[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section covers the unaudited condensed consolidated financial statements and management's analysis [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for Orgenesis Inc., including the balance sheets, statements of loss and comprehensive loss, statements of changes in equity, and statements of cash flows for the three months ended March 31, 2023 and 2022, along with accompanying notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at March 31, 2023, and December 31, 2022 Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :---------------- | :------------- | :---------------- | | Total Assets | $93,267 | $90,928 | | Total Liabilities | $33,959 | $31,654 | | Total Equity | $29,003 | $29,071 | Current Assets and Liabilities (in thousands) | Metric | March 31, 2023 | December 31, 2022 | Change | | :---------------------- | :------------- | :---------------- | :----- | | Total Current Assets | $49,450 | $46,318 | +$3,132 | | Total Current Liabilities | $13,938 | $15,910 | -$1,972 | [Condensed Consolidated Statements of Loss and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) This section details the company's financial performance, including revenues, costs, and net loss for the three months ended March 31, 2023 and 2022 Financial Performance (Three Months Ended March 31, in thousands, except per share) | Metric | 2023 | 2022 | Change (%) | | :-------------------------------------------------- | :--- | :--- | :--------- | | Total revenues | $7,044 | $7,212 | -2.3% | | Cost of revenues | $2,722 | $714 | +281.2% | | Gross profit | $4,322 | $6,498 | -33.5% | | Operating loss | $3,205 | $3,236 | -1.0% | | Net loss | $4,261 | $3,997 | +6.6% | | Net loss attributable to Orgenesis Inc. | $4,189 | $4,009 | +4.5% | | Basic and diluted loss per share | $0.16 | $0.16 | 0.0% | [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section outlines changes in the company's equity for the three months ended March 31, 2023 and 2022 Equity Changes (Three Months Ended March 31, in thousands) | Metric | January 1, 2023 | March 31, 2023 | | :-------------------------------- | :-------------- | :------------- | | Additional Paid-in Capital | $150,355 | $154,691 | | Accumulated Deficit | $(121,261) | $(125,450) | | Equity attributable to Orgenesis Inc. | $27,561 | $27,667 | | Total Equity | $29,071 | $29,003 | - Key activities contributing to changes in equity include stock-based compensation to employees and service providers, issuance of shares and warrants, and comprehensive loss for the period[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 Cash Flow Summary (Three Months Ended March 31, in thousands) | Cash Flow Activity | 2023 | 2022 | | :----------------------------------- | :--- | :--- | | Net cash used in operating activities | $(7,240) | $(2,792) | | Net cash used in investing activities | $(1,307) | $(1,613) | | Net cash provided by financing activities | $5,910 | $1 | | Net change in cash, cash equivalents and restricted cash | $(2,637) | $(4,404) | | Cash, cash equivalents and restricted cash at end of period | $3,731 | $1,613 | - Financing activities in Q1 2023 included **$3,441 thousand from equity investments** and **$5,485 thousand from convertible loan issuances**, partially offset by **$3,000 thousand in convertible loan repayments**[21](index=21&type=chunk)[111](index=111&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE 1 – DESCRIPTION OF BUSINESS](index=11&type=section&id=NOTE%201%20%E2%80%93%20DESCRIPTION%20OF%20BUSINESS) This note describes Orgenesis Inc.'s business, focus on Cell and Gene Therapies, and going concern considerations - Orgenesis Inc. is a global biotech company focused on Cell and Gene Therapies (CGTs), primarily autologous therapies, manufactured using closed and automated systems at the point of care (POCare)[24](index=24&type=chunk)[81](index=81&type=chunk) - The company utilizes a collaborative worldwide POCare Network and a scalable POCare Platform to develop and out-license POCare Therapies and provide POCare Services, aiming to overcome cost and logistical limitations of traditional manufacturing[25](index=25&type=chunk)[26](index=26&type=chunk)[82](index=82&type=chunk) - As of March 31, 2023, the company had an **accumulated deficit of $125 million** and **negative operating cash flows of $7.2 million**, raising substantial doubt about its ability to continue as a going concern for the next 12 months without additional capital[34](index=34&type=chunk)[36](index=36&type=chunk)[113](index=113&type=chunk) [NOTE 2 – BASIS OF PRESENTATION](index=13&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note explains the accounting principles and basis used for preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP, consistent with annual statements, and reflect management's estimates and judgments[38](index=38&type=chunk)[39](index=39&type=chunk) - The adoption of ASU 2016-13 (Credit Losses) and ASU 2021-08 (Business Combinations) did not materially impact the consolidated financial statements[40](index=40&type=chunk)[41](index=41&type=chunk) [NOTE 3 – SEGMENT INFORMATION](index=14&type=section&id=NOTE%203%20%E2%80%93%20SEGMENT%20INFORMATION) This note provides financial information disaggregated by the company's operating segments: Morgenesis and Therapies - Operations were separated into two segments: Morgenesis (POCare Services) and Therapies (therapeutic development), following the Metalmark Investment in November 2022[43](index=43&type=chunk)[83](index=83&type=chunk) - The CEO, as chief operating decision maker (CODM), reviews consolidated financial information along with disaggregated revenue and contributed profit data for these two segments[46](index=46&type=chunk) Segment Performance (Three Months Ended March 31, 2023, in thousands) | Metric | Morgenesis | Therapies | Eliminations | Consolidated | | :-------------------------------------------------- | :--------- | :-------- | :----------- | :----------- | | Revenues | $6,914 | $130 | $- | $7,044 | | Gross profit | $4,606 | $(48) | $- | $4,558 | | Income (loss) before income taxes | $162 | $(4,294) | $- | $(4,132) | [NOTE 4 – EQUITY](index=15&type=section&id=NOTE%204%20%E2%80%93%20EQUITY) This note details significant equity transactions, including stock and warrant issuances, during the period - On February 23, 2023, the company issued **1,947,368 shares of common stock** and warrants for **973,684 shares at $1.90 per share**, generating **$3.7 million in gross proceeds**[49](index=49&type=chunk)[50](index=50&type=chunk)[93](index=93&type=chunk) - The warrants are exercisable immediately at **$1.90 per share** and expire in five years, with an alternate cashless exercise option[50](index=50&type=chunk) - Net proceeds from the offering are designated for working capital and general corporate purposes, including therapy-related activities[50](index=50&type=chunk)[93](index=93&type=chunk) [NOTE 5 – CONVERTIBLE LOANS](index=16&type=section&id=NOTE%205%20%E2%80%93%20CONVERTIBLE%20LOANS) This note outlines new and extended convertible loan agreements and their key terms - On January 10, 2023, the company secured **$5 million in new convertible loans** from NewTech Investment Holdings and Ariel Malik, with an **8% annual interest rate** and a conversion price of **$2.464 per share**[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[91](index=91&type=chunk) - On March 27, 2023, subsidiary Koligo Therapeutics Inc. entered into a convertible loan agreement for up to **$5 million** with Yehuda Nir, at **8% interest**, with a maturity date of January 1, 2024, and a mandatory conversion clause under certain equity financing conditions[59](index=59&type=chunk)[60](index=60&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - On January 12, 2023, the company extended **$12 million in existing convertible loans** with Yosef Dotan, Aharon Lukach, and Yehuda Nir to January 31, 2026, increasing interest rates to **10%** (for most) and reducing conversion prices to **$2.50 per share**[63](index=63&type=chunk) [NOTE 6 – LOSS PER SHARE](index=18&type=section&id=NOTE%206%20%E2%80%93%20LOSS%20PER%20SHARE) This note presents the calculation of basic and diluted loss per share for the reporting periods Loss Per Share (Three Months Ended March 31) | Metric | 2023 | 2022 | | :----------------------------------- | :--- | :--- | | Net loss attributable to Orgenesis Inc. | $4,189 thousand | $4,009 thousand | | Weighted average common shares outstanding | 26,246,924 | 24,600,954 | | Basic and diluted loss per share | $0.16 | $0.16 | - Diluted loss per share excludes **8,390,035 shares underlying options/warrants** and **6,987,879 shares from convertible loans** for Q1 2023 due to their anti-dilutive effect[67](index=67&type=chunk) [NOTE 7 – REVENUES](index=18&type=section&id=NOTE%207%20%E2%80%93%20REVENUES) This note disaggregates revenue by stream and identifies major customers for the reporting periods Revenue Disaggregation (Three Months Ended March 31, in thousands) | Revenue Stream | 2023 | 2022 | Change | | :------------------------------------------ | :--- | :--- | :----- | | POCare development services | $- | $6,324 | $(6,324) | | Cell process development services and hospital services | $2,308 | $888 | $1,420 | | POCare cell processing | $4,736 | $- | $4,736 | | Total | $7,044 | $7,212 | $(168) | - The decline in POCare development services is a result of the company's revenue model progression, where completed development services lead to new cell processing agreements with customers[101](index=101&type=chunk) - Major customers in Q1 2023 included Customer A (US) contributing **$3,605 thousand**, Customer B (Greece) **$2,022 thousand**, and Customer C (US) **$750 thousand**[70](index=70&type=chunk) [NOTE 8 – OTHER SIGNIFICANT TRANSACTIONS DURING THE PERIOD](index=20&type=section&id=NOTE%208%20%E2%80%93%20OTHER%20SIGNIFICANT%20TRANSACTIONS%20DURING%20THE%20PERIOD) This note describes other material transactions, including updates to joint venture agreements - Orgenesis updated joint venture agreements (JVAs) and assigned certain rights and obligations to Texas Advanced Therapies LLC, transferring its option to require JV entity incorporation and its share in the JV entity[72](index=72&type=chunk)[97](index=97&type=chunk) - The company retained call options to acquire JV partner shares, royalty rights, and the right to conclude manufacturing/service agreements, while eliminating its obligation for additional funding and the right to an additional **15% of JVE's GAAP profit**[72](index=72&type=chunk)[97](index=97&type=chunk) [NOTE 9 – LEGAL PROCEEDINGS](index=20&type=section&id=NOTE%209%20%E2%80%93%20LEGAL%20PROCEEDINGS) This note details ongoing legal proceedings and the company's assessment of their potential impact - A complaint was filed in January 2022 by the State of Israel and Sheba Medical Center seeking **7% royalties on sales** and **24% on sublicense revenues** related to specific know-how and technology, plus **NIS 10 million**[73](index=73&type=chunk)[121](index=121&type=chunk) - Orgenesis believes the allegations are without merit and is vigorously defending against the claims, with no provision made in financial statements as a material loss is not considered probable[73](index=73&type=chunk) [NOTE 10 – SUBSEQUENT EVENTS](index=20&type=section&id=NOTE%2010%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before financial statement issuance - On May 5, 2023, MM OS Holdings, L.P. (an affiliate of Metalmark) agreed to invest an additional **$5 million** in Morgenesis for **500,000 Class A Preferred Units**[74](index=74&type=chunk) - This investment aims to support the continued expansion of Orgenesis' POCare Services business[74](index=74&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=21&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2023, compared to the prior year. It covers business overview, significant developments, detailed analysis of revenues and expenses, working capital, liquidity, and capital resources outlook, highlighting the company's focus on Cell and Gene Therapies (CGTs) and the challenges related to its going concern status [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) This section cautions readers about forward-looking statements and inherent risks and uncertainties - The report contains forward-looking statements based on management's beliefs, estimates, and assumptions, identified by words like "anticipate," "believe," "expect," etc[76](index=76&type=chunk) - These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from current expectations[76](index=76&type=chunk) - The company does not intend to update forward-looking statements to conform to actual results, except as required by applicable law[77](index=77&type=chunk) [Business Overview](index=22&type=section&id=Business%20Overview) This section describes Orgenesis's business model, focus on CGTs, and segment structure - Orgenesis is a global biotech company focused on Cell and Gene Therapies (CGTs), particularly autologous therapies, manufactured at the point of care (POCare) to improve affordability and accessibility[81](index=81&type=chunk) - The company's operations are divided into two segments: Morgenesis (POCare Services) and Therapies (therapeutic development), established after a November 2022 investment[83](index=83&type=chunk) - The company aims to expand its decentralized POCare Centers for efficient and scalable CGT delivery and to develop and out-license POCare advanced therapies by collaborating with academic institutions and hospitals[84](index=84&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk) [Significant developments during the quarter ended March 31, 2023](index=23&type=section&id=Significant%20developments%20during%20the%20quarter%20ended%20March%2031%2C%202023) This section highlights key financial and operational events that occurred during the first quarter of 2023 - The company entered into convertible loan agreements totaling **$5 million** with NewTech Investment Holdings and Ariel Malik, with an **8% interest rate** and a **$2.464 conversion price**, used for debt redemption and general corporate purposes[91](index=91&type=chunk)[92](index=92&type=chunk) - A registered direct offering closed on February 27, 2023, raising approximately **$3.7 million (gross)** through the issuance of **1,947,368 common shares and warrants**, with proceeds allocated to working capital and therapy-related activities[93](index=93&type=chunk) - Subsidiary Koligo Therapeutics Inc. secured a convertible loan of up to **$5 million** from Yehuda Nir, bearing **8% interest**, with **$485 thousand drawn** as of March 31, 2023[94](index=94&type=chunk)[96](index=96&type=chunk) - Updated Joint Venture (JV) agreements assigned certain rights to Texas Advanced Therapies LLC, reducing Orgenesis's funding obligations while retaining call options, royalty rights, and manufacturing/service agreement rights[97](index=97&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenues and expenses for the reporting periods Financial Performance Summary (Three Months Ended March 31, in thousands) | Metric | 2023 | 2022 | Change (%) | | :-------------------------------------------------- | :--- | :--- | :--------- | | Total revenues | $7,044 | $7,212 | -2.3% | | Cost of revenues | $2,722 | $714 | +281.2% | | Gross profit | $4,322 | $6,498 | -33.5% | | Cost of development services and R&D expenses | $3,281 | $6,651 | -50.7% | | Selling, general and administrative expenses | $4,039 | $2,851 | +41.7% | | Financial expenses, net | $644 | $213 | +202.3% | | Net loss | $4,261 | $3,997 | +6.6% | [Revenues](index=25&type=section&id=Revenues) This section analyzes the company's revenue streams and their changes between periods Revenue Breakdown (Three Months Ended March 31, in thousands) | Revenue Stream | 2023 | 2022 | Change | | :------------------------------------------ | :--- | :--- | :----- | | POCare development services | $- | $6,324 | $(6,324) | | Cell process development services and hospital services | $2,308 | $888 | $1,420 | | POCare cell processing | $4,736 | $- | $4,736 | | Total | $7,044 | $7,212 | $(168) | - The decrease in total revenue reflects a shift from POCare development services to cell processing agreements as performance obligations for prior development contracts were completed[101](index=101&type=chunk) [Cost of revenues](index=25&type=section&id=Cost%20of%20revenues) This section details the costs directly associated with generating the company's revenues Cost of Revenues (Three Months Ended March 31, in thousands) | Expense Category | 2023 | 2022 | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | | Total Cost of revenues | $2,722 | $714 | +281.2% | | Salaries and related expenses | $1,113 | $329 | +238.3% | | Professional fees and consulting services | $807 | $22 | +3568.2% | | Raw materials | $228 | $30 | +660.0% | - The substantial increase was due to higher costs associated with increased process development and cell processing