburse the Investors for their fees and expenses incurred in conjunction with this transaction. The $1.5 million will reflect the entire fee payable under this transaction (net payment of $10.3 million). The follow up payment will be in the amount of $6,600,000 to be made in each of years 2018 and 2019 (the “Future Payments”), or an aggregate of $13.2 million, if (a) Masthercell Global achieves specified EBITDA and revenues targets during each of these years, and (b) the Orgenesis’ shareholders approve on or before December 31, 2019 certain provisions of the Stockholders’ Agreement entered into by these parties. None of the future Consideration amounts, if any, will result in an increase in GPP-II’s equity holdings in Masthercell Global beyond the 378,000 shares of Series A Preferred Stock issued to GPP-II at closing. Notwithstanding the foregoing, GPP-II may, in its sole discretion, elect to pay all or a portion of the future Consideration amounts even if the financial targets described above have not been achieved and the Orgenesis Stockholder Approval has not been obtained.

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

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

10

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

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

The Company accounted for the investment made by GPP as a redeemable non-controlling interest due to the embedded redemption feature whose settlement is not at the Company discretion.

Corporate Reorganization

Contemporaneous with the execution of the SPA and the Stockholders’ Agreement, Orgenesis and Masthercell Global entered into a Contribution, Assignment and Assumption Agreement pursuant to which Orgenesis contributed to Masthercell Globalassets relating to the CDMO Business (as defined below), including the CDMO subsidiaries (the “Corporate Reorganization”). For further details see Note 4. Together with MaSTherCell S.A., Atvio and CureCell are directly held subsidiaries under Masthercell Global (collectively, the “Masthercell Global Subsidiaries”).

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

As of August 31, 2018, the Company accumulated losses of approximately $57.4 million. Although the Company is showing positive revenue and gross profit trends in its CDMO business, the Company expects to incur further losses in the CT business.

To date, the Company has been funding operations primarily from the proceeds from private placements of the Company’s convertible debt and equity securities and from revenues generated by MaSTherCell S.A. From December 1, 2017 through August 31, 2018, the Company received, through MaSTherCell S.A., proceeds of approximately $11.5 million in revenues and accounts receivable from customers, and $16.5 million from the private placement to accredited investors of the Company's equity and equity linked securities and convertible loans and exercise of warrants, out of which $8.1 million are from the institutional investor with whom the Company entered into definitive agreements in January 2017 for the private placement of units (see also Note 7(a)). In addition, from September 1, 2018 through October 12, 2018, the Company raised $3.4 million from the private placement referred to above of unsubscribed units under such investor’s subscription agreement, and proceeds of approximately $2.9 million in accounts receivable from customers of MaSTherCell S.A. See also Note 12.

11

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of August 31, 2017,2018, and the consolidated statements of comprehensive loss for the three and nine months ended August 31, 20172018 and 2016,2017, and the changes in equity and cash flows for the nine monthsnine-month period ended August 31, 20172018 and 2016.2017. The interim results are not necessarily indicative of the results to be expected for the year ending November 30, 2017.2018. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2016.2017.

Mircod Limited

Going Concern

            The accompanying condensed consolidated financial statements have been prepared assuming thatOn June 19, 2018, the Company and Mircod Limited, a company formed under the laws of Cyprus (“Mircod”) entered into a Collaboration and License Agreement (the “Collaboration Agreement”) for the research, development and commercialization of potential key technologies related to biological sensing for the Company's clinical development and manufacturing projects (the “Development Project”). Within 45 days of the execution of the Collaboration Agreement, the parties are to approve a written project development plan outlining each party’s responsibilities with respect to the Development Project, and the Company will continuebe funding the projected development costs as outlined in the development plan. Under the terms of the Collaboration Agreement, the Company remitted to Mircod an upfront payment of $50,000.

Under the Collaboration Agreement, all results of such collaboration (“Project Results”) shall be jointly owned by Mircod and the Company. The Company was granted an exclusive, worldwide sub licensable license under Mircod’s right in such Project Results to use and commercialize Project Results in consideration for a going concern. royalty of 5% of Net Sales (as defined in the Collaboration Agreement) of products incorporating Project Results.

