UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
(Mark
One)
x ANNUAL
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the Fiscal Year Ended September 30, 2005
o TRANSITION
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from _________ to __________
Commission
file number: 0-32835
GAMMACAN
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
33-0956433
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
11
Ben Gurion Street
54100
Givat Shmuel, Israel
(Address
of principal executive offices)
972
3 5774475
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the
past 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 x
No o
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE
PRECEDING
FIVE YEARS:
Indicate
by check mark whether the registrant filed all documents and reports required
to
be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
after
the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE
ONLY TO CORPORATE ISSUERS:
State
the
number of shares outstanding of each of the registrant's classes of common
equity, as of the latest practicable date: 28,453,732 shares issued and
outstanding as of December 28, 2005.
GAMMACAN
INTERNATIONAL, INC.
FORM
10-KSB
TABLE
OF CONTENTS
|
|
|
Page
No.
|
PART
I
|
|
Item 1.
Business
|
1
|
Item 2.
Properties
|
16
|
Item 3.
Legal Proceedings
|
16
|
Item 4.
Submission of Matters to a Vote of Security Holders
|
16
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PART
II
|
|
Item 5.
Market for Common Equity and Related Stockholder Matters
|
17
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Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of
Operation
|
19
|
Item 7.
Financial Statements and Supplementary Data
|
26
|
Item 8.
Change in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
47
|
Item 8A.
Controls And Procedures
|
47
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PART
III
|
|
Item 9.
Directors and Officers of the Registrant
|
47
|
Item 10.
Executive Compensation
|
50
|
Item 11.
Security Ownership of Certain Beneficial Owners and Management and
Related
Stockholder Matters
|
55
|
Item 12.
Certain Relationships and Related Transactions
|
56
|
Item 13.
Exhibits
|
57
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Item 14.
Principal Accountant Fees and Services
|
58
|
This
Form
10-KSB includes a number of forward-looking statements that reflect management's
current views with respect to future events and financial performance. Those
statements include statements regarding the intent, belief or current
expectations of Gammacan and members of its management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures
made
in this report and in our other reports filed with the Securities and Exchange
Commission. Important factors currently known to Management could cause actual
results to differ materially from those in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in the future operating results over time. Gammacan believes that its
assumptions are based upon reasonable data derived from and known about its
business and operations and the business and operations of Gammacan. No
assurances are made that actual results of operations or the results of
GammaCan's future activities will not differ materially from its
assumptions.
PART
I
ITEM
1. - BUSINESS
This
Annual Report on Form 10-KSB (including the section regarding Management's
Discussion and Analysis of Financial Condition and Results of Operations)
contains forward-looking statements regarding our business, financial condition,
results of operations and prospects. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
or
variations of such words are intended to identify forward-looking statements,
but are not deemed to represent an all-inclusive means of identifying
forward-looking statements as denoted in this Annual Report on Form 10-KSB.
Additionally, statements concerning future matters are forward-looking
statements.
Although
forward-looking statements in this Annual Report on Form 10-KSB reflect the
good
faith judgment of our management, such statements can only be based on facts
and
factors currently known by us. Consequently, forward-looking statements are
inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those
specifically addressed under the heading "Risks Related to Our Business" below,
as well as those discussed elsewhere in this Annual Report on Form 10-KSB.
Readers are urged not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Annual Report on Form
10-KSB. We file reports with the Securities and Exchange Commission ("SEC").
We
make available on our website under "Investor Information/SEC Filings," free
of
charge, our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K and amendments to those reports as soon as
reasonably practicable after we electronically file such materials with or
furnish them to the SEC. Our website address is www.gammacan.com. You can also
read and copy any materials we file with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional
information about the operation of the Public Reference Room by calling the
SEC
at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including
us.
We
undertake no obligation to revise or update any forward-looking statements
in
order to reflect any event or circumstance that may arise after the date of
this
Annual Report on Form 10-KSB/A. Readers are urged to carefully review and
consider the various disclosures made throughout the entirety of this annual
Report, which attempt to advise interested parties of the risks and factors
that
may affect our business, financial condition, results of operations and
prospects.
DESCRIPTION
OF BUSINESS
As
used
in this current report, the terms "we", "us", "our", and "Gammacan" mean
Gammacan International, Inc. and our subsidiary, Gammacan, Ltd., unless
otherwise indicated.
