U.S. DOLLARS IN THOUSANDS
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
The accompanying notes are an integral part of these interim condensed consolidated financial statements
The accompanying notes are an integral part of these interim condensed consolidated financial statements
The accompanying notes are an integral part of these interim condensed consolidated financial statements
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 1 - GENERAL
|
A.
|
Description of Business
|
New York Global Innovations Inc. (the “Predecessor Company”) was originally incorporated under the laws of the State of Nevada, on April 22, 1997. On July 8, 2003, the Predecessor Company effected
a reincorporation from Nevada to Delaware through a merger with and into its wholly-owned subsidiary, Inksure Technologies (Delaware) Inc., which was incorporated on September 30, 2003. The surviving corporation in the merger was Inksure
Technologies (Delaware) Inc., which thereupon renamed itself Inksure Technologies Inc. In 2014, following the sale of its assets to Spectra Systems Corporation, the Predecessor Company changed its name to New York Global Innovations Inc. On August
23, 2016, the Predecessor Company consummated an agreement and plan of merger (the “Merger Agreement”) with Artemis Pharma Inc.
The Merger between the Predecessor Company and Artemis was accounted for as a reverse recapitalization. As the stockholders of Artemis received the largest ownership interest in the Predecessor
Company, Artemis was determined to be the "accounting acquirer" in the reverse acquisition. As a result, the historical financial statements of the Predecessor Company were replaced with the historical financial statements of Artemis. Following the
Merger, the Predecessor Company and its subsidiary, Artemis, are collectively referred to as the "Company."
Based on the lack of Company business activities since January 10, 2019, our Company is classified as a “shell” company as defined by the Securities and Exchange Commission (the “SEC”).
|
B.
|
Establishment of Artemis (the "accounting acquirer"):
|
Artemis was incorporated in the State of Delaware on April 19, 2016. Until January 10, 2019, the Company was engaged in the development of agents for the prevention and treatment of severe and
potentially life-threatening infectious diseases.
On January 10, 2019, Artemis received a notice regarding the immediate termination of a certain license agreement, dated May 31, 2016 (the “License Agreement”), executed by and between the Company,
Hadasit Medical Research Services and Development Ltd. (“Hadasit”) and the Hong Kong University of Science and Technology R and D Corporation Limited (“RDC”). Artemis relied primarily on the License Agreement with respect to the development of
Artemisone, its lead product candidate. Since the termination of the License Agreement, Artemis no longer has any operating business.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 1 - GENERAL (Cont.)
To date, Artemis has not generated revenues from its activities and has incurred substantial operating losses. Management expects Artemis to continue to generate substantial operating losses and to
continue to fund its operations primarily through additional raises of capital.
Such conditions raise substantial doubts about the Company’s ability to continue as a going concern. Management’s plan includes raising funds from outside potential investors. However, there is no
assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. These financial statements do not include any
adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.
Additionally, as discussed above, on January 10, 2019, Artemis received a notice regarding the immediate termination of the License Agreement.
Since the termination of the license agreement, Artemis no longer has any operating businessand is classified as a “shell” company as defined by the Securities and Exchange Commission (the “SEC”).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
|
A.
|
Unaudited Interim Financial Statements
|
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Article 10 of the SEC regulations. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed).
|
B.
|
Use of estimates in the preparation of financial statements:
|
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect reported amounts and
disclosures made. Actual results could differ from those estimates.
|
C.
|
Cash and cash equivalents
|
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less as of the date acquired.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
D.
|
Fair value of financial instruments
|
The carrying values of cash and cash equivalents, other receivables and other accounts payable approximate their fair value due to the short-term maturity of these instruments.
The Company measures the fair value of certain of its financial instruments (such as the derivative warrant liabilities) on a recurring basis. The method of determining the fair value of derivative
warrant liabilities is discussed in Note 7B.
