My Size, Inc. - Annual Report: 2010 (Form 10-K)
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| þ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 333-144472
TOPSPIN MEDICAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 510394637 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
Lechi 25
Bnei-Brak
Israel
(Address of Principal Executive Offices)
Bnei-Brak
Israel
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code: 972-3-9470921
Securities registered pursuant to Section 12(b) of the Act: Not applicable
Securities registered pursuant to Section 12(g) of the Act: Not applicable
Indicate by check mark if the registrant is a well-known seasoned, issuer, as defined in Rule 405
of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes þ No o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§
229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendments to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes þ No o
Indicated by check mark whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes þ No o
As of April [•], 2011, 11,645,405 shares of the registrant’s Common Stock, $0.001 par value per
share, were outstanding. As of June 30, 2010 (the last day of the registrant’s second fiscal
quarter), the aggregate market value of the common equity held by non-affiliates of the registrant
was approximately NIS 58 million (approximately $16 million, based upon the New Israeli Shekel
(“NIS”)/U.S. Dollar exchange rate of NIS 3.611 for every U.S. Dollar as of June 30, 2010). Such
aggregate market value was computed by reference to the closing price of the Common Stock as
reported on the Tel Aviv Stock Exchange on June 30, 2010. For purposes of determining this amount
only, the registrant has defined affiliates as including the executive officers and directors of
the registrant on June 30, 2010.
TABLE OF CONTENTS
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PART I
This Annual Report on Form 10-K of TopSpin Medical, Inc. and its subsidiaries (“TopSpin” or the
“Company”, or “us”, or “we” or “our”) for the fiscal year ending December 31, 2010 contains
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Those statements are therefore entitled to the protection of the safe harbor
provisions of these laws. These forward-looking statements, which are usually accompanied by words
such as “may,” “might,” “will,” “should,” “could,” “intends,” “estimates,” “predicts,” “potential,”
“continue,” “believes,” “anticipates,” “plans,” “expects” and similar expressions, involve risks
and uncertainties, and relate to, without limitation, statements about our market opportunities,
our strategy, our competition, our projected revenue and expense levels and the adequacy of our
available cash resources. There are important factors that could cause our actual results, level of
activity, performance or achievements to differ materially from those expressed or forecasted in,
or implied by, such forward-looking statements.
Although we believe that the expectations reflected in these forward-looking statements are based
upon reasonable assumptions, no assurance can be given that such expectations will be attained or
that any deviations will not be material. In light of these risks, uncertainties and assumptions,
the forward-looking events and circumstances discussed in this Annual Report on Form 10-K for the
fiscal year ending December 31, 2010 may not occur and our actual results could differ materially
and adversely from those anticipated or implied in the forward-looking statements. We disclaim any
obligation or undertaking to disseminate any updates or revision to any forward-looking statement
contained herein to reflect any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Unless specified otherwise, all U.S. Dollar amounts in this Annual Report on Form 10-K are
calculated using the NIS/U.S. Dollar exchange rate of NIS 3.549 for every U.S. Dollar as of
December 31, 2010. Historical numbers are calculated according to historical exchange rates. Profit
and loss numbers are calculated using average exchange rates for years 2009 and 2010.
Item 1. Description of Business.
Overview
We were incorporated in Delaware on September 20, 1999. We have conducted all of our business
operations through our wholly-owned Israeli subsidiary, TopSpin Medical (Israel) Ltd. (TopSpin
Israel). TopSpin Israel was incorporated on October 5, 1999 to engage in research and development
of MRI technology using miniaturized MRI sensors. Until we suspended our activities due to
financial considerations in October 2008, we were engaged through TopSpin Israel, in the design,
research, development and manufacture of imaging devices that utilize MRI technology by means of
miniature probes for various body organs.
On September 1, 2005, we issued securities to the public in Israel and our shares of common stock
began to trade on the Tel Aviv Stock Exchange (TASE). In 2007, we registered some of our securities
with the U.S. Securities and Exchange Commission (SEC). Our securities are traded only on the TASE
in NIS. (See PART II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities”—“Market for Common Equity and Related Stockholder
Matters”). On February 4, 2010, the Tel Aviv Stock Exchange (TASE) notified the Company that it
failed to satisfy the minimum requirement that issuers whose securities are listed on TASE maintain
a minimum equity value of NIS 2 million (approximately $509,609). Following two extensions, the
Company will need to comply with this minimum required on or before June 18, 2012 in order to
retain its listing on TASE.
In October 2008, we paid NIS 12,513,000 (approximately $3,291,163) as part of a settlement with
holders of our Series A Debentures (see Part II, Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operation”). In addition, grants due to us for the years 2007
and 2008 from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and
Labor (OCS), an Israeli governmental agency, were not paid. As a result of the combination of the
substantial outlay of cash in connection with the settlement and the lack of cash inflow from the
OCS grants, on October 27, 2008, we decided to terminate the employment of all of TopSpin Israel’s
employees (excluding the finance department and employees who were pregnant or on maternity leave)
and suspend our operational activities.
In February 2009, we raised an aggregate of NIS 900,000 (approximately $238,410) through the
issuance of shares of our Common Stock to support efforts to continue our activities.
On January 27, 2010, the Company entered into an investment agreement (the “Investment Agreement”)
with Medgenesis Partners Ltd., a private company organized under the laws of Israel and controlled
by Ascher Shmulewits (“Medgenesis” and the “Stockholder”, respectively). Under the terms of the
Investment Agreement, the Company agreed to issue to Medgenesis (i) 423,346 shares of Common Stock
of the Company; (ii) a warrant to purchase 245,871
shares of Common Stock; and (iii) a warrant to purchase 116,129 shares of Common Shares, all in
exchange for payment by Medgenesis in the amount of $211,673 and the cancellation of a certain
warrant issued by the Company to the Stockholder pursuant to a certain agreement, dated February 2,
2009, filed with the Securities and Exchange Commission on February 5, 2009.
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On February 1, 2010 Medgenesis transferred $53,804 pursuant to the Investment Agreement (“Initial
Payment”). The Investment Agreement has not been consummated since the Company failed to fulfill a
precondition to the Closing pursuant to the Investment Agreement. The Initial Payment has been
converted into Funds (as defined below) pursuant to the Loan Agreement entered into between the
parties, as further detailed below.
In addition, the Company, Medgenesis and the Stockholder entered into a memorandum of understanding
pursuant to which Medgenesis and the Stockholder will assist the Company to acquire interests in
commercial and/or industrial biotech companies and/or assets. We are currently pursuing acquisition
options.
Under the terms of the Investment Agreement, on April 29, 2010, we entered into a loan agreement
(the “Loan Agreement”) with Medgenesis, pursuant to which Medgenesis agreed to loan the Company a
total of $353,804 (the “Funds”), consisting of: (i) $53,804 already paid to the Company on February
1, 2010, pursuant to the Investment Agreement and (ii) an additional $300,000 to be placed in an
escrow account and to be disbursed pursuant to an Escrow Instruction Letter (the “Letter”), dated
April 29, 2010, between the Company, Medgenesis and the escrow agent. The Loan Agreement and the
Letter provide that the Company may use the Funds for payment of legal fees, including fees
associated with retaining its current counsel for bankruptcy counseling advice, and for the payment
of all other outstanding obligations as may be required by the Plan (as defined below). The Loan
Agreement also provides for the termination of the Investment Agreement and all obligations of the
parties there-under.
Pursuant to the Loan Agreement, the Company filed a petition seeking relief under Chapter 11 of
Title 11 of the United States Code, pursuant to which the Company applied to the United States
Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to authorize the approval of
transactions and all other actions required according to a plan to be prepared by the Company and
approved by Medgenesis in writing prior to any filing (the “Plan”). Further, the Company covenanted
not to engage in certain conduct while Funds loaned under the Loan Agreement are outstanding,
including (i) hiring employees; (ii) applying for any credit or loan from a banking institution;
(iii) amending any of the Company’s organizational documents; and (iv) acting in any manner that
would result in a material adverse effect on the Company or in non-compliance with the Plan.
On June 28, 2010 the Company received a letter from Medgenesis requesting full repayment of the
loan because, at that time, the Company had not yet filed its Chapter 11 petition pursuant to the
Loan Agreement. On June 29, 2010, Medgenesis withdrew the remaining amount from the escrow
account. As of December 31, 2010, the outstanding loan balance, including unpaid interest at a rate
of 4.0%, was $427,695.
On July 12, 2010, in accordance with the Loan Agreement, the Company filed a voluntary petition for
relief under Chapter 11 of Title 11 of the United States Code with the Bankruptcy Court (Case No.
10-12213 (CSS)). As part of the Plan that the Company submitted to the Bankruptcy Court, the
Company requested that the Bankruptcy Court approve an increase in its registered capital, a
reverse split of the Company’s reorganized Common Stock (as further detailed below) and the
conversion of the outstanding Funds into Company’s shares of Common Stock (all under terms that
have not yet been authorized by the Company’s shareholders).
On September 26, 2010, the Company and Medgenesis signed another loan agreement totaling up to
$200,000. The purpose of the loan is to cover the Company’s then current expenses, complete the
Chapter 11 proceeding and settle some of the unsecured creditors’ claims based on the settlement
approved by the Bankruptcy Court and the relevant regulatory entities. The loan agreement was
contingent on the Bankruptcy Court’s approval of the Chapter 11 proceeding in Delaware (the “Second
Loan”). As of December 30, 2010, the Company borrowed approximately NIS 485,613 (approximately
$136,831) under the Second Loan.
On October 22, 2010, the Bankruptcy Court entered the Order Granting Motion Of Debtor And
Debtor-In-Possession For Authority To Incur Unsecured Debt Under Loan Agreement And For Approval Of
Loan Agreement, pursuant to which the Bankruptcy Court authorized the Company to incur up to an
additional $200,000.00 under the Second Loan.
On December 13, 2010 the Plan was approved by the general meeting of the equity interest holders of
the Company, and on December 21, 2010 the Plan was approved by the Bankruptcy Court. In accordance
with the provisions of the Plan, the consolidation of the capital of the Company was approved, in
such way that each 500 shares par value US$0.001 US$ each shall be consolidated into 1 share par
value US$0.001 US$ each, and each warrant exercisable into 1 share par value US$0.001 each, shall
be exercisable into 0.0002 shares par value US$0.001 each, with the exercise price remaining the
same. The Amended and Restated Certificate of Incorporation of the Company was amended, in such way
that the authorized share capital of the Company was increased to a total of 50,000,000 shares par
value US$0.001 each. The aforesaid amendments to the Amended and Restated Certificate of
Incorporation of the Company and the authorized capital of the Company were executed on February
13, 2011. In the course of the Plan, on February 13, 2011 the Company has allocated 10,122,463
shares to a Medgenesis as a repayment of a debt of US$484,000 of the Company to Medgenesis.
We have not generated any revenues to date and have not achieved profitable operations or positive
cash flows from operations. We have an accumulated deficit of NIS 184,432,000 (approximately
$51,967,315) as of December 31, 2010, and have incurred a net loss of NIS 2,315,000 (approximately
$620,145) and negative cash flow from operating activities in the amount of NIS 2,570,000
(approximately $688,454) for the year ended December 31, 2010.
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Expenditures on Research and Development
From the time of our inception in 1999 through December 31, 2010, we invested a total of NIS
135,023,000 (approximately $35,513,677) in gross research and development expenses. We funded our
research and development expenses from our own resources and from the OCS. Due to the suspension of
our operations in October 2008, we have not engaged in any research and development activities in
2010.
Intellectual Property
As of December 31, 2010, TopSpin Israel owned one registered patent in the United States. TopSpin
Israel holds the exclusive rights to U.S. Patent No. 6,704,594 entitled Magnetic Resonance Imaging
Device, issued March 9, 2004 concerning the basic technology for local MRI imaging from a miniature
imaging probe that expires on September 9, 2011.
TopSpin Israel also registered Israel patent No. 149945 which concerns our basic technology for
local MRI imaging from a miniature probe; this patent was abandoned on November 24, 2010.
On January 24, 2010, we decided to discontinue the maintenance and development of our intellectual
property due to management’s assessment that the Company will not be able to complete the
development of our intellectual property or sell products based on such intellectual property.
Employees
Due to financial difficulties, as of December 31, 2010, we had only one full-time employee, Mr.
Eitan Shtarkman, serving as the Company’s CEO. We do not have any other employees. The Company is
also receiving services from CFO Direct Ltd., a company providing financial services through Mr.
Uri Ben-Or, CPA serving as the Company’s CFO.
Our employee is not represented by a collective bargaining agreement, nor have we experienced any
work stoppages. We believe that our relations with our remaining employee are good. As of December
31, 2010, we have not adopted a code of ethics but intend to do so if and when we restart our
suspended activities or enter into new business activities.
Availability of SEC Reports
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K
and other information with the SEC. Members of the public may read and copy materials that we file
with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Members of the public may also obtain information in the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers, including TopSpin, that file
electronically with the SEC. The address of that site is http://www.sec.gov.
We are not required to deliver an annual report to our shareholders; electronic copies of such
reports, however, are available on the SEC website described above.
Item 1A. Risk Factors.
Not applicable.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
From
January 2010 to May 2010, we leased offices located at
Rothschild 65, Tel Aviv, Israel for a monthly rent payment of NIS 4,200
(approximately $1,125). In May 2010, the lease expired and the Company vacated the premises and sold
certain technological and office equipment and supplies.
