Manuka, Inc. - Annual Report: 2019 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2019
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______________to________________
COMMISSION FILE NUMBER: 0-24431
ARTEMIS THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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84-1417774
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(State or other jurisdiction of
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(I.R.S. employer
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incorporation or organization)
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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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REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (646) 233-1454
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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ATMS
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OTCQB
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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 ☒
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 ☒
Indicate by a 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
Smaller Reporting Company ☒
Emerging Growth Company ☐
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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 Act).
Yes ☒ No ☐
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,
2019 (the last business day of the Registrant’s most recently completed second fiscal quarter) was $901,856.
As of March 30, 2020, the Registrant had outstanding 5,153,461 shares of Common Stock, par value $0.01 per share.
ii
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EXPLANATORY NOTE
Unless otherwise specified, all dollar amounts are expressed in United States dollars. Except as otherwise indicated by the context, references in this report to the “Company”, “Artemis,” “we,” “us”
and “our” are references to Artemis Therapeutics Inc., a Delaware corporation, together with its consolidated subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that
do not relate solely to the historical or current facts, and can be identified by the use of forward-looking words such as “may”, “believe”, “will”, “expect”, “expected”, “project”, “anticipate”, “anticipated,” estimates”, “plans”, “strategy”,
“target”, “prospects” or “continue”. These forward-looking statements are based on the current plans and expectations of our management and are subject to various uncertainties and risks that could significantly affect our current plans and
expectations, as well as future results of operations and financial condition. The factors discussed herein, including those risks described in Item 1A. Risk Factors, and expressed from time to time in our filings with the Securities and Exchange
Commission, or the SEC, may cause our actual results, performances or achievements to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Although we believe that
the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to have been correct. Except as required by law, we do not assume any obligation to update these
forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements.
Company Overview
Until January 10, 2019, we were engaged in the development of agents for the prevention and treatment of severe and potentially life-threatening infectious diseases. On January 10, 2019, we 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”). We relied primarily on the License Agreement with respect to the development of Artemisone, our lead product candidate. Since the termination of the License Agreement, the
Company no longer has any operating business.
Former Business
Until the termination of the License Agreement we were engaged in the development of agents for the prevention and treatment of severe and potentially life-threatening infectious diseases. Our former
lead product candidate, Artemisone, was a clinical-stage synthetic artemisinin derivative with antiviral and antiparasitic properties.
On May 31, 2016, we entered into the License Agreement with Hadasit and RDC, pursuant to which we 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. 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.
We have sustained significant losses in recent periods, which have resulted in a significant reduction in our cash reserves. As a result of the termination
of the License Agreement, the Company no longer has any operating business. The Company believes that it will continue to experience losses and increased negative working capital and negative cash flows in the near future and will not be able
to return to positive cash flow without obtaining additional financing in the near term or the completing of a business transaction. The Company has and will experience difficulties accessing the equity and debt markets and raising such
capital, and there can be no assurance that the Company will be able to raise such additional capital on favorable terms or at all find a suitable business transaction. If additional funds are raised through the issuance of equity securities or
a business transaction is concluded, the Company’s existing stockholders will experience significant further dilution. In order to conserve the Company’s cash and manage its liquidity, the Company has implemented cost-cutting initiatives
including the reduction of employee headcount and overhead costs.
Present Business
Since the termination of the License Agreement, our Board of Directors has been exploring strategic alternatives.
Shell Company Status
Based on the lack of Company business activities since the termination of the License Agreement, our Company is classified as a “shell” company by the Securities and Exchange Commission (the “SEC”).
Rule 144(i)(1)(i) Securities Act of 1933, as amended (the “Securities Act”) defines a shell company as a company that has:
(A) No or nominal operations; and
(B) Either:
(1) No or nominal assets;
(2) Assets consisting solely of cash and cash equivalents; or
(3) Assets consisting of any amount of cash and cash equivalents and nominal other assets.
Searching for Business Combination Candidate
The Company is undercapitalized. The Company is seeking a business combination candidate that would bring revenue and/or asset value to the Company. A business combination candidate would most
probably be a private company that seeks to become a publicly traded company through a business combination transaction with a publicly held and quoted company. Often times these business combination transactions are termed “reverse mergers” or
“reverse acquisitions” whereby the private company acquires a controlling interest in the publicly held company.
Other Relevant Factors
In applying the foregoing criteria, no one of which will be controlling, the Company will attempt to analyze all factors and circumstances and make a determination based upon reasonable
investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of
such business opportunities extremely difficult and complex. Due to the Company’s limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
No assurances can be given that the Company will be able to enter into a business combination, as to the terms of a business combination, or as to the nature of the target company.
Employees
As of December 31, 2019, the Company had no full-time employees and one part-time consultant.
Corporate Overview
We were incorporated under the laws of the State of Nevada on April 22, 1997. On July 8, 2003, we effected a reincorporation from Nevada to Delaware through a merger with and into our wholly-owned
subsidiary, InkSure Technologies (Delaware) Inc., which was incorporated on June 30, 2003. The surviving corporation in the merger was InkSure Technologies (Delaware) Inc., which thereupon renamed itself InkSure Technologies Inc. In 2014, we
changed our name to New York Global Innovations Inc. Upon the closing of the Merger, defined below, Artemis Subsidiary, defined below, became our wholly-owned subsidiary. The Merger closed on August 23, 2016, and such date is referred to as the
“Effective Time.”
2
On August 23, 2016, we consummated a merger with Artemis Therapeutics Inc., a Delaware corporation (“Artemis Subsidiary”) and Artemis Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Company (the “Merger Subsidiary”), pursuant to which Artemis Subsidiary merged with and into the Merger Subsidiary, with Artemis Subsidiary being the surviving entity (the “Merger”). Following the Merger, we adopted the business
plan of Artemis Subsidiary. Artemis Subsidiary was incorporated on April 19, 2016, under the laws of the State of Delaware. Between April 19, 2016, and August 23, 2016, Artemis’s business activities primarily consisted of negotiating and executing
the License Agreement.
Pursuant to the Merger, the Merger Subsidiary merged with and into Artemis Subsidiary in a reverse merger, with Artemis Subsidiary surviving as our wholly-owned subsidiary. As consideration for the
Merger, we issued an aggregate of 460,000 shares of common stock and 2,357.04 shares of our Series B Preferred Stock to the Artemis Subsidiary shareholders, such that each outstanding share of Artemis Subsidiary common stock was exchanged for the
right to receive 50 shares of our common stock and 0.2562 shares of the Series B Preferred Stock (each share is convertible into 72,682.814 shares of the Company’s common stock) (collectively, the “Merger Shares”). In addition, we agreed to reserve
for future issuance 40,000 shares of common stock and 204.96 shares of Series B Preferred Stock to Artemis Subsidiary option holders, including options issued to Dr. Wolf and Hadasit, as set forth in greater detail herein.
As a condition for the consummation of the Merger, the Company and Artemis Subsidiary agreed to the following covenants and closing conditions: (i) a requirement that a concurrent financing of not
less than $590,000 shall have occurred immediately prior to the Effective Time; (ii) a requirement that the Company have a cash balance of at least $590,000, exclusive of the concurrent financing at the Effective Time; (iii) a requirement that
Artemis Subsidiary, Hadasit and RDC have entered into and finalized a license agreement with respect to human cytomegalovirus technology; (iv) the resignation of Roberto Alonso Jimenez Arias, our former director, as a director of the Company at the
Effective Time; (v) the appointment by Artemis Subsidiary of a new director; (vi) the right for Gadi Peleg, or his designee, to continue serving as a director of the Company for a period of one year from the closing of the Merger; and (vii) for a
period of one year from the closing of the Merger, in the event that the Company desires to enter into a transaction involving the sale of securities at a pre-transaction valuation of $10,000,000 or less, the approval of Mr. Peleg, or his designee,
shall be required prior to the Company entering into such transaction. The Company and Artemis Subsidiary agreed to waive the requirement that concurrent financing of not less than $590,000 shall have occurred immediately prior to the Effective
Time and that the Company have a cash balance of at least $590,000, exclusive of the concurrent financing at the Effective Time.
In addition, on August 23, 2016, the Company closed on a private placement pursuant to a Securities Purchase Agreement (the “Acumen SPA”) with Acumen Bioventures LLC (“Acumen”) with respect to the
sale of an aggregate of $500,000 of 68,321 shares of the Company’s common stock and 453 shares of Series A Preferred Stock (each share is convertible into 1,453.656 shares of the Company’s common stock). The Acumen SPA provided that the Company
will obtain shareholder approval within 90 days of the date thereof to increase its authorized capital or conduct a reverse stock split such that the Company will have reserved for issuance at least 200% of the number of shares issuable upon
conversion of all of the Series A Preferred Stock or be subject to liquidated damages (the “Approval”). The Board of Directors and the stockholders holding a majority of the Company’s voting power approved a 1-for-50 reverse stock split (the
“Reverse Stock Split”) on November 2, 2016, and November 9, 2016, respectively. The Company’s management and its largest shareholder provided the Company with their irrevocable consent to the Approval.