All
dollar amounts refer to US dollars unless otherwise indicated.
Corporate
History
We
were
incorporated under the laws of the state of Delaware on October 6, 1998 under
the name of San Jose International, Inc. On August 19, 2004, we changed the
name
of our company to Gammacan International, Inc. in the State of Delaware.
During
our first quarter ended December 31, 2003, we identified a promising business
prospect focused on the seismic acquisition business located in Western Canada
and agreed in principal to acquire all of the shares of two Alberta based
companies. However, on April 20, 2004, we decided to terminate our efforts
to
pursue this proposed acquisition, because it appeared we would not be successful
in obtaining the necessary financing on a timely basis.
Pursuant
to an agreement for purchase and sale of intellectual property between our
subsidiary, Gammacan, Ltd., and ARP Biomed, Ltd. ("ARP”), we completed the
purchase and sale of the intellectual property on August 17, 2004. As a result,
we now own all of ARP's rights and interests in the intellectual property assets
(the "Intellectual Property") consisting of intravenous immunoglobulin ("IVIG")
research and development, patents and other intellectual property, which appears
to hold promising potential for the clinical treatment for various cancer types.
In consideration for acquiring the Intellectual Property, we have issued to
ARP
12.5% of the common shares of Gammacan, Ltd.
Business
Subsequent to the Acquisition of the Intellectual Property
With
the
acquisition of the Intellectual Property, we are now focused on the
commercialization of an anti-cancer immunotherapy that appears to be effective
in reducing the metastatic spread of a wide range of cancers. Our proposed
treatment will be based on intravenous immunoglobulin or IVIG, a safe,
minimally-toxic human plasma-based product, currently used to treat a variety
of
immune deficiencies and autoimmune diseases, and replace the antibodies in
people who are unable to produce them. Antibodies are naturally occurring,
disease fighting proteins or compounds produced by healthy people. Intravenous
implies the direct injection or delivery, via certain equipment, into the
patient's bloodstream. In preliminary studies, IVIG appears to boost and
strengthen cancer patient's immune systems or antibody levels, which may be
successful in fighting cancer. Although there can be no assurance, many experts
currently view IVIG as a promising future alternative or complementary therapy
to today's standard chemotherapies and biological therapies.
Cancer
is
a disease of the body's cells. Cells in all the tissues and organs of the body
constantly grow and divide to replace old and damaged cells and maintain the
health of the body. Normally, all cells divide and reproduce themselves in
an
orderly and controlled manner. In cancer, however, some cells keep dividing
without proper control, forming a lump (which is called a primary tumor). In
leukemia, or cancer of the blood, too many white blood cells are produced.
Sometimes
cancer cells break away from a tumor and travel to other parts of the body
through the bloodstream or lymphatic system. The lymphatic system is a network
of fine channels - called lymph vessels - which run throughout the body and
are
part of the body's protection against infection and cancer. When the cancer
cells reach other parts of the body they may settle and start to develop into
new tumors. These are known as secondary cancers/tumors or metastases.
Primary
tumors, while still localized, can be treated through surgery and radiation.
However, cancers tend to metastasize, or spread, and form secondary tumors
in
other locations throughout the body. Most existing therapeutics or treatments
fail because the cancer has metastasized and formed multiple tumors. Many cancer
victims with operable tumors ultimately succumb to metastatic or spreading
cancer following surgery
The
extent to which metastases occur varies with the type of primary tumor. Melanoma
or skin cancer, breast cancer, lung cancer, colon cancer and prostate cancer
are
among the types of cancer that frequently metastasize or spread. When metastasis
takes place, the secondary tumors may form at a number of sites in the body.
Lungs, liver, brain and bone are the most common sites of secondary tumors.
Cancer
therapeutics represents a major multibillion pharmaceutical market. This market
continues to grow in particular in response to the introduction of new an more
effective treatments. New products that have been introduced to the market
in
recent years such as Mabthera Irressa, Gleevec, Avastin, Rituxan and others
seem
to fuel increased growth both as these more effective, and thus more costly,
treatments replace conventional less effective, and because these new therapies
are being used in conjunction with conventional therapies.