On June 15, 2010, the Company entered into an agreement with Tapuz Clothing Industry Ltd (“Tapuz”),
a company affiliated with Mr. Zvi Linkovsky, one our directors, pursuant to which Tapuz provides us
with office space and services for a monthly payment of NIS 2,000 (approximately $536). The
agreement with Tapuz is on a month-to-month basis. Both parties may terminate the agreement upon 15
days’ notice. We believe that this arrangement is sufficient to meet our current needs. However, in
the long-term, we will reevaluate the need for additional facilities based on our growth and future
needs with respect to management, administration, marketing and manufacturing requirements.
Item 3. Legal Proceedings.
The Company filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States
Code in the United States Bankruptcy Court for the District of Delaware, as detailed in Item 1
above. Except for the Chapter 11 proceedings, as of December 31, 2010, we were not a party to any
material legal proceeding.
Item 4. Removed and Reserved.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market for Common Equity and Related Stockholder Matters
Our shares of Common Stock are listed for trading on the TASE. On February 28, 2008, 22,522 of our
outstanding Series 1 Warrants were converted into shares of our Common Stock and all warrants that
remained unexercised as of the close of business of such date expired and were delisted from TASE.
The information below refers to shares of our Common Stock that are currently traded on TASE under
the symbols “TOPMD”. Public trading of our Common Stock commenced on September 6, 2005.
On February 11, 2011, the Company filed an amended and restated certificate of incorporation with
the Secretary of State of the State of Delaware (Restated Charter). Pursuant to the Restated
Charter, the Company effected a reverse split of its common stock (Split), such that every 500
shares of the common stock existing prior to the Split were automatically combined into 1 share of
the Company’s common stock (such combined common stock, the “New Common Stock”). Pursuant to the
Restated Charter, the authorized capital stock of the Company was reduced to 50,000,000 shares of
New Common Stock.
The following tables set forth, for the periods indicated, the range of high and low per share sale
prices for our Common Stock as reported on TASE.
Common Stock
| 2009 | ||||||||||||||||
| High | Low | |||||||||||||||
First Quarter |
NIS | 0.014 | NIS | 0.01 | ||||||||||||
Second Quarter |
NIS | 0.053 | NIS | 0.01 | ||||||||||||
Third Quarter |
NIS | 0.034 | NIS | 0.025 | ||||||||||||
Fourth Quarter |
NIS | 0.03 | NIS | 0.018 | ||||||||||||
| 2010 | ||||||||||||||||
| High | Low | |||||||||||||||
First Quarter |
NIS | 0.022 | NIS | 0.014 | ||||||||||||
Second Quarter |
NIS | 0.022 | NIS | 0.013 | ||||||||||||
Third Quarter |
NIS | 0.015 | NIS | 0.01 | ||||||||||||
Fourth Quarter |
NIS | 0.018 | NIS | 0.01 | ||||||||||||
Holders of Securities
As of December 31, 2010, we had 34 stockholders.
Dividends
Holders of our Common Stock are entitled to equal ratable rights to dividends and distributions
with respect to the Common Stock, as may be declared by the Board of Directors out of funds legally
available. We have never declared any dividends on any of our securities, and do not intend to do
so in the foreseeable future.
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Securities Authorized For Issuance Under the Equity Compensation Plans
The following table sets forth the aggregate number of securities to be issued upon the exercise of
outstanding options, warrants and rights under our equity compensation plans, and the number of
securities remaining available for future issuance under our equity compensation plans as of
December 31, 2010:
Equity Compensation Plan Information
| Number of | ||||||||||||||||
| securities | ||||||||||||||||
| remaining | ||||||||||||||||
| available for | ||||||||||||||||
| future | ||||||||||||||||
| issuance | ||||||||||||||||
| Weighted- | Weighted- | under | ||||||||||||||
| Number of | average | average | equity | |||||||||||||
| securities to be | exercise price | exercise price | compensation | |||||||||||||
| issued upon | of | of | plans | |||||||||||||
| exercise of | outstanding | outstanding | (excluding | |||||||||||||
| outstanding | options, | options, | securities | |||||||||||||
| options, | warrants and | warrants and | reflected in | |||||||||||||
| Plan category | warrants and Rights | rights | rights | column (a)) | ||||||||||||
| (a) | (b)(1) | (c) | ||||||||||||||
Equity compensation
plans approved by
security holders |
0 | 0 | 0 | |||||||||||||
Equity compensation
plans not approved
by security holders |
232,813 | NIS | 0.003 | USD | 0.001 | 24,832,438 | ||||||||||
Total |
232,813 | NIS | 0.003 | USD | 0.001 | 24,832,438 | ||||||||||
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our Financial Statements and Notes and the other financial information
included elsewhere in this Annual Report on Form 10-K for the fiscal year ending December 31, 2010.
In addition to historical information, this discussion and analysis contains forward-looking
statements based on current expectations that involve risks, uncertainties and assumptions, such as
our plans, objectives, expectations and intentions. Our actual results and the timing of events may
differ materially from those anticipated in these forward-looking statements as a result of various
factors.
Overview
Until suspension of our business activities due to financial considerations in October 2008, we,
through our subsidiary, TopSpin Israel, were engaged in the design, research, development and
manufacturing of imaging devices that utilize MRI technology by means of miniature probes that
image various body organs. Until 2008, our main product was an intravascular MRI, or IVMRI,
catheter system for imaging and characterizing the tissue composition of coronary plaque during a
conventional cardiac catheterization procedure.
As previously disclosed in current reports on Form 8-K filed on September 25, 2008, September 29,
2008 and October 16, 2008, we executed a supplemental indenture with Wilmington Trust Company (in
its capacity as Trustee for our Series A Debentures) and the Ziv Haft Trust Company Ltd. (in its
capacity as Co-Trustee of our Series A Debentures) which supplemented the original indenture
governing the Series A Debentures and provided for the conversion of each NIS 1.00 of principal
amount of Series A Debentures held by eligible bondholders into nine (9) shares of our common stock
and NIS 0.25 in cash.
As contemplated by the supplemental indenture and the settlement agreement, dated July 13, 2008,
between the Company and the Co-Trustee, on October 12, 2008, all of the outstanding NIS 50,000,000
of the Series A Debentures were converted into 450,000,000 shares of our Common Stock. Upon the
completion of this conversion, all of our outstanding Series A Debentures were removed from trading
on the TASE. We issued the cash payment contemplated by the settlement agreement on October 26,
2008 in the amount of NIS 12,513,000 (approximately $3,291,162).
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This payment significantly reduced our cash resources, and, together with the discontinuation of
grants from OCS,
materially and adversely affected our business and the cash we have available to maintain research
and development, marketing, and other activities conducted in the ordinary course of our business.
Our reduced cash position caused us to suspend our activities as of October 27, 2008. We were
forced to terminate all of our employees except three employees in our finance department and three
employees who were on maternity leave at the time (each of whose employment was terminated prior to
March 31, 2009), and we incurred termination fees in connection with the early termination of our
property and motor vehicle lease. As of December 31, 2010, we employed only one full-time
employee—our CEO—and our financial function is currently satisfied by third-party provider.
Critical Accounting Policies
The consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in the United States (US GAAP), applied on a consistent basis, as follows:
Financial statements in NIS: A majority of the Company’s costs and expenses are incurred in New
Israeli Shekels, or NIS. In addition, the Company finances its operations from mainly NIS
denominated resources, mainly from equity raisings. The Company’s management believes that the NIS
is the primary currency of the economic environment in which the Company operates. Thus, the
functional currency of the Company is the NIS. Accordingly, monetary accounts maintained in
currencies other than the NIS are re-measured into NIS in accordance with ASC 830 (formerly — SFAS
No. 52), “Foreign Currency Matters”.
All transaction gains and losses of re-measured monetary balance sheet items are reflected in the
statement of operations as financial income or expenses, as appropriate. Substantially all the
operations and assets of the Company are conducted in NIS in Israel and it has no assets and
operations in the US. The Company’s equity securities are traded in Israel in NIS. As such the
Company’s management believes that the functional and reporting currency is NIS.
Use of estimates: The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported and disclosure of
contingent assets and liabilities in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Principles of consolidation: The consolidated financial statements include the accounts of the
subsidiary over which the Company exercises control. Significant inter-company balances and
transactions between the two companies have been eliminated in the consolidated financial
statements.
Results of Operations
Years Ended December 31, 2009 and 2010
Revenue — We did not have any revenues in 2010 or 2009.
Research and Development — We had no research and development expenses in 2010 or 2009 due to
suspension of operations in October 2008.
Marketing and Sales — We had no marketing and sales expenses in 2010 or 2009 due to suspension of
operations in October 2008.
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General and Administrative — General and administrative expenses consist primarily of professional
fees, rent, office maintenance, payroll related expenses and directors’ fees. General and
administrative expenses increased by approximately 30% to NIS 2,512,000 (approximately $672,917) in
2010 from NIS 1,930,000 (approximately $490,769) in 2009. This increase was the result of
reorganization of the Company in connection with our bankruptcy proceedings.
Financial Income, Net — In 2010, our financial income decreased by 22% to NIS 197,000
(approximately $52,773) as compared to financial income of NIS 254,000 (approximately $64,588) in
2009. This decrease is attributable primarily to the interest expenses from related party loan and
foreign currency translation adjustments.
Taxes on income — Since its formation, the Company has had no income from operations and has no
deferred tax liabilities. As a result of the settlement with our bondholders in 2008, we recorded a
reserve in the amount of NIS 1,344,000 (approximately $374,603) for possible tax payments.
Net Loss — Our net loss for 2010 was NIS 2,315,000 (approximately $620,145) compared to a net loss
of NIS 1,676,000 (approximately $426,181) in 2009, an increase of approximately 40% which is
attributable to a reorganization of the company in connection with out bankruptcy proceedings.
Liquidity and Capital Resources
We have not had any revenues from operations since our inception in September 1999. We financed our
operations principally through private and public sales of equity securities, convertible notes and
through grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade
and Labor, an Israeli governmental agency.
In February 2009, we raised net proceeds of NIS 900,000 (approximately $236,717) through the sale
of 240,000 shares of our common shares of $0.001 par value and 58,064,516 warrants exercisable into
116,129 common. Each warrant is exercisable into one common share for the exercise price of NIS
0.01 for a period of 4 years following the issuance date.
As of December 31, 2010, our assets were approximately NIS 82,000 (approximately $23,105), of which
cash and cash equivalents were approximately NIS 33,000 (approximately $9,298). As of December 31,
2010, our liabilities were approximately NIS 1,975,000 (approximately $529,065).
We believe that our cash resources are insufficient for our operations at current levels for the
next twelve months. We are contemplating and pursuing possibilities for new business activities for
the Company and new avenues for raising capital.
We may not be able to raise additional funds required to resume our regular business operations or
to engage in new fields of business that we may decide to pursue. The global stock and credit
markets are experiencing significant price volatility, dislocations and liquidity disruptions,
which have caused market prices of many stocks to fluctuate substantially and the spreads on
prospective debt financings to widen considerably. These circumstances have materially impacted
liquidity in the financial markets, making terms for certain financings less attractive, and in
certain cases have resulted in the unavailability of certain types of financing. Continued
uncertainty in the stock and credit markets may negatively affect our ability to raise necessary
additional funds
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
9
Table of Contents
Item 8. Financial Statements and Supplementary Data.
TOPSPIN MEDICAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2010
AS OF DECEMBER 31, 2010
10
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2010
INDEX
| Page | ||||
| 12 | ||||
| 13 - 14 | ||||
| 15 | ||||
| 16 | ||||
| 17 -18 | ||||
| 19 - 42 | ||||
11
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
TOPSPIN MEDICAL, INC.
We have audited the accompanying consolidated balance sheets of Topspin Medical, Inc. (“the
Company”) and its subsidiary as of December 31, 2009 and 2010, and the related consolidated
statements of operations, changes in shareholders’ deficiency and cash flows for each of the two
years in the period ended December 31, 2010. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal control over
financial reporting. Our audit included considerations of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company and its subsidiary as of
December 31, 2009 and 2010 and the consolidated results of their operations and their cash flows
for each of the two years in the period ended December 31, 2010, in conformity with accounting
principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1b and 1c in the last
quarter of 2009, the Company terminated the employment of most of its employees and suspended its
operational activities. On July 7, 2010 the Company’s board of directors unanimously approved the
filing of chapter 11 (see note 1d). The Company has incurred losses in the amount of NIS 2,315
thousand during the year ended December 31, 2010 and has an accumulated deficit in the amount of
NIS 184,432 thousand as of that date. These factors, among other factors described in that Note,
raise substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments relating to the carrying amounts and classification of
assets and liabilities that might result should the Company be unable to continue to operate as a
going concern.
