UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 2, 2012
ORGENESIS INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
000-54329
(Commission File Number)
98-0583166
(IRS Employer Identification No.)
70 Denya St. Haifa Israel, 34980
(Address of principal executive offices and Zip Code)
+972.4.8242051
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
FORWARD-LOOKING STATEMENTS
This current report on Form 8-K contains forward-looking statements.
Forward-looking statements are projections in respect of future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. Forward-looking
statements made in this Form 8-K include statements about:
* our plans to identify and acquire products that we believe will be
prospective for acquisition and development;
* our intention to develop to the clinical stage a new technology for
regeneration of functional insulin-producing cells, thus enabling
normal glucose regulated insulin secretion, via cell therapy;
* our belief that our treatment seems to be safer than other options;
* our belief that our major competitive advantage is in our cell
transformation technology;
* our marketing plan;
* our plans to hire industry experts and expand our management team;
* our belief that Diabetes Mellitus will be one of the most challenging
health problems in the 21st century and will have staggering health,
societal and economic impact;
* our beliefs regarding the future of our competitors;
* our expectation that the demand for our products will eventually
increase; and
* our expectation that we will be able to raise capital when we need it.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors" and the risks set out below, any of which may cause our 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 include, by way of example and not in limitation:
* general economic and business conditions;
* our ability to identify attractive products and negotiate their
acquisition or licensing;
* our ability to effectively develop and market products that we acquire
or license;
* volatility in prices for our products;
* risks inherent in the pharmaceutical industry;
* competition for, among other things, capital, pharmaceutical products
and skilled personnel; and
* other factors discussed under the section entitled "Risk Factors".
These risks may cause our company's or our 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. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
As used in this current report on Form 8-K and unless otherwise indicated, the
terms "we", "us" and "our" refer to Orgenesis Corp. and our wholly owned
subsidiary, Orgenesis Ltd., an Israeli corporation (the "SUBSIDIARY"). Unless
otherwise specified, all dollar amounts are expressed in United States dollars.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Please see Item 2.01 of this current report on Form 8-K.
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ITEM 2.01 COMPLETION OF LICENSING AGREEMENT.
Pursuant to a licensing agreement dated February 2, 2012 with Tel Hashomer -
Medical Research, Infrastructure and Services Ltd. ("TEL HASHOMER" or "THM"), a
private company duly incorporated under the laws of the State of Israel having
its registered office at Tel Hashomer, 52621, Israel, on February 2, 2012, our
Subsidiary was granted a worldwide royalty bearing, exclusive license to certain
information regarding a molecular and cellular approach directed at converting
liver cells into functional insulin producing cells, as a treatment for
diabetes, (the "LICENSED INFORMATION"), with the right to sublicense and to make
commercial use of the Licensed Information and any other intellectual property
rights related thereto, all in order to develop, manufacture, produce, use,
market, commercialize, lease, sell, distribute, export, import and otherwise
utilize new technology for regeneration of functional insulin-producing cells so
as to sell a new therapeutic mix, new functional AIP (Autologus Insulin
Producing) cells, and to provide the treatment process and protocols (the
"PRODUCTS"). This licensed portfolio is based on the groundbreaking work and two
decades of research by the world renowned researcher, Prof. Sarah Ferber as a
researcher in Tel Hashomer.
As consideration for the Licensed Information, our Subsidiary will pay the
following to THM:
* A royalty (the "ROYALTY") of 3.5% of net sales.
* 16% of all sublicensing fees.
* An annual fee (the "ANNUAL FEE") of $15,000, which shall commence on
January 1, 2012 and shall be paid once every year thereafter. The
Annual Fee is non-refundable, but it shall be credited each year due,
against the Royalty, to the extent that such are payable, during that
year.
* Milestone payments as follows:
* $50,000 on the date of initiation of phase I clinical trials in
human subjects;
* $50,000 on the date of initiation of phase II clinical trials in
human subjects;
* $150,000 on the date of initiation of phase III clinical trials
in human subjects;
* $750,000 on the date of initiation of issuance of an approval for
marketing of the first Product by the FDA or any other equivalent
authority;
* $2,000,000, when worldwide net sales of Products have reached the
amount of $150,000,000 for the first time (the "SALES
MILESTONE").
In the event that a third party closes an acquisition of all or substantially
all of the issued and outstanding share capital of our company or our Subsidiary
or our company or our Subsidiary consolidates with another corporation (an
"EXIT"), THM shall be entitled to choose, according to its sole discretion,
whether to receive one of the following;:
* a one time payment, based, as applicable, on the value of either
5,563,809 shares of our common stock at the time of the Exit
(these 5,563,809 shares of common stock being equivalent to 10%
of our outstanding share capital on a fully diluted basis
immediately following the closing of the Private Placement, as
defined below); or
* or the value of 1,000 common shares of our Subsidiary at the time
of Exit (these 1,000 common shares constitute, at the date of the
License Agreement, 10% of our Subsidiary's outstanding share
capital on a fully diluted basis.
If, THM chooses not to receive any consideration as a result of an Exit, THM
shall be entitled to continue to receive all the rights and consideration it is
entitled to pursuant to the License Agreement (including, without limitation,
the exercise of the rights pursuant to future Exit events), and any agreement
relating to an Exit event shall be subject to the surviving entity's and/or the
purchaser's undertaking towards THM to perform all of our obligations pursuant
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to the License Agreement. If THM chooses to receive the consideration as a
result of an Exit, the Royalty payments will cease.
We agreed to provide our Subsidiary during the three years period following the
date of the License Agreement an amount not less then $750,000, or, if the
entire Warrants (as defined below) are exercised within said period, an
aggregate amount (including the above $750,000) of not less than $1,100,000.
We agreed to submit to THM a commercially reasonable plan which shall include
all research and development activities as required for the development and
manufacture of the Products, including preclinical and clinical activities until
an FDA or any other equivalent regulatory authority's approval for marketing and
including all regulatory procedures required to obtain such approval for each
Product (a "DEVELOPMENT PLAN"), within 18 months from the date of the License
Agreement. We must develop, manufacture, sell and market the Products pursuant
to the milestones and time schedule specified in the Development Plan. In the
event we fail to fulfill the terms of the Development Plan, THM shall be
entitled to terminate the License Agreement with a one year prior written
notice, provided that during such year we do not cure the breach of the
Development Plan. THM is also entitled to terminate the License Agreement in the
event that:
Without derogating from THM's rights under any applicable law, THM shall be
entitled to terminate this Agreement and/or the License hereunder in each of the
following events:
* We materially change our business.
* We breach any of our material obligations under the License Agreement,
provided that THM has provided us with written notice of such material
breach and THM's intention to terminate, and we have not cured such
breach within 180 days of receiving such written notice from THM. Our
failure to comply with sections relating to the following are deemed
to be a material breach of the License Agreement:
* granting of sublicenses;
* confidentiality provisions;
* perform payments to THM; and
* indemnity and insurance.
* We breach any of our obligations thereunder other than material
breaches, and such breach remains uncured for 200 days after written
notice from THM.
* We become insolvent; file a petition or have a petition filed against
us, under any laws relating to insolvency; enter into any voluntary
arrangement for the benefit of our creditors; or appoint or have
appointed on our behalf a receiver, liquidator or trustee of any of
our property or assets, under any laws relating to insolvency; and
such petition, arrangement or appointment is not dismissed or vacated
within 90 days.
* We have ceased to carry on our business for a period of more than 60
days.
* We have challenged, challenge, or cause any third party to challenge,
the intellectual property rights or other rights of THM to the
licensed information anywhere in the world.
We may terminate the License Agreement and the License hereunder and return the
licensed information to THM only in the following events:
* the development and/or manufacture of the licensed information is not
successful according to the scientific criteria acceptable in the
relevant field of the Invention;
* if the registration and/or defense of a patent is not successful, in
any country for reasons not dependant upon us;
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* the development and/or manufacture of the licensed information is not
approved by the proper regulation procedures as mandated under the
relevant laws for reasons not dependant upon us; or
* an external specialist in the field of the Product(s) determined in a
reasoned and explained written opinion that there is insufficient
market demand for the Products and such written opinion was provided
to THM.
In connection with the closing of the License Agreement, on February 2, 2012, we
completed a private placement of units (each, a "UNIT"). Each Unit is comprised
of one common share in our capital and two non-transferrable share purchase
warrants (each, a "WARRANT"). Each Warrant is exercisable into one additional
common share and shall expire after three years. The holders of such Unit must
exercise half of their Warrants, at a price of $1.00 per warrant share, for
additional equity of $500,000, upon the earlier of: (i) our company or our
Subsidiary signing an agreement with a clinical center, and (ii) 6 months
following the closing of such placement of Units, and the other half, at a price
of $1.00 per warrant share, for additional equity of $500,000, upon the
feasibility of enhancement of cell propogation capability for three years from
closing at a price of $1.00 per warrant share. Each Unit was priced at $1.00 for
total gross proceeds of $500,000. The Units were issued to offshore investors
under the exemptions from the Securities Act of 1933 contained in Regulation S.
On February 2, 2012, we entered into a fee services agreement with Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. ("MINTZ, LEVIN"), whereby upon closing of
the Private Placement, we agreed to pay Mintz, Levin $80,000 and issue to Mintz
Levin 1,390,952 common shares, being 2.5% of our fully diluted capitalization,
which are subject to escrow for a period of two years. Mintz, Levin has
undertaken work with regards to certain of our patents and this fee services
agreement settles its fees for those services. We also agreed to pay Mintz,
Levin an additional $50,000 upon the consummation of the earlier of:
(i) the purchase of all of our outstanding common shares and/or
amalgamation of our company or our wholly-owned Israeli subsidiary
into or with another corporation;
(ii) our sublicensing the technology to a non-affiliate of our company; or
(iii)$20,000 upon each of the following milestones (but in any event no
more than $50,000 in total):
(A) initiation by us of phase I clinical trials for the Product in
human subjects,
(B) initiation by us of phase II clinical trials for the Product in
human subjects, and
(C) initiation by us of phase III clinical trials for the Product in
human subjects,
provided that if any payments are made under subsection (iii) above and
thereafter an event described in subsection (i) or subsection (ii) occur,
then we shall only pay an amount equal to the difference between $50,000
and the amounts paid under subsection (iii) above.
