Attached files
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EX-32.2 - EXHIBIT 32.2 - Artemis Therapeutics, Inc. | exhibit_32-2.htm |
EX-32.1 - EXHIBIT 32.1 - Artemis Therapeutics, Inc. | exhibit_32-1.htm |
EX-31.2 - EXHIBIT 31.2 - Artemis Therapeutics, Inc. | exhibit_31-2.htm |
EX-31.1 - EXHIBIT 31.1 - Artemis Therapeutics, Inc. | exhibit_31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
Commission file number: 001-24431
ARTEMIS THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
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84-1417774
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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18 EAST 16TH STREET, SUITE 307, NEW YORK, NY
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10003
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(Address of principal executive offices)
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(Zip Code)
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(646) 233-1454
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $0.01 per share
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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ý
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Emerging growth company
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☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
The aggregate market value of the Common Stock held by non-affiliates of the Registrant computed by reference to the average bid and asked price of such Common Stock on June 30, 2016 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $1,031.44.
As of May 10, 2017, the Registrant had outstanding 4,818,259 shares of Common Stock, par value $0.01 per share.
2
EXPLANATORY NOTE
The purpose of this Amendment No. 1 to the Artemis Therapeutics, Inc. (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2016 (this “Amendment No. 1”), filed with the Securities and Exchange Commission on March 31, 2017 (the “Form 10-K”), is to correct a typographical error in the date for the Report of Independent Registered Public Accounting Firm to the Board of Directors and the Company included on page F-2 of the Company’s Consolidated Financial Statements as of December 31, 2016 (the “Report”). The Report in the original Form 10-K is incorrectly dated March 27, 2017. The correct date for the Report is March 31, 2017. Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, the Company has repeated the entire text of Item 8 and Item 15 of the Form 10-K in this Amendment No. 1, however, there have been no changes to such items other than to replace the audit report of Brightman Almagor Zohar & Co., CPA, a member firm of Deloitte Touche Tohmatsu Limited, to correct the date as described above.
In addition, the Company is filing this Amendment No. 1 to correct an inadvertent error on the cover page of the Form 10-K in which the box identifying the Company as a shell company was incorrectly checked “Yes”. The error has been corrected in this Amendment No. 1 by checking the “No” box in response to this item on the cover page.
Other than these corrections to the Report, no other changes have been made to the Form 10-K. This Amendment No. 1 does not reflect subsequent events occurring after the original filing date of the Form 10-K or otherwise modify or update in any way disclosures made in the Form 10-K. This Amendment No. 1 should be read in conjunction with the Form 10-K.
3
ARTEMIS THERAPEUTICS, INC.
FORM 10-K
FOR THE PERIOD ENDED DECEMBER 31, 2016
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements and supplementary data required by this item are set forth at the pages indicated in Item 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) |
The following documents are filed as a part of this report:
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(1) |
Financial Statements.
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Financial Statements:
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F - 2
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F - 3
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F - 4
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F - 5
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F - 6
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F - 7- F - 15
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(2) |
Exhibits. See subsection (b) below.
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(b) |
The following exhibits are filed as part of this report:
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Exhibit No.
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Description
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3.1
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Articles of Incorporation of the Company, as amended (previously filed as exhibit 3.1 to our Form 10-SB filed with the SEC on June 10, 1998; Exhibits 3.1 and 3.2 to our Current Report on Form 8-K filed with the SEC on November 8, 2002; Exhibit 4 to our Current Report on Form 8-K filed with the SEC on July 22, 2003; and Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on September 24, 2010; and Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on December 20, 2016).
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3.2
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By-Laws, as amended (previously filed as exhibit 3.2 to our Form 10-SB on June 10, 1998; Exhibit 3.4 to our Quarterly Report on Form 10-QSB filed on November 14, 2002; Exhibit 5 to our Current Report on Form 8-K on July 22, 2003; and Exhibit 3.1 to our Current Report on Form 8-K filed on April 4, 2008).
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10.1*
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2002 Employee, Director and Consultant Stock Option Plan (previously filed as Exhibit 10.1 to our Quarterly Report on Form 10-QSB filed on November 14, 2002).
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10.2*
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Amendment No. 1 to InkSure Technologies Inc. 2002 Employee, Director and Consultant Stock Option Plan. (previously filed as Exhibit 10.2 to our Current Report on Form 8-K filed on September 24, 2010).