Tal Aviv, Israel
|
KOST FORER GABBAY & KASIERER | |
April 14, 2011
|
A Member of Ernst & Young Global |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NIS in thousands (except share and per share data)
| December 31, | ||||||||||
| Note | 2009 | 2010 | ||||||||
ASSETS |
||||||||||
CURRENT ASSETS: |
||||||||||
Cash and cash equivalents |
3 | 1,002 | 33 | |||||||
Other receivables and prepaid expenses |
4 | 242 | 49 | |||||||
Restricted deposits |
9d | 59 | — | |||||||
| 1,303 | 82 | |||||||||
PROPERTY AND EQUIPMENT, NET |
5 | 9 | — | |||||||
| 1,312 | 82 | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
13
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
NIS in thousands (except share and per share data)
NIS in thousands (except share and per share data)
| December 31, | ||||||||||
| Note | 2009 | 2010 | ||||||||
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY |
||||||||||
CURRENT LIABILITIES: |
||||||||||
Trade payables |
6 | 140 | 658 | |||||||
Other payables and accrued expenses |
7 | 1,011 | 63 | |||||||
Liabilities in respect of options to employees and consultants |
11 | 3 | — | |||||||
Tax provision |
13 | 1,334 | 1,254 | |||||||
| 2,488 | 1,975 | |||||||||
CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES |
8 | |||||||||
SHAREHOLDERS’ DEFICIENCY: |
10 | |||||||||
Share capital: |
||||||||||
Common shares of $0.001 par value: |
||||||||||
Authorized 2,000,000 shares as of December 31, 2009 and
2010; Issued and outstanding 1,522,942 shares as of
December 31, 2009 and 2010 |
6 | 6 | ||||||||
Additional paid-in capital |
180,935 | 181,015 | ||||||||
Receipts on account of shares |
— | 1,518 | ||||||||
Accumulated deficit |
(182,117 | ) | (184,432 | ) | ||||||
| (1,176 | ) | (1,893 | ) | |||||||
| 1,312 | 82 | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
14
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
NIS in thousands (except share and per share data)
| Year ended | ||||||||||
| December 31, | ||||||||||
| Note | 2009 | 2010 | ||||||||
General and administrative expenses |
1,930 | 2,512 | ||||||||
Financial income, net |
12 | 254 | 197 | |||||||
Net loss |
(1,676 | ) | (2,315 | ) | ||||||
Basic and diluted net loss per Common share |
(1.1 | ) | (1.52 | ) | ||||||
Weighted average number of Common shares
outstanding used in basic and diluted net
loss per share calculation |
1,522,942 | 1,522,942 | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
15
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
NIS in thousands (except share data)
| Number of | ||||||||||||||||||||||||
| outstanding | Additional | Receipts | Total | |||||||||||||||||||||
| shares | Share | paid-in | on account | Accumulated | shareholders’ | |||||||||||||||||||
| Common **) | capital | capital | of shares | deficit | deficiency | |||||||||||||||||||
Balance as of
January 1, 2009 |
1,273,742 | 5 | 179,639 | — | (180,441 | ) | (797 | ) | ||||||||||||||||
Exercise of options |
9,200 | — | *) | 19 | — | — | 19 | |||||||||||||||||
Issuance of Common
shares and
warrants (series
3) |
240,000 | 1 | 899 | — | — | 900 | ||||||||||||||||||
Classification of
liability into
equity in respect
of exercise of
options |
— | — | 161 | — | — | 161 | ||||||||||||||||||
Stock-based
compensation
expense |
— | — | 217 | — | — | 217 | ||||||||||||||||||
Net loss |
— | — | — | — | (1,676 | ) | (1,676 | ) | ||||||||||||||||
Balance as of
December 31, 2009 |
1,522,942 | 6 | 180,935 | — | (182,117 | ) | (1,176 | ) | ||||||||||||||||
Stock-based
compensation
expense |
80 | — | — | 80 | ||||||||||||||||||||
Receipts on
account of shares |
— | — | — | 1,518 | — | 1,518 | ||||||||||||||||||
Net loss |
— | — | — | — | (2,315 | ) | (2,315 | ) | ||||||||||||||||
Balance as of
December 31, 2010 |
1,522,942 | 6 | 181,015 | 1,518 | (184,432 | ) | (1,893 | ) | ||||||||||||||||
| *) | Represents an amount lower than $1 thousand. |
|
| **) | In December 2010, the Company recorded a share consolidation of 500 for one against all shares
of the Company, see Note 1d. Accordingly, all share and per share data in the financial statements
were retroactively adjusted to reflect the share consolidation. |
The accompanying notes are an integral part of the consolidated financial statements.
16
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NIS in thousands
| Year ended | ||||||||
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
(1,676 | ) | (2,315 | ) | ||||
Adjustments to reconcile net loss to net cash used in
operating activities (a) |
(2,123 | ) | (255 | ) | ||||
Net cash used in operating activities |
(3,799 | ) | (2,570 | ) | ||||
Cash flows from investing activities: |
||||||||
Change in restricted deposits, net |
503 | 59 | ||||||
Purchase of property and equipment |
(6 | ) | — | |||||
Net cash provided by investing activities |
497 | 59 | ||||||
Cash flows from financing activities: |
||||||||
Exercise of stock options and warrants |
19 | — | ||||||
Proceeds from issuance of shares and warrants (series
3), net of issuance expenses |
900 | — | ||||||
Loan from related party |
— | 1,542 | ||||||
Net cash provided by financing activities |
919 | 1,542 | ||||||
Decrease in cash and cash equivalents |
(2,383 | ) | (969 | ) | ||||
Cash and cash equivalents at the beginning of the year |
3,385 | 1,002 | ||||||
Cash and cash equivalents at the end of the year |
1,002 | 33 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
17
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NIS in thousands
NIS in thousands
| Year ended | ||||||||
| December 31, | ||||||||
| 2009 | 2010 | |||||||
(a) Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||
Depreciation |
7 | 9 | ||||||
Interest on loan from related party |
— | (24 | ) | |||||
Change in fair value of liability in respect of
warrants (series 2) |
(250 | ) | — | |||||
Change in fair value of embedded derivative |
(500 | ) | — | |||||
Stock-based compensation |
217 | 80 | ||||||
Change in fair value and amortization of stock
options classified as a liability |
115 | — | ||||||
Accrued severance pay, net |
(270 | ) | — | |||||
Decrease in other receivables and prepaid expenses |
192 | 193 | ||||||
Increase (decrease) in trade payables |
(315 | ) | 518 | |||||
Decrease in liabilities in respect of options to
employees and consultants |
— | (3 | ) | |||||
Decrease in tax provision, other payables and accrued
expenses |
(1,319 | ) | (1,028 | ) | ||||
Total adjustments |
(2,123 | ) | (255 | ) | ||||
(b) Supplemental disclosure of non cash flows activities: |
||||||||
Classification of liabilities into equity |
161 | — | ||||||
Loan converted into receipts on account of shares |
— | 1,518 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
18
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 1:- GENERAL
| a. | TopSpin Medical, Inc. (“the Company”) and its subsidiary, TopSpin
Medical (Israel) Ltd. (“the subsidiary”) (collectively “the Group”) were engaged in
research and development of a medical MRI technology. |
||
In October 2008, the Company suspended its activities as described below. |
|||
The Company was incorporated and commenced operation in September 1999 as a
private company registered in Delaware, U.S. On September 1, 2005, the Company
issued securities to the public in Israel and became publicly traded on the Tel
Aviv Stock Exchange (“TASE”). In 2007, the Company listed some of its securities
with the U.S. Securities and Exchange Commission (“SEC”). The Company’s shares are
traded only in Israel in NIS. |
|||
In October 2008, the Company terminated the employment of all of its subsidiary’s
employees (excluding two employees from the finance department) and suspended its
operational activities. |
|||
On January 24, 2010, the Company decided to discontinue the development of its
intellectual property due to management’s assessment from December 2009 that the
Company will not be able to finalize the development of its intellectual property
or sell products based on such intellectual property. |
|||
| b. | Since the suspension of the Company’s operational activity and as of
the date of the financial statements the Company is not engaged in any operational
activity. Additionally, in January 2010, Company’s management decided to suspend
the support in protection of its intellectual property (registered patent and
patent applications). |
||
| c. | The Group has not generated any revenues and has not achieved
profitable operations or positive cash flows from operations. The Company has an
accumulated deficit of NIS 184,432 as of December 31, 2010, and it incurred a net
loss of NIS 2,315 and negative cash flows from operating activities in the amount
of NIS 2,570 for the year ended December 31, 2010. |
||
There is uncertainty about the Company’s ability to generate revenues or raise
sufficient funds in the near term, if any. These factors, among other factors
raise substantial doubt about the Company’s ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of this
uncertainty. |
19
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 1:- GENERAL (Cont.)
| d. | On July 7, 2010 the Company’s Board of Directors unanimously approved
the filing of Chapter 11. Subject to the approval of the Company’s request the
Company will be able to increase its capital, change its capital structure and
convert the loan from with Medgenesis Partners Ltd. (“Medgenesis”), a private
company incorporated under the laws of Israel and controlled by Mr. Ascher
Shmuelevich (“the Investor” and “the Shareholder”, respectively) (see details on
the loan in note 14b). The request was filed in Delaware on July 12, 2010. |
||
As part of the restructuring plan, the Company requested the Bankruptcy Court to
approve an increase in its registered capital, approve a reverse split of the
Company’s reorganized Common Stock and approve converting the Medgenesis loan into
Company’s common stock (under terms that have not yet been authorized by the
Bankruptcy Court or the Company’s shareholders). |
|||
On August 30, 2010, the United Stated Bankruptcy Court — District of Delaware
approved the Chapter 11 settlement sought by the Company (“the first proposed
settlement”). The first proposed settlement consists of capital consolidation at a
ratio of 1:500 without derogating from the rights arising from holding the
Company’s shares or stock options. The first proposed settlement also prescribes
that following the capital consolidation, 2,806,524 of the Company’s shares will
be allocated to Medgenesis against the waiver of the first loan which as of the
date of the approval of the first proposed settlement amounted to approximately
$284 thousand. According to the first proposed settlement, after said share
allocation, Medgenesis would hold 55.94% of the Company’s issued and outstanding
share capital and the Shareholder would hold directly and through Medgenesis 71.7%
of the issued and outstanding share capital. |
|||
On October 4, 2010, the Company’s Audit Committee and Board of Directors approved
an amended Chapter 11 settlement (“the settlement”) according to which: |
| 1. | A capital consolidation at a ratio of 1:500 will be carried
out in the context of the consolidation. |
||
| 2. | The conversion of loans totaling $484 thousand which were
extended and/or will be extended to the Company by Medgenesis into 10,122,463
Company’s shares. |
According to the settlement, after the share allocation, Medgenesis would hold
86.92% of the Company’s issued and outstanding share capital and the Shareholder
would hold directly and through Medgenesis 88.68% of the issued and outstanding
share capital. |
20
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 1:- GENERAL (Cont.)
On December 13, 2010 the settlement was approved by the Company’s general
shareholders’ meeting. Accordingly, the capital consolidation was approved and the
shares allocation was performed as described above. See more information on note
10b6. On December 21, 2010 the court approved the settlement. As of December 31,
2010 the shares were not issued to the Shareholder and Medgenesis. |
|||
| e. | On March 18, 2010, due to lack of resources, the Company’s Board of
Directors terminated the employment of the Company’s remaining finance department
employees. |
||
On April 28, 2010, the Company’s Board of Directors rescinded the termination of
one finance employee of the Company and appointed her as controller and secretary
of the Company. On September 12, 2010, the Company’s controller ceased her
employment with the Company. On September 20, 2010, an outsourcing company
provided financial services to the Company including a chief financial officer
services. |
|||
| f. | The Company’s management is currently operating to raise the necessary
funds for the operation of the company and for finding operational activity for the
Company in the field of life science or other fields. |
||
| g. | On February 4, 2010, the Tel Aviv Stock Exchange (“TASE”) notified the
Company that it does not comply with the maintenance regulations since the
Company’s equity is lower than NIS 2,000 in the last four reporting quarters. The
Company was given an extension until June 30, 2010 to increase its equity. |
||
On July 18, the Company received notification from TASE that w the Company’s
shares will be transfer to the maintenance list beginning July 19, 2010. The
Company was given an extension until July 18, 2012 to increase its equity,
otherwise, its shares will be eliminated from trading commencing July 20, 2012. |
21
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with generally
accepted accounting principles in the United States (“U.S. GAAP”), applied on a
consistent basis, as follows: |
| a. | Financial statements in NIS: |
||
A majority portion of the Company’s costs and expenses are incurred in New Israeli
Shekels (“NIS”). In addition, the Company finances its operations from mainly NIS
denominated resources, mainly from equity raisings. |
|||
The Company’s management believes that the NIS is the primary currency of the
economic environment in which the Company operates. Thus, the functional currency
of the Company is the NIS. |
|||
Accordingly, monetary accounts maintained in currencies other than the NIS are
re-measured into NIS in accordance with ASC 830, “Foreign Currency Matters”. All transaction gains and losses of the re-measured monetary balance sheet items are reflected in the statement of operations as financial income or expenses, as appropriate. |
|||
Substantially all the operations and assets of the Company are conducted in NIS in
Israel and it has no assets and operations in the US. The Company’s stocks are
traded in Israel in NIS. As such the Company’s management believes that the
functional and reporting currency is NIS. |
|||
| b. | Use of estimates: |
||
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported and disclosure of contingent assets and liabilities in
the financial statements and accompanying notes. Actual results could differ from
those estimates. |
|||
| c. | Principles of consolidation: |
||
The consolidated financial statements include the accounts of the subsidiary over
which the Company exercises control. Significant inter-company balances and
transactions between the two companies have been eliminated in the consolidated
financial statements. |
22
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| d. | Cash equivalents: |
||
Cash equivalents are short-term highly liquid investments that are readily
convertible to cash with maturities of three months or less at the date of
acquisition. |
|||
| e. | Property and equipment: |
||
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated by the straight-line method over the estimated useful
lives of the assets at the following annual rates: |
| % | ||
Computers and software |
33 | |
Office furniture and equipment |
7 – 15 |
| f. | Impairment of long-lived assets: |
||
The Company’s long-lived assets are reviewed for impairment in accordance with ASC
360, “Property, Plant and Equipment”, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of an asset to be held and used is measured by a comparison of the
carrying amount of the asset to the future undiscounted cash flows expected to be
generated by the asset. If such asset is considered to be impaired, the impairment
to be recognized is measured as the amount by which the carrying amount of the
asset exceeds its fair value. For the year ended December 31, 2010, no impairment
losses on its property and equipment were recorded. |
|||
| g. | Severance pay: |
||
The Company’s liability for severance pay to the Israeli employees of the
subsidiary is calculated pursuant to Israeli severance pay law based on the most
recent salary of the employees multiplied by the number of years of employment, as
of the balance sheet date. Employees are entitled to one month’s salary for each
year of employment or a portion thereof. The Company’s liability for all of its
employees is partially provided by monthly deposits with insurance policies. The
value of these policies is recorded as an asset in the Company’s balance sheet.
