My Size, Inc. - Quarter Report: 2012 March (Form 10-Q)

zk1211466.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 333-144472

Topspin Medical, Inc.
(Exact name of registrant as specified in its charter)
Delaware		51-0394637
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)
16 Hatidhar St. Raanana, 43652 PO Box 4131 ISRAEL
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 972-9-7442440
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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 x
	(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 x No o

Indicate 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 x No o

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of May15, 2012, was 23, 814, 428.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20
ITEM 4.	CONTROLS AND PROCEDURES	20
PART II - OTHER INFORMATION
ITEM 5.	OTHER INFORMATION
	EXHIBITS	E-1

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012 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,” “continues,” “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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 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.

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31 2012

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Development stage company)

AS OF MARCH 31, 2012

UNAUDITED

INDEX

	Page

Consolidated Balance Sheets	7-8

Consolidated Statements of Operations	9

Statements of Changes in Shareholders' Deficiency	10-11

Consolidated Statements of Cash Flows	12-13

Notes to Interim Consolidated Financial Statements	14-15

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

CONSOLIDATED BALANCE SHEETS

NIS in thousands (except share and per share data)

	December 31,		March 31,
	2011		2012
			Unaudited
ASSETS

CURRENT ASSETS:
Cash and cash equivalents		929		90
Accounts receivable and prepaid expenses		411		330

Total current assets		1,340		420

LONG-TERM ASSETS:
Property and equipment, net		225		217

Total long-term assets		225		217

Total assets		1,565		637

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Trade payables		386		404
Employees and payroll accruals		132		127
Other payables and accrued expenses		1,064		1,217
Tax provision		1,351		1,313

		2,933		3,061

The accompanying notes are an integral part of the interim consolidated financial statements.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

CONSOLIDATED BALANCE SHEETS

NIS in thousands (except share and per share data)

	December 31,			March 31,
		2011			2012
				Unaudited
LONG-TERM LIABILITIES:
Stock options and warrants liability		175			183
Accrued severance pay, net		2			2

Total long-term liabilities		177			185

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' DEFICIENCY:
Share capital -
Common shares of $ 0.001 par value - Authorized: 50,000,000 shares as of December 31, 2011 and March 31, 2012; Issued and outstanding: 22,355,929 and 23,814,428 shares as of December 31, 2011 and March 31, 2012, respectively		87			93
Additional paid-in capital		8,527			8,886
Accumulated deficit		(10,159	)		(11,588	)

		(1,545	)		(2,609	)

		1,565			637

The accompanying notes are an integral part of the interim consolidated financial statements.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

NIS in thousands (except share and per share data)

	Year ended December 31,			Three months ended March 31,						Period from January 31, 2007(inception date) to March 31,
	2011			2011			2012			2012
				Unaudited

Operating expenses:

Research and development, net		734			398			297			8,187
General and administrative expenses		546			121			1,178			3,141

Total operating expenses		1,280			519			1,475			11,328

Operating loss		1,280			519			1,475			11,328

Financial expense (income), net		(238	)		(30	)		(46	)		260

Net loss		1,042			489			1,429			11,588

Basic and diluted loss per Common share		0.10			0.06			0.06			1.20

Weighted average number of Common shares outstanding used in basic and diluted net loss per share calculation		9,967,875			8,673,800			23,085,179			23,085,179

The accompanying notes are an integral part of the interim consolidated financial statements.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY

NIS in thousands (except share data)

	Number of Ordinary shares		Number of Preferred shares		Share capital		Additional paid-in capital		Accumulated deficit			Total shareholders' equity (deficiency)

Balance at of January 31, 2007 (inception date):		-		-		-		-		-			-
Issuance of shares		7,694,500				29		1,952					1,981
Net loss		-								(1,053	)		(1,053	)

Balance at of December 31, 2007(*)		7,694,500		-		29		1,952		(1,053	)		928

Issuance of shares		979,300		-		4		2,601		-			2,605
Share based compensation		-						394					394
Net loss		-		-		-		-		(1,646	)		(1,646	)

Balance at of December 31, 2008(*)		8,673,800		-		33		4,947		(2,699	)		2,281

Net loss		-		-		-		-		(1,715	)		(1,715	)

Balance at of December 31, 2009(*)		8,673,800		-		33		4,947		(4,414	)		566

(*) Including an exchange of previously issued and outstanding shares of Metamorefix ordinary and preferred shares for common shares of the Company according to exchange rate of 1.399 (see details on note 1c).