Also, our former directors, Guilbert Cuison and Jerome Golez, have cancelled
33,873,049 of our common shares held by them. Also, Messrs. Cuison and Golez
have granted to Oded Shvartz a conditional option to acquire 10,840,970 (each as
to 5,420,485 shares) common shares of our company at a price of $0.0003571 per
share. The option is exercisable if we issue shares or grants options or
warrants to purchase shares, or other security or right convertible into shares
of our company (collectively, "NEW Securities"). In that event, Schwartz shall
have the right to exercise the option by purchasing 1 option share for every 4
New Securities issued. The option is exercisable for a period of up to four
years after February 2, 2012. Should the option be exercised in full, Oded
Shvartz would own up to 21,967,951 common shares in the capital of our company,
which may result in a change of control.
BUSINESS
Corporate Overview
We were incorporated in the state of Nevada on June 5, 2008, under the name
Business Outsourcing Services, Inc.
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Effective August 31, 2011, we completed a merger with our subsidiary, Orgenesis
Inc., a Nevada corporation which was incorporated solely to effect a change in
our name. As a result, we have changed our name from "Business Outsourcing
Services, Inc." to "Orgenesis Inc."
Effective August 31, 2011 we effected a 35 to one forward stock split of our
authorized and issued and outstanding common stock. As a result, our authorized
capital has increased from 50,000,000 shares of common stock with a par value of
$0.001 to 1,750,000,000 shares of common stock with a par value of $0.001.
Unless otherwise noted, all references in this report on Form 8-K to number of
shares, price per share or weighted average number of shares outstanding have
been adjusted to reflect these stock split on a retroactive basis.
OUR CURRENT BUSINESS
We were previously engaged in the business of providing online accounting and
bookkeeping services to small and medium sized companies who seek to save money
by outsourcing these services.
On August 5, 2011, we entered into a letter of intent with Prof. Sarah Ferber
and Ms. Vered Caplan according to which, INTER ALIA, Prof. Ferber has agreed to
use commercially reasonable efforts to cause THM to license all of the assets
associated with "Methods Of Inducing Regulated Pancreatic Hormone Production"
and "Methods Of Inducing Regulated Pancreatic Hormone Production In
Non-Pancreatic Islet Tissues".
On October 11, 2011 we incorporated Orgeneis Ltd. as our wholly-owned subsidiary
under the laws of Israel. On February 2, 2012, Orgenesis Ltd. signed and closed
a definitive agreement to license patents and knowhow related to the development
of AIP (Autologous Insulin Producing) cells.
Based on the licensed know how and patents, our intention is to develop to the
clinical stage a new technology for regeneration of functional insulin-producing
cells, thus enabling normal glucose regulated insulin secretion, via cell
therapy. By using a therapeutic agent (i.e., PDX-1, or additional pancreatic
transcription factors in adenovirus-vector) that efficiently converts a
sub-population of liver cells into pancreatic islets phenotype and function,
this approach allows the diabetic patient to be the donor of his own therapeutic
tissue. The development of AIP cells is based on the licensed patents and
knowhow. We believe that our major competitive advantage is in our cell
transformation technology.
This technology was licensed based on the published work of Prof. Ferber. Prof.
Ferber has developed this technology, as a researcher in Tel Hashomer, and has
established a proof of concept that demonstrates the capacity to induce a shift
in the developmental fate of cells in liver and convert them into `pancreatic
beta cell like' cells. Furthermore, those cells were found to be resistant to
the autoimmune attack.
We intend to develop our business by further developing the technology to a
clinical stage. We intend to dedicate most of our capital to research and
development with no expectation of revenue from product sales in the foreseeable
future.
DEVELOPMENT
Our goal is to advance an initial product to clinical stage that is a one
overall clinical treatment for the diabetic patient. The diabetic patient serves
as the donor of his own therapeutic tissue. We anticipate producing AIP cells by
sending a standard liver biopsy taken from the patient to our central laboratory
where we intend to produce, from the biopsy, a sufficient amount of cells and
deliver it back to the clinical center. Then, the AIP cells will be transplanted
back to the patient's liver in a standard infusion procedure.
MARKETING
Our intention is to sell a new therapeutic mix, the new functional AIP cells,
and to provide the treatment process and protocols. We may also provide
bio-banking of pancreatic precursor cells for future use.
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In the short term, we aim to take advantage of our clinical study centers in
order to initiate sales in the Asian market. Once we obtain CE Mark for the AIP
cell therapy, we anticipate initiating sales in the European market as well. We
believe that at that stage, we should start to implement our long term strategy.
Our long term strategy is to collaborate with international companies involved
in the diabetes treatment market after completing phase II clinical trials or
after initiation of sales activity. Leading companies in this area include Novo
Nordisk, Tekada Pharmaccutical, Eli Lilly, GlaxoSmithKline, and Merck. We aim to
collaborate with international companies who currently do not play a role in the
diabetes therapy market, but are interested in expanding their product line and
enter new markets. The agreements will define the terms under which the
strategic partners will be granted the rights to further develop, test, obtain
regulatory approval, and market the new therapeutic mix in pre-defined
geographical territories. We anticipate continuing to support the research and
development ("R&D") process as necessary, based on our R&D team's extensive
know-how.
Based on industry benchmarks and history, we believe that we are most likely to
sign a licensing deal that will generate revenues through the following
acceptable mechanisms:
* Upfront payment
* Milestone payments
* Royalties upon sales
FUTURE PRODUCTS
Future products may be less invasive using more accessible cells of a diabetic
patient.
EXPANDED DISTRIBUTION
We intend to expand distribution of our products in foreign markets, likely
through partnerships and licensing agreements with existing centers of
Pancreatic Islet transplantations.
MARKET
Diabetes Mellitus (DM) is a metabolic disorder caused usually by a combination
of hereditary and environmental factors, and results in abnormally high blood
sugar levels (hyperglycemia). DM occurs as a result of impaired insulin
production by the pancreatic islet cells. The most common types of the disease
are type-1 DM (T1DM) and type-2 DM (T2DM). In T1DM, the onset of the disease
follows an autoimmune attack of (Beta)-cells thus severely reducing (Beta)-cell
mass. In T2DM, the pathogenesis involves insulin resistance, insulin deficiency
and enhanced gluconeogenesis, while late progression stages eventually leads to
(Beta)-cell failure and a significant reduction in (Beta)-cell function and
mass. Thus, both T1DM and late-T2DM result in marked hypoinsulinemia, reduction
in (Beta)-cell function and mass and lead to severe secondary complications, as
myocardial infarcts, limb amputations, neuropathies and nephropathies and even
death.
We believe that Diabetes Mellitus (DM) will be one of the most challenging
health problems in the 21st century, and will have a staggering health,
societal, and economic impact. Diabetes is the fourth or fifth leading cause of
death in most developed countries. There also is substantial evidence that it is
an epidemic in many developing and newly industrialized nations.
Diabetes afflicts nearly 180 million people worldwide and Frost and Sullivan in
their Global Diabetes Market 2009 report predict that the DM epidemic that has
been sweeping the globe for the past several years will continue at a rapid
pace, while there are expected to be more than 380 million people around the
world with DM by 2025. In the United States alone, 21 million people (6.2% of
the population) have diabetes.
The Global DM drug treatment market was valued at $15 billion in 2005 and
increased to $21 billion in 2006. Due to the high prevalence of diabetes and
lifestyle changes, we believe that the market will keep expanding. Oral
anti-diabetics were the leading category of drugs - $8.19 billion - and showed a
growth rate of 6.3% from the total global sales in 2004. The total sales for
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insulin products are $6.83 billion in 2004. The annual direct cost of DM in the
US is $43 billion.
COMPETITION
Insulin therapy is used for Insulin Depended Diabetes Mellitus (IDDM) patients
who are not controlled with oral medications, but this therapy has some
disadvantages. Weight gain is a common side effect of insulin therapy, which is
a risk factor for cardiovascular disease. Injection of insulin causes pain and
inconvenience for patients. Patient compliance and inconvenience of self
administering multiple daily insulin injections is also considered as
disadvantage of this therapy. The most serious adverse effect of insulin therapy
is hypoglycemia.
The global diabetes market comprising the insulin, insulin analogues and other
antidiabetic drugs has been evolving rapidly. A look at the diabetes market in
2005 reveals that it was dominated by a handful of participants such as Novo
Nordisk A/S, Eli Lilly and Company, Sanofi-aventis, Takeda Pharmaceutical
Company Limited, Pfizer Inc, Merck KgaA, and Bayer AG. The diabetes market
landscape is quite dynamic and has changed significantly with a host of new
participants.
Takeda Pharmaceutical Company Limited's Actos featured as one of the top selling
diabetes drugs with global sales of $4.20 billion in 2008. Although faced with
tough competition from other novel oral antidiabetic drugs such as DPP-4
inhibitors and GLP-1 analogues, Takeda Pharmaceutical Company Limited is likely
to maintain its market position because of its strong pipeline comprising of a
novel DPP-4 inhibitor Algolipitin.
MERCK & CO., INC's Januvia has been gaining market share and it had global sales
of $1.40 billion in 2008. However, strong competition is expected from a
`me-too' drug Onglyza, from AstraZeneca and Bristol-Myers Squibb Company.