revenues[100](index=100&type=chunk) [Cost of development services and research and development expenses](index=25&type=section&id=Cost%20of%20development%20services%20and%20research%20and%20development%20expenses) This section analyzes expenses related to development services and research and development activities R&D Expenses (Three Months Ended March 31, in thousands) | Expense Category | 2023 | 2022 | Change (%) | | :------------------------------------------ | :--- | :--- | :--------- | | Total Cost of development services and R&D | $3,281 | $6,651 | -50.7% | | Salaries and related expenses | $1,628 | $2,849 | -42.8% | | Professional fees and consulting services | $796 | $1,726 | -53.9% | | Lab expenses | $176 | $582 | -69.8% | - The decrease was primarily attributed to reduced R&D spending in the Morgenesis segment and lower professional fees and other R&D expenses in the Therapies segment[102](index=102&type=chunk) [Selling, General and Administrative Expenses](index=26&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) This section details the company's selling, general, and administrative expenses and their drivers SG&A Expenses (Three Months Ended March 31, in thousands) | Expense Category | 2023 | 2022 | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | | Total SG&A expenses | $4,039 | $2,851 | +41.7% | | Salaries and related expenses | $1,173 | $900 | +30.3% | | Accounting and legal fees | $1,550 | $910 | +70.3% | | Professional fees | $361 | $260 | +38.8% | - The increase was driven by expansion in the Morgenesis segment and higher accounting and legal fees related to fundraising activities in Q1 2023[103](index=103&type=chunk) [Financial Expenses, net](index=26&type=section&id=Financial%20Expenses%2C%20net) This section outlines the company's net financial expenses, including interest and foreign exchange impacts Financial Expenses (Three Months Ended March 31, in thousands) | Expense Category | 2023 | 2022 | Change (%) | | :------------------------------------------ | :--- | :--- | :--------- | | Total Financial expenses, net | $644 | $213 | +202.3% | | Interest expense on convertible loans and loans | $495 | $125 | +296.0% | | Foreign exchange loss, net | $148 | $82 | +80.5% | - The increase was mainly due to higher interest rates on convertible loans and increased convertible loan financing[104](index=104&type=chunk) [Working Capital](index=26&type=section&id=Working%20Capital) This section analyzes the company's current assets and liabilities, and overall working capital position Working Capital Position (in thousands) | Metric | March 31, 2023 | December 31, 2022 | Change | | :---------------- | :------------- | :---------------- | :----- | | Current assets | $49,450 | $46,318 | +$3,132 | | Current liabilities | $13,938 | $15,910 | -$1,972 | | Working capital | $35,512 | $30,408 | +$5,104 | - Current assets increased due to higher accounts receivable and prepaid expenses, while current liabilities decreased primarily from the repayment and extension of short-term convertible loans[106](index=106&type=chunk)[107](index=107&type=chunk) [Liquidity and Financial Condition](index=27&type=section&id=Liquidity%20and%20Financial%20Condition) This section assesses the company's cash flows, liquidity, and overall financial health Cash Flow Summary (Three Months Ended March 31, in thousands) | Cash Flow Activity | 2023 | 2022 | | :----------------------------------- | :--- | :--- | | Net loss | $(4,261) | $(3,997) | | Net cash used in operating activities | $(7,240) | $(2,792) | | Net cash used in investing activities | $(1,307) | $(1,613) | | Net cash provided by financing activities | $5,910 | $1 | | Decrease in cash and cash equivalents | $(2,637) | $(4,404) | - The increased cash used in operating activities was mainly due to a higher net loss, increased interest expenses on convertible loans, and a rise in prepaid expenses[109](index=109&type=chunk)[110](index=110&type=chunk) - Financing activities provided significant cash, driven by **$3,441 thousand from equity investments** and **$5,485 thousand from convertible loan issuances**, partially offset by **$3,000 thousand in loan repayments**[111](index=111&type=chunk) [Liquidity & Capital Resources Outlook](index=28&type=section&id=Liquidity%20%26%20Capital%20Resources%20Outlook) This section discusses the company's future funding needs, going concern status, and capital raising plans - Operations are funded by revenue, convertible loans, and securities offerings, but sustainable positive cash flows are not assured[112](index=112&type=chunk) - Management has identified substantial doubt about the company's ability to continue as a going concern for the next 12 months, based on current and projected cash resources and commitments[113](index=113&type=chunk) - Plans include raising additional capital, refinancing or amending existing convertible loans, and exploring ways to increase revenues and reduce expenditures[113](index=113&type=chunk) [Off-Balance Sheet Arrangements](index=28&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements - The company reports no off-balance sheet arrangements that are material to stockholders or likely to affect financial condition, results, or liquidity[114](index=114&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - The company has no disclosures regarding quantitative and qualitative market risk[115](index=115&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, and concluded they were effective at a reasonable assurance level. There have been no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2023[117](index=117&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2023[118](index=118&type=chunk) [PART II - OTHER INFORMATION](index=29&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings and risk factors [ITEM 1. LEGAL PROCEEDINGS](index=29&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Information regarding legal proceedings is available in Note 9 to the condensed consolidated financial statements. The company is not involved in any other pending material legal proceedings - Details on legal proceedings are provided in Note 9 of the financial statements[121](index=121&type=chunk) - The company is not involved in any other pending material legal proceedings beyond those described[122](index=122&type=chunk) [ITEM 1A. RISK FACTORS](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers readers to the "Risk Factors" section of the company's Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive understanding of significant risks. No material changes to these risk factors have occurred since the annual report - Investors should consider risk factors from the Annual Report on Form 10-K for December 31, 2022[123](index=123&type=chunk) - There have been no material changes to the previously disclosed risk factors[123](index=123&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=29&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section states that there were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities or use of proceeds during the period[124](index=124&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=29&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities to report - There were no defaults upon senior securities during the period[125](index=125&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=29&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[126](index=126&type=chunk) [ITEM 5. OTHER INFORMATION](index=29&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - There is no other information to report[127](index=127&type=chunk) [ITEM 6. EXHIBITS](index=30&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the Form 10-Q, including various warrant forms, convertible loan agreements, extension agreements, a securities purchase agreement, a placement agency agreement, and certifications - The report includes exhibits such as warrant forms, convertible loan agreements, extension agreements, a securities purchase agreement, a placement agency agreement, and certifications (302 and 906)[129](index=129&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) This section contains the official signatures of the company's executive officers, certifying the report [SIGNATURES](index=31&type=section&id=SIGNATURES) The report is duly signed on behalf of Orgenesis Inc. by Vered Caplan, President & Chief Executive Officer, and Neil Reithinger, Chief Financial Officer, Treasurer and Secretary, on May 10, 2023 - The report was signed by Vered Caplan (President & CEO) and Neil Reithinger (CFO, Treasurer, and Secretary) on May 10, 2023[132](index=132&type=chunk)

FORM 10-K Annual Report [Registrant Information](index=1&type=section&id=Registrant%20Information) ORGENESIS INC. filed its 2022 Annual Report on Form 10-K, with common stock (ORGS) traded on The Nasdaq Capital Market and 27,493,123 shares outstanding as of March 22, 2023 - ORGENESIS INC. filed its Annual Report on Form 10-K for the fiscal year ended **December 31, 2022**[1](index=1&type=chunk) Registrant Details | Indicator | Value | | :---------- | :---- | | Trading Symbol | ORGS | | Exchange | The Nasdaq Capital Market | | Shares Outstanding (as of March 22, 2023) | 27,493,123 | | Market Value of Non-Affiliate Common Stock (June 30, 2022) | $54,809,919 | - The registrant is classified as a **Non-accelerated filer** and a **Smaller reporting company**, and is not a well-known seasoned issuer or an emerging growth company[2](index=2&type=chunk)[3](index=3&type=chunk) [Table of Contents](index=3&type=section&id=TABLE%20OF%20CONTENTS) [PART I](index=3&type=section&id=PART%20I) Part I covers Orgenesis Inc.'s business operations, risk factors, properties, and legal proceedings, detailing core activities and challenges - Part I includes sections on Business, Risk Factors, Unresolved Staff Comments, Properties, Legal Proceedings, and Mine Safety Disclosures[9](index=9&type=chunk) [PART II](index=3&type=section&id=PART%20II) Part II details market information, management's discussion and analysis, market risk disclosures, financial statements, and controls and procedures - Part II covers Market for Registrant's Common Equity, Management's Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures About Market Risk, Financial Statements and Supplementary Data, Changes in and Disagreements with Accountants on Accounting and Financial Disclosure, Controls and Procedures, and Other Information[9](index=9&type=chunk) [PART III](index=3&type=section&id=PART%20III) Part III provides information on directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees - Part III includes sections on Directors, Executive Officers and Corporate Governance, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Certain Relationships and Related Transactions, and Director Independence, and Principal Accountant Fees and Services[9](index=9&type=chunk) [PART IV](index=3&type=section&id=PART%20IV) Part IV lists exhibits and financial statement schedules, concluding the annual report - Part IV contains Exhibits and Financial Statement Schedules and the Form 10-K Summary[9](index=9&type=chunk) [Special Cautionary Note Regarding Forward-Looking Statements](index=5&type=section&id=SPECIAL%20CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) [Forward-Looking Statements Disclaimer](index=5&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section cautions that the report contains forward-looking statements subject to risks, with actual results potentially differing materially - Statements in this report are 'forward-looking statements' under the Securities Act of 1933 and the Securities Exchange Act of 1934, based on management's current beliefs, estimates, and assumptions[11](index=11&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as actual results may differ significantly due to various risks and uncertainties[11](index=11&type=chunk) - The company does not intend to update forward-looking statements to conform to actual results, except as required by applicable law[12](index=12&type=chunk) [Key Forward-Looking Statements](index=5&type=section&id=Key%20Forward-Looking%20Statements) The company's forward-looking statements cover revenue generation, R&D, collaborations, operational management, and specific Metalmark Investment risks - Corporate and Financial: * Ability to generate and increase revenue from POCare cell therapy commercialization * Ability to achieve profitability * Ability to manage R&D programs based on novel technologies * Ability to grow the organization through collaborations and strategic alliances * Ability to control key elements of therapeutic product candidate development and commercialization with third parties * Ability to manage potential disruptions from the coronavirus outbreak * Accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and additional financing needs * Belief that therapeutic related developments have competitive advantages and can compete favorably and profitably in the cell and gene therapy industry[15](index=15&type=chunk)[18](index=18&type=chunk) - Cell & Gene Therapy Business (CGT): * Ability to adequately fund and scale collaboration, license, partnership, and joint venture agreements * Ability to advance therapeutic collaborations through industrial, clinical, regulatory, commercial, and manufacturing stages * Ability to implement POCare strategy for autologous therapies * Expectations regarding obtaining and maintaining intellectual property protection * Ability to commercialize products despite others' IP rights * Ability to obtain funding for clinical trials * Ability to further CGT development projects and fulfill obligations under agreements * Belief that systems and therapies are safe and effective * Risks related to the relationship with Tel Hashomer Medical Research Infrastructure and Services Ltd. (THM) and potential cancellation or challenge of the License Agreement * Outcome of legal proceedings * Dependence on POCare business financial results * Ability to complete development, processing, and rollout of Orgenesis Mobile Processing Units and Labs (OMPULs) and generate sufficient revenue from POCare Services * Ability to grow POCare business and develop additional joint venture relationships for demonstrable revenues[18](index=18&type=chunk) - Metalmark Investment Risks: * Morgenesis may not receive future payments from MM OS Holdings, L.P. (MM) * MM may force the sale of Morgenesis under certain conditions, potentially benefiting MM more than Orgenesis and its shareholders * MM may assume control of Morgenesis' Board of Managers, leading to Orgenesis' inability to control the subsidiary * MM has the right to buy Orgenesis' units in Morgenesis upon certain events, potentially resulting in Orgenesis holding no equity in Morgenesis * Orgenesis may be forced to redeem MM's units in Morgenesis, requiring substantial cash outlay * If MM exchanges Morgenesis units for Orgenesis common stock, significant dilution to existing stockholders could occur (up to **5,106,596 shares**)[18](index=18&type=chunk) [PART I](index=7&type=section&id=PART%20I) [ITEM 1. BUSINESS](index=7&type=section&id=ITEM%201.