In conjunction with the closing of the Merger, on August 23, 2016, Roberto Alonso Jimenez Arias resigned as a director of the Company. At the effective time of the Merger, the Company’s board of
directors and officers were reconstituted by the appointment of Dana Wolf as our Chief Scientific Officer and Israel Alfassi as a director.
For financial accounting purposes, the Merger between the Company and Artemis Subsidiary was accounted for as a reverse recapitalization and, as a result of the Merger, the Company ceased to be a
shell company. As the shareholders of Artemis Subsidiary received the largest ownership interest in the Company, Artemis Subsidiary was determined to be the “accounting acquirer” in the reverse recapitalization. As a result, the historical
financial statements of the Company were replaced with the historical financial statements of Artemis Subsidiary. Following the Merger, the Company and its subsidiary, Artemis Subsidiary, are collectively referred to as the “Company”.
3
On November 2, 2016, the Board of Directors of the Company approved (i) an amendment (the “Amendment”) to its Certificate of Incorporation to decrease the Company’s authorized Common Stock from
75,000,000 shares, with a par value of $0.01 per share, to 51,000,000 shares with a par value of $0.01 per share, as well as reduce the Company’s authorized Preferred Stock from 10,000,000 shares, with a par value of $0.01 per share, to 200,000
shares with a par value of $0.01 per share, and (ii) a 1-for-50 reverse stock split of the Company’s issued and outstanding shares of Common Stock, such that each 50 shares of Common Stock held by stockholders of record on or about December 13,
2016 be combined into one share of Common Stock, except to the extent that the actions described herein result in any of the Company’s stockholders holding a fractional share of Common Stock (in which instance, because such stockholder’s number of
shares is not evenly divisible by the 50:1 ratio, such stockholder will be automatically entitled to receive an additional fraction of a share of Common Stock to round up to the next whole share). On November 9, 2016, stockholders holding a
majority of the Company’s voting power approved the Amendment and the Reverse Stock Split by written consent in lieu of a meeting, in accordance with the Delaware General Corporation Law. The Amendment and Reverse Stock Split took effect on
December 20, 2016.
On October 23, 2017, the Company executed Securities Purchase Agreements (each, a “Securities Purchase Agreement”) with a total of 6 accredited investors relating to a private placement offering (the
“Offering”) of an aggregate of 300,000 shares of the Company’s Common Stock at a purchase price of $1.00 per share, and of 250 shares of the Company’s newly designated Series C Convertible Preferred Stock (the “Series C Preferred Stock”), at a
purchase price of $1,000.00 per share, with such shares of Series C Preferred Stock initially convertible into an aggregate of 250,000 shares of Common Stock. In addition, each investor received a warrant (each, a “Warrant”) to purchase fifty
percent of the number of shares of Common Stock effectively purchased in the Offering, for an aggregate of 275,000 shares of Common Stock. The closing of the Offering took place on October 23, 2017.
Each Warrant is immediately exercisable at an exercise price of $2.00 per share, expires 5 years from the date of issuance, may be exercised for cash or on a cashless basis, and contains future
price-based and customary stock-based anti-dilution protections.
Pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series C Preferred Stock (the “Certificate of Designation”), the shares of Series C Preferred Stock are
convertible into an aggregate of 250,000 shares of Common Stock based on a conversion price of $1.00 per share. Such conversion price is subject to future price-based and customary stock-based anti-dilution protections. The holders of the Series C
Preferred Stock do not possess any voting rights but the Series C Preferred Stock does carry a liquidation preference for each holder equal to the investment made by such holder in the Offering. In addition, the holders of Series C Preferred Stock
are eligible to participate in dividends and other distributions by the Company on an as-converted basis.
As discussed above, on January 10, 2019, we received a notice regarding the immediate termination of the License Agreement. Since the termination of the License Agreement, the Company no longer has
any operating business.
THE FOLLOWING RISK FACTORS, AMONG OTHERS, COULD AFFECT OUR ACTUAL RESULTS OF OPERATIONS AND COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN
FORWARD-LOOKING STATEMENTS MADE BY US. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND WE ASSUME NO OBLIGATION TO UPDATE THAT INFORMATION. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS ANNUAL
REPORT ON FORM 10-K BEFORE MAKING AN INVESTMENT DECISION. OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY ANY OF THESE RISKS. OUR COMMON STOCK IS CONSIDERED SPECULATIVE AND THE TRADING PRICE
OF OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. THE FOLLOWING RISK FACTORS ARE NOT THE ONLY RISK FACTORS FACING US. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT
WE CURRENTLY DEEM IMMATERIAL MAY ALSO AFFECT OUR BUSINESS.
4
IF WE ARE UNABLE TO OBTAIN FINANCING NECESSARY TO SUPPORT OUR OPERATIONS, OUR CASH RESOURCES MIGHT BE REDUCED TO A LEVEL THAT MAY NOT ENABLE US TO CONTINUE AS A GOING CONCERN.
Because we do not currently have any business operations, we believe that our existing cash resources may no longer be sufficient to support us for the next twelve months. If we are unable to
obtain the financing necessary to support us, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders will lose their entire investment in our company. In order to conserve our
cash and manage our liquidity, we implemented cost-cutting initiatives including the reduction of overhead costs. We are experiencing difficulties accessing the equity and debt markets and raising such
capital, and there can be no assurance that we will be able to raise such additional capital on favorable terms or at all. If additional funds are raised through the issuance of equity securities, our existing stockholders will experience
significant further dilution.
IN THE EVENT WE CAN NOT FIND A SUITABLE ACQUISITION OR MERGER PARTNER WE MAY BE FORCED TO CEASE OUR EXISTENCE IF OUR CASH IS EXHAUSTED.
In the event we are unable to find a suitable acquisition or merger partner and our cash is exhausted it may become necessary to either liquidate the Company or file for bankruptcy. There is no
assurance that we will be able to find a suitable acquisition or merger partner. Furthermore, a suitable acquisition or merger partner could cause a change in control of the Company as well as a significant dilution to our shareholders. If our
cash is exhausted, we will not be able to pay our liabilities and obligations.
WE HAVE HAD NO REVENUES SINCE INCEPTION, AND WE WILL NOT BE PROFITABLE IN THE FUTURE UNLESS WE OBTAIN NEW OPERATIONS.
We have not been profitable and we cannot predict when we will achieve profitability. We have experienced net losses and have had no revenues since our
inception in April 2016. We do not anticipate generating significant revenues and will not be able to return to positive cash flow without obtaining additional financing in the near term or the entering into a business transaction. We may
experience difficulties accessing the equity and debt markets and raising such capital, and there can be no assurance that we will be able to raise such additional capital on favorable terms or at all. If additional funds are raised through the
issuance of equity securities, the Company’s existing stockholders will experience significant dilution. In order to conserve our cash and manage our liquidity, we are implementing cost-cutting initiatives including the reduction of
employee headcount and overhead costs.
THE NATURE OF PROPOSED OPERATIONS IS SPECULATIVE.
The success of our proposed plan of operation will depend, to a great extent, on the operations, financial condition and management of the identified business opportunity. While management intends
to seek a business combination with an entity having an established operating history, there can be no assurance that we will be successful in locating a candidate meeting such criteria. In the event that we complete a business combination, of
which there can be no assurance, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control.
WE HAVE NO AGREEMENT FOR A BUSINESS COMBINATION OR OTHER TRANSACTION AND NO SET STANDARDS FOR ANY SUCH BUSINESS COMBINATION.
We have no agreements with respect to engaging in a merger with, joint venture with or acquisition of, a private entity. There can be no assurance that we will be successful in identifying and
evaluating suitable business opportunities or in concluding a business combination. There is no assurance that we will be able to negotiate a business combination on terms favorable to us. We have not established a specific length of operating
history or a specified level of earnings, assets, net worth or other criteria a target business opportunity will be required to have achieved in order for us to consider a business combination. Accordingly, we may enter into a business
combination with a business opportunity having no significant operating history, losses, limited or no potential for earnings, limited assets, negative net worth or other negative characteristics.
5
WE FACE A SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private entities. A large number of established
and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies which may be desirable target candidates for us. Nearly all such entities have significantly greater financial resources, technical
expertise and managerial capabilities than us and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking
merger or acquisition candidates with numerous other small public companies.
WE HAVE NOT DONE MARKET RESEARCH AND DO NOT HAVE A MARKETING ORGANIZATION.
