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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q/A
 (Amendment No. 1)
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 001-33357
(Commission file number)
 PROTALIX BIOTHERAPEUTICS, INC.
 (Exact name of registrant as specified in its charter)
 
 Florida
    
    65-0643773(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)2 Snunit StreetScience ParkPOB 455Carmiel, Israel
    
    20100(Address of principal executive offices)
    
    (Zip Code)
 972-4-988-9488  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon stock, par value $0.001 per share
    
    American Stock Exchange
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



FORM 10-Q/A
TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONCautionary Statement Regarding Forward-Looking Statements
    
    iiItem 1. Financial StatementsCondensed Consolidated Balance Sheets 
As of March 31, 2008 (Unaudited) and December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations (Unaudited) 
For the Three Months Ended March 31, 2008 and 2007; and for the Period from
December 27, 1993 through March 31, 2008
    
    
    2Condensed Consolidated Statement of Changes in Shareholders Equity 
As of March 31, 2008 (Unaudited) and December 31, 2007
    
    
    3Condensed Consolidated Statements of Cash Flows (Unaudited) 
For the Three Months Ended March 31, 2008 and 2007; and for the Period from December
27, 1993 through March 31, 2008
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    19PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    24EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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Except where the context otherwise requires, the terms, we, us, our or the Company refer to
the business of Protalix BioTherapeutics, Inc. and its consolidated subsidiaries, and Protalix or
Protalix Ltd. refers to the business of Protalix Ltd., our wholly-owned subsidiary and sole
operating unit.
 
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
   
    
    the inherent risks and uncertainties in developing drug platforms and products of
the type we are developing;
    
    delays in our preparation and filing of applications for regulatory approval;
    
    delays in the approval or potential rejection of any applications we file with the
United States Food and Drug Administration, or the FDA, or other regulatory
authorities;
    
    any lack of progress of our research and development (including the results of
clinical trials we are conducting);
    
    obtaining on a timely basis sufficient patient enrollment in our clinical trials;
    
    the impact of development of competing therapies and/or technologies by other
companies;
    
    our ability to obtain additional financing required to fund our research programs;
    
    the risk that we will not be able to develop a successful sales and marketing
organization in a timely manner, if at all;
    
    our ability to establish and maintain strategic license, collaboration and
distribution arrangements and to manage our relationships with collaborators,
distributors and partners;
    
    potential product liability risks and risks of securing adequate levels of product
liability and clinical trial insurance coverage;
    
    the availability of reimbursement to patients from health care payors for our drug
products, if approved;
    
    the possibility of infringing a third partys patents or other intellectual property
rights;
    
    the uncertainty of obtaining patents covering our products and processes and in
successfully enforcing them against third parties; and
    
    the possible disruption of our operations due to terrorist activities and armed
conflict, including as a result of the disruption of the operations of regulatory
authorities, our subsidiary, our manufacturing facilities and our customers, suppliers,
distributors, collaborative partners, licensees and clinical trial sites.




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EXPLANATORY NOTE
 Share-Based Payment
        iii




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PROTALIX BIOTHERAPEUTICS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  March 31, 2008
    
    
    December 31, 2007(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    57,782
    
    
    $
    61,813Accounts receivable
    
    
    2,096
    
    
    
    1,354Total current assets
    
    
    59,878
    
    
    
    63,167FUNDS IN RESPECT OF EMPLOYEE
RIGHTS UPON RETIREMENT
    
    
    544
    
    
    
    464PROPERTY AND EQUIPMENT, NET
    
    
    5,404
    
    
    
    4,506Total assets
    
    $
    65,826
    
    
    $
    68,137LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accruals:Trade
    
    $
    1,057
    
    
    $
    899Other
    
    
    3,148
    
    
    
    2,863Total current liabilities
    
    
    4,205
    
    
    
    3,762LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT
    
    
    872
    
    
    
    690Total liabilities
    
    
    5,077
    
    
    