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10.3
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Amendment No. 2 to InkSure Technologies Inc. 2002 Employee, Director and Consultant Stock Option Plan. (previously filed as Exhibit 10.3 to our Current Report on Form 8-K filed on September 24, 2010).
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10.4
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2011 Employee, Director and Consultant Stock Plan (previously filed as Appendix A to the Company’s Proxy Statement on Schedule 14A filed on August 9, 2011).
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10.5
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License Agreement by and between Artemis Therapeutics, Inc., Hadasit Medical Research Services & Development Ltd. and Hong Kong University of Science and Technology R and D Corporation Limited, dated May 31, 2016 (previously filed as Exhibit 10.1 to our Current Report on Form 8-K filed on December 15, 2016).
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10.6
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Amendment No. 1 to License Agreement by and between Artemis Therapeutics, Inc., Hadasit Medical Research Services & Development Ltd. and Hong Kong University of Science and Technology R and D Corporation Limited, dated August 22, 2016 (previously filed as Exhibit 10.2 to our Current Report on Form 8-K filed on December 15, 2016).
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10.7
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Agreement and Plan of Merger, dated August 2, 2016 (previously filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 15, 2016).
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10.8
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Consulting Agreement by and between Artemis Therapeutics, Inc., Hadasit Medical Research Services & Development Ltd. and Dr. Dana Wolf, dated August 23, 2016 (previously filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 15, 2016).
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10.9
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Securities Purchase Agreement, dated August 2, 2016 (previously filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on December 15, 2016).
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10.10
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Employment Agreement, dated as of January 5, 2017, by and between the Company and Peter Payne (previously filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 17, 2017).
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31.1*
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Certification by CEO pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
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31.2*
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Certification by CFO pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
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32.1*
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Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
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32.2*
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Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
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101.1**
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The following materials from the Company’s Annual Report on Form 10-K for the period ended December 31, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Statements of Changes in Stockholders’ Deficiency, (iv) the Consolidated Statements of Cash Flows and (v) related notes to these financial statements, tagged as blocks of text and in detail.
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* Filed herewith.
** Furnished herewith.
5
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ARTEMIS THERAPEUTICS, INC.
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May 10, 2017
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By:
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/s/ Peter Payne
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Peter Payne
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Chief Executive Officer (Principal Executive Officer)
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By:
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/s/ Chanan Morris
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Chanan Morris
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Chief Financial Officer (Principal Financial
and Accounting Officer)
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6
ARTEMIS THERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2016
U.S. DOLLARS IN THOUSANDS
INDEX
PAGE
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Financial Statements:
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F - 2 | |
F - 3
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F - 4
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F - 5
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F - 6
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F - 7- F - 15
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TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
Artemis Therapeutics Inc.
We have audited the accompanying consolidated balance sheet of Artemis Therapeutics Inc. and its subsidiaries (the “Company”) as of December 31, 2016 and the related consolidated statement of comprehensive loss, stockholders' equity, and cash flows for the period from April 19, 2016 (Inception) to the period ended December 31, 2016. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and the results of its operations and cash flows for the period from April 19, 2016 (Inception) to the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. To date, the Company has not generated revenue and does not anticipate generating revenue for an extended period of time. These conditions result in substantial doubts about the Company's ability to continue as a going concern. Management's plans concerning these matters are described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of' these uncertainties.
/s/ Brightman Almagor Zohar & Co.
Brightman Almagor Zohar & Co.
Certified Public Accountants
Member of Deloitte Touche Tohmatsu Limited
Tel Aviv, Israel
March 31, 2017
F - 2
As of
December 31,
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Note
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2016
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ASSETS
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Current assets
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Cash and cash equivalents
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907
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Other accounts receivable and prepaid expenses
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65
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Total current assets
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972
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TOTAL ASSETS
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972
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities
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Accrued expenses and other payables
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58
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Total current liabilities
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58
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Commitments and Contingencies
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3
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-
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Total Liabilities
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58
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Shareholders' equity
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Common stock, $0.01 par value - Authorized: 51,000,000; issued and outstanding: 5,774,549 as of December 31, 2016
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2,887
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Additional paid in capital
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6
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(1,709
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Accumulated deficit
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(264
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Total shareholders' equity
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914
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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972
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* Share data is retroactively adjusted to reflect the 1 to 50 reverse stock split (refer to Note 6)
The accompanying notes are an integral part of the financial statements.
