Medigus Announces Six Months Financial Results
OMER, Israel, Aug. 31, 2020 - Medigus Ltd. (“Medigus” or the “Company”) (NASDAQ: MDGS) (TASE: MDGS), a medical device company developing minimally invasive endo-surgical tools and an innovator in direct visualization technology, announced today its financial results for the first half-year period ended June 30, 2020.
The Company reported IFRS loss of $3.6 million and non-IFRS net loss of $3 million for the six months ended June 30, 2020.
- On February 18, 2020, the Company purchased 2,284,865 shares of Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA) (“Matomy”) representing 2.32% of its issued and outstanding share capital. On March 24, 2020, the Company completed an additional purchase of 22,326,246 shares of Matomy, raising the Company aggregate holdings in Matomy to 24.99% of Matomy’s issued and outstanding share capital.
- On March 6, 2020, the Company announced that ScoutCam, Inc. (OTC: SCTC) (“ScoutCam”), the Company’s majority owned subsidiary, closed an investment round in which ScoutCam raised $948,400.
- On May 19, 2020, the Company announced that ScoutCam entered into and consummated a securities purchase agreement with M. Arkin (1999) Ltd. in connection with an investment of $2 million.
- On May 19, 2020, the Company entered into an underwriting agreement with ThinkEquity, a division of Fordham Financial Management (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter in a firm commitment public offering: (i) 575,001 ADSs for a public offering price of $1.50 per ADS, and (ii) 2,758,333 pre-funded warrants to purchase one ADS at a public offering price of $1.499, with an exercise price of $0.001. The immediate proceeds, gross and net of issuance expenses, from such securities issuance aggregated to approximately $5 million and $4.4 million, respectively.
- On June 23, 2020, the Company entered into and consummated a Side Letter Agreement with ScoutCam, whereby the parties agreed to convert, at a conversion price of $0.484, an outstanding line of credit previously extended by the Company to ScoutCam, which as of the date of conversion amounted to $381,136, into (i) 787,471 shares of ScoutCam’s common stock, par value $0.001 per share, or the Common Stock, (ii) warrants to purchase 393,736 shares of Common Stock with an exercise price of $0.595, and (iii) warrants to purchase 787,471 shares of Common Stock with an exercise price of $0.893.
- On July 15, 2020, the Company entered into a reseller agreement with Polyrizon Ltd. (“Polyrizon”), a private company engaged in developing biological gels for the purpose of protecting patients against biological threats, and preventing intrusion of allergens and viruses through the upper airways and eye cavities. As part of the reseller agreement the Company received an exclusive global license to resell the Polyrizon products, focusing on a unique Biogel for the protection from COVID-19 virus. The term of the license will be for four years, commencing upon receipt of sufficient FDA approvals for the lawful marketing and sale of the products globally. The Company shall have the right to purchase the Polyrizon products on a cost plus 15% basis for the purpose of reselling the products worldwide. In consideration for the license, Polyrizon shall be entitled to receive annual royalty payments equal to 10% of the Company’s annualized operating profit arising from the sale of the products.
- In addition, On July 15, 2020, the Company and Polyrizon signed an ordinary share purchase agreement. The agreement includes investment of $10,000 and a loan of $94,000 that will be extended to Polyrizon. Pursuant to the investment, the Company was issued shares representing 19.9% of the issued and outstanding share capital of Polyrizon, on a fully diluted basis excluding outstanding deferred shares. In addition, the Company was granted the option, exercisable at the Company’s sole discretion, to invest an additional investment amount of $1,000,000, in consideration for shares of Polyrizon such that following the additional investment, the Company will own 51% of Polyrizon on a fully diluted basis excluding outstanding deferred shares. The option is exercisable until the earlier of April 23, 2023 or the consummation by Polyrizon of equity financing of at least $500,000 based on a pre-money valuation of at least $10,000,000.
Six months Financial Results:
- Revenues for the six months ended June 30, 2020 were $73,000, a decrease of 49% compared to the six months ended June 30, 2019.
- Research and development expenses for the six months ended June 30, 2020 were $356,000, a decrease of 24% compared to the six months ended June 30, 2019. The decrease was primarily due to the Company’s decision to cease the MUSE™ operation.
- Sales and marketing expenses for the six months ended June 30, 2020 were $213,000, a decrease of 8% compared to the six months ended June 30, 2019.
- General and administrative expenses for the six months ended June 30, 2020 were $2,639,000, an increase of 126% compared to the six months ended June 30, 2019. The increase was primarily due to an increase in payroll expenses, as a result of an increase in share based compensation, the hiring of additional employees and an increase in professional services. The increase in professional services are a result of the reorganization, following which ScoutCam began to operate as an independent company and business unit.
- IFRS loss for the six months ended June 30, 2020 was $3,599,000, compared to IFRS loss of $1,804,000 for the six months ended June 30, 2019. The increase is attributed mainly to an increase in general and administrative expenses as described above, net loss in fair value of financial assets at fair value through profit or loss, share of net loss of associate accounted for using the equity method and a listing expense partially offset by an increase in income from changes in fair value of warrants issued to investors.
- Non-IFRS loss for the six months ended June 30, 2020 was $2,962,000, compared to Non-IFRS loss of $1,645,000 for the six months ended June 30, 2019. The increase is attributed mainly to an increase in general and administrative expenses as described above, net loss in fair value of financial assets at fair value through profit or loss and share of net loss of associate accounted for using the equity method.
- Non-IFRS results exclude the effect of stock-based compensation expenses, revaluation of warrants at fair value and listing expenses.
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Balance Sheet Highlights:
- Cash and cash equivalents totaled $10.2 million as of June 30, 2020, compared to $7 million on December 31, 2019.
- Investment in Gix Internet (formerly known as Algomizer) Group totaled $4.3 million as of June 30, 2020, compared to $4.8 million. The decrease is attributed primarily to the decrease in fair value of Linkury’s shares.
- Investment in Matomy totaled $1.1 million as of June 30, 2020.
- IFRS equity totaled $13.4 million as of June 30, 2020, compared to $8.1 million as of December 31, 2019.
- Non-IFRS equity totaled $13.2 million as of June 30, 2020, compared to $18.1 million as of December 31, 2019.
A reconciliation between IFRS equity results and non-IFRS equity results is provided following the financial statements that are part of this release. Non-IFRS results exclude revaluation of warrants at fair value, amortization of excess purchase price of associate and listing expenses.
Use of Non-IFRS Financial Results
In addition to disclosing financial results calculated in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, this press release contains non-IFRS financial measures of net loss for the periods presented that exclude the effect of share-based compensation expenses, amortization of excess purchase price of associate and listing expenses. The Company’s management believes the non-IFRS financial information provided in this release is useful to investors’ understanding and assessment of the Company’s ongoing operations. Management also uses both IFRS and non-IFRS information in evaluating and operating its business internally, and as such deemed it important to provide this information to investors. The non-IFRS financial measures disclosed by the Company should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with IFRS, and the financial results calculated in accordance with IFRS and reconciliations to those financial statements should be carefully evaluated. Investors are encouraged to review the reconciliations of these non-IFRS measures to their most directly comparable IFRS financial measures provided in the financial statement tables herein.
Medigus is traded on the Nasdaq Capital Market and the TASE (Tel Aviv Stock Exchange). To learn more about the Company’s advanced technology, please visit www.medigus.com.