    4,452SHAREHOLDERS EQUITY
    
    
    60,749
    
    
    
    63,685Total liabilities and shareholders equity
    
    $
    65,826
    
    
    $
    68,137
 The accompanying notes are an integral part of the condensed consolidated financial statements.
 1




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PROTALIX BIOTHERAPEUTICS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Period fromDecember 27, 1993*Three Months Ended
    
    
    throughMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008(restated)
    
    
    (restated)REVENUES
    
    
    
    
    
    
    
    
    
    $
    830COST OF REVENUES
    
    
    
    
    
    
    
    
    
    
    206GROSS PROFIT
    
    
    
    
    
    
    
    
    
    
    624RESEARCH AND DEVELOPMENT EXPENSES (1)
    
    $
    5,653
    
    
    $
    3,226
    
    
    
    37,955less  grants
    
    
    (1,366
    )
    
    
    (738
    )
    
    
    (7,553
    )4,287
    
    
    
    2,488
    
    
    
    30,402GENERAL AND ADMINISTRATIVE EXPENSES (2)
    
    
    1,976
    
    
    
    6,392
    
    
    
    31,572OPERATING LOSS
    
    
    6,263
    
    
    
    8,880
    
    
    
    61,350FINANCIAL INCOME  NET
    
    
    (1,150
    )
    
    
    (331
    )
    
    
    (3,598
    )OTHER INCOME
    
    
    
    
    
    
    
    
    
    
    (6
    )NET LOSS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE
    
    
    5,113
    
    
    
    8,549
    
    
    
    57,746CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE
    
    
    
    
    
    
    
    
    
    
    (37
    )NET LOSS FOR THE PERIOD
    
    $
    5,113
    
    
    $
    8,549
    
    
    $
    57,709NET LOSS PER SHARE OF COMMON STOCK 
BASIC AND DILUTED:
    
    $
    0.07
    
    
    $
    0.13WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK USED IN COMPUTING LOSS PER
COMMON STOCK:Basic and diluted
    
    
    75,811,866
    
    
    
    64,365,376(1) Includes share-based compensation
    
    
    1,327
    
    
    
    900
    
    
    
    6,711(2) Includes share-based compensation
    
    
    847
    
    
    
    5,650
    
    
    
    21,847
 
 *
    
    Incorporation date. See Note 1a. The accompanying notes are an integral part of the condensed consolidated financial statements.
 2




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PROTALIX BIOTHERAPEUTICS, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
  DeficitaccumulatedConvertible
    
    
    
    
    
    
    Convertible
    
    
    
    
    
    
    Additional
    
    
    duringCommon
    
    
    Preferred
    
    
    Common
    
    
    Preferred
    
    
    
    
    
    
    paid-in
    
    
    developmentStock (2)
    
    
    Shares
    
    
    Stock
    
    
    Shares
    
    
    Warrants
    
    
    capital
    
    
    stage
    
    
    TotalNumber of shares
    
    
    AmountBalance at December 27, 1993(1)Changes during the period from
December 27, 1993 through December 31,
2007 (restated):Common Stock and convertible preferred
A, B and C shares and warrants issued
for cash (net of issuance costs of
$5,078)
    
    
    38,856,127
    
    
    
    398,227
    
    
    $
    39
    
    
    $
    1
    
    
    $
    1,382
    
    
    $
    73,836
    
    
    
    
    
    
    $
    75,258Exercise of options granted to
employees and non-employees
    
    
    2,780,467
    
    
    
    847
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    408
    
    
    
    
    
    
    
    411Conversion of convertible preferred
shares into common stock
    
    
    24,375,870
    
    
    
    (399,074
    )
    
    
    24
    
    
    
    (1
    )
    
    
    
    
    
    
    (23
    )Change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    $
    37Expiration of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    34Merger with a wholly owned subsidiary
of the Company (net of issuance cost
of $642)
    
    
    583,280
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    241Exercise of warrants
    