F - 3
Artemis Therapeutics Inc.
(USD in thousands, except per share data)
For the period from
April 19 (Inception),
2016 to
December 31, 2016
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Research and development expenses
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89
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General and administrative
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166
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Operating loss
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255
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Finance Expense
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9
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Net loss
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264
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Loss per share: | ||||
Basic and diluted net loss per share
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(0.05
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Weighted average number of common stocks used in calculation of net loss per share(*): | ||||
Basic and diluted
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4,991,828
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* Share data is retroactively adjusted as if the reverse stock split (refer to Note 6) occurred at the beginning of the earliest period presented
The accompanying notes are an integral part of the financial statements.
F - 4
Share Capital (***)
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Number of
stock
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USD
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Additional paid
in capital
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Accumulated
Deficit
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Total shareholders'
equity (deficiency)
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Establishment of the company | ||||||||||||||||||||
April 2016
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3,945,998
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(**
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)
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-
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(
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*)
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Issuance of shares
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238,270
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(**
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127
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127
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Share based compensation
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-
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-
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36
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-
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36
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Effect of reverse recapitalization
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863,453
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(**) 2,524
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(1,990
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-
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534
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Issuance of shares
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726,828
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363
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118
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-
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481
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Net Loss
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-
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(264
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(264
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BALANCE AS OF December 31, 2016
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5,774,549
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2,887
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(1,709
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(260
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914
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(*) Represents an amount lower than $1,000
(**) Share data has been adjusted based on the equivalent number of shares received by the accounting acquirer as a result of the reverse recapitalization
(***) Share data includes preferred shares convertible to common shares on an as-converted basis, and is retroactively adjusted to reflect the one for fifty reverse stock split (refer to Note 6). All preferred shares were converted to common shares prior to December 31 2016.
The accompanying notes are an integral part of the financial statements
F - 5
For the period
from April 19
(Inception), 2016 to
December 31, 2016
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Net cash used in operating activities
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Net loss
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(264
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Stock-based compensation expenses
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36
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Decrease in accrued expenses and other payables
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(28
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Increase in Other Accounts receivable and prepaid expenses
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(20
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Net cash used in operating activities
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(276
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Cash flows from Financing Activities
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Issuance of ordinary shares
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608
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Cash acquired in connection with reverse acquisition (Note 1A)
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575
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Cash flows from Financing Activities
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1,183
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Increase (decrease) in cash and cash equivalents
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907
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Cash and cash equivalents at the beginning of the period
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-
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Cash and cash equivalents at the end of the period
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907
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Supplemental information for Cash Flow:
Assets (liabilities) acquired:
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As of Aug 23
2016 (Reverse
Merger Consummation
Date)
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Current assets and liabilities excluding cash and cash equivalents
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41
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Reverse acquisition effect on equity
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534
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575
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The accompanying notes are an integral part of the financial statements
F - 6
NOTE 1 - GENERAL
A.
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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. (formerly, Artemis Therapeutics Inc.), a Delaware corporation (“Artemis”). Pursuant to the terms of the Merger Agreement, in exchange for the outstanding shares of Artemis, the Company issued to Artemis shareholders a total of 460,000 shares (as adjusted to reflect the reverse stock split) of the Predecessor Company's common stock and series B convertible preferred stock convertible into 3,724,225 shares (as adjusted to reflect the reverse stock split) (the “Merger”). All series B preferred shares were converted to common shares prior to December 31, 2016. Immediately following the consummation of the Merger Agreement, Artemis stockholders owned approximately 82% of the Company’s common stock, on a fully diluted basis. Following the issuance and sale of the Company’s Series A Preferred Stock and common stock to an investor, ownership was reduced, after which Artemis stockholders owned approximately 73% of the Company’s common stock, on a fully diluted basis. (refer to note 6).
As a result of the Merger, Artemis became a wholly owned subsidiary of the Company. Artemis’ fiscal year end is December 31.
The Merger between the Predecessor Company and Artemis was accounted for as a reverse recapitalization and, as a result of the Merger, the Predecessor Company ceased to be a shell company. As the shareholders 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".
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F - 7
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 1 - GENERAL (cont.)