%20BUSINESS) Orgenesis Inc. is a global biotech company focused on making cell and gene therapies affordable and accessible through its decentralized POCare Platform - Orgenesis is a global biotech company focused on unlocking the potential of cell and gene therapies (CGTs) in an affordable and accessible format, primarily through autologous therapies manufactured at the point of care (POCare)[22](index=22&type=chunk) - The company's POCare Platform is a scalable infrastructure of technology and services designed to standardize and decentralize CGT production, utilizing POCare Centers and Orgenesis Mobile Processing Units & Labs (OMPULs)[27](index=27&type=chunk) - In **November 2022**, Orgenesis separated its operations into two segments: Morgenesis (POCare Services) and Therapies (POCare Therapies), following a significant investment from Metalmark Capital Partners[284](index=284&type=chunk) [Business Overview](index=7&type=section&id=Business%20Overview) Orgenesis is a global biotech company making cell and gene therapies affordable and accessible via its decentralized POCare Platform - Orgenesis is a global biotech company focused on unlocking the potential of cell and gene therapies (CGTs) in an affordable and accessible format, primarily **autologous therapies**[22](index=22&type=chunk) - The company's POCare Platform aims to overcome limitations of traditional centralized manufacturing by enabling closed and automated production near the patient, reducing cost and complex logistics[22](index=22&type=chunk)[24](index=24&type=chunk) - Advanced Therapy Medicinal Products (ATMPs) include: * Somatic cell therapy medicinal products (STMP) * Tissue engineered products (TEP) * Gene therapy medicinal products (GTMP)[24](index=24&type=chunk) [POCare Services](index=8&type=section&id=POCare%20Services) Orgenesis provides POCare Services through a decentralized network, offering process development, automation, GMP compliance, and CRO services - POCare Services include: * Process development, adaptation, and optimization (OMPULization) * Adaptation of automation and closed systems * Incorporation of serviced therapies compliant with GMP in OMPULs * Tech transfers and training of local teams at POCare Centers * Processing and supply of therapies and required supplies under GMP conditions * Contract Research Organization (CRO) services for clinical trials[29](index=29&type=chunk) - The POCare Platform aims to standardize infrastructure using flexible building blocks (POCare Centers and OMPULs) to allow quick expansion and reduce costs associated with traditional cleanroom facilities[36](index=36&type=chunk) - OMPULs can shorten implementation time from **18-24 months to 3-9 months**, offer a more cost-effective environment, and enable local scalability[37](index=37&type=chunk) [POCare Services Operations via Subsidiaries](index=9&type=section&id=POCare%20Services%20Operations%20via%20Subsidiaries) Orgenesis conducts POCare Services through Morgenesis LLC, a subsidiary with a **76.9% ownership stake**, which received a **$30.2 million** investment from Metalmark Capital Partners - Morgenesis LLC was formed in **August 2022** to streamline POCare Services, with Orgenesis owning **76.9%** of the subsidiary[30](index=30&type=chunk) - In **November 2022**, Metalmark Capital Partners invested **$30.2 million** in Morgenesis, acquiring **22.31%** of its equity interests, through **$20 million cash** and conversion of **$10.2 million** in senior secured convertible loans[31](index=31&type=chunk) - Subsidiaries transferred to Morgenesis: * Orgenesis Maryland LLC (North America POCare Services) * Tissue Genesis International LLC (technology and therapy development) * Orgenesis Services SRL (Belgium POCare Network expansion) * Orgenesis Germany GmbH (CRO services) * Orgenesis Korea Co. Ltd. (cell-processing and pre-clinical services in Korea) * Orgenesis Biotech Israel Ltd. (process development and cell-processing services in Israel)[33](index=33&type=chunk) [Integration of Custom Fit Solutions within the POCare Center](index=10&type=section&id=Integration%20of%20Custom%20Fit%20Solutions%20within%20the%20POCare%20Center) The POCare Platform integrates custom solutions within POCare Centers and OMPULs to decentralize ATMP production, minimizing risks and costs - The POCare Platform aims to bring ATMPs from research to patients worldwide by decentralizing processing, minimizing cell transportation, and reducing costs and timelines associated with traditional cleanroom facilities[35](index=35&type=chunk)[36](index=36&type=chunk) - Orgenesis has developed proprietary equipment and OMPULs for validation, clinical trials, manufacturing, and processing of cell and gene therapy products in a safe, reliable, and cost-effective manner at the point of care[37](index=37&type=chunk)[40](index=40&type=chunk) - Established POCare Centers globally, including: * Israel: Process development and QC labs, OMPULs at hospital sites, manufacturing TILs and CAR-T therapies * Greece: Three OMPULs installed, process development lab, servicing two customers * Maryland, USA: Operating process development lab, establishing cleanroom facility with government grant * Spain: OMPUL producing a clinical grade product[44](index=44&type=chunk) [POCare Services Development Facilities](index=12&type=section&id=POCare%20Services%20Development%20Facilities) Orgenesis operates specialized facilities like OBI for process development, the Korean Subsidiary for cell therapies, and Tissue Genesis for Icellator™ technology - Orgenesis Biotech Israel Ltd. (OBI) is a wholly-owned subsidiary specializing in custom process development, upscaling, innovation, and automation procedures for cell therapy industrialization, operating out of a **1,300 square meter facility**[45](index=45&type=chunk) - Tissue Genesis International develops the Icellator™ for isolating stromal and vascular fraction cells (SVF) from adipose tissue and is integrating automation for Cell and Gene Therapy into OMPULs[47](index=47&type=chunk)[48](index=48&type=chunk) - Theracell Laboratories in Greece, now controlled by Orgenesis through Morgenesis, has been designated a 'Priority Investment of Strategic National Importance' by Enterprise Greece, accelerating its development and clinical use of CGT at POCare[33](index=33&type=chunk)[52](index=52&type=chunk) - Notable **2022** POCare Services Activities: * Setup of regional POCare Centers overseeing development and GMP services, OMPUL deployment, and product supply * Expansion of POCare Centers in Maryland, Boston, California, Belgium, Greece, Slovenia, Israel, Italy, Spain, and Korea * Development of GMP processes for CAR-T, TILs, NK, and MSC-based therapies, with production already in OMPULs * Collaboration with UC Davis for GMP grade lentivirus production and decentralized OMPUL model validation * Partnership with Johns Hopkins University for a GMP facility with grant support from Maryland * Expansion of POCare Services to include CRO services[53](index=53&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [POCare Therapies](index=14&type=section&id=POCare%20Therapies) Orgenesis' POCare Therapies division develops and out-licenses advanced cell and gene therapies, leveraging its global network to expedite development - The global CGT market is rapidly growing, with over **2,000 active clinical trials** and significant acquisitions by large pharma companies, indicating high potential but also high costs and logistical challenges for traditional centralized production[59](index=59&type=chunk)[60](index=60&type=chunk) - Orgenesis' POCare Network offers an alternative drug development pathway, partnering with hospitals and research institutes to in-license promising therapies, adapt them to a point-of-care approach, and out-license for market approval, thereby lowering development costs and expediting the process[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - Therapies in Development (summarized): * **HiCAR-T**: IND enabling studies for B-ALL, B-cell Lymphoma * **CeCART**: Pre-clinical for Solid Tumors * **T-LOOP**: IND enabling studies for Solid Tumors * **Intra Nasal Delivery of Cell based Immunotherapy**: Pre-Clinical for Drug delivery technology, Glioblastoma * **MSCP**: Pre-clinical for Wound healing and Psoriasis * **EVRD**: Pre-clinical for CKD * **MDVAC**: IND enabling studies for Pancreatic Cancer * **AutoSVF**: Clinical development for Systemic ARDS, vascular disorders * **CellFix**: Clinical use for Cartilage Defects * **KYSLECEL (Autologous Pancreatic Islets)**: Market approval in the US for TP-IAT * **KT-DM-103 and KT-CP-203 (3D-Printed Pancreatic Islets)**: Own development for Type 1 diabetes and chronic pancreatitis * **RanTop, Ranpirnase Topical Formulation**: Clinical Stage for Anti-viral/Immune oncology * **Autovac**: Pre-clinical for Autologous viral vaccine * **Bioxomes**: Pre-clinical for Drug Delivery Technology * **MSPP**: Pre-clinical for Urinary Incontinence[70](index=70&type=chunk) - KYSLECEL, an autologous cell-based product for chronic or acute recurrent pancreatitis patients after total pancreatectomy (TP-IAT), is available in the United States and regulated by the FDA[72](index=72&type=chunk) [Strategic CGT Therapeutics Collaborations](index=18&type=section&id=Strategic%20CGT%20Therapeutics%20Collaborations) Collaborations, partnerships, and license agreements are central to Orgenesis' POCare strategy, spanning technology and therapeutic development globally - Collaborations, partnerships, joint ventures, and license agreements are key components of Orgenesis' POCare strategy[81](index=81&type=chunk) - POCare technology collaborators and partners include: * Ori Biotech * Accellix * Columbia University in the City of New York * Caerus Therapeutics Corporation * UC Davis * The Johns Hopkins University * The Weizman Institute of Science[81](index=81&type=chunk) - The company has collaborations and joint ventures for developing POCare Therapies in North America, Europe, Latin America, Asia, and Australia, involving in-licensing, out-licensing, service contracts, and manufacturing agreements[82](index=82&type=chunk) [Current POCare Therapies Development Facilities](index=18&type=section&id=Current%20POCare%20Therapies%20Development%20Facilities) Orgenesis maintains facilities like Koligo for KYSLECEL production, a Belgian Subsidiary for CGT development, and Mida for IPS-based therapies - Koligo maintains commercial production facilities for KYSLECEL in Indiana and develops new technologies such as bio-degradable 3D structures for cell/tissue delivery[83](index=83&type=chunk) - The Belgian Subsidiary specializes in developing and validating proprietary and licensed advanced cell and gene therapies, including Muscle-derived Mesenchymal Stem Cells therapy for SUI, leveraging its location in the Walloon biotech cluster[84](index=84&type=chunk) - Mida specializes in developing and validating IPS-based therapies and AI, while the Israel subsidiary focuses on R&D and R&D management services[86](index=86&type=chunk)[87](index=87&type=chunk) [Revenue Model, Business Development and Licenses](index=19&type=section&id=Revenue%20Model,%20Business%20Development%20and%20Licenses) Orgenesis' revenue model integrates licensed therapies, automated technology, and a collaborative network, generating revenue from out-licensing, services, and product sales - Orgenesis' POCare Platform revenue model involves in-licensing technology and therapeutic collaborations, followed by out-licensing marketing and manufacturing rights to partners and JVs, typically earning a **10% royalty** on net sales[89](index=89&type=chunk)[90](index=90&type=chunk) - Revenue streams include: * R&D development services provided to out-licensing partners * Hospital supply (sale or lease of products and processing services) * Cell process development services for third-party customers * POCare cell processing services at decentralized centers[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) Revenue Breakdown (Years Ended December 31, in thousands) | Revenue stream | 2022 ($) | 2021 ($) | | :-------------------------- | :------- | :------- | | POCare development services | 14,894 | 32,192 | | Cell process development services and hospital services | 11,212 | 3,310 | | POCare cell processing | 9,919 | - | | **Total** | **36,025** | **35,502** | [Competition in the Cell Therapy Field](index=20&type=section&id=Competition%20in%20the%20Cell%20Therapy%20Field) The cell therapy industry is intensely competitive, with Orgenesis facing larger, better-resourced competitors who could adopt similar strategies - The biopharmaceutical industry is intensely competitive, with continuous demand for innovation and speed in the evolving cell-based therapies market[96](index=96&type=chunk) - Competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and research institutions, many with substantially greater financial and technical resources[96](index=96&type=chunk) - While Orgenesis is not aware of direct competitors pursuing an identical POCare Platform business model, larger, better-capitalized entities could adopt similar strategies and develop them more rapidly[97](index=97&type=chunk) [Intellectual Property](index=20&type=section&id=Intellectual%20Property) Orgenesis protects its technology and products through a portfolio of **36 U.S. patents**, **75 foreign-issued patents**, and numerous pending applications - Orgenesis protects its technology and products through valid and enforceable patents and by maintaining trade secrets[98](index=98&type=chunk) - Intellectual Property Portfolio: * **36** United States patents * **75** foreign-issued patents * **18** pending patent applications in the United States * **71** pending patent applications in foreign jurisdictions (e.g., Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, New Zealand, North Korea, Panama, Russia, Singapore, South Africa, South Korea) * **11** international Patent Cooperation Treaty (PCT) patent applications[100](index=100&type=chunk) - Patents and applications cover diverse areas including dendritic cell-based vaccines, Ranpirnase compositions, tumor infiltrating lymphocytes (TILs), exosomes/bioxomes, bioreactors for cell culture, chimeric antigen receptors (CARs), and mobile processing laboratories[100](index=100&type=chunk) [Government Regulation](index=22&type=section&id=Government%20Regulation) Orgenesis' operations are subject to extensive and complex government regulations from bodies like the FDA and EMA, with non-compliance leading to severe penalties - Orgenesis must comply with regulatory requirements from local, state, national, and international bodies concerning R&D, testing, manufacturing (GMPs), labeling, distribution, import/export, and facility registration[119](index=119&type=chunk) - U.S. Regulatory Process (FDA): * Pre-clinical tests (GLP) * Investigational New Drug (IND) application * Institutional Review Board (IRB) approval * Clinical trials (GCP) * Current GMP regulations * Biologics License Application (BLA) * FDA review and approval, including manufacturing facility inspection * Potential post-marketing testing and surveillance[126](index=126&type=chunk)[130](index=130&type=chunk) - European Regulatory Process (EMA): * Compliance with current GMP regulations * Clinical Trial Application (CTA) via CTIS * Ethic committee approval * Clinical trials (GCP) * Centralized submission for Marketing Authorization * Review and approval of Marketing Authorization Application[131](index=131&type=chunk) - The FDA has granted **Orphan Drug designation** for Orgenesis' AIP cells for severe hypoglycemia-prone diabetes, providing incentives like **7 years of market exclusivity** and reduced fees[133](index=133&type=chunk) [Human Capital Resources](index=25&type=section&id=Human%20Capital%20Resources) As of **December 31, 2022**, Orgenesis had **167 employees** and is committed to diversity, equity, and inclusion, with **53% women** in its workforce - As of **December 31, 2022**, Orgenesis had **167 employees** and utilized outside consultants for clinical, finance, accounting, and business development services[134](index=134&type=chunk) - The company offers a total rewards package (base salary, cash bonus, equity compensation) to attract and retain highly skilled employees in a competitive biotechnology market[135](index=135&type=chunk) - Orgenesis is committed to diversity, equity, and inclusion, with its total workforce comprising approximately **53% women**, **11% ethnically diverse**, and **50% over the age of 40**[136](index=136&type=chunk) [Health, Wellness and Safety](index=26&type=section&id=Health,%20Wellness%20and%20Safety) Orgenesis prioritizes employee safety and health, implementing clear COVID-19 policies, encouraging remote work, and expanding benefits - Orgenesis prioritizes employee safety and health, particularly in response to the COVID-19 pandemic, by implementing clear policies, encouraging remote work, and providing resources[138](index=138&type=chunk) - COVID-19 response measures included: * Establishing clear and regular COVID-19 policies, safety protocols, and updates * Strongly encouraging office-based employees to work from home * Implementing protocols for actual and suspected COVID-19 cases and potential exposure * Expanding financial, medical, and mental health benefits, including mindfulness sessions[138](index=138&type=chunk)[143](index=143&type=chunk) [Environmental, Social and Governance](index=26&type=section&id=Environmental,%20Social%20and%20Governance) Orgenesis integrates sustainability, with the Board overseeing ESG strategy and employees adhering to a Code of Ethics and Business Conduct - The Board of Directors' Nominating and Governance Committee oversees Environmental, Social and Governance (ESG) strategy and risk management[139](index=139&type=chunk) - Employees are responsible for upholding core values and adhering to the Code of Ethics and Business Conduct, which includes policies on bribery, corruption, conflicts of interest, and a whistleblower program[139](index=139&type=chunk) - Orgenesis is committed to environmental protection by monitoring resource use, improving efficiency, reducing emissions and waste, and using third-party vendors for biohazardous and chemical waste disposal[140](index=140&type=chunk) [Corporate and Available Information](index=26&type=section&id=Corporate%20and%20Available%20Information) Orgenesis provides SEC filings free on its website, with common stock traded on the Nasdaq Capital Market under 'ORGS' - Orgenesis makes its SEC filings (10-K, 10-Q, 8-K) available free of charge on its website (http://www.orgenesis.com)[141](index=141&type=chunk) - The company's common stock is listed and traded on the Nasdaq Capital Market under the symbol '**ORGS**'[142](index=142&type=chunk) [ITEM 1A. RISK FACTORS](index=27&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines significant risks impacting