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY

NIS in thousands (except share data)

	Number of Ordinary shares		Number of Preferred shares			Share capital		Additional paid-in capital			Accumulated deficit			Total shareholders' equity (deficiency)
Balance at of January 1, 2010(*)		8,673,800		-			33		4,947			(4,414	)		566
Issuance of preferred shares		-		699,500			3		204			-			207
Exercise of warrants to Preferred shares		-		595,575			2		3,344			-			3,346
Share based compensation related to warrants		-		-			-		409			-			409
Net loss		-		-			-		-			(4,703	)		(4,703	)

Balance at of December 31, 2010 (*)		8,673,800		1,294,075			38		8,904			(9,117	)		(175	)

Convergence of loan from related party		859,889		-			-		858			-			858
Recapitalization of equity upon reverse acquisition		12,822,240		(1,294,075	)		49		(1,235	)		-			(1,186	)
Net loss		-		-			-		-			(1,042	)		(1,042	)

Balance at of December 31, 2011		22,355,929		-			87		8,527			(10,159	)		(1,545	)

Share based compensation related to options and warrants		-		-			-		96			-			96
Issuance of shares		1,458,499					6		263			-			269
Net loss		-		-					-			(1,429	)		(1,429	)
Balance at of March 31, 2012		23,814,428		-			93		8,886			(11,588	)		(2,609	)

The accompanying notes are an integral part of the interim consolidated financial statements.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company

CONSOLIDATED STATEMENTS OF CASH FLOWS

NIS in thousands

	Year ended December 31,			Three months ended March 31,						Period from January 31,2007 (inception date) to March 31,
	2011			2011			2012			2012
				Unaudited
Cash flows from operating activities:
Net loss		(1,042	)		(489	)		(1,429	)		(11,588	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		43			8			13			105
Revaluation of stock options and warrants liability		(310	)		42			8			97
Interest on loan from related party		70			-			-			70
Increase (decrease) in accrued severance pay, net		(71	)		5			-			2
Share based compensation related to stock option and warrants		(481	)		-			96			1,073
Decrease (increase) in accounts receivable and prepaid expenses		(24	)		(159	)		81			(76	)
Revaluation of tax provision		-			-			(38	)		(38	)
Increase (decrease) in trade payables		(110	)		(183	)		(72	)		137
Increase in related party payables		-			-			90			90
Increase (decrease) in employees and payroll accruals and other accrued expenses		(15	)		(41	)		313			437

Net cash used in operating activities		(1,940	)		(817	)		(938	)		(9,691	)

Cash flows from investing activities:

Purchase of property and equipment		-			-			(5	)		(321	)

Net cash used in investing activities		-			-			(5	)		(321	)

Cash flows from financing activities:
Recapitalization of equity upon reverse acquisition of Topspin (a)		595			-			-			595
Proceeds from loan from related party		1,352			-			-			1,352
Issuance of shares		-			-			104			4,690
Issuance of preferred shares		-			-			-			1,870
Exercise of warrants to preferred shares		-			-			-			1,595

Net cash provided by financing activities		1,947			-			104			10,102

Increase (decrease) in cash and cash equivalents		7			(817	)		(839	)		90
Cash and cash equivalents at beginning of year		922			922			929			-

Cash and cash equivalents at end of year		929			105			90			90

The accompanying notes are an integral part of the interim financial statements.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

NIS in thousands

		Year ended December 31,			Three months ended March 31,				Period from January 31, 2007(inception date) to March 31,
		2011			2011		2012		2012
					Unaudited

(a)	Recapitalization of equity upon reverse acquisition:

	Topspin' assets and liabilities at date of recapitalization
	Tax provision		1,351			-		-		1,351
	Other accounts receivable and prepaid expenses		(818	)		-		-		(818	)
	Related party		270			-		-		270
	Other accounts payable and accruals		978			-		-		978

			1,781			-		-		1,781
	Acquired through issuance of shares		(1,186	)		-		-		(1,186	)

	Cash inflow		595			-		-		595

(b)	Supplemental disclosure of non-cash financing activities:
	Convergence of loan from related party		858			-		-		858

	Issuance of shares on account of other payables		-			-		165		165

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

NOTE 1:-

GENERAL

Topspin Medical, Inc. ("the Company") and its subsidiary, Topspin Medical (Israel) Ltd. ("the subsidiary") were engaged in research and development of a medical MRI technology.

In October 2008, the Company suspended its activities as described in b 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 2011 the Company acquired the full shares of Metamorefix Ltd. (Metamorefix").

Metamorefix is engaged in developing solutions for tissue regeneration and skin tissue regeneration in particular. Metamorefix was incorporated and commenced operation on January 31, 2007.

Metamorefix is in the development stage as it has devoted since inception substantially most of its efforts to business planning, research and development, marketing, recruiting management and technical staff, acquiring assets and raising capital.

Since the suspension of the Company's operational activity in October 2008 and through the date of acquisition of Metamorefix, the Company was 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).

As detailed in Company's Financial Statement of December 31, 2011, the consolidated financial statements of Topspin and Topspin Ltd. and Metamorefix Ltd. (together "its Subsidiaries") represent a continuation of the financial statements of Metamorefix (the acquirer in the transaction for accounting purposes) and the comparative data included in these financial statements represent Metamorefix's data, excluding comparative data regarding net loss per share, share capital and share premium which are presented in accordance with the provisions of ASC 805.

Topspin and its Subsidiaries (collectively "the Group") have not generated any revenues and have not achieved profitable operations or positive cash flows from operations. The Group have an accumulated deficit of NIS 11,588 thousands as of March 31, 2012, and incurred a net loss of NIS 1,429 thousands and negative cash flows from operating activities in the amount of NIS 938 thousands for the three months ended March 31, 2012.

TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARIES

(Development stage company)

NOTE 1:-

GENERAL (Cont.)

There is uncertainty about the Group'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 Group'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.

As of the date of the Financial Statement, the Company has no cash or other financial resources to finance the Company's activities. In addition, the Company has ceased payments to the Company's employees and suppliers.

The Company's management is currently acting to raise the necessary funds for the operation of the Group and for finding additional operational activities for the Group in the field of life science or other fields.

On January 25, 2012, the TASE notified the Company that it does not comply with the maintenance regulations, of a minimum public holdings in the Company's shares of at least 15%.

The Company was given an extension until June 30, 2012, to increase the public holding shares, to comply with the regulation described above. If the Company will not comply with this regulation it will be transferred to the maintenance list.

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2011 are applied consistently in these consolidated financial statements.

NOTE 3:-

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In March, 2012, the Company issued 1,271,597 ordinary shares of $0.001 par value each, as part of financing round in an aggregated amount of NIS 1,234 thousands (NIS 1,130 thousands were received prior to December 31, 2011 and were also presented in the Financial statement of December 31, 2011, as part of the Additional paid-in capital. The Company also issued 186,902 Ordinary Shares in lieu of repayments of debts in the aggregate amount of NIS 165 thousands.

On March 1, 2012,("Approval date") the Company's shareholders meeting approved a Grant of 62,500 non-listed company options, which can be materialized to 62,500 Company's ordinary stock of $ 0.001 par value each, for each of the Company's five Directors. The granted options Fair Value estimated on the Approval date according to the Binomial model. The parameters being used for the calculation are: risk-free interest of 4.99%, Dividend yield 0%, expected volatility 71.02%, stock price NIS 1.6 and term life of 10 years. The options aggregated Fair value of these options accumulated to NIS 332 in thousands, and is recognized over the vesting period.

The options described above have not been issued as of the date of the Financial Statement.

