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, 2022
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
State or other jurisdiction
of incorporation or organization
98-0583166
(I.R.S. Employer
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
Common Stock, par value $0.0001 per share
Trading Symbol(s)
ORGS
Name of each exchange on which registered
The Nasdaq Capital 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 ☐
Non-accelerated filer ☒
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 ☒
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, 2022) was $54,809,919, as computed by reference to the
closing price of such common stock on The Nasdaq Capital Market on such date.
The registrant had 27,493,123 shares of common stock outstanding as of March 22, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
None.
ORGENESIS INC.
2022 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
SIGNATURES
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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”); Orgenesis Belgium SRL, a Belgian-based entity (the “Belgian Subsidiary”); Orgenesis
Services SRL, a Belgian-based entity which was incorporated in 2022 (“Orgenesis Services SRL”); Orgenesis Ltd., an Israeli
corporation (the “Israeli Subsidiary”); Orgenesis Maryland LLC (formerly Orgenesis Maryland Inc.), a Maryland limited liability
company (the “U.S. Subsidiary”); Orgenesis Switzerland Sarl, (the “Swiss Subsidiary”); Orgenesis Biotech Israel Ltd. (“OBI”);
Koligo Therapeutics Inc., a Kentucky corporation (“Koligo”); Tissue Genesis International LLC (“Tissue Genesis”) a Texas limited
liability company which was incorporated in 2022; Orgenesis Germany GmbH (the “German Subsidiary”); Orgenesis CA, Inc. (the
“California Subsidiary”); Mida Biotech BV (the “Dutch Subsidiary”) which was purchased in 2022; Orgenesis Australia PTY LTD
(the “Australian Subsidiary”) which was incorporated in 2022; Orgenesis Italy SRL (the “Italian Subsidiary”) which was
incorporated in 2022, Theracell Laboratories Private Company (“Theracell Laboratories”), a Greek company that the Company
gained control on in December 2022, and Morgenesis LLC, a Delaware limited liability company (“Morgenesis”) which was
incorporated in 2022.
Forward-looking statements made in this Annual Report on Form 10-K include statements about:
Corporate and Financial
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our ability to generate revenue from the commercialization of our point-of-care cell therapy (“POCare”) to reach patients
and to increase such revenues;
our ability to achieve profitability;
our ability to manage our research and development programs that are based on novel technologies;
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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;
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”)
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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 POCare strategy in order to further develop and advance autologous therapies to reach
patients;
expectations regarding our ability to obtain and maintain existing intellectual property protection for our technologies and
therapies;
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 relationship with Tel Hashomer Medical Research Infrastructure and Services Ltd. (“THM”) and the growing risk that
THM may cancel or, at the very least continue to challenge, the License Agreement with the Israeli Subsidiary;
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 POCare business;
our ability to complete development, processing and then roll out Orgenesis Mobile Processing Units and Labs
(“OMPULs”) generate sufficient revenue from our POCare Services; and
our ability to grow our POCare business and to develop additional joint venture relationships in order to produce
demonstrable revenues.
Metalmark Investment Risks
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Morgenesis may not receive the future payments pursuant to the Unit Purchase Agreement with MM OS Holdings, L.P.
(“MM”), an affiliate of Metalmark Capital Partners;
MM may force the sale of Morgenesis under certain conditions which may result in MM receiving a greater value than us
and our shareholders;
MM may, under certain circumstances, assume control of the Board of Managers of our subsidiary, Morgenesis, which
would result in our inability to control and direct the activities of such subsidiary;
MM has the right to buy our units in Morgenesis upon the occurrence of certain events, which could result in us not
holding any equity in Morgenesis;
we may be forced to redeem all of the units of Morgenesis held by MM, which could require substantial cash outlay and
would adversely affect our financial position; and
if MM opts to exchange its Morgenesis units for shares of our common stock, we could potentially issue up to 5,106,596
shares of our common stock to MM, which may result in significant dilution to our existing stockholders.
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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, 2022, 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.
PART I
ITEM 1. BUSINESS
Business Overview
We 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 (“ATMPs”). We are mostly focused
on autologous therapies that can be manufactured under processes and systems that are developed for each therapy using a closed
and automated 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).
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:
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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 body;
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 tissue; or
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” since they are based on maintaining the
cell’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 their 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 our POCare Platform to potentially overcome some
of the development and supply chain challenges of affordably bringing CGT to patients.
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To 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 developing our pipeline of
advanced therapies and with the goal of entering into out-licensing agreements for these therapies.
We believe that, for this industry to prosper, 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 produced is
inherently different from producing existing drugs. They are based on reprogramming of cells sourced from the 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 then sterilized such as typical biotech products. These “living drug” products
are, in most cases, produced per patient individually in a highly sterile and controlled environment, and their efficacy is optimized
when administered a short time following production as fresh product.
To advance the execution of our goal of bringing such therapies to market, 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 Morgenesis, an Orgenesis subsidiary (see
below). This platform is utilized by other parties, such as biotech companies and hospitals for the supply of their products.
Morgenesis 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.
POCare Services
The POCare Services that we and our affiliated entities perform include:
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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.
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.
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POCare Services Operations via Subsidiaries
We currently conduct our core business operations ourselves and through Morgenesis and its subsidiaries which are all
wholly owned except as otherwise stated below (collectively, the “Subsidiaries”). The following is a description of our
Subsidiaries:
Morgenesis LLC
In August 2022, we formed Morgenesis LLC, a subsidiary to hold substantially all the assets of our POCare Services. We
formed Morgenesis to streamline all existing POCare Service business units into one unified entity, bringing together a full-service
range of solutions for therapeutic developers for point of care treatments. The newly formalized service offering provides solutions
from initial process development, regulatory strategy and implementation, “OMPULization” which includes cGMP process
development, closing/automating the process, and with the end goal of optimizing full cGMP processing and supply of therapeutic
product to patients at the point of care. We currently own 76.9% of Morgenesis.
During November 2022, we and MM OS Holdings, L.P. (“MM”), an affiliate of Metalmark Capital Partners
(“Metalmark”), entered into a series of definitive agreements intended to finance, strengthen and expand our POCare Services
business (the “Metalmark Investment”). Pursuant to a unit purchase agreement (the “UPA”), MM agreed to purchase 3,019,651
Class A Preferred Units of Morgenesis (the “Class A Units”), which represents 22.31% of the outstanding equity interests of
Morgenesis following the initial closing, for a purchase price of $30.2 million, comprised of (i) $20 million of cash consideration
and (ii) the conversion of $10.2 million of MM’s then-outstanding senior secured convertible loans previously entered into with
MM. Under certain conditions related to Morgenesis’ performance among others, MM has agreed to make future payments of up to
$20 million in cash for additional Class A (or Class B) Units, and/or make a one-time cash payment of $10 million to Orgenesis
(the “Earnout Payment”). In connection with the entry into of the UPA, we, Morgenesis and MM entered into the Second Amended
and Restated Limited Liability Company Agreement (the “LLC Agreement”) providing for certain restrictions on the disposition of
Morgenesis securities, the provisions of certain options and rights with respect to the management and operations of Morgenesis, a
right for MM to exchange any units of Morgenesis for shares of Orgenesis common stock and certain other rights and obligations.
In addition, MM was provided certain protective rights in Morgenesis.
We transferred the following subsidiaries to Morgenesis, and the proceeds of the investment will generally be used to fund
the activities of Morgenesis and its consolidated subsidiaries.
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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, which was formed in Texas in 2022, is currently focused on development of our
technologies and therapies.
Orgenesis Services SRL, which was incorporated in 2022 and 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. The Company owns
94.12% of the Korean Subsidiary.
Orgenesis Biotech Israel Ltd., which is a provider of process development and cell-processing services in Israel.
In December 2022, we (through our subsidiary Morgenesis) gained control over Theracell Laboratories, a Greek company
currently focused on expanding our POCare Network. (See notes 12 and 13)
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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 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
and reduce the cost and lengthy timelines associated with building additional clean rooms and complex tech transfers between
production sites.
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 on the concept of standardizing infrastructure by providing flexible
building blocks through the POCare Centers and OMPULs, which allows for quick expansion at multiple locations.
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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.
Integrated closed and automated processing systems require fewer full-time employees (“FTEs”) to produce GMP batches,
resulting in lower cost 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.
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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
systems. Therapies serviced include immuno-oncology, anti-aging, metabolic, dermatology, orthopedic, as well as regenerative
technologies.
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 implementation of several therapy types in OMPULs and have made
significant progress in the validation, risk analysis, regulatory and other related tasks relating to the OMPULs. We are setting up the
OMPULs through our POCare 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.
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Above are diagrams of an OMPUL and partial interior for illustrative purposes only.
We have finalized or are in the process of finalizing the development of several POCare Centers and adapting to the local
requirements of each POCare Center with the target of achieving a capacity to process and supply CGTs per production contracts.
As we expand operations, we expect that the OMPUL setup costs will decline over time. Most of our POCare revenue to date is in
support of the implementation of technologies and therapies in the OMPULs and production at the POCare Sites.
We have established POCare Centers in several locations globally, in which we perform process development and
manufacturing activities for several types of CGT products. For example, in Israel, our POCare Center 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 an additional hospital. In these OMPULs, we currently manufacture TILs and CAR-T therapies for our customers.
In Greece, our POCare Center includes three OMPULs installed in place and a process development lab, currently servicing two
customers. Our POCare Center in Maryland, 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.
POCare Services Development Facilities
OBI
OBI is our specialized process and technology development wholly-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 1,300 square meters of labs and offices resulting in an efficient and
unique environment for cell therapy development. 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 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”).
10
The Korean Subsidiary
The Korean Subsidiary has a particular focus on developing innovative cell therapies for 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.
Tissue Genesis International
The Tissue Genesis Icellator™ is used to isolate stromal and vascular fraction cells (“SVF”) from a patient’s own
(autologous) adipose tissue (fat). The Tissue 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 world and maintain research and development labs to support continued
product development.
Tissue 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.
On the Icellator front, in 2022 TGI continued to service our existing customers both domestically and abroad, added new
customers, increased revenue from sales, extended shelf-life of existing Icellator inventory, continued Adipase development, and
engaged in production of a new lot of disposables.
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 for our customers. The subsidiary benefits
both from its central position in Europe and its being in the leading Walloon biotech cluster. It occupies innovative facilities for the
development and quality control of therapies in R&D and GMP grades.
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 2022 POCare Services Activities
In 2022, we continued 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 expanding 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.
11
As part of our POCare Services, we have developed the relevant GMP processes for a variety of therapies such as CAR-T,
TILs, 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. 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 expanded our collaboration with UC Davis and have completed the first production batch of GMP grade lentivirus to
be utilized for clinical grade production of CAR-Ts. We intend to expand the collaboration to establish and validate the
decentralized model of OMPUL placement in compliance with regulatory requirements. The parties aim to commercialize and
install OMPULs at other sites within the State of California. We have expanded our partnership with Johns Hopkins University and
are setting up a GMP facility with the support of a grant from Maryland. We are providing products to several hospitals in the U.S.,
are working closely with leading hospitals in Spain and Italy and are working closely with clinicians from hospitals in Israel, where
we have deployed our OMPULs to set up additional clinical sites where we can provide POCare Services for our customers and
partners. Based on the requests of our customers and partners, we have expanded our POCare Services to include CRO services.
We have collaborated closely with our Greek partner, Theracell, and have set up a partnership in Greece focusing on
delivering advanced therapies to Greek hospitals. The Greek government has granted our Greek joint venture entity a “fast track”
status and a supportive financial grant.
Our POCare Services are expanding to additional geographies, and we are providing services to the U.S., EU, and Asia.
POCare Therapies
The global CGT market is growing at a rapid pace, now with over 2,000 active clinical trials (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. 16 of the world’s largest 20 biopharma companies now have CGT assets in their product portfolios.
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.
12
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.
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 18 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 was acquired in 2022 and 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 was incorporated in 2022 and 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.
13
●
●
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 Australia PTY LTD, which was incorporated in 2022 and is currently focused on the development of the
Company’s technologies and therapies.
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, implying 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 is originated
from solid internal proprietary, joint ventures and in-licensing agreements with biotech companies and leading research institutes.
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
HiCAR-T
CeCART
T-LOOP
Intra Nasal Delivery of Cell based
Immunotherapy
MSCP
EVRD
MDVAC
AutoSVF
CellFix
KYSLECEL (see 1 below)
KT-DM-103 and KT-CP-203 (3D-Printed
Pancreatic Islets)
(see 2 below)
RanTop, Ranpirnase Topical Formulation
(see 3 below)
Autovac
(see 4 below)
Bioxomes
(see 5 below)
MSPP
Development Stage
IND enabling studies
Pre-clinical
IND enabling studies
Pre-Clinical
Pre-clinical
Pre-clinical
IND enabling studies
Clinical development
Clinical use
Market approval in the US
Own development
Indication
B-ALL, B-cell Lymphoma
Solid Tumors
Solid Tumors
Drug delivery technology, Glioblastoma
Wound healing and Psoriasis
CKD
Pancreatic Cancer
Systemic ARDS , vascular disorders
Cartilage Defects
TP-IAT
Type 1 diabetes and chronic pancreatitis
Clinical Stage
Anti-viral/ Immune oncology
Pre-clinical
Pre-clinical
Pre-clinical
14
Autologous viral vaccine
Drug Delivery Technology
Urinary Incontinence
1.
KYSLECEL® (Autologous Pancreatic Islets)
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), available in the
United States and regulated by the U.S. Food and Drug Administration (“FDA”). The target population of KYSLECEL is chronic
or acute recurrent pancreatitis patients after total pancreatectomy (TP-IAT), who are in need of insulin secretory capacity
preservation.
To gain insight into KYSLECEL patient outcomes, an observational study is expected to be initiated in the United States.
In addition, to promote process development and marketing of KYSLECEL in the European Union, substantial efforts are being
invested. In this regard, designated teams are being trained by Orgenesis, to manage the introduction of KYSLECEL into new
markets by supporting tech transfer, as well as working on the automation of the manufacturing process. We are also considering
new potential indications, as well as promoting the development of new additional biological product.
2.
KT-DM-103 and KT-CP-203 (3D-Printed Pancreatic Islets)
Orgenesis, through the acquisition of Koligo, has 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.
3.
RanTop, Ranpirnase Topical Formulation
We 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 preliminary clinical efficacy in the treatment of HPV-associated external anogenital
warts (EGW) in a Phase 2a clinical study conducted in Bolivia.
Following FDA positive pre-IND feedback, a dermal toxicology feasibility study was conducted, showing that Ranpirnase
gel formulation was well-tolerated in repeated daily topical administration. Additionally, a sensitive Ranpirnase blood concentration
bioanalytical method was established, needed for determining systemic exposure in toxicology studies for IND filing.
We have demonstrated in laboratory experiments the feasibility of Ranpirnase encapsulation in the Orgenesis Bioxome
delivery platform, as well as an encapsulation-enhanced Ranpirnase anti-viral activity in an in vitro test. Following identification of
an optimal cell source, the combined product will be further developed for oncological indications.
4.
Autologous Cell-Based Vaccine for protecting against SARS-CoV-2
AutoVac is an autologous, pan-antigenic vaccine platform. 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. Currently, additional pre-clinical
immunogenicity studies are planned for regulatory submission support, as well as regulatory and clinical strategy finalization. In
addition, other viral pathogens are tested, to confirm specificity, and robustness of this vaccine platform.
5.
BioxomesTM as a cell-based delivery product
Exosomes are small, membrane-enclosed extracellular vesicles, involved in cell-to-cell interactions. Exosomes may serve
as a valuable therapeutic modality, given their ability to transfer a wide variety of therapeutic payloads among cells that can affect a
cell in multiple ways, and can be designed to reach specific cell types. Bioxomes are biocompatible and serve as GMP/GLP-
compliant exosome-like membrane nanostructures that can be produced from various cell types. To this end, we have developed a
proprietary large-scale GMP-compatible manufacturing process for preparation of Bioxome, from human adipose cells, fibroblasts,
blood cells, as well as plant cells.
15
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 and safety. Bioxomes are planned to be utilized as the next generation
biological delivery platform for Immuno-oncology indications. Currently, the regulatory strategy is being finalized according to US
FDA requirements.
Strategic CGT Therapeutics Collaborations
Collaborations, partnerships, joint ventures and license agreements are key components of our POCare strategy.
Our POCare technology collaborators and partners include Ori Biotech, Accellix, Columbia University in the City of New
York, Caerus Therapeutics Corporation, UC Davis, The Johns Hopkins University, The Weizman Institute of Science and others.
In addition, we have 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 the Financial Statements” included in Item 8.
Current POCare Therapies Development Facilities
Koligo
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 & other cell/tissue. Koligo also maintains
development labs at its Indiana location to support continued development.
The Belgian Subsidiary
The Belgian Subsidiary specializes in developing and validating proprietary and licensed advanced cell and gene therapies
such as the Muscle-derived Mesenchymal Stem Cells therapy for the treatment of SUI. 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.
The subsidiary employs talented and highly experienced staff and collaborators.
Mida
Mida specializes in developing and validating proprietary and licensed advanced cell and gene therapies such IPS based
therapies and AI.
The Israel Subsidiary
The Israel subsidiary occupies 400 square meters of labs and offices in Nes Ziona, Israel.
16
Revenue Model, Business Development and Licenses
Our POCare Platform is comprised of three enabling components: a multitude of licensed cell based POCare Therapies 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 JVs active in autologous cell therapy product development, including
facilities in various countries in North America, Europe, Asia, the Middle East, and Australia. Our goal through the POCare
Platform 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. Our POCare Network brings together industry partners, research institutes and
hospitals worldwide to achieve harmonized, regulated clinical development and production of the therapies.
We are focused on technology in licensing and therapeutic collaborations, and we out-license therapies marketing rights
and manufacturing rights to partners and/or to the JVs. In many cases, the JVs 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 Entity and/or its sublicensees (as applicable) with respect to the
Orgenesis products.
Further to revenues generated from out-licensing, we generate revenues from POCare Services and sales which is
comprised of:
●
R&D development services provided to out-licensing partners
We have signed POCare development services Master Services Agreements (“MSAs”) with our 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
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 JV partnerships.
●
Cell process development revenue
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.
●
POCare cell processing
We provide distributed cell processing services for third party customers at POCare Centers in close proximity to patients.
Our POCare revenue is as follows:
Revenue stream:
POCare development services
Cell process development services and hospital services
POCare cell processing
Total
17
Years Ended December 31,
2021
2022
(in thousands)
$
$
14,894 $
11,212
9,919
36,025 $
32,192
3,310
-
35,502
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-six (36) United States patents, seventy-five (75) foreign-issued
patents, eighteen (18) pending patent applications in the United States, seventy-one (71) 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 eleven (11) 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; (7) chimeric antigen
receptors (CARs); (8) adoptive immunotherapy using neurotransmitters; (9) Mobile Processing Units; (10) Axial Stem Cells; (11)
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) skin diseases treatment and anti-aging compositions.
We have a granted U.S. patent, a pending U.S. patent application 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 in 2037. The granted U.S. patent will expire in 2037.
18
We have pending U.S. patent applications directed, among others, to compositions comprising Ranpirnase and other
ribonucleases for the treatment of viral diseases. If issued, any patents based on these applications will expire between 2031 and
2040. Counterpart 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. These expiration dates do not include any patent term extensions that might be available following
the grant of marketing authorizations.
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 and South Korea. If issued, any
patents based on these applications will expire in 2039. These expiration dates do not include any patent term extensions that might
be available following the grant of marketing authorizations.
We have pending U.S. patent applications directed, among others, to compositions comprising ribonucleases and
antibodies or bioxomes, and their use for treating viral diseases, including COVID-19. If 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.
We have a pending International PCT application directed, among others, to compositions comprising immune cells 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.
We have a pending International PCT application, pending U.S. patent applications, and pending U.S. provisional patent
applications directed, among others, to bioreactors for cell culture and automated devices for supporting cell therapies. If issued,
any patents based on these applications will expire between 2027 and 2042. Counterpart patent applications were filed in Australia,
Brazil, Canada, China, Europe, Israel, Japan, Korea, Mexico, South Africa, Taiwan, Thailand, and Vietnam.
We have a pending International PCT application directed, among others, to tumor infiltrating lymphocytes (TILs) and
their use for treating cancer. 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.
We have a pending U.S. patent 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.
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 four pending U.S. provisional patent applications and a pending U.S. patent application directed, among others,
to chimeric antigen receptors (CARs), and their use for treating malignancies. If 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.
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.
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We have a pending International PCT application and a pending U.S. patent application directed, among others, to mobile
processing laboratories configured for performing there within a cell therapy process. 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.
We have a pending U.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. Counterpart patent applications were filed in Australia, Brazil, Canada, China, Europe, Israel, India, Japan,
Russian Federation, and South Korea. If 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.
We have a pending U.S. provisional patent application and a pending PCT 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 and 2043, without including any patent term extensions that might be available following
the grant of marketing authorizations.
The Israeli Subsidiary has exclusive rights to eight (8) United States patents, thirty (30) foreign-issued patents, one (1) pending
patent application in the United States, and six (6) pending patent applications in foreign jurisdictions, including Brazil, Canada,
Europe, and Israel. 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 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.
We also own IP and related Extracellular Vesicle (“EV”) Technology pursuant to an EV purchase agreement (the “EV
Agreement”). Pursuant to the EV Agreement, we received all of the rights in EV technology purchased. In addition, we received an
exclusive worldwide license to use the EV IP technology for any purpose.
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.
Both 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.
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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 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 grade 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, our therapeutic
pipeline is developed by researchers from our network and are subsequently out-licensed and validated in multi-center clinical trials
conducted across point of care partner sites leveraging the robustness of our POCare Network. Once approved these therapies are
distributed to leading medical institutions globally within our network and thus granting the inventors a royalty-based
commercialization horizon.
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:
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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;
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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.
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:
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Compliance with current GMP regulations and standards, as described in the delegated acts;
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; and
Review and approval of the Marketing Authorization 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” 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.