A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and
disclosed in one of the following three categories:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as
unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
|
E.
|
Basic and diluted net loss per share
|
Basic loss per share is computed by dividing the net loss applicable to holders of common stock by the weighted average number of shares of common stock outstanding during the year. Diluted loss
per share is computed by dividing the net loss applicable to holders of common stock by the weighted average number of shares of common stock outstanding plus the number of additional shares of common stock that would have been outstanding if all
potentially dilutive common stock had been issued, using the treasury stock method, in accordance with Accounting Standards Codification (“ASC”) 260-10 “Earnings per Share.” Potentially dilutive shares of common stock were excluded from the diluted
loss per share calculation because they were anti-dilutive.
The weighted average number of shares outstanding has been retroactively restated for the equivalent number of shares received by the accounting acquirer as a result of the reverse merger as if
these shares had been outstanding as of the beginning of the earliest period presented.
|
F.
|
Research and development expenses, net
|
Research and development expenses are charged to the statement of operations as incurred.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” This topic prescribes the use of the liability method whereby deferred tax asset and liability account balances are
determined based on differences between financial reporting and tax bases of assets and liabilities. As such, deferred taxes are computed based on the tax rates anticipated (under applicable law as of the balance sheet date) to be in effect when
the deferred taxes are expected to be paid or realized.
|
H.
|
Share-based compensation
|
The Company applies ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made to service providers,
employees and directors including stock options under the Company's stock plans based on estimated fair values.
ASC 718-10 requires companies to estimate the fair value of stock options using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as
an expense over the requisite service periods in the Company's statement of operations.
The Company estimates the fair value of stock options granted as share-based payment awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions,
of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility is estimated based on the volatility of similar companies
in the technology sector for equity awards granted prior to the Merger and on the Company's trading share price for equity awards granted subsequent to the Merger. The Company has historically not paid dividends and has no foreseeable plans to
issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected stock option term is calculated for stock options granted to employees and directors using the "simplified"
method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the stock options granted and the results of operations of the Company.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Agreement with Hadasit and RDC
On May 31, 2016, Artemis entered into the License Agreement with Hadasit and RDC, pursuant to which Artemis acquired a worldwide, royalty-bearing license based on net sales to make any and all use
of certain patents and know-how owned by Hadasit and RDC relating to Artemisone. Artemis will rely primarily on the License Agreement with respect to the development of Artemisone, its lead product candidate. As part of this agreement, Artemis
agreed to certain development and investment milestones. Additionally, Artemis agreed to certain investment milestones, including the requirement to obtain financing of not less than $700,000 within seven months of the closing of the Merger on
August 23, 2016 (such time, the “Effective Time”), $1 million within 12 months of the Effective Time and $2 million within 24 months of the Effective Time. In the event that Artemis fails to meet development or investment milestones as set forth
in the License Agreement, Hadasit has the right to terminate the License Agreement.
On January 10, 2019, the Company received the Notice from Hadasit regarding the immediate termination of the License Agreement. The License Agreement was terminated as a result of the non-payment for certain sponsored research fees, patent
expenses, patent maintenance fees and consulting fees.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 4 - INCOME TAX
|
A.
|
Tax rates applicable to the income
|
U.S. corporate tax
The maximum statutory federal tax rate in the U.S. is 21%. The Company is not subject to current federal taxes, as it has incurred losses.
Israel corporate tax
The Company's subsidiary in Israel is subject to income tax at a regular corporate tax of 23%.
As the Company has not yet generated revenues, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the future. Therefore, a
valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.
|
|
As of
September 30, 2020
|
|
|
As of
December 31,
2019
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Deferred taxes due to carryforward losses
|
|
|
2,892
|
|
|
|
2,879
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(2,892
|
)
|
|
|
(2,879
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
|
C.
|
Tax loss carry-forwards
|
Net operating loss carry-forwards as of September 30, 2020 and December 31, 2019 are as follows:
|
|
As of
September 30, 2020
|
|
|
As of
December 31,
2019
|
|
Israel
|
|
|
4,917
|
|
|
|
4,887
|
|
United States (*)
|
|
|
8,384
|
|
|
|
8,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,301
|
|
|
|
13,245
|
|
Net operating losses in Israel may be carried forward indefinitely. Net operating losses in the U.S. are available through 2027.
