Manuka, Inc. - Annual Report: 2020 (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, 2020
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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, 2020 (the last business day of the Registrant’s most recently
completed second fiscal quarter) was $1,236,831.
As of March 23, 2021, the Registrant had outstanding 5,153,461 shares of Common Stock, par value $0.01 per share.
TABLE OF CONTENTS
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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.
1
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, 2020, 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 $356,000 at December 31, 2020. 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:
| • |
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;
|
| • |
variations in quarterly operating results from the expectations of securities analysts or investors;
|
| • |
revisions in securities analysts’ estimates or reductions in security analysts’ coverage;
|
| • |
announcements of new products or services by us or our competitors;
|
| • |
reductions in the market share of our products;
|
| • |
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
| • |
general technological, market or economic trends;
|
| • |
investor perception of our industry or prospects;
|
| • |
insider selling or buying;
|
| • |
investors entering into short sale contracts;
|
| • |
regulatory developments affecting our industry; and
|
| • |
additions or departures of key personnel.
|
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:
| • |
changes in our industry;
|
| • |
our ability to obtain working capital financing;
|
| • |
additions or departures of key personnel;
|
| • |
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;
|
| • |
sales of our common stock;
|
| • |
our ability to execute our business plan;
|
| • |
operating results that fall below expectations;
|
| • |
loss of any strategic relationship;
|
| • |
regulatory developments;
|
| • |
economic and other external factors; and
|
| • |
period-to-period fluctuations in our financial results.
|
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.
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, 2020
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 2020 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, 2020. 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.
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 23, 2021, 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,
2020 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, 2020. 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, 2018. We did record an income tax benefit of $53 for the year ended December 31, 2019 and an income tax
benefit of $53 for the year ended December 31, 2020.
CRITICAL ACCOUNTING POLICIES
There are no critical accounting policies for the years ended December 31, 2020 and 2019.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2020 COMPARED TO THE PERIOD ENDED DECEMBER 31, 2019 (dollars in thousands)
REVENUES. The Company did not have revenue-producing operations for the fiscal year ended December 31, 2020, or the fiscal year ended December 31, 2019.
COST OF REVENUES. The Company had no cost of revenues for the fiscal year ended December 31, 2020, or the fiscal year ended December 31, 2019, 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, 2020, or the fiscal
year ended December 31, 2019.
RESEARCH AND DEVELOPMENT EXPENSES. We did not incur any research and development expenses for the fiscal year ended December 31, 2020, or for the fiscal
year ended December 31, 2019, due to the termination of the License Agreement resulting in the Company no longer having business operations.
13
SELLING AND MARKETING EXPENSES. Selling and marketing expenses were $0 for the fiscal year ended December 31, 2020, and $0 for the fiscal year ended
December 31, 2019, due to the Company being in its developmental stage and having no substantive operations.
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, 2020, decreased by 1% to $167 from $168 for the fiscal year ended December 31, 2019. The decrease is attributable
mainly to the decrease in administrative expenses.
FINANCIALEXPENSE, NET. We recognized financial income of $7 for the fiscal year ended December 31, 2020, compared to financial expense, net of $6 for the
fiscal year ended December 31, 2019.
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, 2020, or the fiscal year ended December 31, 2019.
NET LOSS. We incurred a net loss of $121 in the fiscal year ended December 31, 2020 and for the fiscal year ended December 31, 2019. These net losses
were primarily related to our operational and financial expenses. The loss for the fiscal year ended December 31, 2020 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, 2020, and as of December 31, 2019, we had an accumulated deficit of $2,318 and $2,197, respectively, and a negative working capital (current assets less current liabilities)
of $345 in 2020 as compared to a negative working capital of $135 in 2019. Losses will probably continue in the foreseeable future.
We do not have any material capital commitments for capital expenditures as of December 31, 2020, or December 31, 2019.
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, 2020 and December 31, 2019, we had accumulated liabilities of $356 and $260, respectively.
As of December 31, 2020 and December 31, 2019, we had cash and cash equivalents of $1 and $2 respectively, and negative cash flow from operating activities of $1 and $108, respectively, for the
years and periods then ended. The negative cash flow from operating activities in the year ended December 31, 2020 is attributable mainly to a net loss of $121, share-based compensation expenses of $14, a decrease in accounts receivable and
prepaid expenses of $10, an increase in accrued expenses of $89 and an increase in related parties expenses of $7.
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, 2020.
No change in our internal control over financial reporting occurred during the year ended December 31, 2020, 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, 2020.