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.
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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.
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.
Human Capital Resources
As of December 31, 2022, we had an aggregate of 167 employees working at our company and 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.
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 53% women, 11% ethnically diverse and 50% over the age of 40.
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Health, Wellness and Safety
We believe that the safety and health of our employees and their families is essential to our business. Our culture is driven
by a desire to do what is right, and we strive to support the well-being of our employees. We prioritize the safety and well-being of
our employees as they face both mental and physical challenges related to the COVID-19 pandemic. Our employees have
demonstrated great resilience during the pandemic, and we continue to provide resources to support their well-being. Beginning in
March 2020, we have supported our employees and government efforts to curb the COVID-19 pandemic through a multi-faceted
communication, infrastructure, and behavior modification and enforcement effort that includes:
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establishing clear and regular COVID-19 policies, safety protocols, and updates to all employees;
strongly encouraging all office-based employees to work from home; and
implementing protocols to address actual and suspected COVID-19 cases and potential exposure.
Our financial, medical, and mental health benefits that were already in place prior to the COVID-19 pandemic were
designed to help employees through crisis, and we further expanded our offerings to create appropriate “work from home”
conditions for success and wellness, including purchasing additional IT equipment and office supplies and increasing
communications related to our mental health benefits. In particular, we offered sessions on mindfulness to further support the
mental health of our employees.
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.
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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.
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Our POCare 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, 2022, and our independent registered public accounting firm, in its report on our
financial statements as of and for the fiscal year ended December 31, 2022, 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, 2022, 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.
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 has been affected by the COVID-19 pandemic and may be significantly adversely affected by a resurgence of
the COVID-19 pandemic 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 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.
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.
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Our product candidates may cause undesirable side effects or have other properties that could halt their clinical
development, prevent their regulatory approval, limit their commercial potential, or result in significant negative
consequences.
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.
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.
Morgenesis may not receive the future payments pursuant to the Unit Purchase Agreement with MM.
MM may force the sale of Morgenesis under certain conditions which may result in MM receiving a greater value than us
and our shareholders.
MM may, under certain circumstances, assume control of the Board of Managers of our subsidiary, Morgenesis, which
would result in our inability to control and direct the activities of such subsidiary.
MM has the right to buy our units in Morgenesis upon the occurrence of certain events, which could result in us not
holding any equity in Morgenesis.
We may be forced to redeem all of the units of Morgenesis held by MM, which could require substantial cash outlay and
would adversely affect our financial position.
If MM opts to exchange its Morgenesis units for shares of our common stock, we could potentially issue up to 5,106,596
shares of our common stock to MM, which may result in significant dilution to our existing stockholders.
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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 POCare Business
Our POCare 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.
Our POCare business has a limited operating history and an unproven business model. Our plans to continue to grow our
POCare 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 POCare
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 POCare business and
develop cell therapy product candidates, which could cause the value of your investment in our common stock to decline.
Our management, as of December 31, 2022, and our independent registered public accounting firm, in its report on
our financial statements as of and for the fiscal year ended December 31, 2022, 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, 2022 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, 2022, 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. The Unit
Purchase Agreement between us and MM requires MM to make up to two additional payments to Morgenesis if certain specified
Net Revenue targets (as defined in the Unit Purchase Agreement) are satisfied by Morgenesis during each of years 2022 and 2023,
as described in more detail in this report. For each of those fiscal years in which such specified Net Revenue targets are satisfied by
Morgenesis, MM will be obligated to pay an additional $10 million to Morgenesis shortly after the end of that fiscal year. However,
we may not be able to secure additional financing in a timely manner or on favorable terms, if at all, and may not receive any such
future payments under the Unit Purchase Agreements if the required milestones are not met. 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, 2022, 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.
For the year ended December 31, 2022 and as of the date of this report, we assessed our financial condition and concluded
that based 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, 2022 includes a going concern opinion on the matter. Management 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 POCare business into fiscal year 2023. There can be no assurance that we will be
successful in increasing revenues, improving our POCare results or that the perceived value of our Company will increase. In the
event that we are unable to generate significant revenues in our POCare business, our stock price could be adversely affected.
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Our research and development programs are based on novel technologies and are inherently risky.
We are subject to the risks of failure inherent in the development of products based on new technologies. The novel nature
of our cell therapy technology creates significant challenges with respect to product development and optimization, manufacturing,
government regulation and approval, third-party reimbursement and market acceptance. For example, the FDA and EMA have
relatively limited experience with the development and regulation of cell therapy products and, therefore, the pathway to marketing
approval for our cell therapy product candidates may accordingly be more complex, lengthy and uncertain than for a more
conventional product candidate. The indications of use for which we choose to pursue development may have clinical effectiveness
endpoints that have not previously been reviewed or validated by the FDA or EMA, which may complicate or delay our effort to
ultimately obtain FDA or EMA approval. Because this is a new approach to treating diseases, developing and commercializing our
product candidates subjects us to a number of challenges, including:
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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;
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.
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.
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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, 2022, we had 167 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:
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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.
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.
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We may require additional capital to support our business, and this capital may not be available on acceptable
terms or at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to
business challenges and to grow our POCare cell therapy business and to further the development of ATMPs. Accordingly, we may
need to engage in equity or debt financings to secure additional funds.
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.
Our operations may be adversely affected by ongoing developments in the Ukraine and Russia.
In December 2020, we signed an agreement with a company one of whose principal places of business is in Russia that
include collaboration in point of care development in Russia, as well as the development and commercialization of potential key
technologies for our 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 cannot predict the outcome of developments in Russian and the Ukraine on these agreements.
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:
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collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;
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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;
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.
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:
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do not have sufficient resources or decide not to devote the necessary resources due to internal constraints such as limited
cash or human resources;
decide to pursue a competitive potential product developed outside of the collaboration;
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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.
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 has been affected by the COVID-19 pandemic and may be significantly adversely affected by a
resurgence of the COVID-10 pandemic or if other events out of our control disrupt our business or that of our third-party
partners.
A 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-town patients and relatives; and
● Changes in regulatory and other requirements for conducting preclinical studies and clinical trials during the
pandemic.
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 third-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.
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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:
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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;
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;
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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.
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.
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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 licensees’ 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.
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:
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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;
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;
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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.
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.
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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:
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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 or disease outbreaks (such as the
recent outbreak of COVID-19, or the novel coronavirus).
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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 Services 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.
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.
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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:
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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.
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 the Israeli Subsidiary as we continue to expand our focus to other therapies and business activities. 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.
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The Israeli Subsidiary is a licensed 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:
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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.
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:
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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;
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.
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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.
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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:
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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.
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:
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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;
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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.
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:
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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;
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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.
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.
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 late-stage clinical trials towards approval and
commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered
along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended
objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned
clinical trials or other future clinical trials.
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Although we are working to develop commercially viable processes, doing so is a difficult and uncertain task, and there
are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others,
cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, and timely
availability of reagents or raw materials. We may ultimately be unable to reduce the cost of goods for our product candidates to
levels that will allow for an attractive return on investment if and when those product candidates are commercialized.
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.
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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:
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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.
These and other risks associated with our planned international operations may materially adversely affect our ability to
attain or maintain profitable operations.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results
will suffer if we fail to compete effectively.
The biopharmaceutical industry, and the rapidly evolving market for developing cell-based therapies is characterized by
intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to
achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established
biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions. Many of our
competitors have substantially greater financial, technical and other resources, such as larger research and development staff and
experienced marketing and manufacturing organizations as well as established sales forces. Smaller or early-stage companies may
also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.
Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated
in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and
greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may
succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more
easily commercialized, or less costly than our product candidates or may develop proprietary technologies or secure patent
protection that we may need for the development of our technologies and products.
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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 the Metalmark Investment
Morgenesis may not receive the future payments pursuant to the Unit Purchase Agreement with MM OS Holdings,
L.P. (“MM”), an affiliate of Metalmark Capital Partners.
The Unit Purchase Agreement between us and MM (the “UPA”) requires MM to make up to two additional payments to
Morgenesis if certain specified Net Revenue targets (as defined in the Unit Purchase Agreement) are satisfied by Morgenesis during
each of years 2022 and 2023, as described in more detail below. For each of those fiscal years in which such specified Net Revenue
targets are satisfied by Morgenesis, MM will be obligated to pay an additional $10 million to Morgenesis shortly after the end of
that fiscal year.
If (a) Morgenesis and its subsidiaries generate Net Revenue (as defined in the UPA) 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) our 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 our 2023 annual meeting of shareholders (such Orgenesis 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 LLC 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 1,000,000 additional Class A Units if the First Milestone is achieved and $10,000,000 in
cash in exchange for 1,000,000 Class B Units Preferred Units of Morgenesis (the “Class B Units”) if the Second Milestone is
achieved. Notwithstanding the foregoing, if the First Milestone is not achieved, but Morgenesis and its subsidiaries generate Net
Revenue equal or greater to $13,000,000 for the three months ending March 31, 2023, then MM shall make the first $10,000,000
future investment for 1,000,000 Class A Units described above. In the event we fail to obtain Orgenesis Stockholder Approval by
the Stockholder Approval Deadline, we will not be entitled to receive (but MM may, in its sole discretion, elect to make) the first
$10,000,000 future investment or the second future $10,000,000 investment. In addition, at any time until the consummation of a
Company IPO or Change of Control of Morgenesis (in each case, as defined in the LLC Agreement), MM may, in its sole
discretion, elect to invest up to an additional $60,000,000 in Morgenesis (any such investment, an “Optional Investment”) in
exchange for certain Class C Preferred Units of Morgenesis (the “Class C Units” and, together with the Class A Units and the Class
B Units, the “Preferred Units”). $10,000,000 of such Optional Investment shall be to purchase Class C-1 Preferred Units based on
an enterprise value of $125,000,000, with such enterprise value adjusted by any net debt as of such time; $25,000,000 of Optional
Investment shall be to purchase Class C-2 Preferred Units based on an enterprise value of $156,250,000, with such enterprise value
adjusted by any net debt as of such time; and $25,000,000 of Optional Investment shall be to purchase Class C-3 Preferred Units
based on an enterprise value of $250,000,000, with such enterprise value adjusted by any net debt as of such time. Further, if,
during the twelve month period ending on December 31, 2023, Morgenesis and its subsidiaries generate (i) Net Revenue (as
defined in the UPA) equal to or greater than $70,000,000, (ii) Gross Profit (as defined in the UPA) equal to or greater than
$35,000,000 and (iii) EBITDA (as defined in the UPA) equal to or greater than $10,000,000, then MM shall make (or cause to be
made) a one-time cash payment of $10,000,000 to the Company upon such payment becoming final and binding pursuant to the
UPA (the “Earnout Payment”).
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Accordingly, if our stockholders do not approve the LLC Agreement Terms and do not meet the applicable Net Revenue,
Gross Profit or EBITDA targets, Morgenesis will not be eligible to receive the future payments from MM. Further, MM may
choose not to make any of the Optional Investments. In addition, under certain circumstances, MM will obtain the right to put to us
(or, at our discretion, to Morgenesis if Morgenesis shall then have the funds available to consummate the transaction) its shares in
Morgenesis.
MM may force the sale of Morgenesis under certain conditions which may result in MM receiving a greater value
than us and our shareholders.
At any time following the earliest to occur of (x) prior to the two year anniversary of the initial closing date under the UPA
(the “Initial Two Year Period”) or a Material Governance Event (as defined in the LLC Agreement), if MM and we approve a sale
of Morgenesis or (y) (i) after the Initial Two Year Period or (ii) after the occurrence of a Material Governance Event, if MM or the
Morgenesis Board by Supermajority Vote (as defined in the LLC Agreement) approves a Sale of Morgenesis (an “Approved Sale”),
then, subject to notice, MM or Morgenesis can require the members of Morgenesis to sell their units in Morgenesis (the “Drag
Along Rights”) to the purchaser in the Approved Sale. Notwithstanding the foregoing, we are entitled to advise Morgenesis and the
Morgenesis Board of our election to be a potential acquiror of Morgenesis. Notwithstanding the foregoing, if MM falls below 50%
of its initial holdings in Morgenesis as specified above, then it is no longer entitled to exercise the Drag Along Right.
Notwithstanding the foregoing, prior to the three-year anniversary of the initial closing date (the “Initial Three-Year Period”), MM
and Morgenesis will not be entitled to exercise the Drag Along Right unless the valuation of Morgenesis reflected in the sale is
equal to or greater than $300,000,000. If we breach our obligation to effectuate an Approved Sale or otherwise the failure of an
Approved Sale to be consummated is primarily attributable to our or our affiliates, then (i) the Morgenesis Board shall be appointed
as follows: (a) one manager shall be appointed by us, (b) the Industry Expert Manager shall be appointed by MM and (c) three
Managers shall be appointed by MM and (ii) MM will have the option to convert all of its Preferred Units into such number of
Common Units (as defined below) that represents (on a post-conversion basis) the Applicable Percentage (as defined in the LLC
Agreement) of all of the outstanding Common Units (including any Common Units to be issued to MM pursuant to this provision).
While we have the right of first refusal with respect to acquiring Morgenesis in its entirety, if MM elects to exercise such a
right and if we are not in the position to acquire Morgenesis, MM may cause the sale of Morgenesis to any third party on terms
MM approves on an arm’s length basis pursuant to the Drag Along Right, subject to the conditions set forth above. If this occurs,
we are contractually obligated to approve such a sale and execute any documents as required by MM. Based on this, there may be a
situation where MM approves a sale that is more valuable or beneficial to MM than to our company and our shareholders, and we
will not be able to prevent such a transaction. A sale of Morgenesis would have impacts to our POCare Services business as
conducted through Morgenesis and to our overall value as a whole.
MM may, under certain circumstances, assume control of the Board of Managers of our subsidiary, Morgenesis,
which would result in our inability to control and direct the activities of such subsidiary.
The initial board of managers of Morgenesis (the “Morgenesis Board”) is comprised of five (5) managers, three (3) of
which were appointed by us, of which one must be an industry expert and will require prior reasonable consultation with MM, and
two (2) by MM. If the equity holdings of each of us and MM fall below 25% of their initial holdings in Morgenesis as specified
above, each will be entitled to appoint one less manager.
If (i) at any time there is a Material Underperformance Event (as defined in the LLC Agreement), (ii) at any time there is a
Material Governance Event, (iii) Morgenesis does not pay in full the aggregate Redemption Price (as defined in the LLC
Agreement) to redeem on any Redemption Date (as defined in the LLC Agreement) all Preferred Units to be redeemed on such
Redemption Date, (iv) Morgenesis or Orgenesis does not pay in full the aggregate price of the Put Option (as defined in the LLC
Agreement), or (v) Orgenesis breaches its obligation to effectuate an Approved Sale (as defined below) or otherwise the failure of
an Approved Sale to be consummated is primarily attributable to us or our affiliates, then the Morgenesis Board shall be appointed
as follows: (a) one manager shall be appointed by us, (b) the Industry Expert Manager shall be appointed by MM and (c) three
Managers shall be appointed by MM.
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If this were to occur, MM would control the Board of Directors of Morgenesis and will be entitled to direct its activities
and approve any transactions of Morgenesis, even if such transactions provide greater value to MM than they do to us and our
shareholders. This lack of control could significantly impact our POCare service activities as conducted through Morgenesis and to
our overall value as a whole.
MM has the right to buy our units in Morgenesis upon the occurrence of certain events, which could result in us
not holding any equity in Morgenesis.
Upon the occurrence of either (i) a Material Governance Event or (ii) failure of our shareholders to approve the Specified
Agreement Terms (as defined in the LLC Agreement) by the Stockholder Approval Deadline, MM is entitled, at its option, to put to
us (or, at our discretion, to Morgenesis if we or Morgenesis shall then have the funds available to consummate the transaction) its
units or, alternatively, purchase from us its units (such purchase right, being the “MM Call Option”). The purchase price for units of
MM or us in Morgenesis under either the put right or the MM Call Option shall be equal to the fair market value of such units as
determined by a nationally recognized independent accounting firm selected by MM in its sole discretion; provided, however, that
in no event shall the Put Price with respect to Preferred Units be less than $10.00 per Class A Preferred Unit plus the Class A PIK
Yield (as defined below) (the “Class A Preferred Unit Original Issue Price”), $10.00 per Class B Preferred Unit plus the Class B
PIK Yield (as defined below) (the “Class B Preferred Unit Original Issue Price”) or the applicable price per Class C Preferred Unit
as set forth in the LLC Agreement (the “Class C Preferred Unit Original Issue Price”), as applicable, to each Preferred Unit. In the
event MM does exercise its right following the occurrence of any such event, we shall cease to be an equity owner of Morgenesis
and will no longer derive any benefits from this subsidiary or its activities. This would also affect the POCare activities being
conducted by us through Morgenesis and our overall value as a whole.
We may be forced to redeem all of the units of Morgenesis held by MM, which could require substantial cash
outlay and would adversely affect our financial position.
Each holder of Preferred Units has the right to require Morgenesis to redeem its Preferred Units if holders of at least 50%
of the then outstanding Preferred Units deliver written notice to Morgenesis (the “Redemption Request”) at any time after (i) the
earlier of either (x) November 4, 2027 and (y) the failure to obtain the Orgenesis Stockholder Approval of the LLC Agreement
Terms by the Stockholder Approval Deadline, and (ii) receipt by Morgenesis of an offer for a Change of Control from a third party
purchaser that is not an affiliate of any unitholder at a valuation of no less than $300,000,000 which Morgenesis has not accepted
and completed (the “Proposed Sale”). In the event a Redemption Request is delivered at any time following November 4, 2027, the
price per Preferred Unit at which Morgenesis will redeem Preferred Units (the “Redemption Price”) will be equal to the applicable
Preferred Liquidation Preference Amount (as defined in the LLC Agreement) determined as if a Deemed Liquidation Event (as
defined in the LLC Agreement) had occurred on the date the Redemption Request is delivered and as determined by a nationally
recognized independent accounting firm selected by MM in its sole discretion. In the event that a Redemption Request is delivered
in connection with the failure to obtain the Orgenesis Stockholder Approval of the LLC Agreement Terms by the Stockholder
Approval Deadline, the Redemption Price will be equal to the applicable Preferred Liquidation Preference Amount that would have
been paid for each Preferred Unit (based on the applicable class of Preferred Unit) if the Proposed Sale had been completed.
Any such redemption would require us to expend substantial cash resources and could have a material adverse effect on
our financial position. In addition, our cash reserves at the time of such redemption may be insufficient to satisfy such redemption,
in which case we may not be able to continue as a going concern if we are unable to support our operations or cannot otherwise
raise the necessary funds to support our operations.
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If MM opts to exchange its Morgenesis units for shares of our common stock, we could potentially issue up to
5,106,596 shares of our common stock to MM, which may result in significant dilution to our existing stockholders.
The LLC Agreement provides that MM is entitled, at any time, to convert its units in Morgenesis for our common stock
(such exchange option being the “Stock Exchange Option”). Under the Stock Exchange Option, MM is entitled, at any time prior to
July 1, 2025, to exchange its units in Morgenesis for our common stock (the “MM Exchange Right”). The amount of shares of
common stock to be received by MM upon exercise of the MM Exchange Right shall be equal to (i) the fair market value of MM’s
units to be exchanged, as determined by a nationally recognized independent accounting firm in the United States with experience
in performing valuation services selected by MM and us, divided by (ii) the average closing price per share of our common stock
during the 30-day period ending on the date on which MM provides an exchange notice to us (the “Exchange Price”); provided,
that in no event shall (A) the Exchange Price be less than a price per share that would result in us having an enterprise value of less
than $200,000,000 and (B) the maximum number of shares of our common stock to be issued pursuant to the MM Exchange Right
exceed 5,106,596 shares of our common stock. If MM opts to exchange its Morgenesis units for shares of our common stock, we
could potentially issue up to 5,106,596 shares of our common stock to MM. The common stock issuable to MM upon exchange of
the Morgenesis units for our common stock could have a depressive effect on the market price of our common stock by increasing
the number of shares of common stock outstanding and the proportionate voting power of the existing stockholders may be
significantly diluted.
If we issue additional shares in the future, it will result in the dilution of our existing stockholders.
Risks Related to our Common Stock
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:
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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.
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 52 weeks ended December 31,
2022, our stock price has fluctuated from a low of $1.23 to a high of $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.
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No assurance can be provided that a purchaser of our common stock will be able to resell their shares of common stock at
or above the price that they acquired those shares. We can provide no assurances that the market price of common stock will
increase or that the market price of common stock will not fluctuate or decline significantly.
We do not intend to pay dividends on any investment in the shares of stock of our company.
We have never paid any cash dividends, and currently do not intend to pay any dividends for the foreseeable future. The
Board of Directors has not directed the payment of any dividends and does not anticipate paying dividends on the shares for the
foreseeable future and intends to retain any future earnings to the extent necessary to develop and expand our business. Payment of
cash dividends, if any, will depend, among other factors, on our earnings, capital requirements, and the general operating and
financial condition, and will be subject to legal limitations on the payment of dividends out of paid-in capital. Because we do not
intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price.
This may never happen, and investors may lose all of their investment in our company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We do not own any real property. A description of the leased premises we utilize in several of our facilities is as follows:
Entity
Property Description
Orgenesis Inc.
●Our principal office is located at 20271 Goldenrod Lane, Germantown, MD 20876.
Orgenesis Maryland LLC.
●FastForward laboratory and office located at 1812 Ashland Ave, Baltimore,
Maryland 21205.
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 Ltd.
●Laboratory and office located in Nes Ziona, Israel
Koligo Therapeutics Inc.
●Production facility and development labs in New Albany, Indiana.
Tissue Genesis International LLC
●Production facility and development labs in Leander, Texas
Orgenesis Biotech Israel Ltd.
●Laboratories and offices located in the Bar Lev Industrial Park M.P. MISGAV,
Israel.
