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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: June 30, 2011
 or
 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.
  Delaware
    
    51-0394637State or other jurisdiction of
incorporation or 
organization
    
    (I.R.S. Employer Identification No.)
 25 Lechi, Bnei-Brak, Israel  (Address of principal executive offices) (Zip Code)
 972-3-5257368
 N/A
 o þ
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
 o þ




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##### 



TOPSPIN
MEDICAL, INC.
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    1ITEM 1. FINANCIAL STATEMENTS
    
    
    1ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    9ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    13ITEM 4. CONTROLS AND PROCEDURES
    
    
    13PART II  OTHER INFORMATION
    
    
    14ITEM 6. EXHIBITS
    
    
    14Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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FORWARD-LOOKING STATEMENTS




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PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 30,2010
    
    
    2011UnauditedASSETSCURRENT ASSETS:Cash and cash equivalents
    
    
    33
    
    
    
    8Accounts receivable and prepaid expenses
    
    
    49
    
    
    
    3382
    
    
    
    41NON-CURRENT ASSETS:Investment in an affiliated company
    
    
    
    
    
    
    9,53882
    
    
    
    9,579LIABILITIES AND SHAREHOLDERS DEFICIENCYCURRENT LIABILITIES:Trade payables
    
    
    658
    
    
    
    1,259Other payables and accrued expenses
    
    
    63
    
    
    
    462Loan from interested party
    
    
    
    
    
    
    123Tax provision
    
    
    1,254
    
    
    
    1,2071,975
    
    
    
    3,051SHAREHOLDERS EQUITY (DEFICIENCY):Share capital -Common shares of $0.001 par value -

Authorized 2,000,000 and 50,000,000
shares as of December 31, 2010 and June
30, 2011; Issued and outstanding
1,522,942 and 11,645,405 shares as of
December 31, 2010 and June 30, 2011,
respectively
    
    
    6
    
    
    
    43Additional paid-in capital
    
    
    181,015
    
    
    
    192,319Receipts on account of shares
    
    
    1,518
    
    
    
    Accumulated deficit
    
    
    (184,432
    )
    
    
    (185,834
    )(1,893
    )
    
    
    6,52882
    
    
    
    9,579
   1




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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended
    
    
    Six months ended
    
    
    Three months endedDecember 31,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2010
    
    
    2011
    
    
    2010
    
    
    2011UnauditedGeneral and
administrative
expenses
    
    
    2,512
    
    
    
    1,475
    
    
    
    1,417
    
    
    
    672
    
    
    
    717Financing income
(expense), net
    
    
    197
    
    
    
    (16
    )
    
    
    15
    
    
    
    (42
    )
    
    
    30Net loss
    
    
    (2,315
    )
    
    
    (1,491
    )
    
    
    (1,402
    )
    
    
    (714
    )
    
    
    (687
    )Basic and diluted
loss per Common
share
    
    
    (1.52
    )
    
    
    (0.98
    )
    
    
    (0.15
    )
    
    
    (0.47
    )
    
    
    (0.06
    )Weighted average
number of Common
shares outstanding
used in basic and
diluted net loss
per share
calculation
    
    
    1,522,942
    
    
    
    1,522,942
    
    
    
    9,114,789
    
    
    
    1,522,942
    
    
    
    11,645,405
   2




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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
 STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIENCY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totaloutstanding
    
    
    Share
    
    
    Additional
    
    
    Receipts
    
    
    
    
    
    
    Shareholdersshares
    
    
    capital
    
    
    paid-in
    
    
    on account
    
    
    Accumulated
    
    
    EquityCommon *)
    
    
    capital
    
    
    of shares
    
    
    deficit
    
    
    (deficiency)Balance as of January
1, 2010
    
    
    1,522,942
    
    
    
    6
    
    
    
    180,935
    
    
    
    
    
    
    
    (182,117
    )
    
    
    (1,176
    )Stock-based
compensation expense
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    80Receipts on account of
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,518
    
    
    
    
    
    
    
    1,518Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,315
    )
    
    
    (2,315
    )Balance as of December
31, 2010
    
    
    1,522,942
    
    
    
    6
    
    
    
    181,015
    
    
    
    1,518
    
    
    
    (184,432
    )
    
    
    (1,893
    )Stock-based
compensation expense
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    36Issuance of common stock
    
    
    10,122,463
    
    
    
    37
    
    
    
    1,730
    
    
    