    
    9,171,695
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    (1,348
    )
    
    
    15,342
    
    
    
    
    
    
    
    14,003Restricted common stock issued for
future services
    
    
    8,000
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,394
    
    
    
    
    
    
    
    26,394Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,633
    )
    
    
    (52,633
    )Balance at December 31, 2007 (restated)
    
    
    75,775,439
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    116,205
    
    
    
    (52,596
    )
    
    
    63,685Changes during the three month period
ended March 31, 2008(Unaudited):Restricted common stock issued for
future services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,180
    
    
    
    
    
    
    
    2,180Exercise (includes Net Exercise) of
options granted to employees
    
    
    92,459
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,113
    )
    
    
    (5,113
    )Balance
at March 31, 2008(Unaudited) (restated)
    
    
    75,867,898
    
    
    
    
    
    
    $
    76
    
    
    
    
    
    
    
    
    
    
    $
    118,382
    
    
    $
    (57,709
    )
    
    $
    60,749
 
 *
    
    Represents an amount less than $1.(1)
    
    Incorporation date. See Note 1a.(2)
    
    Common Stock, $0.001 par value; Authorized  as of December 31, 2007 and March 31, 2008 -
150,000,000 shares. The accompanying notes are an integral part of the condensed consolidated financial statements.
 3




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PROTALIX BIOTHERAPEUTICS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Period fromDecember 27, 1993*Three Months Ended
    
    
    throughMarch 31, 2008

    
    
    March 31, 2007
    
    
    March 31, 2008(restated)
    
    
    (restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss for the period
    
    $
    (5,113
    )
    
    $
    (8,549
    )
    
    $
    (57,709
    )Adjustments required to reconcile net loss to net
cash used in operating activities:
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (37
    )Share based compensation
    
    
    2,174
    
    
    
    6,550
    
    
    
    28,558Financial income net (principal differences relate
to currency exchange rates)
    
    
    (580
    )
    
    
    (43
    )
    
    
    (1,386
    )Depreciation and impairment of fixed assets
    
    
    262
    
    
    
    132
    
    
    
    2,201Changes in accrued liability for employee rights
upon retirement
    
    
    182
    
    
    
    74
    
    
    
    872Gain on amounts funded in respect of employee rights
upon retirement
    
    
    (41
    )
    
    
    (5
    )
    
    
    (145
    )Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    (6
    )Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (658
    )
    
    
    (886
    )
    
    
    (1,803
    )Increase (decrease) in accounts payable and
accruals
    
    
    (33
    )
    
    
    (129
    )
    
    
    2,974Net cash used in operating activities
    
    $
    (3,807
    )
    
    $
    (2,856
    )
    
    $
    (26,481
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    $
    (817
    )
    
    $
    (516
    )
    
    $
    (6,639
    )Investment grant received in respect of fixed assets
    
    
    
    
    
    
    
    
    
    
    38Investment in restricted cash deposit
    
    
    
    
    
    
    
    
    
    
    (47
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    4
    
    
    
    11Amounts funded in respect of employee rights upon
retirement
    
    
    (39
    )
    
    
    (30
    )
    
    
    (570
    )Amounts paid in respect of employee rights upon
retirement
    
    
    
    
    
    
    8
    
    
    
    171Net cash used in investing activities
    
    $
    (856
    )
    
    $
    (534
    )
    
    $
    (7,036
    )CASH FLOWS FROM FINANCING ACTIVITIES:Loan and convertible bridge loan received
    
    
    
    
    
    
    
    
    
    $
    2,145Repayment of loan
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Issuance of shares and warrants, net of issuance cost
    
    $
    (20
    )
    
    
    
    
    
    
    74,095Exercise of options and warrants
    
    $
    3
    
    
    $
    12,910
    
    
    
    14,417Merger with a wholly-owned subsidiary of the
Company, net of issuance cost
    
    
    
    
    
    
    (39
    )
    