Mida Biotech BV
●Laboratories and offices located in Leiden, The Netherlands
Orgenesis Belgium and Orgenesis Services
SRL
●Laboratories and offices located near Namur, at Novalis Science Park, Belgium
Theracell Laboratories
●Laboratory and offices located Koropi, Greece
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We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if
required, suitable alternative or additional space will be available to us on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
On January 18, 2022, a complaint (the “Complaint”) was filed in the Tel Aviv District Court (the “Court”) against the
Company, the Israeli Subsidiary, Orgenesis Ltd., Prof. Sarah Ferber, Vered Caplan and Dr. Efrat Assa 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
contains 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 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 Company believes that the allegations in this Complaint are without merit and intends to vigorously defend
itself against the claims. Since a material loss is not considered probable, no provision was made in the financial statements.
Except as described above, we are not involved in any pending material legal proceedings.
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
Since March 13, 2018, our common stock has been listed for trading on the Nasdaq Capital Market (“Nasdaq CM”) under
the symbol “ORGS.”
As of March 22, 2023, there were 305 holders of record of our common stock, and the last reported sale price of our
common stock on the NasdaqCM on March 22, 2023 was $1.43. 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.
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.
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Unregistered Sales of Equity Securities
As previously disclosed in a Current Report on Form 8-K, on October 23, 2023, the Company and Ricky Neumann that
were parties to the Securities Purchase Agreement, dated as of March 30, 2022 (the “SPA”) and the Registration Rights Agreement,
dated as of March 30, 2022 (the “RRA”), entered into an Amendment, Consent and Waiver Agreement (the “RRA Amendment”).
Pursuant to the RRA Amendment, the Company and Neumann agreed that Neumann shall (i) consent and agree 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 (ii) 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 an additional warrant to purchase
174,460 shares of Common Stock to Neumann (the “Neumann Additional PIPE Warrant”) and such Neumann Additional PIPE
Warrant shall have an exercise price of $2.50 per share of Common Stock, be exercisable beginning six months and one day after
the Effective Date and end 36 months after the Effective Date and be in the same form as the original Warrants issued pursuant to
the SPA. In connection with such RRA Amendment, an aggregate of 41,042 additional Warrants identical to the Neumann
Additional PIPE Warrant were issued to the other investors under the SPA, who also agreed to become parties to the RRA
Amendment. Such additional Warrants and the shares of Common Stock issuable upon exercise of such Warrants have not been
registered under the Securities Act and shall be exempt from registration under Section 4(a)(2) of the Securities Act as a transaction
not involving a public offering.
Issuer Purchases of Equity Securities
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.
There were no repurchases to the Stock Repurchase Plan during the year ended December 31, 2022.
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 years ended December 31, 2022
and December 31, 2021 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, 2022, as compared to the year ended December 31, 2021.
This discussion should be read in conjunction with our consolidated financial statements for the years ended December 31,
2022 and December 31, 2021 and related notes included elsewhere in this Annual Report on Form 10-K. These historical financial
statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition
and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and
could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.”
Corporate Overview
We are a global biotech company working to unlock the potential of 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, or ATMPs. We are mostly focused on autologous therapies that
can be manufactured under processes and systems that are developed for each therapy using a closed and automated approach that
is validated for compliant production near the patient for treatment of the patient at the point of care, 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).
To achieve these goals, we have developed a collaborative worldwide network of research institutes and hospitals who are
engaged in the POCare model, or our POCare Network, and a pipeline of licensed POCare advanced therapies that can be
processed and produced under such closed and automated processes and systems, or POCare Therapies. We are developing our
pipeline of advanced therapies and with the goal of entering into out-licensing agreements for these therapies.
53
Following the Metalmark Investment in November 2022, we separated our operations into two operating segments namely
1) Morgenesis and 2) Therapies. Prior to that, we conducted all of our operations as one single segment. The Morgenesis operations
includes mainly POCare Services, and include the results of the subsidiaries transferred to Morgenesis. The Therapies segment
includes our therapeutic development operations. The segment information presented in note 5 of item 8 reflects the results of the
subsidiaries that were transferred to Morgenesis.
Morgenesis segment (mainly POCare Services)
The 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 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 services for clinical trials.
The POCare Services are performed in decentralized hubs that provide harmonized and standardized services to
customers, or 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.
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 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.
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 get these products to market.
54
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.
Significant Developments During Fiscal 2022
Financing Activities
Equity
From March to June 2022, we sold to certain investors pursuant to a Securities Purchase Agreement, dated as of March 30,
2022, in a private placement, an aggregate of 724,999 shares of our Common Stock at a purchase price of $3.00 per share and
warrants to purchase up to an aggregate of 146,959 shares of Common 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 date of issuance. We received gross proceeds of
$2,175,000 before deducting related offering expenses through the final closing on June 30, 2022.
Convertible Loan Agreements
During April and May 2022, we entered into three convertible loan agreements (the “Convertible Loan Agreements”) with
three non-U.S. investors (the “Lenders”), pursuant to which the Lenders loaned us an aggregate of $9.15 million (the “Loan
Amount”). Interest is calculated at 6% per annum (based on a 365-day year) and is payable, along with the principal, during or
before the third quarter of 2023. At any time prior to or on the maturity date, the Lenders may provide us with written notice to
convert all or part of the loans into shares of our Common Stock at a conversion price equal to $4.50 per share (subject to
adjustment for certain capital events, such as stock splits) (the “Conversion Price”). In connection with such loans, we issued to the
Lenders warrants representing the right to purchase an aggregate of 408,335 shares of our Common Stock (which is 25% of the
shares of our Common Stock into which the loans are initially convertible at the Conversion Price), at an exercise price per share of
$4.50 per share. Such warrants are exercisable at any time beginning six months and one day after the closing date and ending 36
months after such closing date.
During October 2022, we entered into convertible loan extension agreements (the “Convertible Loan Extension
Agreements”) with two of the Lenders, which amended their respective Convertible Loan Agreements in an aggregate $8,000,000
principal Loan Amount as follows: (i) the interest rate increased from 6% to 10% per annum from the loan receipt date on the
unconverted and then outstanding loan amount; (ii) the maturity date was extended to repayment to the first quarter of 2024; (iii)
we agreed to issue a warrant to the Lender for the right to purchase an aggregate of 1,777,777 shares of Common Stock, at an
exercise price per share of $2.50 per share, which is exercisable at any time beginning from April 2023 and ending October 2025;
and (iv) the Conversion Price was amended to a price per share of $2.50 per share instead of $4.50 per share.
In addition, we repaid four loans in the principal amount of $2.3 million.
Metalmark Investment in Morgenesis LLC
In November 2022, we and MM OS Holdings, L.P. (“MM”), an affiliate of Metalmark Capital Partners (“Metalmark”),
entered into a series of definitive agreements intended to finance, strengthen and expand our POCare Services business.
55
Pursuant to a unit purchase agreement (the “UPA”), MM purchased 3,019,651 Class A Preferred Units of Morgenesis (the
“Class A Units”), which represented 22.31% of the outstanding equity interests of Morgenesis following the initial closing, for a
purchase price of $30.2 million, comprised of (i) $20 million of cash consideration and (ii) the conversion of $10.2 million of
MM’s then-outstanding senior secured convertible loans previously entered into with MM (collectively, the “Consideration”).
Under certain conditions related to Morgenesis’ performance among others, MM has agreed to make future payments of up to $20
million in cash for additional Class A (or Class B) Units, and/or make a one-time cash payment of $10 million to Orgenesis (the
“Earnout Payment”).
Until the consummation of a Company IPO or Change of Control of Morgenesis (in each case, as defined in the LLC
Agreement), MM may, in its sole discretion, elect to invest up to an additional $60 million in Morgenesis (any such investment, an
“Optional Investment”) in exchange for certain Class C Preferred Units of Morgenesis (the “Class C Units” and, together with the
Class A Units and the Class B Units, the “Preferred Units”).
The proceeds of the investment will generally be used to fund the activities of Morgenesis and its consolidated
subsidiaries.
In connection with the entry into of the UPA, we, Morgenesis and MM entered into the Second Amended and Restated
Limited Liability Company Agreement (the “LLC Agreement”) providing for certain restrictions on the disposition of Morgenesis
securities, the provisions of certain options and rights with respect to the management and operations of Morgenesis, a right for
MM to exchange any units of Morgenesis for shares of Orgenesis common stock and certain other rights and obligations. In
addition, MM was provided certain protective rights in Morgenesis.
Purchase of Mida Biotech BV
During February 2022, pursuant to the joint venture agreement between ourselves and Mida Biotech BV “Mida”), we
purchased all the issued shares in Mida for consideration of $100 thousand. In lieu of cash, the consideration was paid via the
issuance of shares of our Common Stock to Mida’s shareholders.
License, Collaboration and Joint Venture Agreements
License and Research Agreement with Yeda Research and Development Company Limited
During January 2022, we and Yeda Research and Development Company Limited (“Yeda”), an Israeli company, entered
into a license and research agreement. Pursuant to the agreement, Yeda granted us an exclusive, worldwide royalty bearing license
to creating licensed information and the licensed patents, for the development, manufacture, use, offer for sale, sale and import of
products in the field of tumor-infiltrating lymphocytes (TIL) and Chimeric antigen receptor (CAR) T cell immunotherapy platforms
(excluding CAR-Cytokine Induced Killer cell immunotherapy.
In addition, during 2022, we continued the development of license agreements previously entered into, as described more
fully in notes 11 and 12 to our consolidated financial statements included in Item 8 of this annual report on Form 10-K.
56
Results of Operations
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021.
Our financial results for the year ended December 31, 2022 are summarized as follows in comparison to the year ended
December 31, 2021:
Revenues
Revenues from related party
Total revenues
Cost of revenues, development services and research and
development expenses
Amortization of intangible assets
Selling, general and administrative expenses
Impairment expenses
Operating loss
Other income
Loss from extinguishment in connection with convertible loan (see
note 7 a of Item 8)
Financial expense, net
Share in income of associated company
Loss before income taxes
Tax expense
Net loss
Revenues
The following table shows our revenues by major revenue streams:
Revenue stream:
POCare development services
Cell process development services and hospital services
POCare cell processing
Total
Years Ended December 31,
2021
2022
(in thousands)
34,741 $
1,284
36,025
27,066
911
15,589
1,061
8,602
(173)
52
1,971
1,508
11,960
209
12,169 $
31,646
3,856
35,502
36,644
948
14,710
-
16,800
(2,278)
1,865
1,292
272
17,951
108
18,059
Years Ended December 31,
2021
2022
(in thousands)
14,894 $
11,212
9,919
36,025 $
32,192
3,310
-
35,502
$
$
$
$
Our revenues for the year ended December 31, 2022 were $36,025 thousand, as compared to $35,502 thousand for the
year ended December 31, 2021, representing an increase of 1%.The change in revenues for the year ended December 31, 2022
compared to the year ended December 31, 2021 was attributable to the following:
●
●
●
A decline in POCare development services as a result of our having completed the majority of performance obligations
under the POCare development services contracts in 2021. The next stage in our revenue model, following the completion
of POCare development services is to enter into cell processing agreements with the relevant customers.
An increase in cell process development services and hospital services as a result of our having signed new process
development services agreements with third party customers who retain the ownership of the intellectual property created
through the process.
During the year ended December 31, 2022 we signed cell processing agreements with customers. In most cases, the cell
processing agreements represent a new stage in our revenue model, following the completion of POCare development
services contracts.
A breakdown of the revenues per customer that constituted at least 10% of revenues is as follows:
Revenue earned:
Years Ended December 31,
2021
2022
(in thousands)
Customer A (Greece)
Customer B (United States)
Customer C (United Arab Emirates)
Customer D (Korea)
$
8,936 $
8,316
5,271
3,873
4,693
6,491
6,969
7,703
57
Cost of revenues, development services and research and development expenses
Salaries and related expenses
Stock-based compensation
Subcontracting, professional and consulting services
Lab expenses
Depreciation expenses, net
Other research and development expenses
Less – grant
Total
Years Ended December 31,
2021
2022
(in thousands)
11,206 $
616
5,655
2,685
1,017
6,010
(123)
27,066 $
10,977
729
12,796
3,513
874
7,755
-
36,644
$
$
Cost of revenues, development services and research and development for the year ended December 31, 2022 were
$27,066 thousand, as compared to $36,644 thousand for the year ended December 31, 2021, representing a decrease of 26%. In
previous years, we made significant investments in research and development services including in the development of several
types of OMPULs, the development of automated processing units and processes, owned and licensed advanced therapies to enable
commercial production, and additional work that addresses POCare needs. While we continue to invest in these activities, the
majority of development work on our OMPULs has been completed thus allowing us to deploy OMPULS in various worldwide
locations. As a result of the reduction in development and research and development services expenses, subcontracting,
professional and consulting services, lab expenses and other research and development expenses declined by 40%.
Selling, General and Administrative Expenses
Salaries and related expenses
Stock-based compensation
Accounting and legal fees
Professional fees
Rent and related expenses
Business development
Depreciation expenses, net
Other general and administrative expenses
Total
Years Ended December 31,
2021
2022
(in thousands)
4,008 $
362
5,527
3,080
199
474
50
1,889
15,589 $
6,277
945
3,293
1,107
249
577
42
2,220
14,710
$
$
Selling, general and administrative expenses for the year ended December 31, 2022 were $15,589 thousand, as compared
to $14,710 thousand for the year ended December 31, 2021, representing an increase of 6%.The increase for the year ended
December 31, 2022 is primarily attributable to an increase in accounting and legal fees and professional services as a result of
additional investment activities, particularly the Metalmark Investment, in 2022 compared to 2021, offset by a decline in salaries
and related expenses. In 2021 a discretionary bonus was granted to our Chief Executive Officer, Vered Caplan, in the amount of
$3.6 million. In 2022 no such bonus award was granted.
Impairment Expenses
Impairment expenses
Years Ended December 31,
2021
2022
$
(in thousands)
1,061 $
-
58
Impairment expenses for the year ended December 31, 2022 were $1,061 thousand, as compared to $0 for the year ended
December 31, 2021. These were attributable to the write-off of customer relationships and IPR&D intangible assets purchased in
previous years.
Financial Expenses, net
Interest expense on convertible loans and loans
Foreign exchange loss, net
Other income
Total
Years Ended December 31,
2021
2022
(in thousands)
1,824
145
2
1,971 $
943
574
(225)
1,292
$
Financial expenses, net for the year ended December 31, 2022 were $1,971 thousand, as compared to $1,292 thousand for
the year ended December 31, 2021, representing an increase of 53%. The increase was mainly attributable to increased interest and
related expenses on new and existing convertible loans.
Tax expense
Tax expense
Total
Years Ended December 31,
2021
2022
$
$
(in thousands)
209 $
209 $
108
108
Tax expense, net for the year ended December 31, 2022 were $209 thousand, as compared to $108 thousand for the year
ended December 31, 2021, representing an increase of 94%. The increase is mainly attributable to increased tax liabilities in the
U.S. Effective for years beginning after December 31, 2021, Internal Revenue Code Section 174 changed the tax 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 period of five years for research and
development paid or incurred in the United States and 15 years for R&E paid or incurred outside of the United States.
Working Capital
Current assets
Current liabilities
Working capital
December 31,
2022
2021
(in thousands)
46,318 $
15,910 $
30,408 $
25,758
15,365
10,393
$
$
$
Current assets increased by $20,560 thousand between December 31, 2021 and December 31, 2022, which was primarily
attributable to an increase in accounts receivable as a result of increased POCare revenues.
Current liabilities increased by $545 thousand between December 31, 2021 and December 31, 2022, which was primarily
attributable to the following: (i) an increase in accounts payable and accrued expenses as a result of expenses incurred towards the
end of 2022 not yet paid for, offset by a reduction in current maturities of convertible loans.
59
Liquidity and Capital Resources
Years Ended December 31,
2021
2022
(in thousands)
Net loss
$
(12,169) $
(18,059)
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents and restricted cash
(24,924)
(14,133)
39,578
$
521 $
(26,866)
(12,384)
(106)
(39,356)
During year ended December 31, 2022, we funded our operations from operations as well as from proceeds raised from
equity and debt offerings.
Net cash used in operating activities for the year ended December 31, 2022 was approximately $24,924 thousand, as
compared to net cash used in operating activities of approximately $26,866 thousand for the year ended December 31, 2021. The
decline was mainly as a result of
●
●
●
●
●
●
●
a loss of $12,169 thousand for the year ended December 31, 2022 compared to a loss of $18,059 thousand for the year
ended December 31, 2021;
a decline of $763 thousand in stock-based compensation mainly as a result of a reduced share price;
an increase of $1,236 thousand in our share of losses in our associated companies (see note 13);
impairment expenses of $1,061 thousand as a result of the write off of certain intangible assets;
an increase of $881 thousand in interest expenses accrued on convertible loans as a result of increased interest rates and
new loan agreements entered into;
an increase in accounts receivable of $20,938 thousand as a result of an increase in POCare revenue;
a decline of $1,284 thousand in accounts payable and accrued expenses a result of reduced expenditures.
Net cash used in investing activities for the year ended December 31, 2022 was approximately $14,133 thousand, as
compared to net cash used in investing activities of approximately $12,384 thousand for the year ended December 31, 2021. The
increase was mainly as a result of additional loans granted to associated companies in the amount of $4,131 thousand and
additional purchases of property, plants and equipment of $12,416 thousand used in our POCare facilities.
Net cash provided by financing activities for the year ended December 31, 2022 was approximately $39,578 thousand, as
compared to net cash used in financing activities of approximately $106 thousand for the year ended December 31, 2021. The
increase was mainly attributable to:
● proceeds raised from equity investments in the amount of $2,181 thousand;
● proceeds raised from loans in the amount of $19,150 thousand, offset by loan repayments in the amount of $2,300
thousand;
● proceeds in the amount of $20,000 thousand from the Metal Mark investment.
Liquidity and Capital Resources Outlook
Through December 31, 2022, we had an accumulated deficit of $121,261 thousand as of December 31, 2022 and negative
operating cashflows of $24,924 thousand in the year ended December 31, 2022. Our activities have been funded by generating
revenue, through offerings of our securities, and through the raising of loan finance. There is no assurance that our business will
generate sustainable positive cash flows to fund its business.
If there are further increases in operating costs for facilities expansion, research and development, commercial and clinical
activity or decreases in revenues from customers, we will need to use mitigating actions such as to seek additional financing,
refinance or amend the terms of existing convertible loans or postpone expenses that are not based on firm commitments. In
addition, in order to fund our operations until such time that we can generate sustainable positive cash flows, we will need to raise
additional funds. For the year ended December 31, 2022 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.
60
Subsequent to the year end, we and investors representing $12,250 thousand of the convertible loans outstanding at
December 31, 2022 agreed to extend the maturity of the loans to January 31, 2026, increase the annual interest rate to 10%
effective February 1, 2023, increase the expiry date of related warrants to January 31, 2026, and change the loan conversion price
to $2.50. We also entered into new convertible loan agreements pursuant to which the lenders loaned the Company $5,000
thousand. Interest on such convertible loans is calculated at 8% per annum. The loan amount and all accrued but unpaid interest
thereon shall either (i) be repaid in cash or (ii) convert into shares of common stock at a conversion price of $2.464 per share on the
maturity date (January 10, 2026). At any time prior to the maturity date, the outstanding amount may be converted into shares of
common stock at the conversion price. We used part of the loan proceeds to repay an existing loan in the principal amount of
$3,000 thousand. Finally, on February 23, 2023, we entered into a securities purchase agreement with certain institutional and
accredited investors relating to the issuance and sale of 1,947,368 shares of common stock and warrants to purchase up to 973,684
shares of common stock at a purchase price of $1.90 per share of common Stock and accompanying warrants in a registered direct
offering. The warrants also have 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 our
common stock exceeds 13,600,000 shares), to receive an aggregate number of shares equal to the product of (x) the aggregate
number of shares of our common stock that would be issuable upon a cash exercise and (y) 1.0. The offering closed on February
27, 2023 and we received approximately $3.7 million, before deducting the placement agent’s cash fee equal to 7% of the proceeds
and offering expenses. We intend to use the net proceeds from the offering and convertible loans raised for working capital and
general corporate purposes, including our therapy related activities.
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 year ended December 31, 2022. 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.
61
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 three main revenue streams, which are POCare development services, cell process development services,
including hospital supplies, and POCare cell processing.
POCare Development Services
Revenue recognized under contracts for POCare 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).
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.
62
We measure 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 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 represent performance 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).
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
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and
regulations promulgated thereunder) as of December 31, 2022, or the Evaluation Date. Based on such evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and
procedures are effective.
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’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, 2022. 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.
63
Based on this evaluation, management concluded that our internal control over financial reporting was effective as of
December 31, 2022 based on those criteria.
This Annual 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
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year
ended December 31, 2022 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 22, 2023.
Vered Caplan
Name
Neil Reithinger
Efrat Assa Kunik
David Sidransky (1) (2) (4)
Guy Yachin (1) (2) (3) (4)
Yaron Adler (2) (3)
Ashish Nanda (3)
Mario Philips (1)
Age
54
53
48
62
55
52
57
53
Position
Chief Executive Officer and Chairperson of the Board of
Directors
Chief Financial Officer, Secretary and Treasurer
Chief Development Officer
Director
Director
Director
Director
Director
(1)
(2)
(3)
(4)
A member on the audit committee.
A member on the compensation committee.
A member on the nominating and corporate governance committee.
A member of the research and development committee.
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.
64
Neil Reithinger – Chief Financial Officer, Secretary and Treasurer
Mr. Reithinger was appointed Chief Financial Officer, Secretary and Treasurer on August 1, 2014. Mr. Reithinger is the
Founder and President of Eventus Advisory Group, LLC, a private, CFO-services firm incorporated in Delaware, which specializes
in capital advisory and SEC compliance for publicly-traded and emerging growth companies. He is also the President of Eventus
Consulting, P.C. Prior to forming Eventus, Mr. Reithinger was Chief Operating Officer & CFO from March 2009 to December
2009 of New Leaf Brands, Inc., a branded beverage company, CEO of Nutritional Specialties, Inc. 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 the University of Arizona 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.
