Orgenesis(ORGS) - 2023 Q4 - Annual Report

PART I ITEM 1. BUSINESS A global biotech company making Cell and Gene Therapies (CGTs) affordable and accessible via its Point-of-Care platform - Orgenesis Inc 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 using a closed and automated approach at the point of care (POCare)[304][307][308] - The company has developed a POCare Platform, a scalable infrastructure of technology and services, including POCare Centers and Orgenesis Mobile Processing Units & Labs (OMPULs), to standardize and decentralize CGT production, aiming to lower costs and simplify logistics[350][351][489] - The business model involves in-licensing promising therapies, adapting them to a point-of-care setting through regional partnerships, and then out-licensing products for market approval in preferred geographical regions, which minimizes pre-clinical development costs and leverages grants[359][561] POCare Therapies This segment develops a pipeline of advanced, personalized cell therapies for out-licensing in point-of-care settings - The company's pipeline includes investigational therapies and next-generation technologies, predominantly personalized autologous cell therapies, for cancer and other unmet clinical needs[368][369] - Key therapeutic fields encompass cell-based immuno-oncology, cell-based drug delivery platforms, regenerative medicine, anti-viral, and autoimmune diseases[369] - The company collaborates with academic institutions and hospitals to in-license promising therapies, adapt them to a point-of-care approach, and out-license them for market approval in preferred geographical regions, reducing overall development costs[357][358][359] POCare Services This segment provides harmonized services for CGT product supply, including process development and automation - POCare Services include process development, automation adaptation, GMP-compliant incorporation into OMPULs, tech transfers, training, processing and supply of therapies, and CRO services for clinical trials[439] - The company is expanding its POCare Centers globally (e g, Maryland, Boston, California, Belgium, Greece, Israel, Italy, Spain, Korea) to provide efficient and scalable CGT processing, aiming to reduce costs and accelerate patient access[440][509] - In 2023, significant activities included developing GMP processes for CAR-T, TILs, and MSC-based therapies, deploying OMPULs, and collaborating with UC Davis and Johns Hopkins University for decentralized production and analytical labs[510][511][512] ITEM 1A. RISK FACTORS The company faces substantial going concern risk, an unproven business model, and various operational and regulatory hurdles - The company's management and independent auditors have concluded there is substantial doubt about its ability to continue as a going concern due to recurring losses and negative cash flows from operations[33][641][663][664] - The POCare business has a limited operating history and an unproven business model, making its prospects speculative and highly dependent on successful execution of its strategy[32][640][660][662] - Significant risks include the inherent challenges of novel biopharmaceutical R&D, extensive industry regulation, potential for product liability lawsuits, reliance on third-party collaborations, and the complexity of manufacturing biologics[19][21][22][28][36][37][161][186][192][478][480][643][644][645][647][650][651][655][667][668][674] ITEM 1B. UNRESOLVED STAFF COMMENTS The company reports no unresolved comments from the Securities and Exchange Commission staff - The company has no unresolved staff comments[74] ITEM 1C. CYBERSECURITY The company maintains a comprehensive cybersecurity program with active board oversight and has had no material incidents - The company's board of directors actively oversees cybersecurity risk management, receiving annual updates and prompt information on material incidents[82][93][94] - A comprehensive cybersecurity program is in place, including security monitoring, audits, vulnerability assessments, penetration testing, threat modeling, and regular mandatory training for employees and contractors[77][78] - The company has not experienced any material cybersecurity incidents in the last three fiscal years, and related expenses were immaterial[92] ITEM 2. PROPERTIES The company operates globally through various leased facilities for offices and laboratories without owning any real property - The company does not own any real property, operating instead through leased premises globally[102] - Key leased facilities include the principal office in Germantown, MD, operational production labs in Gwanggyo, Korea, development and production facilities in New Albany, IN (Koligo), and labs/offices in Bar Lev Industrial Park, Israel (Orgenesis Biotech Israel Ltd)[85][86][87][88] - Additional leased properties support operations in Baltimore, MD (Orgenesis Maryland LLC), Nes Ziona, Israel (Orgenesis Ltd), Leander, TX (Tissue Genesis International LLC), Leiden, Netherlands (Mida Biotech