Novo Nordisk A/S's insulin analogue Lantus witnessed good sales with global
revenues of $3.30 billion. Novo Nordisk A/S is banking on its once-a-day
injection Victoza (Liraglutide), which is under FDA review. Though there were
concerns on its safety profile (as it has caused thyroid tumors in a few people
and rats), it is likely to get an approval soon. Once approved, this drug is
expected to largely increase the market share of Novo Nordisk A/S. If the FDA
fails to approve this drug, the impact is likely to pass on to companies such as
Glaxo-SmithKline Pharmaceuticals Limited and F. Hoffman-La Roche Ltd that are
currently pursuing research on similar drug compounds.
Eli Lilly and Company lost its market shares to Sanofi-aventis and Takeda
Pharmaceutical Limited. However, Eli Lilly and Company, Amylin Pharmaceutical,
Inc and Alkermes, Inc. have a novel version of Byetta once-a-week injection in
the late stage pipeline. The results for this drug are quite positive as the
efficacy is much more than the current Byetta. If this drug is approved, it is
likely to pose serious threat to Novo Nordisk A/S's liraglutide--Victoza.
THREATS FROM PANCREAS ISLET TRANSPLANTATION AND CELL THERAPIES
TRANSPLANT PROCEDURE
Researchers use specialized enzymes to remove islets from the pancreas of a
deceased donor. Because the islets are fragile, transplantation occurs soon
after they are removed. Typically a patient receives at least 10,000 islet
"equivalents" per kilogram of body weight, extracted from two donor pancreases.
Patients often require two transplants to achieve insulin independence. Some
transplants have used fewer islet equivalents taken from a single donated
pancreas.
Transplants are often performed by a radiologist, who uses x-rays and ultrasound
to guide placement of a catheter--a small plastic tube--through the upper
abdomen and into the portal vein of the liver. The islets are then infused
slowly through the catheter into the liver. The patient receives a local
anesthetic and a sedative. In some cases, a surgeon may perform the transplant
through a small incision, using general anesthesia.
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In an experimental procedure called islet transplantation, islets are taken from
the pancreas of a deceased organ donor. The islets are purified, processed, and
transferred into another person. Once implanted, the beta cells in these islets
begin to make and release insulin.
STUDIES AND REPORTS
Since reporting their findings in the June 2000 issue of the NEW ENGLAND JOURNAL
OF MEDICINE, researchers at the University of Alberta in Edmonton, Canada, have
continued to use and refine a procedure called the Edmonton protocol to
transplant pancreatic islets into selected patients with type 1 diabetes that is
difficult to control.
In 2005, the researchers published 5-year follow-up results for 65 patients who
received transplants at their center and reported that about 10 percent of the
patients remained free of the need for insulin injections at 5-year follow-up.
Most recipients returned to using insulin because the transplanted islets lost
their ability to function over time, potentially due to the immune suppression
protocol, which prevents the immune rejection of the implanted cells. The
researchers noted, however, that many transplant recipients were able to reduce
their need for insulin, achieve better glucose stability, and reduce problems
with hypoglycemia, also called low blood sugar level.
In its 2006 annual report, the Collaborative Islet Transplant Registry, which is
funded by the National Institute of Diabetes and Digestive and Kidney Diseases,
presented data from 23 islet transplant programs on 225 patients who received
islet transplants between 1999 and 2005. According to the report, nearly
two-thirds of recipients achieved "insulin independence"--defined as being able
to stop insulin injections for at least 14 days--during the year following
transplantation. However, other data from the report showed that insulin
independence is difficult to maintain over time. Six months after their last
infusion of islets, more than half of recipients were free of the need for
insulin injections, but at 2-year follow-up, the proportion dropped to about
one-third of recipients. The report described other benefits of islet
transplantation, including reduced need for insulin among recipients who still
needed insulin, improved blood glucose control, and greatly reduced risk of
episodes of severe hypoglycemia.
In a 2006 report of the Immune Tolerance Network's international islet
transplantation study, researchers emphasized the value of transplantation in
reversing a condition known as hypoglycemia unawareness. People with
hypoglycemia unawareness are vulnerable to dangerous episodes of severe
hypoglycemia because they are not able to recognize that their blood glucose
levels are too low. The study showed that even partial islet function after
transplant can eliminate hypoglycemia unawareness.
Pancreatic islet transplantation (Cadaver donors) is an Allogeneic transplant,
and as in all allogeneic transplantations there is a risk for graft rejection
and patients must receive lifelong immune suppressants . Though this technology
has shown good results clinically there are several setbacks, patients are
sensitive to recurrent T1DM autoimmune attacks and there is also a shortage in
tissues available for islet cells transplantation.
HUMAN EMBRYONIC STEM CELLS (ESC)
The use of ESC is still in preliminary research stage and there are ethical and
legal issues involved in the use of such cells. Many issues concerning cancerous
tumor risks have not been resolved.
OUR ADVANTAGES
We believe that our singular focus on the acquisition, development, and
commercialization of AIP cells has a competitive advantage over other
technologies, since it has the potential of providing an approach which may:
* Release the patient from the daily involvement in monitoring blood
glucose levels, numerous insulin injections and watching food intake
and exercise.
* Allow continuous control of blood glucose levels which prevents
diabetes related complications.
* Provide an unlimited source of therapeutic tissue and overcomes the
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shortage in tissues available for islet cells transplantation.
* Generate an autologous transplant, thus avoiding the risk of
transplant rejection.
* Protect the patient from recurrent auto-immune attack on the
transplanted beta-cells, thus avoiding the need of immunosuppressant
treatment.
* Provide a minimally invasive procedure.
We are aware of no other company focused exclusively on development of AIP
cells. The pharmaceutical industry is fragmented and it is a competitive market.
We compete with many pharmaceutical companies, both large and small and there
may be technologies in development of which we are not aware.
We intend to dedicate most of our capital to research and development with no
expectation of revenue from product sales in the foreseeable future.
RESEARCH AND DEVELOPMENT EXPENDITURES
We did not incur expenditures in research and development activities over the
last two fiscal years.
EMPLOYEES
We intend to hire additional staff and to engage consultants in compliance,
investor and public relations, and general administration. We also intend to
engage experts in healthcare and in general business to advise us in various
capacities. We currently have one full time employee located in Israel and one
part time employee located in Israel.
SUBSIDIARIES
On October 11, 2011, we incorporated our wholly owned subsidiary, Orgenesis
Ltd., a company governed by the laws of Israel.
INTELLECTUAL PROPERTY
We have licensed the intellectual property rights related to AIP cells as
follows:
Docket Appln Publication Filing Issue
Number Title Country Status No. No. Patent No. Date Date
------ ----- ------- ------ --- --- ---------- ---- ----
21415-501/ Methods Of Inducing United Granted 09/584216 6,774,120 2000-05-31 2004-08-10
Regulated Pancreatic States of
Hormone Production In America
Non-Pancreatic Islet
Tissues
21415-501 Methods Of Inducing United Published 10/843801 2005-0090465 2004-05-12
CIP Regulated Pancreatic States of
Hormone Production In America
Non-Pancreatic Islet
Tissues
21415-501 Methods Of Inducing United Allowed 10/852994 2004-05-24
DIV/ Regulated Pancreatic Slates of
Hormone Production In America
Non-Pancreatic Islet
Tissues
21415-501 Methods Of Inducing United Granted 00935435.8 1180143 1180143 2000-06-01 2007-05-09
PRO/023 Regulated Pancreatic Kingdom
Hormone Production
10
Docket Appln Publication Filing Issue
Number Title Country Status No. No. Patent No. Date Date
------ ----- ------- ------ --- --- ---------- ---- ----
21415-501 Methods Of Inducing Patent National IB00/00824 WO00/72885 2000-06-01
PRO/061 Regulated Pancreatic Cooperation
Hormone Production Treaty
21415- Methods Of Inducing Japan Published 2010-261850 2011-68660 2004-05-12
501/D01 Regulated Pancreatic
Hormone Production In
Non-Pancreatic Islet
Tissues
21415- Methods or Inducing Japan Published 2010-288937 2011-57716 2000-06-01
501/D02 Regulated Pancreatic
Hormone Production In
Non-Pancreatic Islet
Tissues
21415-501 Methods Of Inducing Japan Published 2000-620991 500457 2000-06-01
PRO/032 Regulated Pancreatic
Hormone Production
21415-501 Methods Of Inducing Italy Granted 00935435.8 1180143 1180143 2000-06-01 2007-05-09
PRO/031 Regulated Pancreatic
Hormone Production
21415-501 Methods Of Inducing Germany Granted 00935435.8 1180143 60034781.8-08 2000-06-01 2007-05-09
PRO/016 Regulated Pancreatic
Hormone Production
21415-501 Methods Of Inducing France Granted 00935435.8 1180143 1180143 2000-06-01 2007-05-09
PRO/022 Regulated Pancreatic
Hormone Production
21415-501 Methods Of Inducing European Published 04732369.6 1624898 2004-05-12
PRO B/019 Regulated Pancreatic Patent
Hormone Production In Convention
Non-Pancreatic Islet
Tissue
21415-501 Methods Of Inducing Canada Pending 2371995 2000-06-01
PRO/008 Regulated Pancreatic
Hormone Production
21415-501 Methods Of Inducing Australia Granted 50974/00 779619 2000-06-01 2005-06-09
PRO/004 Regulated Pancreatic
Hormone Production
21415-501 Methods Of Inducing Australia Granted 2004236573 2004236573 2004-05-12 2010-02-04
PRO B/004 Regulated Pancreatic
Hormone Production In
Non-Pancreatic Islet
Tissues
GOVERNMENT REGULATIONS
We have not sought approval from the United States Food and Drug Administration
for the AIP cells.
