Orgenesis Inc. - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended March 31, 2021

or

For the Transition Period from ___________ to ___________

Commission file number: 001-38416

ORGENESIS INC.

(Exact name of registrant as specified in its charter)

20271 Goldenrod Lane

Germantown, MD 20876

(Address of principal executive offices) (Zip Code)

(480) 659-6404

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 6, 2021, there were 24,479,751 shares of registrant’s common stock outstanding

ORGENESIS INC.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

TABLE OF CONTENTS

PART I –FINANCIAL INFORMATION

Item 1. Financial Statements

ORGENESIS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. Dollars in Thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORGENESIS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Cont’d)

(U.S. Dollars in Thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORGENESIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (INCOME)

(U.S. Dollars in Thousands, Except Share and Loss Per Share Amounts)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORGENESIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(U.S. Dollars in thousands, except share amounts)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORGENESIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(U.S. Dollars in thousands, except share amounts)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements. 

ORGENESIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (*)

(U.S. Dollars in thousands)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

(*) See Note 3 for information regarding the discontinued operation

ORGENESIS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 and 2020

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS

Orgenesis Inc., a Nevada corporation, is a global biotech company working to unlock the potential of cell and gene therapies (“CGTs”) in an affordable and accessible format.

CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products (“ATMP”). The Company mostly focusses on autologous therapies, with processes and systems that are developed for each therapy using a closed and automated processing system approach that is validated for compliant production near the patient at their point of care for treatment of the patient. This approach has the potential to overcome the limitations of traditional commercial manufacturing methods that do not translate well to commercial production of advanced therapies due to their cost prohibitive nature and complex logistics to deliver the treatments to patients (ultimately limiting the number of patients that can have access to, or can afford, these therapies).

To achieve these goals, the Company has developed a Point of Care Platform comprised of three enabling components: a pipeline of licensed POCare Therapies that are designed to be processed and produced in closed, automated POCare Technology systems and a collaborative POCare Network. Via a combination of science, technology, engineering, and networking, the Company is working to provide a more efficient and scalable pathway for advanced therapies to reach patients more rapidly at lowered costs. The Company also draws on extensive medical expertise to identify promising new autologous therapies to leverage within the POCare Platform either via ownership or licensing.

The POCare Network brings together patients, doctors, industry partners, research institutes and hospitals worldwide with a goal of achieving harmonized, regulated clinical development and production of the therapies.

Over time, the Company has worked to develop and validate POCare Technologies that can be combined within mobile production units for advanced therapies. The Company has made significant investments in the development of several types of Orgenesis Mobile Processing Units and Labs (“OMPULs”) with the expectation of use and/or distribution through our POCare Network of partners, collaborators, and joint ventures. As of the date of this report, the OMPULs are still in the development stage.

OMPULs are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential or approved cell and gene therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing of such CGTs in a consistent and standardized manner in all locations. The design delivers a potential industrial solution for the Company to deliver CGTs to practically any clinical institution at the point of care.

Until December 31, 2019, the Company operated the POCare Platform as one of two business separate business segments.

Historically, the second separate business segment was operated as a Contract Development and Manufacturing Organization (“CDMO”) platform, providing contract manufacturing and development services for biopharmaceutical companies (the “CDMO Business”). The CDMO platform was historically operated mainly through majority-owned Masthercell Global (which consisted of the following two subsidiaries: MaSTherCell S.A. in Belgium (“MaSTherCell”), and Masthercell U.S., LLC in the United States (“Masthercell U.S.”) (collectively, the “Masthercell Global Subsidiaries”)).

In February 2020, the Company sold its entire equity interests in Masthercell Global Inc. (the “Masthercell Business”), which comprised the majority of the Company’s Contract Development and Manufacturing Organization (“CDMO”) business, to Catalent Pharma Solutions, Inc. (the “Masthercell Sale”). The Company determined that the Masthercell Business (“Discontinued Operation”) met the criteria to be classified as a discontinued operation as of the first quarter of 2020. The Discontinued Operation includes the vast majority of the previous CDMO Business, including majority-owned Masthercell, including MaSTherCell, Masthercell U.S. and all of the Masthercell Global Subsidiaries (See Note 3).