    (1,518
    )
    
    
    
    
    
    
    249Receive shares of
Investment in
affiliated company
(Note 4)
    
    
    
    
    
    
    
    
    
    
    9,538
    
    
    
    
    
    
    
    
    
    
    
    9,538Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,402
    )
    
    
    (1,402
    )Balance as of June 30,
2011 (unaudited)
    
    
    11,645,405
    
    
    
    43
    
    
    
    192,319
    
    
    
    
    
    
    
    (185,834
    )
    
    
    6,528
 
 1)
    
    In December 2010, the Company recorded a share consolidation of 500 for one against all shares
of the Company, see Note 1d. Accordingly, all share and per share data in the financial statements
were retroactively adjusted to reflect the share consolidation.   3




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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended
    
    
    Six months endedDecember 31,
    
    
    June 30,2010
    
    
    2010
    
    
    2011UnauditedCash flows from operating activities:Net loss
    
    
    (2,315
    )
    
    
    (1,491
    )
    
    
    (1,402
    )Adjustments to reconcile net loss to net cash
used in operating activities (a)
    
    
    (255
    )
    
    
    (543
    )
    
    
    1,150Net cash used in operating activities
    
    
    (2,570
    )
    
    
    (2,034
    )
    
    
    (252
    )Cash flows from investing activities:Change in restricted deposits, net
    
    
    59
    
    
    
    52
    
    
    
    Net cash provided by investing activities
    
    
    59
    
    
    
    52
    
    
    
    Cash flows from financing activities:Issuance of shares
    
    
    
    
    
    
    
    
    
    
    208Loan from related party
    
    
    1,542
    
    
    
    1,101
    
    
    
    19Net cash provided by financing activities
    
    
    1,542
    
    
    
    1,101
    
    
    
    227Increase (decrease) in cash and cash equivalents
    
    
    (969
    )
    
    
    (881
    )
    
    
    (25
    )Cash and cash equivalents at the beginning of the
period
    
    
    1,002
    
    
    
    1,002
    
    
    
    33Cash and cash equivalents at the end of the period
    
    
    33
    
    
    
    121
    
    
    
    8
   4




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TOPSPIN MEDICAL, INC. AND ITS SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended
    
    
    Six months endedDecember 31,
    
    
    June 30,2010
    
    
    2010
    
    
    2011Unaudited(a) Adjustments to reconcile net loss to net
cash used in operating activities:Depreciation
    
    
    9
    
    
    
    2
    
    
    
    Finance expenses (income) on loan from
interested party
    
    
    (24
    )
    
    
    
    
    
    
    41Stock-based compensation
    
    
    80
    
    
    
    (3
    )
    
    
    36Decrease (increase) in accounts
receivables and prepaid expenses
    
    
    193
    
    
    
    113
    
    
    
    16Increase (decrease) in trade payables
    
    
    518
    
    
    
    (57
    )
    
    
    601Decrease in liabilities in respect of
options to employees and consultants
    
    
    (3
    )
    
    
    
    
    
    
    Increase (decrease) in tax provision,
other payables and accrued expenses
    
    
    (1,028
    )
    
    
    (598
    )
    
    
    456Total adjustments
    
    
    (255
    )
    
    
    (543
    )
    
    
    1,150(b) Supplemental disclosure of non cash
flows activities:Loan converted into receipts on account
of shares
    
    
    1,518
    
    
    
    
    
    
    
    Issuance of shares
    
    
    
    
    
    
    
    
    
    
    1,518
   5




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NOTE 1  GENERAL
 a.
    
    Topspin Medical, Inc. (the Company) and its subsidiary, Topspin Medical
(Israel) Ltd. (the subsidiary) (collectively, the Group) were engaged in research
and development of a medical MRI technology.
 In October 2008, the Company suspended its activities as described in subsection b
below.
 The Company was incorporated in Delaware and commenced operation in September 1999. 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 sold some
of its securities pursuant to a registration statement filed with the U.S. Securities
and Exchange Commission (SEC). The Companys shares are traded only in Israel in NIS.
 On January 24, 2010, the Company decided to discontinue the development of its
intellectual property due to managements assessment from December 2009 that the Company
will not be able to finalize the development of its intellectual property or sell
products based on such intellectual property.
 b.
    
    Since the suspension of the Companys operational activity in October 2008 and
as of the date of these unaudited consolidated financial statements, the Company is 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 patents and patent applications) .
 c.
    