11
Among all forms of cell therapy modalities, we believe that autologous cell
replacement therapy seems to be of the highest benefit. We believe that it seems
to be safer than other options as it does not alter the host genome but only
alters the set of expressed genetic information which seems to be highly
specific to the reprogramming protocol. It provides an abundant source of
therapeutic tissue, which is not rejected by the patient, which does not have to
be treated by immune suppressants. It is highly ethical since no human organ
donations or embryo derived cells are needed. The proposed therapeutic approach
does not need cells bio-banking at birth, which is both expensive and cannot be
used for patients born prior to 2000.
Within the last decade, many studies published in leading scientific journal
confirmed the capacity of reprogramming adult cells from many of our mature
organs to either alternate organs or to "stem like cells". The most widely used
autologous cell replacement protocol is the one used for autologous implantation
of bone marrow stem cells. This protocol is widely used in patients undergoing
massive chemotherapy session which destroys their bone marrow cells. However,
the cell therapy protocol for cancer patients delineated above does not require
extensive cell culture, in vitro. An additional autologous cell therapy
approaches already used in man is autologous chondrocyte implantation.
In the United States, Genzyme Corporation provides the only FDA approved ACI
treatment: Carticel. The Carticel treatment is designated for young, healthy
patients with medium to large sized damage to cartilage. During an initial
procedure, the patient's own chondrocytes are removed arthroscopically from a
non-load-bearing area from either the intercondylar notch or the superior ridge
of the medial or lateral femoral condyles.
To aid us in our efforts to achieve the highest level of compliance with United
States Food and Drug Administration requirements we have looked to hire experts
in the field of pharmaceutical compliance.
REGULATORY PROCESS IN THE UNITED STATES
Our product is subject to regulation as biological products 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:
* Pre-clinical laboratory and animal tests conducted in compliance with
the Good Laboratory Practice, or GLP, requirements to assess a drug's
biological activity and to identify potential safety problems, and to
characterize and document the product's chemistry, manufacturing
controls, formulation, and stability;
* Submission to the FDA of an Investigational New Drug, or IND
application, which must become effective before clinical testing in
humans can begin;
* Obtaining approval of Institutional Review Boards, or IRBs, of
research institutions or other clinical sites to introduce the
biologic drug candidate into humans in clinical trials;
* Conducting adequate and well-controlled human 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 Good Manufacturing Practices, or cGMP
regulations and standards;
* Submission to the FDA of a Biologics License Application, or BLA, for
marketing that includes adequate results of pre -clinical testing and
clinical trials;
* 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 cGMP
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.
12
REGULATORY PROCESS IN EUROPE
The European Union (EU) has approved a regulation specific to cell and tissue
therapy product, the Advanced Therapy Medicinal Product (ATMP) regulation. For
products such as our AIP that are regulated as an ATMP, the EU Directive
requires:
* Compliance with current Good Manufacturing Practices, or cGMP
regulations and standards, pre-clinical laboratory and animal testing;
* Filing a Clinical Trial Application (CTA) with the various member
states or a centralized procedure; Voluntary Harmonization Procedure
(VHP), a procedure which makes it possible to obtain a coordinated
assessment of an application for a clinical trial that is to take
place in several European countries. Obtaining approval of Ethic
Committees of research institutions or other clinical sites to
introduce the AIP into humans in clinical trials;
* Adequate and well-controlled clinical trials to establish the safety
and efficacy of the product for its intended use; and
* Submission to EMA for a Marketing Authorization (MA); Review and
approval of the MAA (Marketing Authorization Application).
CLINICAL TRIALS:
Typically, both in the U.S. and the European Union, 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 and clinical trial
investigators. An agency may, at its discretion, re-evaluate, alter, suspend, or
terminate the testing based upon the data which 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
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
THE WORLDWIDE ECONOMIC DOWNTURN MAY REDUCE OUR ABILITY TO OBTAIN THE FINANCING
NECESSARY TO CONTINUE OUR BUSINESS AND MAY REDUCE THE NUMBER OF VIABLE PRODUCTS
AND BUSINESSES THAT WE MAY WISH TO ACQUIRE. IF WE CANNOT RAISE THE FUNDS THAT WE
NEED OR FIND A SUITABLE PRODUCT OR BUSINESS TO ACQUIRE, WE MAY GO OUT OF
BUSINESS AND INVESTORS WILL LOSE THEIR ENTIRE INVESTMENT IN OUR COMPANY.
13
Since 2008, there has been a downturn in general worldwide economic conditions
due to many factors, including the effects of the subprime lending and general
credit market crises, slower economic activity, decreased consumer confidence,
reduced corporate profits and capital spending, adverse business conditions,
increased unemployment and liquidity concerns. In addition, these economic
effects, including the resulting recession in various countries and slowing of
the global economy, will likely result in fewer business opportunities as
companies face increased financial hardship. Tightening credit and liquidity
issues will also result in increased difficulties for our company to raise
capital for our continued operations. We may not be able to raise money through
the sale of our equity securities or through borrowing funds on terms we find
acceptable. If we cannot raise the funds that we need or find a suitable product
or business to acquire, we will go out of business. If we go out of business,
investors will lose their entire investment in our company.
OUR INDEPENDENT AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
We have not generated any revenue from operations since our incorporation. We
expect that our operating expenses will increase over the next 12 months as we
ramp-up our business. We estimate our average monthly expenses over the next 12
months to be approximately $100,000, including general and administrative
expenses but excluding acquisition costs and the cost of any development
activities. On February 2, 2012, we had cash and cash equivalents & commitments
of approximately $1,500,000. This amount could increase if we encounter
difficulties that we cannot anticipate at this time. As we cannot assure a
lender that we will be able to successfully acquire and develop pharmaceutical
assets, we will almost certainly find it difficult to raise debt financing from
traditional lending sources. If we cannot raise the money that we need in order
to continue to operate our business, we will be forced to delay, scale back or
eliminate some or all of our proposed operations. If any of these were to occur,
there is a substantial risk that our business would fail. As of February 2,
2012, we had total debt of approximately $200,000.
If we are unable to meet our debt service obligations and other financial
obligations, we could be forced to restructure or refinance, seek additional
equity capital or sell our assets. We might then be unable to obtain such
financing or capital or sell our assets on satisfactory terms
WE MAY NEED TO RAISE ADDITIONAL FUNDS IN THE FUTURE WHICH MAY NOT BE AVAILABLE
ON ACCEPTABLE TERMS OR AT ALL.
We may consider issuing additional debt or equity securities in the future to
fund potential acquisitions or investments, to refinance existing debt, or for
general corporate purposes. If we issue equity or convertible debt securities to
raise additional funds, our existing stockholders may experience dilution, and
the new equity or debt securities may have rights, preferences and privileges
senior to those of our existing stockholders. If we incur additional debt, it
may increase our leverage relative to our earnings or to our equity
capitalization, requiring us to pay additional interest expenses. We may not be
able to market such issuances on favorable terms, or at all, in which case, we
may not be able to develop or enhance our products, execute our business plan,
take advantage of future opportunities, or respond to competitive pressures or
unanticipated customer requirements.
WE ARE AN EARLY-STAGE COMPANY WITH A LIMITED OPERATING HISTORY, WHICH MAY HINDER
OUR ABILITY TO SUCCESSFULLY MEET OUR OBJECTIVES.
We are an early-stage company with only a limited operating history upon which
to base an evaluation of our current business and future prospects. As a result,
the revenue and income potential of our business is unproven. In addition,
because of our limited operating history, we have limited insight into trends
that may emerge and affect our business. Errors may be made in predicting and
reacting to relevant business trends and we will be subject to the risks,
uncertainties and difficulties frequently encountered by early-stage companies
in evolving markets. We may not be able to successfully address any or all of
these risks and uncertainties. Failure to adequately do so could cause our
business, results of operations and financial condition to suffer.
14
BECAUSE OUR DIRECTORS AND OFFICERS ARE NOT ALL RESIDENTS OF THE UNITED STATES,
INVESTORS MAY FIND IT DIFFICULT TO ENFORCE, WITHIN THE UNITED STATES, ANY
JUDGMENTS OBTAINED AGAINST OUR SOLE DIRECTOR AND OFFICER.
Our directors and officer are not all residents of the United States, and all or
a substantial portion of their assets are located outside the United States. As
a result, it may be difficult for investors to enforce within the United States
any judgments obtained against our directors and officers, including judgments
predicated upon the civil liability provisions of the securities laws of the
United States or any state thereof.
IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT AND RETAIN QUALIFIED PERSONNEL, WE MAY
NOT BE ABLE TO CONTINUE OUR OPERATIONS.
In order to successfully implement and manage our business plan, we will depend
upon, among other things, successfully recruiting and retaining qualified
personnel having experience in the pharmaceutical industry. Competition for
qualified individuals is intense. We may not be able to find, attract and retain
qualified personnel on acceptable terms. If we are unable to find, attract and
retain qualified personnel with technical expertise, our business operations
could suffer.
FUTURE GROWTH COULD STRAIN OUR RESOURCES, AND IF WE ARE UNABLE TO MANAGE OUR
GROWTH, WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN.
We hope to experience rapid growth in our operations, which will place a
significant strain on our management, administrative, operational and financial
infrastructure. Our future success will depend in part upon the ability of our
executive officers to manage growth effectively. This will require that we hire
and train additional personnel to manage our expanding operations. In addition,
we must continue to improve our operational, financial and management controls
and our reporting systems and procedures. If we fail to successfully manage our
growth, we may be unable to execute upon our business plan.
RISKS RELATING TO OUR OPERATIONS IN ISRAEL
CONDITIONS IN ISRAEL AND THE SURROUNDING MIDDLE EAST MAY MATERIALLY ADVERSELY
AFFECT OUR SUBSIDIARIES' OPERATIONS AND PERSONNEL.