The Company has continued to grow its infrastructure and expand its processing sites into new markets and jurisdictions. In addition, the Company has been investing manpower and financial resources to focus on developing, manufacturing and rolling out several types of OMPULs to be used and/or distributed through our POCare Network of partners, collaborators, and joint ventures.

The Chief Executive Officer (“CEO”) is the Company’s chief operating decision-maker who reviews financial information prepared on a consolidated basis. Effective from the first quarter of 2020, all of the Company’s continuing operations are in one segment, being the point-of-care business via our POCare Platform. Therefore, no segment report has been presented.

The Company currently conducts its core CGT business operations through itself and its subsidiaries which are all wholly-owned except as otherwise stated (collectively, the “Subsidiaries”). The Subsidiaries are as follows:

These condensed consolidated financial statements include the accounts of Orgenesis Inc. and its subsidiaries (2020 including the Discontinued Operation).

The Company’s common stock, par value $0.0001 per share (the “Common Stock”) is listed and traded on the Nasdaq Capital Market under the symbol “ORGS.”

As used in this report and unless otherwise indicated, the term “Company” refers to Orgenesis Inc. and its Subsidiaries. Unless otherwise specified, all amounts are expressed in United States Dollars.

As of March 31, 2021, the Company has accumulated losses of approximately $89 Million.

Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development activities and expected level of expenditures for at least 12 months from the date of the issuance of these financial statements. If there are further increases in operating costs for facilities expansion, research and development, commercial and clinical activity or decreases in revenues from customers, the Company may decide to seek additional financing.

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the financial statements reflect all normal and recurring adjustments necessary to fairly state the financial position and results of operations of the Company. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”). The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2020, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included.

The accounting policies adopted are consistent with those of the previous financial year except as described below:

Use of Estimates in the Preparation of Financial Statements

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity, the amount of revenues and expenses and determining whether an acquisition is a business combination or a purchase of asset. Actual results could differ from those estimates.

The full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We examined the impact of COVID-19 on our financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Reclassifications

Certain reclassifications have been made to the prior year’s financial statements to conform to the current year presentation. These reclassifications had no net effect on previously reported results of operations.

Revision of Previously Reported Consolidated Financial Statements

In connection with the preparation of the company’s consolidated financial statements for the fiscal year ended December 31, 2020, the Company identified an immaterial error originating in the first quarter of 2020 related to the gain calculation on the sale of MastherCell, which was consummated in February 2020. The Company did not adjust the gain calculation for the reversal of previously-recorded accretion adjustments to the carrying amount of the Redeemable Non-Controlling Interest (NCI) in the amount of $5,574. The Company has revised its financial statements presented herein for the three months ended March 31, 2020 to correct the error. The revision resulted in an increase to additional paid-in capital and a decrease in net income from discontinued operations, net of tax. There is no impact on net loss from continuing operations or earning per share. In addition, there is no impact on the Company’s balance sheet or statement of cash flows.

The following table summarizes the impact of the revision on additional paid-in capital and net income from discontinued operations, net of tax for the three months ended March 31, 2020:

 SCHEDULE OF REVISION OF PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – DISCONTINUED OPERATIONS

On February 2, 2020, the Company completed the Masthercell sale and determined that the Masthercell Business met the criteria to be classified as a discontinued operation.

The financial results of the Masthercell Business are presented as income from discontinued operations, net of tax on the Company’s condensed Consolidated Statement of Comprehensive Loss (Income). The following table presents the financial results associated with the Masthercell Business operation as reflected in the Company’s condensed Consolidated Comprehensive loss (Income) (in thousands):

 SCHEDULE OF DISCONTINUED FINANCIAL STATEMENTS

The following table represents the components of the cash flows from discontinued operations (in thousands):

Disaggregation of Revenue

The following table disaggregates the Company’s revenues by major revenue streams related to discontinued operations (in thousands):

 SCHEDULE OF DISAGGREGATION OF REVENUE RELATED TO DISCONTINUED OPERATIONS

NOTE 4 – EQUITY

During the three months ended March 31, 2021, the Company received approximately $1.9 million from the exercise of warrants for the purchase of the Company’s Common Stock at a price of $6.24. A total of 237,563 shares were issued during the quarter ended March 31, 2021 (and a further 67,960 shares were issued during the second quarter).

During the three months ended March 31, 2021, the Company received $50 thousand from the exercise of options for the purchase of 8,750 shares of the Company’s Common Stock at a weighted average price of $5.56.