    The Group has not generated any revenues and has not achieved profitable
operations or positive cash flows from operations. The Company has an accumulated
deficit of NIS 185,834 as of June 30, 2011, and it incurred a net loss of NIS 1,402 and
negative cash flows from operating activities in the amount of NIS 252 for the six
months ended June 30, 2011.
 There is uncertainty about the Company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 Company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.
 The Companys management is currently acting to raise the necessary funds for the
operation of the Company and for finding operational activities for the Company in the
field of life science or other fields
 d.
    
    On February 13, 2011 the Company effected the Chapter 11 settlement according
to which the Companys capital structure was modified effective from that date. The
Companys authorized share capital increased to 50,000,000 shares of $0.001 par
value each. The Company also initiated a proceeding for swapping the (unquoted) share
and warrant certificates with the holders of shares and warrants that are registered in
the registry of the Companys shareholders and warrant holders.
 In addition, as part of the settlement, on February 13, 2011, the Company completed the
allocation of 10,122,463 shares to Medgenesis against the write off of the Companys
debt totaling $484 thousand.
  6




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NOTE 1: GENERAL (Cont.)
 e.
    
    On February 4, 2010, the Tel Aviv Stock Exchange (TASE) notified the Company
that it does not comply with the preservation regulations due to having equity lower
than NIS 2,000 in the last four reporting quarters. The Company was given an extension
until June 30, 2010 to increase its equity. If the required increase in equity does not
occur until that date, the TASE Board of Directors will discuss transferring the
Companys shares to the preservation list.
 On July 18, 2010, the Company received notification from TASE that the Companys shares
will be transferred to the maintenance list beginning July 19, 2010. The Company was
given an extension until July 18, 2012 to increase its equity, otherwise, its shares
will be eliminated from trading commencing July 20, 2012.
 f.
    
    On March 2, 2010, the Board of Directors approved to grant Mr. Zvi Linkovski,
director in the Company, 10 million options which are exercisable into 10 million
Common shares of $0.001 par value each which make up 1.19% of the Companys fully
diluted equity. The options exercise price is NIS 0.0143. 50% of the options would
vest on February 16, 2011 and after then, every quarter 6.25% of the options would
vest. The grant is conditional on enlarging the option pool as part of increasing the
Companys issued stock, changing the Companys status from a shell company (as defined
in the Securities Exchange Act of 1934) into an active one. As of the date of the
financial statements, the option pool and the Companys status were not enlarged.
 As of June 30, 2011, an expense was recorded in the amount of approximately NIS 36.
 NOTE 2  SIGNIFICANT ACCOUNTING POLICIES
 The significant accounting policies applied in the annual financial statements of the
Company as of December 31, 2010 are applied consistently in these consolidated
financial statements.
 NOTE 3  UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 The accompanying unaudited interim consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States for
interim financial information. Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six-month period ended June 30, 2011 are
not necessarily indicative of the results that may be expected for the year ended
December 31, 2011.
 NOTE 4  SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
 On June 15, 2011, the Company entered into an agreement with Israel Healthcare Ventures 2
LP Incorporated (IHCV) under which the Company shall receive (directly and/or by its
subsidiary) from IHCV its holdings in Metamorfix Ltd.( Metamorfix) (an amount of
1,400,000 ordinary shares of NIS 0.01 par value) at no consideration. Together with that,
IHCV entered into agreement with the Companys existing stockholders, Medgenesis, under
which Medgenesis shall transfer to IHCV 1,095,295 ordinary shares of the Companys stock,
at no consideration (Medgenesis Transaction). Following the Medgenesis Transaction,
the Company will hold approximately 20% of Metamorphix shares.
  7




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Under the Medgenesis Transaction, certain provisions were determined to protect IHCV
rights, in certain events, which are detailed below:
 a.
    
    The parties intention is that the transferred shares shall
constitute 10% of the authorized share capital of the Company (not fully diluted)
after the Companys delisting from the maintenance list. If additional actions
will be performed for the purpose of delisting the Company from the Companys
maintenance list resulting in holding of IHCV in the Company under 10%, Medgenesis
shall transfer additional shares of the Company to IHCV in order to bring its
holding to 10% of the Companys shares after the delisting from the maintenance
list.
 b.
    
    In the event that prior to new offering to the public of the
Companys shares other shareholders in Metamorfix will perform more profitable
agreements with Medgenesis in connection with sale or transfer of their shares,
IHCV shall be compensated for the loss it incurred.
 c.
    