NOTE 4:-

SUBSEQUENT EVENTS

On April 15, 2012 the Company's Board of directors approved the accumulated private issuance of 23,660 non-listed Company's options in return for Director fees debt in the total amount of NIS 18 thousands.

The options described above has not been issued until the date of the Financial Statement.

In April 2012, the Company issued 107,248 options in exchange for liabilities in aggregate amount of NIS 79 thousands.

ITEM 2.

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 Quarterly Report on Form 10-Q for the period ending March 31, 2012. 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 the Subsidiary, 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 (the “Settlement Agreement”), 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).

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 a result of the Metamorefix Transaction, we have resumed operations and plan to focus our energies and resources towards the development of the Metamorefix business for the foreseeable future.

We expect that the Company’s expenses will increase in future periods in connection with the clinical trials that we must conduct in order to obtain FDA approval for Metamorefix’s products, as well as disclosure relating to expected fundraising sources. Because the Company did not have on-going operations at the time it acquired Metamorefix, there will be no significant elements of historical income or loss, other than the Company’s existing liabilities, that will continue to affect our operations going forward.

Critical Accounting Policies

The consolidated financial statements of the Company 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 Company’s 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 consolidated financial statements in conformity with US GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Principles of consolidation: The Company’s consolidated financial statements include the accounts of the Subsidiary over which the Company exercises control. Significant inter-company balances and transactions between the Company and the Subsidiary have been eliminated in the consolidated financial statements.

Results of Operations

Three Months Ended March 31, 2012

Prior to December 29, 2011, we were a public shell company without material assets or liabilities. On December 29, 2011, we completed the Metamorefix Transaction, pursuant to which Metamorefix became our wholly owned subsidiary and we succeeded to the business of Metamorefix. For financial reporting purposes, Metamorefix is considered the acquirer in the transaction and the former public shell company is considered the acquired company. Accordingly, the historical financial statements presented and the discussion of financial condition and results of operations herein are those of Metamorefix and do not include the historical financial results of our former business. The accumulated deficit of Metamorefix was also carried forward after the Metamorefix Transaction for all periods presented. Operations reported for periods prior to the Metamorefix Transaction are those of Metamorefix.

Net Loss

In the three months ended March 31, 2012 our net loss were NIS 1,429,000 (approximately $385,000), and in the same period in 2011 our net loss was NIS 489,000 (approximately $132,000). The net loss in the three months ended March 31, 2012 mainly represents the research and development expenses of NIS 297,000 (approximately $80,000), expenses for service providers about NIS 835,000 (approximately $224,764) and share based payment about NIS 100, 000 (approximately $27,000).

Revenues

None.

Research and Development Expense

Research and Development — Research and development expenses include costs of salaries and related expenses, activities related to intellectual property, research materials and supplies. Research and development expenses decreased by approximately 25% to NIS 297,000 (approximately $79,946) in the three months ended March 31, 2012 from NIS 398,000 (approximately $107,133) in the same period in 2011. The decrease in the expenses resulted from a decrease in subcontractor costs (due to completion of our preclinical and clinical trial requirements, which had generated significant subcontractor costs in 2011) .

General and Administrative Expense

General and administrative (“G&A”) expenses include legal services, audit services and other professional services. G&A expenses for the three months ended March 31, 2012 were NIS 1,178,000 (approximately $317,000), compared to NIS 121,000 (approximately $33,000), for the same period in 2011. G&A expenses for the three month ended March 31, 2012 and for the same period 2011, are primarily due to service providers fees of NIS 835,000 (approximately $224,764) and NIS 53,000 (approximately $14,000), respectively, director in the three month ended March 31, 2012 fees of NIS 52,000 (approximately $14,000) in the same period in 2011 there was no director fees, share based payment of NIS 100,000 (approximately $27,000) and NIS 48,000 (approximately $13,000), in the three month ended March 31, 2012 and 2011, respectively. Likewise G&A expenses for the three months ended March 31, 2012 including management fees of NIS 99,000 (approximately $26,600), rent and maintenance fees of NIS 42,000 (approximately $11,000) .