investment in Orgenesis, including business model uncertainty, going concern doubts, unprofitability, and Metalmark Investment risks - Investment in Orgenesis common stock is speculative due to the limited operating history and unproven business model of its POCare business, and the rapidly evolving cell therapy industry[145](index=145&type=chunk)[149](index=149&type=chunk) - Management and independent auditors have concluded there is substantial doubt about the company's ability to continue as a going concern as of **December 31, 2022**, due to recurring losses and negative cash flows[145](index=145&type=chunk)[150](index=150&type=chunk) - The company is not profitable as of **December 31, 2022**, has limited cash flow, and its future success is highly dependent on successful development of novel cell-based therapy technology and effective management of growth[145](index=145&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) [Summary of Risk Factors](index=27&type=section&id=Summary%20of%20Risk%20Factors) Key risks include the speculative nature of the POCare business, going concern doubts, unprofitability, R&D challenges, and Metalmark Investment risks - Key risks include: * Limited operating history and unproven business model of POCare business * Substantial doubt about ability to continue as a going concern * Unprofitability and limited cash flow * Risks inherent in novel cell-based therapy R&D * Challenges in collaborations and strategic alliances * Impact of COVID-19 pandemic * Dependence on intellectual property protection * Risks related to OMPUL development and operation * Product liability lawsuits * Dependence on information technology and cybersecurity risks * Inability to develop in-house sales/commercial distribution or maintain third-party collaborations * Undesirable side effects of product candidates * Complex manufacturing of biologics and scaling difficulties * Reliance on sole/limited source vendors for reagents and equipment * Significant competition * High dependence on key personnel * Extensive industry regulation * Risks related to the Metalmark Investment (future payments, forced sale, control of Morgenesis, dilution)[145](index=145&type=chunk)[146](index=146&type=chunk) [Risks Related to Our Company and POCare Business](index=29&type=section&id=Risks%20Related%20to%20Our%20Company%20and%20POCare%20Business) Orgenesis faces significant risks from its unproven POCare business model, going concern doubts, unprofitability, R&D challenges, and need for capital - Orgenesis' POCare business has a limited operating history and unproven business model, making its prospects speculative and its ability to execute its strategy uncertain[149](index=149&type=chunk) - The company's management and auditors have expressed substantial doubt about its ability to continue as a going concern due to expected operating losses and negative cash flows, necessitating additional capital or increased revenues[150](index=150&type=chunk)[151](index=151&type=chunk) - Risks in novel technology R&D include: * Obtaining regulatory approval from agencies with limited cell therapy experience * Developing consistent and reliable processes for cell engineering and administration * Sourcing clinical and commercial supplies * Developing cost-effective manufacturing and distribution networks * Establishing sales and marketing capabilities * Maintaining post-marketing surveillance[152](index=152&type=chunk)[157](index=157&type=chunk) - The therapeutic efficacy of Ranpirnase and other product candidates is unproven in humans, and successful development and commercialization are not guaranteed[158](index=158&type=chunk) - The company needs to grow its organization significantly, which poses management challenges in recruiting, integrating, and motivating personnel, as well as managing outsourced activities[160](index=160&type=chunk)[161](index=161&type=chunk) - Additional capital may be required to support business growth, and financing may not be available on acceptable terms, potentially leading to dilution for existing stockholders[163](index=163&type=chunk)[165](index=165&type=chunk) - Operations may be adversely affected by ongoing developments in Ukraine and Russia, and currency exchange fluctuations, particularly the euro-to-U.S. dollar rate, can impact financial results[166](index=166&type=chunk)[167](index=167&type=chunk) - Risks in collaborations and strategic alliances: * Collaborators may not perform as expected or commit sufficient resources * Delays in clinical trials or regulatory submissions * Disputes or termination of collaborations * Collaborators developing competing products or failing to maintain intellectual property rights[168](index=168&type=chunk)[170](index=170&type=chunk) - COVID-19 pandemic impacts include: * Delays in supply chain and manufacturing * Disruptions to discovery and preclinical efforts * Changes or shutdowns at clinical trial sites * Limited patient access and enrollment * Changes in regulatory requirements[173](index=173&type=chunk)[176](index=176&type=chunk) [Risks Related to Our OMPULs](index=40&type=section&id=Risks%20Related%20to%20Our%20OMPULs) OMPUL operations face risks from local regulations, facility damage, supply chain issues, skilled labor shortages, and security concerns - OMPUL operations may be restricted by local zoning, environmental, medical waste, or other licensing regulations, potentially limiting their location, size, and use[201](index=201&type=chunk) - Damage or inoperability of OMPUL facilities due to natural or man-made disasters could disrupt testing and R&D, leading to loss of customers or reputational harm[202](index=202&type=chunk)[203](index=203&type=chunk) - Operational risks for OMPULs include: * Changes in price and availability of raw materials * Dependence on skilled human capital and potential shortages * Security concerns in certain locations impacting safety of OMPULs, employees, and patients * Heavy industry regulation, with changes or violations potentially reducing revenue and harming business[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) [Risks Related to Our Trans-Differentiation Technologies for Diabetes and the THM License Agreement](index=41&type=section&id=Risks%20Related%20to%20Our%20Trans-Differentiation%20Technologies%20for%20Diabetes%20and%20the%20THM%20License%20Agreement) Orgenesis faces risks with its diabetes trans-differentiation technology, including potential THM License Agreement cancellation and an ongoing royalty dispute - THM is entitled to cancel the License Agreement if the Israeli Subsidiary fails to fulfill development plan terms or breaches obligations, with cure periods of **one year or 180 days**, respectively[209](index=209&type=chunk) - An ongoing legal proceeding initiated by THM alleges that Orgenesis and its Israeli Subsidiary owe royalties for using Sheba's know-how and technology in cell therapy, including the point-of-care platform and CDMO activities[209](index=209&type=chunk)[269](index=269&type=chunk) - Challenges in developing and commercializing trans-differentiating technology for diabetes include: * Obtaining regulatory approval from authorities with limited experience in this technology * Developing consistent and reliable processes for engineering and infusing patient's liver cells * Ensuring safe administration and long-term follow-up for patients * Sourcing clinical and commercial supplies * Developing cost-effective manufacturing and distribution networks * Establishing sales and marketing capabilities * Maintaining post-marketing surveillance and risk assessment programs[210](index=210&type=chunk)[212](index=212&type=chunk) [Risks Related to Development and Regulatory Approval of Our Therapies and Product Candidates](index=42&type=section&id=Risks%20Related%20to%20Development%20and%20Regulatory%20Approval%20of%20Our%20Therapies%20and%20Product%20Candidates) Biopharmaceutical development is inherently risky, facing extensive regulations, clinical trial failures, manufacturing complexities, and market acceptance challenges - Biopharmaceutical product development is inherently risky, with no guarantee of successful product candidates or commercial viability, and limited resources may be expended on unsuccessful programs[211](index=211&type=chunk) - Reasons for R&D program failure include: * Inability to identify additional product candidates * Failure in preclinical or clinical testing * Harmful side effects or lack of efficacy * Competitor alternatives * Third-party patent infringement * Unfavorable market changes * Inability to produce in commercial quantities at acceptable cost * Lack of acceptance by patients, medical community, or payers[213](index=213&type=chunk) - Extensive, complex, and costly government regulations (FDA, EMA) significantly impact product development, manufacturing (GMPs), and distribution, with non-compliance leading to severe sanctions and delays[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Factors affecting revenue generation and profitability: * Completion of R&D and nonclinical/clinical development * Obtaining regulatory approvals and marketing authorizations * Developing sustainable and scalable manufacturing processes and supply relationships * Launching and commercializing product candidates * Achieving market acceptance * Addressing competing technological and market developments * Protecting intellectual property * Attracting and retaining qualified personnel[220](index=220&type=chunk)[223](index=223&type=chunk) - Clinical trial risks include: * Inability to generate sufficient preclinical data * Delays in regulatory consensus on study design or IRB approval * Imposition of clinical holds * Difficulties in patient recruitment or retention * Failure to comply with GCP requirements * Adverse events outweighing benefits * Changes in regulatory requirements or standard of care * High costs or negative/inconclusive results * Manufacturing, testing, or supply delays[222](index=222&type=chunk)[227](index=227&type=chunk) - Manufacturing of biologics is complex, highly regulated, and susceptible to product loss, contamination, equipment failure, and logistical issues, making process development and scaling challenging and costly[231](index=231&type=chunk)[232](index=232&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - Reliance on sole or limited source vendors for reagents, specialized equipment, and other specialty materials poses a risk to manufacturing and supply, potentially causing delays or disruptions[237](index=237&type=chunk)[238](index=238&type=chunk) - Risks associated with international operations: * Differing regulatory requirements, tariffs, trade barriers, and exchange controls * Economic weakness or political instability * Compliance with foreign tax, employment, immigration, and labor laws * Foreign currency fluctuations * Difficulties in staffing and managing foreign operations * Potential liability under foreign anti-corruption laws * Challenges in enforcing intellectual property rights * Production shortages or business interruptions from geopolitical actions or disease outbreaks[240](index=240&type=chunk)[243](index=243&type=chunk) [Risks Related to the Metalmark Investment](index=49&type=section&id=Risks%20Related%20to%20the%20Metalmark%20Investment) The Metalmark Investment in Morgenesis LLC carries risks including uncertain future payments, MM's control rights, potential forced sale, and significant stockholder dilution - Morgenesis may not receive future payments of up to **$20 million** from MM, which are contingent on achieving specific Net Revenue targets for **2022 and 2023**, and Orgenesis stockholder approval of LLC Agreement Terms[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - MM may force the sale of Morgenesis under certain conditions (e.g., after **two years** or a Material Governance Event), potentially resulting in MM receiving greater value than Orgenesis and its shareholders[250](index=250&type=chunk)[251](index=251&type=chunk) - MM may assume control of Morgenesis' Board of Managers under specific circumstances (e.g., Material Underperformance Event, Material Governance Event, failure to pay redemption price), leading to Orgenesis' inability to control the subsidiary's activities[252](index=252&type=chunk)[253](index=253&type=chunk)[255](index=255&type=chunk) - MM has the right to buy Orgenesis' units in Morgenesis (MM Call Option) upon a Material Governance Event or failure of stockholder approval, potentially resulting in Orgenesis holding no equity in Morgenesis[256](index=256&type=chunk) - Orgenesis may be forced to redeem all of MM's Preferred Units in Morgenesis under certain conditions, requiring substantial cash outlay and adversely affecting its financial position[257](index=257&type=chunk)[258](index=258&type=chunk) - If MM exercises its Stock Exchange Option, Orgenesis could issue up to **5,106,596 shares** of common stock to MM, potentially causing significant dilution to existing stockholders[259](index=259&type=chunk) [Risks Related to our Common Stock](index=52&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) Risks related to Orgenesis' common stock include potential dilution from future share issuances, stock price volatility, and no foreseeable dividend payments - Future issuances of additional shares (up to **145,833,334 authorized**) could result in significant dilution for existing stockholders and potentially a change of control[261](index=261&type=chunk) - The company's stock price and trading volume may be volatile due to factors such as: * Quarterly variations in operating results * Changes in future financial performance expectations * Announcements related to the business * Conditions affecting the biotechnology industry * Success of operating strategy * Performance of comparable companies[262](index=262&type=chunk) - Orgenesis does not intend to pay dividends on its common stock in the foreseeable future, meaning investment gains depend solely on stock price appreciation[265](index=265&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=53&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) This section states that there are no unresolved staff comments from the SEC - Not applicable, indicating no unresolved staff comments[266](index=266&type=chunk) [ITEM 2. PROPERTIES](index=53&type=section&id=ITEM%202.%20PROPERTIES) Orgenesis Inc. leases various global facilities for its principal office, laboratories, and production, believing them suitable for its business operations - Orgenesis Inc. does not own real property but leases facilities for its operations[267](index=267&type=chunk) - Leased properties include: * **Orgenesis Inc.**: Principal office in Germantown, MD * **Orgenesis Maryland LLC.**: FastForward laboratory and office in Baltimore, MD * **Orgenesis Korea Co. Ltd**: Operational production laboratory and office in Gwanggyo, South Korea * **Orgenesis Ltd.**: Laboratory and office in Nes Ziona, Israel * **Koligo Therapeutics Inc.**: Production facility and development labs in New Albany, Indiana * **Tissue Genesis International LLC**: Production facility and development labs in Leander, Texas * **Orgenesis Biotech Israel Ltd.