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.
65
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. After 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.
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.
66
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. He 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, Mr. Philips acted as VP/GM for Danaher Pall Biotech business with full P&L responsibility for a $1.3 billion
business unit. Mr. 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.
Mr. Philips joined ATMI in 1999 with ATMI’s acquisition of MST Analytics, Inc., serving as European Sales Manager for
ATMI Analytical Systems. In 2004, he 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.
Mr. 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.
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.
67
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. 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 located at http://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 5 meetings in 2022. In addition, the Audit Committee reviewed and approved various corporate
items by way of written consent during the year 2022. 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 2 meetings in 2022. In addition, the Compensation Committee reviewed and approved
various corporate items by way of written consent during the year ended December 31, 2022. 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.
68
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 3 meetings in 2022. In addition, the Nominating and
Corporate Governance Committee reviewed and approved various corporate items by way of written consent during the year ended
December 31, 2022. 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 2 meeting in 2022.
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 one report on Form 4 was filed late by David Sidransky, one
report on Form 4 was filed late by Yaron Adler, one report on Form 4 was filed late by Mario Philips, one report on Form 4 was
filed late by Guy Yachin, and one report on Form 4 was filed late by Ashish Nanda.
Corporate 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 years ended December 31, 2022 and 2021 to
our Chief Executive Officer, Chief Financial Officer and Chief Development Officer. As of December 31, 2022, there were no other
executive officers who earned more than $100,000 during the year ended December 31, 2022 and were serving as executive
officers as of such date (the “named executive officers”).
69
Summary Compensation Table
Name and
Principal
Position
Vered
Caplan
CEO(3)
Neil
Reithinger
CFO,
Treasurer &
Secretary
Efrat Assa-
Kunik,
Chief
Development
Officer
Year
Salary
($)
Bonus
($)
2022 243,868
-
2021 264,483 3,600,000
2022 126,005
2021 239,670
2022 162,316
2021 169,533
-
-
-
-
Non-
Equity
Incentive
Plan
Compensa-
tion
($)
Stock
Awards
($)
Option
Awards
($) (1)
Non-qualified
Deferred
Compensation
Earnings
($)
All Other
Compensa-
tion
($) (2)
Total ($)
-
-
-
-
-
-
107,941
-
19,048
-
19,048
-
-
-
-
-
-
-
-
-
-
-
-
-
92,100
443,909
112,345 3,976,828
-
145,053
-
239,670
44,467
225,831
46,387
215,919
(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, 2022. No executive officers received options awards in the year ended December 31, 2022. See
below for a summary of options awarded in previous years.
(2)
For 2022 and 2021, represents the compensation as described under the caption “All Other Compensation” below.
All Other Compensation
The following table provides information regarding each component of compensation for the years ended December 31,
2022 and 2021 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
Vered Caplan
Efrat Assa Kunik
Automobile and
Communication
Related
Expenses
$
2,536
-
436
924
Year
2022
2021
2022
2021
Social
Benefits
$ (1)
89,564
112,345
44,031
45,462
Total
$
92,100
112,345
44,467
46,387
(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.”
70
Outstanding Equity Awards at December 31, 2022
The following table summarizes the outstanding equity awards held by each named executive officer of our company as of
December 31, 2022.
Name
Grant Date
Vered Caplan
Neil Reithinger
Efrat Assa Kunik
22-Aug-14(1)
09-Dec-16(1)
06-Jun-17(1)
28-Jun-18(1)
22-Oct-18(1)
19-Mar-20(1)
14-Jun-22(2)
09-Dec-16(1)
08-Mar-19(1)
19-Mar-20(1)
14-Jun-22(2)
09-Dec-16(1)
22-Oct-18(1)
19-Mar-20(1)
14-Jun-22(2)
Number of
Shares
Underlying
Unexercised
Options (#)
Exercisable
Number of
Shares
Underlying
Unexercised
Options (#)
Unexercisable
Option Exercise
Price ($)
Option Expiration
Date
230,189
166,667
83,334
250,001
85,000
85,000
21,250
83,334
25,000
15,000
3,750
16,667
15,000
15,000
3,750
-
-
-
-
-
-
63,750
-
-
-
11,250
-
-
-
11,250
0.0012
4.80
7.20
8.36
5.99
2.99
2.00
4.80
5.07
2.99
2.00
4.8
5.99
2.99
2.00
22-Aug-24
09-Dec-26
06-Jun-27
28-Jun-28
22-Oct-28
18-Mar-30
13-Jun-32
09-Dec-26
08-Mar-29
18-Mar-30
13-Jun-32
09-Dec-26
22-Oct-28
18-Mar-30
13-Jun-32
(1)
(2)
The options were fully vested as of December 31, 2022.
The options vest on a quarterly basis over a period of two years from the date of grant.
Option Exercises and Stock Vested in 2022
The following table shows information regarding exercises of options to purchase our common stock and vesting of stock
awards held by each executive officer named in the Summary Compensation Table during the year ended December 31, 2022.
Option Awards
Stock Awards
Number of
Shares
Acquired
on Exercise
(#)
(b)
Value Realized
on Exercise
($) (1)
(c)
278,191
875,745
Number of
Shares
Acquired
on Vesting
(#)
(d)
-
Value Realized
on Vesting
($)
(e)
-
Name
(a)
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 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.
71
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 supersedes and replaces the Amended Caplan 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).
72
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 has 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 during 2021. On November 19, 2020, the
Compensation Committee approved a special remuneration of $400,000 to Ms. Caplan for her outstanding service in the business
development 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 Ms. Caplan in the amount of $3.6
million pursuant to the discretionary bonus provisions of the Personal Employment Agreement between Ms. Caplan and Orgenesis
Services Sàrl. The bonus was paid during September 2021.
Ms. Caplan received an aggregate salary and board fee of $243,868 during 2022. As of December 31, 2022, the $75
thousand chairperson fee for 2022 was unpaid, but accrued, per agreement by Ms. Caplan. In addition, in 2022 Ms. Caplan was
awarded options to purchase 85,000 shares of common stock.
73
Neil Reithinger
Mr. Reithinger was appointed Chief Financial Officer, Treasurer and Secretary on August 1, 2014. Mr. Reithinger’s
employment agreement stipulates a monthly salary of $1,500; payment of an annual bonus as determined by the Company in its
sole discretion, participation in the Company’s pension plan; grant 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 was paid
prior to December 31, 2020. As of December 31, 2022, Eventus was owed $23 thousand for accrued and unpaid services under the
financial consulting agreement. In addition, in 2022 Mr. Reithinger was awarded options to purchase 15,000 shares of common
stock
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.
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.
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, 2022.
Name
Vered Caplan
Salary
Continuation
*
$
(*) Termination by Company without cause: $250,000
Termination without cause following a change in control: $375,000
74
Director Compensation
The following table sets forth for each non-employee director that served as a director during the year ended December 31,
2022:
Year Ended December 31, 2022
Fees
Earned
or
Paid in
Cash
($)
Name
Guy Yachin
100,000
Yaron Adler
Dr. David
Sidransky
Ashish
Nanda
Mario Philips
60,000
105,000
65,000
50,000
Stock
Awards
($)
Option
Awards
($) (1)
Non-equity
Incentive Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
- 23,161 (2)
- 17,725 (3)
- 24,165 (4)
- 18,729 (5)
- 16,248 (6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
($)
123,161
77,725
129,165
83,729
66,248
(1)
(2)
(3)
(4)
(5)
(6)
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.
In respect of 19,600 options which will vest on December 23, 2023.
In respect of 15,000 options which will vest on December 23, 2023.
In respect of 20,450 options which will vest on December 23, 2023.
In respect of 15,850 options which will vest on December 23, 2023.
In respect of 13,750 options which will vest on December 23, 2023.
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 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 year ended December 31, 2022.
75
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 22, 2023 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 22, 2023 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 27,493,123 shares of common stock outstanding on
March 22, 2023.
Security Ownership of Greater than 5% Beneficial Owners
Name and Address of
Beneficial Owner
Yehuda Nir
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Security Ownership of Directors and Executive Officers
Name and Address of
Beneficial Owner
Vered Caplan
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Neil Reithinger
14201 N. Hayden Road, Suite A-1
Scottsdale, AZ 85260
Efrat Assa Kunik
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Guy Yachin
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Dr. David Sidransky
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Yaron Adler
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Ashish Nanda
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Mario Philips
c/o Orgenesis Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Amount and
Nature of
Beneficial
Ownership (1)
Percent(1)
8,718,861(2)
24.08%
Amount and
Nature of
Beneficial
Ownership (1)
Percent(1)
1,210,257(3)
4.26%
128,959(4)
<1%
52,292(5)
<1%
131,267(6)
<1%
153,851(7)
<1%
188,721(8)
<1%
82,550(9)
<1%
46,250(10)
<1%
Directors & Executive Officers as a Group (8 persons)
1,994,147
7.25%
76
Notes:
(1) Percentage of ownership is based on 27,493,123 shares of our common stock outstanding as of March 22, 2023. Except as
otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished
by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Shares of common stock subject to options, warrants or convertible debt currently
exercisable, or convertible or exercisable or convertible within 60 days, are deemed outstanding for purposes of computing the
percentage ownership of the person holding such options, warrants or convertible debt but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(2) Consists of (i) 10,016 shares of common stock, (ii) 453,294 shares of common stock issuable upon exercise of outstanding
warrants at a price of $6.24 per share, exercisable until January 31, 2026, (iii) 277,778 shares of common stock issuable upon
exercise of outstanding warrants at a price of $4.50 per share, exercisable until January 31, 2026, (iv) 1,111,111 shares of
common stock issuable upon exercise of outstanding warrants at a price of $2.50 per share, exercisable until January 31, 2026,
and (v) 6,866,662 shares of common stock issuable upon conversion of convertible debt at a conversion price of $2.50 per
share.
(3) Consists of (i) 278,191 shares of common stock, (ii) 230,189 shares of common stock issuable upon exercise of outstanding
options at a price of $0.0012 per share, (iii) 166,667 shares of our common stock issuable upon exercise of outstanding options
at a price of $4.80 per share, (iv) 83,334 shares of our common stock issuable upon exercise of outstanding options at a price
of $7.20 per share, (v) 250,001 shares of our common stock issuable upon exercise of outstanding options at a price of $8.36
per share, (vi) 85,000 shares of our common stock issuable upon exercise of outstanding options at a price of $5.99 per share,
(vii) 85,000 shares of our common stock issuable upon exercise of outstanding options at a price of $2.99 per share and (viii)
31,875 shares of our common stock issuable upon exercise of outstanding options at a price of $2.00 per share. Does not
include option for 53,125 shares of common stock with an exercise price of $2.00 per share that are exercisable quarterly after
March 31, 2023.
(4) Consists of (i) 83,334 shares of our common stock issuable upon exercise of outstanding options at a price of $4.80 per share,
(ii) 25,000 shares of our common stock issuable upon exercise of outstanding options at a price of $5.07 per share, (iii) 15,000
shares of our common stock issuable upon exercise of outstanding options at a price of $2.99 per share and (iv) 5,625 shares of
our common stock issuable upon exercise of outstanding options at a price of $2.00 per share. Does not include option for
9,375 shares of common stock with an exercise price of $2.00 per share that are exercisable quarterly after March 31, 2023.
77
(5) Consists of (i) 16,667 shares of our common stock issuable upon exercise of outstanding options at a price of $4.8 per share,
(ii) 15,000 shares of our common stock issuable upon exercise of outstanding options at a price of $5.99 per share, (iii) 15,000
shares of our common stock issuable upon exercise of outstanding options at a price of $2.99 per share and (iv) 5,625 shares of
our common stock issuable upon exercise of outstanding options at a price of $2 per share. Does not include option for 9,375
shares of common stock with an exercise price of $2 per share that are exercisable quarterly after March 31, 2023.
(6) Consists of (i) 41,667 shares of our common stock issuable upon exercise of outstanding options at a price of $4.80 per share,
(ii) 28,750 shares of our common stock issuable upon exercise of outstanding options at a price of $5.99 per share, (iii) 25,000
shares of our common stock issuable upon exercise of outstanding options at a price of $2.99 per share, (iv) 16,250 shares of
our common stock issuable upon exercise of outstanding options at a price of $4.60 per share, (v) 19,600 shares of our
common stock issuable upon exercise of outstanding options at a price of $2.89 per share. Does not include option for 19,600
shares of common stock with an exercise price of $1.86 per share that are exercisable on December 23, 2023.
(7) Consists of (i) 20,834 shares of our common stock issuable upon exercise of outstanding options at a price of $9.00 per share,
(ii) 41,667 shares of our common stock issuable upon exercise of outstanding options at a price of $4.80 per share, (iii) 29,200
shares of our common stock issuable upon exercise of outstanding options at a price of $5.99 per share, (iv) 25,000 shares of
our common stock issuable upon exercise of outstanding options at a price of $2.99 per share, (v) 16,700 shares of our
common stock issuable upon exercise of outstanding options at a price of $4.60 per share and (vi) 20,450 shares of our
common stock issuable upon exercise of outstanding options at a price of $2.89 per share. Does not include option for 20,450
shares of common stock with an exercise price of $1.86 per share that are exercisable on December 23, 2023.
(8) Consists of (i) 63,304 shares of our common stock, (ii) 41,667 shares of our common stock issuable upon exercise of
outstanding options at a price of $4.80 per share, (iii) 28,750 shares of our common stock issuable upon exercise of outstanding
options at a price of $5.99 per share, (iv) 25,000 shares of our common stock issuable upon exercise of outstanding options at a
price of $2.99 per share, (v) 15,000 shares of our common stock issuable upon exercise of outstanding options at a price of
$4.60 per share and (vi) 15,000 shares of our common stock issuable upon exercise of outstanding options at a price of $2.89
per share. Does not include option for 15,000 shares of common stock with an exercise price of $1.86 per share that are
exercisable on December 23, 2023.
(9) Consists of (i) 27,100 shares of our common stock issuable upon exercise of outstanding options at a price of $5.99 per share,
(ii) 25,000 shares of our common stock issuable upon exercise of outstanding options at a price of $2.99 per share, (iii) 14,600
shares of our common stock issuable upon exercise of outstanding options at a price of $4.60 per share and (iv) 15,850 shares
of our common stock issuable upon exercise of outstanding options at a price of $2.89 per share. Does not include option for
15,850 shares of common stock with an exercise price of $1.86 per share that are exercisable on December 23, 2023.
(10) Consists of (i) 6,250 shares of our common stock issuable upon exercise of outstanding options at a price of $4.70 per share,
(ii) 12,500 shares of our common stock issuable upon exercise of outstanding options at a price of $2.99 per share, (iii) 13,750
shares of our common stock issuable upon exercise of outstanding options at a price of $4.60 per share and (iv) 13,750 shares
of our common stock issuable upon exercise of outstanding options at a price of $2.89 per share. Does not include option for
13,750 shares of common stock with an exercise price of $1.86 per share that are exercisable on December 23, 2023.
78
Securities Authorized for Issuance Under Existing Equity Compensation Plans
The following table summarizes certain information regarding our equity compensation plans as of December 31, 2022:
Number of
Securities
Remaining
Available for
Future Issuance
Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
(c)
1,174,140
-
1,552,834
Number of
Securities
to be Issued
Upon
Exercise of
Outstanding
Options
(a)
2,825,860 $
726,780 $
3,552,640 $
Weighted-
Average
Exercise Price
of
Outstanding
Options
(b)
4.17
4.68
4.27
Plan Category
Equity compensation plans approved by security holders (1)
Equity compensation plans not approved by security holders
Total
(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 2022 Consolidated Financial Statements included in this Annual Report on Form 10-K for the
year ended December 31, 2022.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Except as set out below, as of December 31, 2022, 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 $108 thousand during the
year ended December 31, 2022 and $240 thousand during the year ended December 31, 2021 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 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.
79
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.
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 years ended December 31, 2022 and 2021. The
following table sets forth the fees billed to us for professional services rendered by PwC for the years ended December 31, 2022
and December 31, 2021:
Services:
Audit Fees (1)
Audit-Related Fees (2)
Tax Fees (3)
Total fees
Years Ended December 31,
2021
2022
$
$
288,705 $
6,405
-
295,110 $
228,188
16,634
29,863
274,685
(1)
(2)
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.
Audit related fees consisted principally of audits of employee benefit plans and special procedures related to regulatory
filings in 2022.
(3)
The tax fees were paid for reviewing various tax related matters.
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-Related services 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.
80
3. Tax services 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.
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
PART IV
(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
No.
Description
3.1
3.2
4.1
4.2
4.3
4.4
4.5
Articles of Incorporation, as amended (incorporated by reference to an exhibit to our registration statement on Form
S-8, filed on August 7, 2020)
Amended and Restated Bylaws of the Company, as amended dated December 14, 2022 (incorporated by reference
to an exhibit to our current report on Form 8-K, filed on December 19, 2022)
Description of Securities (incorporated by reference to an exhibit to our annual report on Form 10-K filed on March
9, 2020)
Form of Warrant (incorporated by reference to an exhibit to our current report on Form 8-K, filed on January 22,
2020)
Form of Stock Option Agreement (incorporated by reference to an exhibit to our registration statement on Form S-8,
filed on August 7, 2020)
Form of Warrant, dated as of September 13, 2021, issued in connection with Convertible Note Extension
Agreements (incorporated by reference to an exhibit to our quarterly report on Form 10-Q, filed on November 4,
2021)
Form of Warrant, dated as of September 13, 2021, issued in connection with Convertible Note Extension
Agreements (incorporated by reference to an exhibit to our quarterly report filed on Form 10-Q, filed November 4,
2021)
81
4.6
4.7
4.8
4.9
4.10
4.11
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Form of Warrant (incorporated by reference to an exhibit to our current report on Form 8-K, filed on April 5, 2022)
Form of Warrant (incorporated by reference to an exhibit to our current report on Form 8-K, filed on April 25, 2022)
Form of Warrant (incorporated by reference to an exhibit to our current report on Form 8-K, filed on May 17, 2022)
Form of Warrant (incorporated by reference to an exhibit to our current report on Form 8-K, filed on May 23, 2022)
Form of Nir Additional Warrant, dated as of October 23, 2022 (incorporated by reference to an exhibit to our current
report on Form 8-K, filed on October 27, 2022)
Form of Neumann Additional Warrant, dated as of October 23, 2022 (incorporated by reference to an exhibit to our
current report on Form 8-K, filed on October 27, 2022)
Financial Consulting Agreement, dated August 1, 2014, with Eventus Consulting, P.C. (incorporated by reference to
an exhibit to our current report on Form 8-K, filed on August 5, 2014)
Personal Employment Agreement, dated August 1, 2014, by and between Orgenesis Inc. and Neil Reithinger
(incorporated by reference to an exhibit to our current report on Form 8-K, filed on August 5, 2014)
2017 Equity Incentive Plan (incorporated by reference to an exhibit to our definitive proxy statement on Schedule
14A, filed on March 30, 2017)
Collaboration and License Agreement, dated as of June 8, 2018, between Orgenesis Inc. and Mircod Limited
(incorporated by reference to an exhibit to our quarterly report on Form 10-Q, filed on October 12, 2018)
Controlled Equity Offering Sales Agreement, dated December 20, 2018, between Orgenesis Inc. and Cantor
Fitzgerald & Co. (incorporated by reference to an exhibit to our current report on Form 8-K, filed on December 20,
2018)
Joint Venture Agreement between the Company and First Choice International Company, Inc. dated March 12, 2019
(incorporated by reference to an exhibit to our quarterly report on Form 10-Q, filed on May 8, 2019)
Convertible Loan Agreement between Orgenesis Maryland Inc. and Yosef Ram dated April 12, 2019 (incorporated
by reference to an exhibit to our quarterly report on Form 10-Q, filed on May 8, 2019)
Convertible Loan Agreement, dated April 10, 2019, by and between the Company and Investor (incorporated by
reference to an exhibit to our quarterly report on form 10-Q, filed on November 7, 2019)
Form of Subscription Agreement, dated May 17, 2019, by and between the Company and Investor (incorporated by
reference to an exhibit to our quarterly report on form 10-Q, filed on November 7, 2019)
Form of Subscription Agreement, dated May 30, 2019, by and between the Company and Investor (incorporated by
reference to an exhibit to our quarterly report on form 10-Q, filed on November 7, 2019)
Form of Subscription Agreement, dated June 6, 2019, by and between the Company and Investor (incorporated by
reference to an exhibit to our quarterly report on Form 10-Q, filed on November 7, 2019)
Transfer Agreement, dated as of August 7, 2019 by and among Masthercell Global, Orgenesis Inc. and GPP-II
Masthercell, LLC (incorporated by reference to our current report on Form 8-K, filed on August 13, 2019)
Executive Directorship Agreement between the Company and Vered Caplan dated November 19, 2020 (incorporated
by reference to an exhibit to our annual report on Form 10-K filed on March 9, 2021)
Swiss Employment Agreement between the Company and Vered Caplan dated November 19, 2020 (incorporated by
reference to an exhibit to our annual report on Form 10-K filed on March 9, 2021)
Convertible Loan Agreement, dated as of August 24, 2021, between the Company and Image Securities FCZ
(incorporated by reference to an exhibit to our quarterly report on Form 10-Q, filed on November 4, 2021)
82
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
Convertible Credit Line and Unsecured Convertible Note Extension Agreement, dated as of September 13, 2021,
between the Company and Yosef Dotan (incorporated by reference to an exhibit to our quarterly report on Form 10-
Q, filed on November 4, 2021)
Convertible Credit Line Extension Agreement, dated as of September 13, 2021, between the Company and Aharon
Lukach (incorporated by reference to an exhibit to our quarterly report on Form 10-Q, filed on November 4, 2021)
Unsecured Convertible Note Extension Agreement, dated as of September 13, 2021, between the Company and
Yehuda Nir (incorporated by reference to an exhibit to our quarterly report on Form 10-Q, filed on November 4,
2021)
Employment Agreement, dated as of December 16, 2021, between the Company and Efrat Assa Kunik
(incorporated by reference to an exhibit to our annual report on Form 10-K filed on March 30, 2022)
Securities Purchase Agreement, dated March 30, 2022, by and among the Company and certain investors
(incorporated by reference to our current report on Form 8-K, filed on April 5, 2022)
Registration Rights Agreement, dated March 30, 2022, by and among the Company and certain investors
(incorporated by reference to our current report on Form 8-K, filed on April 5, 2022)
Convertible Loan Agreement, dated April 21, 2022, by and among the Company and Yehuda Nir (incorporated by
reference to our current report on Form 8-K, filed on April 25, 2022)
Amendment to Convertible Loan Agreement, dated May 16, 2022, by and among the Company and Yehuda Nir
(incorporated by reference to our current report on Form 8-K, filed on May 16, 2022)
Convertible Loan Agreement, dated May 17, 2022, by and among the Company and Southern Israel Bridging Fund
Two, LP (incorporated by reference to an exhibit to our current report on Form 8-K, filed on May 17, 2022)
Convertible Loan Agreement, dated May 19, 2022, by and among the Company and Ricky Neumann (incorporated
by reference to an exhibit to our current report on Form 8-K, filed on May 23, 2022)
Convertible Note Extension Agreement, dated July 15, 2022, by and among the Company and J. Ezra Merkin
(incorporated by reference to an exhibit to our current report on Form 8-K, filed on July 20, 2022)
Senior Secured Convertible Loan Agreement, dated August 15, 2022, by and among Morgenesis, Orgenesis, and the
Lender (incorporated by reference to an exhibit to our current report on Form 8-K, filed on August 17, 2022)
Convertible Loan Extension Agreement, dated as of October 23, 2022, by and between the Company and Yehuda
Nir (incorporated by reference to an exhibit to our current report on Form 8-K, filed on October 27, 2022)
Convertible Loan Extension Agreement, dated as of October 23, 2022, by and between the Company and Ricky
Neumann (incorporated by reference to an exhibit to our current report on Form 8-K, filed on October 27, 2022)
Amendment, Consent and Waiver Agreement, dated as of October 23, 2022, by and between the Company and
Ricky Neumann (incorporated by reference to an exhibit to our current report on Form 8-K, filed on October 27,
2022)
Unit Purchase Agreement dated as of November 4, 2022 by and among Orgenesis Inc., Morgenesis LLC and MM
OS Holdings, L.P. (incorporated by reference to an exhibit to our current report on Form 8-K, filed on November 7,
2022)
Form of Second Amended and Restated Limited Liability Company Agreement of Morgenesis LLC (incorporated
by reference to an exhibit to our current report on Form 8-K, filed on November 7, 2022)
Services Agreement, dated as of November 4, 2022, by and between Morgenesis LLC and Orgenesis Inc.