BV), Namur, Belgium (Orgenesis Belgium and Orgenesis Services SRL), and Koropi, Greece (Theracell Laboratories)[97][98][99][100][101][102] ITEM 3. LEGAL PROCEEDINGS The company is not involved in any material legal proceedings, except as noted elsewhere in the report - The company is not involved in any pending material legal proceedings, except as described in Note 22 of Item 8[103][104] ITEM 4. MINE SAFETY DISCLOSURES Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[105] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The company's common stock trades on Nasdaq, and it has never paid cash dividends, retaining earnings for development - The company's common stock is listed on the Nasdaq Capital Market under the symbol "ORGS" since March 13, 2018[107] Common Stock Information (April 12, 2024) | Metric | Value | | :--- | :--- | | Closing Price | $0.49 | | Holders of Record | 346 | | Shares Outstanding | 34,338,782 | - 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[68][109] - There were no unregistered sales of equity securities or issuer purchases of equity securities[110][111] ITEM 6. [RESERVED] This section is intentionally left blank - Item 6 is reserved[112] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A significant revenue decrease and increased operating loss in 2023 raise substantial doubt about its going concern status - The company's operations are separated into two segments: Octomera (POCare Services) and Therapies (therapeutic development), following the Metalmark Investment in November 2022[117] Key Financial Results (2023 vs. 2022, in thousands USD) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $530 | $36,025 | -98.59% | | Gross Profit (Loss) | $(5,725) | $30,892 | -118.53% | | Operating Loss | $(53,636) | $(10,110) | +430.52% | | Net Loss | $(64,918) | $(12,169) | +433.48% | | Net Cash Used in Operations| $(14,837) | $(24,924) | -40.47% | - Total revenues decreased by 99% in 2023, primarily due to customer payment failures and the deconsolidation of Octomera, which accounted for almost all potential revenues[146] - The company has an accumulated deficit of $176,622 and negative operating cash flows of $14,837 as of December 31, 2023, raising substantial doubt about its ability to continue as a going concern[221][617] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Disclosures regarding market risk are not applicable to the company - Quantitative and qualitative disclosures about market risk are not applicable[250] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data are included starting on page F-1 of this report - 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[251] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The company reports no changes in or disagreements with its accountants on financial disclosure - There have been no changes in or disagreements with accountants on accounting and financial disclosure[252] ITEM 9A. CONTROLS AND PROCEDURES Disclosure controls were deemed ineffective due to a material weakness in internal control over financial reporting - As of December 31, 2023, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[263][267] - The material weakness was identified in the accounting for revenue collectability and estimated credit losses, which resulted in restatements of unaudited condensed consolidated financial statements for interim periods in 2023[267] - Management's remediation plan for 2024 includes thorough credit assessment of new customers, analysis of payment history for existing customers, and analysis of expected credit losses[268] ITEM 9B. OTHER INFORMATION The company has no other information to report under this item - No other information is reported under this item[271] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS No disclosures are required regarding foreign jurisdictions that prevent inspections - No disclosures regarding foreign jurisdictions that prevent inspections[272] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The company's governance structure includes a six-member board with a majority of independent directors and key committees - The board of directors consists of six members, with a majority being independent directors according to Nasdaq listing standards[293][294][312] - Key executive officers include Vered Caplan (CEO and Chairperson) and Victor Miller (CFO, Secretary, and Treasurer, appointed Jan 2, 2024)[275][277][278] - The board has established an Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and a Research and Development Committee, all comprised of independent directors[314] ITEM 11. EXECUTIVE COMPENSATION Details executive and non-employee director compensation for 2023, including salaries, awards, and committee fees Summary Compensation Table (2023 vs. 2022, in USD) | Name and Principal Position | Year | Salary ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Vered Caplan CEO | 2023 | 259,029 | 107,941 | 82,355 | 341,384 | | | 2022 | 243,868 | - | 92,100 | 443,909 | | Elliot Maltz Former CFO | 2023 | 111,667 | 