    
    237Net cash provided by financing activities
    
    $
    (17
    )
    
    $
    12,871
    
    
    $
    89,894EFFECT OF EXCHANGE RATE CHANGES
ON CASH
    
    $
    649
    
    
    $
    37
    
    
    $
    1,405NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (4,031
    )
    
    
    9,518
    
    
    
    57,782BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
    
    
    61,813
    
    
    
    15,378
    
    
    
    BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    57,782
    
    
    $
    24,896
    
    
    $
    57,782
 The accompanying notes are an integral part of the condensed consolidated financial statements.
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PROTALIX BIOTHERAPEUTICS, INC.   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Period fromDecember 27,1993*Three Months Ended
    
    
    throughMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008(restated)
    
    
    (restated)SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION:Cash paid during the period for interest
    
    
    
    
    
    
    
    
    
    $
    80SUPPLEMENTARY INFORMATION
ON INVESTING AND FINANCING
ACTIVITIES NOT INVOLVING CASH FLOWS:Conversion of convertible bridge loan into shares
    
    
    
    
    
    
    
    
    
    $
    1,145Purchase of property and equipment
    
    $
    1,009
    
    
    $
    249
    
    
    $
    1,009Issuance cost not yet paid and accruals  other:
    
    $
    41
    
    
    $
    5
    
    
    $
    41Issuance cost paid by a grant of options
    
    
    
    
    
    
    
    
    
    $
    21Consultants and director credit balance
converted into shares
    
    
    
    
    
    
    
    
    
    $
    80Merger with a wholly owned subsidiary of
the Company
Issuance cost setoff against accounts payable
    
    
    
    
    
    $
    65
 
 *
    
    Incorporation date. See Note 1a. The accompanying notes are an integral part of the condensed consolidated financial statements.
 5




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PROTALIX BIOTHERAPEUTICS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   NOTE 1  SIGNIFICANT ACCOUNTING POLICIES
 a.
    
    General
 1.
    
    OperationProtalix BioTherapeutics, Inc. (the Company), and its wholly-owned subsidiary,
Protalix Ltd. (the Subsidiary or Protalix Ltd.), are biopharmaceutical companies
focused on the development and commercialization of recombinant therapeutic proteins
based on the Companys proprietary ProCellExtm protein expression system
(ProCellEx). The Companys lead product development candidate is prGCD for the
treatment of Gaucher disease, which the Company is developing using its ProCellEx
protein expression system. The Company is currently enrolling and treating patients
in a phase III clinical trial of prGCD.During the period from 2003 to 2005, Protalix Ltd. was a party to a research and
development services contract with a pharmaceutical company pursuant to which the
Company agreed to provide certain research and development services. The Company
earned total revenues of $830 throughout the duration of the contract in
consideration for the performance of such services. The contract expired in the
first quarter of 2005, and, since that time, the Company has not focused efforts on
providing any further research and development services for third parties.The Company has been in the development stage since its inception (see 2 below).
The Companys successful completion of its development program and its transition to
normal operations is dependent upon the Companys receipt of necessary regulatory
approvals from the United States Food and Drug Administration (FDA) prior to
selling its products within the United States, and foreign regulatory approvals must
be obtained to sell its products internationally. There can be no assurance that
the Companys products will receive regulatory approvals, and a substantial amount
of time may pass before the Company achieves a level of sales adequate to support
the Companys operations, if at all. The Company will also incur substantial
expenditures in connection with the regulatory approval process and it might need to
raise additional capital during the developmental period. Obtaining marketing
approval will be directly dependent on the Companys ability to implement the
necessary regulatory steps required to obtain marketing approval in the United
States and other countries and the success of the Companys clinical trials. The
Company cannot predict the outcome of these activities.2.
    