NOTE 5 – LOSS (EARNINGS) PER SHARE

The following table sets forth the calculation of basic and diluted loss per share for the period indicated:

 SCHEDULE OF BASIC AND DILUTED LOSS PER SHARE

NOTE 6 – REVENUES

Disaggregation of Revenue

The following table disaggregates the Company’s revenues by major revenue streams.

 SCHEDULE OF DISAGGREGATION OF REVENUE

A breakdown of the revenues per customer constituted at least 10% of revenues is as follows:

 SCHEDULE OF BREAKDOWN OF REVENUES PER CUSTOMER

Contract Assets and Liabilities

Contract assets are mainly comprised of trade receivables net of allowance for doubtful debts, which includes amounts billed and currently due from customers.

The activity for trade receivables is comprised of:

 SCHEDULE OF ACTIVITY FOR TRADE RECEIVABLES

The activity for contract liabilities is comprised of:

 SCHEDULE OF ACTIVITY FOR CONTRACT LIABILITIES

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2021. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations and the effects that the COVID-19 outbreak, or similar pandemics, could have on our business and CGT Biotech Platform. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

The full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within our financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company,” “our Company” or “Orgenesis” refer to Orgenesis Inc., a Nevada corporation, and our majority or wholly-owned subsidiaries, Orgenesis Korea Co. Ltd. (the “Korean Subsidiary”); Orgenesis Belgium SRL, a Belgian-based entity (the “Belgian Subsidiary”); Orgenesis Ltd., an Israeli corporation (the “Israeli Subsidiary”); Orgenesis Maryland Inc., a Maryland corporation (the “U.S. Subsidiary”); Orgenesis Switzerland Sarl, which was incorporated in October 2020 (the “Swiss Subsidiary”); Orgenesis Biotech Israel Ltd. (“OBI”); Koligo Therapeutics Inc., a Kentucky corporation, purchased in 2020 (“Koligo”); Masthercell Global Inc. (“Masthercell”) and its wholly owned subsidiaries Cell Therapy Holdings S.A., MaSTherCell, S.A. (“MaSTherCell”), a Belgian-based subsidiary and a Contract Development and Manufacturing Organization (“CDMO”) specialized in cell therapy development and manufacturing for advanced medicinal products, and Masthercell U.S., LLC (“Masthercell U.S.”), a U.S.-based CDMO (collectively, “Masthercell”). The Company sold all of its equity interests in Masthercell and its subsidiaries in February 2020.

Corporate Overview

Orgenesis Inc., a Nevada corporation, is a global biotech company working to unlock the potential of cell and gene therapies (“CGTs”) in an affordable and accessible format.

CGTs can be centered on autologous (using the patient’s own cells) or allogenic (using master banked donor cells) and are part of a class of medicines referred to as advanced therapy medicinal products (ATMPs). We mostly focus on autologous therapies, with processes and systems that are developed for each therapy using a closed and automated processing system approach that is validated for compliant production near the patient at their point of care for the treatment of patients. This approach has the potential to overcome the limitations of traditional commercial manufacturing methods that do not translate well to commercial production of advanced therapies due to their cost prohibitive nature and complex logistics to deliver the treatments to patients (ultimately limiting the number of patients that can have access to, or can afford, these therapies).

To achieve these goals, we have developed a Point of Care Platform comprised of three enabling components: a pipeline of licensed POCare Therapies that are designed to be processed and produced in closed, automated POCare Technology systems and a collaborative POCare Network. Via a combination of science, technology, engineering, and networking, we are working to provide a more efficient and scalable pathway for advanced therapies to reach patients more rapidly at lowered costs. We also draw on extensive medical expertise to identify promising new autologous therapies to leverage within the POCare Platform either via ownership or licensing.

The POCare Network brings together patients, doctors, industry partners, research institutes and hospitals worldwide with a goal of achieving harmonized, regulated clinical development and production of the therapies.