81,883 | - | 193,550 | | Efrat Assa-Kunik Former CDO | 2023 | 129,633 | - | 18,690 | 148,323 | | | 2022 | 162,316 | 19,048 | 44,467 | 225,831 | - Vered Caplan's compensation includes an annual board fee and eligibility for performance remuneration, with a lump sum payment upon certain termination events[343][344][377][378][379] Non-Employee Director Compensation (2023, in USD) | Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Guy Yachin | 100,000 | 6,067 | 106,067 | | Yaron Adler | 60,000 | 4,643 | 64,643 | | Dr. David Sidransky | 105,000 | 6,330 | 111,330 | | Ashish Nanda | 65,000 | 4,907 | 69,907 | | Mario Philips | 50,000 | 4,256 | 54,256 | - The compensation policy for non-employee directors, updated in January 2021, includes annual cash compensation ($40,000 base, additional for Chairman/lead director and committee roles) and annual option bonuses[393][394] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Two beneficial owners hold over 5% of common stock, with directors and executives as a group owning 5.82% Security Ownership of Greater than 5% Beneficial Owners (April 15, 2024) | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent | | :--- | :--- | :--- | | Jacob Safier | 4,988,000 | 14.53% | | Yehuda Nir | 11,297,179 | 24.75% | Security Ownership of Directors and Executive Officers (April 15, 2024) | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent | | :--- | :--- | :--- | | Vered Caplan | 1,252,757 | 3.55% | | Elliot Maltz | 25,000 | <1% | | Efrat Assa Kunik | 54,167 | <1% | | Guy Yachin | 150,867 | <1% | | Dr. David Sidransky | 153,467 | <1% | | Yaron Adler | 203,721 | <1% | | Ashish Nanda | 98,400 | <1% | | Mario Philips | 60,000 | <1% | | Directors & Executive Officers as a Group (8 persons) | 1,998,379 | 5.82% | Securities Authorized for Issuance Under Existing Equity Compensation Plans (December 31, 2023) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options (a) | Weighted-Average Exercise Price of Outstanding Options and RSUs (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 2,944,865 | 3.66 | 2,046,646 | | Equity compensation plans not approved by security holders | 491,671 | 4.80 | - | | Total | 3,436,536 | 3.82 | 2,046,646 | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE No material related-party transactions were reported, aside from standard executive and director compensation - As of December 31, 2023, there were no material related party transactions exceeding $120,000 or one percent of average total assets, other than executive and director compensation[452] - Director independence is maintained in accordance with Nasdaq listing standards, as detailed in Item 10[453] ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Total fees billed to the principal accountant, PwC, decreased in 2023, with all services pre-approved by the Audit Committee - Kesselman & Kesselman (PwC) served as the independent registered public accounting firm for the years ended December 31, 2023 and 2022[455] Principal Accountant Fees (in USD) | Services | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $225,000 | $288,705 | | Audit-Related Fees | $42,000 | $6,405 | | Total Fees | $267,000 | $295,110 | - The Audit Committee has a policy to pre-approve all audit and permissible non-audit services, categorized into audit, audit-related, tax, and other fees, with a budgeting and reporting process[457][458][459][460][461][462] PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES This section lists all financial statements and exhibits filed with or incorporated by reference into the report - Consolidated financial statements are incorporated by reference from Part II, Item 8 of this Annual Report on Form 10-K[466] - No financial statement schedules have been filed separately as they are either not applicable, not required, or the information is already included[467] - The section includes a detailed list of exhibits, such as organizational documents, various warrant forms, and numerous agreements related to financing, collaborations, and executive employment[468][469][470] ITEM 16. FORM 10-K SUMMARY A Form 10-K Summary is not applicable and has been omitted - A Form 10-K Summary is not applicable[470] SIGNATURES The report is duly signed by the company's principal executive and financial officers, as well as its directors - The Annual Report on Form 10-K is signed by Vered Caplan, Chief Executive Officer and Chairperson of the Board of Directors, and Victor Miller, Chief Financial Officer, Treasurer, and Secretary, both dated April 15, 2024[473][474] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Presents audited financial statements, with the auditor's report noting substantial doubt about the company's going concern status - The independent registered public accounting firm (Kesselman & Kesselman, PwC) issued an unqualified opinion on the consolidated financial statements for 2023 and 2022[477] - The auditor's report explicitly states a substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows from operations[477][528] - A