**: Laboratories and offices in Bar Lev Industrial Park, Israel * **Mida Biotech BV**: Laboratories and offices in Leiden, The Netherlands * **Orgenesis Belgium and Orgenesis Services SRL**: Laboratories and offices near Namur, Belgium * **Theracell Laboratories**: Laboratory and offices in Koropi, Greece[267](index=267&type=chunk) - The company believes its facilities are in good condition and suitable for its business, with suitable alternative or additional space expected to be available on commercially reasonable terms if needed[268](index=268&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=54&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Orgenesis is involved in a legal dispute with THM in Tel Aviv District Court, seeking **NIS 10 million** and royalties for alleged technology use - A complaint was filed on **January 18, 2022**, in the Tel Aviv District Court against Orgenesis Inc. and its Israeli Subsidiary by Tel Hashomer Medical Research, Infrastructure and Services Ltd. (THM)[269](index=269&type=chunk) - Plaintiffs seek declaratory relief for royalties (**7% of sales, 24% of sublicense revenues**) and **NIS 10 million** in payments, alleging use of THM's know-how and technology in cell therapy and point-of-care platform activities[269](index=269&type=chunk) - Orgenesis believes the allegations are without merit, intends to vigorously defend itself, and has made no provision in financial statements as a material loss is not considered probable[269](index=269&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=54&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to Orgenesis Inc. - Not applicable, indicating no mine safety disclosures[271](index=271&type=chunk) [PART II](index=54&type=section&id=PART%20II) [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=54&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Orgenesis common stock (ORGS) trades on Nasdaq, with **305 holders** as of March 22, 2023; the company does not anticipate paying dividends - Orgenesis common stock has been listed on the Nasdaq Capital Market under the symbol '**ORGS**' since **March 13, 2018**[273](index=273&type=chunk) - As of **March 22, 2023**, there were **305 holders of record** of the company's common stock, with a closing price of **$1.43**[273](index=273&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future, planning to retain all earnings for business operations and expansion[274](index=274&type=chunk)[265](index=265&type=chunk) - In **October 2023**, the company issued additional warrants to purchase **174,460 shares** of Common Stock to Ricky Neumann and **41,042 additional warrants** to other investors, as part of an amendment to a Securities Purchase Agreement and Registration Rights Agreement[276](index=276&type=chunk) - No shares were repurchased under the **$10 million** Stock Repurchase Plan during the year ended **December 31, 2022**[277](index=277&type=chunk)[278](index=278&type=chunk) [ITEM 6. [RESERVED]](index=55&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=55&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes Orgenesis' financial condition and results for **2022 and 2021**, focusing on its CGT business, POCare Platform, and segment separation - The discussion analyzes financial condition and results of operations for the years ended **December 31, 2022, and 2021**, in conjunction with consolidated financial statements[279](index=279&type=chunk)[280](index=280&type=chunk) - Orgenesis is a global biotech company focused on affordable and accessible cell and gene therapies (CGTs), primarily autologous therapies, through its Point-of-Care (POCare) Platform[281](index=281&type=chunk) - Following the Metalmark Investment in **November 2022**, operations were separated into two segments: Morgenesis (POCare Services) and Therapies (therapeutic development operations)[284](index=284&type=chunk) [Corporate Overview](index=55&type=section&id=Corporate%20Overview) Orgenesis is a global biotech company making CGTs affordable and accessible via its POCare Platform, which includes POCare Services and Therapies segments - Orgenesis is a global biotech company focused on unlocking the potential of CGTs in an affordable and accessible format, primarily through autologous therapies manufactured at the point of care (POCare)[281](index=281&type=chunk) - The company's POCare Platform, operated by Morgenesis, provides a scalable infrastructure of technology and services, including OMPULs, to ensure standardized, GMP-compliant production near the patient[282](index=282&type=chunk)[285](index=285&type=chunk) - POCare Services include: * Process development, adaptation, and optimization (OMPULization) * Adaptation of automation and closed systems * Incorporation of serviced therapies compliant with GMP in OMPULs * Tech transfers and training of local teams for serviced therapies * Processing and supply of therapies and required supplies under GMP conditions * Contract Research Organization (CRO) services for clinical trials[285](index=285&type=chunk)[289](index=289&type=chunk) - The Therapies segment focuses on in-licensing promising therapies from academic institutions, adapting them to a point-of-care approach, and out-licensing for market approval, aiming to lower development costs and expedite the process[286](index=286&type=chunk)[288](index=288&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) [Significant Developments During Fiscal 2022](index=58&type=section&id=Significant%20Developments%20During%20Fiscal%202022) Fiscal **2022** saw significant financing, including a **$2.175 million** private placement, **$9.15 million** in convertible loans, and a **$30.2 million** Metalmark Investment in Morgenesis - Financing Activities (**2022**): * **Equity**: Sold **724,999 shares** of Common Stock and warrants for **146,959 shares** in a private placement, raising **$2.175 million** * **Convertible Loan Agreements**: Entered into three agreements for an aggregate of **$9.15 million** at **6% interest**, issuing warrants for **408,335 shares**. Two loans totaling **$8 million** were later extended to **Q1 2024**, with interest increased to **10%** and conversion price amended to **$2.50 per share**, issuing additional warrants for **1,777,777 shares** * **Loan Repayments**: Repaid four loans totaling **$2.3 million**[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) - Metalmark Capital Partners invested **$30.2 million** in Morgenesis LLC, acquiring **22.31%** of its equity, comprising **$20 million cash** and conversion of **$10.2 million** in existing convertible loans. Future payments of up to **$20 million** and a **$10 million** Earnout Payment are contingent on Morgenesis' performance[296](index=296&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk) - Orgenesis acquired Mida Biotech BV for **$100 thousand**, paid via issuance of company common stock[302](index=302&type=chunk) - Entered into an exclusive, worldwide royalty-bearing license and research agreement with Yeda Research and Development Company Limited for TIL and CAR T-cell immunotherapy platforms[303](index=303&type=chunk) [Results of Operations](index=60&type=section&id=Results%20of%20Operations) Orgenesis reported **$36,025 thousand** in total revenues for **2022**, a **1% increase**, with operating loss decreasing by **48.8%** due to reduced costs Consolidated Statements of Comprehensive Loss (Income) (in thousands) | Indicator | 2022 ($) | 2021 ($) | | :--------------------------------------------------- | :------- | :------- | | Total revenues | 36,025 | 35,502 | | Cost of revenues, development services and R&D expenses | 27,066 | 36,644 | | Amortization of intangible assets | 911 | 948 | | Selling, general and administrative expenses | 15,589 | 14,710 | | Impairment expenses | 1,061 | - | | Operating loss | 8,602 | 16,800 | | Other income | (173) | (2,278) | | Loss from extinguishment in connection with convertible loan | 52 | 1,865 | | Financial expense, net | 1,971 | 1,292 | | Share in income of associated company | 1,508 | 272 | | Loss before income taxes | 11,960 | 17,951 | | Tax expense | 209 | 108 | | Net loss | 12,169 | 18,059 | Revenue by Stream (Years Ended December 31, in thousands) | Revenue stream | 2022 ($) | 2021 ($) | | :------------------------------------------ | :------- | :------- | | POCare development services | 14,894 | 32,192 | | Cell process development services and hospital services | 11,212 | 3,310 | | POCare cell processing | 9,919 | - | | **Total** | **36,025** | **35,502** | - Revenue changes (**2022 vs. 2021**): * **POCare development services**: Declined due to completion of most performance obligations in **2021** * **Cell process development services and hospital services**: Increased due to new agreements with third-party customers * **POCare cell processing**: New revenue stream from signed cell processing agreements[309](index=309&type=chunk) Cost of Revenues, Development Services and R&D Expenses (in thousands) | Expense Category | 2022 ($) | 2021 ($) | | :--------------------------------------- | :------- | :------- | | Salaries and related expenses | 11,206 | 10,977 | | Stock-based compensation | 616 | 729 | | Subcontracting, professional and consulting services | 5,655 | 12,796 | | Lab expenses | 2,685 | 3,513 | | Depreciation expenses, net | 1,017 | 874 | | Other research and development expenses | 6,010 | 7,755 | | Less – grant | (123) | - | | **Total** | **27,066** | **36,644** | - Cost of revenues, development services and R&D expenses decreased by **26%** in **2022**, primarily due to the completion of the majority of development work on OMPULs, leading to a **40% decline** in subcontracting, professional, consulting, lab, and other R&D expenses[311](index=311&type=chunk) Selling, General and Administrative Expenses (in thousands) | Expense Category | 2022 ($) | 2021 ($) | | :--------------------------------- | :------- | :------- | | Salaries and related expenses | 4,008 | 6,277 | | Stock-based compensation | 362 | 945 | | Accounting and legal fees | 5,527 | 3,293 | | Professional fees | 3,080 | 1,107 | | Rent and related expenses | 199 | 249 | | Business development | 474 | 577 | | Depreciation expenses, net | 50 | 42 | | Other general and administrative expenses | 1,889 | 2,220 | | **Total** | **15,589** | **14,710** | - Selling, general and administrative expenses increased by **6%** in **2022**, mainly due to higher accounting and legal fees and professional services related to investment activities (e.g., Metalmark Investment), offset by a decline in salaries (no **$3.6 million bonus** for CEO in **2022**)[312](index=312&type=chunk) - Impairment expenses of **$1,061 thousand** were recorded in **2022** (vs. **$0** in **2021**) due to the write-off of customer relationships and IPR&D intangible assets[313](index=313&type=chunk)[314](index=314&type=chunk) - Financial expenses, net, increased by **53%** to **$1,971 thousand** in **2022**, primarily due to increased interest and related expenses on new and existing convertible loans[315](index=315&type=chunk) - Tax expense increased by **94%** to **$209 thousand** in **2022**, mainly due to increased tax liabilities in the U.S. following changes in Internal Revenue Code Section 174 regarding R&E expenditures[316](index=316&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) Orgenesis reported an accumulated deficit of **$121,261 thousand** and negative operating cash flows, raising substantial doubt about its going concern ability Working Capital (in thousands) | Indicator | December 31, 2022 ($) | December 31, 2021 ($) | | :---------------- | :-------------------- | :-------------------- | | Current assets | 46,318 | 25,758 | | Current liabilities | 15,910 | 15,365 | | **Working capital** | **30,408** | **10,393** | - Current assets increased by **$20,560 thousand**, mainly due to increased accounts receivable from higher POCare revenues. Current liabilities increased by **$545 thousand**, primarily from higher accounts payable and accrued expenses, offset by reduced current maturities of convertible loans[317](index=317&type=chunk)[318](index=318&type=chunk) Cash Flow Summary (Years Ended December 31, in thousands) | Cash Flow Activity | 2022 ($) | 2021 ($) | | :------------------------------------------ | :------- | :------- | | Net loss | (12,169) | (18,059) | | Net cash used in operating activities | (24,924) | (26,866) | | Net cash used in investing activities | (14,133) | (12,384) | | Net cash provided by (used in) financing activities | 39,578 | (106) | | Net change in cash and cash equivalents and restricted cash | 521 | (39,356) | - Net cash used in operating activities decreased due to a lower net loss and reduced stock-based compensation, partially offset by increased accounts receivable[320](index=320&type=chunk)[322](index=322&type=chunk) - Net cash used in investing activities increased due to additional loans to associated companies and purchases of property, plants, and equipment for POCare facilities[320](index=320&type=chunk) - Net cash provided by financing activities significantly increased due to proceeds from equity investments (**$2.181 million**), loans (**$19.150 million**), and the Metalmark investment (**$20 million**)[321](index=321&type=chunk)[323](index=323&type=chunk) - Subsequent to year-end, the company extended convertible loan maturities, increased interest rates, amended conversion prices, entered new convertible loan agreements for **$5 million**, and completed a registered direct offering for **$3.7 million**, with proceeds for working capital and therapy activities[324](index=324&type=chunk) [Off-Balance Sheet Arrangements](index=65&type=section&id=Of%20-Balance%20Sheet%20Arrangements) Orgenesis Inc. has no material off-balance sheet arrangements that would significantly impact its financial condition or results of operations - Orgenesis has no material off-balance sheet arrangements that would significantly impact its financial condition or results of operations[325](index=325&type=chunk) [Critical Accounting Policies and Estimates](index=65&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Orgenesis' critical accounting policies involve significant judgment for income taxes, revenue recognition, and estimating standalone selling prices - Critical accounting policies and estimates include: * **Income Taxes**: Deferred income tax assets and liabilities are computed based on differences between financial statement and tax bases, with valuation allowances established when realization is not probable. Uncertain tax positions are evaluated using a 'more likely than not' standard * **Revenue from Contracts with Customers**: Revenue is recognized when control of services is transferred, based on transaction price. The company has three main revenue streams: POCare development services, cell process development services (including hospital supplies), and POCare cell processing * **Significant Judgement and Estimates**: Required for identifying distinct performance obligations, estimating standalone selling prices, and determining revenue recognition timing (over time or at a point in time)[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=67&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that quantitative and qualitative disclosures about market risk are not applicable to Orgenesis Inc. - Not applicable, indicating no quantitative and qualitative disclosures about market risk[340](index=340&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=67&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item refers to the consolidated financial statements and supplementary data, included elsewhere in the Annual Report on Form 10-K - The financial statements and supplementary data are included following the 'Index to Financial Statements' on page **F-1** of this Annual Report on Form 10-K[341](index=341&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=67&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This section states that there have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[342](index=342&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=67&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Orgenesis management concluded that disclosure controls and internal control over financial reporting were effective as of **December 31, 2022** - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of **December 31, 2022**[343](index=343&type=chunk) - Management assessed the effectiveness of internal control over financial reporting using the COSO framework and concluded it was effective as of **December 31, 2022**[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - No material changes in internal control over financial reporting occurred during the **fourth quarter of 2022**[347](index=347&type=chunk) [ITEM 9B. OTHER INFORMATION](index=68&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) This section states that there is no other information to report - None, indicating no other information to report[348](index=348&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=68&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This section states that there is no disclosure regarding foreign jurisdictions that prevent inspections - None, indicating no disclosure regarding foreign jurisdictions that prevent inspections[349](index=349&type=chunk) [PART III](index=68&type=section&id=PART%20III) [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=68&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section provides information on Orgenesis Inc.'s directors and executive officers, including their professional backgrounds and board committee structures Directors and Executive Officers (as of March 22, 2023) | Name | Age | Position | | :--------------- | :-- | :-------------------------------------------- | | Vered Caplan | 54 | Chief Executive Officer and Chairperson of the Board of Directors | | Neil Reithinger | 53 | Chief Financial Officer, Secretary and Treasurer | | Efrat Assa Kunik | 48 | Chief Development Officer | | David Sidransky | 62 | Director | | Guy Yachin | 55 | Director | | Yaron Adler | 52 | Director | | Ashish Nanda | 57 | Director | | Mario Philips | 53 | Director | - The Board of Directors consists of **six members**, with a majority deemed independent according to Nasdaq Stock Market listing standards[370](index=370&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) - Board Committees: * **Audit Committee**: Members are Dr. Sidransky, Mr. Yachin, and Mr. Philips. Dr. Sidransky is designated as an 'audit committee financial expert' * **Compensation Committee**: Members are Dr. Sidransky, Mr. Adler, and Mr. Yachin * **Nominating and Corporate Governance Committee**: Members are Mr. Nanda, Mr. Adler, and Mr. Yachin * **Research and Development Committee**: Members are Mr. Yachin and Dr. Sidransky[374](index=374&type=chunk) - All committees operate under written charters and are comprised of independent direc