    The MergerOn December 31, 2006, the Company (formerly Orthodontix, Inc.) consummated the
acquisition of Protalix Ltd., a privately-held Israeli biotechnology company
incorporated on December 27, 1993, by the merger (the Merger) of its wholly owned
subsidiary, Protalix Acquisition Co., Ltd., with Protalix Ltd. At and as of the
Merger, the former shareholders of Protalix Ltd. received a number of shares of the
Companys common stock, par value $.001 per share (the Common Stock), equal to
more than 99% of the outstanding shares of Common Stock. As a result, Protalix Ltd.
is now the Companys wholly-owned subsidiary. As of that date, for accounting
purposes, the Merger was accounted for as a recapitalization of Protalix Ltd.
Accordingly, the historical financial statements of the Company reflect the
historical operations and financial statements of Protalix Ltd. before the Merger.
 6




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PROTALIX BIOTHERAPEUTICS, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1
 SIGNIFICANT ACCOUNTING POLICIES (Continued):
 All share and per share data provided in these notes to the financial statements
have been retroactively restated to reflect the conversion ratio related to the
exchange of shares in the Merger (and giving effect to the one-for-ten reverse stock
split), unless otherwise stated herein. The Company currently does not have
sufficient resources to complete the commercialization of any of its proposed
products. Based on its current cash resources and commitments, the Company believes
it will be able to maintain its current planned development activities and the
corresponding level of expenditures for at least the next 24 months, although no
assurance can be given that it will not need additional cash prior to such time. If
there are unexpected increases in general and administrative expenses and research
and development expenses, the Company may need to seek additional financing during
the next 24 months.
 b.
    
    General Basis of Presentation
 The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles in the United States (GAAP) for interim financial information,
Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and
Reporting by Development Stage Enterprises, and Article 10 of Regulation S-X under
the Securities Exchange Act of 1934. Accordingly, they do not include all of the
information and notes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (of a normal recurring nature) considered
necessary for a fair statement of the results for the interim periods presented have
been included. Operating results for the interim period are not necessarily
indicative of the results that may be expected for the full year. These unaudited
condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements in the Annual Report on Form 10-K for the
year ended December 31, 2007, filed by the Company with the Securities and Exchange
Commission (the Commission). The comparative balance sheet at December 31, 2007
has been derived from the audited financial statements at that date, but does not
include all of the information and notes required under GAAP for complete financial
statements.
 c.
    
    Net loss per share
 Basic and diluted loss per share (LPS) are computed by dividing net loss by the
weighted average number of shares of Common Stock outstanding for each period.Shares of restricted Common Stock and the shares of Common Stock underlying
outstanding options and warrants of the Company were not included in the calculation
of diluted LPS because the effect would be anti-dilutive.Diluted LPS does not include options, restricted shares of Common Stock and warrants
of the Company in the amount of 13,008,658 and 10,565,151 shares of Common Stock for
the three months ended March 31, 2007 and 2008, respectively.
 d.
    
    Newly issued and recently adopted Accounting Pronouncements
 1.
    
    In September 2006, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework,
provides guidance regarding the methods to be used for measuring fair value and
expands the required disclosure regarding fair value measurements.
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PROTALIX BIOTHERAPEUTICS, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1
 SIGNIFICANT ACCOUNTING POLICIES (Continued):
 SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. The Company adopted SFAS 157 on January 1, 2008. The
adoption did not have any impact on the Companys results of operations and
financial position since no other assets or liabilities are recognized or disclosed
at fair value.2.
    
    In February 2007, the FASB issued Statement of Financial Accounting
Standards No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities  including an amendment of FASB Statement No. 115 (SFAS 159). SFAS
159 is expected to expand the use of fair value accounting but does not affect
existing standards that require certain assets or liabilities to be carried at fair
value. SFAS 159 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The Company adopted SFAS 159 on January 1,
2008. The adoption did not have any impact on the Companys financial position
since the Company did not elect the fair value option for any assets or liabilities
under SFAS 159.3.
    