We have neither conducted nor have others made available to us, results of market research indicating that market demand exists for the transactions we have contemplated. Even in the event demand
is identified for a merger or acquisition contemplated by us, there is no assurance we will be successful in completing any such business combination.
BECAUSE WE HAVE NOMINAL ASSETS, WE ARE CONSIDERED A “SHELL COMPANY” AND WILL BE SUBJECT TO MORE STRINGENT REPORTING REQUIREMENTS.
The SEC adopted Rule 405 under the Securities Act, and Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which defines a shell company as a company that has no
or nominal operations, and either (a) no or nominal assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets. The rules applicable to shell
companies prohibit them from using a Form S-8 to register securities pursuant to employee compensation plans. However, the rules do not prevent us from registering securities pursuant to registration statements. Additionally, the rules regarding
Form 8-K require shell companies to provide more detailed disclosure upon completion of a transaction that causes it to cease being a shell company. We must file a current report on Form 8-K containing the information required pursuant to
Regulation S-K and in a registration statement on Form 10, within four business days following completion of the transaction together with financial information of the private operating company. In order to assist the SEC in the identification of
shell companies, we are also required to check a box on Form 10-Q and Form 10-K indicating that we are a shell company. To the extent that we are required to comply with additional disclosure because we are a shell company, we may be delayed in
executing any mergers or acquiring other assets that would cause us to cease being a shell company. In addition, Rule 144 under the Securities Act makes resales of restricted securities by shareholders of a shell company more difficult. See
discussion under heading “Rule 144” below.
ANY TRANSACTION WE PURSUE MAY BE SUBJECT TO TAXATION.
Federal and state tax consequences will, in all likelihood, be major considerations in any business combination we may undertake. Such transactions may be structured to result in tax-free treatment
to both companies, pursuant to various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences for us and the target entity; however, there can be no assurance
that such business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in
the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.
6
THE REQUIREMENT TO PROVIDE AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS OPPORTUNITIES.
Our management believes that any potential business opportunity must provide audited financial statements for review, and for the protection of all parties to the business combination. One or more
attractive business opportunities may choose to forego the possibility of a business combination with us, rather than incur the expenses associated with preparing audited financial statements.
WE MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN.
We had accumulated liabilities of $260,000 at December 31, 2019. These factors raise substantial doubt in the minds of our auditors about our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. If the Company cannot continue as a going concern, its stockholders may lose their entire
investment.
INVESTORS MAY HAVE DIFFICULTIES ENFORCING A U.S. JUDGMENT, INCLUDING JUDGMENTS BASED UPON THE CIVIL LIABILITY PROVISIONS OF THE U.S. FEDERAL SECURITIES LAWS, AGAINST US OR OUR EXECUTIVE OFFICERS
AND DIRECTOR, OR ASSERTING U.S. SECURITIES LAWS CLAIMS IN ISRAEL.
None of our directors or officers are residents of the United States. Our directors’ and officers’ assets and most of our assets are located outside the
United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. directors and executive officers may be difficult to obtain within
the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions
of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not be the most appropriate forum to bring such a claim. In
addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which
can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments
rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.
OUR CERTIFICATE OF INCORPORATION CONTAINS ANTI-TAKEOVER PROVISIONS WHICH COULD ADVERSELY AFFECT THE VOTING POWER OR OTHER RIGHTS OF THE HOLDERS OF OUR COMMON STOCK.
Our certificate of incorporation authorizes the issuance of up to 200,000 shares of preferred stock and our Board of Directors is empowered, without stockholder approval, to issue a new series of
preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. Such authority, together with certain provisions of Delaware law and of
our certificate of incorporation and bylaws, may have the effect of delaying, deterring or preventing a change in control of us, may discourage bids for the common stock at a premium over the market price and may adversely affect the market
price, and the voting and other rights of the holders of the common stock. Although we have no present intention to issue any additional shares of our preferred stock, we may do so in the future. The board of directors of a Delaware corporation
may issue rights, options, warrants or other convertible securities, or rights entitling its holders to purchase, receive or acquire shares or fractions of shares of the corporation or assets or debts or other obligations of the corporation, upon
such terms as are determined by the board of directors. Our Board of Directors is free, subject to their fiduciary duties to stockholders, to structure the issuance or exercise of the rights in a manner which may exclude significant stockholders
from being entitled to receive such rights or to exercise such rights or in a way which may effectively prevent a takeover of the corporation by persons deemed hostile to management. Nothing contained in our certificate of incorporation will
prohibit our Board of Directors from using these types of rights in this manner.
7
CERTAIN STOCKHOLDERS POSSESS THE MAJORITY OF OUR VOTING POWER, AND THROUGH THIS OWNERSHIP, CONTROL OUR COMPANY AND OUR CORPORATE ACTIONS.
Our current executive officers and certain large shareholders of the Company hold approximately 52% of the voting power of our outstanding shares. These persons have a
controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of
directors, and other significant corporate actions. As such, our executive officers have the power to prevent or cause a change in control; therefore, without their consent we could be prevented from entering into transactions that could be
beneficial to us. The interests of our executive officers may give rise to a conflict of interest with the Company and the Company’s shareholders.
THERE IS A SUBSTANTIAL LACK OF LIQUIDITY OF OUR COMMON STOCK AND VOLATILITY RISKS.
Our common stock is traded on the over-the-counter market with quotations published on the OTCQB tier of the OTC Bulletin Board (the “OTCQB”), under the symbol “ATMS”. The
trading volume of our common stock historically has been limited and sporadic, and the stock prices have been volatile. As a result of the limited and sporadic trading activity, the quoted price for our common stock on the over-the-counter market
is not necessarily a reliable indicator of its fair market value. The price at which our common stock will trade in the future may be highly volatile and may fluctuate as a result of a number of factors, including, without limitation, any potential
business combination that we announce, as well as the number of shares available for sale in the market.
The trading volume of our common stock may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company which is
relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and
would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading
activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you
any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. As a result of such trading activity, the quoted price for our common stock on
the OTCQB may not necessarily be a reliable indicator of our fair market value. In addition, if our shares of common stock cease to be quoted, holders would find it more difficult to dispose of or to obtain accurate quotation as to the market
value of, our common stock and as a result, the market value of our common stock likely would decline.
The market price for our stock may be volatile and subject to fluctuations in response to factors, including the following:
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The increased concentration of the ownership of our shares by a limited number of affiliated stockholders following the Merger may limit interest in our securities;
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variations in quarterly operating results from the expectations of securities analysts or investors;
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revisions in securities analysts’ estimates or reductions in security analysts’ coverage;
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announcements of new products or services by us or our competitors;
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reductions in the market share of our products;
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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general technological, market or economic trends;
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investor perception of our industry or prospects;
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insider selling or buying;
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investors entering into short sale contracts;
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regulatory developments affecting our industry; and
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additions or departures of key personnel.
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Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or
projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain current market prices, or as to what effect that the sale of shares or the availability of common
stock for sale at any time will have on the prevailing market price.
8
BECAUSE WE BECAME PUBLIC BY MEANS OF A “REVERSE MERGER,” WE MAY NOT BE ABLE TO ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS.
There may be risks associated with us becoming public through a “reverse merger.” Securities analysts of major brokerage firms and securities institutions may not provide
coverage of us because there were no broker-dealers who sold our stock in a public offering that would be incentivized to follow or recommend the purchase of our common stock. The absence of such research coverage could limit investor interest in
our common stock, resulting in decreased liquidity. No assurance can be given that established brokerage firms will, in the future, want to cover our securities or conduct any secondary offerings or other financings on our behalf.
OUR COMMON STOCK MAY NEVER BE LISTED ON A MAJOR STOCK EXCHANGE.
While we may seek the listing of our common stock on a national or other securities exchange at some time in the future, we currently do not satisfy the initial listing standards
and cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our common stock is
otherwise rejected for listing, the trading price of our common stock could suffer, the trading market for our common stock may be less liquid, and our common stock price may be subject to increased volatility.
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control,
including the following:
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changes in our industry;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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sales of our common stock;
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our ability to execute our business plan;
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operating results that fall below expectations;
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loss of any strategic relationship;
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regulatory developments;
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economic and other external factors; and
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period-to-period fluctuations in our financial results.
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In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
9
OUR COMMON STOCK IS SUBJECT TO PRICE VOLATILITY UNRELATED TO OUR OPERATIONS.
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth,
quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting the Company’s competitors or the Company
itself. In addition, the OTCQB is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock.
SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE
PRICE OF THE SHARES OF OUR COMMON STOCK.
A portion of the outstanding shares of Common Stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”)
(“Rule 144”). As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required
under applicable state securities laws. Rule 144 provides in essence that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common stock. Under Rule 144, affiliates who have held
restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock
or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTCQB). A sale under Rule 144 or under any other exemption from the Securities Act, if
available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.