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, 2021.
|
NAME
|
AGE
|
POSITION
|
||
|
EXECUTIVE OFFICERS
|
||||
|
Chanan Morris
|
55
|
Chief Financial Officer
|
||
|
Dana Wolf
|
63
|
Chief Scientific Officer
|
||
|
Israel Alfassi
|
52
|
Director, Chief Executive Officer of Artemis Pharma, Inc.
|
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
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, 2020, and 2019. 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
|
2020
|
42
|
(1)
|
-
|
-
|
-
|
-
|
42
|
||||||||||||||||||
|
Chief Financial Officer
|
2019
|
42
|
(1)
|
-
|
-
|
-
|
-
|
42
|
||||||||||||||||||
(1) Mr. Morris receives a monthly fee of $3,500 in connection with a consulting arrangement with the Company.
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, 2021 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, 2021, 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, 2021.
|
|
|
(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, 2020. 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, 2020
|
DECEMBER 31, 2019
|
|||||||
|
Audit fees (1)
|
$
|
26
|
$
|
26
|
||||
|
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.
22
|
EXHIBIT NO.
|
DESCRIPTION
|
|
|
101.1
|
The following materials from the Company’s Annual Report on Form 10-K for the period ended December 31, 2020 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, 2020
U.S. DOLLARS IN THOUSANDS
INDEX
|
PAGE
|
|
|
Financial Statements:
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7 - F-17
|
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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,
2020 and 2019 and the related consolidated statements of operations, stockholders' deficiency and cash flows for each of the two years in the period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 2020, 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 audits. 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 audits 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 audits, 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 audits 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 audits 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.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no
critical audit matters.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 30, 2021
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
|
2020
|
2019
|
|||||||||
|
ASSETS
|
|||||||||||
|
Current assets
|
|||||||||||
|
Cash and cash equivalents
|
1
|
2
|
|||||||||
|
Other accounts receivable and prepaid expenses
|
10
|
20
|
|||||||||
|
Total current assets
|
11
|
22
|
|||||||||
|
TOTAL ASSETS
|
11
|
22
|
|||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||||
|
Current liabilities
|
|||||||||||
|
Accrued expenses and other payables
|
246
|
157
|
|||||||||
|
Related parties
|
8
|
110
|
-
|
||||||||
|
Total current liabilities
|
356
|
157
|
|||||||||
|
Long term Liabilities
|
|||||||||||
|
Related Parties
|
8
|
0
|
103
|
||||||||
|
Total Liabilities
|
356
|
260
|
|||||||||
|
Shareholders' equity
|
|||||||||||
|
Preferred A stock, $0.01 par value - Authorized: 10,000,000 shares; issued and outstanding: 453 shares as of December 31, 2020 and 2019
Preferred C stock, $0.01 par value - Authorized: 250 shares; issued and outstanding: 250 shares as of December 31, 2020 and December 31, 2019
Common stock, $0.01 par value - Authorized: 51,000,000; issued and outstanding: 5,153,461 as of December 31, 2020 and 2019
|
52
|
52
|
|||||||||
|
Additional paid in capital
|
7
|
1,921
|
1,907
|
||||||||
|
Accumulated deficit
|
(2,318
|
)
|
(2,197
|
)
|
|||||||
|
Total shareholders' equity
|
(345)
|
(238
|
)
|
||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
11
|
22
|
|||||||||
(*) 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, 2020
|
Year Ended December 31, 2019
|
|||||||
|
Research and development expenses
|
-
|
-
|
||||||
|
General and administrative
|
167
|
168
|
||||||
|
Operating loss
|
167
|
168
|
||||||
|
Finance expenses
|
(7
|
)
|
(6
|
)
|
||||
|
Income Tax Benefit
|
53
|
53
|
||||||
|
Net loss
|
121
|
121
|
||||||
|
Loss per share:
|
||||||||
|
Basic and diluted net loss per share
|
(0.02
|
)
|
(0.02
|
)
|
||||
|
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
|
Accumulated
(deficiency)
|
Total
shareholders'
Equity
|
|||||||||||||||||||||||||||||||
|
Number of Shares
|
USD
|
Number
|
Amount
|
Number
|
Amount
|
|||||||||||||||||||||||||||||||