Financial Data and Key Metrics Changes - Company reported revenues of $8 million for Q3 2022, a decrease from $8.7 million in Q3 2021, primarily due to a decline in point-of-care (POC) development services [20] - Cost of revenues for development services and R&D decreased to $4.7 million from $10 million, a 53% reduction [21] - SG&A expenses were reduced by 49% to $3.1 million compared to $6.1 million in the same period last year [21] - Operating loss for Q3 2022 was $7 million, down from $7.7 million in Q3 2021, while net loss decreased by 86% to $1.4 million from $10.1 million [22] Business Line Data and Key Metrics Changes - Revenue from cell processing contributed $2.4 million in Q3 2022, marking the beginning of revenue recognition from this segment [20] - The company has developed a low-cost, capital-efficient business model with a pipeline of a dozen distinct therapeutic programs in various stages of development [14] Market Data and Key Metrics Changes - The global supply network now spans North America, Europe, Asia, and the Middle East, with point-of-care centers established as strategic hubs [12] - Expansion of collaboration with Johns Hopkins to establish a new point-of-care center, funded in part by a $5 million grant from the state of Maryland [13] Company Strategy and Development Direction - The company aims to reduce the cost of therapies to tens of thousands of dollars, making them more widely available [12] - A decentralized model is being pursued to address industry challenges, including capacity constraints and excessive costs [10] - The recent investment from Metalmark Capital is expected to accelerate the rollout of point-of-care services while minimizing dilution to existing shareholders [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business outlook, highlighting the scalable recurring revenue model and the potential for growth in the industry [18] - The investment from Metalmark is seen as a validation of the business model and a means to expand operations, particularly in the U.S. market [26][38] Other Important Information - The company has successfully reduced SG&A expenses by 49% and net loss by 86% compared to the same period last year, achieving nearly breakeven income from operations for Q3 2022 [16] - The company has a strong track record of securing non-dilutive grant funding to support the development of its therapeutic programs [16] Q&A Session Summary Question: Examples of past capital constraints and how new capital will help growth - Management indicated that capital constraints were related to CapEx for setting up new point-of-care sites and hiring staff, and the new capital will enable expansion, especially in the U.S. [25][26] Question: Current number of active OMPULs - Management refrained from providing a specific number but emphasized the importance of capacity utilization over the number of OMPULs [27][29] Question: Highlights from the therapeutic pipeline - Most therapeutic programs are in preclinical or various clinical stages, with progress being made, and potential for revenue generation in the coming year [30] Question: Achievements in cost management - Management attributed the improved financial results to past investments and the maturation of the business, with the new capital expected to facilitate further growth [36] Question: Profitability expectations with new capital infusion - Management indicated a focus on meeting demand while maintaining a growth trajectory, with a goal to avoid losses [38] Question: Growth of cell processing revenue and its significance - Cell processing revenue is recognized as a recurring portion of the business, with expectations for further growth as the company expands its capabilities [39]

PART I [Financial Statements (unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) Unaudited financial statements for the nine months ended September 30, 2022, show decreased revenues, a reduced net loss, increased assets and liabilities, and significant financing cash inflows, including a key investment in Morgenesis LLC [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets increased to **$70.7 million**, liabilities rose sharply to **$40.4 million** due to convertible loans, and total equity decreased to **$30.3 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $31,856 | $25,758 | +$6,098 | | Cash and cash equivalents | $3,015 | $5,473 | -$2,458 | | Accounts receivable, net | $23,744 | $15,245 | +$8,499 | | **Total Assets** | **$70,690** | **$59,841** | **+$10,849** | | **Total Current Liabilities** | $34,168 | $15,365 | +$18,803 | | Short-term convertible loans | $22,488 | $5,885 | +$16,603 | | **Total Liabilities** | **$40,440** | **$21,210** | **+$19,230** | | **Total Equity** | **$30,250** | **$38,631** | **-$8,381** | [Condensed Consolidated Statements of Loss and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) For the nine months ended September 30, 2022, total revenues decreased by **21.7%** to **$22.4 million**, while reduced operating expenses led to an improved net loss of **$10.8 million** Statement of Loss Summary (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $22,401 | $28,610 | -21.7% | | Operating Loss | $7,975 | $9,925 | -19.6% | | Net Loss Attributable to Orgenesis Inc. | $10,792 | $13,037 | -17.2% | | Basic and Diluted Loss Per Share | $0.43 | $0.54 | Improved | [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased from **$38.6 million** to **$30.3 million** as of September 30, 2022, primarily due to a **$10.8 million** net loss, partially offset by capital contributions - Equity decreased by **$8.3 million** during the first nine months of 2022, mainly due to the net loss for the period[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, net cash used in operating activities improved to **$14.2 million**, while financing activities provided **$20.1 million**, primarily from new convertible loans Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,163) | $(24,402) | | Net cash used in investing activities | $(7,458) | $(6,644) | | Net cash provided by financing activities | $20,095 | $989 | | **Net Change in Cash** | **$(1,526)** | **$(30,057)** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's POCare platform, the formation of Morgenesis LLC with a significant Metalmark Capital investment, and disclose substantial doubt about going concern status and a legal proceeding - The company's financial condition raises substantial doubt about its ability to continue as a going concern. Management's plans include raising additional capital and exploring ways to increase revenue and reduce expenditures[43](index=43&type=chunk) - In August 2022, the company formed Morgenesis LLC to hold substantially all assets of its POCare Services business, streamlining service units into one entity[39](index=39&type=chunk) - Subsequent to the quarter end, on November 4, 2022, Metalmark Capital agreed to invest **$30.2 million** in Morgenesis, with potential future payments up to **$20 million** and an optional investment of up to **$60 million**. This investment is intended to finance and expand the POCare Services business[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - The company is involved in a legal proceeding with the State of Israel, which is seeking declaratory remedy and payment of royalties related to certain technology. The company believes the claims are without merit and has not made a provision for loss[82](index=82&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic focus on POCare therapies, the formation of Morgenesis LLC with Metalmark Capital investment, and the need for additional capital despite reduced net loss and expenses - The company formed Morgenesis LLC to hold its POCare Services business and secured a strategic investment from Metalmark Capital, expected to provide **$30.2 million** initially, with potential for up to **$80 million** in additional funding[103](index=103&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk) - Management acknowledges that current and projected cash resources raise substantial doubt about the company's ability to continue as a going concern, and plans to raise additional capital to fund operations[144](index=144&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2022, total revenues decreased by **22%** to **$22.4 million**, offset by significant reductions in cost of revenues, R&D, and SG&A expenses Revenue Comparison (in thousands) | Period | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $22,401 | $28,610 | -22% | Expense Comparison (in thousands) | Expense Category | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Cost of revenues, dev. services & R&D | $20,932 | $25,861 | -19% | | Selling, general and administrative | $8,758 | $11,961 | -27% | - The decrease in SG&A expenses is primarily due to a reduction in salaries and related expenses; a discretionary bonus was paid to the CEO in Q3 2021 which was not repeated in 2022. This was partially offset by higher legal and accounting fees related to 2022 financing activities[128](index=128&type=chunk)[135](index=135&type=chunk) [Liquidity and Financial Condition](index=37&type=section&id=Liquidity%20and%20Financial%20Condition) As of September 30, 2022, the company faced a working capital deficiency of **$2.3 million** due to an **$18.8 million** increase in current liabilities from new convertible loans, offset by **$20.1 million** in financing activities Working Capital (in thousands) | | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Current Assets | $31,856 | $25,758 | | Current Liabilities | $34,168 | $15,365 | | **Working Capital (Deficiency)** | **$(2,312)** | **$10,393** | - Net cash provided by financing activities was **$20.1 million** for the nine months ended Sep 30, 2022, compared to only **$1.0 million** in the prior-year period, due to additional equity and debt financing[142](index=142&type=chunk) - The company states it will need to raise additional capital to fund its operations (separate from the Morgenesis subsidiary) and to repay outstanding convertible loans as they become due[143](index=143&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable to the company's current operations - Not applicable[146](index=146&type=chunk) [Controls and Procedures](index=38&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[148](index=148&type=chunk) - No material changes to the internal control over financial reporting were identified during the quarter ended September 30, 2022[149](index=149&type=chunk) PART II [Legal Proceedings](index=39&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is defending against a legal proceeding in Israel seeking royalties related to technology, believing the claims are without merit - A complaint was filed against the company in Israel by the State of Israel and Tel Hashomer Medical Research, seeking royalties and **NIS 10 million** related to a 2012 license agreement. The company considers the claims to be without merit[82](index=82&type=chunk)[151](index=151&type=chunk) [Risk Factors](index=39&type=section&id=ITEM%201A.%20Risk%20Factors) Substantial doubt exists regarding the company's ability to continue as a going concern without significant changes or additional capital - A key risk factor is the substantial doubt about the company's ability to continue as a going concern, which is dependent on raising additional capital or making significant changes to its operating plan[154](index=154&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the company's stock repurchase plan during the three months ended September 30, 2022 - No shares were repurchased under the company's existing stock repurchase plan during the third quarter of 2022[156](index=156&type=chunk) [Defaults Upon Senior Securities](index=39&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[157](index=157&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section is not applicable - Not Applicable[158](index=158&type=chunk) [Other Information](index=39&type=section&id=ITEM%205.%20Other%20Information) No other material information was reported - None[159](index=159&type=chunk) [Exhibits](index=40&type=section&id=ITEM%206.%20Exhibits) The report includes key exhibits such as convertible loan agreements and CEO/CFO certifications - Key exhibits filed include a Convertible Note Extension Agreement and the Senior Secured Convertible Loan Agreement with an affiliate of Metalmark Capital Partners[161](index=161&type=chunk)

Orgenesis, Inc. (NASDAQ:ORGS) Q2 2022 Earnings Conference Call August 16, 2022 11:00 AM ET Company Participants David Waldman – Investor Relations Vered Caplan – Chief Executive Officer Neil Reithinger – Chief Financial Officer Conference Call Participants Bruce Jackson – The Benchmark Company Operator Good day, ladies and gentlemen, and welcome to the Orgenesis Business Update Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, David Waldman from Investor Relations. Sir ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Orgenesis Inc. as of June 30, 2022, show a decrease in total equity driven by a significant increase in net loss compared to the prior year. Total assets grew slightly, while total liabilities increased substantially, primarily due to new convertible loans. The company also reported a significant decrease in revenue for the six-month period [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets were $62.8 million, a slight increase from $59.8 million at year-end 2021. Total liabilities increased significantly to $31.0 million from $21.2 million, primarily due to an increase in convertible loans. Consequently, total equity decreased from $38.6 million to $31.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (USD) | December 31, 2021 (USD) | | :--- | :--- | :--- | | **Total Current Assets** | $25,458 | $25,758 | | **Total Assets** | **$62,799** | **$59,841** | | **Total Current Liabilities** | $16,245 | $15,365 | | **Total Liabilities** | **$30,956** | **$21,210** | | **Total Equity** | **$31,843** | **$38,631** | [Condensed Consolidated Statements of Loss and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) The company's net loss widened significantly for both the three and six-month periods ended June 30, 2022. For the six-month period, total revenues decreased to $14.4 million from $19.9 million in the prior year, while net loss attributable to Orgenesis Inc. increased to $9.4 million from $2.9 million. This resulted in a basic and diluted loss per share of $0.38 for the six-month period, up from $0.12 in 2021 Statement of Loss Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | Six Months Ended June 30, 2022 (USD) | Six Months Ended June 30, 2021 (USD) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $7,201 | $10,545 | $14,413 | $19,934 | | Operating Loss | $4,732 | $2,322 | $7,968 | $2,266 | | Net Loss Attributable to Orgenesis Inc. | $5,427 | $2,659 | $9,436 | $2,878 | | Basic and Diluted Loss Per Share | $0.22 | $0.11 | $0.38 | $0.12 | [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased from $38.6 million on January 1, 2022, to $31.8 million on June 30, 2022. The decline was primarily driven by a comprehensive loss of $9.9 million for the period, which was partially offset by proceeds from share and warrant allotments and stock-based compensation - Equity attributable to Orgenesis Inc. decreased by **$6.7 million** in the first six months of 2022, from **$38.5 million** to **$31.8 million**, mainly due to a net loss of **$9.4 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash used in operating activities was $9.2 million, an improvement from $16.0 million in the same period of 2021. Net cash used in investing activities increased to $4.9 million. These activities were funded by $10.9 million in net cash provided by financing activities, primarily from the issuance of convertible loans Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 (USD) | Six Months Ended June 30, 2021 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,206) | $(16,047) | | Net cash used in investing activities | $(4,863) | $(1,562) | | Net cash provided by financing activities | $10,906 | $993 | | **Net Change in Cash** | **$(3,163)** | **$(16,616)** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business as a global biotech firm focused on cell and gene therapies via its POCare Platform. A significant disclosure is the management's conclusion that there is substantial doubt about the company's ability to continue as a going concern due to accumulated deficits and negative cash flows. The notes also cover revenue disaggregation, recent financing activities including convertible loans and a private placement with defaulting investors, a new legal proceeding, and a significant subsequent financing event - The company's business model is centered on its Point of Care (POCare) Platform, which includes a pipeline of therapies, automated processing systems (OMPULs), and a global network of hospitals