Subject to completion of the Development Project, Mircod and the Company are to negotiate and enter into a manufacturing and supply agreement under which Mircod is to manufacture and supply products incorporating the Project Results and, at the Company’s request, to provide support and maintenance service for such products. If for whatever reason the parties fail to enter into such manufacturing and supply agreement within 90 days of the completion of the Development Project or if Mircod is unable to perform such services, the Company is entitled to manufacture the products, in which event Mircod will be entitled to a payment of $80,000 and royalties on Net Sales are to increase to 8% of Net Sales.

HekaBio K.K

On July 10, 2018, the Company and HekaBio K.K. (“HB”), a corporation organized under the laws of Japan entered into a Joint Venture Agreement (the “JVA”) pursuant to which the parties will collaborate in the clinical development and commercialization of regeneration and cell and gene therapeutic products (hereinafter the “Products”) in Japan (the “Project”). The parties intend to pursue the joint venture through a newly established Japanese company (hereinafter the “JV Company”) which the Company by itself, or together with a designee, will hold a 49% participating interest therein, with the remaining 51% participating interest being held by HB. HB will fund, at its sole expense, all costs associated with obtaining the requisite regulatory approvals for conducting clinical trials, as well as performing all clinical and other testing required for market authorization of the Products in Japan.

12

Under the JVA, each party may invest up to $10 million, which may take the form of a loan, if required, as determined by the steering committee. The terms of such investment, if any, will be on terms mutually agreeable to the parties, provided that the minimum pre-money valuation for any such investment shall not be less than $10 million. Additionally, HB was granted an option to affect an equity investment in the Company of up to $15 million within the next 12 months on mutually agreeable terms. If such investment is in fact consummated, the Company agreed to invest in the JV Company by way of a convertible loan an amount to HB’s pro-rata participating interest in the JV Company, which initially will be at 51%. Such loan may then be converted by the Company into share capital of the JV company at an agreed upon formula for determining JV Company valuation which in no event shall be less than $10 million. Under the JVA, the Company can require HB to sell to the Company its participating (including equity) interest in the JV Company in consideration for the issuance of the Company’s common stock based on an agreed upon formula for determining JV Company valuation which in no event shall be less than $10 million.

In addition, under the JVA, the Company shall grant the JV Company an exclusive license to certain intellectual property of the Company as may be required for the JV Company to develop and commercialize the Products in Japan. In consideration of such license, the JV Company shall pay the Company, in addition to other payments, royalties at the rate of 10% of the JV Company’s net sales of Products.

It was further agreed that the JV Company shall grant the Company (and its affiliates) a non-exclusive, worldwide (other than Japan), royalty-free and fully paid-up license to use and practice, for any purpose, new inventions, discoveries and intellectual property rights that are generated by and/or on behalf of HB and/or the JV Company in connection with the Project.

All matters pertaining to such license rights shall be governed under a separate license agreement to be entered by and between the Company and the JV Company.

As of August 31, 2017,2018, no activity had begun in the said JVand no investments were made therein.

Image Securities Ltd.

On July 11, 2018, the Company had accumulated losses of approximately $41 million and expectsImage Securities Ltd., a corporation with its registered office in Grand Cayman, Grand Cayman Islands (“India Partner”) entered into a Joint Venture Agreement (the “India JVA”) pursuant to incur further losseswhich the parties will collaborate in the development and/or marketing, clinical development and commercialization of its business. Presently,cell therapy products in India (the “Cell Therapy Products”). The India Partner will collaborate with a network of healthcare facilities and a healthcare infrastructure as well as financial partners to advance the development and commercialization of the cell therapy products.

The India JVA becomes effective upon the consummation of an equity investment by the India partner in the Company does not have sufficient cash to meet its requirements inof $5 million within 15 days of the following twelve months. These factors raise substantial doubt aboutexecution of the Company's ability to continue asIndia JVA through the purchase of units of Orgenesis securities at a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability. In the event that the remaining subscription proceeds from a private placement with an institutional investor referred to below, in the aggregate amount of $12 million (out of total committed amount $16 million) will not be paid periodically through August 2018, thenper unit purchase price payable into the Company will need to raise significant funds in order to continue to meet its liquidity needs, realize its business plan and maintain operations. The Company’s current cash balance is not sufficient to support its operations as presently conducted or permit it to take advantage of business opportunities that may arise. Management$6.24, with each unit comprised of one share of the Company is continuing its effortsand three-year warrant for the acquisition of an additional common share at a per share exercise price of $6.24. Subject to generate sustainable profits from its CDMO business and to secure funds throughthe consummation of such equity and/or debt instruments for its operations and business opportunities investments.