Our subsidiary has significant operations in Israel, including research and
development. Since the establishment of the State of Israel in 1948, a number of
armed conflicts and terrorist acts have taken place, which in the past, and may
in the future, lead to security and economic problems for Israel. In addition,
certain countries in the Middle East adjacent to Israel, including Egypt and
Syria, recently experienced and some continue to experience political unrest and
instability marked by civil demonstrations and violence, which in some cases
resulted in the replacement of governments and regimes. Current and future
conflicts and political, economic and/or military conditions in Israel and the
Middle East region may affect our operations in Israel. The exacerbation of
violence within Israel or the outbreak of violent conflicts involving Israel may
impede our subsidiary's ability to engage in research and development, or
otherwise adversely affect its business or operations. In addition, our
subsidiary's employees in Israel may be required to perform annual mandatory
military service and are subject to being called to active duty at any time
under emergency circumstances. The absence of these employees may have an
adverse effect on our subsidiary's operations. Hostilities involving Israel may
also result in the interruption or curtailment of trade between Israel and its
trading partners, which could materially adversely affect our results of
operations.
THE ABILITY OF OUR SUBSIDIARY TO PAY DIVIDENDS IS SUBJECT TO LIMITATIONS UNDER
ISRAELI LAW AND DIVIDENDS PAID AND LOANS EXTENDED BY OUR SUBSIDIARY MAY BE
SUBJECT TO TAXES.
The ability of our subsidiary to pay dividends is governed by Israeli law, which
provides that dividends may be paid by an Israeli corporation only out of its
earnings as defined in accordance with the Israeli Companies Law of 1999,
provided that there is no reasonable concern that such payment will cause such
subsidiary to fail to meet its current and expected liabilities as they come
due. Cash dividends paid by an Israeli corporation to United States resident
corporate parents are subject to provisions of the Convention for the Avoidance
of Double Taxation between Israel and the United States, which may result in our
subsidiary having to pay taxes on any dividends it declares.
15
RISKS RELATING TO THE PHARMACEUTICAL BUSINESS
THM MAY CANCEL THE LICENSE AGREEMENT.
Pursuant to the terms of the License Agreement, we are required to submit to THM
the Development Plan within 18 months from the date of the License Agreement. We
must develop, manufacture, sell and market the Products pursuant to the
milestones and time schedule specified in the Development Plan. In the event we
fail to fulfill the terms of the Development Plan, THM shall be entitled to
terminate the License Agreement by providing us with written notice of such a
breach and we do not cure such breach within one year of receiving the notice.
If THM cancels the License Agreement, our business may be materially adversely
affected. THM may also terminate the License Agreement if we breach an
obligation contained in the License Agreement and do not cure it within 180 days
of receiving notice of the breach.
IF WE ARE UNABLE TO SUCCESSFULLY ACQUIRE, DEVELOP OR COMMERCIALIZE NEW PRODUCTS,
OUR OPERATING RESULTS WILL SUFFER.
Our future results of operations will depend to a significant extent upon our
ability to successfully develop and commercialize new products and businesses in
a timely manner. There are numerous difficulties in, developing and
commercializing new products, including:
* there are still major developmental steps required to bring the
product to a clinical testing stage;
* clinical testing may not be positive;
* developing, testing and manufacturing products in compliance with
regulatory standards in a timely manner;
* failure to receive requisite regulatory approvals for such products in
a timely manner or at all;
* developing and commercializing a new product is time consuming, costly
and subject to numerous factors, including legal actions brought by
our competitors, that may delay or prevent the development and
commercialization of new products;
* incomplete, unconvincing or equivocal clinical trials data;
* experiencing delays or unanticipated costs;
* significant and unpredictable changes in the payer landscape, coverage
and reimbursement for our products;
* experiencing delays as a result of limited resources at FDA or other
regulatory agencies; and
* changing review and approval policies and standards at FDA and other
regulatory agencies.
As a result of these and other difficulties, products in development by us may
or may not receive timely regulatory approvals, or approvals at all, necessary
for marketing by us or other third-party partners. If any of our products are
not approved in a timely fashion or, when acquired or developed and approved,
cannot be successfully manufactured, commercialized or reimbursed, our operating
results could be adversely affected. We cannot guarantee that any investment we
make in developing products will be recouped, even if we are successful in
commercializing those products.
OUR EXPENDITURES MAY NOT RESULT IN COMMERCIALLY SUCCESSFUL PRODUCTS.
We cannot be sure our business expenditures will result in the successful
acquisition, development or launch of products that will prove to be
commercially successful or will improve the long-term profitability of our
business. If such business expenditures do not result in successful acquisition,
development or launch of commercially successful brand products our results of
operations and financial condition could be materially adversely affected.
16
THIRD PARTIES MAY CLAIM THAT WE INFRINGE THEIR PROPRIETARY RIGHTS AND MAY
PREVENT US FROM MANUFACTURING AND SELLING SOME OF OUR PRODUCTS.
The manufacture, use and sale of new products that are the subject of
conflicting patent rights have been the subject of substantial litigation in the
pharmaceutical industry. These lawsuits relate to the validity and infringement
of patents or proprietary rights of third parties. Litigation may be costly and
time-consuming, and could divert the attention of our management and technical
personnel. In addition, if we infringe on the rights of others, we could lose
our right to develop, manufacture or market products or could be required to pay
monetary damages or royalties to license proprietary rights from third parties.
Although the parties to patent and intellectual property disputes in the
pharmaceutical industry have often settled their disputes through licensing or
similar arrangements, the costs associated with these arrangements may be
substantial and could include ongoing royalties. Furthermore, we cannot be
certain that the necessary licenses would be available to us on commercially
reasonable terms, or at all. As a result, an adverse determination in a judicial
or administrative proceeding or failure to obtain necessary licenses could
prevent us from manufacturing and selling our products, and could have a
material adverse effect on our business, results of operations, financial
condition and cash flows.
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 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
products.
Under these regulations, we may become subject to periodic inspection of our
facilities, procedures and operations and/or the testing of our 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 cGMP 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 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.
For Europe, the European Medicines Agency ("EMEA") will regulate our products.
Regulatory approval by the EMEA will be subject to the evaluation of data
relating to the quality, efficacy and safety of our 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.
17
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.
THE PHARMACEUTICAL INDUSTRY IS HIGHLY COMPETITIVE.
The pharmaceutical industry has an intensely competitive environment that will
require an ongoing, extensive search for technological innovations and the
ability to market products effectively, including the ability to communicate the
effectiveness, safety and value of products to healthcare professionals in
private practice, group practices and payers in managed care organizations,
group purchasing organizations and Medicare & Medicaid services. We are smaller
than almost all of our competitors. Most of our competitors have been in
business for a longer period of time than us, have a greater number of products
on the market and have greater financial and other resources than we do.
Furthermore, recent trends in this industry are toward further market
consolidation of large drug companies into a smaller number of very large
entities, further concentrating financial, technical and market strength and
increasing competitive pressure in the industry. If we directly compete with
them for the same markets and/or products, their financial strength could
prevent us from capturing a profitable share of those markets. It is possible
that developments by our competitors will make any products or technologies that
we acquire noncompetitive or obsolete.
RISKS RELATING TO OUR COMMON STOCK
IF WE ISSUE ADDITIONAL SHARES IN THE FUTURE, IT WILL RESULT IN THE DILUTION OF
OUR EXISTING SHAREHOLDERS.
Our articles of incorporation authorize the issuance of up to 1,750,000,000
shares of common stock with a par value of $0.001 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
shareholders. Further, such issuance may result in a change of control of our
corporation.
TRADING OF OUR STOCK IS RESTRICTED BY THE SECURITIES EXCHANGE COMMISSION'S PENNY
STOCK REGULATIONS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR
COMMON STOCK.
The Securities and Exchange Commission has adopted regulations which generally
define "penny stock" to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny
stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
"accredited investors". The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission, which provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules; the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
18
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules described above, the Financial Industry
Regulatory Authority (known as "FINRA") has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.
OUR COMMON STOCK IS ILLIQUID AND THE PRICE OF OUR COMMON STOCK MAY BE NEGATIVELY
IMPACTED BY FACTORS WHICH ARE UNRELATED TO OUR OPERATIONS.
Although our common stock is currently listed for quotation on the OTC Bulletin
Board, there is no market for our common stock. Even when a market is
established and trading begins, trading through the OTC Bulletin Board is
frequently thin and highly volatile. There is no assurance that a sufficient
market will develop in our stock, in which case it could be difficult for
shareholders to sell their stock. The market price of our common stock could
fluctuate substantially due to a variety of factors, including market perception
of our ability to achieve our planned growth, quarterly operating results of our
competitors, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our
competitors or us. In addition, the stock market is subject to extreme price and
volume fluctuations. 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.
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. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Our audited financial statements for the years ended November 30, 2010 and 2009
and related management's discussion and analysis of financial condition and
results of operations are available in our annual report on Form 10-K filed with
the Securities and Exchange Commission on February 28, 2011. Our unaudited
financial statements for the nine month periods ended August 31, 2011 and 2010
and related management's discussion and analysis of financial condition and
results of operations are available in our quarterly report on Form 10-Q filed
with the Securities and Exchange Commission on October 17, 2011.
RECENT FINANCING ACTIVITIES
On February 2, 2012, we completed a private placement (the "PRIVATE PLACEMENT")
of units (each, a "UNIT"). Each Unit is comprised of one common share in our
capital and two non-transferrable share purchase warrants (each, a "WARRANT").