and research institutes[37](index=37&type=chunk)[41](index=41&type=chunk) - Management has identified a substantial doubt about the Company's ability to continue as a going concern due to an accumulated deficit of **$116 million** and negative operating cash flows of **$9.2 million** for the six months ended June 30, 2022[47](index=47&type=chunk)[49](index=49&type=chunk) - In a March 2022 private placement, the company received only **$2.175 million** of a planned **$14.8 million** due to defaulting investors[61](index=61&type=chunk) - The company is a defendant in a lawsuit filed by Chaim Sheba Medical Center, which seeks royalties and **NIS 10 million** in damages. The company believes the claims are without merit and has not made a provision for loss[78](index=78&type=chunk) - Subsequent to the quarter's end, on August 15, 2022, a subsidiary entered into a **$10 million** senior secured convertible loan agreement with an affiliate of Metalmark Capital Partners[81](index=81&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 28% decrease in revenue for the first six months of 2022 compared to 2021, primarily due to the completion of performance obligations under POC development service contracts. Despite lower revenues, the cost of revenues and R&D increased slightly. The company's liquidity position is strained, with working capital decreasing and a reiterated warning of substantial doubt about its ability to continue as a going concern. Operations were funded through convertible loan agreements, though some investors defaulted on their commitments [Results of Operations](index=28&type=section&id=Results%20of%20Operations) For the three months ended June 30, 2022, revenues decreased 32% to $7.2 million from $10.5 million in Q2 2021. For the six-month period, revenues decreased 28% to $14.4 million. The decline was mainly from POC development services. Cost of revenues, development services, and R&D decreased 8% for the quarter but increased 3% for the six-month period, driven by higher salaries and other R&D expenses, offset by lower subcontracting fees. Selling, general, and administrative expenses saw a slight decrease - Revenue for Q2 2022 decreased by **32%** year-over-year, mainly due to a decline in POC development services as major contracts from 2021 were largely completed. The company recognized its first revenue from point-of-care cell processing services (**$416 thousand**)[113](index=113&type=chunk) - For the six months ended June 30, 2022, revenues decreased by **28%** year-over-year, also due to a decline in POC development services[120](index=120&type=chunk) Cost of Revenues, Development Services and R&D (Six Months Ended, in thousands) | Expense Category | June 30, 2022 (USD) | June 30, 2021 (USD) | | :--- | :--- | :--- | | Salaries and related expenses | $6,240 | $4,767 | | Subcontracting, professional and consulting services | $3,426 | $6,033 | | Other research and development expenses | $4,465 | $2,870 | | **Total** | **$16,266** | **$15,854** | [Liquidity and Financial Condition](index=34&type=section&id=Liquidity%20and%20Financial%20Condition) The company's working capital decreased from $10.4 million at year-end 2021 to $9.2 million as of June 30, 2022. Net cash used in operating activities for the first six months of 2022 was $9.2 million. The company reiterates that current resources and commitments raise substantial doubt about its ability to continue as a going concern and that it plans to raise additional capital Working Capital (in thousands) | | June 30, 2022 (USD) | December 31, 2021 (USD) | | :--- | :--- | :--- | | Current Assets | $25,458 | $25,758 | | Current Liabilities | $16,245 | $15,365 | | **Working Capital** | **$9,213** | **$10,393** | - Management states that current and projected cash resources raise substantial doubt about the company's ability to continue as a going concern[134](index=134&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the company - The company has indicated that this disclosure is not applicable[136](index=136&type=chunk) [Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022. There were no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[138](index=138&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[139](index=139&type=chunk) [PART II - OTHER INFORMATION](index=36&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=36&type=section&id=ITEM%201.%20Legal%20Proceedings) The company refers to the notes in the financial statements regarding a legal proceeding. The relevant note details a complaint filed against the company by the State of Israel and Tel Hashomer Medical Research, seeking royalties and damages - Refers to Note 10 (Note 9 in the document) of the financial statements for details on a legal proceeding involving a claim for royalties from Chaim Sheba Medical Center[142](index=142&type=chunk)[78](index=78&type=chunk) [Risk Factors](index=36&type=section&id=ITEM%201A.%20Risk%20Factors) The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the risk factors disclosed in the company's 2021 Form 10-K[144](index=144&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a stock repurchase plan approved in May 2020 for up to $10 million of its common stock. However, no shares were repurchased under this plan during the three months ended June 30, 2022 - No stock repurchases were made under the company's existing **$10 million** stock repurchase plan during the second quarter of 2022[145](index=145&type=chunk)[146](index=146&type=chunk) [Defaults Upon Senior Securities](index=36&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[147](index=147&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not Applicable[148](index=148&type=chunk) [Other Information](index=36&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information - None[149](index=149&type=chunk) [Exhibits](index=37&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including material contracts such as the Securities Purchase Agreement and various Convertible Loan Agreements, as well as required CEO and CFO certifications - Exhibits filed include the Securities Purchase Agreement from March 2022, various convertible loan agreements from April and May 2022, and Sarbanes-Oxley Act certification statements[151](index=151&type=chunk)

PART I - FINANCIAL INFORMATION [Financial Statements (unaudited)](index=3&type=section&id=ITEM%201%20Financial%20Statements%20(unaudited)) Orgenesis Inc reported Q1 2022 total revenues of $7.2 million, a net loss of $4.0 million, and negative operating cash flow, with total assets decreasing to $58.5 million [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $58.5 million by March 31, 2022, driven by reduced cash, while total liabilities increased to $23.7 million, leading to a decline in total equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,123 | $5,473 | | Accounts receivable, net | $17,075 | $15,245 | | Total current assets | $24,010 | $25,758 | | Total non-current assets | $34,528 | $34,083 | | **TOTAL ASSETS** | **$58,538** | **$59,841** | | **Liabilities & Equity** | | | | Total current liabilities | $15,253 | $15,365 | | Total long-term liabilities | $8,428 | $5,845 | | **TOTAL LIABILITIES** | **$23,681** | **$21,210** | | **Total equity** | **$34,857** | **$38,631** | | **TOTAL LIABILITIES AND EQUITY** | **$58,538** | **$59,841** | [Condensed Consolidated Statements of Loss and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) The company reported a net loss of $4.0 million for Q1 2022, a significant increase from $165 thousand in Q1 2021, driven by decreased revenues and higher R&D expenses Consolidated Statements of Loss (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total revenues | $7,212 | $9,389 | | Cost of development services and R&D expenses | $6,651 | $5,357 | | Operating loss (income) | $3,236 | $(56) | | Net loss | $3,997 | $165 | | Net loss attributable to Orgenesis Inc | $4,009 | $219 | | Basic and diluted loss per share | $0.16 | $0.01 | [Condensed Consolidated Statements of Changes in Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased by $3.8 million to $34.9 million in Q1 2022, primarily due to a comprehensive loss of $4.1 million - Total equity decreased from **$38.6 million** to **$34.9 million** in Q1 2022[17](index=17&type=chunk) - The decrease was primarily driven by a comprehensive loss of **$4.1 million** for the period[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $2.8 million, with total cash decreasing by $4.4 million to $1.6 million due to significant investing outflows Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,792) | $(4,547) | | Net cash used in investing activities | $(1,613) | $(539) | | Net cash provided by financing activities | $1 | $1,898 | | **Net change in cash** | **$(4,404)** | **$(3,188)** | - Cash used in investing activities increased significantly, mainly due to a **$1.5 million** loan granted to an associated entity[23](index=23&type=chunk)[105](index=105&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's biotech business, recent financing, strategic agreements, the Mida Biotech acquisition, and a disclosed legal proceeding - The company is a global biotech firm focused on making cell and gene therapies (CGTs) accessible through its Point of Care (POCare) Platform[26](index=26&type=chunk)[28](index=28&type=chunk) - As of March 31, 2022, the company had an accumulated deficit of **$110 million** and negative operating cash flows of **$3 million** for the quarter, indicating liquidity risks[38](index=38&type=chunk) - In March 2022, the company entered a securities purchase agreement to raise up to **$14.8 million**, though only **$1.8 million** was received by the filing date with the closing extended[52](index=52&type=chunk) - The company is facing a lawsuit from Sheba Medical Center in Israel seeking royalties, but management believes the claims are without merit and has not provisioned for a loss[64](index=64&type=chunk) - Subsequent to the quarter end, in April and May 2022, the company entered into convertible loan agreements for an aggregate of **$13 million**, receiving **$9 million** by the filing date[65](index=65&type=chunk)[67](index=67&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue decline to completed contracts, explains increased R&D, and expresses confidence in liquidity based on recent financing and strategic developments - Revenue from point-of-care development services decreased by **31%** in Q1 2022 compared to Q1 2021, as major performance obligations for setting up customer territories were largely completed in 2021[93](index=93&type=chunk) - Cost of development and R&D expenses increased by **24%** year-over-year, mainly due to hiring more employees to support the expansion and development of new POCare activities and technologies[95](index=95&type=chunk)[96](index=96&type=chunk) - The company believes it has sufficient liquidity to fund operations for at least the **next 12 months**, based on current cash and funds from convertible loan agreements executed in April and May 2022[108](index=108&type=chunk) - Significant developments during the quarter include a license agreement with Yeda for TIL and CAR-T platforms, a joint venture with Proterna for mRNA vaccines, and the acquisition of Mida Biotech[88](index=88&type=chunk)[89](index=89&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company indicates that this section is not applicable - Not applicable[110](index=110&type=chunk) [Controls and Procedures](index=24&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[112](index=112&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[113](index=113&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=24&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in a legal dispute with the State of Israel and Sheba Medical Center seeking royalties, which the company intends to vigorously defend - A complaint was filed against the company and its Israeli subsidiary by the State of Israel (as owner of Chaim Sheba Medical Center) seeking royalties and payment of **NIS 10 million**[115](index=115&type=chunk) - The company believes the allegations are without merit and intends to vigorously defend against the claims[115](index=115&type=chunk) [Risk Factors](index=24&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to risk factors were reported from the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the risk factors from those disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021[117](index=117&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued 29,940 common shares for the Mida Biotech BV acquisition in an unregistered sale, with no equity repurchases during the quarter - On February 22, 2022, the company issued **29,940 shares** of Common Stock, valued at **$100,000**, to acquire Mida Biotech BV. This was an unregistered sale relying on exemptions under the Securities Act[118](index=118&type=chunk) - There was no repurchase activity under the company's Stock Repurchase Plan during the quarter ended March 31, 2022[120](index=120&type=chunk) [Defaults Upon Senior Securities](index=25&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[121](index=121&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section is not applicable - Not Applicable[122](index=122&type=chunk) [Other Information](index=25&type=section&id=ITEM%205.%20Other%20Information) No other information was reported - None[123](index=123&type=chunk) [Exhibits](index=26&type=section&id=ITEM%206.%20Exhibits) This section lists required exhibits, including Sarbanes-Oxley Act certifications and Interactive Data Files (Inline XBRL) - Lists required exhibits, including Sarbanes-Oxley Act certifications and Inline XBRL data files[125](index=125&type=chunk) Signatures

Financial Data and Key Metrics Changes - Revenue for the year ended December 31, 2021, increased over 360% to $35.5 million compared to $7.7 million in 2020, driven by increased activity under service agreements with partners and customers [10][37] - Cost of services and R&D expenses decreased to $36.6 million from $84 million in 2020, a reduction of 56%, primarily due to decreased R&D investments after significant expenditures in 2020 [38] - Selling, general, and administrative expenses decreased to $14.7 million from $19 million in 2020, a decline of 22%, attributed to reduced corporate investment activities and business development expenditures [39] Business Line Data and Key Metrics Changes - The company reported strong year-over-year revenue growth due to increased service agreements and commitments from customers for future revenues exceeding $30 million for 2022 and over $50 million for 2023 [11][10] - The point of care platform is expected to lower costs and enhance distribution, with a focus on processing therapies close to hospital settings [15][20] Market Data and Key Metrics Changes - The company is expanding its global supply network across North America, Europe, Asia, and the Middle East, establishing point of care centers as central hubs for therapy validation and distribution [16][17] - The potential addressable market for KYSLECEL is estimated to exceed $500 million in the U.S. alone, with plans to adjust manufacturing processes for European GMP requirements [33] Company Strategy and Development Direction - The strategy focuses on decentralizing and standardizing the supply of cell and gene therapies, utilizing mobile processing units (OMPULs) to enhance capacity and reduce costs [20][18] - The company aims to qualify production processes at one OMPUL location before expanding to additional sites, leveraging a decade of experience in therapy development [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving breakeven in 2022, with expectations that revenue growth will cover R&D and SG&A expenses [45][40] - The company is focused on expanding its therapeutic pipeline and leveraging government grants to support growth, indicating a strong outlook for the business [41][35] Other Important Information - The company has received a $5 million grant from the State of Maryland to support the establishment of a new point of care center [23] - A joint venture with Theracell in Greece has been designated as a priority investment, receiving a grant of up to €32 million from the Greek government [24] Q&A Session Summary Question: Next steps for KYSLECEL program and potential sites in Europe - Management indicated ongoing discussions regarding regulatory approvals and the need for more sites in Europe, but no final numbers were available yet [44] Question: Revenue and operating expense expectations for 2022 - Management hopes to achieve breakeven, with most development work completed and remaining expenses covered by grants [45][46] Question: Accounts receivable details and expected collection - Accounts receivable comprises various partners and customers, with a good history of collectability and expectations for timely payments [62][64] Question: Future grant funding expectations - Management noted growing global interest in funding for cell and gene therapies, with potential for additional grants from various governments [68][70] Question: Revenue commitments for 2022 and 2023 - Revenue commitments from customers are expected to be in addition to the $35 million generated in 2021, indicating strong future revenue potential [76] Question: Potential for therapy-related revenues - Management highlighted the complexity of generating therapy-related revenues, with some products potentially entering the market under hospital exemptions [80] Question: Strategic options for raising capital - Management discussed various strategic options for financing, including potential partnerships and collaborations, while emphasizing the importance of long-term value for shareholders [86][90]