8

            The condensed consolidated financial statements do not include any adjustments that might result frominvestment in the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of its business plan will actually improve the Company’s operating results. IfCompany, the Company is unable to raiseadvance to the necessaryJV Company a convertible loan in the amount of $5 million. The loan is convertible into equity capital of the JV Company at an agreed upon formula for determining JV Company valuation. The investment in the Company may have to cease curtail or reduce operations.

            The Company has been funding its operations primarily fromby the proceeds from private placementsIndia Partner would be the consummation of the Company’s convertible debt and equity securities and from revenues generated by MaSTherCell. Frompreviously disclosed private placement subscription agreement entered into in December 2016 through August 2017,between the Company received, through MaSTherCell, proceeds of approximately $6.1 million in revenues and accounts receivable from customers and $9 million from the private placement to accredited investors of its equity and equity linked securities and convertible loans, out of which $3.5 are million from the institutional investor definitive agreements in January 2017 for the private placement of unitsan affiliate of the Company’s securitiesIndia Partner pursuant to which the closing of such subscription agreement was by the terms thereof delayed until terms comprising the India JV were mutually agreed to.

Under the India JVA, the India Partner agreed to invest in the JV $10 million within 12 months of the incorporation of the JV Company. If for aggregate subscription proceedswhatever reason such investment is not made by the India Partner within such time, then Orgenesis is authorized to convert its above-referenced loan into 50% of the Companyequity capital of $16 million. The subscription proceeds are payablethe JV Company on a periodicfully diluted basis, through August 2018. In addition, from September 1, 2017 through October 16, 2017,provided that if the Company raised an additional $1.1 million from the proceedspre-money valuation of the private placementJV Company is then independently determined to certain accredited investorsbe less than $5 million, then such conversion to be effected in the basis of its equitysuch valuation.

13

As of August 31, 2018, no activity had begun in the said JV and equity linked securities and Company received, through MaSTherCell, proceeds of approximately $1 million in accounts receivable from its customers.no investments were made therein.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the previous financial year.year, except as noted below regarding the adoption of new accounting pronouncements.

Recently Issued Accounting Pronouncements- adopted by the Company

1)       In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus of the FASB Emerging Issues Task Force) (“ASU 2016-18”), which requires entities to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual reporting periods (including interim periods within those annual reporting periods) beginning after December 15, 2017. The Company adopted this standard as of beginning of 2018. The Company did not have restricted cash in the previously presented period. Therefore, there is no impact for the new adoption on previously reported periods.

2)       In July 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480; Derivatives and Hedging (Topic 815)", ("ASU 2017-11"). This update was issued to address complexities in accounting for certain equity-linked financial instruments containing down round features. The amendment changes the classification analysis of these financial instruments (or embedded features) so that equity classification is no longer precluded. The amendments in ASU 2017-11 are effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company elected to early adopt the standard effective September 1, 2017, retrospectively. Following is the result of the adoption on the Company’s condensed consolidated financial statements previously reported:

Shareholders’ Equity

Statement of Comp[rehensive Loss

14

NOTE 3 - SEGMENT INFORMATION

The Chief Executive Officer ("CEO") is the Company’s chief operating decision-maker ("CODM").

Based on the Company's organizational structure, its business activities and information reviewed by the CODM for the purposes of allocating resources and assessing performance, management has determined that there are two operating segments.

CDMO

The CDMO activity is comprised of a specialization in cell therapy development for advanced therapeutic products and is comprised of two types of services to its customers: (i) process and assay development services and (ii) cGMP contract manufacturing services. The CDMO activities include the operations of MaSTherCell.Masthercell Global since the Corporate Reorganization (which includes the operations of CureCell and Atvio from the same date) and MaSTherCell prior to the Corporate Reorganization. As of the date of acquisition of CureCell and Atvio their activity is included in this segment.

CTBCT Business

The Cellular TherapyCT Business (“CTB”) activity is based on theour technology licensed by the Israeli Subsidiary, 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 Type 1 Diabetes. This segment is comprised of all entities aside from Masthercell Global, CureCell and Atvio.

The Company assessesCODM does not review assets by segment, therefore the performance based on a measure of "Adjusted EBIT" (earnings before financial expenses and tax, and excluding share-based compensation expenses and non-recurring income or expenses). The measure of assets has not been disclosed for each segment.