    In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 141 (revised 2007), Business Combinations (SFAS 141(R)). SFAS
141(R) changes the accounting for business combinations, including the measurement
of acquirer shares issued in consideration for a business combination, the
recognition of contingent consideration, the accounting for contingencies, the
recognition of capitalized in-process research and development, the accounting for
acquisition-related restructuring cost accruals, the treatment of acquisition
related transaction costs and the recognition of changes in the acquirers income
tax valuation allowance and income tax uncertainties. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. Early application is prohibited. The Company will be required
to adopt SFAS 141(R) on January 1, 2009.4.
    
    In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements,
an Amendment of ARB No. 51 (SFAS 160). SFAS 160 amends ARB 51 to establish
accounting and reporting standards for the noncontrolling interest in a subsidiary
and for the deconsolidation of a subsidiary. Ownership interests in subsidiaries
held by parties other than its parent company are required to be presented in the
consolidated statement of financial position within equity, but separate from the
parent companys equity. SFAS 160 requires that changes in a parent companys
ownership interest while the parent company retains its controlling financial
interest in its subsidiary should be accounted for in a manner similar to the
accounting treatment of equity transactions. When a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary should be
initially measured at fair value, with any gain or loss recognized in earnings.SFAS 160 requires consolidated net income to be reported in amounts that include the
amounts attributable to both the parent company and the noncontrolling interest. It
also requires disclosure, on the face of the consolidated income statement, of the
amounts of consolidated net income attributable to both parent companies and the
noncontrolling interests.SFAS 160 is effective for fiscal years (including interim periods within those
fiscal years) beginning on or after December 15, 2008. Earlier adoption is
prohibited. SFAS 160 is required to be applied prospectively as of the beginning of
the fiscal year in which it is initially applied, except for the presentation and
disclosure requirement which shall be applied retrospectively for all periods
presented. The Company is required to adopt SFAS 160 as of January 1, 2009. The
Company is currently assessing the impact that SFAS 160 may have on its results of
operations and financial position.
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PROTALIX BIOTHERAPEUTICS, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1
 SIGNIFICANT ACCOUNTING POLICIES (Continued):
 5.
    
    In December 2007, the FASB ratified EITF Issue No. 07-01, Accounting
for Collaborative Arrangements (EITF 07-01). EITF 07-01 defines collaborative
arrangements and establishes reporting requirements for transactions between
participants in a collaborative arrangement and between participants in the
arrangement and third parties. EITF 07-01 also establishes the appropriate income
statement presentation and classification for joint operating activities and
payments between participants, as well as the sufficiency of the disclosures
related to these arrangements. EITF 07-01 is effective for fiscal years beginning
after December 15, 2008 (January 1, 2009, for the Company). Companies are required
to apply EITF 07-01 using a modified version of retrospective transition for those
arrangements in place at the effective date. In addition, companies are required
to report the effects of the application of EITF 07-01 as a change in accounting
principle through retrospective application to all prior periods presented for all
arrangements existing as of the effective date, unless it is impracticable to apply
the effects of the change retrospectively. The Company is currently assessing the
impact that EITF 07-01 may have on its results of operations and financial
position.6.
    
    In March 2008, the FASB issued Statement of Financial Accounting
Standards No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS 161). SFAS 161 is intended to improve financial reporting
regarding derivative instruments and hedging activities by requiring enhanced
disclosure to enable investors to better understand the effects of such derivative
instruments and hedging activities on a companys financial position, financial
performance and cash flows. SFAS 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged (January 1, 2009, for the Company). SFAS 161 also improves
transparency regarding the location and amounts of derivative instruments in a
companys financial statements; how derivative instruments and related hedged items
are accounted for under Statement of Financial Accounting Standards No. 133
Accounting for Derivative Instruments and Hedging Activities; and how derivative
instruments and related hedged items affect a companys financial position,
financial performance and cash flows. The Company is currently evaluating the
effect SFAS 161 will have on its financial statement presentations.
 e.
    