THE SECURITIES ISSUED IN CONNECTION WITH THE MERGER ARE RESTRICTED SECURITIES AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY OF A RESALE EXEMPTION.
The shares of common stock being issued in connection with the Merger are being issued in reliance on an exemption from the registration requirements under Section 4(a)(2) of the
Securities Act. Consequently, these securities will be subject to restrictions on transfer under the Securities Act and may not be transferred in the absence of registration or the availability of a resale exemption. In particular, in the absence
of registration, such securities cannot be resold to the public until certain requirements under Rule 144 promulgated under the Securities Act have been satisfied, including certain holding period requirements. As a result, a purchaser who receives
any such securities issued in connection with the Merger may be unable to sell such securities at the time or at the price or upon such other terms and conditions as the purchaser desires, and the terms of such sale may be less favorable to the
purchaser than might be obtainable in the absence of such limitations and restrictions.
WE DO NOT PLAN TO DECLARE OR PAY ANY DIVIDENDS TO OUR STOCKHOLDERS IN THE NEAR FUTURE.
We have not declared any dividends in the past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will
be made at the discretion of the board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers
relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.
10
THE REQUIREMENTS OF BEING A PUBLIC COMPANY MAY STRAIN OUR RESOURCES AND DISTRACT MANAGEMENT.
As a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements are
extensive. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal
controls over financial reporting.
We may incur significant costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements. We expect all of
these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. This may divert management’s attention from other business concerns, which could
have a material adverse effect on our business, financial condition and results of operations. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to
serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such
costs.
FUTURE CHANGES IN FINANCIAL ACCOUNTING STANDARDS OR PRACTICES MAY CAUSE ADVERSE UNEXPECTED FINANCIAL REPORTING FLUCTUATIONS AND AFFECT REPORTED RESULTS OF OPERATIONS.
A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change
is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported
financial results or the way we conduct business.
“PENNY STOCK” RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT.
Trading in our common stock is subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer that recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock,
of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price
and liquidity of our common stock.
INEFFECTIVE INTERNAL CONTROLS COULD IMPACT OUR BUSINESS AND FINANCIAL RESULTS. WE IDENTIFIED MATERIAL WEAKNESSES IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING AS OF DECEMBER 31, 2019
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish an annual report by our management assessing the effectiveness of our internal control over
financial reporting. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. Ineffective internal control over financial reporting can result in errors or other
problems in our financial statements. In addition, our internal control over financial reporting is not required to be audited by our independent registered public accounting firm. If we are unable to assert that our internal controls are
effective, our investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline. Failure to maintain effective internal control over financial reporting could also
result in investigation or sanctions by regulatory authorities. Management’s report as of the end of fiscal year 2019 concluded that our internal control over financial reporting were not effective.
11
As further described in Item 9A of this Form 10-K, management has concluded that, because of material weaknesses in internal control over financial reporting, our internal
control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2019. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis. If we fail to remediate these material weaknesses in our internal controls, or after
having remediated such material weaknesses, thereafter fail to maintain the adequacy of our internal control over financial reporting or our disclosure controls and procedures, we could be subjected to regulatory scrutiny, civil or criminal
penalties or stockholder litigation, the defense of any of which could cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, and we could be required to pay damages to settle such actions
if any such actions were not resolved in our favor. Moreover, we may be the subject of negative publicity focusing on these material weaknesses and we may be subject to negative reactions from stockholders and others with whom we do business.
Not applicable.
We do not currently own or lease any properties.
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We are not currently a party to or subject to any material legal proceedings.
Not applicable.
Our common stock is quoted on the OTCQB under the symbol “ATMS.”
As of March 27, 2020, there were 85 holders of record of our common stock.
We have not paid dividends on our common stock since inception and we do not intend to pay any dividends to our stockholders in the foreseeable future. We currently intend to retain earnings, since
the Company has no current business or development projects. The declaration of dividends in the future will be at the election of our Board of Directors and will depend upon our earnings, capital requirements, financial position, general economic
conditions, and other factors the Board of Directors deem relevant.
Not applicable.
12
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) covers information pertaining to the Company for the year ended December 31, 2019 and
should be read in conjunction with the audited financial statements and related notes of the Company as of and for the year ended December 31, 2019. Except as otherwise noted, the financial information contained in this MD&A and in the
financial statements has been prepared in accordance with accounting principles generally accepted in the United States of America. All amounts are expressed in U.S. dollars unless otherwise noted. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.
OVERVIEW
As a result of the notice of termination of the License Agreement on January 10, 2019, the Company no longer has business operations. The Company believes that it will continue to experience losses
and increased negative working capital and negative cash flows in the near future and will not be able to return to positive cash flow without either obtaining additional financing in the near term or completing a business transaction. The Company
has experienced difficulties accessing the equity and debt markets and raising capital and there can be no assurance that the Company will be able to raise such additional capital on favorable terms, or at all, or be able to complete a business
transaction. If additional funds are raised through the issuance of equity securities or completing a business transaction, the Company’s existing stockholders will experience significant dilution. In order to conserve the Company’s cash and manage
its liquidity, the Company has implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs.
The Company’s Board of Directors is exploring strategic alternatives, which may include future acquisitions, a merger with another company or the sale of the public shell company.
TAXES
We have not recorded any income tax benefit for any period from inception to December 31, 2019. The utilization of these benefits depends on our ability to generate taxable income in the future.
Because of the uncertainty of our generating taxable income, we have recorded a full valuation allowance with respect to these deferred assets.
CRITICAL ACCOUNTING POLICIES
Our financial statements are prepared in accordance with the United States generally accepted accounting principles (“U.S. GAAP”). The significant accounting policies followed in the preparation of
the financial statements, applied on a consistent basis and which have been prepared in accordance with the historical cost convention, are set forth in Note 2 to the consolidated financial statements contained elsewhere in this annual report.
Of these significant accounting policies, certain policies may be considered critical because they are most important to the portrayal of our financial condition and results, and they require
management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
REVENUE RECOGNITION. Revenues from product sales were recognized in accordance with Accounting Standards Codification Topic 605, “Revenue Recognition,” when
delivery had occurred, persuasive evidence of an agreement existed, the vendor’s fee was fixed or determinable, no further obligation existed and collectability was probable. Delivery was considered to have occurred upon shipment of products. When
and if a right of return existed, we deferred revenues until the right of return expired. As a result of the Asset Sale, we no longer generate revenues.
INVENTORIES. Inventories were stated at the lower of cost or market. Cost was determined on a “first in, first out” basis. We regularly reviewed inventory
values and quantities on hand and wrote down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and
market conditions. In making the determination, we considered future sales of related products and the quantity of inventory at the balance sheet date, assessed against each inventory item’s past usage rates and future expected usage rates. As a
result of the Asset Sale, we no longer have inventories.
13
ALLOWANCE FOR DOUBTFUL ACCOUNTS. We performed credit evaluations of our customers’ financial condition. We maintained allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required payments. We recorded our bad debt expenses as general and administrative expenses. When we became aware that a specific customer was unable to meet its financial
obligations to us, we recorded a specific allowance to reflect the level of credit risk in the customer’s outstanding receivable balance.
DEFERRED INCOME TAXES. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and any valuation
allowance recorded against net deferred tax assets. Due to the fact that we have a history of losses, it is likely that the deferred tax will not be realized. This will continue to be the case following the Closing.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019 COMPARED TO THE PERIOD ENDED DECEMBER 31, 2018 (dollars in thousands)
REVENUES. The Company did not have revenue-producing operations for the fiscal year ended December 31, 2019, or the fiscal year ended December 31, 2018.
COST OF REVENUES. The Company has no cost of revenues for the fiscal year ended December 31, 2019, or the fiscal year ended December 31, 2018, due to the fact
that the Company has no business operations.
PROFIT FROM SALE OF OPERATIONS, NET. We did not incur a profit from the sale of operations in the fiscal year ended December 31, 2019, or the fiscal year
ended December 31, 2018.
RESEARCH AND DEVELOPMENT EXPENSES. We incurred no research and development expenses for the fiscal year ended December
31, 2019 as compared to $246 for the fiscal year ended December 31, 2018. Our research and development expenses for the year ended December 31, 2018 consisted primarily of consulting services,
patent expenses and option expenses. We do not capitalize research and development expenses, as all such expenses were charged to operating expenses as incurred. The decrease in research and
development expenses is primarily due to the termination of the License Agreement resulting in the Company no longer having business operations.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses were $0 for the fiscal year ended December 31, 2019, and $0 for the fiscal year ended December
31, 2018, due to the Company being in its developmental stage.
GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative expenses consisted primarily of compensation costs for administrative, finance and general
management personnel, insurance, legal, accounting and administrative costs.
