U.S. DOLLARS IN THOUSANDS
U.S. dollars in thousands (except share and per share data)
The accompanying notes are an integral part of the consolidated financial statements.
U.S. dollars in thousands (except share and per share data)
*) Includes stock-based compensation.
The accompanying notes are an integral part of the consolidated financial statements.
U.S. dollars in thousands (except share data)
*) Represents an amount lower than $ 1.
The accompanying notes are an integral part of the consolidated financial statements.
U.S. dollars in thousands
The accompanying notes are an integral part of the consolidated financial statements.
U.S. dollars in thousands
| | a. | Compugen is a drug and diagnostic discovery company that relies on unique computer-based discovery platforms to systematically predict and select novel product candidates in areas of high industry interest and unmet medical need. Following this computer based prediction and selection, the resulting in silico novel molecules are synthesized and then validated utilizing traditional in vitro and in vivo experimental procedures. Compugen’s business model is to provide an increasing number of these validated product candidates to pharmaceutical, biotech and diagnostic companies under licensing and other commercialization arrangements whereby the Company is entitled to receive advance fees or research revenues, milestone payments and revenue-sharing amounts from the development and commercialization by such companies of products based on its candidate molecules. |
The Company's headquarters and research facilities are located in Israel.
In 1999, the Company established a division focusing on agricultural biotechnology and plant genomics called Evogene Ltd. ("Evogene"). Evogene is an Israeli corporation primarily engaged in delivering improved plant traits to the agbio industry through the use of a platform combining computational genomics, molecular biology and breeding methods. During June 2007, Evogene completed an initial public offering ("IPO") on the Tel-Aviv Stock Exchange. Prior to the IPO, the excess of losses over investment in Evogene amounted to $ 466 and was presented as a liability included in the Company's balance sheet that represents excess of losses sustained by Compugen over its investment through the deconsolidation date. In August 2008, Evogene signed a collaboration agreement involving shares equity investment with third party. In June 2009 the Company sold 1,000,000 of Evogene's Ordinary shares to a third party in a private transaction for $ 3,557, net. The basis on which the cost of a security sold or the amount reclassified out of accumulated other comprehensive income into earnings was determined is a specific identification. As a consequence of the IPO, the additional equity investment and the sale transaction the Company currently holds 1,150,000 shares representing 3.9% of Evogene outstanding Ordinary shares.
As of September 30, 2010, the investment in Evogene was accounted for as available-for-sale marketable security in accordance with ASC 320-10.
Available-for-sale securities are carried at fair value, with the recognized gains and losses reported as a separate component of shareholders' equity under accumulated other comprehensive income in the consolidated balance sheet
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2009 are applied consistently in these financial statements. For further information, refer to the consolidated financial statements as of December 31, 2009.
| NOTE 3:- | UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
COMPUGEN LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share data)
| NOTE 3:- | UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
Operating results for the nine-month period ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ended December 31, 2010.
In the nine month period ended September 30, 2010 the Company recognized revenues from product candidate collaboration agreements, under which the Company performs research services.
The Company views its product candidate collaboration agreements under which it performs research services as arrangements subject to the revenue recognition criteria in ASC 605-10. Revenue is being recognized when the Company completes its performance obligation.
| NOTE 5:- | SHAREHOLDERS EQUITY |
In July 2010, the Company adopted the Compugen Ltd. 2010 Share Incentive Plan (the “Plan”), which replaced the Compugen Share Option Plan (2000) adopted in March 2000. The plan provides for the grant of options to purchase 1,953,851 ordinary shares to employees and consultants of the Company and its subsidiaries. Any available pool under the old plans, including any additional options that may return to the pool in connection with the termination of options granted under old option plans but not exercised prior to their termination, will be made available for future grants under the Plan.
During the nine month period ended September 30, 2010, the Company's Board of Directors granted total options to purchase 1,514,000 shares of the Company's common stock. 1,318,000, 21,000 and 175,000 options were granted to employees, consultant and directors, respectively.
The exercise price for the options granted during the nine month period ended September 30, 2010 ranges $ 3.43-$ 5 per share. Options' vesting period range is up to 4 years.