The deposited funds include profits accumulated up to the balance sheet date. The
deposited funds may be withdrawn only upon the fulfillment of the obligation
pursuant to Israeli severance pay law or labor agreements. The value of the
deposited funds is based on the cash surrendered value of these policies, and
includes immaterial profits. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Commencing 2009, the Company has defined deposited funds for all of its employees,
pursuant to section 14 to the Severance Pay Law, under which, the Company pays
fixed contributions and will have no legal or constructive obligations to pay
further contributions upon termination of employees. As of December 31, 2010 the
Company terminated the employment of all its employees. |
|||
Severance pay expenses for the years ended December 31, 2009 and 2010 amounted to
approximately NIS 54 and NIS 16, respectively. |
|||
| h. | Stock-based compensation: |
||
ASC 718 requires the use of a valuation model to calculate the fair value of stock
based awards. The Company has elected to use the binomial pricing model to
determine the fair value of stock based awards on the dates of grant. |
|||
The following assumptions were used to estimate the fair value of the stock
options granted during the years ended December 31, 2008, 2009 and 2010: |
|||
The Company recognizes compensation expenses for the value of its options based on
the accelerated method over the requisite service period of the options. |
24
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company estimates the fair value of stock options granted using the Binomial
model with the following assumptions: |
| Binomial model | 2009 | |
Dividend yield |
0% | |
Expected volatility |
113%-136.4% | |
Risk-free interest rate |
4.5% | |
Suboptimal exercise factor |
3.09 for employees, | |
| 3.56 for officers |
Risk-free interest rates are based on the yield from U.S. Treasury zero-coupon
bonds with a term equivalent to the contractual life of the options; Expected
volatilities are based on historical volatilities from traded stock of the Company
and of similar companies. The Company uses historical data to estimate option
exercise and employee termination within the valuation model; separate groups of
employees that have similar historical exercise behavior are considered separately
for valuation purposes. |
|||
The suboptimal exercise factor represents the value of the underlying stock as a
multiple of the exercise price of the option which, if achieved, results in
exercise of the option. |
|||
The Company has historically not paid dividends and has no foreseeable plans to
declare dividends. |
|||
The Company applies ASC 718 and ASC 505-50, “Equity-Based Payment to
Non-employees”, with respect to options issued to non-employees. ASC 718 requires
the use of option valuation models to measure the fair value of the options and
warrants. The Company uses the Binomial model to measure the fair value of options
granted to non-employees. In 2010, no options were granted to non-employees. |
|||
| i. | Fair value of financial instruments: |
||
The carrying amount reported in the consolidated balance sheet for cash and cash
equivalents, other receivables and prepaid expenses, trade payables and other
payables approximate their fair values due to the short-term maturities of such
instruments. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| j. | Basic and diluted net loss per share: |
||
Basic net loss per share is computed based on the weighted average number of
Common shares outstanding during each year. Diluted net loss per share is computed
based on the weighted average number of Common shares outstanding during each
period, plus dilutive potential Common shares considered outstanding during the
year in accordance with ASC 260, “Earning per Share”. All outstanding stock
options have been excluded from the calculation of the diluted loss per Common
share because all such securities are anti-dilutive for each of the periods
presented. |
|||
| k. | Concentration of credit risks: |
||
Financial instruments that potentially subject the Group to concentrations of
credit risk consist principally of cash and cash equivalents and other
receivables. The Group’s cash and cash equivalents are invested in NIS and U.S.
dollar instruments of major banks in Israel and in the United States. Management
believes that the financial institutions that hold the Company’s investments are
financially sound and, accordingly, minimal credit risk exists with respect to
these investments. The Company and its subsidiary have no significant off-balance
sheet concentration of financial instruments subject to credit risk such as
foreign exchange contracts, option contracts or other hedging arrangements. |
|||
| l. | Income taxes: |
||
The Group accounts for income taxes in accordance with ASC 740 (, “Income Taxes”.
This Statement prescribes the use of the liability method, whereby deferred tax
assets and liability account balances are calculated for temporary differences
between financial reporting and tax bases of assets and liabilities and net
operating loss carryforward. The deferred tax assets and liabilities are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. |
|||
The Company and its subsidiary provide a valuation allowance if necessary, to
reduce deferred tax assets to their estimated realizable value. |
|||
As for tax uncertainties, the Statement establishes a single model to address
accounting for uncertain tax positions. The Statement clarified the accounting for
income taxes by prescribing the minimum recognition threshold a tax position is
required to meet before being recognized in the financial statements. The
Statement also provides guidance on recognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
The Company elected to classify interest expenses and penalties recognized in the
financial statements as income taxes. For the years 2009 and 2010, no penalties
were recognized. |
26
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| m. | Impact of recently issued Accounting Standards: |
||
Adoption of New Accounting Standards during the period: |
|||
ASU 2010-06 — In January 2010, the FASB updated the “Fair Value Measurements
Disclosures” codified in ASC 820. More specifically, this update require (a) an
entity to disclose separately the amounts of significant transfers in and out of
Levels 1 and 2 fair value measurements and to describe the reasons for the
transfers; and (b) information about purchases, sales, issuances and settlements
to be presented separately (i.e. present the activity on a gross basis rather than
net) in the reconciliation for fair value measurements using significant
unobservable inputs (Level 3 inputs). This update clarifies existing disclosure
requirements for the level of disaggregation used for classes of assets and
liabilities measured at fair value, and requires disclosures about the valuation
techniques and inputs used to measure fair value for both recurring and
nonrecurring fair value measurements using Level 2 and Level 3 inputs. As
applicable to the Company, this update became effective as of the first quarter
ended December 31, 2010, except for the gross presentation of the Level 3 roll
forward information, which is required for annual reporting of December 31, 2010.
The adoption of the new guidance did not have a material impact on its
consolidated financial statements. |
NOTE 3:- CASH AND CASH EQUIVALENTS
| December 31, | ||||||||
| 2009 | 2010 | |||||||
In New Israeli Shekels |
978 | 9 | ||||||
In other currencies (mainly in U.S. dollars) |
24 | 24 | ||||||
| 1,002 | 33 | |||||||
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NIS in thousands, except share and per share data
NOTE 4:- OTHER RECEIVABLES AND PREPAID EXPENSES
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Prepaid expenses and suppliers advances |
8 | 9 | ||||||
Government of Israel — VAT refund |
45 | 37 | ||||||
Deduction of tax |
175 | — | ||||||
Prepaid lease and other |
14 | 3 | ||||||
| 242 | 49 | |||||||
NOTE 5:- PROPERTY AND EQUIPMENT, NET
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Cost: |
||||||||
Computers and software |
36 | 36 | ||||||
Office furniture and equipment |
17 | 17 | ||||||
| 53 | 53 | |||||||
Accumulated depreciation: |
||||||||
Computers and software |
29 | 36 | ||||||
Office furniture and equipment |
15 | 17 | ||||||
| 44 | 53 | |||||||
| 9 | — | |||||||
Depreciation expenses amounted to NIS 7 and NIS 9 for the years ended December 31, 2009
and 2010, respectively. |
NOTE 6:- TRADE PAYABLES
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Open accounts |
98 | 198 | ||||||
Accrued expenses |
— | 455 | ||||||
Notes payable |
42 | 5 | ||||||
| 140 | 658 | |||||||
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 7:- OTHER PAYABLES AND ACCRUED EXPENSES
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Provision for payroll and related expenses |
49 | — | ||||||
Vacation pay and recreation pay |
11 | — | ||||||
Accrued expenses |
951 | 63 | ||||||
| 1,011 | 63 | |||||||
NOTE 8:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES
Commitments to pay royalties to the Chief Scientist:
The Company’s subsidiary participated in program sponsored by the Israeli Government for
the support of research and development activities. The Company is obligated to pay
royalties to the Office of the Chief Scientist (“OCS”), amounting to 3%-3.5% of the
sales of the products and other related revenues generated from such projects, up to
100% of the grants received, linked to the U.S. dollar and bearing interest at the rate
of LIBOR. The obligation to pay these royalties is contingent on actual sales of the
products and in the absence of such sales, no payment is required.
As of December 31, 2010, the Company had not paid or accrued royalties to the OCS and
its outstanding contingent obligation for royalties amounted to approximately NIS 17,985
plus interest.
NOTE 9:- CONVERTIBLE DEBENTURES AND WARRANTS
| a. | On November 21, 2006, the Company issued in a private placement NIS
50,000,000 par value of bonds (series A) (“the bonds (series A)” or “the
convertible debentures”) and 25,000,000 warrants (series 2) (“the warrants” or “the
warrants (series 2)”) such that each issuance of two bonds (series A) entitled the
holder of bonds (series A) to receive from the Company, at no consideration, one
warrant (series 2). |
||
The warrants (series 2) are convertible into 50,000 Common shares of the Company,
par value $0.001, such that each warrant is exercisable into one Common share of
the Company in consideration of NIS 0.84 linked to the Israeli Consumer Price
Index. |
|||
The bonds (series A) were offered at a purchase price equaling 95% of their par
value and for total consideration of NIS 47,500 and issuance costs of
approximately NIS 5,000. The warrants (series 2) were offered at no consideration.
The share’s quoted market price at November 21, 2006, was NIS 0.752. |
29
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 9:- CONVERTIBLE DEBENTURES AND WARRANTS (Cont.)
| b. | On September 11, 2007, a registration statement pursuant to the United
States Securities Act of 1933 (“the registration statement”) with the U.S.
Securities and Exchange Commission (“SEC”) for the registration of the bonds
(series A), warrants (series 2) and the shares underlying the conversion of the
bonds (series A) and the exercise of the warrants (series 2) became effective. |
||
| c. | On September 17, 2007, the bonds (series A) and the warrants (series 2)
and the shares underlying the conversion of the bonds (series A) and the exercise
of the warrants (series 2) were listed for trade on the TASE. |
||
| d. | On July 13, 2008, the Company and Ziv Haft Trust Company, the
Co-Trustee acting on behalf of the holders of the Series A Convertible Bonds (the
“Co-Trustee”, the “Bondholders” and the “Series A Bonds”, respectively), executed a
settlement agreement (the “Settlement Agreement”). Pursuant to the Settlement
Agreement, and subject to its terms and the approval of an Israeli court (the
“Israeli Court”), the Indenture will be amended such that in consideration of each
NIS 1 par value of the Series A Bonds, each Bondholder will be entitled to receive
9 shares of Common stock of the Company and the sum of NIS 0.25 in cash. Pursuant
to this arrangement, the Bondholders will be paid an aggregate amount of NIS 12,500
in cash, and will be issued Common stock such that following the execution of the
arrangement, the Bondholders will hold 71% of the issued and outstanding capital of
the Company. Pursuant to the Settlement Agreement, the Company deposited within 3
days following the execution of the Settlement Agreement NIS 12,500 in an account
on behalf of the Co-Trustee. |
||
By September 25, 2008, the above mentioned amounts were deposited and all of the
conditions for amending the Indenture were satisfied. |
|||
| e. | On October 12, 2008, following the settlement, the bonds were converted
into 900,000 shares of Common stock (see also Note 10b2). On October 26, 2008, the
amount was paid in such a manner that each bond was exercisable into one share of
Common stock of the Company, in consideration for a cash payment of NIS 0.0.250263. |
||
| f. | According to ASC 470-50, “Debt — Modifications and Extinguishments”
(formerly: EITF 96-19 and EITF 06-6), the Company determined that the terms of the
convertible debentures do not constitute a substantial change compared to the
original terms. Consequently, a new effective interest rate was determined based on
the carrying amount of the original debt instrument, adjusted for an increase in
the fair value of an embedded conversion option (calculated as the difference
between the fair value of the embedded conversion option immediately before and
after the modification or exchange) resulting from the modification, and the
revised cash flows. |
30
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 9:- CONVERTIBLE DEBENTURES AND WARRANTS (Cont.)
| g. | Series 2 expired on May 31, 2009. As a result, the entire liability in
the amount of NIS 250 on account of series 2 was written off against finance
expenses. |
||
| h. | Due to the implementation of the Settlement Agreement, the Company
recorded a tax provision in its financial statements (see Note 13). |
||
| i. | The Company had 22,800,000 registered options (series 1) which were
exercisable into 45,600 Common shares of $0.001 par value with an exercise price of
NIS 1.1 per share, linked to the changes in the dollar/NIS exchange rate from
August 25, 2005. The options were exercisable up to February 28, 2008. In February
2008, 22,522 options (series 1) have been exercised and the rest have been
forfeited. |
NOTE 10:- SHAREHOLDERS’ DEFICIENCY
| a. | Composition of share capital: |
||
The Company’s authorized Common stock consists of 2,000,000 shares with a par
value of $0.001 per share. All shares have equal voting rights and are entitled to
one non-cumulative vote per share in all matters to be voted upon by shareholders.