(incorporated by reference to an exhibit to our current report on Form 8-K, filed on November 7, 2022)
Advisory Services and Monitoring Agreement dated as of November 4, 2022 by and between Morgenesis LLC and
Metalmark Management II LLC. (incorporated by reference to an exhibit to our current report on Form 8-K, filed
on November 7, 2022)
Global Share Incentive Plan (2012) (incorporated by reference to an exhibit to our current report on Form 8-K, filed
on May 31, 2012)
Appendix – Israeli Taxpayers Global Share Incentive Plan (2012) (incorporated by reference to an exhibit to our
current report on Form 8-K, filed on May 31, 2012)
List of Subsidiaries of Orgenesis Inc.
Consent of independent registered public accounting firm
Certification Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification Statement of the Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
Certification Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002
21.1*
23.1*
31.1*
31.2*
32.1**
32.2**
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)
*Filed herewith
**Furnished herewith
ITEM 16. FORM 10-K SUMMARY
Not applicable.
83
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.
SIGNATURES
ORGENESIS INC.
By:
/s/ Vered Caplan
Vered Caplan
Chief Executive Officer and Chairperson of the Board of
Directors (Principal Executive Officer)
Date: March 22, 2023
By:
/s/ Neil Reithinger
Neil Reithinger
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: March 22, 2023
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: March 22, 2023
By:
/s/ Neil Reithinger
Neil Reithinger
Chief Financial Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer)
Date: March 22, 2023
By:
/s/ Guy Yachin
Guy Yachin
Director
Date: March 22, 2023
By:
/s/ David Sidransky
David Sidransky
Director
Date: March 22, 2023
By:
/s/ Yaron Adler
Yaron Adler
Director
Date: March 22, 2023
By:
/s/ Ashish Nanda
Ashish Nanda
Director
Date: March 22, 2023
By:
/s/ Mario Philips
Mario Philips
Director
Date: March 22, 2023
84
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ORGENESIS INC.
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022
TABLE OF CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB name: Kesselman & Kesselman
C.P.A.s; PCAOB ID: 1309)
F-2
Page
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
F-4
F-6
F-7
F-9
F-10
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. and its subsidiaries (the “Company”) as of
December 31, 2022 and 2021, and the related consolidated statements of comprehensive loss (income), change 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, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
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 audit 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 Matter
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.
Goodwill Impairment Assessment
As described in Note 2 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance was $8 million
at December 31, 2022. In the fourth quarter of 2022, following the separation of the Company’s business into two operating
segments, the Company reallocated goodwill to its newly reorganized reporting units (Morgenesis and Therapies) using a relative
fair value approach. As a result, the goodwill associated with Morgenesis and Therapies reporting units were $7 million and $1
million, respectively. Based on this reallocation, the Company performed an impairment analysis for these two reporting units on
the date of change. Fair value is estimated by management using a discounted cash flow model. Management’s cash flow
projections for the reporting units included significant judgments and assumptions relating to revenue growth rates, projected
operating income and the discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a
critical audit matter are there was significant judgment by management when determining the fair value measurement of the
reporting units; This in turn led to high degree of auditor judgment, subjectivity and effort in performing procedures and evaluate
management’s cash flow projections and significant assumptions including revenue growth rates, projected operating income and
discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in
performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included, among others, testing management’s process for
developing the fair value estimate; evaluating the appropriateness of the discounted cash flow model; testing the completeness,
accuracy and relevance of underlying data used in the model; and evaluating the significant assumptions used by management,
including the discount rate, revenue growth rates, and projected operating income. Evaluating management’s assumptions related to
revenue growth rates and projected operating income involved evaluating whether the assumptions used by management were
reasonable considering (i) the current performance of the reporting units (ii) the consistency with external market and industry data,
and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with
specialized skill and knowledge were used to assist in the evaluation of Company’s discounted cash flow model and certain
significant assumptions, including the discount rate.
/s/ Kesselman & Kesselman
Certified Public Accountants (Isr.)
A member of PricewaterhouseCoopers International Limited
Tel Aviv, Israel
March 22, 2023
We have served as the Company’s auditor since 2012.
F-3
ORGENESIS INC.
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars, in thousands, except share and per share amounts)
December 31,
2022
2021
Assets
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable, net *
Prepaid expenses and other receivables
Convertible loan to related parties
Grants receivable
Inventory
Total current assets
NON CURRENT ASSETS:
Deposits
Investments and loans to associates
Loans receivable
Property, plants and equipment, net
Intangible assets, net
Operating lease right-of-use assets
Goodwill
Deferred tax
Other assets
Total non-current assets
TOTAL ASSETS
$
$
$
5,311 $
1,058
36,183
958
2,688
-
120
46,318
331 $
135
-
22,834
9,694
2,304
8,187
103
1,022
44,610
90,928 $
5,473
501
15,245
1,188
3,064
169
118
25,758
363
584
821
10,271
11,821
1,015
8,403
-
805
34,083
59,841
* Including related party in the amount of $1,972 thousand as of December 31, 2021.
F-4
ORGENESIS INC.
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars, in thousands, except share and per share amounts)
December 31,
2022
2021
CURRENT LIABILITIES:
Liabilities and equity
Accounts payable
Accrued expenses and other payables
Income tax payable
Employees and related payables
Advance payments on account of grant
Contract liabilities
Current maturities of finance leases
Current maturities of operating leases
Short-term and current maturities of convertible loans
TOTAL CURRENT LIABILITIES
LONG-TERM LIABILITIES:
Non-current operating leases
Convertible loans
Retirement benefits obligation
Long-term debt and finance leases
Advance payments on account of grant
Other long-term liabilities
TOTAL LONG-TERM LIABILITIES
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING INTEREST
EQUITY:
Common stock of $0.0001 par value: Authorized at December 31, 2022 and
December 31, 2021: 145,833,334 shares; Issued at December 31, 2022 and
December 31, 2021: 25,832,322 and 24,567,366 shares, respectively;
Outstanding at December 31, 2022 and December 31, 2021: 25,545,755 and
24,280,799 shares, respectively.
Additional paid-in capital
Accumulated other comprehensive income (loss)
Treasury stock 286,567 shares as of December 31, 2022 and December 31,
2021
Accumulated deficit
Equity attributable to Orgenesis Inc.
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING
INTEREST AND EQUITY
$
$
4,429 $
2,578
289
1,860
1,578
70
60
542
4,504
15,910
1,728 $
13,343
163
95
144
271
15,744
31,654
30,203
3
150,355
(270)
(1,266)
(121,261)
27,561
1,510
29,071
5,238
485
54
1,907
1,238
59
18
481
5,885
15,365
561
4,854
101
41
-
288
5,845
21,210
-
3
145,916
207
(1,266)
(106,372)
38,488
143
38,631
$
90,928 $
59,841
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (INCOME)
(U.S. Dollars, in thousands, except share and per share amounts)
Years Ended December 31,
2022
2021
Revenues
Revenues from related party
Total revenues
Cost of revenues, development services and research and development
expenses
Amortization of intangible assets
Selling, general and administrative expenses
Impairment expenses of intangible assets
Operating loss
Other income, net
Loss from extinguishment in connection with convertible loan
Financial expenses, net
Share in net loss of associated companies
Loss before income taxes
Tax expense
Net loss
Net income (loss) attributable to non-controlling interests
Net loss attributable to Orgenesis Inc.
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
Other Comprehensive loss – Translation adjustment
Comprehensive loss
Comprehensive income (loss) attributed to non-controlling interests
Comprehensive loss attributed to Orgenesis Inc.
$
$
$
$
$
$
$
34,741 $
1,284
36,025
27,066
911
15,589
1,061
8,602
(173)
52
1,971
1,508
11,960
209
12,169 $
2,720
14,889 $
0.59 $
31,646
3,856
35,502
36,644
948
14,710
-
16,800
(2,278)
1,865
1,292
272
17,951
108
18,059
(6)
18,053
0.74
25,096,284
24,273,658
12,169 $
477
12,646 $
2,720
15,366 $
18,059
541
18,600
(6)
18,594
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars, in thousands, except share amounts)
Common Stock
Additional
Paid-in
Capital
Par
Value
Number
Accumulated
Other
Comprehensive
Income
Treasury
Shares
Accumulated
Deficit
Equity
Attributable
to
Orgenesis
Inc.
Non-
Controlling
Interest
Par
Value
24,167,784 $
3 $ 140,397 $
748 $
(250) $
(88,319) $
52,579 $
149 $ 52,728
Balance at
January 1,
2021
Changes
during the
Year ended
December 31,
2021:
Stock-based
compensation
to employees
and directors
Stock-based
compensation
to service
providers
Exercise of
options
Extinguishment
in connection
with
convertible
loan
restructuring
Issuance of
Shares due to
exercise of
warrants
Repurchase of
treasury stock
Comprehensive
loss for the
period
Balance at
December 31,
2021
-
-
1,349
-
-
-
1,349
-
1,349
25,000
*
396
13,750
*
64
-
-
-
-
-
-
396
64
-
-
396
64
-
-
1,848
-
-
-
1,848
-
1,848
305,523
*
1,862
-
-
-
(1,016)
-
-
1,862
-
1,862
(1,016)
-
(1,016)
(231,258)
-
-
-
-
-
(541)
-
(18,053)
(18,594)
(6) (18,600)
24,280,799 $
3 $ 145,916 $
207 $ (1,266) $
(106,372) $
38,488 $
143 $ 38,631
*Represents an amount lower than $1 thousand
The accompanying notes are an integral part of these consolidated financial statement
F-7
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. Dollars, in thousands, except share amounts)
Common Stock
Additional
Paid-in
Capital
Par
Value
Number
Accumulated
Other
Comprehensive
Income
(loss)
Treasury
Shares
Accumulated
Deficit
Equity
Attributable
to
Orgenesis
Inc.
Non-
Controlling
Interest
Par
Value
24,280,799 $
3 $ 145,916 $
207 $ (1,266) $
(106,372) $
38,488 $
143 $ 38,631
Balance at
January 1,
2022
Changes
during the
Year ended
December 31,
2022:
Stock-based
compensation
to employees
and directors
Stock-based
compensation
to service
providers
Exercise of
options
Issuance and
modification of
warrants with
respect to
convertible
loans
Extinguishment
in connection
with
convertible
loan
restructuring
Issuance of
Shares
Issuance of
shares related
to acquisition
of Mida
Non-
Controlling
Interest arising
from a business
combination
Comprehensive
income (loss)
for the period
Balance at
December 31,
2022
-
-
916
-
-
-
916
-
916
-
-
510,017
*
66
6
-
-
-
-
-
-
66
6
-
-
66
6
950
950
950
-
-
226
724,999
*
2,175
-
-
-
-
-
-
226
-
226
2,175
-
2,175
29,940
*
100
-
-
-
100
-
100
-
-
-
-
-
-
-
-
-
-
(1,353)
(1,353)
(477)
-
(14,889)
(15,366)
2,720 (12,646)
25,545,755
3
150,355
(270)
(1,266)
(121,261)
27,561
1,510 29,071
*Represents an amount lower than $1 thousand
The accompanying notes are an integral part of these consolidated financial statements.
F-8
ORGENESIS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS(*)
(U.S. Dollars, in thousands)
Years Ended December 31,
2022
2021
$
(12,169) $
(18,059)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments required to reconcile net income (loss) to net cash used in
operating activities:
Stock-based compensation
Capital loss (gain), net
Share in loss of associated company
Depreciation and amortization expenses
Impairment expenses of intangible assets
Effect of exchange differences on inter-company balances
Net changes in operating leases
Interest expense accrued on loans and convertible loans
Loss from extinguishment in connection with convertible loan
restructuring
Changes in operating assets and liabilities:
Increase in accounts receivable
Decrease (increase) in inventory
Decrease (increase) in other assets
Decrease (increase) in prepaid expenses, other accounts receivable
Decrease in accounts payable
Increase (decrease) in accrued expenses and other payable
Increase (decrease) in employee and related payables
Decrease in contract liabilities
Change in advance payments and receivables on account of grant, net
Change in deferred taxes, net
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
$
Investment in convertible loan to related party partners
Repayment of convertible loan to related party partners
Increase in loan to associate entities
Loan granted
Repayment of loan granted
Sale of property, plants and equipment
Purchase of property, plants and equipment
Investment in associated company
Cash acquired from acquisition of Mida (see note 4)
Increase in cash from business combinations of TLABS and Orgenesis
Austria (see note 13a)
Investment in long-term deposits
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
$
Repurchase of treasury stock
Proceeds from issuance of shares
Proceeds from issuance of convertible loans
Proceeds from transaction with redeemable non-controlling interest that do
not acquire control of a subsidiary
Repayment of convertible loans and convertible bonds
Repayment of short and long-term debt
Grant received in respect of third party
Transfer of the grant received to third party
Net cash provided (used in) by financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT
BEGINNING OF YEAR
$
$
$
982
(170)
1,508
1,978
1,061
502
(61)
1,372
52
(21,051)
(7)
26
391
(1,321)
1,570
(216)
10
722
(103)
(24,924) $
-
538
(4,131)
-
782
246
(12,416)
-
702
160
(14)
(14,133) $
-
2,181
19,150
20,000
(2,300)
(46)
1,396
(803)
39,578 $
521
(126) $
5,974 $
1,745
25
272
1,864
-
341
(4)
482
1,865
(12,178)
55
(18)
(173)
(3,755)
(248)
487
-
433
-
(26,866)
(3,000)
-
(430)
(818)
-
-
(7,866)
(242)
-
-
(28)
(12,384)
(1,016)
1,926
-
-
(1,000)
(16)
-
-
(106)
(39,356)
(238)
45,568
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF
YEAR
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING
ACTIVITIES
Recognition of finance lease liability and right-of-use assets
Recognition of operating lease liability and right-of-use assets
Increase (decrease) in accounts payable related to purchase of property,
plant and equipment
Loan conversion for Redeemable non-controlling interest (See note 3)
Issuance of common stocks in connection with the acquisition of Mida (see
note 4)
Extinguishment in connection with convertible loan restructuring
CASH PAID DURING THE YEAR FOR:
Interest
$
$
$
$
$
$
$
6,369 $
5,974
136 $
432 $
(383) $
10,203 $
100 $
226 $
-
-
331
-
-
1,848
458 $
443
The accompanying notes are an integral part of these consolidated financial statements.
F-9
ORGENESIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS
a. General
Orgenesis Inc. is a global biotech company working to unlock the potential of 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, or ATMPs. The Company is mostly focused on
autologous therapies that can be manufactured under processes and systems that are developed for each therapy using a closed and
automated approach that is validated for compliant production near the patient for treatment of the patient at the point of care, 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).
To achieve these goals, the Company has developed a collaborative worldwide network of research institutes and hospitals
who are engaged in the POCare model, or the Company’s POCare Network, and a pipeline of licensed POCare advanced therapies
that can be processed and produced under such closed and automated processes and systems, or POCare Therapies. The Company
is developing its pipeline of advanced therapies and with the goal of entering into out-licensing agreements for them. The
Company’s cellular therapies, though defined as drug products, conceptually differ from other drug modalities in that they are
based on reprogramming of cells sourced from the patient or from a donor. In most cases, they are individually produced per patient
in a highly sterile and controlled environment, and their efficacy is optimized when administered a short time following production
as fresh product.
To advance the execution of the Company’s goal of bringing such therapies to market, the Company has designed and
built the Company’s 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 the Company’s POCare quality system, Good
Manufacturing Practices, training procedures, quality control testing, incoming supply of materials and oversee the actual
production in the Orgenesis Mobile Processing Units & Labs, or OMPULs. During the year ended December 31, 2022 the
Company streamlined its POCare platform with the incorporation of a new subsidiary, Morgenesis, which became responsible for
certain POC operations. This platform is utilized by other parties, such as biotech companies and hospitals for the supply of their
products. Morgenesis services include adapting the process to the platform and supplying the products, or POCare Services. These
are services for third party companies and for CGT’s that are not necessarily based on the Company’s POCare Therapies.
POCare Services
The POCare Services that the Company and its 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 the Company designs 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 the Company’s POCare
Network, including required quality control testing; and
Contract Research Organization services for clinical trials.
The POCare Services are performed in decentralized hubs that provide harmonized and standardized services to
customers, or POCare Centers. The Company is working to expand the number and scope of the Company’s POCare Centers with
the intention of providing 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.
F-10
POCare Services Operations via Subsidiaries
The Company currently conducts its core business operations itself and through Morgenesis and its subsidiaries which are
all wholly owned except as otherwise stated below (collectively, the “Subsidiaries”). The following is a description of the
Company’s Subsidiaries:
Morgenesis LLC
In August 2022, the Company formed Morgenesis LLC, a subsidiary to hold substantially all the assets of the Company’s
POCare Services. The Company formed Morgenesis to streamline all existing POCare Service business units into one unified
entity, bringing together a full-service range of solutions for therapeutic developers for point of care treatments. The newly
formalized service offering provides solutions from initial process development, regulatory strategy and implementation,
“OMPULization” which includes cGMP process development, closing/automating the process, and with the end goal of optimizing
full cGMP processing and supply of therapeutic product to patients at the point of care. The Company currently owns 76.9% of
Morgenesis.
During November 2022, the Company and MM OS Holdings, L.P. (“MM”), an affiliate of Metalmark Capital Partners
(“Metalmark”), entered into a series of definitive agreements intended to finance, strengthen and expand the Company’s POCare
Services business (the “Metalmark Investment”). Pursuant to a unit purchase agreement (the “UPA”), MM purchased 3,019,651
Class A Preferred Units of Morgenesis (the “Class A Units”), which represents 22.31% of the outstanding equity interests of
Morgenesis following the initial closing, for a purchase price of $30.2 million, comprised of (i) $20 million of cash consideration
and (ii) the conversion of $10.2 million of MM’s then-outstanding senior secured convertible loans previously entered into with
MM. Under certain conditions related to Morgenesis’ performance among others, MM has agreed to make future payments of up to
$20 million in cash for additional Class A (or Class B) Units, and/or make a one-time cash payment of $10 million to Orgenesis
(the “Earnout Payment”). In connection with the entry into of the UPA, the Company, Morgenesis and MM entered into the Second
Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”) providing for certain restrictions on the
disposition of Morgenesis securities, the provisions of certain options and rights with respect to the management and operations of
Morgenesis, a right for MM to exchange any units of Morgenesis for shares of Orgenesis common stock and certain other rights
and obligations. In addition, MM was provided certain protective rights in Morgenesis. (See note 3)
The Company transferred the following subsidiaries to Morgenesis:
●
●
●
●
●
●
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, which was formed in Texas in 2022, is currently focused on development of the
Company’s technologies and therapies.
Orgenesis Services SRL, which was incorporated in 2022 and is currently focused on expanding the Company’s 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. The Company owns
94.12% of the Korean Subsidiary.
Orgenesis Biotech Israel Ltd., which is a provider of process development and cell-processing services in Israel.
POCare Therapies
The Company’s POCare Network is an alternative to the traditional pathway of drug development. The Company
collaborates with academic institutions and entities that have been spun out from such institutions. The Company is in close contact
with researchers who are experts in the field of the drug and also partners with leading hospitals and research institutes. Based on
such collaborations, the Company enters 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. It then is able to out-license its
own therapeutic developments, as well as those therapies developed from in-licensing agreements, to out-licensing partners at
preferred geographical regions.