The Company usually estimates the fair value of stock options granted using the Black-Scholes option pricing model. The option pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements. The expected term of options granted assumptions are based on the Company historical experience, in accordance with the guidance of ASC 718 and SAB 110. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company used the following weighted-average assumptions for granted options for the period ended September 30, 2010: expected volatility – 79%, risk free interest rate – 2.34%, dividend yield – 0%, expected life of up to (years) – 5
During the nine month periods ended September 30, 2010 and 2009 the Company recorded share based compensation in total of $ 1,755 and $ 1,089, respectively.
COMPUGEN LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share data)
| NOTE 6:- | FAIR VALUE MEASURMENTS |
The Company adopted ASC 820-10 effective January 1, 2008, with respect to fair value measurements of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company's financial statements on a recurring basis (at least annually) and (b) all financial assets and liabilities. The Company measures marketable securities available-for-sale at fair value. Marketable securities are classified only within Level 1 for these assets are valued using quoted market prices. Foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. As of September 30, 2010 foreign currency derivative contracts amounted to $ 15. As of De cember 31, 2009 there are no foreign currency derivative contracts recorded in the Company's balance sheet.
| NOTE 7:- | DERIVATIVE INSTRUMENTS |
None of the Company's derivatives qualify for hedge accounting under ASC 815-10. They are recognized on the balance sheet at their fair value, with changes in the fair value carried to the statements of operations and included in financial income/expenses.
In the nine month period ended September 30, 2010, the Company recorded net losses from forward contracts transactions in the amount of $ 19. In the nine month period ended September 30, 2009 the Company recorded net losses from forward contracts in the amount of $ 41.
| NOTE 8:- | COMMITMENTS AND CONTINGENCIES |
| | a. | The Company provided a bank guarantee in the amount of $ 100 in favor of its offices' lessor in Israel. |
| | b. | Commitments in favor of the Government of Israel and other grants: |
| | 1. | As of September 30, 2010, the Company's aggregate contingent obligations for payments to Office of the Chief Scientist and BIRD, based on royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled approximately to $ 7,166 and $ 500, respectively. |
| | 2. | Under the BIRD royalty-bearing program, the Company is not obligated to repay any amounts received from BIRD if no income is generated from the results of the funded research program. If such income is generated, the Company is required to repay BIRD 100% of the grant that the Company received provided that the repayment to BIRD is made within the first year following expiry of the term of the project. For every year that the Company does not make these repayments, the amounts to be repaid incrementally increase up to an amount of 150% in the fifth year following expiry of the term of the project. All amounts to be repaid to BIRD are linked to the U.S. Consumer Price Index. |
| | 3. | Under the OCS royalty-bearing programs, the Company is not obligated to repay any amounts received from the OCS if it does not generate any income from the results of the funded research program. If income is generated and the research program is successful, the Company is committed to pay royalties at a rate of 3% to 5% of sales of the products arising from such research program, up to a maximum of 100% of the amount received, linked to the U.S. dollar (for grants received under programs approved subsequent to January 1, 1999, the maximum to be repaid is 100% plus interest at LIBOR). |
COMPUGEN LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share data)
| NOTE 8:- | COMMITMENTS AND CONTINGENCIES (Cont.) |
For the nine month period ended September 30, 2010 the Company paid or accrued royalties to the OCS in the amount of $ 32 (unaudited). For the period ended December 31, 2009 the Company had an aggregate of paid and accrued royalties to the OCS in the amount of $ 9.
| NOTE 9:- | SUBSEQUENT EVENTS |
Subsequent to the balance sheet date the Company entered into an agreement (the “Funding Agreement”) with an investor whereby the investor agreed to provide the Company with $ 5 million in support of the Company’s Pipeline Program. In exchange, the investor received (i) with respect to five designated molecules that are currently in the Pipeline Program, the right to receive ten percent (which amount may be reduced under certain circumstances) (the “Participation Payments”) of certain cash consideration (including both development and post-marketing fees) that may be received by Compugen in the future pursuant to any licenses covering the development and commercialization of products developed from these five designated molecules, provided that, in all cases, any such Participation P ayments are to reduced by certain pass-through amounts; and (ii) warrants for 500,000 Compugen ordinary shares, exercisable at $ 6.00 per share through June 30, 2013. In addition, the investor has the right, until June 30, 2013, to waive its right to receive Participation Payments, in exchange for 833,334 ordinary shares.
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