POCare Platform Operations via Subsidiaries

We currently conduct our core business operations ourselves and through our subsidiaries, which are all wholly-owned except as otherwise stated below (collectively, the “Subsidiaries”). The Subsidiaries are as follows:

United States

Europe

Asia

Business Strategy

Our aim is to provide a pathway to bring Advanced Therapy Medicinal Products (“ATMPs”) in the cell and gene therapy industry from research to patients worldwide through our POCare Platform. We define point of care as a process of collecting, processing, and administering cells within the patient care environment, namely through academic partnerships in a hospital setting. We believe that this approach is an attractive proposition for personalized medicine because of our strategic partnerships with suppliers that help us to customize closed systems into effective mobile clean room facilities. This will potentially help to minimize or eliminate the need for cell transportation, which is a high-risk and costly aspect of the supply chain.

We aim to build value in various aspects of our company ranging from supply related processes including development and distribution systems, clinical and regulatory services, engineering and devices such as OMPULs discussed below, delivery systems, therapies including immuno-oncology, anti-aging, anti-viral, metabolic, nephrology, dermatology, orthopedic, as well as regenerative technologies.

Over time, we have worked to develop and validate POCare Technologies that can be combined within mobile production units for advanced therapies. We made significant investments in the development of several types of Orgenesis Mobile Processing Units and Labs (“OMPULs”) with the expectation of use and/or distribution through our POCare Network of partners, collaborators, and joint ventures. We anticipate distributing and using the OMPULS through our POCare Network of partners, collaborators, and joint ventures.

OMPULs are designed for the purpose of validation, development, performance of clinical trials, manufacturing and/or processing of potential or approved cell and gene therapy products in a safe, reliable, and cost-effective manner at the point of care, as well as the manufacturing of such CGTs in a consistent and standardized manner in all locations. The design delivers a potential industrial solution for us to deliver CGTs to most clinical institutions at the point of care.

Revenue Model and Business Development

Our Point of Care (“POCare”) Platform is comprised of three enabling components: a multitude of licensed cell based POCare Therapeutics that are produced in closed, automated POCare Technology systems and a collaborative POCare Network. Our therapies include, but are not limited to, autologous, cell-based immunotherapies, therapeutics for metabolic diseases, anti-viral diseases, and tissue regeneration. We are establishing and positioning the business to bring point-of-care therapies to patients in a scalable way working directly with hospitals and through regional joint venture partners (“JVs”) and JVs active in autologous cell therapy product development, including facilities in various countries in North America, Europe, Latin America, Asia, the Middle East, and Australia. The POCare Platform’s goal is to enable a rapid, globally harmonized pathway for these therapies to reach large numbers of patients at lowered costs through efficient and decentralized production. The POCare Network brings together industry partners, research institutes and hospitals worldwide to achieve harmonized, regulated clinical development and production of the therapies.

We are focused on technology in-licensing and therapeutic collaborations, and we out-license therapies marketing rights and manufacturing rights to partners and / or to the JVs. In many cases, the JVs are responsible for the preparation of clinical trials, local regulatory approvals and regional marketing activities. Such licensing includes exclusive or nonexclusive, sublicensable, royalty bearing rights and license to the Orgenesis Background IP as required solely to manufacture, distribute and market and sell Orgenesis Products within the relevant territories. In consideration of the rights and the licenses so granted, we receive a royalty in the range of ten percent of the net sales generated by the JVs and/or its sublicensees (as applicable) with respect to the Orgenesis Products.

In addition, in many cases, once the JVs become profitable, we are entitled (in addition to any of its rights as holder of the JVs and prior to any other distributions of dividends by the JVs to shareholders of the JVs) to certain royalties pursuant to an Orgenesis License Agreement, to receive from the JVs royalties at a range of 10 to 15 percent of the JV’s audited U.S. GAAP profit, after tax.

We currently generate revenues from POCare services and sales which is comprised of:

The Company has signed POCare Master Services Agreements (“MSAs”) with our JV partners. In terms of the MSAs, we provide certain broadly defined development services that relate to our licensed therapies designed to develop or enhance the therapy with the objective of preparing it for clinical use. Such services, per therapy, include regulatory services, pre-clinical studies, intellectual property services, development services, and GMP process translation.

Hospital services includes the sale or lease of products and the performance of processing services to our POCare hospitals or other medical providers. We either work directly with hospitals or receive payments through our regional JV partnerships.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020.

The following table presents our results of operations for the three months ended March 31, 2021 and 2020:

During the three months ended March 31, 2021, we recognized point-of-care development service revenue in the amount of $9,254 thousand, as compared to $1,851 during the three months ended March 31, 2020, representing an increase of 400%, due to increased activity under MSAs with our existing and new joint venture partners.