(*) Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
On July 23, 2020, the company received a tax refund in the amount of $53 with respect to prior tax years. The income tax benefit has been recorded in the current period.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 5 – WARRANTS ISSUED TO INVESTORS
The Company issued warrants to purchase common stock to investors. The below table lists these warrants and their material terms.
Issuance
date
|
|
Number of warrants
outstanding as
September, 2020
|
|
Exercise
price
|
|
Exercisable
through
|
|
|
|
|
|
|
|
October 2017
|
|
|
275,000
|
|
$
|
2.00
|
|
October 2022
|
The warrants contain a full ratchet anti-dilution price protection (See note 7B).
NOTE 6 - Computation of Net Loss per Share
Basic loss per share is computed by dividing the net loss, as adjusted, to include the dividend participation rights of preferred shares outstanding during the relevant fiscal year, by the weighted
average number of shares of common stock outstanding during the relevant fiscal year. Diluted loss per share is computed by dividing the net loss, as adjusted, to include the dividend participation rights of preferred shares outstanding during the
relevant fiscal year as well as of preferred shares that would have been outstanding if all potentially dilutive preferred shares had been issued, by the weighted average number of shares of common stock outstanding during the relevant fiscal year,
plus the number of shares of common stock that would have been outstanding if all potentially dilutive common stock had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”.
The loss and weighted average number of common stock used in the calculation of basic loss per share are as follows (in thousands, except share and per share data):
|
|
Nine Months
Ended September 30
|
|
|
Three Months
Ended September 30
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
Net loss available to stockholders of the company
|
|
|
(48
|
)
|
|
|
(114
|
)
|
|
|
(25
|
)
|
|
|
(24
|
)
|
Net loss attributable to stockholders of preferred shares
|
|
|
(8
|
)
|
|
|
(17
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss used in the calculation of basic loss per share
|
|
|
(56
|
)
|
|
|
(97
|
)
|
|
|
(29
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common stock used in the calculation of net loss per share
|
|
|
5,153,461
|
|
|
|
5,153,461
|
|
|
|
5,153,461
|
|
|
|
5,153,461
|
|
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 7 - STOCK CAPITAL
Shares of common stock confer upon their holders the right to receive notice to participate and vote in general meetings of stockholders of the Company, the right to receive dividends, if declared,
and the right to receive a distribution of any surplus of assets upon liquidation of the Company.
The Series A Convertible Preferred shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis, and the right to
receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any common stock.
The Series C Convertible Preferred shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis. The shares of Series
C Convertible Preferred Stock have the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any other securities.
In August 2016, immediately upon consummation of the Merger, the Company issued 68,321 shares of the Company’s common stock, as well as 453 shares of the Company’s newly designated Series A
Convertible Preferred Stock convertible into 658,498 shares of common stock, to an investor for an aggregate purchase price of $481,000 (net of issuance expenses).
In October 2017, the Company issued 300,000 shares of the Company’s common stock, warrants to purchase 275,000 shares of common stock, as well as 250 shares newly designated Series C Convertible
Preferred Stock to investors for an aggregate purchase price of $550,000 less issuance expenses. Each share of Series C Convertible Preferred Stock is convertible into 1,000 shares of common stock, subject to adjustments in the event of future
financing at a price of less than the conversion price. Preferred shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis. The holders of shares of Series C
Convertible Preferred Stock have the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any other securities.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 7 - STOCK CAPITAL (Cont.)
|
B.
|
Issuance of Shares (Cont.)
|
The warrants to purchase 275,000 shares of the Company’s common stock contain a full ratchet anti-dilution price protection so that, in most situations upon the issuance of any common stock or
securities convertible into common stock at a price below the then-existing exercise price of the outstanding warrants, the warrant exercise price will be reset to the lower common stock sales price.