9Segment data for the nine months ended August 31, 2018 is as follows:

* The Company's revenues consist of: $9,493 from services and $3,360 from goods sold.

Reconciliation of segment performance to loss for the nine months ended August 31, 2018:

15

Segment data for the three months ended August 31, 2018 is as follows:

* The Company's revenues consist of: $4,473 from services and $1,757 from goods sold.

Reconciliation of segment performance to loss for the three months ended August 31, 2018:

Segment data for the nine months ended August 31, 2017 is as follows:

            * Excluding $1,389 thousand stock based compensation included in financial expenses.16

                          Segment dataReconciliation of segment performance to loss for the nine months ended August 31, 2016 is as follows:2017:

Segment data for the three months ended August 31, 2017 is as follows:

            * Excluding $275 thousand stock based compensation included in financial income.

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                          Segment dataReconciliation of segment performance to loss for the three months ended August 31, 2016 is as follows:2017:

17

Geographic, Product and Customer Information

Substantially all the Company's revenues and long-lived assets are located in Belgium through its controlled subsidiary MaSTherCell. Manufacturing activities show a significant increase ofand South Korea. Net revenues in line with the company Business Plan. It reflects market recognition in CDMO business expertise and the adequacy of the Company strategy.

     Revenues from single customers from the CDMO segment that exceed 10% of total net revenues are:

CDMO business has substantially diversified revenues by source signing contractsNOTE 4 – EXERCISE OF CALL OPTIONS OF CURECELL AND ATVIO

Description of the Transactions

Contemporaneous with leading Biotech companies in their respective cell-based therapy fieldthe execution of the SPA and strengthened its revenue base over the last three quarters.  In January 2017, MaSTherCellMasthercell Global Stockholders Agreement (as described above), the Company and Masthercell Global entered into a service agreementContribution, Assignment and Assumption Agreement pursuant to which Company contributed to Masthercell Global the Orgenesis’ assets relating to the CDMO business, including the CDMO subsidiaries. In furtherance thereof, Masthercell Global, as Orgenesis’ assignee, acquired all of the issued and outstanding share capital of Atvio, the Company’s Israel based CDMO partner since August 2016, and 94.2% of the share capital of CureCell, the Company’s Korea based CDMO partner since March 2016. Orgenesis exercised the "call option" to which it was entitled under the joint venture agreements with Les Laboratoires Servier (“Servier”)each of these entities to purchase from the former shareholders their equity holding. The consideration for the developmentoutstanding share equity in each of its CAR-TAtvio and CureCell consisted solely of Company Common Stock. In respect of the acquisition of Atvio, the Company issued to the former Atvio shareholders an aggregate of 83,964 shares of Company Common Stock. In respect of the acquisition of CureCell, the Company will issue according to valuation to the former CureCell shareholders an aggregate of 202,846 shares of Company Common Stock. Together with MaSTherCell S.A., Atvio and CureCell are directly held subsidiaries under Masthercell Global.

CureCell and Atvio are customer-oriented CDMO companies specializing in cell therapy manufacturing platformdevelopment for advanced medicinal products.

The exercise of the call options of CureCell and Atvio, pursuant to which the Company obtained effective control over such entities, was accounted for as a business combination. The results of operations of CureCell and Atvio have been included in the Company’s condensed consolidated statements of operations starting from June 2017, MaSTherCell entered into a service agreement with CRISPR  Therapeutics AG  (“CRISPR”)28, 2018, the date on which the Company obtained effective control of CureCell and Atvio. The revenues from operations of CureCell and Atvio for the developmentperiod from June 28, 2018, the acquisition date, to August 31, 2018 was approximately $784 thousands and manufacturing$41 thousands, respectively.

Fair Value of allogeneic cell therapies.Consideration Transferred

The Company accounted for the exercise of the call options of CureCell and Atvio as a business combination under the acquisition method of accounting.

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The following table summarizes the provisional allocation of purchase price to the fair values of the assets acquired and liabilities assumed as of the transaction date:

(a)       The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of other intangible assets which comprised of: Customer Relationships of $859 and “Know How” of $3,074. These other intangible assets have a useful life of 10 and 12 years, respectively. The useful life of the other intangible assets for amortization purposes was determined considering the period of expected cash flows generated by the assets used to measure the fair value of the intangible assets adjusted as appropriate for the entity-specific factors, including legal, regulatory, contractual, competitive, economic or other factors that may limit the useful life of intangible assets.

