Business Context and Reporting Period
Company: TopSpin Medical, Inc. (Note: Input metadata listed "My Size, Inc.", but the filing text identifies the registrant as TopSpin Medical, Inc.)
Reporting Period: Quarter ended March 31, 2010
Status: Development Stage Company / Shell Company
Operations: The Company suspended operational activities in October 2008 due to financial constraints. In January 2010, management decided to discontinue the development of its intellectual property (MRI technology) due to an inability to finalize development or sell products. As of March 18, 2010, the Company terminated the employment of its remaining finance department employees due to lack of resources.
Key Financial Metrics
All figures in NIS (Israeli New Shekels) in thousands, unless otherwise noted.
| Metric | Q1 2010 (Unaudited) | Q1 2009 (Unaudited) | Year Ended Dec 31, 2009 |
|---|---|---|---|
| Revenue | 0 | 0 | 0 |
| Net Loss | (779) | (982) | (1,676) |
| General & Admin Expenses | 803 | 751 | 1,930 |
| Financial Income (Expenses), Net | 24 | (231) | 254 |
| Cash and Cash Equivalents (Ending) | 182 | 3,234 | 1,002 |
| Net Cash Used in Operating Activities | (1,068) | (1,430) | (3,799) |
| Accumulated Deficit | (182,896) | N/A | (182,117) |
| Shareholders' Deficiency | (1,953) | N/A | (1,176) |
Liquidity: Cash balance dropped from NIS 1,002 (Dec 31, 2009) to NIS 182 (Mar 31, 2010). The Company has not generated revenue since inception and relies on financing activities.
Material Changes vs. Prior Period
- Cash Position: Cash and cash equivalents decreased by approximately 82% from the prior quarter (NIS 1,002 to NIS 182) and significantly from the prior year period (NIS 3,234).
- Operating Expenses: General and administrative expenses increased slightly to NIS 803 from NIS 751 in the prior year quarter, primarily due to legal costs associated with investment and loan agreements.
- Financial Income: Net financial income improved to NIS 24 from a net expense of NIS 231 in the prior year quarter, largely due to exchange rate revaluations.
- Personnel: The Company terminated all non-finance employees in 2008 and terminated remaining finance staff in March 2010 due to lack of funds.
Guidance, Outlook, Risks, and Unusual Items
Going Concern: The filing explicitly states there is substantial doubt about the Company's ability to continue as a going concern. The Company has an accumulated deficit of NIS 182.9 million and requires additional funding to meet obligations.
Bankruptcy Proceedings: On April 29, 2010 (subsequent to the reporting period), the Company entered into a loan and escrow agreement with Medgenesis Partners Ltd. for approximately $354,000. A condition of this loan is that the Company must file a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The funds are intended to cover legal fees and obligations related to a reorganization plan.
Regulatory Risks: The Tel Aviv Stock Exchange (TASE) notified the Company of non-compliance with preservation regulations due to equity lower than NIS 2,000. The Company was granted an extension until June 30, 2010, to increase equity or face transfer to the preservation list.
Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of March 31, 2010, due to the downsizing of the finance department to a single employee, constituting a material weakness.
Unusual Items: The Company discontinued its core R&D activities in January 2010. A previously signed investment agreement was cancelled in April 2010 and replaced by the aforementioned loan agreement.
Investor Verification Checklist
- Bankruptcy Filing: Verify if the Company has filed the required Chapter 11 petition as mandated by the April 29, 2010 loan agreement.
- Capital Raise: Confirm if the Company has secured the additional funds necessary to avoid delisting from the Tel Aviv Stock Exchange by the June 30, 2010 deadline.
- Employee Status: Verify the current employment status of the finance department, given the termination of staff in March 2010 and the subsequent appointment of a controller in April 2010.
- Loan Terms: Review the specific terms of the $354,000 loan from Medgenesis, including the 4% interest rate and the 12% penalty rate upon default.
- Asset Recovery: Assess the likelihood of recovering the NIS 3.2 million in grants requested from the Office of the Chief Scientist, which management currently deems unlikely.