General and administrative expenses for the fiscal year ended December 31, 2019, decreased by 68% to $168 from $526 for the fiscal year ended December 31, 2018. The decrease is attributable mainly to
the decrease in management personnel and a decrease in legal expenses.
FINANCIALEXPENSE (INCOME), NET. We recognized financial expense, net of $6 in 2019, compared to financial income, net of $259 for the fiscal year ended December
31, 2018. This decrease in financial income is primarily due to the adoption of ASU 2017-11, which resulted in the re-classification of
certain warrants from a liability to equity.
OTHER EXPENSES. Other expenses consist primarily of capital losses in respect of the sale of fixed assets. We incurred no capital losses in the fiscal year
ended December 31, 2019, or the fiscal year ended December 31, 2018.
NET LOSS. We
incurred a net loss of $121 in the fiscal year ended December 31, 2019, as compared to a net loss of $513 for the fiscal year ended December 31, 2018. These net losses were primarily related to our operational and financial expenses. The
decrease in research and net loss during 2019 is mainly due to the fact that the Company has no business operations.
14
LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)
As of December 31, 2019, and as of December 31, 2018, we had an accumulated deficit of $2,197 and $1,920, respectively, and a negative working capital (current assets less current liabilities) of
$135 in 2019 as compared to a negative working capital of $297 in 2018. Losses will probably continue in the foreseeable future.
We do not have any material capital commitments for capital expenditures as of December 31, 2019, or December 31, 2018.
We have sustained significant operating losses in recent periods, which have resulted in a significant reduction in our cash reserves. Due to the termination of the License Agreement, the Company no
longer has any business operations. The Company believes that it will continue to experience losses and negative cash flows in the near future and will not be able to return to positive cash flow without obtaining additional financing in the near
term or entering into a business transaction. The Company has experienced difficulties accessing the equity and debt markets and raising capital or entering into a business transaction, and there can be no assurance that the Company will be able to
raise such additional capital on favorable terms or at all or entering into a business transaction. If additional funds are raised through the issuance of equity securities or entering into a business transaction, the Company’s existing
stockholders will experience significant further dilution. In order to conserve the Company’s cash and manage its liquidity, the Company has implemented cost-cutting initiatives including the reduction of employee headcount and overhead costs.
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. In that regard, one Note, with a
principal aggregate balance of $50,000, was issued to KNRY Ltd., an entity related to Nadav Kidron, the natural person with voting and dispositive power over the securities held by Tonak Ltd., the Company’s largest shareholder. $20,000 of the funds
relating to KNRY Ltd.’s Note were received by the Company on March 22, 2019. The balance of the funds relating to KNRY Ltd.’s Note was received by the Company on April 4, 2019. In addition, one Note, with an aggregate principal balance of $50,000,
was issued to Cutter Mill Capital LLC, an existing shareholder of the Company. 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.
As of December 31, 2019 and December 31, 2018, we had accumulated liabilities of $260 and $324, respectively.
As of December 31, 2019 and December 31, 2018, we had cash and cash equivalents of $2 and $7 respectively, and negative cash flow from operating activities of $108 and $518, respectively, for the
year and period then ended. The negative cash flow from operating activities in the year ended December 31, 2019 is attributable mainly to a net loss of $121, share-based compensation expenses of $17, and a decrease in accrued expenses of $4.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
None.
OFF-BALANCE SHEET ARRANGEMENTS
None.
Not applicable.
The Financial Statements and Notes thereto can be found beginning on page F-1, following Part III of this Annual Report on Form 10-K.
None.
15
Under the direction of the Chief Financial Officer, we evaluated our disclosure controls and procedures. Based on the evaluation, and as a result of the material weaknesses described below, the Chief
Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2019.
No change in our internal control over financial reporting occurred during the year ended December 31, 2019, that has materially affected, or is reasonably likely to materially affect, such internal
control over financial reporting.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide
reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes: maintaining records that in reasonable detail accurately and fairly
reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance
with management authorization; and providing reasonable assurance that unauthorized acquisition, use, or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Our Chief Financial Officer has conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019.
This assessment included (a) an evaluation and testing of the design of our internal control over financial reporting and (b) testing of the operational effectiveness of these controls.
Our assessment was conducted in accordance with criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on that assessment under those criteria, management has concluded that our internal control over financial reporting was not effective as of December 31, 2019.
Remediation Efforts to Address Material Weaknesses
Our management has worked, and continues to work, to strengthen our internal control over financial reporting. We are committed to ensuring that such controls are designed and operating effectively.
We intend to remediate the identified material weakness in internal controls, subject to possessing sufficient financial means to do so, by hiring internal staff to our financial department to assist our Chief Financial Officer as well as intend to
form an audit committee comprised of independent directors with sufficient financial reporting experience
None.
16
The following table sets forth certain information concerning our current executive officers and directors, their ages, their offices with us, if any, their principal occupations or employment for the past five years,
their education and the names of other public companies in which such persons hold directorships as of March 30, 2020.
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NAME
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AGE
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POSITION
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EXECUTIVE OFFICERS
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Chanan Morris
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54
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Chief Financial Officer
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Dana Wolf
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62
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Chief Scientific Officer
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Israel Alfassi
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51
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Director, Chief Executive Officer of Artemis Pharma, Inc.
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CHANAN MORRIS was appointed as Chief Financial Officer in September 2014. Since October 2011, Mr. Morris has also served as the Vice President of Finance at
Mango DSP Ltd., which provides intelligent video solutions using video encoding appliances and intelligent video analytics. He also provides CFO and business services to public companies and start-up companies. Prior to joining Mango, Mr. Morris
served as the Vice President of Finance at Power Paper Ltd. Mr. Morris holds a B.A. in Accounting from Northeastern Illinois University.
DANA WOLF was appointed as Chief Scientific Officer in August 2016 in conjunction with the closing of the Merger. From 2001 until the present, Dr. Wolf has
served as the Head of Clinical Virology, and from 1996 until the present has served as a Senior physician for infectious diseases, at the Hadassah University Hospital in Jerusalem, Israel, where she had previously completed her Internal Medicine
residency and her clinical fellowship in Infectious Diseases. Dr. Wolf has also served as the Director of National Influenza Center in Israel from 2002 until the present, as well as served on the National Advisory Committee on Immunization
practices and Infectious Diseases from 2005 until the present. In addition, Dr. Wolf has been a member of the National Epidemics Preparedness Team from 2009 to the present and from 2008 to 2013 served on the National Laboratory Advisory
Committee. In 2014, Dr. Wolf was the recipient of the Landau Prize for the Science and Performing Arts in the field of virology. Dr. Wolf holds an M.D. from the Hadassah Hebrew University Medical School.
ISRAEL ALFASSI was appointed as a Director in August 2016 in conjunction with the closing of the Merger and has served as the Chief Executive Officer and
co-founder of Artemis Pharma Inc. since its inception. From 2007 to 2009, Mr. Alfassi served as a Director and Vice President of Products and Business Development for DVTel, later acquired by Flir Systems, Inc. (NASDAQ: FLIR), which provides video
surveillance HW & SW solutions. During 2012 he served as the Vice President of Products, and from 2010 to 2011 as Director of Product management and Marketing, for 3i-Mind, a company which primarily provides advanced security solutions &
services for governments. Mr. Alfassi has also served in various entrepreneurial roles as the co-founder of TraceTech Security, an Israeli company founded in 2009 focused on explosive and drug trace detection products, serving as the Chief
Executive Officer of LoginWall, a cyber security company, in 2013, serving as the Vice President Products and Marketing in 2014 of Kaymera, a leading cyber security provider of secured mobile communication solutions and as a founder of AlgoCrowd
Trading, a crowd wisdom based Algotrading Company. Mr. Alfassi’s prior investment and managerial experience make him suitable to serve as a director of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of
beneficial ownership and reports of changes in beneficial ownership of our common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal period ended December 31,
2019, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were filed on a timely basis.
17
CODE OF ETHICS
We currently do not have a code of ethics in place, as we are in the process of revising our preexisting code of conduct and ethics subsequent to the consummation of the Merger. Disclosure regarding
the adoption of, any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days
following the date of any such amendment or waiver.
CORPORATE GOVERNANCE
AUDIT COMMITTEE. Currently, the Board of Directors recommends to retain or terminate the services of our independent accountants, reviews annual financial
statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits. We do not currently have any audit committee financial expert on our Board of Directors.
COMPENSATION COMMITTEE. The Board of Directors has not established a compensation committee primarily because the current composition and size of the Board of
Directors permits candid and open discussion regarding compensation of the Company’s executive officers and administration of plans of the Company under which Company securities may be acquired by directors, executive officers, employees and
consultants.