critical audit matter identified was revenue recognition and accounts receivables – collectability criteria, due to the high degree of auditor judgment and effort required to evaluate management's assumptions[533][534][535] CONSOLIDATED BALANCE SHEETS Total assets decreased significantly in 2023, leading to a total equity deficiency of $(20,983) thousand Consolidated Balance Sheet Summary (in thousands USD) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $4,076 | $46,318 | | Total Non-Current Assets | $10,476 | $44,610 | | TOTAL ASSETS | $14,552 | $90,928 | | Total Current Liabilities | $16,407 | $15,910 | | Total Long-Term Liabilities | $19,128 | $15,744 | | TOTAL LIABILITIES | $35,535 | $31,654 | | Total Equity (Capital Deficiency) | $(20,983) | $29,071 | - Current assets decreased by $42,242 thousand between December 31, 2022, and December 31, 2023, mainly due to the deconsolidation of Octomera, which held the majority of cash, restricted cash, and accounts receivable[214] - Current liabilities increased by $497 thousand, driven by higher accounts payable, tax payable, and grants payable, partially offset by a decline in short-term convertible loans due to maturity date extensions[215] CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (INCOME) The company reported a net loss of $64,918 thousand in 2023, a substantial increase from the prior year Consolidated Statements of Comprehensive Loss (in thousands USD) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenues | $530 | $36,025 | | Gross (Loss) Profit | $(5,725) | $30,892 | | Cost of development services and research and development expenses | $10,623 | $21,933 | | Selling, general and administrative expenses (incl. credit losses) | $35,134 | $15,589 | | Operating Loss | $(53,636) | $(10,110) | | Loss from deconsolidation of Octomera | $5,343 | - | | Net Loss | $(64,918) | $(12,169) | | Net Loss attributable to Orgenesis Inc. | $(55,361) | $(14,889) | - Total revenues decreased by 98.59% from $36,025 thousand in 2022 to $530 thousand in 2023[547] - Selling, general and administrative expenses increased by 125% to $35,134 thousand in 2023, largely due to $24,367 thousand in credit losses[152][153][547] CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CAPITAL DEFICIENCY) The company shifted from a positive equity position to a capital deficiency of $(20,983) thousand in 2023 Consolidated Statements of Changes in Equity (in thousands USD) | Metric | Balance at Jan 1, 2023 | Balance at Dec 31, 2023 | | :--- | :--- | :--- | | Common Stock | $3 | $3 | | Additional Paid-in Capital | $150,355 | $156,837 | | Accumulated Other Comprehensive Income (loss) | $(270) | $65 | | Treasury Shares | $(1,266) | $(1,266) | | Accumulated Deficit | $(121,261) | $(176,622) | | Equity Attributable to Orgenesis Inc. | $27,561 | $(20,983) | | Non-Controlling Interest | $1,510 | - | | Total Equity (Capital Deficiency) | $29,071 | $(20,983) | - The accumulated deficit increased from $(121,261) thousand at the beginning of 2023 to $(176,622) thousand by year-end[550] - Changes during 2023 included $5,283 thousand from issuance of shares and warrants, $9,406 thousand from deconsolidation of Octomera (in additional paid-in capital), and a comprehensive loss of $(55,410) thousand attributable to Orgenesis Inc[550] CONSOLIDATED STATEMENTS OF CASH FLOWS Net cash used in operations decreased, but overall cash and equivalents declined by $(4,926) thousand in 2023 Consolidated Statements of Cash Flows (in thousands USD) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,837) | $(24,924) | | Net cash used in investing activities | $(3,707) | $(14,133) | | Net cash provided by financing activities | $13,618 | $39,578 | | Net change in cash and cash equivalents and restricted cash | $(4,926) | $521 | | Cash, cash equivalents and restricted cash at end of year | $1,479 | $6,369 | - Net cash used in operating activities decreased by 40.47% in 2023, mainly due to a lower net loss after adjustments, despite the overall increase in net loss[217][607] - Net cash provided by financing activities decreased by 65.59% in 2023, with $5,283 thousand from equity investments and $5,735 thousand from convertible loans, and $5,000 thousand from MM[220][607] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Provides detailed disclosures on accounting policies, segment performance, and the company's going concern status - The company's business is focused on Cell and Gene Therapies (CGTs) through its Octomera (POCare Services) and Therapies (therapeutic development) segments[610][611] - A substantial doubt exists about the company's ability to continue as a going concern due to an accumulated deficit of $176,622 thousand and negative operating cash flows, necessitating additional financing[617][619][620] - Significant accounting policies include revenue recognition (with four main streams), credit loss measurement (CECL standard adopted Jan 1, 2023), and segment reporting, with ongoing evaluation of estimates and judgments[623][720][724][744]