    During a period commencing upon consummating the agreement regarding the
Medgenesis Transaction and terminating upon the earlier of (i) 12 months following the consummation, or (ii) the date the Company or its shareholders shall effect purchase or
merger, after which, the Company shall cease from operating as an independent
entity, or that 100% of its shares shall be transferred to third parties, IHCV
shall have the right to receive from Medgenesis (together with Asher Smulevitz) shares
of the Company in an amount equal to amount of shares IHCV transferred to Topspin,
against all Topspin shares IHCV received from Medgenesis. In addition, an effort
shall be made to change the right (name) to appoint a director from Medgenesis to
IHCV.
 It is clarified in the agreement that all protections detailed above are only between
Medgenesis and IHCV and the Company is not a party to such protections.
 The Company recorded its investment in Metamorfix at its fair value on the transaction
date against an identical increase in capital reserve of approximately NIS 9,538
thousand. The fair value of the Companys investment in Metamorfix as of June 30, 2011
was evaluated by an external appraiser in the amount of approximately NIS 9,538
thousand and includes the Companys share in the fair value of assets and liabilities
of Metamorfix (as appeared in Metamorfix books) plus the Companys share in intangible
assets, net (technology net of tax provision) in the amount of approximately NIS 6,590
thousand and goodwill in the amount of approximately NIS 2,948 thousand.
 The purchase consideration and the fair value of the Companys share in the assets and
liabilities of Metamorfix may be adjusted up to 12 months from the purchase date. At
the final measurement, the adjustments are carried out by restatement of comparative
figures that were previously reported according to the temporary measurement.
 
  8




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Overview
    Critical Accounting Policies
   9




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Results of Operations
 Three and Six Months Ended June 30, 2010 and 2011
 Net Loss
  Revenues
  Research and Development Expense
  Selling and Marketing Expense
  General and Administrative Expense
  Financing Income
  Income Taxes
   10




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Liquidity and Capital Resources
          11




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Cash Flows
 Operating Activities
  Financing Activities
  Investing Activities
   12




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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
   13




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PART II  OTHER INFORMATION
 
 ITEM 6.
    
    EXHIBITS
 Exhibit No.
    
    Description10.1
    
    
    Shares Assignment Agreement, dated as of June 15,
2011, by and among Israel Healthcare Ventures 2 LP
Incorporated, Topspin Medical, Inc. and Topspin
Medical (Israel) Ltd.10.2
    
    
    Share Transfer Agreement, dated as of June 15,
2011, by and between Israel Healthcare Ventures 2
LP Incorporated and Medgenesis Partners Ltd.10.3
    
    
    Amendment of the Share Transfer Agreement, dated
as of July 11, 2011, by and between Israel
Healthcare Ventures 2 LP Incorporated and
Medgenesis Partners Ltd.31.1
    
    
    Certification of Principal Executive Officer
pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.31.2
    
    
    Certification of Principal Financial Officer
pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.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.
  14




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SIGNATURES
  TOPSPIN MEDICAL, INC.Date: August 22, 2011
    
    By:
    
    /s/ Ascher Smuelevitz

Ascher SmuelevitzChairman of the Board of Directors andacting Principal Executive Officer(Principal Executive Officer)Date: August 22, 2011
    
    By:
    
    /s/ Uri Ben-Or

Uri Ben-OrChief Financial Officer(Principal Financial Officer)
  S-1




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EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    
    Shares Assignment Agreement, dated as of June 15, 2011,
by and among Israel Healthcare Ventures 2 LP
Incorporated, Topspin Medical, Inc. and Topspin Medical
(Israel) Ltd.10.2
    
    
    Share Transfer Agreement, dated as of June 15, 2011, by
and between Israel Healthcare Ventures 2 LP Incorporated
and Medgenesis Partners Ltd.10.3
    
    
    Amendment of the Share Transfer Agreement, dated as of
July 11, 2011, by and between Israel Healthcare Ventures
2 LP Incorporated and Medgenesis Partners Ltd.31.1
    
    
    Certification of Principal Executive Officer pursuant to
Rule 13a-14(a) promulgated under the Securities Exchange
Act of 1934, as amended.31.2
    
    
    Certification of Principal Financial Officer pursuant to
Rule 13a-14(a) promulgated under the Securities Exchange
Act of 1934, as amended.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.
  E-1