Each Warrant is exercisable into one additional common share and shall expire
after three years. The holders of such Unit must exercise half of their
Warrants, at a price of $1.00 per warrant share, for additional equity of
$500,000, upon the earlier of: (i) our company or our Subsidiary signing an
agreement with a clinical center, and (ii) 6 months following the closing of
such placement of Units, and the other half, at a price of $1.00 per warrant
share, for additional equity of $500,000, upon the feasibility of enhancement of
cell propogation capability for three years from closing at a price of $1.00 per
warrant share. Each Unit was priced at $1.00 for total gross proceeds of
$500,000. The Units were issued to offshore investors under the exemptions from
the Securities Act of 1933 contained in Regulation S.
19
On February 2, 2012, we entered into a fee services agreement with Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. ("MINTZ, LEVIN"), whereby upon closing of
the Private Placement, we agreed to pay Mintz, Levin $80,000 and issue to Mintz
Levin 1,390,952 common shares, being 2.5% of our fully diluted capitalization,
which are subject to escrow for a period of two years. Mintz, Levin has
undertaken work with regards to certain of our patents and this fee services
agreement settles its fees for those services. We also agreed to pay Mintz,
Levin an additional $50,000 upon the consummation of the earlier of:
(i) the purchase of all of our outstanding common shares and/or
amalgamation of our company or our wholly-owned Israeli subsidiary
into or with another corporation;
(ii) our sublicensing the technology to a non-affiliate of our company; or
(iii)$20,000 upon each of the following milestones (but in any event no
more than $50,000 in total):
(A) initiation by us of phase I clinical trials for the Products in
human subjects,
(B) initiation by us of phase II clinical trials for the Product in
human subjects, and
(C) initiation by us of phase III clinical trials for the Product in
human subjects,
provided that if any payments are made under subsection (iii) above and
thereafter an event described in subsection (i) or subsection (ii) occur,
then we shall only pay an amount equal to the difference between $50,000
and the amounts paid under subsection (iii) above.
CASH REQUIREMENTS
Our primary objectives for the next twelve month period are to further develop
the technology of producing AIP cells and to advance the technology so that it
may be appropriate for clinical safety testing.
Our plan of operation over the next 12 months is to:
* initiate regulatory activities in Asia, Europe and USA;
* collaborate with clinical center, specifically those performing
Pancreatic Islet transplantations, in order to carry out clinical
studies;
* locate suitable centers and sign a collaboration agreement;
* Identify optional technologies for scale up of the cells production
process (this activity will be carried out at subcontracted facilities
of Sheba Medical Center); and
* initialize efforts to validate the manufacturing process (in certified
labs); and
* raise sufficient capital to perform initial clinical safety testing.
We estimate our operating expenses and working capital requirements for the next
12 months to be as follows:
Expense Amount
------- ------
Product development $ 323,500
Employee compensation 484,184
General and administration 38,552
Professional services fees 334,868
Regulation and compliance 109,500
Business development 174,000
----------
TOTAL: $1,464,604
==========
20
If we are not able to obtain the additional financing on a timely basis, if and
when it is needed, we may be forced to cease the operation of our business.
FUTURE FINANCING
We will require additional financing to fund our planned operations, including
further development, clinical testing, regulatory requirements, commercializing
our existing assets, We currently do not have committed sources of additional
financing and may not be able to obtain additional financing, particularly, if
the volatile conditions in the stock and financial markets, and more
particularly the market for early development stage pharmaceutical company
stocks persist.
There can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
if and when it is needed, we will be forced to delay or scale down some or all
of our development activities or perhaps even cease the operation of our
business.
Since inception we have funded our operations primarily through equity and debt
financings and we expect that we will continue to fund our operations through
the equity and debt financing. If we raise additional financing by issuing
equity securities, our existing stockholders' ownership will be diluted.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.
There is no assurance that we will be able to maintain operations at a level
sufficient for an investor to obtain a return on his, her, or its investment in
our common stock. Further, we may continue to be unprofitable.
PROPERTIES
EXECUTIVE OFFICES AND REGISTERED AGENT
Our executive and head office is located at 70 Denya St. Haifa Israel, 3498. We
pay approximately $1,300 per month for rent. We believe that this arrangement
will be suitable for the next 12 months.
INTELLECTUAL PROPERTY
The description of our intellectual property rights is under the section
entitled "Business - Intellectual Property".
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth, as of February 2, 2012, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock, by
each of our current directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Beneficial ownership consists of a direct interest in
the shares of common stock, except as otherwise indicated.
In the following tables, we have determined the number and percentage of shares
beneficially owned in accordance with Rule 13d-3 of the SECURITIES EXCHANGE ACT
OF 1934 based on information provided to us by our controlling stockholder,
executive officers and directors, and this information does not necessarily
indicate beneficial ownership for any other purpose. In determining the number
of shares of our common stock beneficially owned by a person and the percentage
ownership of that person, we include any shares as to which the person has sole
or shared voting power or investment power, as well as any shares subject to
warrants or options held by that person that are currently exercisable or
exercisable within 60 days.
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
Title Name and Address of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership(1) Class
-------- ---------------- ----------------------- -----
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
Common Oded Shvartz 11,126,951(2) Direct 23.6%
Stock 130 Biruintei Bvd.,
Pantelimon,
Ilfov, Romania
Common Guilbert Cuison 5,500,015(2) Direct 11.7%
Stock 1001 SW 5th Avenue,
Suite 1100
Portland, OR 97204
Common Jerome Golez 5,500,015(2) Direct 11.7%
Stock 1001 SW 5th Avenue,
Suite 1100
Portland, OR 97204
SECURITY OWNERSHIP OF MANAGEMENT
Common Vered Caplan nil(3) Direct nil
Stock 6 Sharabi street,
Neve tzedek,
Tel-Aviv 65147, Israel
Common Jacob BenArie nil Direct nil
Stock 70 Denya st.
Haifa, Israel 34980
Common Dov Weinberg nil Direct nil
Stock 21 Sparrow Circle
White Plains, New York 10605
Common Prof. Sarah Ferber 2,781,905(4) Direct 5.9%
Stock Shderot Hahaskala 17b,
Tel-Aviv
67890, Israel
Common Directors & Executive 2,781,905 Direct 5.9%
Stock Officers as a group
(4 persons)
----------
(1) Percentage of ownership is based on 47,126,951 shares of our common stock
issued and outstanding as of February 2, 2012. 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 Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Shares of
common stock subject to options or warrants currently exercisable, or
exercisable within 60 days, are deemed outstanding for purposes of
computing the percentage ownership of the person holding such option or
warrants, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Oded Shvartz currently holds 11,126,951 common shares representing 20% of
our share capital on a fully diluted basis. Guilbert Cuison and Jerome
Golez (each as to 5,420,485 shares) have granted to Oded Shvartz a
conditional option to acquire 10,840,970 common shares of our company at a
price of $0.0003571 per share. The option is exercisable only if we issue
shares or grants options or warrants to purchase shares, or other security
or right convertible into shares of our company (collectively, "NEW
SECURITIES"). In that event, Schwartz shall have the right to exercise the
option by purchasing 1 option share for every 4 New Securities issued. The
option is exercisable for a period of up to four years after February 2,
2012. Should the option be exercised in full, Oded Shvartz would own up to
21,967,951 common shares in the capital of our company.
(3) We have agreed to grant Ms. Caplan options to acquire up to 3,338,285 of
our common shares for a price per share equal to $0.001. We have not yet
granted these options.
(4) Prof Ferber currently holds 5% of our share capital on a fully diluted
basis. On February 2, 2012, we granted Prof. Ferber stock options to
acquire up to 2,781,905 of our common shares for a price per share equal to
$0.001 for a period of ten years. Any stocks issued to Prof. Ferber will be
held in escrow for a period of two years from the date the License
Agreement closed.
22
CHANGES IN CONTROL
We are not aware of any arrangement that may result in a change in control of
our company.
DIRECTORS AND EXECUTIVE OFFICERS
The following individuals serve as the director and executive officers of our
company.
Date First Elected
Name Position Age or Appointed
---- -------- --- ------------
Vered Caplan Director 43 February 2, 2012
Jacob BenArie Chief Executive Officer
and President 43 February 2, 2012
Dov Weinberg Chief Financial Officer, 59 February 2, 2012
Secretary, and Treasurer
Dr. Sarah Ferbe r Chief Scientist Officer 57 February 2, 2012
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of
director and executive officers during at least the past five years, indicating
their principal occupation during the period, and the name and principal
business of the organization by which they were employed
VERED CAPLAN, DIRECTOR
Since 2008, Ms. Caplan has been Chief Executive Officer of Kamedis, a company
focused on utilizing plant extracts for dermatology purposes. From 2004 to 2007,
Ms. Caplan was Chief Executive Officer of GammaCan, a company focused on the use
of immunoglobulins for treatment of cancer. During the previous five years, Ms.
Caplan has been a director of the following companies: Opticul Ltd., a company
involved with optic based bacteria classification; Inmotion Ltd., a company
involved with self propelled disposable colonoscopies; Nehora Photonics Ltd., a
company involved with non invasive blood monitoring; Ocure Ltd., a company
involved with wound management; Eve Medical Ltd., a company involved with
hormone therapy for Menopause and PMS; and Biotech Investment Corp., a company
involved with prostate cancer diagnostics. Ms. Caplan has a M.Sc. in bio-medical
engineering from Tel-Aviv University specialized in signal processing;
management for engineers from Tel-Aviv University specialized in business
development; and a B.Sc. in mechanical engineering from the Technion specialized
in software and cad systems.
We believe Ms. Caplan is qualified to serve on our board of directors because of
her education and business experiences, including her experience as a director
of similar companies, as described above.
JACOB BENARIE MBA, B.SC., CHIEF EXECUTIVE OFFICER AND PRESIDENT
Prior his joining to Orgenesis, Jacob BenArie served for the last 5 years as the
CEO of Beta-Stim Ltd, a private held company that developed a therapy for the
treatment of type 2 diabetics. Mr. BenArie also co founded Beta-Stim, Slender
Medical and the Medical Device Design & Manufacture Israel conference. Mr.