F-11
This approach lowers overall development costs through minimizing pre-clinical development costs incurred by the
Company, and through receiving of the additional funding from grants and/or payments by regional partners.
●
●
●
●
●
●
●
●
The Company’s 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 technologies and therapies in
California.
Orgenesis Belgium SRL which is currently focused on product development. Since its incorporation, the subsidiary been
awarded grants in excess of 18 million 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 was acquired in 2022 and 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 was incorporated in 2022 and 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 as a hub for biotech research and pioneers in this field
Orgenesis Australia PTY LTD, which was incorporated in 2022 and is currently focused on the development of the
Company’s technologies and therapies.
b. Liquidity
Through December 31, 2022, the Company had an accumulated deficit of $121 million as of December 31, 2022 and
negative operating cashflows of $24.9 million in the year ended December 31, 2022. The Company’s activities have been funded
by generating revenue, offerings of the Company’s securities and raising of loans. There is no assurance that the Company’s
business will generate sustainable positive cash flows to fund its business.
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 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 may need to raise additional funds.
Current and projected cash resources and commitments, as well as other factors mentioned above, raise 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.
Management plans include raising additional capital to fund its operations, as well as exploring additional avenues to increase
revenue and reduce capital expenditures. If the Company is unable to raise sufficient additional capital or meet revenue targets, it
may have to curtail certain activities.
The estimation and execution uncertainty regarding the Company’s future cash flows and management’s judgments and
assumptions in estimating these cash flows is a significant estimate. Those assumptions include reasonableness of the forecasted
revenue, operating expenses, and uses and sources of cash.
F-12
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 the 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, the Company evaluates its estimates, judgments and
methodologies. The Company bases its estimates on historical experience and on various other assumptions that it 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 and determining whether an acquisition is a business combination or a purchase of asset. Actual
results could differ from those estimates.
The full extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s 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. The Company examined the impact of COVID-19 on the
Company’s 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 fair value of consideration transferred in a business combination to the assets acquired,
liabilities assumed, and non-controlling interests in the acquired business based on their fair values at the acquisition date. All
assets and liabilities are recognized in 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.
c. Cash Equivalents
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.
F-13
d. Cost of revenues, development services and research and development expenses
Cost of revenues, development services and research and development expenses 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 reviews its investments accounted for under the equity method for possible impairment, which generally
involves an analysis of the facts and changes in circumstances influencing the investments.
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.
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 Subsidiaries 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 are 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.
F-14
j. Property, plants and Equipment
Property, plants 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:
Production facility
Laboratory equipment
Office equipment and computers
k. Intangible assets
Intangible assets and their useful lives are as follows:
Weighted Average
Useful Life (Years)
3 – 10
1 – 10
3 – 17
Customer Relationships
Know-How
Technology
In-process research and
development
Useful Life (Years)
10
12
15
Indefinite
Amortization Recorded at Comprehensive Loss Line Item
Amortization of intangible assets
Amortization of intangible assets
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.
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. Following the Metalmark Investment, the Company conducted
an analysis of its operations, which led to changes in the Company’s identified reporting units, operating and reporting segments.
As a result of the analysis, two operating units were identified: Morgenesis and Therapies. As a result, the Company reallocated its
goodwill to the adjusted reporting units using a relative fair value allocation. 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 no 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. For indefinite life intangible assets, the 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.
F-15
Impairment charges to customer relationships and IPR&D during the year ended December 31, 2022 were $1,061.
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% likely of being realized upon ultimate 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.
o. Stock-based Compensation
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.
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.
q. Loss per Share of Common Stock
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) 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 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).
F-16
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. As of December 31,
2022, the Company does not have credit losses with respect to these accounts and does not believe it is exposed to significant credit
risk on these instruments.
Bad debt allowance is created when objective evidence exists 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 are all considered indicative of reduced debtor balance value.
s. Treasury shares
The Company repurchases its common 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, 2022 and December 31, 2021.
t. Other Comprehensive Loss
Other comprehensive loss represents adjustments of foreign currency translation.
u. Revenue from Contracts with Customers
The Company’s agreements are primarily service and processing contracts, the performance obligations of which range in
duration from a few months to one year. The Company recognizes revenue when control of the 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.
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 has three main revenue streams, which are POCare development services, cell process development
services, including hospital supplies, and POCare cell processing.
POCare Development Services
Revenue recognized under contracts for POCare 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.
F-17
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). Revenues from support services provided to the Company’s customers are recognized as and when the services are
provided, because the customer simultaneously receives and consumes the benefits provided.
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.
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.
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 represent performance 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 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.
F-18
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.
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 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: Morgenesis and Therapies.
See note 5.
x. Recently adopted accounting pronouncements
In the first quarter of 2022, the Company early adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt –
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40) (“ASU 2020-06”). The update simplifies the accounting for convertible debt instruments and convertible
preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately
recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible
instruments and earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.
The Company adopted ASU 2020-06 in the first quarter of 2022 using the modified retrospective method which resulted with no
material effect.
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 from January 1, 2022. The Company adopted ASU
2021-24 in the first quarter of 2022 which resulted in no material effect.
In November 2021, the FASB issued ASU 2021-10 “Government Assistance (Topic 832),” which requires annual
disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2)
the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The Company
applied the guidance prospectively to all in-scope transactions beginning fiscal year 2022. The adoption of this guidance did not
have a material impact on the Company’s consolidated financial statements
F-19
y. Recently issued accounting pronouncements, not yet adopted
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 will apply the guidance prospectively to
transactions occurring on or after January 2023.
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 plans to adopt the new accounting standard effective January 1, 2023 and will apply the guidance prospectively to all
business combinations with an acquisition date occurring on or after January 2023.
NOTE 3 – REDEEMABLE NON-CONTROLLING INTEREST
Metalmarket Investment in Morgenesis LLC
On November 4, 2022, the Company and MM OS Holdings, L.P. (“MM”), an affiliate of Metalmark Capital Partners
(“Metalmark”), entered into a series of definitive agreements (“MM agreement”) intended to finance, strengthen and expand the
Company’s POCare Services business (the “Metalmark Investment”).
Pursuant to the Unit Purchase Agreement (the “UPA”), MM agreed to purchase 3,019,651 Class A Preferred Units of
Morgenesis (the “Class A Units”), which represents 22.31% of the outstanding equity interests of Morgenesis following the initial
closing, for a purchase price of $30,196 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, Morgenesis 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 held 77.69% of the issued and outstanding equity interests of Morgenesis.
If (a) Morgenesis and its subsidiaries generate Net Revenue (as defined in the UPA) 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 LLC 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 1,000,000 additional Class A Units if the First Milestone is achieved and
$10,000,000 in cash in exchange for 1,000,000 Class B Units Preferred Units of Morgenesis (the “Class B Units”) if the Second
Milestone is achieved. Notwithstanding the foregoing, if the First Milestone is not achieved, but Morgenesis and its subsidiaries
generate Net Revenue equal or greater to $13,000,000 for the three months ending March 31, 2023, then MM shall make the first
$10,000,000 future investment for 1,000,000 Class A Units described above. In the event that the Company fails to obtain
Orgenesis Stockholder Approval by the Stockholder Approval Deadline, the Company will not be entitled to receive (but MM may,
in its sole discretion, elect to make) the first $10,000,000 future investment or the second future $10,000,000 investment.
F-20
At any time until the consummation of a Company IPO or Change of Control (in each case, as defined in the LLC
Agreement), MM may, in its sole discretion, elect to invest up to an additional $60,000,000 in Morgenesis (any such investment, an
“Optional Investment”) in exchange for certain Class C Preferred Units of Morgenesis (the “Class C Units” and, together with the
Class A Units and the Class B Units, the “Preferred Units”). $10,000,000 of such Optional Investment shall be to purchase Class C-
1 Preferred Units based on an enterprise value of $125,000,000, with such enterprise value adjusted by any net debt as of such time;
$25,000,000 of Optional Investment shall be to purchase Class C-2 Preferred Units based on an enterprise value of $156,250,000,
with such enterprise value adjusted by any net debt as of such time; and $25,000,000 of Optional Investment shall be to purchase
Class C-3 Preferred Units based on an enterprise value of $250,000,000, with such enterprise value adjusted by any net debt as of
such time.
The proceeds of the investment will generally be used to fund the activities of Morgenesis and its consolidated
subsidiaries. In addition, if, during the twelve month period ending on December 31, 2023, Morgenesis and its subsidiaries generate
(i) Net Revenue (as defined in the UPA) equal to or greater than $70,000,000, (ii) Gross Profit (as defined in the UPA) equal to or
greater than $35,000,000 and (iii) EBITDA (as defined in the UPA) equal to or greater than $10,000,000, then MM shall make (or
cause to be made) a one-time cash payment of $10,000,000 to the Company upon such payment becoming final and binding
pursuant to the UPA (the “Earnout Payment”).
In connection with the entry into the UPA, each of the Company, Morgenesis and MM entered into the Second Amended
and Restated Limited Liability Company Agreement (the “LLC Agreement”) providing for certain restrictions on the disposition of
Morgenesis securities, the provisions of certain options and rights with respect to the management and operations of Morgenesis, a
right for MM to exchange any units of Morgenesis for shares of the Company’s common stock and certain other rights and
obligations.
In connection with the entry into the UPA, each of the Company, Morgenesis and MM entered into a services agreement
(the “Services Agreement”) under which the Company will provide certain operational services to Morgenesis for an initial term of
three years. Also, in connection with the entry into the UPA, each of Morgenesis and Metalmark Management II LLC, an affiliate
of Metalmark (“MM Management”), entered into an advisory services and monitoring agreement (the “Monitoring Agreement”)
under which MM Management will provide certain analytical and financial and business monitoring services to Morgenesis. Under
the Monitoring Agreement, MM Management will be paid a quarterly cash fee equal to 0.25% of the total amount invested by MM
in Morgenesis as of the date of any payment and will be entitled to the reimbursement of certain expenses.
The Preferred Units have voting rights, may be converted into ordinary shares, and are prioritized over ordinary shares in
case of 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 further 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 liquidation or
deemed liquidation event that would constitute a redemption event that is outside of the Company’s control. As such, all
redeemable preferred units have been presented outside of permanent 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.
NOTE 4 – ACQUISITIONS
Purchase of Mida Biotech BV
During February 2022, pursuant to the joint venture agreement between the Company and Mida Biotech BV, the Company
purchased all the issued shares of Mida for a consideration of $100 thousand. In lieu of cash, the consideration was paid via 29,940
Company shares of Common Stock issued to Mida Biotech BV’s shareholders.
Theracell Laboratories
See note 13a.
F-21
NOTE 5 – SEGMENT INFORMATION
Following the Metalmark Investment, the Company separated its operations into two operating segments: Morgenesis
operations and therapies. Prior to that, the Company conducted all its operations as one segment. The Morgenesis operations
includes mainly POCare Services, while the therapies segment includes the Company’s therapeutic development operations.
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
Morgenesis. Certain activities of these subsidiaries have changed after they were transferred to Morgenesis 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 Morgenesis 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, 2022 is as follows:
Morgenesis
Therapies
Eliminations Consolidated
Revenues
Revenues from related party
Total revenues
Cost of revenues, development services and
research and development expenses*
Operating expenses*
Other income, net
Depreciation and amortization
Impairment expenses
Loss from extinguishment in connection with
convertible loan
Financial Expenses, net
Share in net income of associated companies
Income (loss) before income taxes
$
33,884 $
1,284
35,168
(in thousands)
6,432 $
-
6,432
(5,575) $
-
(5,575)
(17,373)
(7,762)
168
(1,006)
(420)
(13,350)
(8,678)
5
(972)
(641)
-
(1,748)
(1,352)
5,675 $
(52)
(223)
(156)
(17,635) $
$
4,675
900
-
-
-
-
-
-
- $
34,741
1,284
36,025
(26,048)
(15,540)
173
(1,978)
(1,061)
(52)
(1,971)
(1,508)
(11,960)
*Excluding Depreciation, amortization and impairment expenses
Reconciliation of segment performance to loss for the year ended December 31, 2021:
Morgenesis
Therapies
Eliminations Consolidated
revenues, development services and
Revenues
Revenues from related party
Total revenues
Cost of
research and development expenses*
Operating expenses*
Other income, net
Depreciation and amortization
Loss from extinguishment in connection with
convertible loan
Financial Expenses, net
Share in net income of associated companies
Income (loss) before income taxes
$
$
31,211 $
3,856
35,067
(21,096)
(3,545)
24
(1,020)
(in thousands)
11,925 $
(11,490) $
-
11,925
(24,000)
(13,287)
2,254
(844)
-
(11,490)
9,327
2,163
-
-
-
(2,508)
(15)
6,907 $
(1,865)
1,216
(257)
(24,858) $
-
-
-
- $
31,646
3,856
35,502
(35,769)
(14,669)
2,278
(1,864)
(1,865)
(1,292)
(272)
(17,951)
*Excluding Depreciation, amortization and impairment expenses
F-22
NOTE 6 – EQUITY
a. Financings
In March 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement) with certain
investors (collectively, the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors, in a private
placement (the “Offering”), an aggregate of 4,933,333 shares of the Company’s Common Stock at a purchase price of $3.00 per
share and warrants to purchase up to an aggregate of 1,000,000 shares of Common Stock at an exercise price of $4.50 per share.
The warrants are not exercisable until after six months and expire three years from the date of issuance. The Company received
proceeds of $2.175 million. The Company does not expect to receive the remaining $12.625 million from the defaulting investors.
The Company issued an aggregate of 724,999 shares of Common Stock and warrants to purchase 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
Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the Company has agreed to register the
resale of the Shares and Underlying Shares on a registration statement on Form S-3 (the “Registration Statement”) to be filed with
the United States Securities and Exchange Commission (the “SEC”) by April 3, 2023.
b. Purchase of Mida Biotech BV
In connection with the acquisition of Mida, the Company issued 29,940 Common Stock to Mida’s shareholders (See Note 4).
c. Warrants
A summary of the Company’s warrants granted to investors and as finder’s fees as of December 31, 2022, and December
31, 2021 and changes for the periods then ended is presented below:
December 31,
2022
2021
Weighted
Average
Exercise
Price
$
Number of
Warrants
Weighted
Average
Exercise
Price
$
Number of
Warrants
3,042,521
6.09
7,070,241
2,978,575
-
(639,636)
3.16
-
6.58
926,413
(319,811)
(4,634,323)
5,381,460
4.41
3,042,521
6.20
6.24
6.19
6.29
6.09
Warrants outstanding at the
beginning of the period
Changes during the period:
Issued
Exercised
Expired
Warrants outstanding and exercisable at
end of the period*
Amendment, Consent and Waiver Agreement
In October and November 2022, the Company and certain investors that were parties to the Securities Purchase Agreement
of March 2022 (the “SPA”) and the Registration Rights Agreement of March, 2022 (the “RRA”) (see note 5(a)), entered into an
Amendment, Consent and Waiver Agreement (the “RRA Amendment”). Pursuant to the RRA Amendment, the Company and 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 warrants to purchase an aggregate of 215,502 shares of Common Stock to the investors (the “Additional PIPE Warrants”)
and such Additional PIPE Warrants shall have an exercise price of $2.50 per share of Common Stock, be exercisable beginning six
months and one day after the applicable effective date and ending 36 months after the applicable effective date and be in the same
form as the original Warrants issued pursuant to the SPA.
F-23
As of December 31, 2022 and December 31, 2021, there are no warrants that are subject to exercise price adjustments.
d. Treasury shares
During the year ended December 31, 2021, the Company repurchased its shares under a stock repurchase 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 as
Part of
Publicly
Announced
Plans or
Programs
Total Number
of Shares
Purchased
Average Price
Paid per Share
January 2021
April 2021
May 2021
November 2021
2,306 $
8,850
195,625
24,477
231,258 $
4.45 $
4.49
4.34
4.32
4.34 $
10,255
39,730
848,234
105,806
1,004,025
e. Controlled Equity Offering Sales Agreement
In December 2018, the Company entered into a Controlled Equity Offering Sales Agreement, or Sales Agreement, with
Cantor Fitzgerald & Co., or Cantor, pursuant to which the Company may offer and sell, from time to time through Cantor, shares of
its common stock having an aggregate offering price of up to $25.0 million. The Company will pay Cantor a commission rate equal
to 3.0% of the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement will be offered and sold pursuant to
the Company’s 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 the Company filed with the Securities and Exchange Commission on December 20, 2018. The
Company has not yet sold any shares of its common stock pursuant to the Sales Agreement.
NOTE 7 – PROPERTY, PLANTS AND EQUIPMENT
The following table represents the components of property, plants and equipment:
Cost:
Production facility
Office furniture and computers
Lab equipment
Advance payment
Subtotal
Less – accumulated depreciation
Total
December 31,
2022
2021
(in thousands)
$
$
3,944 $
589
4,811
17,442
26,786
(3,952)
22,834 $
4,040
555
2,435
6,181
13,211
(2,940)
10,271
F-24
Depreciation expense for the years ended December 31, 2022 and December 31, 2021 were $1,067 thousand and $916
thousand, respectively.
Property, plants and equipment, net by geographical location were as follows:
Belgium
Greece
Netherlands
Korea
Israel
U.S.
Total
December 31,
2022
2021
(in thousands)
$
$
1,095 $
858
380
466
2,284
17,751
22,834 $
1,149
-
-
694
2,602
5,826
10,271
NOTE 8 – INTANGIBLE ASSETS AND GOODWILL
Changes in the carrying amount of the Company’s goodwill for the years ended December 31, 2022 and 2021 are as
follows:
Goodwill as of December 31, 2020
Translation differences
Goodwill as of December 31, 2021
Translation differences
Goodwill as of December 31, 2022
(in thousands)
8,745
(342)
8,403
(216)
8,187
$
$
$
Goodwill impairment assessment for the year ended December 31, 2022
In the fourth quarter of 2022, following the separation of the Company’s business into two operating segments, the
Company reallocated goodwill to its newly reorganized reporting units (Morgenesis and Therapies) using a relative fair value
approach. As a result, the carrying amount of goodwill assigned to the Morgenesis segment reporting unit was $7 million and $1
million was assigned to the Therapies segment. The Company performed an impairment analysis for these two reporting units.
Based on the Company’s assessment as of date of the change in the reporting units, it was concluded that the fair value of each of
the Morgenesis and Therapies reporting units 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.
Other Intangible Assets
Other intangible assets consisted of the following:
Gross Carrying Amount:
Know How
Customer relationships
Kyslecel Technology
IPR&D
Subtotal
December 31,
2022
2021
(in thousands)
$
2,735 $
345
9,340
-
12,420
2,904
811
9,340
641
13,696
Less – Accumulated amortization
Net carrying amount of other intangible assets
$
(2,726)
9,694 $
(1,875)
11,821
Intangible assets amortization expenses were approximately $911 thousand and $948 thousand for the years ended
December 31, 2022 and December 31, 2021, respectively.
Following an annual impairment check, the Company determined that certain IPR&D and customer relationships
intangible assets were no longer relevant. Therefore the Company wrote off IPR&D intangible assets in the amount of $641
thousand and customer relationship intangible assets in the amount of $420 thousand in the year ended December 31, 2022.
F-25
Estimated aggregate amortization expenses for the five succeeding years ending on December 31st are as follows:
Amortization expenses
NOTE 9 – CONVERTIBLE LOANS
a. Long-Term Convertible Loans
2023
2024 to 2027
(in thousands)
840 $
3,362
$
Long-term convertible loans outstanding as of December 31, 2022 and December 31, 2021 are as follows:
Convertible Loans Outstanding as of December 31, 2022
Principal
Amount
(in thousands)
750
6,600
100
9,150
16,600
$
$
Issuance
Year
Interest
Rate
Maturity Exercise
Price
Period
(Years)
NOTE
BCF
2018
2019
2020
2022
2%
6%-8%
8%
6%-10%
5
3-5
3
1-2
7.00
7.00
7.00
2.5-4.5
(1)+(5)
(2)+(5)
(3)
(4,5+6)
-
-
-
-
During January 2023 the Company and investors representing $12,250 of the convertible loans
outstanding at December 31, 2022 agreed to extend the maturity of the loans to January 31, 2026, increase
the annual interest rate to 10% effective February 1, 2023, increase the expiry date of related warrants to
January 31, 2026, and change the loan conversion price to $2.50.
Convertible Loans Outstanding as of December 31, 2021
$
$
750
8,750
250
9,750
*Extended
*2018
*2019
*2020
2%
6%-8%
8%
5
3-5
3
7.00
7.00
7.00
(1)+(5)
(2)+(5)
(3)
39
-
-
Convertible Loans repaid during the year ended December 31, 2022
Principal
Amount
Issuance
Year
Interest Rate
Maturity
Period
Exercise
Price
BCF
150
50
150
1,950
2,300
2019
2019
2020
2019
8%
6%
8%
6%-8%
2.5 $
3
2.5
3
7
7
7
4.5-7
-
-
-
-
Convertible Loans repaid during the year ended December 31, 2021
Principal
Amount
750
250
1,000
Issuance
Year
Interest Rate
Maturity
Period
2019
2018
8%
2%
F-26
Exercise Price
7
3 $
7
2
BCF
31
-
Apart from the items mentioned below there were no repayments of convertible loans during the years ended December
31, 2022 and December 31, 2021. In addition, except for the Metalmark Morgenesis loan conversion mentioned below there were
no other conversions during the years ended December 31, 2022 and December 31, 2021.
(1)The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of
115,918 shares and 115,918 three-year warrants to purchase up to an additional 115,918 shares of the Company’s common stock
at a per share exercise price of $7. As of December 31, 2022, the loans are presented in current maturities of convertible notes in
the balance sheet.
(2)The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of
1,069,602 shares and 1,011,781 three-year warrants to purchase up to an additional 1,011,781 shares of the Company’s common
stock at a per share exercise price of $7. As of December 31, 2022, $1,600 thousands of the principal amount is included in
current maturities of convertible loans in the balance sheet and the remainder in long-term convertible loans. See also note 9(b).