The shares have no preemptive, subscription, conversion or redemption rights and
may be issued only as fully paid and non-assessable shares. Holders of the Common
stock are entitled to equal ratable rights to dividends and distributions with
respect to the Common stock, as may be declared by the Board of Directors out of
funds legally available. The Common stock are listed and publicly traded on the
Tel-Aviv Stock Exchange (“TASE”). |
|||
| b. | Share capital: |
| 1. | On April 19, 2007, the Company filed a registration
statement pursuant to the United States Securities Act of 1933 (“the
registration statement” and “Securities Act”, respectively) with the U.S.
Securities and Exchange Commission (“SEC”) regarding the sale of shares of
Common stock and warrants (series 3) and the shares resulting from the
exercise of the warrants (series 3). On June 4, 2007, the registration
statement became effective. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 10:- SHAREHOLDERS’ DEFICIENCY (Cont.)
On June 6, 2007, the Company issued 48,797 shares of Common stock which are
listed for trade on the TASE together with 12,199,201 warrants C (series 3)
that are listed for trade on the TASE since September 17, 2007. The issued
securities were issued in consideration for NIS 1.586 in cash per Unit. The
total net proceeds from the issuance amounted to approximately NIS 18,336
(net of issuance expenses of NIS 1,013). |
|||
Each warrant (series 3) was exercisable into one share of Common stock of
the Company until June 30, 2009, in consideration for a cash payment of NIS
0.84. |
|||
On June 30, 2009, no warrants (series 3) were exercised and all were
forfeited. |
|||
| 2. | On October 12, 2008, the Company issued 900,000 shares of
Common stock following the settlement with convertible bond holders (see Note
9e). |
||
| 3. | On February 2, 2009, the Company entered into a private
placement agreement with an investor. According to the agreement, the Company
issued 240,000 Common shares of $0.001 par value and 58,064,516 warrants
exercisable into 116,129 Common shares of the Company for total consideration
of NIS 900,000. Each warrant is exercisable into one Common share for the
exercise price of NIS 0.01 for a period of 4 years following the issuance
date. According to the Binomial model, with 92.96% volatility and 3.39%
risk-free interest rate, the fair value of the warrants amounted to
approximately NIS 401,000. |
||
| 4. | On July 15, 2009, the Board of Directors decided to obtain
the approval of the shareholders of the Company to increase the registered
capital of the Company by 500,000 shares of Common stock and to amend the
corporation’s certificate of incorporation whereby the total number of
authorized shares of Common stock shall be increased by 500,000 shares. |
||
A shareholders’ meeting was set for September 3, 2009. Since a sufficient
quorum was not present at the shareholders’ meeting, the number of
authorized shares of the Company was not increased. As of December 31, 2010,
the increase in the Company’s number of authorized shares has not been
approved. |
32
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 10:- SHAREHOLDERS’ DEFICIENCY (Cont.)
| 5. | On January 27, 2010, the Company entered into an investment
agreement (“the Agreement”) with Medgenesis Partners Ltd. (“Medgenesis”), a
private company incorporated under the laws of Israel and controlled by Mr.
Ascher Shmuelevich (“the Investor” and “the Shareholder”, respectively).
Under the terms of the Agreement, the Company will issue to the Investor: (i)
423,346 Common shares of the Company, par value $0.001; (ii) a warrant to
purchase 245,871 Common shares (“the Investment Warrant”); and (iii) a
warrant to purchase 116,129 Common shares (“the Substituted Warrant”, and
together with the shares and the Investment Warrant, “the Securities”) in
exchange for payment by the Investor of the amount of $212 thousand and the
cancellation of a certain warrant issued by the Company to the Shareholder
pursuant to a certain agreement, dated February 2, 2009, filed with the
Securities and Exchange Commission on February 5, 2009 (“the Cancelled
Warrant”) (collectively, “the Transaction”). The Common shares and the
Investment Warrant will constitute 33.25% of the Company’s fully diluted
equity. In total, the investor will hold privately and through Medgenesis
43.4% of the Company’s fully diluted equity. All the Securities issued in
connection with the Agreement will be subject to certain transfer
restrictions in compliance with U.S. and Israeli securities laws. |
||
In addition, the Company, Medgenesis and the Shareholder signed an
understanding agreement according to which they would assist the Company to
acquire a commercial and industrial bio-tech activity. |
|||
On April 28, 2010, the investment agreement described above was cancelled
and replaced by a loan agreement. See note 14b. |
|||
| 5. | On February 4, 2010, the Tel Aviv Stock Exchange (TASE)
notified the Company that it does not withstand the maintenance regulations
due to having equity lower than NIS 2 million in the last four reporting
quarters. For more information see note 1g. |
||
| 6. | On February 13, 2011 the Company effected the Chapter 11
settlement (see note 1d) according to which the Company’s capital structure
was modified effective from that date. The Company’s authorized share capital
increased to 50,000,000 shares of $0.001 par value each. The Company also
initiated a proceeding for swapping the (unquoted) share and warrant
certificates with the holders of shares and warrants that are registered at
the registry of the Company’s shareholders and warrant holders. In addition,
as part of the settlement, on February 13, 2011, the Company completed the
allocation of 10,122,463 shares to Medgenesis against the write off of the
Company’s debt totaling $484 thousand. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 11:- STOCK-BASED COMPENSATION
| a. | The Company grants options to its employees, directors and consultants
under the 2001 and 2003 Share Option Plans. As of December 31, 2010, there are
24,832,438 options available for future grant. Any options, which are canceled or
forfeited before the expiration date, become available for future grants. |
||
| b. | On February 26, 2009, the Board of Directors approved an increase of an
additional 25,000,000 shares of Common stock to be granted under the 2003 Israeli
Share Option Plan. On January 24, 2010, the Board of Directors cancelled this
decision. |
||
| c. | On December 30, 2008, the Board of Directors approved agreements with
the former CEO, Yaron Tal, and the former CFO, Eyal Kolka, which include
a modification to their option terms. According to the agreements: |
| 1. | The exercise price of the 2,500,000 vested options out of
all the options granted to Yaron Tal was reduced to $0.001 and will be
exercisable until December 30, 2010. All the unvested options were canceled.
The compensation resulting from the modification amounted to approximately
NIS 17. |
||
| 2. | The exercise price of the 2,100,000 options from the 2003
Option Plan granted to Eyal Kolka was reduced to $0.001, 862,500 out of the
2,100,000 options which were unvested will become immediately vested and all
of the aforementioned options will be exercisable until November 30, 2010.
The compensation resulting from the modification amounted to approximately
NIS 14. |
Both Yaron Tal and Eyal Kolka exercised their above mentioned options during 2009.
According to ASC 718, modifications of the expiration date and reduction in the
exercise price of the options are treated as an exchange of the original award,
resulting in additional compensation expenses based on the differences between the
fair value of the new award and the original award immediately before
modification. Compensation expenses were recognized immediately as the modified
options were fully vested. As a result of the modification, the Company recorded
additional compensation expenses in the amount of approximately NIS 31 in 2008,
using the Binomial model.
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 11:- STOCK-BASED COMPENSATION (Cont.)
| d. | On March 2, 2010, the Board of Directors approved to grant Mr. Zvi
Linkovski, director in the Company, 10 million options which are exercisable into
10 million Common shares of $0.001 par value each constituting 1.19% of the
Company’s fully diluted equity. The options’ exercise price is NIS 0.0143. 50% of
the options would vest on February 16, 2011 and after then, every quarter 6.25% of
the options would vest. The grant is conditional on expanding the option pool as
part of increasing the Company’s issued stock, changing the Company’s status from a
shell company (as defined in the ‘Securities Exchange Act of 1934’) into an active
one. As of the date of the financial statements, the option pool and the Company’s
status were not expanded. The compensation resulting from the grant amounted to
approximately NIS 83. |
||
| e. | Options to employees: |
||
A summary of the Company’s share option activities for options granted to
employees under the plans excluding performance based options is as follows: |
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | terms | intrinsic | ||||||||||||||
| Number | price (*) | (in years) | Value | |||||||||||||
Options outstanding at
January 1, 2010 |
11,232,813 | 0.015 | 1.44 | 0.8 | ||||||||||||
Options granted |
— | |||||||||||||||
Options exercised |
— | |||||||||||||||
Options forfeited and expired |
(11,000,000 | ) | 0.015 | |||||||||||||
Options outstanding at
December 31, 2010 |
232,813 | 0.003 | 0.40 | 0.3 | ||||||||||||
Options vested and expected
to vest at December 31, 2010 |
232,813 | 0.003 | 0.40 | 0.3 | ||||||||||||
Options exercisable at
December 31, 2010 |
232,813 | 0.003 | 0.40 | 0.3 | ||||||||||||
| (*) | Exercise prices for options granted before 2009 were
denominated in U.S. dollars, while exercise prices for options granted in
2009 were denominated in NIS. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 11:- STOCK-BASED COMPENSATION (Cont.)
The aggregate intrinsic value in the tables above represents the total intrinsic
value (the difference between the Company’s closing stock price on the last
trading day of December 2010 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had all
option holders exercised their options on December 31, 2010. This amount changes
based on the fair market value of the Company’s stock.
As of December 31, 2010, there was NIS 62 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted to employees
under the Company’s stock option plans. That cost is expected to be recognized
over a weighted-average period of 3 years.
On December 10, 2009 two of the Company’s directors resigned. As a result
9,500,000 of their unvested options were forfeited. On March 10, 2010 the
remaining 9,500,000 of the directors vested options became forfeited.
Compensation expenses (income) related to options granted to employees were
recorded to research and development expenses and general and administrative
expenses, as follows:
| Year ended | ||||||||
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Research and development expenses |
(8 | ) | — | |||||
General and administrative expenses |
340 | 80 | ||||||
| 332 | 80 | |||||||
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 11:- STOCK-BASED COMPENSATION (Cont.)
| f. | Options to non-employees: |
||
A summary of the Company’s share option activities for options granted to
non-employees under the plans excluding performance-based options is as follows: |
| Weighted | ||||||||||||
| average | ||||||||||||
| Weighted | remaining | |||||||||||
| average | contractual | |||||||||||
| exercise | terms | |||||||||||
| Number | price | (in years) | ||||||||||
Options outstanding at January 1, 2010 |
566,010 | 1.31 | 4.04 | |||||||||
Options expired |
(566,010 | ) | 1.31 | |||||||||
Options outstanding at December 31, 2010 |
— | |||||||||||
The Company accounted for its options to non-employees under the fair value method
in accordance of ASC 718 (formerly SFAS 123(R)) and ASC 505 (formerly EITF 96-18).
The fair value for options granted to non-employees was estimated according to the
principles determined in ASC 718 based on binomial option pricing model and
amounts to approximately NIS 4. For the weighted-average assumptions see Note 2h.
A summary of the activity under the performance share-based options granted to
non-employees is as follows:
| Weighted | ||||||||||||
| average | ||||||||||||
| Weighted | remaining | |||||||||||
| average | contractual | |||||||||||
| exercise | terms | |||||||||||
| Number | price | (in years) | ||||||||||
Options outstanding at January 1, 2010 |
900,000 | 0.42 | 6.7 | |||||||||
Options expired |
(900,000 | ) | 0.42 | |||||||||
Options outstanding at December 31, 2010 |
— | |||||||||||
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 12:- FINANCIAL INCOME, NET
| Year ended | ||||||||
| December 31, | ||||||||
| 2009 | 2010 | |||||||
Bank commissions |
(7 | ) | (16 | ) | ||||
Interest income (expenses) |
3 | (34 | ) | |||||
Change in fair value of liability in respect of warrants |
250 | — | ||||||
Gain (loss) from exchange rates differences |
(2 | ) | 177 | |||||
Gain on short-term deposits |
10 | 70 | ||||||
| 254 | 197 | |||||||
NOTE 13:- INCOME TAXES
| a. | Tax laws applicable to the companies: |
| 1. | The Company is taxed under U.S. tax laws. |
||
| 2. | The subsidiary is taxed under the Israeli Income Tax
Ordinance. |
| b. | Tax assessments: |
||
The Company has not received final tax assessments since its incorporation. The
subsidiary has tax assessments considered as final through 2005. |
38
Table of Contents
TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 13:- INCOME TAXES (Cont.)
| c. | Tax rates applicable to the Group: |
| 1. | The subsidiary: |
||
The rate of the Israeli corporate tax is as follows: 2008 — 27%, 2009 — 26%,
2010 — 25%. Tax at a reduced rate of 25% applies on capital gains arising
after January 1, 2003, instead of the regular tax rate. In July 2009, the
Israeli Parliament (the Knesset) passed the Economic Efficiency Law 2009
(Amended Legislation for Implementing the Economic Plan for 2009 and 2010)
which prescribes, among other things, an additional gradual reduction in
Israeli corporate tax rate starting from 2011 to the following tax rates:
2011 — 24%, 2012 — 23%, 2013 — 22%, 2014 — 21%, 2015 — 20%, 2016 and
thereafter — 18%. |
|||
The Company estimates that the Economic Efficiency Law is not expected to
affect the Company’s consolidated financial statements. |
|||
| 2. | The Company: |
||
The tax rates applicable to the Company whose place of incorporation is the
U.S. are corporate (progressive) tax at the rate of up to 35%, including
State tax and Local tax which rates are dependent on the country and city in
which the Company will conduct its business. |
|||
According to the tax laws applicable to Israeli residents, dividend received
from a foreign resident company is subject to tax in Israel at the rate of
25% by its recipient. According to the tax laws applicable in the U.S., tax
at the rate of 30% is withheld and, based on the treaty for the avoidance of
double taxation of Israel and the U.S., it may be reduced to either 25% or
12.5% (dependent on the identity of the shareholder). To enjoy the benefits
of the tax treaty, certain procedural requirements need to be satisfied. |
| d. | Carryforward losses for tax purposes: |
||
In the year ended December 31, 2010, the main reconciling items from the statutory
tax rate of the Company (25%) to the effective tax rate (0%) are carryforward tax
losses for which a full valuation allowance was provided. |
|||
Carryforward tax losses of the Company amount to approximately NIS 42,000 as of
December 31, 2010. According to the tax laws in the U.S., these losses may be
gradually carried forward until 2025. Carryforward tax losses of the subsidiary in
Israel, which may be carried forward for an indefinite period, total approximately
NIS 134,000 as of December 31, 2010. Deferred tax assets relating to these
carryforward losses were not recorded due to the uncertainty of their utilization
and as a result, the Company provided a valuation allowance on the total amount of
the deferred assets. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 13:- INCOME TAXES (Cont.)
| e. | Deferred tax assets: |
||
Significant components of the Company’s deferred tax assets are as follows: |
| December 31, 2010 | ||||
Tax assets with respect to tax loss carryforwards |
38,820 | |||
Less — valuation allowance |
(38,820 | ) | ||
Net deferred tax assets |
— | |||
Realization of deferred tax assets is depended on generating sufficient taxable
income in the period that the deferred tax assets are realized. Based upon all
available information and because of the Company’s lack of earnings history,
deferred tax assets have been fully offset by a valuation allowance. |
|||
The Company has not been assessed for tax purposes since
incorporation. |
|||
| f. | Tax provision: |
||
In 2008, as a result of the Settlement Agreement (see Note 9d), the Company
recorded taxable income. The Company believes it has reasonable arguments to
enable it to offset the taxable income against taxable losses from other sources.