Expenses

Cost of services and other research and development expenses

Research and development expenses for the three months ended March 31, 2021 were $6,127 thousand, as compared to $4,873 thousand for the three months ended March 31, 2020, representing an increase of 26%.

The increase is mainly attributable to the continued expansion of our pipeline of licensed CGTs with a harmonized pathway for regulatory approval, the expansion of our POC capacity globally, further investments in automated processing units and processes, further development of owned and licensed advanced therapies to enable commercial production, and additional work with partners to enable efficient closed processing system technologies addressing POCare needs.

Furthermore, additional employees were hired as we expanded our research and development to the evaluation and development of new cell therapies and related technologies.

We also continued investing in the development of several types of OMPULs with the expectation of use and/or distribution through our POCare Network of partners, collaborators, and joint ventures.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2021 were $2,968 thousand, as compared to $3,518 thousand for the three months ended March 31, 2020, representing a decrease of 16%. The decrease in selling, general and administrative expenses in the three months ended in March 31, 2021 compared to the three months ended March 31, 2020 is primarily attributable to a decrease in accounting and legal fees of $752 thousand, as a result of decreased corporate investment activities in 2021 compared to 2020.

Financial Expenses, net

Financial expenses, net for the three months ended March 31, 2021 were $233 thousand, as compared to $329 thousand for the three months ended March 31, 2020, representing a decrease of 29%. The decrease was mainly a result of repayments in relation to the convertible loans during 2020.

Working Capital

Current assets increased, primarily due to increased accounts receivable as a result of the increased revenues. The increase in current liabilities was mainly attributable to an increase in accounts payable caused by the expansion of business operations.

Liquidity and Financial Condition

During the quarter ended March 31, 2021, we funded our operations from existing funds.

Net cash used in operating activities for the three months ended March 31, 2021 was approximately $5 million, as compared to net cash used in operating activities of approximately $14 million for the three months ended March 31, 2020.

Net cash used in investing activities for the three months ended March 31, 2021 was approximately $1 million, as compared to net cash provided by investing activities of approximately $103 million for the three months ended March 31, 2020. The change was mainly due to the proceeds from Masthercell in the first quarter of 2020. Net cash used in investing activities was primarily for related activates under our CGT Biotech Platform.

Liquidity & Capital Resources Outlook

We believe that our current cash balance as well as revenues from our current operations results will provide sufficient liquidity to fund our operating needs for at least the next 12 months. However, there are factors that can impact our ability to continue to fund our operating needs, including:

If there are further increases in operating costs in general and administrative expenses for facilities expansion, funding for some of our collaborations and joint ventures, research and development, commercial and clinical activity or decreases in revenues from customers, we may decide to seek additional financing.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

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 that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material pending legal proceedings to which the Company or its subsidiaries are a party or of which any of its properties, or the properties of its subsidiaries, are the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

We know of no material proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to the Company or its Subsidiaries or has a material interest adverse to the Company or its subsidiaries.

ITEM 1A. RISK FACTORS

An investment in the Company’s Common Stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 9, 2021, in addition to other information contained in our reports and in this quarterly report in evaluating the Company and its business before purchasing shares of our Common Stock. There have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020. The Company’s business, operating results and financial condition could be adversely affected due to any of those risks.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Equity Securities

There were no sales of unregistered equity securities during the three-month period ended March 31, 2021.

Issuer Purchases of Equity Securities

On May 14, 2020, our Board of Directors approved the stock repurchase plan (the “Stock Repurchase Plan”) pursuant to which we may, from time to time, purchase up to $10 million of our outstanding shares of common stock. The shares may be repurchased from time to time in privately negotiated transactions or the open market, including pursuant to Rule 10b5-1 trading plans, and in accordance with applicable regulations of the SEC. The timing and exact amount of any repurchases will depend on various factors including, general and business market conditions, corporate and regulatory requirements, share price, alternative investment opportunities and other factors. The Repurchase Plan commenced on May 29, 2020 and does not obligate us to acquire any specific number of shares in any period, and may be expanded, extended, modified, suspended or discontinued by the Board of Directors at any time.

The following table summarizes the share repurchase activity pursuant to the Stock Repurchase Plan during the quarter ended March 31, 2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K

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.