(3)The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of
17,711 shares at a per share exercise price of $7. As of December 31, 2022, all the principal amount is included in short-term
convertible loans in the balance sheet. See also note 9(b).
(4)The holders, at their option, may convert the outstanding principal amount and accrued interest under this note into a total of
3,678,575 shares at a per share exercise price of between $2.5 $4.5. As of December 31, 2022, all the principal amount is
included in short-term convertible loans in the balance sheet. See also note 9(a)6.
(5)During the year ended December 31, 2021, the Company and certain convertible loan holders (including certain credit line
investors, see note 9 (b)) agreed to extend the maturity date on loans due during the fourth quarter of 2021 to June 30, 2023. The
loan repayment extension included the loan holders’ right to request that the Company repay them on November 21, 2022 (the
“Early Redemption Option”). In consideration for the extension, including for the credit line investors, warrants to purchase
926,413 shares of common stock of the Company were issued to the loan holders at an exercise price of $6.24 per share. During
March 2022 the loan holders waived the early redemption option. Based on the analysis, the Company concluded that the change
in terms should be accounted for as a modification.
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 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 recorded in the 12 months ended December 31, 2021.
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.
F-27
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:
Parameter
Notional (USD)
Accrued Coupon (USD)
Coupon Rate
Conversion Ratio (USD)
Exercise Price (USD)
Stock Price (USD)
Expected Term (years)
Risk Free Rate
Volatility
Yield
8% Note
1,500,000
224,603
2% Note
750,000
41,945
Warrants
926,413
-
-
-
6.24
5.02
1.79
0.20%
72.84%
-
2.00%
7.00
-
5.02
1.79
0.20%
72.84%
7.84%
8.00%
7.00
-
5.02
1.79
0.20%
72.84%
7.87%
(6)During April and May 2022, the Company entered into three convertible loan agreements (the “Convertible Loan Agreements”)
with three non-U.S. investors (the “Lenders”), pursuant to which the Lenders loaned the Company an aggregate of $9.15
million (the “Loan Amount”). Interest is calculated at 6% per annum (based on a 365-day year) and is payable, along with the
principal, during or before the third quarter of 2023. At any time prior to or on the maturity date, the Lenders may provide the
Company with written notice to convert all or part of the loans into shares of Common Stock at a conversion price equal to
$4.50 per share (subject to adjustment for certain capital events, such as stock splits) (the “Conversion Price”). In connection
with such loans, we issued to the Lenders warrants representing the right to purchase an aggregate of 408,335 shares of
Common Stock (which is 25% of the shares of the Company’s Common Stock into which the loans are initially convertible at
the Conversion Price), at an exercise price per share of $4.50 per share. Such warrants are exercisable at any time beginning six
months and one day after the closing date and ending 36 months after such closing date.
On October 23, 2022, the Company entered into a Convertible Loan Extension Agreement with one of the Lenders, which
amended the respective Lender’s Convertible Loan Agreement for the $5,000,000 principal Loan Amount as follows: (i) the interest
rate increased from 6% to 10% per annum as of April 21, 2022 on the unconverted and then outstanding loan amount; (ii) the
maturity date was extended to January 20, 2024; (iii) the Company agreed to issue a warrant to the Lender for the right to purchase
1,111,111 shares of Common Stock, at an exercise price per share of $2.50 per share, which is exercisable at any time beginning
April 23, 2023 and ending October 23, 2025; and (iv) the Conversion Price was amended to a price per share of $2.50 per share
instead of $4.50 per share. Based on the analysis, the Company concluded that the change in terms should be accounted for as a
modification.
In addition, on October 23, 2022, the Company entered into a Convertible Loan Extension Agreement with one of the
Lenders, which amended the respective Lender’s Convertible Loan Agreement for the $3,000,000 principal Loan Amount as
follows: (i) the interest rate increased from 6% to 10% per annum as of May 19, 2022 on the unconverted and then outstanding loan
amount; (ii) the maturity date was extended to February 19, 2024; (iii) the Company agreed to issue a warrant to the Lender for the
right to purchase 666,666 shares of Common Stock, at an exercise price per share of $2.50 per share, which is exercisable at any
time beginning April 23, 2023 and ending October 23, 2025; (iv) the prepayment terms were amended to allow the outstanding
Loan Amount to be prepaid by the Company at the Lender’s option following any financings by the parent Company, and in the
event that any of the Company’s subsidiaries raises financing, the Company will make reasonable commercial efforts to ensure the
funds are received in order to repay the loan amount; and (v) the Conversion Price was amended to a price per share of $2.50 per
share instead of $4.50 per share. 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 $459 thousand. 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. During
January 2023, following the receipt of a loan financing (see note 21), the Company refunded the entire principal and accrued
interest to the Lender).
F-28
b. Private Placements
During May 2019, the Company entered into a private placement subscription agreement with an investor for $5 million.
The lender 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.
In June 2019, the Company entered into private placement subscription agreements with lenders for an aggregate
unsecured convertible note in the aggregate principal amount of $2 million. During the year ended December 31, 2022, the
Company repaid the lenders the debt in full.
During 2019, the Company entered into a Private Placement Subscription Agreement and Convertible Credit Line
Agreement (collectively, the “Credit Line Agreements”) with certain non-U.S. investors (the “Lenders”), pursuant to which the
Lenders furnished to the Company access to an aggregate $5.0 million credit line (collectively, the “Credit Line”). Pursuant to the
terms of the Credit Line Agreements and the Notes, the total loan amount, and all accrued but unpaid interest thereon, became due
and payable on the second anniversary of the Effective Date (the “Maturity Date”). The Maturity Date may be extended by each
Lender in its sole discretion and shall be in writing signed by the Company and the Lender. Interest on any amount that has been
drawn down under the Credit Line accrues at a per annum rate of eight percent (8%). At any time prior to or on the Maturity Date,
by providing written notice to the Company, each of the Lenders is entitled to convert its respective drawdown amounts and all
accrued interest, into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at a conversion
price equal to $7.00 per share.
During the years ended December 2020, December 2021, and December 2022 the Company repaid principal amounts of
$1,400 thousand, $750 thousand and $150 thousand respectively and a total interest amount of $31 thousand, $124 thousand and
$29 thousand respectively to certain of the credit line investors.
In 2019, the Company entered into private placement subscription agreements with investors for an aggregate amount of
$250 thousand. 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 share of common stock of the Company at a conversion price per share equal to $7.00. In addition, the
Company granted the investors 183,481 warrants to purchase an equal number of additional shares of Common Stock at a price of
$7.00 per share. The fair value of the warrants was $124 thousand using the fair value of the shares on the grant date. During the
year ended December 31, 2021, the Company and the investors agreed to extend the maturity of the loans to December 2022.
During the year ended December 2022, the Company and certain investors agreed to extend the maturity of the loans to December
2023. Based on the analysis, the Company concluded that the changes in terms should be accounted for as a modification.
During the year ended December 2022, the Company repaid a principal amount of $150 thousand and a total interest
amount of $29 thousand to a certain investor.
In 2020, the Company entered into private placement subscription agreements with certain 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 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. During the year ended December 2022, the Company repaid a principal amount of $150 thousand and a total interest amount
of $29 thousand to a certain investor. During 2022, the Company and other investors agreed to extend the maturity of the loans to
December 2023 and to extend the warrants maturity date to December 2023 and January 2024. Based on the analysis, the Company
concluded that the change in terms should be accounted for as a modification.
F-29
c. Unsecured Convertible Notes
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, respectively.
In March 2018, the investor submitted a notice of its intention to convert into shares 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 107,985 issued under those agreements and the principal amount and accrued interest of the loan in
escrow account. The deposit of the principal amount and accrued interest presented as restricted cash in the balance sheet as of
December 31, 2022.
d. Senior Secured Convertible Loan Agreement
In August 2022, Morgenesis entered into a senior secured convertible loan agreement (the “Agreement”) with MM
(“Lender”) pursuant to which the Lender agreed to loan Morgenesis $10 million (the “Loan”) at an interest rate of 8.0% paid-in-
kind interest per annum (the “PIK Interest”), which shall be capitalized, compounded and added to the unpaid outstanding principal
balance of the Loan on the applicable quarterly interest payment date and which, along with the principal, was scheduled to mature
on March 29, 2023 (the “Maturity Date”). During the fourth quarter of 2022 the Loan was fully converted into preferred units of
Morgenesis (see note 3).
NOTE 10 – 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 record 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 under operating lease agreements. The leasing contracts are for
a period of 3 – 10 years.
Research and Development facilities
The Company leases space for its research and development facilities under operating lease agreements. The leasing
contracts are for a period of 2 – 5 years.
Offices
The Company leases space for offices under operating leases. The leasing contracts are valid for terms of 5 years.
F-30
Lease Position
The table below presents the lease-related assets and liabilities recorded on the balance sheet:
Assets
Operating Leases
Operating lease right-of-use assets
Finance Leases
Property, plants and equipment, gross
Accumulated depreciation
Property and equipment, net
Liabilities
Current liabilities
Current maturities of operating leases
Current maturities of long-term finance leases
Long-term liabilities
Non-current operating leases
Long-term finance leases
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
December 31,
2022
2021
$
2,304
$
1,015
222
(68)
154
$
542
60
$
$
1,728
95
$
$
$
$
$
$
$
91
(33)
58
481
18
561
41
4.7 years
2.4 years
2.3 years
3.2 years
8.0%
6.4%
6.9%
2.0%
Lease Costs
The table below presents certain information related to lease costs and finance and operating leases:
Years ended December 31,
2021
2022
Operating lease cost:
$
546
Finance lease cost:
Amortization of leased assets
Interest on lease liabilities
Total finance lease cost
43
7
50
$
The table below presents supplemental cash flow information related to lease:
Years ended December 31,
2021
2022
(in Thousands)
Cash paid for amounts included in the measurement of leases
liabilities:
Operating leases
Finance leases
$
$
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
$
559 $
43 $
432 $
136
F-31
514
20
1
21
526
20
-
-
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.
Operating
Leases
Finance
Leases
Year ended December 31,
2023
2024
2025
2026
2027
Thereafter
Total minimum lease payments
Less: amount of lease payments representing interest
Present value of future minimum lease payments
Less: Current leases obligations
Long-term leases obligations
$
$
681 $
539
367
213
213
960
2,973
(703)
2,270
(542)
1,728 $
69
69
30
-
-
-
168
(13)
155
(60)
95
Operating lease right-of-use assets by geographical location were as follows:
Greece
Korea
Israel
U.S.
Total
December 31,
2022
2021
(in thousands)
$
$
1,368 $
218
580
138
2,304 $
-
432
365
218
1,015
NOTE 11 – COMMITMENTS AND LICENSE AGREEMENTS
See Note 12 for additional commitments 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.
F-32
As consideration for the license, the Israeli Subsidiary will pay the following to THM:
1) A royalty of 3.5% of net sales;
2) 16% of all sublicensing fees received;
3) An annual license fee of $15 thousand, which commenced on January 1, 2012 and shall be paid once every year
thereafter. The annual fee is non-refundable, but it shall be paid each year against the royalty noted above, to the
extent that such are payable, during that year; and
4) Milestone payments as follows:
a.
b.
c.
d.
e.
$50 thousand on the date of initiation of Phase I clinical trials in human subjects;
$50 thousand on the date of initiation of Phase II clinical trials in human subjects;
$150 thousand on the date of initiation of Phase III clinical trials in human subjects;
$750 thousand on the date of initiation of issuance of an approval for marketing of the first product by the
FDA; and
$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, 2022, 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 463,651
shares of common stock of the Company at the time of the Exit or the value of 1,000 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”)
(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 (70% of budgeted costs) grant for the industrial research part of the research program and a further
recoverable advance of Euro 930 thousand (60% 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, 2022, the Company repaid to the DGO6 a total amount of approximately $167 thousand and amount of $243
thousand was recorded in other payables.
(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 55% 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, 2022, an amount of Euro 438 thousand ($537 thousand) was recorded as deduction of
research and development expenses and an amount of Euro 74 thousand was recorded as advance payments on account of grant.
(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 be conducted 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 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, 2022 the program is pending for extension approval.
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 60% 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, 2022, an amount of Euro 247 thousand ($262 thousand) was recorded in research and development
expenses.
F-33
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 5% of gross sales generated from the Project. To date no sales have been
generated.
d. Korea-Israel Industrial Research and Development Foundation (“KORIL”)
On May 26, 2016, the Israeli Subsidiary and the Korean 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. The grant is to be
repaid at the yearly rate of 2.5% of gross sales. To date no sales have been generated. As of December 31, 2022, the Israeli
Subsidiary and the Korean Subsidiary received $597 thousand under the grant.
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, 2022, 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 5% of gross sales. To date no sales have been generated.
f. 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, 2022 no royalty incurring sales were made.
In January 2022, the Company terminated both of the licensing agreements with BGN effective April 26, 2022.
g. 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.
F-34
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 5% of net sales of any product sold which incorporates a
licensed Columbia patent and (ii) 2.5% 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, 2022, no royalty incurring sales were made.
h. 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 5% (or up to 20% of sub-licensing sales) in the event of sales
that includes certain types of University owned IP. As of December 31, 2022, no royalty incurring sales were made.
i. 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 5% and up to 18% of sub-license fees. As of December 31, 2022, no royalty incurring sales were made.
j. Tissue Genesis LLC
Included in the Koligo acquisition of 2020 were the assets of Tissue 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.
k. 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.
l. Neuro-Immunotherapy Exclusive License Agreement
During the year ended 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. In
2023, the Company terminated this license agreement.
F-35
m. Savicell
During 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 10% royalty for all gross sales of such products developed under the Savicell Agreement. As of December 31,
2022, no royalty incurring sales were made.
n. Stromatis Pharma
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, 2022, no royalty
incurring sales were made.
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 (5%) 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 12% 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 Cost of revenues, development services and research and development expenses.
o. Helmholtz Zentrum München Deutsches Forschungszentrum für Gesundheit und Umwelt (GmbH)) (“HMGU”)-
During 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. In addition, payments will be
due by the Company upon certain milestones. The agreement also includes payment of royalties of between 3% and 4% 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 5% in service revenues and payment of between 10% and 18% on sublicense revenues.
F-36
p. 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. Pursuant to the agreement, Yeda granted to the Company an exclusive, worldwide
royalty bearing license to certain licensed information and the licensed patents, for the development, manufacture, use, offer for
sale, sale and import of products in the field of tumor-infiltrating lymphocytes (TIL) and Chimeric antigen receptor (CAR) T cell
immunotherapy platforms (excluding CAR-Cytokine Induced Killer cell immunotherapy). The Company undertook to make
commercially reasonable efforts to develop and commercialize products in the field and to achieve certain milestones. In
consideration for the grant of the License, the Company shall pay Yeda:
1. A non-refundable annual license fee of $10 thousand;
2. Royalties of up to 2% on net sales of licensed products;
3.
25% of all Other Receipts received in respect of a Sublicense first granted or an assignment of rights made prior to the
achievement of the dosing of a first patient 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 achievement of the dosing of a first
patient in a Phase I Clinical Trial
4. Milestone Events payments:
a.
b.
c.
d.
$50 thousand upon the dosing of a first patient in a Phase I Clinical Trial;
$500 thousand upon the receipt of FDA marketing approval in respect of 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 from an additional non-FDA major regulatory agency
(namely, a regulatory agency in Europe, Japan, China or Canada);
5. Patent fees already incurred by Yeda in connection with the Licensed Patents and all future costs and fees relating to
the filing, prosecution, and maintenance of the Licensed Patents; and
6. Research related expenses based on a budget to be agreed upon.
As of December 31, 2022, the Company recognized $120 thousand as expenses under this contract.
q. 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 1.1920 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 thousand for the use of the subsidiary as per the grant agreement. As at
December 31, 2022, the restricted cash related to the iPSC project was $609 thousand. During the year ended December 31, 2022,
the Company recognized grant income of $73 thousand which was offset against research and development expenses.
NOTE 12 – COLLABORATIONS
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.
F-37
b. Johns Hopkins University
During 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. Pursuant to the agreement, the Company will pay for certain leasehold improvements in
the premises according to plans and specifications to be agreed upon. The Company advanced $1,976 thousand for this purpose.
The costs of the leasehold improvements will be offset by up to $5 million 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
fourth quarter of 2024.
c. 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. During 2022, 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 joint
venture 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”):
The incorporation of a joint venture entity (“JVE”) in which the Company or an assignee will hold between 49% and 51%
of the equity.
The JV partner will manage the joint venture activities until the JVE is incorporated.
The JVE will be managed by a steering committee consisting of 3 members which will act as the entity’s board of
directors. The Company or assignee is entitled to appoint 1 member, the partner is entitled to appoint 1 member, and
Company or assignee and partner will jointly appoint the third member.
The Company has the right to exercise a call option to acquire the JV partner’s share in the JVE based on the occurrence
of certain events and according to an agreed upon mechanism.
The funding of the parties’ investment in the joint venture share may be made in the form of cash investment and / or in-
kind services. The Company’s or its assignee’s cash investment may be in the form of additional shares, a convertible loan,
and/or procured services.
Each of the Parties may agree to provide additional funding to the JVE to cover the operation costs and such additional
funding may be in the form of in-kind contributions. The Company’s or its assignee’s investments may be made in the
form of a cash investment for additional shares, a convertible loan, and/or procured services. Procured services refer to
certain services that the Company or assignee has engaged the partner or the JVE to provide the Company or assignee
with, in support of Company’s or its assignee’s activity. All results of these procured services shall be owned by Company
or its assignee, as relevant.
As appropriate, the parties will grant to the JVE an exclusive or nonexclusive, sublicensable, royalty-bearing, right and
license to the relevant party’s background IP as required solely to manufacture, distribute and market and sell the party’s
products within the defined territory. Each party shall receive royalties in an amount of ten percent (10%) of the net sales
generated by the JVE and/or its sublicensees with respect to the sale of such parties’ products.
Once the JVE is profitable, under certain circumstances, the Company will be entitled (in addition to any of its rights as
the holder of the JVE) to an additional share of fifteen percent (15%) of the JVE’s GAAP profit after tax, over and above
all rights granted pursuant to Company’s participating interest in the JVE.
Unless otherwise stated, the relevant JVE had not been incorporated by December 31, 2022.
1.
2.
3.
4.
5.
6.
7.
8.
9.
F-38
Name of party (and country of origin)
Theracell Advanced Biotechnology SA
(Greece) and / or its related parties
Broaden Bioscience and Technology Corp
(USA)
Mircod LLC (US)
Image Securities FZC (UAE)
Cure Therapeutics (Korea)
Kidney Cure Ltd (Israel)
Educell D.O.O
(Slovenia)
Med Centre for Gene and Cell Therapy FZ-
LLC
(UAE)
First Choice International Company, Inc
(USA)
SBH Sciences Inc (USA)
Revitas SA (Belgium)
Deep Med IO Ltd. (UK)
Territory
European Union, Israel, Australia
Notes
(1) (5) & (11)
Certain projects in China and the
(5) & (11)
Middle East
Russia (No POCare activities
have taken place to date)
India and European Union
South Korea, Australia and Japan
N / A
Croatia, Serbia and Slovenia
(2)
(3) (5) & (11)
(5) & (11)
(4)
(6)
European Union and United Arab
(5) & (11)
Emirates
Panama and certain other Latin
American countries
N / A
N / A
N / A
(7)
(8)
(9)
(10)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
The Theracell JVE was incorporated in Greece under the name of Theracell Laboratories Private Company (“Theracell
Laboratories”). (See Note 13). In November 2021, the Company loaned approximately $800 thousand to Theracell which
was repaid during 2022. The Company also loaned approximately $4,132 thousand as part of its obligations under the JVA
to Theracell Laboratories. The 3-year loan bears interest at the annual rate of 8%.
Under the Mircod JVA, provisos 7 and 8 do not apply. According to the Mircod JVA, subject to payment by the Company
of the contribution amount, the JVA will grant Company an exclusive, perpetual, irrevocable, royalty free and fully paid up
and sublicensable license to use the Project IP for research and development and for the manufacturing, processing,
supplying, and use of products based on point of care manufacturing and/or processing of treatments for patients and for
use in hospitals, medical centers and academic institution settings solely outside the territory. In order for the Company to
fulfil its obligations pursuant to proviso 6, the Parties concluded a convertible loan agreement pursuant to which Company
shall lend to Mircod Biotech Inc up to $5 million. Mircod Biotech Inc., performs technological development work ordered
by Company. The loan bears simple interest in the amount of 6% annually. During 2021 and 2022, the Company had
transferred $1,640 thousand and $435 thousand respectively under the loan agreement. The Company recorded the loan
amounts as research and development expenses under ASC 730. As of December 31, 2022, the technological development
work had not been completed.
On August 24, 2021, the Company entered into a convertible loan agreement with Image whereby, pursuant to the terms of
the Image joint venture agreement, the Company agreed to loan Image up to $5 million. The loan bears interest at the rate
of 6%. The Company and Image have agreed to extend the maturity date of the loan to December 31, 2023. As of
December 31, 2022, the outstanding balance under the loan agreement was $2.7 million, and this has been reflected as a
short-term asset on the Company’s balance sheet.
The Kidney Cure JVE was incorporated in Switzerland under the name of Butterfly Biosciences Sarl (“BB”) (See Note
13). The Company recorded the expenses paid to BB as research and development expenses under ASC 730. During the
year ended December 31, 2022, development activities continued.
During December 2022 the Company and the relevant joint venture partners agreed to replace the relevant JVAs to reflect
updated partners’ responsibilities and amend certain terms relating to future licence agreements and conversion
mechanisms. In addition, it was agreed that Proviso 8 will be removed from these JVAs.
During 2021, the Company and Educell entered into a convertible loan agreement whereby the Company, pursuant to its
obligations under the JVA, agreed to loan up to $1.2 million. As of December 31, 2022, the Company had transferred $970
thousand under the loan agreement. The Company recorded the loan amounts as research and development expenses under
ASC 730. The loan bears interest at the annual rate of 4.5% and is repayable after 5 years. At Company’s election, the loan
is convertible into equity of borrower, or JVE entity if incorporated, at a valuation to be determined by an independent
third party.
