| RECONSOLIDATION OF OCTOMERA LLC | NOTE
4 – RECONSOLIDATION OF OCTOMERA LLC Pursuant
to the MM UPA signed on January 29, 2024, the Company and MM agreed to the following:
1. Consideration:
● Royalty
Payments: If Octomera and its subsidiaries generate Net Revenue during the three year period 2025-2027, then the Company will pay
5
● Milestone
Payments: If the Company sells Octomera within ten years from the date of the Closing at a price that is more than $ 40 5
2. 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 (the “Octomera LLC Agreement”) to be a single member agreement
reflecting the transactions consummated under the UPA, such that MM no longer (i) is member of Octomera or a party to the Octomera
LLC Agreement, or (ii) has a right to appoint members of the board of managers of Octomera.
3. 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 Fair
Value of Consideration Transferred Accounting
guidance provides that the allocation of the purchase price may be adjusted for up to one year from the date of the
acquisition to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition
date. The primary area of the purchase price allocation that is not yet finalized is related to intangible assets, property,
plant and equipment, and certain other assets and tax matters and the related impact on goodwill. In
evaluating the fair value of the Octomera Equity Investment under the income approach, the Company used a discounted cash flow model
of the business, adjusted to the Company’s share in the investment. Key assumptions used to determine the estimated fair value included:
(a) internal cash flows forecasts for 5 years following the assessment date, including expected revenue growth, costs to produce, operating
profit margins and estimated capital needs; (b) an estimated terminal value using a terminal year long-term future growth determined
based on the growth prospects of the reporting units; and (c) a discount rate which reflects the weighted average cost of capital adjusted
for the relevant risk associated with the Company’s reporting unit operations and the uncertainty inherent in the Company’s
internally developed forecasts. The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the
recognition of other intangible assets, net, which comprised of technology. The useful life of the technology for amortization purposes
was determined by considering the period of expected cash flows generated by the assets used to measure the fair value of the intangible
assets, adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic, or other
factors that may limit the useful life of intangible assets. The
following table summarizes the allocation of purchase price to the fair values of the assets acquired and liabilities assumed as
of the Transaction date: SCHEDULE OF PURCHASE PRICE TO THE FAIR VALUES OF THE ASSETS ACQUIRED AND LIABILITIES ASSUMED
(in thousands)
Total contingent liability to MM for royalty and milestone payments $ 4,643
Total assets acquired:
Cash and cash equivalents $ 139
Property, plants and equipment, net 17,852
Other Assets 3,478
Total assets $ 21,469
Total liabilities assumed:
Total current liabilities $ (12,518 )
Total long-term liabilities (5,628 )
Total liabilities $ (18,146 )
Know how Technology 1,728
Total Net Assets $ 5,051
Fair-Value of Non-controlling interests (408 )
Total liability to MM $ 4,643 The allocation of the purchase price to the net assets acquired and liabilities
assumed resulted in the recognition of an intangible asset know-how of $ 1,728 4,643 Key inputs for the fair values valuation are summarized below. SCHEDULE OF
KEY INPUTS FOR THE FAIR VALUES VALUATION
Key Valuation Inputs Jan 31 st
Discount rate 40 %
Risk-free interest rate 4.4 %
Average 5 years revenue growth 50 % The Company incurred transaction costs of approximately $ 50 The
revenues and net loss of Octomera from January 1, 2024 until the reconsolidation date were $ 23
and $ 1,244
respectively. Fair
Value Assumptions Used in Accounting for Derivative Liabilities ASC
815 requires assessing the fair market value of derivative liabilities at the end of each reporting period and recognize any change in
the fair market value as other income or expense. In
January 29, 2024, in connection with the PPA study Octomera LLC the Company has recognize a liability to pay MM two components: 1.
Royalties (based on revenues in years 2, 4 and 4 as of Closing and; 2.
Earnout amount, which is dependent of a future trigger event- in case of an IPO or exit. The
Company classified these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate
the fair value as of January 29, 2024 and March 31, 2024 $ 5,112 Key
inputs for the simulation are summarized below. SCHEDULE
OF KEY INPUTS
Key Valuation Inputs Jan 31 st March 31 2024
Standard Deviation 13.5 %
Risk-free interest rate 4.4 %
Possible trigger event examination Year 10
Average 5 years revenue growth 50 %
Trigger events 30 %
Revenues multiple 10
* Based on a Monte Carlo simulation analysis of 30,000 iterations Deconsolidation
of Orgenesis Biotech Israel Limited (“OBI”) On
February 14, 2024, following a claim for payment of past salaries due by employees of OBI, a fully owned subsidiary of Octomera, the
district court in Haifa, Israel, 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. As a result of this appointment, effective February 14, 2024, the
Company no longer controls OBI and ceased to consolidate the results of OBI into its consolidated results. The Company recognized a loss
as a result of the deconsolidation of $ 66 The Company recorded $ 2,697 The
following table summarizes the deconsolidate assets and liabilities as of February 14, 2024: SCHEDULE
OF DECONSOLIDATE ASSETS AND LIABILITIES
Total assets acquired:
Cash and cash equivalents $ 4
Property, plants and equipment, net 2,884
Other Assets 1,422
Total assets $ 4,310
Total liabilities assumed: $ 4,244
Total Net Assets deconsolidated $ 66
Loss from deconsolidation of OBI $ 66 |
