Filing summary
Entity and period: The supplied filing is TopSpin Medical, Inc.’s Form 10-K for the fiscal year ended December 31, 2011, filed March 30, 2012. It is not a My Size, Inc. filing, and it reports an annual period rather than a standalone 2011 fourth quarter.
Business context
TopSpin had suspended its original miniature-probe MRI business in 2008. On December 29, 2011, it completed a transaction that made Metamorefix Ltd. its wholly owned subsidiary and shifted the company’s focus to Metamorefix’s development of a hyaluronic-acid and fibrin-based dermal filler and wound-treatment product. The transaction was accounted for as a recapitalization; the financial statements principally continue Metamorefix’s results.
Financial performance and condition
| Metric | FY 2011 | FY 2010 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | NIS 734,000 | NIS 3,642,000 |
| General and administrative expense | NIS 546,000 | NIS 576,000 |
| Operating loss | NIS 1,280,000 | NIS 4,218,000 |
| Net loss | NIS 1,042,000 | NIS 4,703,000 |
| Cash used in operating activities | NIS 1,940,000 | NIS 3,094,000 |
Amounts are in NIS; the filing also gives approximate U.S. dollar equivalents in its narrative. No revenue or profit margin is available because the company had no revenue. R&D expense fell about 80%, contributing to a narrower reported net loss; net financial income of NIS 238,000 also contrasted with net financial expense of NIS 485,000 in 2010, mainly reflecting remeasurement of options and warrants.
At December 31, 2011, cash and cash equivalents were NIS 929,000, total assets NIS 1,565,000, current liabilities NIS 2,933,000, total liabilities NIS 3,110,000, and shareholders’ equity was deficient by NIS 1,545,000. Accumulated deficit was NIS 10,159,000. The filing gives no clear outstanding conventional debt balance at year-end; shareholder and related-party loans were converted into shares in connection with the transaction. Financing activities provided NIS 1,947,000 during 2011.
Changes, outlook, and material risks
- The Metamorefix acquisition and related share issuances materially changed the company’s business and capital structure. At year-end, 22,355,929 shares were issued and outstanding; 23,814,428 were reported outstanding as of March 30, 2012.
- Management stated that available cash was insufficient to fund operations at current levels for the next 12 months and that the company was pursuing additional capital and business opportunities. The auditors highlighted substantial doubt about the company’s ability to continue as a going concern.
- Management’s development plans included expanding the wrinkle-product clinical study, pursuing a European CE mark, developing the wound-treatment application, and preparing regulatory submissions. The filing anticipated submitting an FDA application for the wrinkle product in the fourth quarter of 2013. These are plans, not assured outcomes.
- The product candidates had no FDA or CE marketing approval. Regulatory classification or approval delays could increase costs and require additional funding. Other stated risks include limited access to capital, competition, reliance on suppliers and contract manufacturing, and the need to establish product safety and efficacy.
- A small Slovakian first-in-human study had enrolled ten subjects in two groups; the company reported positive six-month follow-up results for the first four subjects. The filing also disclosed a NIS 1,351,000 tax provision and contingent OCS royalty obligations of approximately NIS 446,000 plus interest, payable only if relevant sales occur.
Important facts to verify
- Confirm the issuer: this filing is for TopSpin Medical, Inc., not My Size, Inc., and covers the full year ended December 31, 2011.
- Reconcile the net-loss figures: the statements report NIS 1,042,000, while the auditor’s going-concern paragraph refers to NIS 962,000; the narrative also varies slightly in its reported amounts.
- Confirm post-year-end share issuance details: the filing gives differing figures for the March 2012 conversion, including 1,271,597 and 1,271,897 shares.
- Assess financing sufficiency and the going-concern risk, including the company’s ability to raise capital and meet TASE public-float requirements.
- Track clinical results, regulatory pathway decisions, and the timing and funding of planned studies and submissions; no product marketing approvals had been obtained.