Under the First Choice JVA, each party shall, subject to fulfilment of the party’s JVA, grant the Panama JV Entity an
exclusive license to certain intellectual property of the part to develop and commercialize such party’s products in the
defined territory, subject to minimum sales obligations. In consideration of such license, the Panama JV shall pay the
relevant party royalties at the rate of 15% of the Panama JVE net sales of such party’s products sold in the defined
territory. The First Choice JVE will be managed by a steering committee consisting of 5 members which will act as the
entity’s board of directors. Each of the Parties is entitled to appoint 2 members, and Company and partner will jointly
appoint the fifth member. Under the First Choice JVA, provisos 5,6,7 and 8 do not apply. There was no material activity
under the First Choice JVA during 2022.
F-39
(8)
(9)
(10)
(11)
Pursuant to the SBH JVA the parties will collaborate in the field of gene and cell therapy development, process and
services of bio-exosome therapy products and services in the areas of diabetes, liver cells and skin applications, including
wound healing. According to the JVA, the board of directors of the SBH JVE shall be comprised of three directors with
one appointed by SBH and two appointed by the Company. Provisos 7 and 8 do not apply to the SBH JVA. There was no
material activity under the SBH JVA during 2022.
The Revitas JVE was incorporated in Belgium under the name of RevaCel Srl during 2021 (See Note 13). The Company
holds 51% of the share capital of RevaCel and has the right to appoint two members to the RevaCel board of directors.
The Company’s partner, Revatis SA, (a Belgian entity) holds the remaining 49% and has the right to appoint two members
to the Revacel board of directors. The fifth RevaCel board member will be an independent industry expert appointed with
the mutual agreement of the Company and Revatis SA. The Company recorded the expenses paid to Revitas and RevaCel
under the JVA as research and development expenses under ASC 730. As part of the Company’s agreement with Revatis
under the Revatis joint venture agreement, 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 and there was
no material activity under the SBH JVA during 2022.
In November 2021, Deep Med IO Ltd (“Deep Med”) and Company entered into a JVA. The Parties agreed to collaborate
in the development and commercialization of an AI-powered system to be used in the manufacturing and/or quality control
of CGTs. The Company has the right to finance 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 convert its holdings under the loan into
shares of Deep Med, or into shares of the Deep Med JV entity once established. Development work under the Deep Med
JVA has continued according to the work plan agreed upon between the Company and Deep Med. During twelve months
ended December 31, 2022, the Company transferred $1.9 million to Deep Med as part of its commitment under the Deep
Med JVA. The Company recorded the amounts paid to Deep Med under the Deep Med JVA as research and development
expenses under ASC 730.
In January 2023, the Company assigned certain rights and obligations under the JVAs to Texas Advanced Therapies LLC,
a Delaware Limited Liability company (“Texas AT”) not related to the Company. Texas AT will receive the Company’s
option 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
royalty and a right to conclude the Manufacturing and Service Agreement with the JV entity. Proviso 8 has been removed
from these JVAs. The Company has no obligation to provide any additional funding to the JV entities.
NOTE 13 – INVESTMENTS AND LOANS TO ASSOCIATES, NET
a. Theracell Laboratories Private Company (“Theracell Laboratories” or “TLABS”)
During 2020, the Company and Theracell, pursuant to the Greek JVA (See Note 12) incorporated the Greek JVA entity
known as TLABS. The Theracell Project activities are run through TLABS. The Company and Theracell each hold a 50%
participating interest in TLABS. Until December 31, 2022, due to the Company’s significant influence over the JVE the Company
applied the equity method of accounting. On December 31, 2022, the shareholders of Theracell Laboratories agreed to a change in
the composition of the board of directors thus giving the Company effective control of Theracell Laboratories. See note 4.
F-40
Business combination
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:
Total assets:
Cash and cash equivalents
Prepaid expenses and other receivables
Orgenesis Accounts Receivable
Other long-term assets
Property, plants and equipment, net
Investments in associates, net
Operating lease right-of-use assets
Advanced payment for Accounts payable
Total assets
Total liabilities:
Operating leases
Orgenesis loan
Other payable
Total liabilities
Total Net Liabilities
Non-controlling interests (50%)
Total Net Liabilities (50%)
(in thousands)
$
$
147
133
241
281
858
19
1,368
366
3,413
1,368
4,567
184
6,119
2,706
1,353
1,353
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
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 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.
F-41
The table below sets forth a summary of the changes in the investments and loans for the years ended December 31, 2022
and December 31, 2021:
Opening balance
Investments during the period
Loan to granted associates
Business Combinations
Interest from loans to associates
Share in net loss of associated companies
Exchange rate differences
Total
NOTE 14 – INCOME (LOSS) PER SHARE
December 31,
2022
2021
(in thousands)
$
$
584 $
-
4,131
(3,156)
161
(1,508)
(77)
135 $
175
260
441
-
2
(272)
(22)
584
The following table sets forth the calculation of basic and diluted loss per share for the periods indicated:
Basic and diluted:
Net loss attributable to Orgenesis Inc.
Weighted average number of common shares outstanding
Net loss per share
Years ended December 31,
2021
2022
(in thousands, except per share data)
$
$
14,889 $
25,096,284
0.59 $
18,053
24,273,658
0.74
For the year ended December 31, 2022, and December 31, 2021, all outstanding convertible notes, options 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 6,753,539 shares underlying outstanding options and warrants and 3,097,691 shares upon conversion of
convertible loans for the year ended December 31, 2022, because the effect of their inclusion in the computation would be anti-
dilutive. Diluted loss per share does not include 5,919,739 shares underlying outstanding options and warrants and 1,518,397
shares upon conversion of convertible loans for the year ended December 31, 2021, because the effect of their inclusion in the
computation would be antidilutive.
NOTE 15 – STOCK-BASED COMPENSATION
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 3,000,000 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 10 years. As of December 31, 2022, total
options granted under this plan are 3,023,518 and the total options that are available for grants under this plan are 450,164.
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 1,000,000 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 10 years. As of
December 31, 2022, total options granted under this plan are 1,415,008 and the total options that are available for grants under this
plan are 161,974.
F-42
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, 2022, and December 31, 2021:
Year Ended
No. of options
granted
Exercise price
Employees
December 31,
2022
440,250
$2-$2.01
Vesting
period
Quarterly
over a period
of two years $
Fair value at
grant
(in
thousands)
Expiration
period
559
10 years
Directors
December 31,
2022
84,650
1.86
anniversary $
100
10 years
On the one-
year
Employees
December 31,
2021
277,000
$2.96-$5.12
Quarterly
over a period
of two years $
On the one-
year
812
10 years
Directors
December
31,2021
84,650 $
2.89
anniversary $
149
10 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 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:
Value of one common share
Dividend yield
Expected stock price volatility
Risk free interest rate
Expected term (years)
Years Ended December 31,
2021
2022
2.89-$5.12
1.86-$2.01
$
$
0%
70%-71%
3.61%-3.85%
5.5-5.56
0%
71%-77%
0.96%-1.34%
5.5-5.56
A summary of the Company’s stock options granted to employees and directors as of December 31, 2022 and December
31, 2021 is presented below:
Years Ended December 31
2022
2021
Weighted
Average
Exercise
Price
$
Number of
Options
Weighted
Average
Exercise
Price
$
Number of
Options
3,210,005
4.05
2,917,667
524,900
(510,017)
(125,426)
(63,997)
-
3,035,465
2,565,919
1.98
0.01
8.8
4.13
-
4.17
4.51
361,650
(13,750)
(20,813)
(34,749)
-
3,210,005
2,777,563
4.05
4.19
4.63
5.67
4.67
-
4.05
4.00
Options outstanding at the beginning of
the period
Changes during the period:
Granted
Exercised*
Expired
Forfeited
Cancelled
Options outstanding at end of the period
Options exercisable at end of the period
*During the year ended December 31, 2022, the Company received $6 thousand from the exercise of employee options for the
purchase of 510,017 shares of the Company’s Common Stock at a weighted average price of $0.012. During the year ended
December 31, 2021, the Company received $64 thousand from the exercise of employee options for the purchase of 13,750
shares of the Company’s Common Stock at a weighted average price of $4.63.
F-43
The following table presents summary information concerning the options granted and exercisable to employees and
directors outstanding as of December 31, 2022 (in thousands, except per share data):
Exercise
Price
$
Number of
Outstanding
Options
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
$
(in thousands)
Number of
Exercisable
Options
Aggregate
Exercisable
Options
Value $
(in thousands)
0.0012
1.86
2.89
2
2.01
2.96
2.99
3.14
4.42
4.5
4.6
4.7
4.8
5.02
5.07
5.1
5.12
5.99
6
6.84
7.2
8.36
8.91
9
230,189
84,650
84,650
357,252
72,500
53,125
429,950
2,500
50,000
32,500
157,488
6,250
483,337
58,563
51,000
57,375
109,250
317,050
16,667
12,000
83,334
250,001
15,000
20,834
3,035,465
1.64
9.99
8.96
9.42
9.96
8.62
7.17
6.91
4.93
6.47
7.20
7.03
3.94
7.40
6.03
6.04
7.81
5.81
1.59
7.38
4.43
5.50
5.46
0.54
6.23
449
7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
456
230,189
-
84,650
90,440
-
53,125
429,950
2,500
50,000
32,500
157,488
4,167
483,337
40,188
51,000
57,375
84,125
317,049
16,667
12,000
83,334
250,001
15,000
20,834
2,565,919
-
-
245
181
-
157
1,286
8
221
146
724
20
2,320
202
259
293
431
1,898
100
82
600
2,090
134
187
11,584
Costs incurred with respect to stock-based compensation for employees and directors for the years ended December 31,
2022 and December 31, 2021 were $917 thousand and $1,349 thousand, respectively. As of December 31, 2022, there was $670
thousand of unrecognized compensation costs related to non-vested employees and directors stock options, to be recorded over the
next 2 years.
c. Options Granted to Consultants and service providers
Below is a table summarizing all the compensation granted to consultants and service providers during the years ended
December 31, 2022 and December 31, 2021:
Year of
grant
No. of
options
granted
Exercise
price
Vesting period
2022
28,335 $
2
Quarterly over a period of two years
Non-
employees
Non-
employees
2021
7,500 $
2.96
Quarterly over a period of two years
Fair value
at grant
(in
thousands)
Expiration
period
$
$
48
10 years
22
10 years
F-44
The fair value of options granted during 2022 and 2021 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 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:
Value of one common share
Dividend yield
Expected stock price volatility
Risk free interest rate
Expected term (years)
Years Ended December 31,
2021
2022
$
$
2
0%
84%
3.6%-3.61%
10
2.96
0%
145%
1.47%
10
A summary of the Company’s stock options granted to consultants and service providers as of December 31, 2022, and
December 31, 2021 is presented below:
Years Ended December 31,
2022
2021
Weighted
Average
Exercise
Price
$
Weighted
Average
Exercise
Price
$
Number of
Options
Number of
Options
547,691
5.89
549,141
28,335
(58,851)
-
-
517,175
453,005
2.00
12.85
-
-
4.88
5.11
7,500
-
(8,950)
-
547,691
467,689
5.89
2.96
-
3.88
-
5.89
6.20
Options outstanding at the
beginning of the year
Changes during the year:
Granted
Expired
Forfeited
Cancelled
Options outstanding at end of the year
Options exercisable at end of the year
The following table presents summary information concerning the options granted and exercisable to consultants and
service providers outstanding as of December 31, 2022 (in thousands, except per share data):
Exercise
Price
$
Number of
Outstanding
Options
Weighted Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
$
(in thousands)
Number of
Exercisable
Options
Aggregate
Exercisable
Options
Value $
(in thousands)
2
2.96
2.99
3.36
4.09
4.42
4.5
4.6
4.8
5.07
5.3
5.99
6
6.84
7
8.34
8.43
11.52
28,335
7,500
35,000
136,775
25,000
5,125
13,335
20,000
16,668
5,000
15,000
16,670
90,000
7,500
70,000
8,600
8,333
8,334
517,175
9.46
8.96
7.22
3.32
6.76
4.93
6.53
7.96
3.94
6.19
5.70
5.81
1.59
7.38
6.83
5.52
5.05
0.26
4.89
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,000
136,775
25,000
5,125
5,000
4,000
16,668
1,000
15,000
16,670
90,000
7,500
70,000
8,600
8,333
8,334
453,005
-
-
105
459
102
23
23
18
80
5
80
100
540
51
490
72
70
96
2,314
F-45
Costs incurred with respect to options granted to consultants and service providers for the years ended December 31, 2022
and December 31, 2021 were $64 thousand and $122 thousand, respectively. As of December 31, 2022, there was $115 thousands
of unrecognized compensation costs related to non-vested consultants and service providers, to be recorded over the next 3.03
years.
d. Warrants and Shares Issued to Non-Employees
The fair value of Common Stock issued was the share price of the shares issued at the day of grant.
During the twelve months ended December 31, 2021, the Company issued 25,000 shares of common stock to a service
provider.
NOTE 16 – TAXES
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, 2022, the Company has an accumulated tax loss carryforward of approximately $22 million (as of
December 31, 2021, approximately $29 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. 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.
F-46
b. Corporate taxation in Israel
The Israeli Subsidiaries are taxed in accordance with Israeli tax laws. The corporate tax rate applicable to 2022 and 2021
are 23%.
As of December 31, 2022, the Israeli Subsidiaries has an accumulated tax loss carryforward of approximately $10 million
(as of December 31, 2021, approximately $11 million). Under the Israeli tax laws, carryforward tax losses have no expiration date.
c. Corporate taxation in Belgium
The Belgian Subsidiaries are taxed according to Belgian tax laws. The corporate tax rates applicable to 2022, 2021 are
25%.
As of December 31, 2022, the Belgian Subsidiary has an accumulated tax loss carryforward of approximately $7 million
(€7 million), (as of December 31, 2021 $8 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
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, 2022, the Korean subsidiary has an accumulated tax loss carryforward of approximately $3 million
(KRW 4,404 million), (as of December 31, 2021, approximately $3 million). Under the Korean tax laws accumulated tax loss can
be carry forwarded for 15 years.
e. Deferred Taxes
The following table presents summary of information concerning the Company’s deferred taxes as of the years ending
December 31, 2021 and December 31, 2021:
Deferred tax assets (liabilities), net:
Net operating loss carry forwards
Research and development expenses
Equity compensation
Employee benefits
Property, plants and equipment
Leases asset
Lease liability
Loans
Partnership Investment
Intangible assets
Other
$
December 31,
2022
2021
(U.S. dollars in thousands)
10,387 $
1,893
1,616
191
(55)
191
(132)
50
2,582
(2,252)
385
14,856
11,451
1,273
2,631
197
(206)
186
(134)
26
-
(2,738)
119
12,805
Valuation allowance
Net deferred tax liabilities
$
(14,753)
103 $
(12,805)
-
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
OBI Subsidiary have recorded full valuation allowance.
F-47
The changes in valuation allowance are comprised as follows:
Balance at the beginning of year
Change during the year
Balance at end of year
December 31,
2022
2021
(U.S dollars in thousands)
$
$
(12,805) $
(1,948)
(14,753) $
(11,932)
(873)
(12,805)
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
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, 2022, 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.
Years Ended December 31,
2021
2022
(in thousands)
Revenue stream:
POCare development services
Cell process development services and hospital services
POCare cell processing
Total
$
$
14,894 $
11,212
9,919
36,025 $
32,192
3,310
-
35,502
A breakdown of the revenues per customer what constituted at least 10% of revenues is as follows:
Revenue earned:
Customer A (Greece)
Customer B (United States)
Customer C (United Arab Emirates)
Customer D (Korea)
F-48
Years Ended December 31,
2022
2021
(in thousands)
8,936
8,316
5,271
3,873
4,693
6,491
6,969
7,703
Contract Assets and Liabilities
Contract assets are mainly comprised of accounts receivable net of allowance for doubtful debts, which includes amounts
billed and currently due from customers.
The activity for accounts receivable is comprised of:
Balance as of beginning of period
Business combination TLABS
Additions
Collections
Exchange rate differences
Balance as of end of period
Years Ended December 31,
2021
2022
(in thousands)
$
$
15,245 $
(1,339)
35,103
(12,728)
(98)
36,183 $
3,085
-
34,570
(22,333)
(77)
15,245
The activity of the related party included in the accounts receivable activity above is comprised of:
Balance as of beginning of period
Additions
Collections
Ceased to be a related party
Balance as of end of period
The activity for contract liabilities is comprised of:
Balance as of beginning of period
Additions
Balance as of end of period
Years Ended December 31,
2021
2022
(in thousands)
1,972 $
1,284
(1,070)
(2,186)
- $
744
3,856
(2,628)
-
1,972
Years Ended December 31,
2021
2022
(in thousands)
59 $
11
70 $
59
-
59
$
$
$
$
NOTE 18 – COST OF REVENUES, DEVELOPMENT SERVICES AND RESEARCH AND DEVELOPMENT EXPENSES
Years Ended December 31,
2021
2022
(in thousands)
Salaries and related expenses
Stock-based compensation
Subcontracting, professional and consulting services
Lab expenses
Depreciation expenses, net
Other research and development expenses
Less grant
Total
$
$
11,206 $
616
5,655
2,685
1,017
6,010
(123)
27,066 $
10,977
729
12,796
3,513
874
7,755
-
36,644
F-49
NOTE 19 – FINANCIAL EXPENSES, NET
Interest expense on convertible loans
Foreign exchange loss, net
Other expense (income)
Total
Years Ended December 31,
2021
2022
(in thousands)
$
$
1,824 $
145
2
1,971 $
943
574
(225)
1,292
NOTE 20 – RELATED PARTIES TRANSACTIONS
a. Related Parties presented in the consolidated statements of comprehensive loss
Stock-based compensation expenses to executive officers
Stock-based compensation expenses to Board Members
Compensation of executive officers
Management and consulting fees to Board Members
Revenues from customer
Financial income
b. Related Parties presented in the consolidated balance sheets
Executive officers’ payables
Non-executive directors’ payable
Loan to Related Party
Accounts receivable, net
NOTE 21 – SUBSEQUENT EVENTS
a) Convertible loan agreements
Years ended December 31,
2022
2021
(in thousands)
111 $
152 $
669 $
380 $
1,284 $
126 $
December 31,
2022
2021
(in thousands)
80 $
558 $
- $
- $
247
265
4,422
380
3,856
64
51
178
3,064
1,972
$
$
$
$
$
$
$
$
$
$
On January 10, 2023 (the “Effective Date”), the “Company” entered into the following agreements: (i) a convertible loan
agreement (the “NewTech Convertible Loan Agreement”) with NewTech Investment Holdings, LLC (the “NewTech Lender”),
pursuant to which the NewTech Lender loaned the Company $4,000,000 (the “NewTech Loan Amount”), and (ii) a convertible loan
agreement (the “Malik Convertible Loan Agreement”, together with the NewTech Convertible Loan Agreement, the “Convertible
Loan Agreements”) with Ariel Malik (the “Malik Lender”, together with the NewTech Lender, the “Lenders”), pursuant to which
the Malik Lender loaned the Company $1,000,000 (the “Malik Loan Amount”, together with the NewTech Loan Amount, the
“Loan Amount”).
The terms of the NewTech Convertible Loan Agreement and the 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 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 (collectively, the “Outstanding Amount”) shall either (i) be repaid in cash or (ii)
convert to shares of common stock, par value $0.0001 per share (“Common Stock”), of the Company on the third anniversary of
the Effective Date (the “Maturity Date”). The Maturity Date may be extended by the Lender upon the written consent of the
Lender. The Outstanding Amount may be prepaid by the Company in whole or in part at any time with the prior approval of the
Lender.
At any time prior to or on the Maturity Date, any Lender may provide the Company with written notice to convert all or
part of the Outstanding Amount into shares of the Company’s Common Stock equal to the quotient obtained by dividing (x) the
Outstanding Amount by (y) a price equal to $2.464 per share (subject to adjustment for certain capital events, such as stock splits)
(the “Conversion Price”).
Under the terms of the Convertible Loan Agreements, the Company will use the proceeds from the Loan Amount to (i)
redeem the loan amount referred to in note 9 (a) between the Company and the lender, and (ii) for general corporate purposes. The
entire loan amount and accrued interest was repaid in January 2023.
The Company also agreed to issue the NewTech Lender warrants representing the right to purchase 405,844 shares of the
Company’s Common Stock, at an exercise price of $2.50 per share and the Malik Lender warrants representing the right to
purchase 101,461 shares of the Company’s Common Stock, at an exercise price of $2.50 per share. Such Warrants will be
exercisable at any time beginning six months and one day after closing and ending 36 months after the closing date.
b) Securities Purchase Agreement and Warrants
On February 23, 2023, the Company entered into a securities purchase agreement with certain institutional and accredited
investors relating to the issuance and sale of 1,947,368 shares of common stock, par value $0.0001 per share and warrants to
purchase up to 973,684 shares of Common Stock at a purchase price of $1.90 per share of Common Stock and accompanying
Warrants in a registered direct offering. The offering closed on February 27, 2023 and the Company received approximately $3.7
million, before deducting the placement agent’s cash fee equal to 7% of the proceeds. The Company intends to use the net proceeds
from the Offering for working capital and general corporate purposes, including the Company’s therapy related activities.
NOTE 22 – LEGAL PROCEEDINGS
On January 18, 2022, a complaint (the “Complaint”) was filed in the Tel Aviv District Court (the “Court”) against the
Company, the Israeli Subsidiary, Orgenesis Ltd., Prof. Sarah Ferber, Vered Caplan and Dr. Efrat Assa 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
contains 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 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 Company believes that the allegations in this Complaint are without merit and intends to vigorously defend
itself against the claims. Since a material loss is not considered probable, no provision was made in the financial statements.
Except as described above, the Company is not involved in any pending material legal proceedings.
F-50