Financing Income

Financing income and/or expenses includes revaluations of certain balance sheet accounts that are linked to the U.S. Dollar exchange rate. Finance expense, net for the three months ended March 31, 2012 was NIS 46,000 (approximately $12,000) compared to financing income, net of NIS 30,000 (approximately $8,000) in the same period in 2011.

Liquidity and Capital Resources

We have not had any revenues from operations since our inception in January 2007. We financed our operations principally through private and public sales of equity securities, and through grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor, an Israeli governmental agency.

As of March 31, 2012, our assets were approximately NIS 637,000 (approximately $171,467), of which cash and cash equivalents were approximately NIS 90,000 (approximately $24,000). As of March 31, 2012, our liabilities were approximately NIS 3,246,000 (approximately $873,755).

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 in order to support and sustain the product development and other business activities of Metamorefix, including execution of private placements of our securities, follow-on offerings of securities of the Company on the Tel-Aviv Stock Exchange, direct investments in Metamorefix and the licensing of Metamorefix’s technology.

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 securities 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.

Since our inception, we have financed our operations principally through private sales of equity securities, issuance of convertible notes and receipt of grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor, an Israeli governmental agency. The Company, through its 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 3.0−3.5% of the sales of products and other related revenues generated from such projects, up to 100% of the grants received. 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 March 31, 2012, the Company had not paid or accrued royalties to the OCS and its outstanding contingent obligation for royalties amounted to approximately NIS 446 plus interest.

Neither Topspin nor Metamorefix is currently eligible to receive grants from the OCS.

The Company and its Subsidiary have not generated any revenue and have not achieved profitable operations or positive cash flows from operations. The Company has an accumulated deficit of NIS 11,588,000 (approximately $3,119,000) as of March 31, 2012, and it incurred net losses of NIS 1,429,000 (approximately $384,657) and negative cash flow from operating activities in the amounts of NIS 938,000 (approximately $252,490) and NIS 817,000 (approximately $220,000) for the three month periods ended March 31, 2011, respectively.

Cash Flows

Operating Activities

In the three months ended March 31, 2012, we used NIS 938,000 (approximately $252,000) and in the same period in 2011 we used NIS 817,000 (approximately $220,000). The increase in net cash used in operating activities in 2012 is primarily attributable to expenses paid to service providers and share based compensation.

Financing Activities

In the three months ended March 31, 2012, the cash provided by financing activities was NIS 104,000 (approximately $28,000) and in the same period in 2011 there was no cash from financing activities. The cash from financing activities in 2012 was primarily due to issuance of shares.

Investing Activities

In the three months ended March 31, 2012, we used NIS 5,000 (approximately $1,000) in investing activities and in the same period in 2011, there was no cash used in investing activities. Cash used in investing activities in the three months ended March 31, 2012 included cash used to purchase property and equipment. In the same period in 2011, there were no such purchases.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.

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 March 31, 2012.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 5.

OTHER INFORMATION

Negotiations with First Care Products

On March 18 2012 the Company announced it is conducting negotiations with the shareholders of First Care Products Ltd. regarding the possible acquisition of their shares, whereby upon completion of the said purchase the company will own a minimum of 55% of First Care's outstanding share capital. There can be no assurance (i) that an acquisition agreement will be successfully negotiated, (ii) that if such an agreement is negotiated, that the acquisition will be completed, or (iii) that if the acquisition is completed, that it will be able to be completed on terms favorable to the Company and its stockholders

Unregistered Sales of Equity Securities

On March 11, 2012, the Company issued 1,271,597 Ordinary shares of the Company of $ 0.001 par value each to third parties which are not and will not be interested parties in the Company after the issuance is effected, this in the context of their separate investments in the Company, in an aggregate of NIS 1,234,000.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TOPSPIN MEDICAL, INC.

Date: May 15, 2012	By:	/s/ Ascher Smuelevitz
		Ascher Smuelevitz Chairman of the Board of Directors and acting Principal Executive Officer

Date: May 15, 2012	By:	/s/ Uri Ben-Or
		Uri Ben-Or Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.		Description
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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