    ReclassificationsCertain figures in respect of prior years have been reclassified to conform with the
current year presentation.
 NOTE 2  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
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PROTALIX BIOTHERAPEUTICS, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2
 RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued):
     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007
(unaudited)
 As Reported
    
    Adjustment
    
    As RestatedResearch and development Expenses, Net (1)
    
    $
    1,794
    
    
    $
    694
    
    
    $
    2,488General and Administrative Expenses (2)
    
    
    1,987
    
    
    
    4,405
    
    
    
    6,392Operating Loss
    
    
    3,781
    
    
    
    5,099
    
    
    
    8,880Net Loss for the Period
    
    
    3,450
    
    
    
    5,099
    
    
    
    8,549Net Loss Per
Share of Common Stock  Basic and Diluted
    
    
    0.05
    
    
    
    0.08
    
    
    
    0.13(1) Includes share-based compensation
    
    
    206
    
    
    
    694
    
    
    
    900(2) Includes share-based compensation
    
    
    1,245
    
    
    
    4,405
    
    
    
    5,650
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PROTALIX BIOTHERAPEUTICS, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2
 RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Continued):
 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2007 (unaudited)
 As Reported
    
    Adjustment
    
    As RestatedNet loss for the period
    
    $
    (3,450
    )
    
    $
    (5,099
    )
    
    $
    (8,549
    )Adjustments required to
reconcile net loss to net
cash used in operating
activities:Share based compensation
    
    
    1,451
    
    
    
    5,099
    
    
    
    6,550
  NOTE 3  STOCK TRANSACTIONS
 a.
    
    During the three months ended March 31, 2008, the Company issued 92,459 shares
of Common Stock in connection with the exercise of 119,233 options by a certain officer
and employees of the Company. The aggregate net exercise price was $3.
 b.
    
    On February 7, 2008, the Companys board of directors approved the grant of
options to purchase 50,000 shares of Common Stock to a newly appointed member of the
Companys board of directors, at an exercise price of $3.02 per share. The options
vest over a four-year period and are exercisable for a 10-year period commencing on the
date of grant.The Company estimated the fair value of the options on the date of the grant using the
Black-Scholes option-pricing model to be approximately $109, based on the following
assumptions: dividend yield of 0% for all years; expected volatility of 62.5%; risk-free
interest rates of 2.9%; and expected life of 10 years.c.
    
    On February 7, 2008, the Companys board of directors approved the grant of
options to purchase 1,900,000 shares of Common Stock, in the aggregate, to certain
officers and employees of the Company, at an exercise price of $5.00 per share. The
options vest in varying rates over periods of up to five years and are exercisable for
a 10-year period commencing on the date of grant.The Company estimated the fair value of the options on the date of the grant using the
Black-Scholes option-pricing model to be approximately $2,766, based on the following
assumptions: dividend yield of 0% for all years; expected volatility of 62.5%; risk-free
interest rates of 2.9%; and expected life of six years.d.
    
    In February 2008, the Company amended the stock option agreements of certain
executive officers. As amended, such stock option agreements provide for the full
acceleration of the vesting period of unvested options held by such officers immediately
upon a change of control. The Company concluded that the amendments do not result in a
modification accounting charge against share-based compensation.
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PROTALIX BIOTHERAPEUTICS, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 4  COMMITMENTS
  NOTE 5  SUBSEQUENT EVENT
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis of our financial condition and results
of operations together with our condensed financial statements and the consolidated financial
statements and the related notes included elsewhere in this Form 10-Q and our Annual Report on Form
10-K for the year ended December 31, 2007. Some of the information contained in this discussion
and analysis, particularly with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and uncertainties. You should
read Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007 for a
discussion of important factors that could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in the following
discussion and analysis.
 Restatement
 Share-Based Payment
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Overview
 tm
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Critical Accounting Policies
  Results of Operations
 Three months ended March 31, 2008 compared to the three months ended March 31, 2007
 Research and Development Expenses
   General and Administrative Expenses
  Financial Expenses and Income
  Liquidity and Capital Resources
 Sources of Liquidity
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Cash Flows
   Future Funding Requirements
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Effects of Inflation and Currency Fluctuations
   Off-Balance Sheet Arrangements
  Recently Issued Accounting Pronouncements
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Currency Exchange Risk
   Three months ended
    