B.
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Establishment of Artemis (the "accounting acquirer"):
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Artemis was incorporated in the State of Delaware on April 19, 2016. The Company is engaged in the development of agents for the prevention and treatment of severe and potentially life-threatening infectious diseases. The company's lead product candidate, Artemisone, is a clinical-stage synthetic artemisinin derivative with antiviral and antiparasitic properties. Artemis expects to advance Artemisone initially as an antiviral agent to address unmet clinical needs in the growing population of immunocompromised patients infected with human cytomegalovirus (HCMV), and other related clinical indications.
On May 31, 2016, Artemis entered into a license agreement with Hadasit Medical Research Services & Development Ltd. (“Hadasit”), and Hong Kong University of Science and Technology R and D Corporation Limited (“RDC”), pursuant to which Artemis acquired a worldwide, royalty-bearing license to make any and all use of certain patents and know-how owned by the 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.
Artemis has not generated any revenues from its activities and has incurred substantial operating losses. Management expects the Company 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. 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.
NOTE 2 |
- SIGNIFICANT ACCOUNTING POLICIES
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A. |
Basis of Presentation
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The financial statements have been prepared in conformity with accounting principles generally accepted in United Sates of America ("US GAAP").
B. Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with u US 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.
F - 8
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 2 |
- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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C. |
Cash and cash equivalents
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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.
D. |
Fair value of financial instruments:
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The carrying values of cash and cash equivalents, accounts receivable, prepaid expenses and other accounts payable approximate their fair value due to the short-term maturity of these instruments.
E. |
Financial statement in U.S. dollars:
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The functional currency of the Company is the U.S dollar ("dollar") since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future.
Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, "Foreign Currency Translation".
All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.
F - 9
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
F. Basic and diluted net loss per share:
Basic loss per share is computed by dividing the net loss applicable to holders of Ordinary Shares by the weighted average number of shares of Ordinary Shares outstanding during the year. Diluted loss per share is computed by dividing the net loss applicable to holders of Ordinary Shares by the weighted average number of Ordinary Shares outstanding plus the number of additional Ordinary Shares that would have been outstanding if all potentially dilutive Ordinary Shares had been issued, using the treasury stock method, in accordance with ASC 260-10 "Earnings per Share". Potentially dilutive Ordinary Shares 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.
G. Research and development expenses, net:
Research and development expenses are charged to the statement of operations as incurred.
H. Income Tax
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.
F - 10
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
I. | 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 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.
J. |
Recent Accounting Standards:
|
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under US GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of the promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for us beginning in the first quarter of 2018; early adoption is prohibited. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. As the Company has not incurred revenues to date, it is unable to determine the expected impact the new standard will have on its consolidated financial statements.
In February 2016, the FASB issued a new lease accounting standard requiring the recognition of lease assets and liabilities on the balance sheet. This standard is effective beginning in the first quarter of 2019; early adoption is permitted. The Company has not yet determined the impact of the new standard on its consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies certain provisions associated with the accounting for stock compensation. Among other things, ASU 2016-09 requires companies to record excess tax benefits and tax deficiencies as income tax benefit or expense in the statement of income and eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities in the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. The Company is currently reviewing and evaluating this guidance and its impact on its consolidated financial statements.
F - 11
Artemis Therapeutics Inc.
Notes to the 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 to make any and all use of certain patents and know-how owned by the Hadsit and RDC relating to Artemisone. Artemis will rely primarily on the License Agreement with respect to the development of Artemisone, its lead product candidate.
NOTE 4 - INCOME TAX
A. Tax rates applicable to the income
The Company is subject to a blended US tax rate (Federal as well as State Corporate Tax) of 35% in 2016. The Company's subsidiary in Israel is subject to income tax at a regular corporate tax 25% in 2016.
In December 2016, a legislation to amend the corporate income tax law was published. The legislation determined a decrease of the corporate income tax law as of January 1, 2017 to 24% (1% decrease) and as of January 1, 2018 to 23% (additional 1% decrease).