Due to uncertainties with respect to this matter and in accordance with ASC 740,
“Income Taxes”, the Company has provided NIS 1,254 (2009 — NIS 1,344) for the
potential tax exposure. The subsidiary filed its tax return in the U.S. during
2009. |
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 14:- RELATED PARTY TRANSACTIONS
| a. | Investment agreement: |
||
On January 27, 2010, the Company entered into an investment agreement (“the
Agreement”) with Medgenesis Partners Ltd. (“Medgenesis”), a private company
incorporated under the laws of Israel and controlled by Mr. Ascher Shmuelevich
(“the Investor” and “the Shareholder”, respectively). For more information see
note 10b5. |
|||
| b. | Loan agreement: |
||
On April 28, 2010 the Company’s Board of Directors entered into a loan and escrow
agreement with Medgenesis. Pursuant to the loan agreement, Medgenesis will lend
the Company approximately $354 thousand. An amount of $54 thousand was paid to the
Company on February 1, 2010, and pursuant to the Investment Agreement (see a
above), was used for on-going expenses of the Company. The remaining amount of
$300 thousand was placed in escrow. |
|||
This amount was used for Chapter 11 proceedings in the U.S. as follows: |
| 1. | An amount of $100,000 will be paid to the Company’s law
firm in the United Stated ($25,000 on account of legal services rendered in
the past and $75,000 on account of expected legal fees in connection with the
Chapter 11 proceeding) for handling the filing of the Chapter 11 application
to the Delaware Court. |
||
| 2. | An amount of $200,000 will be paid once Medgenesis grants
the order or at the close of the Chapter 11 proceeding and after all the
required regulatory and corporate approvals are obtained, provided that a
vesting event has not occurred. Upon the occurrence of a vesting event, all
the funds still held with the trustee will be returned to Medgensis. A
vesting event will occur in the following circumstances: (1) four weeks from
the date of signing the loan agreement if the Company does not file for
Chapter 11, (2) 90 days after filing for Chapter 11 in the event that the
Court does not approve the application, (3) the Company does not complete the
Chapter 11 proceeding and does not obtain all the required approvals from the
Delaware Court, the Stock Exchange and the SEC within 120 days, (4) the
Company is removed from the list of traded companies with no possibility of
returning to be traded on the Stock Exchange, (5) the Company initiates
liquidation proceedings, a claim is filed against the Company in respect of
all or substantially all of its assets or the Company does not meet material
conditions of the loan agreement. |
The loan bears interest at an annual rate of 4%. The loan shall be paid with the
accrued interest thereon upon the occurrence of certain events as defined in the
loan agreement.
In the event that the loan, including interest, are not repaid on the maturity
date (as defined in the agreement), then the interest, on the outstanding loan
shall be at a rate of 12% per year, for the actual number of days elapsed from the
maturity date until the Lender receives payment of the full loan and related
interest.
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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NIS in thousands, except share and per share data
NOTE 14:- RELATED PARTY TRANSACTIONS (Cont.)
Pursuant to the loan and escrow agreement, the Company undertook, among other
things, to file a petition seeking relief under Chapter 11 of Title 11 of the
United States Code, pursuant to which the Company will apply to the U.S.
bankruptcy court for the District of Delaware to authorize approval of
transactions and all other actions required according to a plan to be prepared by
the Company and approved by the lender in writing prior to any filing (the
“Plan”). Further, the Company covenanted not to engage in certain conduct while
funds loaned under the agreement are outstanding, including: (i) hiring employees;
(ii) applying for any credit or loan from a banking institution; (iii) amending
any of the Company’s organizational documents; and (iv) acting in any manner that
would result in a material adverse effect on the Company or in non-compliance with
the Plan.
On June 28, 2010 the Company received a letter from Medgenesis requesting full
payment of the loan since as of June 29, 2010 the Company has not yet filed
Chapter 11. On June 29, 2010 Medgenesis withdrew the remaining amount from the
escrow account.
On September 26, 2010, the Company and Medgenesis signed another loan agreement
totaling up to $200 thousand to cover the Company’s current expenses, complete the
Chapter 11 proceeding and settle some of the unsecured creditors’ claims in
accordance with the settlement approved by the Court. As of December 31, 2010, the
Company received approximately NIS 486 (approximately $137 thousand).
As of December 31, 2010, the Company’s outstanding debt to Medgenesis approximates
$428 thousand (for both loans).
Following the approval of the Chapter 11 proceedings by the Company’s general
shareholders’ meeting on December 13, 2010 and by the court on December 21, 2010,
as of the date of the financial statements the outstanding debt was classified as
receipts on account of shares.
NOTE 15:- SUBSEQUENT EVENTS
For details on capital consolidation, increasing capital and private allocation,
see note 10b6.
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Table of Contents
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are
designed to provide reasonable assurance that the information required to be disclosed in the
reports we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission rules, and that such
information is accumulated and communicated to our management to allow timely decisions regarding
required disclosure.
The Company’s principal executive officer and its principal financial officer evaluated the
effectiveness of the Company’s disclosure controls and procedures, as of the end of the period
covered by this report. Based on that evaluation, the principal executive officer and the principal
financial officer concluded that our disclosure controls and procedures were effective as of
December 31, 2010.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f) or Exchange Act Rule 15d-15(f).
Under the supervision and with the participation of our management,
including our Principal Executive Officer and our Principal Financial
Officer, we carried out an evaluation of the effectiveness of our internal control over financial
reporting as of December 31, 2009 based on the Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our
management concluded that our internal control over financial reporting was effective as of
December 31, 2010.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting during the quarter
ended December 31, 2010 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Management
As of December 31, 2010, our directors and executive officers, their ages and positions held, were
as follows:
| Name | Age | Position | ||||
Ran Ben-Or (1)(2)(3)(4)
|
47 | Director | ||||
Zvi Linkovsy (2)
|
60 | Director | ||||
Orly Ben Ami (2)(4)
|
45 | Director | ||||
Eran Feldhay (1)(2)(4)
|
38 | Director | ||||
Hanan Waksman (4)(5)
|
36 | Director | ||||
Uri Ben-Or (6)
|
40 | Chief Financial Officer | ||||
| (1) | Directors were elected at the annual general meeting on December 10, 2008. |
|
| (2) | Member of the Audit Committee. |
|
| (3) | Audit Committee financial expert. |
|
| (4) | Independent Directors. |
|
| (5) | Directors were nominated on June 9th, 201 |
|
| (6) | On September 20, 2010, Mr. Uri Ben-Or began to serve as the Finance
Officer of both TopSpin and TopSpin Israel. |
The following is a brief account of the education and business experience during the past five
years of each director, executive officer and key employee, indicating the principal occupation
during that period of time, and the name and principal business of the organization in which such
occupation and employment were carried out:
Ran Ben-Or has served as a director of the Company since March 25, 2008. From 1994 to 2004, Mr.
Ben-Or was a partner in Prof. Itzhak Swary & Co. Since 2004, he has served as the Chief Executive
Officer and Founder of Bagira Investments Ltd. and also as it’s Chief Executive Officer. Since 2005
he has served as a Managing Partner of the Tene Private Equity Funds. Mr. Ben-Or also serves as a
director of Hanita Coating RCA, Omen Die Casting RCA, Teldor Cables &
Systems Ltd., Blue I Technologies Ltd., Gazit Industries RCA and
Macabident Ltd. Until May 2010, Mr. Ben-Or also served as a director
of Cidav Printed Circles Ltd. Mr. Ben-Or
received a B.Sc. in Computer Science and Accounting and an M.B.A. from the Hebrew University of
Jerusalem. Mr. Ben-Or is also a licensed Israeli C.P.A. Mr. Ben-Or’s accounting and investment
experience will assist the Board in identifying, valuing and accounting for any future acquisition.
Zvi Linkovsky has served as a director of the Company since December 17, 2009. Since 2000, Mr.
Linkovsky has been the CEO of Tapuz and main representative and advisor to Kuohwa in Israel. Since
2001, Mr. Linkovsky has also served as a Director of Rabintex Industries Ltd, and since 2002, he
also served as the director of Mandarin, Israel. Mr. Linkovsky holds a B.Sc. in Textile
Technologies from Shenkar College. Mr. Linkovski brings to the Board substantial experience with
multinational corporations and will be able to guide the Company in developing future operations
both inside and beyond Israel.
Eran Feldhay has served as a director of the Company since December 10, 2008. From 1998 to 2004,
Dr. Feldhay served as the Product Manager of Medcon Systems (1993) Ltd.; from 2004 to 2006 he
served as the VP of Marketing of Medcon Systems (1993) Ltd.; and from 2006 he served as the General
Manager of Medcon Systems (1993) Ltd. Dr. Feldhay received a B.Sc and an M.D. from the Tel-Aviv
University. Mr. Feldhay brings to the Board expertise in product development, which will serve the
Board well in developing product lines acquired in the course of any future acquisitions.
Orly Ben Ami has served as a director of the Company since June 9, 2010. Ms Ben Ami has previously
worked as an advocate in the private sector and was the manager of the Northern District at Bank
Leumi LeMashkanteot Ltd. (mortgages specialization). Ms Ben Ami holds an LLB from Sha’arei Mishpat
College and holds as degree in Management of Education and General Studies from Haifa University.
Ms Ben Ami’s legal and banking experience will be a great asset to the Board in identifying
potential issues and in advising with respect regulatory matters
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Table of Contents
Hanan Waksman has served as a director of the Company since June 9, 2010. Mr Waksman has
previously served as the vice president for business and property development at Capital Investment
and as vice president for business development at Sage Capital Growth. Mr Waksman is currently
serving as an external director at Rabintex Industries Ltd, an Israeli defense contractor which is
publicly listed on the Tel-Aviv Stock Exchange. Mr Waksman holds an M.B.A, specializing in Finance
from Baruch College in New York. Mr Waksman brings substantial experience in business and property
development will assist the Board in evaluating future acquisition opportunities.
Uri Ben-Or, has served as the CFO of the Company since September 20, 2010. Mr. Ben-Or has served as
the chief executive officer of CFO Direct Ltd. since January 2007; through CFO Direct, he has
provided chief financial officer services to a number of biotechnology companies based in Israel
and traded on the Tel-Aviv Stock Exchange. Prior to founding CFO Direct, Mr. Ben-Or served as the
Vice President, Finance of Glycominds Ltd., a leading biotechnology company from 2001 until 2005.
Mr. Ben-Or holds a BA (Business) from the College of Administration and an MBA from the Bar Ilan
University, both in Israel; he is a Certified Public Accountant.
During the fiscal year ending December 31, 2010, the following directors and executive officers
ceased their affiliation with the Company: (i) Fufi Fatal ceased serving as the Chairman of the
Board of Directors, Acting Principal Executive Officer on May 26, 2010; (ii) Shlomit Oren ceased
serving as a Director of the Company on April 11, 2010; (iii) Eldad Yehiely ceased serving as a
Director of the Company on May 2, 2010; and (iv) Shiri Blackman served as a Controller of the
Company since May 2, 2010 until September 26, 2010.
The following are additional directors, executive officers and key employees appointed after
December 31, 2010 (both appointed to the Board on March 7, 2011):
Eitan Shtarkman
|
53 | Chief Executive Officer and Director | ||||
Ascher Shmulewitz
|
54 | Chairman of the Board of Directors |
The following is a brief account of the education and business experience during the past five
years of each additional director, executive officer and key employee appointed after December 31,
2010, indicating the principal occupation during that period of time, and the name and principal
business of the organization in which such occupation and employment were carried out:
Eitan Shtarkman: From January 2009 until joining the Company as Chief Executive Officer in
February ,2011, Mr. Shtarkman worked as an entrepreneur in the dental medicine arena. He
participated in the founding and management of three companies during this period: Precise Implant
Systems, which manufactures dental implants based on proprietary technology; IGS Dental, which
creates real-time positioning and monitoring technology for dental implant surgery; and ChainPlant,
which developed the first dental implant system capable of being extended or shortened. Between
January 2005 and December 2008, Mr. Shtarkman served as Chief Executive Officer of Chmir-Nir, a
public Israeli avionics company. Mr. Shtarkman holds a B. Sc. in Physics from Tel Aviv University
and a diploma from The Institute of Capital Market Studies.