PART I [Business](index=7&type=section&id=ITEM%201.%20BUSINESS) The company develops affordable cell and gene therapies via its decentralized Point of Care (POCare) Platform - Orgenesis is a global biotech company focused on making cell and gene therapies (CGTs) affordable and accessible through its **Point of Care (POCare) Platform**[17](index=17&type=chunk) - The POCare Platform consists of a licensed therapy pipeline, automated closed POCare technology systems (OMPULs), and a global network of partners[19](index=19&type=chunk) - The company primarily focuses on **autologous therapies**, using a patient's own cells to reduce costs and logistical complexity[18](index=18&type=chunk) - Orgenesis Mobile Processing Units and Labs (OMPULs) are key to providing a standardized, cost-effective, and scalable manufacturing solution at the point of care[25](index=25&type=chunk)[78](index=78&type=chunk) - In February 2020, Orgenesis sold its Contract Development and Manufacturing Organization (CDMO) business, Masthercell, which is now treated as a **discontinued operation**[30](index=30&type=chunk) [Therapies in Development](index=10&type=section&id=Therapies%20in%20Development) The therapeutic pipeline includes products across clinical, IND-enabling, and pre-clinical stages Orgenesis Therapy Development Pipeline Summary | Stage | Therapy | Indication | | :--- | :--- | :--- | | **Clinical Use** | KYSLECEL® | Total Pancreatectomy (TP-IAT) | | | Tissue Genesis Icellator® | Cell Assisted Lipotransfer | | | Cartil-S / Chondroseal | Osteoarthritis / Cartilage Defects | | **Clinical Trials** | RanTop (Ranpirnase) | HPV-associated external anogenital warts (EGW) | | | Tissue Genesis Icellator® | Erectile Dysfunction, COVID-19 ARDS | | **IND Enabling** | Autologous Insulin-Producing (AIP) Cells | Diabetes | | | CAR-T CD19 | B-ALL, Lymphoma | | | Dual Cellular vaccine (DUVAC) | Pancreatic Cancer | | **Pre-Clinical** | Bioxomes | Drug Delivery Platform | | | MSCP | Wound healing and Psoriasis | | | Kidney Disease Therapies | Chronic Kidney Disease (CKD) | - **KYSLECEL®**, an autologous pancreatic islet cell therapy, is commercially available in the US for patients undergoing total pancreatectomy, with plans for EU expansion[37](index=37&type=chunk) - The FDA granted **Orphan Drug Designation** for the company's Autologous Insulin-Producing (AIP) cells for treating severe hypoglycemia-prone diabetes[49](index=49&type=chunk) [POCare Platform Strategy](index=15&type=section&id=POCare%20Platform%20Strategy) The strategy delivers therapies at the point of care through a decentralized network using mobile OMPUL facilities - The strategy focuses on a **decentralized model** where therapies are collected, processed, and administered close to the clinical setting[70](index=70&type=chunk) - Global harmonization is maintained through a central quality system and supply chain, while local decentralization is achieved via regional POCare Centers[72](index=72&type=chunk)[73](index=73&type=chunk) - **OMPULs** are critical for rapid deployment of GMP-compliant capacity, reducing setup time from 18-24 months to 3-9 months and lowering costs[73](index=73&type=chunk)[78](index=78&type=chunk) - Collaborations, joint ventures, and licensing agreements are key, with partnerships established in North America, Europe, Latin America, Asia, and Australia[82](index=82&type=chunk)[83](index=83&type=chunk) [Revenue Model and Financials](index=19&type=section&id=Revenue%20Model%20and%20Financials) Revenue is generated from therapy out-licensing and POCare services, with total revenues surging 364% in 2021 - The revenue model is based on out-licensing therapies for royalties (typically **10% of net sales**) and JV profits (**10-15%**), plus fees from POCare Services[99](index=99&type=chunk)[100](index=100&type=chunk) - **Total revenues increased by 364%** from $7.65 million in 2020 to $35.5 million in 2021, driven by growth in POC and hospital services[102](index=102&type=chunk)[299](index=299&type=chunk) - Cost of services and other R&D expenses were **$36.6 million** in 2021, a significant decrease from $84.0 million in 2020[103](index=103&type=chunk) POCare Therapy Revenue (2020 vs. 2021) | Revenue Stream | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | POC and hospital services | $32,819 | $6,068 | | Cell process development services | $2,683 | $1,584 | | **Total** | **$35,502** | **$7,652** | [Risk Factors](index=26&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks in its business model, technology development, operations, and regulatory compliance - **Business & Financial Risks:** The POC business has a limited operating history and an unproven model, and the company is **not yet profitable**[148](index=148&type=chunk)[149](index=149&type=chunk) - **Technology & Development Risks:** Research programs are based on novel cell therapies, which are inherently risky and face an **uncertain regulatory approval pathway**[151](index=151&type=chunk) - **Operational Risks:** The business is affected by the COVID-19 pandemic and depends on the successful development and rollout of its OMPULs[172](index=172&type=chunk)[209](index=209&type=chunk) - **Collaboration & Partnership Risks:** Success depends on strategic collaborations, but the company may not realize the benefits of these alliances or control key elements[167](index=167&type=chunk)[170](index=170&type=chunk) - **Legal & Regulatory Risks:** The company faces risks related to intellectual property protection, potential infringement lawsuits, and extensive government regulation[185](index=185&type=chunk)[189](index=189&type=chunk)[223](index=223&type=chunk) [Properties](index=51&type=section&id=ITEM%202.%20PROPERTIES) The company does not own any real property and leases all its office, laboratory, and production facilities globally - The company **does not own any real property** and operates entirely out of leased facilities[259](index=259&type=chunk) Key Leased Facilities | Entity | Location | Type | | :--- | :--- | :--- | | Orgenesis Inc. | Germantown, MD | Principal Office | | Orgenesis Maryland Inc. | Baltimore, MD | Lab and Office | | Orgenesis Korea | Suwon-si, Republic of Korea | Lab and Office | | Koligo Therapeutics Inc. | New Albany, IN & Leander, TX | Production and Development Labs | | Orgenesis Biotech Israel | Bar Lev Industrial Park, Israel | Labs and Offices | | Orgenesis Belgium | Novalis Science Park, Belgium | Labs and Offices | [Legal Proceedings](index=51&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in a legal dispute with the State of Israel over technology licensing and royalties - A complaint was filed against Orgenesis and its Israeli subsidiary by the State of Israel and Tel Hashomer Medical Research on January 18, 2022[260](index=260&type=chunk) - The plaintiffs are seeking a declaratory remedy for royalties and **NIS 10 million in damages** related to the POCare platform and CDMO activities[260](index=260&type=chunk)[261](index=261&type=chunk) - The company believes the allegations are **without merit** and plans to vigorously defend against the claims[261](index=261&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=53&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock trades on Nasdaq, no dividends are planned, and a stock repurchase plan is active - The company's common stock is listed on the Nasdaq Capital Market under the symbol **"ORGS"**[266](index=266&type=chunk) - Orgenesis has **never paid dividends** and does not plan to in the foreseeable future, intending to retain earnings for business operations[267](index=267&type=chunk) - A stock repurchase plan of up to **$10 million** was approved in May 2020, under which 24,477 shares were repurchased in November 2021[269](index=269&type=chunk)[271](index=271&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Revenue grew 364% in 2021, while net loss from continuing operations narrowed significantly due to lower R&D expenses Consolidated Results of Operations (2020 vs. 2021) | Metric (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenues | $35,502 | $7,652 | | Cost of services and other R&D, net | $36,644 | $83,986 | | Selling, general and administrative | $14,710 | $18,973 | | Operating Loss | $16,800 | $95,785 | | Net Loss from Continuing Operation | $18,059 | $95,127 | | Net Income from Discontinued Operations | $0 | ($95,706) | | **Net Loss (Income)** | **$18,059** | **($579)** | - Revenues for FY2021 **increased by 364% to $35.5 million**, primarily due to a significant increase in point-of-care (POC) services revenue[299](index=299&type=chunk) - Cost of services and other R&D expenses **decreased by 56% to $36.6 million** in 2021, mainly due to the completion of major OMPUL development work in 2020[303](index=303&type=chunk)[304](index=304&type=chunk) - SG&A expenses **decreased by 22% to $14.7 million** in 2021, despite a $3.6 million discretionary bonus to the CEO[306](index=306&type=chunk)[308](index=308&type=chunk) - The company's **working capital decreased from $33.8 million to $10.4 million** at year-end 2021, primarily due to cash used to fund POC operations[312](index=312&type=chunk)[313](index=313&type=chunk) - Net cash used in operating activities was **$26.9 million** in 2021, a significant improvement from $78.0 million used in 2020[315](index=315&type=chunk)[316](index=316&type=chunk) [Financial Statements and Supplementary Data](index=65&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) Audited financial statements show decreased assets and a net loss in 2021, with a critical audit matter on liquidity Key Consolidated Balance Sheet Data (as of Dec 31) | Account (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,473 | $44,923 | | Total Current Assets | $25,758 | $50,077 | | **Total Assets** | **$59,841** | **$77,684** | | Total Current Liabilities | $15,365 | $16,285 | | **Total Liabilities** | **$21,210** | **$24,956** | | **Total Equity** | **$38,631** | **$52,728** | Key Consolidated Comprehensive Loss (Income) Data (Year Ended Dec 31) | Account (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenues | $35,502 | $7,652 | | Operating Loss | $16,800 | $95,785 | | Net loss from continuing operation | $18,059 | $95,127 | | Net income from discontinued operations | $0 | ($95,706) | | **Net Loss (Income)** | **$18,059** | **($579)** | - The auditor's report includes a **Critical Audit Matter related to the company's liquidity**, highlighting uncertainty regarding future cash flows[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk) [Controls and Procedures](index=65&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that both disclosure controls and internal control over financial reporting were effective as of year-end 2021 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2021[341](index=341&type=chunk) - Based on the COSO framework, management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2021[343](index=343&type=chunk)[344](index=344&type=chunk) - As a smaller reporting company, the annual report **does not include an auditor attestation report** on internal control over financial reporting[344](index=344&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=66&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) The company is led by an experienced executive team and a board of six directors, a majority of whom are independent - The executive team includes Vered Caplan (CEO & Chairperson), Neil Reithinger (CFO), and Efrat Assa Kunik (Chief Development Officer)[350](index=350&type=chunk) - The Board of Directors is composed of six members: Vered Caplan, David Sidransky, Guy Yachin, Yaron Adler, Ashish Nanda, and Mario Philips[350](index=350&type=chunk)[370](index=370&type=chunk) - A **majority of the board members are considered independent** under Nasdaq listing standards[372](index=372&type=chunk)[373](index=373&type=chunk) - The Board has four committees: Audit, Compensation, Nominating and Corporate Governance, and Research and Development[375](index=375&type=chunk) [Executive Compensation](index=71&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) CEO compensation in 2021 was dominated by a $3.6 million discretionary bonus, with no new option awards for executives 2021 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Bonus ($) | All Other Comp. ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Vered Caplan, CEO | 2021 | 264,483 | 3,600,000 | 112,345 | 3,976,828 | | Neil Reithinger, CFO | 2021 | 239,670 | - | - | 239,670 | | Efrat Assa-Kunik, CDO | 2021 | 169,533 | - | 46,387 | 215,919 | - In July 2021, the Compensation Committee approved a **$3.6 million discretionary bonus** for CEO Vered Caplan[411](index=411&type=chunk) - As of December 31, 2021, CEO Vered Caplan held outstanding options to purchase **1,167,756 shares**[398](index=398&type=chunk)[431](index=431&type=chunk) - Non-employee directors receive an annual cash retainer of **$40,000**, plus additional fees for committee service and annual option grants[422](index=422&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=77&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Two beneficial owners hold over 5% of common stock, while the executive and director group holds 7.86% Security Ownership of >5% Beneficial Owners (as of March 30, 2022) | Name of Beneficial Owner | Amount of Beneficial Ownership | Percent | | :--- | :--- | :--- | | Image Securities fzc. | 2,070,919 | 8.34% | | Yehuda Nir | 2,182,164 | 8.79% | - All current directors and executive officers as a group beneficially own 1,949,963 shares, representing **7.86%** of outstanding common stock[427](index=427&type=chunk) - CEO Vered Caplan beneficially owns 1,167,756 shares, or **4.70%** of the company, including shares issuable upon option exercise[426](index=426&type=chunk)[431](index=431&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=81&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) The company engages in transactions with the CFO's firm and a major shareholder, including service fees and a loan facility - CFO Neil Reithinger's firm, Eventus Consulting, P.C., received **$240,000** in 2021 for financial consulting services[442](index=442&type=chunk) - The company earned revenues of **$3.9 million** from related party Image Securities fzc in 2021[443](index=443&type=chunk) - In August 2021, Orgenesis entered into a **$5 million convertible loan agreement** with Image Securities fzc, of which $3 million was drawn as of year-end[444](index=444&type=chunk) [Principal Accountant Fees and Services](index=82&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Total fees billed by the independent auditor, a member of PwC, were $274,685 in 2021 Accountant Fees (2020 vs. 2021) | Service Category | 2021 Fees | 2020 Fees | | :--- | :--- | :--- | | Audit Fees | $228,188 | $267,231 | | Audit-Related Fees | $16,634 | $67,405 | | Tax Fees | $29,863 | $12,500 | | All Other Fees | $0 | $10,000 | | **Total Fees** | **$274,685** | **$357,136** | - The Audit Committee is responsible for appointing, compensating, and overseeing the independent auditor and pre-approves all services[449](index=449&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=83&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all exhibits filed with the Form 10-K, including material contracts and required certifications - The report incorporates by reference key agreements such as the Stock Purchase Agreement for the sale of Masthercell and the merger agreement for Koligo Therapeutics[460](index=460&type=chunk) - Material contracts filed include the 2017 Equity Incentive Plan, various collaboration and license agreements, and convertible loan agreements[461](index=461&type=chunk) - Certifications from the CEO and CFO pursuant to the **Sarbanes-Oxley Act** are included as exhibits[462](index=462&type=chunk)

Orgenesis Inc. (NASDAQ:ORGS) Q3 2021 Earnings Conference Call November 4, 2021 8:30 AM ET Company Participants David Waldman - Investor Relations Vered Caplan - Chief Executive Officer Neil Reithinger - Chief Financial Officer Conference Call Participants Bruce Jackson - The Benchmark Company Operator Good morning, ladies and gentlemen, and welcome to the Orgenesis Third Quarter 2021 Business Update Call. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, David Waldman, Inv ...