    Year endedMarch 31,
    
    December 31,2008
    
    2007
    
    2007Average rate for period
    
    
    3.6234
    
    
    
    4.2155
    
    
    
    4.1081Rate at period end
    
    
    3.5530
    
    
    
    4.1550
    
    
    
    3.8460
  18




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Interest Rate Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Inherent Limitations on Effectiveness of Controls
  19




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Changes in internal controls
  Management Consideration of Restatement
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Unregistered Sales of Equity Securities
  Use of Proceeds
    
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
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For
    
    WithheldEli Hurvitz
    
    
    50,252,375
    
    
    
    218,325David Aviezer, Ph.D., MBA
    
    
    50,343,780
    
    
    
    126,920Yoseph Shaaltiel, Ph.D.
    
    
    50,343,780
    
    
    
    126,920Alfred Akirov
    
    
    50,343,780
    
    
    
    126,920Zeev Bronfeld
    
    
    50,337,251
    
    
    
    29,520Yodfat Harel Gross
    
    
    50,343,861
    
    
    
    126,839Eyal Sheratzky
    
    
    50,345,913
    
    
    
    124,787Sharon Toussia-Cohen
    
    
    50,337,251
    
    
    
    133,449
  For
    
    Against
    
    Abstain50,436,839
    
    33,047
    
    814
 
 Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNumber
    
    Exhibit Description
    
    Method of Filing3.1
    
    Amended and Restated Articles of
Incorporation of the Company
    
    Incorporated by
reference to the
Companys Registration
Statement on Form S-4
filed on March 26,
1998, SEC File No.
333-486773.2
    
    Article of Amendment to Articles of
Incorporation dated June 9, 2006
    
    Incorporated by
reference to the
Companys Registration
Statement on Form 8-A
filed on March 9, 2007,
SEC File No. 001-333573.3
    
    Article of Amendment to Articles of
Incorporation dated December 13,
2006
    
    Incorporated by
reference to the
Companys Registration
Statement on Form 8-A
filed on March 9, 2007,
SEC File No. 001-333573.4
    
    Article of Amendment to Articles of
Incorporation dated December 26,
2006
    
    Incorporated by
reference to the
Companys Registration
Statement on Form 8-A
filed on March 9, 2007,
SEC File No. 001-333573.5
    
    Article of Amendment to Articles of
Incorporation dated February 26,
2007
    
    Incorporated by
reference to the
Companys Registration
Statement on Form 8-A
filed on March 9, 2007,
SEC File No. 001-333573.6
    
    Bylaws of the Company, as amended
    
    Incorporated by
reference to the
Companys Registration
Statement on Form S-4
filed on March 26,
1998, SEC File No.
333-4867731.1
    
    Certification of Chief Executive
Officer
    
    Filed herewith
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ExhibitNumber
    
    Exhibit Description
    
    Method of Filingpursuant to Rule 13a-14(a)
as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial
Officer pursuant to Rule 13a-14(a)
as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
    
    Filed herewith32.1
    
    18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002,
Certification of Chief Executive
Officer
    
    Filed herewith32.2
    
    18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002,
Certification of Chief Financial
Officer
    
    Filed herewith
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SIGNATURES
  PROTALIX BIOTHERAPEUTICS, INC.(Registrant)Date: March 6, 2009
    
    By:
    
    /s/ David AviezerDavid Aviezer, Ph.D.President and Chief Executive Officer(Principal Executive Officer)Date: March 6, 2009
    
    By:
    
    /s/ Yossi MaimonYossi MaimonChief Financial Officer, Treasurer and Secretary(Principal Financial and Accounting Officer)
 24