Ascher Shmulewitz is the Company’s controlling shareholder and owns 88.98% of the outstanding
voting securities of the Company. On April 4, 2011, he was
appointed Chairman of the Board. Since 2002, Mr. Shmulewitz has led and managed Medgenesis
Partners Ltd., an Israeli company that invests in, develops and commercializes innovative products,
technologies and devices in various medical and wellness fields, aimed at improving the health and
well-being of consumers and patients, and assisting medical practitioners. Dr. Shmulewitz holds a
Ph.D in Engineering from Tel Aviv University and an MD from the Israel Institute of Technology
(Technion).
Beneficial Ownership Reporting Compliance
As none of our securities have been registered as a class under Section 12 of the Exchange Act,
none of our directors, executive officers and beneficial owners of more than ten percent of any
class of our equity securities are required to file reports of ownership and changes in ownership
with the SEC on Forms 3, 4 or 5.
Code of Ethics
As of December 31, 2010, we have not adopted a code of ethics but intend to do so if and when we
restart our suspended activities or enter into new business activities.
Corporate Governance
We are not listed as an issuer, nor have we applied to be listed as an issuer, on any national
securities exchange or inter-dealer quotation system in the United States. For the purposes of
compliance with applicable securities rules, our Board of Directors affirmatively determines the
independence of each of our directors using the independence standards required by a national
securities exchange, the NASDAQ Stock Market, including the consideration of any relationship
which, in the opinion of the Board of Directors, would interfere with the exercise of independent
judgment in carrying out the director’s responsibilities as a member of our Board of Directors.
During its annual review of director independence, our Board of Directors determined that Messrs.
Ben-Or and Mr. Feldhay and Ms. Ben Ami are each independent under the director independence
standards of the NASDAQ Stock Market, Inc. as of December 31, 2010.
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Table of Contents
Although our Board of Directors has not separately designated a nominating committee or a committee
performing similar functions, our
Board of Directors determined that Messrs. Ben-Or and Feldhay and Ms. Ben Ami each would be
independent under the NASDAQ nominating committee independence standards.
Our Board has a separately-designated standing audit committee composed of the following directors:
Messrs. Ben-Or and Feldhay and Ms. Ben Ami. Under the independence standards required by a national
securities exchange, the NASDAQ Stock Market for audit committee members, as of December 31, 2010,
each of the audit committee members were independent.
Our Board of Directors determined that as of December 31, 2010, the Company had at least two audit
committee financial experts serving on the Company’s Audit Committee: Hanan Waksman and Ran
Ben-Or.
Item 11. Executive Compensation.
Executive Compensation
Summary Compensation Table
The following table sets forth the aggregate cash compensation paid during the 2010 fiscal year to
Mr. Fatal, who served as our Chief Executive Officer during the fiscal year ending December 31,
2010 (our “Named Executive Officer”). We did not have any other executive officers who received
compensation in excess of $100,000 during the fiscal year ended December 31, 2010.
| Name of Named | Option | All Other | ||||||||||||||||||||||
| Executive Officer and | Salary | Bonus | Awards | Compensation | Total | |||||||||||||||||||
| Principal Position | Year | ($) | ($) | ($) | ($)(1) | ($)(1) | ||||||||||||||||||
Fufi Fatal (4) |
2010 | — | — | — | 30,867 | 30,867 | ||||||||||||||||||
| 2009 | — | — | — | — | — | |||||||||||||||||||
| (1) | All compensation received by the executives of TopSpin and TopSpin
Israel is paid in NIS. For the purpose of completing this table in
U.S. Dollars, we have used the average NIS/U.S. Dollar exchange rate
for compensation received by the executive officer in 2010 which was
3.733. |
Employment Agreements
Fufi Fatal
On January 28, 2010, the Company entered into a consulting agreement with Nichsey F.N. Fatal Ltd.,
a private company organized under the laws of Israel and controlled by Mr. Fufi Fatal, who serves
as a director of the Company with an effective date of March 1, 2010.
Pursuant to the terms of Mr. Fatal’s consulting agreement, the Company engages him to provide
certain consulting services to the Company as may reasonably be requested by the Board. Mr. Fatal
is required to provide at least 80 hours of services to the Company per month, which services shall
be provided solely by Mr. Fatal. In exchange for these services, the Company will pay Mr. Fatal a
monthly fee equal to NIS 34,105 (approximately $9,100) beginning on March 1, 2010. In addition to
this monthly fee, we will issue to Mr. Fatal (subject to requisite approvals) options to purchase
shares of the Common Stock representing ten percent (10%) of issued and outstanding shares of
Common Stock immediately preceding such option issuance. The grant of these options is subject to:
(i) execution of an investment in the Company by a third party (or, if earlier to occur, a rights
offering), and (ii) the increase of the registered share capital of the Company. The options will
vest as follows: (i) fifty percent (50%) of the Consultant Options will vest on December 17, 2010,
and (ii) the remaining fifty percent (50%) will vest on December 17, 2011. The options will expire,
if unexercised, on the earlier of the occurrence of a “merger or acquisition event” (as such term
is defined in the consulting agreement) and the date that is seven (7) years after the date of
grant. Unvested options will be cancelled and will cease to vest only upon termination of the
agreement by Mr. Fatal or termination of the agreement by the Company for cause. The options issued
in connection with the agreement will be subject to certain transfer restrictions in compliance
with U.S. and Israeli securities laws. Fufi Fatal ceased serving as the Chairman of the Board of
Directors, and Acting Principal Executive Officer on May 26, 2010 and his options expired.
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Table of Contents
Outstanding Equity Awards at Fiscal-Year End Table
There were no unexercised options, unvested shares of Common Stock or any awards under an equity
incentive plan as of December 31, 2010 outstanding with respect to our Named Executive Officer.
Compensation of Directors
The following table sets forth information regarding the compensation paid to each individual who
served as our director during the 2010 fiscal year:
| Fees | Nonqualified | |||||||||||||||||||||||||||
| Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
| or Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
| Cash | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
Ran Ben-Or (1) |
19,420 | — | — | — | — | — | 19,420 | |||||||||||||||||||||
Eran Feldhay (2) |
26,010 | — | — | — | — | — | 26,010 | |||||||||||||||||||||
Shlomit Oren (3) |
7,401 | — | — | — | — | — | 7,401 | |||||||||||||||||||||
Hanan Waksman (4) |
— | — | — | — | — | — | — | |||||||||||||||||||||
Orly Ben-Ami (5) |
— | — | — | — | — | — | — | |||||||||||||||||||||
Fufi Fatal (6) |
— | — | — | — | — | — | — | |||||||||||||||||||||
| (1) | Appointed to our Board of Directors on March 25, 2008. |
|
| (2) | Appointed to our Board of Directors on December 10, 2008. |
|
| (3) | Resigned from our Board of Directors on April 11, 2010. |
|
| (4) | Appointed to our Board of Directors on June 9, 2010. |
|
| (5) | Appointed to our Board of Directors on June 9, 2010. |
|
| (6) | Resigned from our Board of Directors on May 26, 2010; please see the
Summary Compensation Table for compensation paid to Mr. Fatal during
2010. |
Dr. Feldhay and Mr. Ben-Or, each an “external director”, received compensation for their services
according to the Israeli regulations concerning payment to external directors. Pursuant to our
board’s decision, Shlomit Oren also received compensation according to the Israeli regulations
concerning payment to external directors despite not being considered an “external director” under
these regulations. No other directors currently receive any compensation.
Director and Officer Indemnification
In January 2004 and August 2005, we undertook to indemnify our officers and directors to the
fullest extent permitted by Delaware law for any liabilities that they may incur for any action
taken as an officer or director or in any other joint venture, partnership or enterprise. The
indemnification includes any monetary liability imposed on the officer or director because of a
verdict, fine, penalty, settlement agreement or any other reasonable amount expense accrued by the
office or director in connection with any threat, activity, pending procedure, claim or civil,
criminal or administrative proceeding or investigation, including any activity by or on behalf of
us in which the officer or director is an interested party or is liable to an interested party, or
where the officer or director has been threatened that he will become an interested party due to
his being an officer of director. We will compensate an officer or director in advance for any
reasonable amount that he has paid for any claim against him (including litigation costs and the
costs of preparing an adequate defense) after the director or officer agrees that he will bear the
detailed costs himself if it is found that the officer or director is not entitled to receive
compensation under the agreement or our Certificate of Incorporation. The conclusion of any
proceeding with a judgment, order,
settlement agreement, indictment or similar conclusion against a director or officer will not give
rise to the assumption that the officer or director acted in a manner other than in our best
interests or, in respect to a criminal charge, had no reasonable grounds for assuming that his
actions were illegal.
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Table of Contents
In a number of circumstances, an officer or director will not be entitled to indemnification or
advance reimbursement for expenditures if: (1) a competent court of law has made a final verdict or
order that a claim or claims against an officer or director arose out of deception or bad faith or
that the officer or director was misled or, that the indemnification is not permitted under
prevailing law; (2) the verdict or order by the court stemmed from a claim regarding infringement
of the Exchange Act, or other federal or state laws; (3) an act or omission occurred for which the
officer or director is not entitled to receive compensation under Delaware law; (4) the proceedings
or claims were initiated by the officer or director that were not in self-defense other than
proceedings brought to pay compensation or where our Board of Directors has approved of the
proceedings and the decision to file them; (5) expenditures or obligations of any kind were paid
directly to the officer or director by the insurance company under the directors and officers
liability policy; or (6) the claim relates to abuse of information that is not available to the
public by the officer or director in all matters pertaining to the purchase and/or sale of our
Common Stock. We will not be obligated to compensate an officer or director for every amount paid
in the framework of a settlement agreement that was drawn up by the officer or director without our
written consent. We will not sign any settlement agreement that would affect any proceedings
against an officer or director without his written consent.
During the fiscal year ended December 31, 2010, we maintained directors’ and officers’ liability
insurance for the purpose of paying these types of claims in an amount of up to $3,000,000 per
event for a year. We may decide to cancel our indemnification agreements with our officers and
directors, but we will still be obligated to compensate an officer or director for any claims
resulting from actions prior to the cancellation of the indemnification agreement. Currently, we
have indemnification agreements with all present or past officers and directors of both us and our
subsidiaries.
TopSpin Medical, Inc. 2001 Israeli Stock Option Plan
In accordance with resolutions adopted by our board of directors in February 2000, we adopted an
option plan in 2001 for the allocation of up to 300,000 shares of our Common Stock to our
directors, employees and consultants and the directors, employees and consultants of our
subsidiaries. Options granted under this plan can be exercised into shares of our Common Stock at
either $2.00 or $12.00. As of December 31, 2010, 280,910 options have been issued to employees,
directors and consultants. 280,910 options have expired and are no longer exercisable. Our Board of
Directors has resolved not to issue any additional options under this plan. The options under the
2001 Israeli Stock Option Plan are not registered for trading on TASE, but however, have been
registered under the Securities Act pursuant to a Form S-8 registration statement that we filed
with the SEC on October 15, 2007.
TopSpin Medical, Inc. 2003 Israeli Stock Option Plan
General Provisions
Our Board of Directors passed resolutions in January 2003, September 2003, August 2005 and
September 2007, under which it adopted the 2003 Israeli Stock Option Plan to allocate up to
37,000,000 shares of our Common Stock to our directors, employees and consultants and the
directors, employees and consultants of our subsidiaries. The plan is administered by the Board of
Directors and any committee that the Board of Directors may appoint for such purpose. The appointed
committee may grant four types of options under this plan: Approved 102 Capital Gains Options,
which are granted only to employees of our subsidiaries and qualify for capital gains tax
treatments, Approved 102 Ordinary Income Options, which qualify for ordinary income tax treatment,
Unapproved 102 Options, and 3(9) Options, which are non-qualified stock options which are granted
mostly to non-employees of our subsidiaries. The number of shares authorized to be issued under
this plan will be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, combination or
reclassification of the stock or the payment of a stock dividend with respect to the Common Stock
or any other increase or decrease in the number of issued shares of Common Stock effected without
receipt of consideration.
The existing outstanding options as of December 31, 2010 are exercisable at prices between $0.001
and $0.1886, depending on the individual grant. Unless stated otherwise in the individual grant,
most grants of options vest and become exercisable according to the following schedule: 25% on the
first anniversary of the option grant, and 6.25% at the end of each subsequent quarter over the
course of the following three years. The committee, though, may, in its absolute discretion and on
such terms and conditions as it deems appropriate, accelerate or otherwise change the time at which
such option or any portion of an option will vest. The option grant may also contain performance
goals and measures and the provisions in one option grant need not be identical to any other option
grant. All options will expire ten years from the date of grant unless terminated earlier. If an
individual option grant expires and has not been exercised, our Board of Directors has the
authority to allocate those options to other employees, directors or consultants.
An option may not be exercised unless the grantee is then employed by us or providing services to
us or our affiliate. Following the termination of a grantee’s position with us or a subsidiary,
other than for cause, death, disability or retirement, the grantee may still exercise his or her
vested options for ninety days following the date of termination. If a grantee dies or is disabled
during his or her employment or service, then his or her heirs will be entitled to exercise the
options for twelve months after the grantee’s death or disability. Also, if the grantee terminates
his or her employment on account of retirement, he or she will have twelve months to exercise
his or her options.