NOMINATING COMMITTEE. We do not have a standing nominating committee. The Board of Directors has not established a
nominating committee primarily because the current composition and size of the Board of Directors permits candid and open discussion regarding potential new members of the Board of Directors. The entire Board of Directors currently operates as the
nominating committee for us. There is no formal process or policy that governs the manner in which we identify potential candidates for the Board of Directors. Historically, however, the Board of Directors has considered several factors in
evaluating candidates for nomination to the Board of Directors, including the candidate’s knowledge of the company and its business, the candidate’s business experience and credentials, and whether the candidate would represent the interests of all
the company’s stockholders as opposed to a specific group of stockholders. We do not have a formal policy with respect to our consideration of Board of Directors nominees recommended by our stockholders. However, the Board of Directors will
consider candidates recommended by stockholders on a case-by-case basis. A stockholder who desires to recommend a candidate for nomination to the Board of Directors should do so by writing to us at 18 East 16th Street, Suite 307, New York, NY
10003, Attn: Chairman of the Board.
|
|
The following table shows the particulars of compensation paid to our named executive officers for the fiscal years ended December 31, 2019, and 2018. We do not currently have any other executive
officers.
Summary Compensation Table
(dollars in thousands)
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Equity
Awards |
Option
Awards |
All Other
Compensation |
Total
|
|||||||||||||||||||
|
Chanan Morris
|
2019
|
42
|
(1)
|
-
|
-
|
-
|
-
|
42
|
||||||||||||||||||
|
Chief Financial Officer
|
2018
|
42
|
(1)
|
-
|
-
|
-
|
-
|
42
|
||||||||||||||||||
|
Brian Culley
|
2019
|
-
|
(2)
|
-
|
-
|
-
|
-
|
96
|
||||||||||||||||||
|
Chief Executive Officer
|
2018
|
96
|
-
|
-
|
-
|
-
|
63
|
|||||||||||||||||||
(1) Mr. Morris receives a monthly fee of $3,500 in connection with a consulting arrangement with the Company.
(2) Mr. Culley resigned from his position of Chief Executive Officer on August 10, 2018.
18
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Our named executive officers do not have any currently outstanding equity awards.
DIRECTOR COMPENSATION
The Company did not pay any fees to their respective directors for attendance at meetings of the board; however, the Company may adopt a policy of making such payments in the future. The Company may
reimburse out-of-pocket expenses incurred by directors in attending board and committee meetings.
The following table provides information as of March 30, 2020 regarding beneficial ownership of our common stock by: (i) each person known to us who beneficially owns more than five percent of our
common stock; (ii) each of our directors; (iii) each of our executive officers; and (iv) all of our directors and executive officers as a group.
The number of shares beneficially owned is determined under rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. The shares
in the tables does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares.
As of March 30, 2020, we had 5,153,461 shares of common stock outstanding.
|
Shareholder (1)
|
Beneficial
Ownership |
Percent of
Class (2)
|
||||||
|
Israel Alfassi
|
253,460
|
5
|
%
|
|||||
|
Chanan Morris
|
23,958
|
*
|
%
|
|||||
|
Dana Wolf
|
126,730
|
(3)
|
2
|
%
|
||||
|
Officers and Directors as a group (3 persons)
|
404,148
|
7
|
%
|
|||||
|
Other 5% Holders
|
||||||||
|
Tonak Ltd.
|
2,833,054
|
(4)
|
55
|
%
|
||||
|
Zavit Holdings Ltd.
|
385,461
|
(5)
|
7
|
%
|
||||
* less than 1%
|
|
(1)
|
The address for all stockholders listed above is 18 East 16th Street, Suite 307, New York, NY.
|
|
|
(2)
|
Based upon 5,153,461 shares of common stock issued and outstanding as of March 30, 2020.
|
|
|
(3)
|
Represents shares underlying stock options issued to Dr. Wolf effective as of August 23, 2016.
|
|
|
|
|
|
|
(4)
|
Consists of 2,833,054 shares of common stock beneficially owned by Tonak Ltd. Mr. Nadav Kidron is the natural person with voting and dispositive power over our securities held by Tonak Ltd.
|
|
|
|
|
|
|
(5)
|
Consists of 385,461 shares of common stock beneficially owned by Zavit Holdings, Ltd. Mr. Amiad Solomon is the natural person with voting and dispositive power over our securities held by
Zavit Holdings, Ltd.
|
19
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about shares of our common stock that may be issued whether directly or upon the exercise of options and warrants under all of our existing compensation plans
as of December 31, 2019. Our stockholder approved equity compensation plan consists of: (i) the Company’s 2002 Employee, Director and Consultant Option Plan, or the Option Plan, and (ii) the Company’s 2011 Employees, Directors and Consultants Stock
Plan, or the Stock Plan.
Under the Option Plan, we grant options in order to attract and retain employees, directors, officers and certain consultants. Such options become exercisable under vesting schemes as approved by the
Board of Directors or by the compensation committee, if delegated by the Board of Directors. Normally, the options are vested ratably as long as the optionee still serves with the Company and expire after five years from the grant date. We have a
number of options and warrants which were granted pursuant to equity compensation plans not approved by security holders and such securities are aggregated in the table below.
In September 2011, the Company’s stockholders approved and ratified the Stock Plan. The purpose of the Stock Plan is to encourage eligible employees, directors and other individuals who render
services to the Company and its subsidiaries to continue their association with the Company and its subsidiaries by providing opportunities for them to participate in the ownership of the Company and in its future growth through the issuance to
such persons of restricted shares of Common Stock of the Company. The total number of shares that can be issued under the Stock Plan shall be determined from time to time by the Board of Directors, provided,
however, that such number, together with the number of shares that may be issued under the Option Plan, and options granted outside the Option Plan, shall not exceed 200,000 shares. The Stock Plan is administered by the Board of Directors.
|
PLAN CATEGORY
|
NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS
|
WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS
|
NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A))
|
|||||||||
|
|
||||||||||||
|
Equity compensation plans approved by security holders
|
-
|
$
|
-
|
43,069
|
||||||||
|
Equity compensation plans not approved by security holders
|
-
|
$
|
-
|
0
|
||||||||
|
Total of all directors and current executive officers (3 persons)
|
-
|
43,069
|
||||||||||
20
TRANSACTIONS WITH RELATED PERSONS
On May 15, 2019, the Company issued the Notes in the aggregate principal amount of $100,000. In that regard, one Note, with a principal aggregate balance of $50,000, was
issued to KNRY Ltd., an entity related to Nadav Kidron, the natural person with voting and dispositive power over the securities held by Tonak Ltd., the Company’s largest shareholder. $20,000 of the funds relating to KNRY Ltd.’s Note were received
by the Company on March 22, 2019. The balance of the funds relating to KNRY Ltd.’s Note was received by the Company on April 4, 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 will be used by the Company for general working capital purposes.
DIRECTOR INDEPENDENCE
As our common stock is currently traded on the OTCQB, we are not subject to the rules of any national securities exchange which require that a majority of a listed Company’s directors and specified
committees of the Board of Directors meet independence standards prescribed by such rules. Nonetheless, none of the directors currently serving on the Board of Directors is an independent director within the meaning of Nasdaq Rule 5605(a)(2).
The following table presents fees for professional audit services rendered by Brightman Almagor Zohar & Co., CPA, a member firm of Deloitte Touche Tohmatsu Limited, or BAZ, for the audit of our
annual financial statements for the years ended December 31, 2019 and December 31, 2018 and fees billed for other services rendered by BAZ during the same periods.
|
|
FISCAL YEAR ENDED
|
FISCAL YEAR ENDED
|
||||||
|
|
DECEMBER 31, 2019
|
DECEMBER 31, 2018
|
||||||
|
|
||||||||
|
Audit fees (1)
|
$
|
26
|
$
|
28
|
||||
|
Audit related fees
|
$
|
0
|
$
|
0
|
||||
|
Tax fees
|
$
|
0
|
$
|
0
|
||||
|
All other fees
|
$
|
0
|
$
|
0
|
||||
|
Total
|
$
|
26
|
$
|
28
|
||||
| (1) |
Audit fees consisted of audit work performed in the preparation of financial statements, and work generally only the independent auditor can reasonably be expected to provide, such as statutory audits.
|
POLICY ON BOARD OF DIRECTORS PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS
Our Board of Directors appoints, sets compensation and oversees the work of the independent registered public accounting firm. The Board of Directors has established a policy to pre-approve all audit
and permissible non-audit services provided by the independent registered public accounting firm.
Prior to engagement of the independent registered public accounting firm for the next year’s audit, management will submit an estimate of fees for the services expected to be rendered during that
year for each of four categories of services to the Board of Directors for approval.