|
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
|
)
|
|||||||||||||||||||||||
|
Share based compensation
|
14
|
14
|
||||||||||||||||||||||||||||||||||
|
Net loss
|
(121
|
)
|
(121
|
)
|
||||||||||||||||||||||||||||||||
|
Balance as of December 31, 2020
|
5,153,461
|
52
|
453
|
(*
|
) |
250
|
(*
|
)
|
1,921
|
(2,318
|
)
|
(345
|
)
|
|||||||||||||||||||||||
(*) 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, 2020
|
Year Ended
December 31, 2019
|
|||||||
|
Net cash used in operating activities
|
||||||||
|
Net Loss
|
(121
|
)
|
(121
|
)
|
||||
|
Share based compensation expenses
|
14
|
17
|
||||||
|
Decrease in other accounts receivable and prepaid expenses
|
10
|
-
|
||||||
|
Increase (decrease) in accrued expenses and other payables
|
89
|
(4
|
)
|
|||||
|
Increase in related parties
|
7
|
-
|
||||||
|
Net cash used in operating activities
|
(1)
|
(108
|
)
|
|||||
|
Cash flows from financing activities
|
||||||||
|
Related party loan
|
-
|
103
|
||||||
|
-
|
||||||||
|
Cash flows from financing activities
|
-
|
103
|
||||||
|
Decrease in cash and cash equivalents
|
(1
|
)
|
(5
|
)
|
||||
|
Cash and cash equivalents at the beginning of the period
|
2
|
7
|
||||||
|
Cash and cash equivalents at the end of the period
|
1
|
2
|
||||||
(*) 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.
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 common 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.)
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 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,
2020
|
As of
December 31,
2019
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Deferred taxes due to carryforward losses
|
2,906
|
2,879
|
||||||
|
Valuation allowance
|
(2,906
|
)
|
(2,879
|
)
|
||||
|
Net deferred tax asset
|
-
|
-
|
||||||
| C. |
Tax loss carry-forwards
|
Net operating loss carry-forwards as of December 31, 2020 and 2019 are as follows:
|
As of
December 31,
2020
|
As of
December 31,
2019
|
|||||||
|
Israel
|
4,974
|
4,887
|
||||||
|
United States (*)
|
8,392
|
8,358
|
||||||
|
13,366
|
13,245
|
|||||||
Net operating losses in Israel may be carried forward indefinitely. Net operating losses in the U.S. are available through 2027.
(*) Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 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,
2020
|
Year
Ended
December 31,
2019
|
|||||||
|
Net loss attributable to shareholders of the company
|
121
|
121
|
||||||
|
Net loss attributable to shareholders of preferred shares
|
18
|
18
|
||||||
|
Net loss used in the calculation of basic loss per share
|
103
|
103
|
||||||
|
Net loss per share
|
(0.02
|
) |
(0.02
|
)
|
||||
|
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.)
A summary of the Company's option activity and related information is as follows:
|
For the Twelve months ended
December 31, 2020
|
||||||||||||
|
Number of stock options
|
Weighted average exercise price
|
Aggregate intrinsic value
|
||||||||||
|
Outstanding at beginning of period
|
141,528
|
0.47
|
21,051
|
|||||||||
|
Granted
|
-
|
|||||||||||
|
Exercised
|
-
|
|||||||||||
|
Cancelled
|
||||||||||||
|
Outstanding at end of period
|
141,528
|
0.47
|
35,513
|
|||||||||
|
Options exercisable at period end
|
127,986
|
0.38
|
35,513
|
|||||||||
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, 2020, and the
exercise price, multiplied by the number of in-the-money stock options on those dates) that would have been received by the stock option holders had all stock option holders exercised their stock options on those dates.
The stock options outstanding as of December 31, 2020 and 2019, 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 20
|
2 0 1 9
|
2 0 20
|
2 0 19
|
2 0 2 0
|
2 0 1 9
|
||||||||||||||||||||
|
0.01
|
91,528
|
91,528
|
5.64
|
6.65
|
91,528
|
91,528
|
||||||||||||||||||||
|
1.30
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
1.30
|
50,000
|
50,000
|
7.21
|
8.21
|
36,458
|
23,958
|
||||||||||||||||||||
|
141,528
|
141,528
|
6.17
|
7.17
|
127,986
|
115,486
|
|||||||||||||||||||||
(*) Less than 1
F - 15
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 - 16
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, 2021
|
||
|
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, 2021
|
||
|
By: Chanan Morris
|
(Principal Executive Officer and Principal Financial and Accounting Officer)
|
|
/s/ Israel Alfassi
|
Director
|
March 30, 2021
|
||
|
By: Israel Alfassi
|