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Termination of an Option
Subject to the Board of Director’s approval, the committee administering this option plan may, from
time to time, cancel all or any portion of an option granted under the plan and our obligation will
be discharged with respect to that option through either (i) payment to the grantee of an amount in
cash equal to the excess, if any, of the fair market value of the cancelled option at the date of
such cancellation over the aggregate exercise price of the option, (ii) the issuance or transfer to
the grantee of Common Stock with a fair market value at the date of such transfer equal to any such
excess, or (iii) a combination of cash and shares with a combined value equal to any such excess,
as determined by the committee, in its sole discretion.
Also, in the event of our voluntary liquidation, merger, acquisition, or reorganization, we must
notify the grantees at least fifteen days prior to the transaction. All options will then expire
prior to the consummation of the transaction if they are not exercised by the notified grantees. In
the event of a merger with another company, however, our Board of Directors is entitled to exchange
the options for the securities of the surviving corporation or to pay the fair market value of the
options to the grantees.
Outstanding Grants
As of December 31, 2010, we have issued 67,392,125 options under the 2003 Israeli Stock Option Plan
with 232,813 options outstanding. During 2010, 11,000,000 options have expired and are no longer
outstanding. As permitted under the plan, we have, from time to time, reissued these expired
options in subsequent option grants as permitted by the plan. The options under the 2003 Israeli
Stock Option Plan are not registered for trading on TASE, but however, have been registered under
the Securities Act pursuant to a Form S-8 registration statement that we filed with the SEC on
October 15, 2007.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The following table sets forth information regarding the shares of our Common Stock beneficially
owned (including options exercisable within 60 days) as of April 1, 2011 by: (i) each of our Named
Executive Officers and our directors, (ii) all directors and executive officers as a group and
(iii) by each person known by us to beneficially own five percent (5%) or more of the outstanding
shares of our Common Stock. Unless otherwise indicated, the address of each of the persons listed
in this table is as follows: 25 Lechi Bnei Brak, Israel.
| Total Number of | ||||||||
| Shares | ||||||||
| Beneficially | Percentage | |||||||
| Beneficial Owners of Five Percent or More | Owned | of Class(1) | ||||||
Asher Shmulewits(1) |
10,478,592 | 88 | % | |||||
Lehi 27, Brak, Israel |
||||||||
Directors and Executive Officers |
||||||||
Ran Ben-Or |
0 | * | ||||||
Eran Feldhay |
0 | * | ||||||
Shlomit Oren |
0 | * | ||||||
Hanan Waksman |
0 | * | ||||||
Orly Ben Ami |
0 | * | ||||||
Fufi Fatal |
0 | * | ||||||
Eitan Shtarkman |
0 | * | ||||||
All directors and executive officers as a group (7 persons) |
0 | * | ||||||
| (1) | Includes 116,129 shares of Common Stock underlying options, which Mr.
Shmulewits has the right to acquire within 60 days of the date of
March 1, 2010. Assumes the full exercise of all options and warrants
that are exercisable by the holder within 60 days from March 1, 2010. |
49
Table of Contents
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Except for: (i) our compensation arrangement with our former Chairman and Acting Principal
Executive Officer, Fufi Fatal, pursuant to which we paid Mr. Fatal NIS 117,636 (approximately
$30,867); (ii) the allocation of 10,122,463 shares of Common Stock to Medgenesis as a repayment of
a debt of US$484,000 of the Company to Medgenesis, as a part of the chapter 11 settlement, as
further detailed above; and (iii) the execution of the Company of an agreement to receive office
services from a company affiliated with Mr Zvi Linkovsky, one of the directors of the Company, for
a monthly rent of NIS 2,000, as further detailed above, during the fiscal year ended December 31,
2010, there has not been, nor is there currently proposed, any transaction or series of similar
transactions to which we were a party or are a party in which:
| • | the amounts involved exceeded or will exceed the lesser of $120,000 or
1% of our average total assets at year-end for the last two completed
fiscal years; and |
||
| • | a director, executive officer, holder of more than 5% of our Common
Stock or any member of their immediate family had or will have a
direct or indirect material interest. |
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for the years ended December 31, 2010 and December 31, 2009 for the
professional services rendered by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,
our independent public accounting firm, for the audit of the Company’s annual financial statements,
review of financial statements or services that are normally provided by our independent public
accounting firm in connection with statutory and regulatory filings or engagements for such fiscal
years, and tax advisory and assistance in the preparation of tax returns and general tax research
and planning equaled NIS 190,000 (approximately $50,897) and NIS 278,000 (approximately $73,642,),
respectively.
Audit-Related Fees
The aggregate fees billed for the year ended December 31, 2010 for professional services rendered
by Kost Forer Gabbay & Kasierer for the Company equaled NIS 30,000 (approximately $8,036).There
were no fees billed for the years ended December 31, 2009.
Tax Fees
The aggregate fees billed for the years ended December 31, 2010 and December 31, 2009 for
professional services rendered by Kost Forer Gabbay & Kasierer for tax compliance, tax advice and
tax planning equaled NIS 20,000 (approximately $5,358) and NIS 127,000 (approximately $33,403),
respectively, and consisted of assistance in the preparation of tax returns and general tax
research and planning.
All Other Fees
The aggregate fees billed for the year ended December 31, 2010 for professional services rendered
by Kost Forer Gabbay & Kasierer for isox equaled NIS 35,000 (approximately $9,376).No other fees
were billed by Kost Forer Gabbay & Kasierer to the Company during the years ended December 31,
2009.
Pre-Approval Policies and Procedures
During fiscal year 2010, all services provided by Kost Forer Gabbay & Kasierer were pre-approved by
our Audit Committee, which concluded that the provision of such services by Kost Forer Gabbay &
Kasierer was compatible with the maintenance of that firm’s independence in the conduct of its
auditing functions. On March 15, 2009, our Audit Committee adopted a pre-approval policy for
services provided by the independent registered public accounting firm. Under that adopted
pre-approval policy, our Audit Committee will pre-approve the provision by the independent
registered public accounting firm of services that fall within specified categories (such as
statutory audits or financial audit work for subsidiaries, services associated with SEC
registration statements and consultations by management as to accounting interpretations) but only
up to specified dollar amounts. Any services that exceed the pre-approved dollar limits, or any
services that fall outside of the general pre-approved categories, require specific pre-approval by
the Audit Committee. If our Audit Committee delegates pre-approval authority to one or more of its
members, the member would be required to report any pre-approval decisions to our Audit Committee
at its next meeting. All our audit fees were preapproved by our Audit Committee.
50
Table of Contents
Item 15. Exhibits and Financial Statement Schedules.
| Exhibit No. | Description of Document | |||
| 3.1 | Amended and Restated Certificate of Incorporation of TopSpin Medical, Inc,
effective February 11, 2011. (Incorporated by reference to the Company’s Current
Report on Form 8-K filed on February 25, 2011) |
|||
| 3.2 | Amended and Restated Bylaws of TopSpin Medical, Inc., adopted June 16, 2010.
(Incorporated by reference to the Company’s Current Report on Form 8-K filed on
June 22, 2010) |
|||
| 10.1 | # | TopSpin Medical, Inc. 2001 Israeli Stock Option Plan (Incorporated by reference
to the Company’s Registration Statement on Form SB-2 (File No. 333-142242) filed
on April 20, 2007) |
||
| 10.2 | (i) # | TopSpin Medical, Inc. 2003 Israeli Stock Option Plan (Incorporated by reference
to the Company’s Registration Statement on Form SB-2 (File No. 333-142242) filed
on April 20, 2007) |
||
| 10.2 | (ii) # | TopSpin Medical, Inc. 2003 Stock Option Plan, as amended on February 26, 2009
(Incorporated by reference to our quarterly report on Form 10-Q filed May 15,
2009) |
||
| 10.3 | # | Form of Option Agreement (Incorporated by reference to the Company’s
Registration Statement on Form SB-2 (File No. 333-142242) filed on April 20,
2007) |
||
| 10.4 | (i) * | Distribution Agreement with Top Medical B.V. dated as of October 3, 2006
(Incorporated by reference to the Company’s Registration Statement on Form SB-2
(File No. 333-142242) filed on April 20, 2007) |
||
| 10.4 | (ii) * | Termination Agreement with Top Medical B.V. dated as of August 28, 2008
(Incorporated by reference to the Company’s Form 8-K filed on September 3, 2008) |
||
| 10.7 | # | Form of TopSpin Medical, Inc. Indemnification Agreement (Incorporated by
reference to the Company’s Registration Statement on Form SB-2 (File No.
333-142242) filed on April 20, 2007) |
||
| 10.8 | Investment Agreement with Asher Shmulewitz dated as of February 2, 2009
(Incorporated by reference to the Company’s quarterly report on Form 10-Q filed
on May 15, 2009) |
|||
| 10.9 | # | Consulting Agreement between TopSpin Medical (Israel) and Top-Notch Consultancy,
dated April 19, 2009 (Incorporated by reference to the Company’s current report
on Form 8-K filed May 11, 2009) |
||
| 10.10 | # | Letter agreement between TopSpin Medical (Israel) and Top-Notch Consultancy,
dated May 5, 2009 (Incorporated by reference to the Company’s current report on
Form 8-K filed May 11, 2009) |
||
| 10.11 | # | Employment Agreement by and between TopSpin Medical, Inc. and Eldad Yehieli,
dated May 6, 2009 (Incorporated by reference to the Company’s quarterly report
on Form 10-Q filed May 15, 2009) |
||
| 10.12 | # | Form of Director Indemnification Director by and between TopSpin Medical, Inc.
and each of its Directors (Incorporated by reference to the
Company’s quarterly report on Form 10-Q filed May 15, 2009) |
||
| 10.13 | Share Purchase and Investment Agreement by and among TopSpin Medical (Israel),
Ltd., Kiryat Anavim — Silicon Technologies, Ltd., Anavid Insulation Products
Kiryat Anavim Agricultural Cooperative Ltd., and Ahzakot Upituach Qiryat Anavim
Agudah Shitufit Haklait Ltd., dated June 2, 2009 (Incorporated by reference to
the Company’s current report on Form 8-K filed on June 8, 2009) |
|||
| 10.14 | Investment Agreement by and among TopSpin Medical, Inc. and Medgenesis Partners
Ltd., dated January 27, 2010 (Incorporated by reference to the Company’s Current
Report on Form 8-K filed on February 2, 2010) |
|||
51
Table of Contents
| Exhibit No. | Description of Document | |||
| 10.15 | # | Consulting Agreement by and among TopSpin Medical, Inc., TopSpin Medical
(Israel) Ltd., and Nichsey F.N. Fatal Ltd., dated January 28, 2010 (Incorporated
by reference to the Company’s Current Report on Form 8-K filed on February 2,
2010) |
||
| 10.16 | Loan Agreement by and among TopSpin Medical, Inc. and Medgenesis Partners Ltd.,
effective April 30, 2010 (Incorporated by reference to the Company’s Current
Report on Form 8-K filed on May 6, 2010). |
|||
| 21.1 | Subsidiaries of TopSpin Medical, Inc. |
|||
| 23.1 | Consent
of Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global, an independent registered public accounting firm. |
|||
| 31.1 | Certification by Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) |
|||
| 31.2 | Certification by Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) |
|||
| 32.1 | Certification Furnished pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
| # | Management contracts and compensatory plans and arrangements required
to be filed as exhibits pursuant to Item 13 of this Annual Report on
Form 10-K for the fiscal year ending December 31, 2009. |
|
| * | An application has been submitted to the Securities and Exchange
Commission for confidential treatment, pursuant to Rule 406 of the
Securities Act of 1933, of portions of this exhibit. These portions
have been omitted from this exhibit, and have been filed separately
with the Securities and Exchange Commission. |
52
Table of Contents
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TOPSPIN MEDICAL, INC. |
||||
| Date: April 14, 2011 | By: | /s/ Eitan Shtarkman | ||
| Name: | Eitan Shtarkman | |||
| Title: | Chief Executive Officer | |||
In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
| DATE | ||||||
By:
|
/s/ Eitan Shtarkman
Title: Chief Executive Officer and Director (Principal Executive Officer) |
April 14, 2011 | ||||
By:
|
/s/ Uri Ben Or
|
April 14, 2011 | ||||
| Name: Uri Ben Or | ||||||
| Title: Chief Financial Officer | ||||||
| (Principal Financial and Accounting Officer) | ||||||
By:
|
/s/ Hanan Waksman
|
April 14, 2011 | ||||
| Name: Hanan Waksman | ||||||
| Title: Director | ||||||
By:
|
/s/ Eran Feldhay
|
April 14, 2011 | ||||
| Name: Eran Feldhay | ||||||
| Title: Director | ||||||
By:
|
/s/ Orly Ben Ami
|
April 14, 2011 | ||||
| Name: Orly Ben Ami | ||||||
| Title: Director | ||||||
By:
|
/s/ Ran Ben-Or
|
April 14, 2011 | ||||
| Name: Ran Ben-Or | ||||||
| Title: Director | ||||||
By:
|
/s/ Zvi Linkovski
|
April 14, 2011 | ||||
| Name: Zvi Linkovski | ||||||
| Title: Director | ||||||
By:
|
/s/ Ascher Shmulewitz
|
April 14, 2011 | ||||
| Name: Ascher Shmulewitz | ||||||
| Title: Chairman of the Board of Directors |
53
Table of Contents
EXHIBIT INDEX
| Exhibit No. | Description of Document | |||
| 21.1 | Subsidiaries of TopSpin Medical, Inc. |
|||
| 23.1 | Consent of Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global, an independent registered public accounting firm. |
|||
| 31.1 | Certification by Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) |
|||
| 31.2 | Certification by Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) |
|||
| 32.1 | Certification Furnished pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
54