BenArie has over 15 years of experience in different management and R&D
positions in life science start-up companies. Mr. BenArie holds a B.Sc. in
electronic engineering and MBA, both from the Technion - Israel Institute of
Technology.
DOV WEINBERG CPA, MBA, CHIEF FINANCIAL OFFICER, SECRETARY, AND TREASURER
Mr. Dov Weinberg has more than 11 years of experience in the medical device
area. He is an owner and president of Weinberg Dalyo Inc a U.S corporation which
renders business development and financial services to companies in the life
23
science industry. Serves currently as CFO of QRS systems Inc. Innovate Inc. and
NaNaMEd LLC and WAS the Chief Financial officer of Impulse Dynamics from
December 2000 until the beginning of 2009. Prior to that Mr. Weinberg served for
more than 15 years as the CFO of a large industrial multinational public
corporation in charge of finance, information systems, and taxation of the
company and its worldwide subsidiaries.
Mr. Weinberg has been a Certified Public Account since 1979 and received an MBA
from Bar-Ilan University in 1984 and a B.A. in Economics & Accounting from Tel
Aviv University in 1977.
PROF. SARAH FERBER PH.D., CHIEF SCIENTIST OFFICER
Prof. Sarah Ferber studied biochemistry at the Technion under the supervision of
Professor Avram Hershko and Professor Aharon Ciechanover, winners of the Nobel
Prize in Chemistry in 2004. She completed a post-doctoral fellowship at the
Joslin Diabetes Lab at Harvard Medical School. Prof. Ferber's breakthrough
discovery suggested that humans carry their own `stem-cells' throughout
adulthood, thus obviating the need for embryonic stem cells for generating an
organ in need. Most of the research was conducted in Prof. Ferber's lab, in the
Endocrine Research Lab at the Sheba Medical Center, and currently employs 11
scientists. Dr. Sarah Ferber received TEVA, LINDNER, RUBIN and WOLFSON awards
for this research. Prof. Ferber's research work has been funded over the past 10
years by the JDRF, the Israel Academy of Science foundation (ISF) and D-Cure.
TERM OF OFFICE
Each director of our company is to serve for a term of one year ending on the
date of subsequent annual meeting of stockholders following the annual meeting
at which such director was elected. Notwithstanding the foregoing, each director
is to serve until his successor is elected and qualified or until his death,
resignation or removal. Our board of directors is to elect our officers and each
officer is to serve until his successor is elected and qualified or until his
death, resignation or removal.
FAMILY RELATIONSHIPS
There are no family relationships between any director or executive officer.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our director and executive officers have not been involved in any of the
following events during the past ten years:
(a) any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
(b) any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences);
(c) being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities;
(d) being found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or
vacated;
(e) being the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of:
(i) any federal or state securities or commodities law or regulation;
or (ii) any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease- and-desist order, or
removal or prohibition order; or (iii) any law or regulation
prohibiting mail or wire fraud or fraud in connection with any
business entity; or
24
(f) being the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Securities
Exchange Act of 1934), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent exchange,
association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The particulars of compensation paid to the following persons:
(a) our principal executive officer;
(b) each of our two most highly compensated executive officers who were
serving as executive officers at the end of the year ended November
30, 2011; and
(c) up to two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as our executive officer at the end of the most recently
completed financial year,
who we will collectively refer to as the named executive officers, for our years
ended November 30, 2011 and 2010, are set out in the following summary
compensation table:
Nonqualified
NonEquity Deferred
Name and Stock Option Incentive Plan Compensation All Other
principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
position Year ($) ($) ($) ($) ($) ($) ($) ($)
-------- ---- --- --- --- --- --- --- --- ---
Gilbert 2011 Nil Nil Nil Nil Nil Nil Nil Nil
Cuison 2010 Nil Nil Nil Nil Nil Nil Nil Nil
Former
President,
Secretary,
and Director
Jerome Golez 2011 Nil Nil Nil Nil Nil Nil Nil Nil
Former 2010 Nil Nil Nil Nil Nil Nil Nil Nil
Treasurer
and Director
EMPLOYMENT OR CONSULTING AGREEMENTS
On February 2, 2012, we entered into an employment agreement (the "FERBER
EMPLOYMENT AGREEMENT") with Prof. Sarah Ferber. Pursuant to the Ferber
Employment Agreement, Prof. Ferber agrees to serve as our Chief Scientific
Officer. Prof. Ferber will be paid a gross salary of NIS (Israeli shekel) 36,000
per month, which is approximately $9,572 based on an exchange rate of 1 NIS
equals 0.2689 USD as of February 2, 2012. In the event we complete a financing
of at least $1,000,000, Prof. Ferber's salary will double. Prof. Ferber agrees
to spend 50% of her entire business time and attention to the business of our
company. We also granted Prof. Ferber stock options to purchase 2,781,905 shares
of our common stock at a price per share equal to $0.001.
25
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
We have not awarded any shares of stock, options or other equity securities to
our directors or executive officers from our inception on June 5, 2008 to
November 30, 2011.
RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide retirement or similar
benefits for our directors or executive officers.
RESIGNATION, RETIREMENT, OTHER TERMINATION, OR CHANGE IN CONTROL ARRANGEMENTS
We have no contract, agreement, plan or arrangement, whether written or
unwritten, that provides for payments to our directors or executive officers at,
following, or in connection with the resignation, retirement or other
termination of our directors or executive officers, or a change in control of
our company or a change in our directors' or executive officers'
responsibilities following a change in control.
COMPENSATION OF DIRECTORS
Our directors have not received any compensation for the fiscal year ended
November 30, 2011. All directors receive reimbursement for reasonable
out-of-pocket expenses in attending board of directors meetings and for
promoting our business. From time to time we may engage certain members of the
board of directors to perform services on our behalf. In such cases, we intend
to compensate the members for their services at rates no more favorable than
could be obtained from unaffiliated parties.
On February 2, 2012, we entered into a compensation agreement (the "CAPLAN
COMPENSATION AGREEMENT") with Ms. Vered Caplan. Pursuant to the Caplan
Compensation Agreement, Ms. Caplan agrees to serve as a director of our company.
Ms. Vered will be paid a gross salary of NIS (Israeli shekel) 10,000 per month,
which is approximately $$2,689 based on an exchange rate of 1 NIS equals 0.2689
USD as of February 2, 2012. In the event we complete a financing of at least
$2,000,000, Ms. Vered will be paid a one time bonus of $100,000. We also agreed
to grant to Ms. Vered stock options to purchase 3,338,285 shares of our common
stock at a price per share equal to $0.001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS, AND CERTAIN CONTROL PERSONS
Except as set out below and discussed under the heading "Employment or
Consulting Agreements" above, since our inception on June 5, 2008, 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:
(a) any director or executive officer of our company;
(b) 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;
(c) and of our promoters and control persons; and
(d) any member of the immediate family (including spouse, parents,
children, siblings and in- laws) of any of the foregoing persons.
On June 5, 2008, we sold 1,600,000 shares of our common stock to Guilbert Cuison
and Jerome Golez, our directors at the time, for cash payment to us of $20,000.
26
On June 5, 2008 Guilbert Cuison, one of our directors at the time, provided us
with a working capital loan in the amount of $500. The amount has increased to
$15,500 due to further advances. The loan is non-interest bearing, unsecured,
and has no specific terms of repayment.
DIRECTOR INDEPENDENCE
Our board of directors consists of Vered Caplan. Our securities are quoted on
the OTC Bulletin Board which does not have any director independence
requirements. Under NASDAQ Marketplace Rule 5605(a)(2), a director is not
considered to be independent if he or she is also an executive officer or
employee of the company. Using this definition of independence, we have
determined that Ms. Caplan is an independent director.
LEGAL PROCEEDINGS
We know of no material pending legal proceedings to which our company or
subsidiary is a party or of which any of their property is the subject. In
addition, we do not know of any such proceedings contemplated by any
governmental authorities.
We know of no material proceedings in which any director, officer or affiliate
of our company, or any registered or beneficial stockholder of our company, or
any associate of any such director, officer, affiliate, or stockholder is a
party adverse to our company or subsidiary or has a material interest adverse to
our company or subsidiary.
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is quoted on the OTC Bulletin Board of the Financial Industry
Regulatory Authority under the symbol "BOUTD". There were no trades of our
shares of common stock made through the facilities of the OTC Bulletin Board
during our fiscal years ended November 30, 2010 and 2009 and six month period
ended May 31, 2011.
Set forth below are the range of high and low bid quotations for the period
indicated as reported by the OTC Bulletin Board. The market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commissions and may
not necessarily represent actual transactions.
Quarter Ended Bid High Bid Low
------------- -------- -------
November 30, 2011 Nil Nil
May 31, 2011 Nil Nil
February 28, 2011 Nil Nil
November 30, 2010 $0.20 $0.11
August 31, 2010 Nil Nil
May 31, 2010 Nil Nil
February 28, 2010 Nil Nil
November 30, 2009 Nil Nil
TRANSFER AGENT
Our shares of common stock are issued in registered form. The transfer agent and
registrar for our common stock is Routh Stock Transfer, Inc., at 6860 North
Dallas Parkway, Suite 200, Plano, Texas 75024.
27
HOLDERS OF COMMON STOCK
As of February 2, 2012, there were 8 holders of record of our common stock. As
of such date, 47,126,951 shares were issued and outstanding.
DIVIDENDS
We have never declared or paid any cash dividends or distributions on our
capital stock. We currently intend to retain our future earnings, if any, to
support operations and to finance expansion and therefore we do not anticipate
paying any cash dividends on our common stock in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We did not have any equity compensation plans in place at November 30, 2011.