As such anti-dilution price protection did not meet the specific conditions for equity classification as of the date of issuance of the warrants, the Company was required to classify the fair value
of these warrants as a liability, with changes in fair value to be recorded as income (loss) due to change in fair value of warrant liability. The estimated fair value of such derivative warrant liability at issuance date, was approximately $319.
|
C.
|
Options issued to employees and consultants
|
On August 22, 2016, the Company granted 126,730 stock options to consultants. Each stock option is exercisable into a share of the Company’s common stock of and expires no later than 10 years from
the date of grant.
One third of the options vested on the grant date, and one third of the options vest upon the first and second anniversaries of the grant date, with the option becoming fully vested on August 22,
2018. 35,202 of these options were exercised in July 2017.
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 7 - STOCK CAPITAL (Cont.)
|
D.
|
Options issued to employees and consultants (Cont.)
|
A summary of the Company's option activity and related information is found below.
|
|
For the Nine months ended
September 30, 2020
|
|
|
|
Number of stock options
|
|
|
Weighted average exercise price
|
|
|
Aggregate intrinsic value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period
|
|
|
141,528
|
|
|
|
0.47
|
|
|
|
21,051
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
141,528
|
|
|
|
0.47
|
|
|
|
27,458
|
|
Options exercisable at period end
|
|
|
124,861
|
|
|
|
0.35
|
|
|
|
27,458
|
|
Artemis Therapeutics, Inc.
Notes to the Interim Condensed Consolidated Financial Statements
(USD in thousands)
NOTE 7 - STOCK CAPITAL (Cont.)
|
D.
|
Options issued to employees and consultants (Cont.)
|
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s common stock on September 30, 2020 and the
exercise price, multiplied by the number of in-the-money stock options on those dates) that would have been received by the stock option holders had all stock option holders exercised their stock options on those dates.
The stock options outstanding as of September 30, 2020, and December 31, 2019, have been separated into exercise price, as follows:
Exercise price
|
|
|
Stock options outstanding as of September 30,
|
|
|
Stock options outstanding as of December 31,
|
|
|
Weighted average remaining contractual life – years as of September 30,
|
|
|
Weighted average remaining contractual life – years as of December 31,
|
|
|
Stock options exercisable as of September 30,
|
|
|
Stock options exercisable as of December 31,
|
|
$
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
91,528
|
|
|
|
91,528
|
|
|
|
5.90
|
|
|
|
6.65
|
|
|
|
91,528
|
|
|
|
91,528
|
|
|
1.30
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
7.46
|
|
|
|
8.21
|
|
|
|
33,333
|
|
|
|
23,958
|
|
|
0.83
|
|
|
|
141,528
|
|
|
|
141,528
|
|
|
|
6.42
|
|
|
|
7.17
|
|
|
|
124,861
|
|
|
|
115,486
|
|
NOTE 8 – RELATED PARTIES
On May 15, 2019, the Company issued two unsecured promissory notes (each, a “Note” and collectively the “Notes”) in the aggregate
principal amount of $100,000 to two related parties. $20,000 and $30,000 of the funds were received by the Company on March 22, 2019, and April 4, 2019, respectively. The balance of the funds was received in May 2019. Each Note accrues interest
at a rate of 6% per annum until the Note is repaid in full. All payments of principal, interest and other amounts under each Note are payable by June 30, 2021. The proceeds of the Notes were used by the Company for general working capital
purposes.
NOTE 9 - SUBSEQUENT EVENTS
In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events through the date the condensed consolidated financial statements were issued.
The Company concluded that no subsequent events have occurred that would require recognition or disclosure in the condensed consolidated financial statements.