The fair value of the Know How was estimated using a relief of royalties’ approach. Under this method, the fair value of the Know How is equal to the royalty fee that the owner of the Know How could profit from if he was to license the Know How out.

Customer Relationships 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 equal 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 specific intangible asset revenue and expense estimates.

(b)       The primary items that generate goodwill include the value of the synergies between the acquired company and the Company and the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.

Atvio

The total consideration of Atvio of $890 thousand was attributed mainly to goodwill.

The Company’s purchase price allocation for both companies are preliminary. The fair values of acquired assets and liabilities may be further adjusted as additional information becomes available during the measurement period. Additional information may become available subsequently and may result in changes in the values allocated to various assets and liabilities includes, but is not limited to, any changes in the values allocated to tangible and identified intangible assets acquired and liabilities assumed during the measurement period and may result in material adjustments to goodwill.

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NOTE 45 – CONVERTIBLE LOAN AGREEMENTS

(a)        On January 12, 2017, the Company repaid the outstanding principal amount and accrued interest in the amount of $51 thousand on convertible loans that were issued during September 2016. The transaction had no material impact on the comprehensive loss for the period.

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(b)       During the nine months ended August 31, 2017,2018, the Company entered into several unsecured convertible noteloan agreements with accredited or offshore investors for an aggregate amount of $3.95 million.$720 thousand. The loans bear an annual interest rate of 6% and mature in six months or two years from the closing date, of issuance, unless earlier converted earlier.subject to the terms defined in the agreements.

The notesloans provide that the entire principal amount under the notes and accrued interest automatically convert into units as in the agreement upon the earlier to occura Unit, consisting of anyone share of the following: (i) the closingCommon Stock and one three-year warrant exercisable into an additional share of an offeringcommon stock at a per share exercise price of equity securities of$6.24. In addition, the Company with gross proceedsissued to the Company greater than $10 million (ii) the trading of the Company’s common stock, par value $0.0001 percertain investors 40,064 three-year warrants to purchase up to an additional one share (the “Common Stock”) on the over-the counter market or an exchange at a weighted average price of at least $0.52 (adjusted for certain capital events such as stock splits) for fifty (50) consecutive trading days, or (iii) the listing of the Company’s Common Stock onat a U.S. National Exchange.per share exercise price of $6.24.

Since the closing price of the Company’sCompany's publicly traded stock is greater than the effective conversion price on the closing date, the conversion feature is considered "beneficial" to the holders and equal to $2.24 million. The 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.

            The transaction costs were approximately $405 thousand, out of which $129 thousand was the fair value of warrants for the purchase of 434,436 shares of Common Stock granted to three holders as a success fee, exercisable at $0.52 per share for three years. The fair value of those warrants as of the date of grant was evaluated using the Black-Scholes valuation model.

(c)        During the nine months ended August 31, 2017, the Company entered into several unsecured convertible note agreements with accredited or offshore investors for an aggregate amount of $0.8 million. The notes have 0% or 6% interest rate and are scheduled to mature between nine months and one year unless converted earlier. At any time, all or a portion of the outstanding principal amount and accrued but unpaid interest thereon may be converted at the Holder’s option into shares of the Company common stock at a price of $0.52 per share. The Company also issued to the investors three-year warrants to purchase up to 1,746,063 shares of the Company’s Common Stock at a per share exercise price of $0.52.

            Since the closing price of the Company’s publicly traded stock is greater than the effective conversion price on the measurement date, the conversion feature is considered "beneficial" to the holders and equal to $81$193 thousand. The 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.

(d)        On January 23, 2017, the Company and a Non-U.S. institutional investor, entered into an agreement pursuant to which the investor advanced to the Company $400,000 at per annum rate of 6% and with a maturity date of April 23, 2017.

The transaction costs for were approximately $71$89 thousand, out of which $35$31 thousand as stock basedare stock-based compensation due to issuance of 76,923 warrants and 32,051 shares. The fair value of those warrants as of the date of grant was evaluated by using the Black-Scholes valuation model.

            The principal amount and accrued interest were repaid by the Company on March 7, 2017 and, in accordance with the terms of the agreement, the Company issued to the investor 650,000 restricted shares of the Company’s Common Stock. The fair value of the shares as of March 7, 2017, was $494 thousand and was recorded as financial expenses.