21
| 1. |
AUDIT services include audit work performed in the preparation of financial statements, as well as work that generally only the independent registered public accounting firm can reasonably be
expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
|
| 2. |
AUDIT-RELATED services are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers
and acquisitions, employee benefit plan audits and special procedures required to meet certain regulatory requirements.
|
| 3. |
TAX services include services related to tax compliance, tax planning and tax advice.
|
| 4. |
OTHER FEES are those associated with services not captured in the other categories.
|
Prior to engagement, the Board of Directors pre-approves these services by category of service. The fees are budgeted and the Board of Directors requires the independent registered public accounting
firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm
for additional services not contemplated in the original pre-approval. In those instances, the Board of Directors approves these services before engaging the independent registered public accounting firm.
The Board of Directors may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval
decisions to the Board of Directors at its next scheduled meeting. The Board of Directors pre-approved all the above listed fees in accordance with its policy.
|
EXHIBIT NO.
|
|
DESCRIPTION
|
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
22
| |
||
|
|
|
|
| |
||
|
|
|
|
|
101.1
|
|
The following materials from the Company’s Annual Report on Form 10-K for the period ended December 31, 2019 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.**
|
* Management contract or compensatory plan or arrangement.
** Filed herewith.
*** Furnished herewith.
None.
23
Artemis Therapeutics Inc.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2019
U.S. DOLLARS IN THOUSANDS
INDEX
|
|
PAGE
|
|
|
|
|
Financial Statements:
|
|
|
|
|
|
F-2
|
|
|
|
|
|
F-3
|
|
|
|
|
|
F-4
|
|
|
|
|
|
F-5
|
|
|
|
|
|
F-6
|
|
|
|
|
|
F-7 - F-17
|
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
Artemis Therapeutics Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Artemis Therapeutics Inc. and its subsidiaries (the "Company") as of December 31, 2019 and 2018 and the related consolidated statements of operations,
stockholders' deficiency and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company's will continue as a going concern. As discussed in Note 1 to the financial statements the Company's lack of business activity and
substantial operating losses raise substantial doubt about the company's ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a
public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to
obtain an understanding of internal control over financial reporting 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.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv
Israel
March 30, 2020
We have served as the Company's auditor since 2016.
F - 2
Artemis Therapeutics Inc.
(USD in thousands, except share data)
|
|
As of
December 31,
|
As of
December 31,
|
|||||||||
|
|
Note
|
2019
|
2018
|
||||||||
|
|
|||||||||||
|
ASSETS
|
|||||||||||
|
|
|||||||||||
|
Current assets
|
|||||||||||
|
Cash and cash equivalents
|
2
|
7
|
|||||||||
|
Other accounts receivable and prepaid expenses
|
20
|
20
|
|||||||||
|
Total current assets
|
22
|
27
|
|||||||||
|
|
|||||||||||
|
TOTAL ASSETS
|
22
|
27
|
|||||||||
|
|
|||||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||||
|
|
|||||||||||
|
Current liabilities
|
|||||||||||
|
Accrued expenses and other payables
|
157
|
161
|
|||||||||
|
Derivative warrant liabilities
|
7B
|
|
-
|
163
|
|||||||
|
Total current liabilities
|
157
|
324
|
|||||||||
|
Long term Liabilities
|
|||||||||||
|
Related Parties
|
8
|
103
|
|||||||||
|
|
|||||||||||
|
Total Liabilities
|
260
|
324
|
|||||||||
|
|
|||||||||||
|
Shareholders' equity
|
|||||||||||
|
Preferred A stock, $0.01 par value - Authorized: 10,000,000 shares; issued and outstanding: 453 shares as of December 31, 2019 and 2018
Preferred C stock, $0.01 par value - Authorized: 250 shares; issued and outstanding: 250 shares as of December 31, 2019 and 2018
Common stock, $0.01 par value - Authorized: 51,000,000; issued and outstanding: 5,153,461 as of December 31, 2019 and 2018
|
52
|
52
|
|||||||||
|
Additional paid in capital
|
7
|
1,907
|
1,571
|
||||||||
|
Accumulated deficit
|
(2,197
|
)
|
(1,920
|
)
|
|||||||
|
Total shareholders' equity
|
(238
|
)
|
(297
|
)
|
|||||||
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
22
|
27
|
|||||||||
(*) Represents an amount lower than $1 USD
The accompanying notes are an integral part of the financial statements.
F - 3
Artemis Therapeutics Inc.
(USD in thousands, except per share data)
|
|
Year Ended
December 31, 2019
|
Year Ended December 31, 2018
|
||||||
|
|
||||||||
|
Research and development expenses
|
-
|
246
|
||||||
|
|
||||||||
|
General and administrative
|
168
|
526
|
||||||
|
|
||||||||
|
Operating loss
|
168
|
772
|
||||||
|
Finance (Expense) income
|
(6
|
)
|
259
|
|||||
|
Income Tax Benefit
|
53
|
-
|
||||||
|
Net loss
|
121
|
513
|
||||||
|
|
||||||||
|
Loss per share:
|
||||||||
|
Basic and diluted net loss per share
|
(0.02
|
)
|
(0.08
|
)
|
||||
|
Weighted average number of common stocks used in calculation of net loss per Common share (*):
|
||||||||
|
Basic and diluted
|
5,153,461
|
5,153,461
|
||||||
The accompanying notes are an integral part of the financial statements.
F - 4
Artemis Therapeutics Inc.
(USD in thousands, except share data)
|
Common
Stock
|
Preferred
Stock A
|
Preferred
Stock C
|
Additional
paid-in Capital
|
|
Total
|
|||||||||||||||||||||||||||||||
|
|
Number of Shares
|
USD
|
Number
|
Amount
|
Number
|
Amount
|
Accumulated
(deficiency)
|
shareholders'
Equity
|
||||||||||||||||||||||||||||
|
Balance as of December 31, 2017
|
5,153,461 ,461
|
52
|
453
|
(*
|
)
|
250
|
(*
|
)
|
1,457
|
(1,407
|
)
|
102
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Share based compensation
|
114
|
114
|
||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Net loss
|
(513
|
)
|
(513
|
)
|
||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2018
|
5,153,461
|
52
|
453
|
(*
|
)
|
250
|
(*
|
)
|
1,571
|
(1,920
|
)
|
(297
|
)
|
|||||||||||||||||||||||
|
Adoption of new accounting Standard (see Note 2J)
|
319
|
(156
|
)
|
163
|
||||||||||||||||||||||||||||||||
|
Share based compensation
|
17
|
17
|
||||||||||||||||||||||||||||||||||
|
Net loss
|
(121
|
)
|
(121
|
)
|
||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2019
|
5,153,461
|
52
|
453
|
(*
|
)
|
250
|
(*
|
)
|
1,907
|
(2197
|
)
|
(238
|
)
|
|||||||||||||||||||||||
(*) Represents an amount lower than 1 USD
The accompanying notes are an integral part of the financial statements
F - 5
Artemis Therapeutics Inc.
(USD in thousands)
|
|
Year Ended
December 31, 2019
|
Year Ended
December 31, 2018
|
||||||
|
|
||||||||
|
Net cash used in operating activities
|
||||||||
|
Net Loss
|
(121
|
)
|
(513
|
)
|
||||
|
|
||||||||
|
Share based compensation expenses
|
17
|
114
|
||||||
|
Decrease in other accounts receivable and prepaid expenses
|
-
|
38
|
||||||
|
Increase (decrease) in accrued expenses and other payables
|
(4
|
)
|
108
|
|||||
|
Change in the fair value of derivative warrant liability
|
-
|
(265
|
)
|
|||||
|
|
||||||||
|
Net cash used in operating activities
|
(108
|
)
|
(518
|
)
|
||||
|
|
||||||||
|
Cash flows from financing activities
|
||||||||
|
Related party loan
|
103
|
-
|
||||||
|
-
|
-
|
|||||||
|
|
-
|
|||||||
|
Cash flows from financing activities
|
103
|
-
|
||||||
|
|
||||||||
|
Decrease in cash and cash equivalents
|
(5
|
)
|
(518
|
)
|
||||
|
Cash and cash equivalents at the beginning of the period
|
7
|
525
|
||||||
|
|
||||||||
|
Cash and cash equivalents at the end of the period
|
2
|
7
|
||||||
(*) Represents an amount lower than 1 USD
The accompanying notes are an integral part of the financial statements
F - 6
Artemis Therapeutics Inc.
(USD in thousands)
NOTE 1 - GENERAL
|
A.
|
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”).
F - 7
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
NOTE 1 - GENERAL (cont.)
| 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.
Going Concern:
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.
As discussed above, on January 10, 2019, Artemis received a notice regarding the immediate termination of the License Agreement.