B. Deferred income taxes
As the entity is still in its development stage and 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
December 31, 2016
|
||||
Deferred tax assets:
|
||||
Deferred taxes due to carryforward losses
|
3,583
|
|||
Valuation allowance
|
(3,583
|
)
|
||
Net deferred tax asset
|
-
|
B. Tax loss carry-forwards
Net operating loss carry-forwards as of December 31, 2016 are as follows:
Israel
|
4,518
|
|||
United States (*)
|
7,011
|
|||
11,529
|
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 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
F - 12
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 5 – WARRANTS ISSUED TO INVESTORS
In connection with historic financings, New York Global Innovations Inc. issued warrants to investors as follows:
ISSUANCE DATE
|
OUTSTANDING
AS OF
December 31, 2016 *
|
EXERCISE PRICE
|
EXERCISABLE THROUGH
|
||||||
|
|
||||||||
January 2010 **
|
43,069
|
$
|
0.055
|
April 2018
|
|||||
* Amount of warrants is retroactively adjusted to reflect the 1 to 50 reverse stock split
NOTE 6 - STOCK CAPITAL
A. |
Stockholders Rights:
|
Ordinary shares confer upon their holders the right to receive notice to participate and vote in general meetings of shareholders 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.
B. |
Preferred Stock
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. In December 2016, all preferred shares were converted into 3,724,225 shares of common stock.
Since the preferred shares were issued as a temporary vehicle designed to facilitate certain technicalities associated with the reverse stock split, and since the preferred shares were certain to be converted at the date they were issued, they were included in basic EPS as contingently issuable common shares in relation to which there were no circumstance under which those shares would not be issued, as well as in the shareholders equity statement as common shares on an as converted basis.
|
C. |
Issuance of Shares:
|
On August 19, 2016 and prior to consummation of the merger, the Company issued 524 shares of common stock (238,629 shares as adjusted to reflect the reverse recapitalization and reverse stock split) for an aggregate purchase price of $127 which was received in October 2016.
In August 2016, immediately upon consummation of the Merger Agreement, the Company issued 68,321 shares of the Company’s common stock and as well as the Company’s newly designated Series A Convertible Preferred Stock convertible into 658,498 common shares to an investor for an aggregate purchase price of $481,000 (net of issuance expenses). All preferred shares were converted into common shares prior to December 31 2016.
F - 13
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 6 - STOCK CAPITAL (Cont.)
D. |
Reverse Stock Split:
On December 16, 2016, the Company effected a one-for-fifty (1:50) reverse stock split of its issued and outstanding shares of common stock. Share data included in these financial statements is retroactively adjusted as if the reverse stock split had occurred at the beginning of the earliest period presented.
|
E. |
Options issued to consultants:
On August 22, 2016, the Company granted 126,730 stock options to consultants. Each stock option is exercisable into a share of common stock of the Company and expires no later than 10 years from the date of grant.
1/3 of the options are vested on the grant date and 1/3 options upon the one and two year anniversaries of the grant date, with the option becoming fully vested on August 22, 2018. As a result, the Company recognized compensation expenses in the amount of $36,066 included in research and development expenses.
|
For the period from April 19 2016 (Inception) to
December 31, 2016
|
||||||||||||
Number of
stock
options
|
Weighted
average
exercise
price
|
Aggregate
intrinsic
value
|
||||||||||
Outstanding at beginning of period
|
-
|
-
|
||||||||||
Granted
|
126,730
|
$
|
0.01
|
|||||||||
Exercised
|
-
|
-
|
||||||||||
Cancelled
|
-
|
-
|
||||||||||
Outstanding at end of period
|
126,730
|
$
|
0.01
|
93,780
|
||||||||
Vested and expected-to-vest at end of period
|
42,243
|
$
|
0.01
|
31,938
|
F - 14
Artemis Therapeutics Inc.
Notes to the financial statements
(USD in thousands)
NOTE 6 - STOCK CAPITAL (Cont.)
E. |
Options issued to consultants (Cont.).:
|
A summary of the Company's option activity and related information is as follows:
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 December 31, 2016 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 December 31, 2016, have been separated into exercise price, as follows:
Exercise price
|
Stock options
outstanding as
of December 31,
|
Weighted average
remaining
contractual life –
years as of December 31,
|
Stock options
exercisable as
of December 31,
|
|||||||||||
2 0 1 6
|
2016
|
2016
|
||||||||||||
0.01
|
126,730
|
9.65
|
42,243
|
As the exercise price of the options is nominal, the Company estimated their fair value based on the value of the Company's shares at the measurement date.
F - 15