RECENT SALES OF UNREGISTERED SECURITIES
On February 2, 2012, we completed a private placement of 500,000 units (each, a
"UNIT"). Each Unit is comprised of one common share in our capital and two
non-transferrable share purchase warrants (each, a "WARRANT"). Each Warrant is
exercisable into one additional common share and shall expire after three years.
The holders of such Unit must exercise half of their Warrants, at a price of
$1.00 per warrant share, for additional equity of $500,000, upon the earlier of:
(i) our company or our Subsidiary signing an agreement with a clinical center,
and (ii) 6 months following the closing of such placement of Units, and the
other half, at a price of $1.00 per warrant share, for additional equity of
$500,000, upon the feasibility of enhancement of cell propogation capability for
three years from closing at a price of $1.00 per warrant share. Each Unit was
priced at $1.00 for total gross proceeds of $500,000. The units were issued to
offshore investors under the exemptions from the Securities Act of 1933
contained in Regulation S.
On February 2, we entered into a fee services agreement with Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C. ("MINTZ, LEVIN"), whereby upon closing of the
Private Placement, we agreed to pay Mintz, Levin $80,000 and issue to Mintz
Levin 1,390,952 common shares, being 2.5% of our fully diluted capitalization,
which are subject to escrow for a period of two years. Mintz, Levin has
undertaken work with regards to certain of our patents. We also agreed to pay
Mintz, Levin an additional $50,000 upon the consummation of the earlier of:
(i) the purchase of all of our outstanding common shares and/or
amalgamation of our company or our wholly-owned Israeli subsidiary
into or with another corporation;
(ii) our sublicensing the technology to a non-affiliate of our company; or
(iii)$20,000 upon each of the following milestones (but in any event no
more than $50,000 in total):
(A) initiation by us of phase I clinical trials for the Product in
human subjects,
(B) initiation by us of phase II clinical trials for the Product in
human subjects, and
(C) initiation by us of phase III clinical trials for the Product in
human subjects,
provided that if any payments are made under subsection (iii) above and
thereafter an event described in subsection (i) or subsection (ii) occur,
then we shall only pay an amount equal to the difference between $50,000
and the amounts paid under subsection (iii) above.
On June 5, 2008, we sold 28,000,000 (800,000 pre-split) shares of our common
stock to each of Guilbert Cuison, our then President and director, and Jerome
Golez, our then Treasurer and director at a purchase price of $0.0125 per
pre-split share, for aggregate proceeds of $20,000. We believe this issuance was
exempt under Section 4(2) and/or Regulation S of the Securities Act of 1933. No
advertising or general solicitation was employed in offering the securities. The
28
offering and sale were made only to Mr. Cuison and Mr. Gomez who are non-U.S.
citizens, and transfers were restricted by us in accordance with the
requirements of the Securities Act of 1933.
During the period between July 2008 and October 2008, we sold an aggregate of
24,500,000 (700,000 pre-split) shares of our common stock to our shareholders at
$0.05 per pre-split share for aggregate proceeds of $35,000. We believe that the
issuances of these securities were exempt from registration as an offering
completed under Regulation S of the Securities Act of 1933. We believe that this
exemption from registration was available because each purchaser represented to
us, among other things, that he, she or it was a non-U.S. person as defined in
Regulation S and was not acquiring the shares for the account or benefit of,
directly or indirectly, any U.S. person. Further, we did not otherwise engage in
distribution of these shares in the U.S.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 1,750,000,000 shares of common stock,
with a par value of $0.001 per share.
VOTING RIGHTS
With respect to all matters upon which our stockholders are entitled to vote or
to which our stockholders are entitled to give consent, the holders of the
outstanding shares of our common stock are entitled to cast thereon one vote in
person or by proxy for each share of our common stock standing in his, her or
its name. Our bylaws provide that when a quorum is present or represented at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy will be sufficient to elect members of
our board of directors or to decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
our articles of incorporation, a different vote is required in which case such
express provision will govern and control the decision of such question. Our
bylaws provide that the holders of at least one third (33.3%) of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, will constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by our articles of incorporation. In addition, our bylaws provide
that any action which may be taken by the vote of the stockholders at a meeting
may be taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power, unless the
provisions of the statutes or of our articles of incorporation require a greater
proportion of voting power to authorize such action in which case such greater
proportion of written consents will be required. Our articles of incorporation
provide that our board of directors is expressly authorized to make, alter and
repeal our bylaws, subject to the power of our stockholders to change or repeal
the bylaws. In addition, our bylaws provide that our board of directors, by a
majority vote of our board of directors at any meeting may amend our bylaws,
including bylaws adopted by the stockholders, but the stockholders may from time
to time specify particular provisions of the bylaws, which will not be amended
by our board of directors.
DIVIDEND RIGHTS
Holders of our common stock are entitled to receive such cash dividends as may
be declared thereon by our board of directors from time to time out of assets of
funds of our company legally available therefore. Our board of directors is not
obligated to declare a dividend. Any future dividends will be subject to the
discretion of our board of directors and will depend upon, among other things,
future earnings, the operating and financial condition of our company, its
capital requirements, general business conditions and other pertinent factors.
It is not anticipated that dividends will be paid in the foreseeable future.
OTHER RIGHTS
No stockholder of our company has any preemptive or other right to subscribe for
any additional un-issued or treasury shares of stock or for other securities of
any class, or for rights, warrants or options to purchase stock, or for scrip,
or for securities of any kind convertible into stock or carrying stock purchase
warrants or privileges unless so authorized by our company.
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Except as otherwise required by the Nevada Revised Statutes and as may otherwise
be provided in our articles of incorporation, each share of our common stock has
identical powers, preferences and rights, including rights in liquidation.
ANTI-TAKEOVER PROVISIONS
Some features of the Nevada Revised Statutes, may have the effect of deterring
third parties from making takeover bids for control of our company or may be
used to hinder or delay a takeover bid. This would decrease the chance that our
stockholders would realize a premium over market price for their shares of
common stock as a result of a takeover bid. We have amended our bylaws and
articles such that these provisions are not applicable to our company.
ARTICLES OF INCORPORATION AND BYLAWS
There are no provisions in our articles of incorporation or our bylaws that
would delay, defer or prevent a change in control of our company and that would
operate only with respect to an extraordinary corporate transaction involving
our company or any of our subsidiaries, such as merger, reorganization, tender
offer, sale or transfer of substantially all of its assets, or liquidation.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada Revised Statutes provide that:
* a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation,
by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he or she acted in
good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful;
* a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
or her in connection with the defense or settlement of the action or
suit if he or she acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of
the corporation. Indemnification may not be made for any claim, issue
or matter as to which such a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of
the case, the person is fairly and reasonably entitled to indemnity
for such expenses as the court deems proper; and
* to the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding, or in defense of any claim, issue
or matter therein, the corporation must indemnify him or her against
expenses, including attorneys' fees, actually and reasonably incurred
by him or her in connection with the defense.
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Nevada Revised Statutes provide that we may make any discretionary
indemnification only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:
* by our stockholders;
* by our board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
* if a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion;
* if a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion; or
* by court order.
Nevada Revised Statutes provide that a corporation may purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise for any liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee or agent, or
arising out of his status as such, whether or not the corporation has the
authority to indemnify him against such liability and expenses.
Our articles of incorporation also provide that we must indemnify to the fullest
extent permitted by law any person made or threatened to be made to a party to
any threatened, pending or completed action or proceeding by reason of the fact
that he or she is or was a director of our company against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses that he or she incurs in connection with such action or proceeding. Our
bylaws provide a similar right of indemnification for a person who is or was a
director or officer of our company. In addition, our bylaws provide that our
board of directors may cause our company to purchase and maintain insurance on
behalf of any person who is or was a director or officer of our company against
any liability asserted against such person and incurred in any such capacity or
arising out of such status, whether or not our company would have the power to
indemnify such person.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
Please see Item 2.01 of this current report on Form 8-K.
ITEM 5.01 CHANGE IN CONTROL OF REGISTRANT.
Please see Item 2.01 of this current report on Form 8-K.
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS.
Please see Item 2.01 of this current report on Form 8-K.
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS.
Management has determined that, as a result of the transaction described in Item
2.01 of this current report, our company has ceased to be a shell company as
defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934.
Please refer to Item 2.01 of this current report on Form 8-K for a description
of these transactions.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
Not applicable
EXHIBITS
No. Description
--- -----------
3.1 Articles of Incorporation (incorporated by reference to an exhibit to a
registration statement on Form S-1 filed on April 2, 2009)
3.2 Certificate of Change (incorporated by reference to an exhibit to a
current report on Form 8-K filed on September 2, 2011)
3.3 Articles of Merger (incorporated by reference to an exhibit to a
current report on Form 8-K filed on September 2, 2011)
3.4 Certificate of Amendment to Articles of Incorporation (incorporated by
reference to an exhibit to a current report on Form 8-K filed on
September 21, 2011)
3.5 Amended and Restated Bylaws (incorporated by reference to an exhibit to
a current report on Form 8-K filed on September 21, 2011)
10.1* Form of Private Placement Subscription Agreement
10.2* Licensing Agreement dated February 2, 2012 with Tel Hashomer - Medical
Research, Infrastructure and Services Ltd.
10.3* Employment Agreement dated February 2, 2012 between our company and
Prof. Sarah Ferber
10.4* Stock Option Agreement dated February 2, 2012 between our company,
Prof. Sarah Ferber and Clark Wilson LLP
10.5* Fee Service Agreement dated February 2, 2012 between our company and
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
10.6* Compensation Letter dated February 2, 2012 between our company and
Vered Caplan
21.1 Orgenesis Ltd. our 100% wholly-owned subsidiary incorporated in Israel
on October 11, 2011
----------
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ORGENESIS CORP.
Per: /s/ Vered Caplan
-----------------------------------
Authorized Signatory
Date: February 8, 2012
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