Based on the lack of Company business activities since the termination of the License Agreement, our Company is classified as a “shell” company by the Securities and Exchange Commission (the
“SEC”).
|
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
|
| A. |
Basis of Presentation
|
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 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 statement
(USD in thousands)
|
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| 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.
| D. |
Fair value of financial instruments:
|
The carrying values of cash and cash equivalents, other receivable 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. |
Financial statement in U.S. dollars:
|
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 Accounting Standards Codification (“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.
|
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 common stock outstanding plus the number of additional common stock 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 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 - 9
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
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.
|
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.
F - 10
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| J. |
Recent Accounting Standards:
|
In February 2016, the Financial Accounting Standards Board (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. To date, the Company is not engaged in lease agreements and accordingly, the standard has no impact on the Company’s consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, which includes Part I “Accounting for Certain Financial Instruments with Down Round Features” and Part II “Replacement of the Indefinite Deferral for
Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests With a Scope Exception”. The ASU makes limited changes to the Board’s guidance on classifying certain
financial instruments as either liabilities or equity. The ASU’s objective is to improve (1) the accounting for instruments with “down-round” provisions and (2) the readability of the guidance in ASC 480 on distinguishing liabilities from equity
by replacing the indefinite deferral of certain pending content with scope exceptions. This standard is effective beginning in the first quarter of 2019. The Company had derivative warranty liabilities as discussed in Note 7B which, due to the
adoption of this new standard, have been re-classified as equity. The following table provides a reconciliation of the derivative warrant liabilities, additional paid-in capital and accumulated deficit on
the consolidated balance sheet as of January 1, 2019:
|
|
As of
January 1, 2019
|
Adjustment
|
As of
December 31,
2018
|
|||||||||
|
|
||||||||||||
|
Derivative warrant liability
|
-
|
(163
|
)
|
163
|
||||||||
|
|
||||||||||||
|
Additional paid-in capital
|
1,890
|
319
|
1,571
|
|||||||||
|
Accumulated deficit
|
(2,076
|
)
|
(156
|
)
|
(1,920
|
)
|
||||||
In June 2018, the FASB issued ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of
Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to
nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods
within that fiscal year. Early adoption is permitted. ASU 2018-07 did not have a material impact on Company’s consolidated financial statements.
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 primarily relied on the License Agreement with respect to the development of Artemisone, its lead product candidate. As part of the License 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 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 failed to meet development or investment milestones as set
forth in the License Agreement, Hadasit had 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.
F - 11
Artemis Therapeutics Inc.
Notes to the financial statement
(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 US is 21%. The Company is not subject to current federal taxes, as it has incurred losses.
The Company received a tax refund in the amount of $53 in respect of prior years.
Israel corporate tax
The Company’s subsidiary in Israel is subject to income tax at a regular corporate tax of 23%.
|
B.
|
Deferred income taxes
|
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
December 31,
2019
|
As of
December 31,
2018
|
||||||
|
|
||||||||
|
Deferred tax assets:
|
||||||||
|
Deferred taxes due to carryforward losses
|
2,879
|
2,864
|
||||||
|
|
||||||||
|
Valuation allowance
|
(2,879
|
)
|
(2,864
|
)
|
||||
|
|
||||||||
|
Net deferred tax asset
|
-
|
-
|
||||||
|
C.
|
Tax loss carry-forwards
|
Net operating loss carry-forwards as of December 31, 2019 and 2018 are as follows:
|
|
As of
December 31,
2019
|
As of
December 31,
2018
|
||||||
|
Israel
|
4,887
|
4,799
|
||||||
|
United States (*)
|
8,358
|
8,385
|
||||||
|
|
||||||||
|
|
13,245
|
13,184
|
||||||
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 statement
(USD in thousands)
NOTE 5 – WARRANTS ISSUED TO INVESTORS
In October 2017 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
|
|
|
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 preferred shares 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):
|
|
Year
Ended
December 31,
2019
|
Year
Ended
December 31,
2018
|
||||||
|
Net loss attributable to shareholders of the company
|
121
|
513
|
||||||
|
Net loss attributable to shareholders of preferred shares
|
18
|
77
|
||||||
|
|
||||||||
|
Net loss used in the calculation of basic loss per share
|
103
|
436
|
||||||
|
|
||||||||
|
Net loss per share
|
(0.02
|
)
|
(0.08
|
)
|
||||
|
|
||||||||
|
Weighted average number of common stock used in the calculation of net loss per share
|
5,153,461
|
5,153,461
|
||||||
F - 13
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
NOTE 7 - STOCK CAPITAL
| A. |
Stockholders Rights:
|
Shares of common stock 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.
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.
| B. |
Issuance of Shares:
|
On August 19, 2016 and prior to consummation of the merger, Artemis issued 524 shares of common stock (221,307 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, 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.
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 classified 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. As further described in Note 2J, upon adoption of ASU 2017-11, such warrants were retrospectively classified as equity.
F - 14
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
NOTE 7 - STOCK CAPITAL (Cont.)
| C. |
Options issued to consultants and employees:
|
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.
On August 1, 2017, the Company granted 242,640 stock options to the Company’s CEO. These options are subject to a 48 month vesting period whereby 5,055 options were vested on September 1, 2017
and 5,055 options become vested on the first day of each following month assuming the employment agreement has not been terminated. In addition, on March 15, 2018 the Company granted 48,528 stock options to the Company’s CEO and 50,000 stock
options to the Company’s CFO. Each stock option is exercisable into a share of the Company’s common stock. The options granted to the CEO on March 15, 2018 vested on the grant date and the options granted to the CFO will vest over a 48-month
period beginning February 1, 2018. These options will expire on March 15, 2028. As a result, the Company recognized for the period ended December 31, 2019 compensation expenses in the amount of $17 included in general and administrative expenses.
On August 10, 2018, Brian Culley, the Company’s former Chief Executive Officer, resigned from his position as Chief Executive Officer of the Company, effective 60 days after such notice as
provided in his employment agreement. Upon termination of the CEO’s employment agreement any of the then unvested options, which were granted on August 1, 2017, expire immediately. All vested options could have been exercised for a period of 90
days from the termination of the agreement. The former CEO did not exercise any vested options prior to their expiration.
F - 15
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
NOTE 7 - STOCK CAPITAL (Cont.)
A summary of the Company's option activity and related information is as follows:
|
|
For the Twelve months ended
December 31, 2019
|
|||||||||||
|
|
Number of stock options
|
Weighted average exercise price
|
Aggregate intrinsic value
|
|||||||||
|
|
||||||||||||
|
Outstanding at beginning of period
|
250,716
|
0.83
|
54,002
|
|||||||||
|
Granted
|
-
|
-
|
-
|
|||||||||
|
Exercised
|
-
|
-
|
-
|
|||||||||
|
Cancelled
|
109,188
|
1.30
|
-
|
|||||||||
|
|
||||||||||||
|
Outstanding at end of period
|
141,528
|
0.47
|
3,844
|
|||||||||
|
Options exercisable at period end
|
115,486
|
0.28
|
3,844
|
|||||||||
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, 2019, 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, 2019 and 2018, 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 9
|
|
|
2 0 1 8
|
|
|
2 0 1 9
|
|
|
2 0 1 8
|
|
|
2 0 1 9
|
|
|
2 0 1 8
|
|
|||||||
|
|
0.01
|
|
|
|
91,528
|
|
|
|
91,528
|
|
|
|
6.65
|
|
|
|
7.64
|
|
|
|
91,528
|
|
|
|
91,528
|
|
|
|
1.30
|
|
|
|
-
|
|
|
|
60,660
|
|
|
|
-
|
|
|
|
8.61
|
|
|
|
-
|
|
|
|
60,660
|
|
|
|
1.30
|
|
|
|
50,000
|
|
|
|
98,528
|
|
|
|
8.21
|
|
|
|
9.21
|
|
|
|
23,958
|
|
|
|
59,986
|
|
|
|
|
|
|
|
141,528
|
|
|
|
250,716
|
|
|
|
7.17
|
|
|
|
8.46
|
|
|
|
115,486
|
|
|
|
212,174
|
|
(*) Less than 1
F - 16
Artemis Therapeutics Inc.
Notes to the financial statement
(USD in thousands)
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.
F - 17
Pursuant to the requirements Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ARTEMIS THERAPEUTICS, INC.
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
|
|
/s/ Chanan Morris
|
|
Chief Financial Officer
|
|
March 30, 2020
|
|
By: Chanan Morris
|
|
(Principal Executive Officer and Principal Financial and Accounting Officer)
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the
dates indicated.
|
/s/ Chanan Morris
|
|
Chief Financial Officer
|
|
March 30, 2020
|
|
By: Chanan Morris
|
|
(Principal Executive Officer and Principal Financial and Accounting Officer)
|
|
|
|
/s/ Israel Alfassi
|
|
Director
|
|
March 30, 2020
|
|
By: Israel Alfassi
|
|
|
|
|
24