(e)        In January 2017 MaSTherCell repaid all but one of its bondholders (originally issued on September 14, 2014), and the aggregate payment amounted to $1.7 million (€1.5 million)(See also Note 8(c)). On January 17, 2017, the remaining bondholder agreed to extend the duration of his Convertible bond until March 21, 2017. In consideration for the extension, the Company issued to the bondholder warrants to purchase 102,822 shares of the Company’s Common Stock, exercisable over a three-year period at a per share exercise price of $0.52. The fair value of those warrants as of the date of grant was $20 thousand using the Black-Scholes valuation model.

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            On March 20, 2017, the remaining bondholder agreed to convert his convertible bonds into 488,182 shares of the Company’s Common Stock.

            The Company returned to treasury from the escrow arrangement entered into in March 2015 in connection with the MaSTherCell acquisition a total of 3,157,716 consideration, in accordance with the terms of the MaSTherCell acquisition agreement. These shares have been retired and cancelled.

(f)        On February 27, 2017, the Company and Admiral Ventures Inc. (“Admiral”) entered into an agreement resolving the payment of amounts owed to Admiral. Under the terms of the settlement agreement, Admiral extended the maturity date to June 30, 2018. The Company agreed to pay to Admiral, on or before March 1, 2017, between $0.3 million and $1.5 million. Further, beginning April 2017, the Company agreed to make a monthly payment of $125 thousand on account of remaining unpaid balance, and also agreed to remit 25% of all amounts received from equity financing raised above $1 million and 20% of such amounts above $500 thousand on account of amounts owed. The Company accounted for the above changes as a modification of the old debt.

            On March 1 and July 17, 2017, the Company repaid $1.5 million and $125 thousand on account of the principal amount of the loan and accrued interest, respectively. As ofThrough August 31, 2017, the Company was2018, all convertible loans were converted. See additional information in arrears in its payment obligations under such agreement. See also Note 10(c).5b.

NOTE 5 – COMMITMENTS

Grants

            In April 2016, the Belgian Subsidiary received the formal approval from the Walloon Region, Belgium (Service Public of Wallonia, DGO6) (“DGO6”) for a budgeted €1.3 million ($1.5 million) support program for CTB activity. The financial support is awarded to the Belgian subsidiary Orgenesis as a recoverable advance payment at 55% of budgeted costs, or for a total of €0.7 million thousand ($0.8 million). The grant will be paid over the project period. On December 19, 2016, the Belgian Subsidiary received a first payment of €359 thousand ($374 thousand).

            On October 8, 2016, the Belgian subsidiary received the formal approval from the DGO6 for an additional budget of €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 be held during a period of three years commencing January 1, 2017. The financial support is awarded to the Belgium subsidiary at 55% of budgeted costs, a total of €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 €1.7 million ($1.8 million).

NOTE 6 – EQUITY

Financings

            1)(b)       During the nine months ended August 31, 2017,2018, holders of approximately $7.7 million in principal and accrued interest of convertible loans converted these outstanding amounts, into units of the Company entered into definitive agreementsCompany’s securities at a deemed per unit conversion price of $6.24, with accredited and other qualified investors relating to a private placement (the “Private Placement”) ofeach unit comprised of: (i) 1,286,944 sharesone share of the Company’s Common Stock and (ii) one warrant, exercisable for a period of three year warrants to purchase up toyears from the date of conversion, for an additional 1,286,944 sharesshare of the Company’s Common Stock, at a per share exercise price of $0.52$6.24. As a result of these conversions, the holders are entitled to 1,240,972 shares of Common Stock and $0.65 respectively. The purchased securities were issued pursuant to subscription agreements between the Company and the purchasersthree-year warrants for aggregate proceeds to the Companyan additional 1,240,972 shares of $699 thousand.common stock at a per share exercise price of $6.24.

The Company allocated the proceeds from the Private Placementconverted amounts based on the fair value of the warrants and the shares. The table below presents the fair valueconverted amounts of the instruments issuedproceeds as of the closing dates and the allocation of the proceeds:date:

13The fair value of these warrants determined using a Black-Scholes model based on the following assumptions:

These loans had beneficial conversion features ("BCF"). Therefore, the Company recognized the unamortized BCF as of the conversion date as interest expenses.

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