Current
Cancer Treatments
Current
cancer treatments include surgery, radiation, and chemotherapy. These treatments
can be ineffective because they are either unable to target cancer cells
throughout the body or they give rise to serious and life-threatening side
effects. Consequently, the medical community is still a long way from winning
the war on cancer. The key success factors for new therapeutic approaches in
the
cancer area seem to be less toxicity than what is available today and higher
rates of efficacy, at least in some patients. Modern immunotherapies tend to
be
targeted towards certain patients in whom particular antigens are expressed
in
their tumors, but these drugs may have no or little effect in other patients.
Thus, the new generation of anti-cancer therapies tends to be more effective
in
patients where they are applicable, but less effective in other patients.
The
alternative to the traditional cancer treatments is the use of various
immunotherapies based on enhanced understanding of cancer biology in recent
years. Current efforts to deliver effective cancer immunotherapies generally
fall into three categories: cytokines, monoclonal antibodies and vaccines.
Cytokines are medical drugs that stimulate the immune system during infections.
Drug developers have hoped that the same factors that fight infections could
be
used to combat cancer cells. Several have been approved for commercial use,
but
they are generally limited in their application.
Many
companies are involved in developing monoclonal antibodies, which are designed
to bind to specific cancer cells and target them for destruction by the immune
system. These products are generally more developed, in terms of market use
and
acceptance, than cytokines and several have significant sales. The monoclonal
antibody products realizing significant sales generally have limited or few
side
effects.
Cancer
vaccines rely on the administration of tumor antigens to elicit an immune
response that remains after the vaccine itself has disappeared. Most cancer
vaccine products currently being developed require the harvesting and processing
of tumor cells to make custom vaccines for each patient. Though this approach
has shown promise in clinical trials, scaling-up manufacture is likely to be
problematic, and these vaccines are generally considered to be a number of
years
away from commercial use.
Chemotherapy
Chemotherapy
is the use of anti-cancer drugs to destroy cancer cells. There are over 50
different chemotherapy drugs and some are given on their own, but often several
drugs may be combined. The type of chemotherapy treatment given for a particular
cancer depends on many things, the type of disease, where in the body it
started, what the cancer cells look like under the microscope and whether they
have spread to other parts of the body.
Chemotherapy
is currently the standard treatment for cancer that has or may have metastasized
or spread. Chemotherapy is a systemic treatment, usually administered
intravenously, but can be administered a number of ways, intended to kill
cancer/tumor cells, which have spread to multiple sites. However, chemotherapy
may also kill healthy dividing cells and consequently, may cause serious side
effects. These side effects may include a weakening of a patient's immune
system, and reduction in number of white blood cells which are necessary to
combat bacterial infections, inhibition or slowing of bone marrow cell growth,
which also may be accompanied with slow down in the production of red blood
cells or anemia, the inability to form blood clots, diarrhea, nausea and hair
loss. Generally, these side effects are temporary in nature, but most patients
experience a significant degree of discomfort, and can be long term in some
cases.
Chemotherapy
can fail to completely eradicate micro-metastases, or the spreading of very
small cancer tumors, already residing in remote organs (lung, liver, bone marrow
or brain), especially when treatment is discontinued due to patients' inability
to tolerate its side effects. If the cancer is not completely eradicated, it
will likely continue to grow.
The
need
for effective, minimally-toxic treatments to inhibit spreading cancers is widely
recognized and numerous researchers, biotechnology and pharmaceutical companies
are seeking alternatives to chemotherapy drugs. The potential for a large
receptive commercial market exists for a successful approach to inhibiting
spreading cancers without causing serious side effects.
IVIG
or Intravenous Immunoglobulin
Our
proposed immunotherapy product, if ultimately proven to be successful on a
regulatory and commercial basis, aims to harness the body's immune system,
or
its natural defense mechanism to destroy cancer cells. Our proposed product
is
intended to be used in the prevention of recurrence of cancer and to prevent
metastatic spread in patients. This use would suggest a long-term treatment
in
which patient would receive IVIG for extended periods of time (possible for
five
years as is the case of Tamoxifen for the prevention of breast cancer
recurrence). IVIG seems particularly suitable for long term treatments as it
has
already been established as a long-term tolerable treatment with minimal side
effects even after year-long use.
Immunoglobulin
or IVIG is a type of protein found in human blood that helps to fight off
harmful bacteria, viruses and other germs. IVIG is a blood plasma-derived
product containing protective antibodies normally present in the blood of
healthy individuals. IVIG is used to replace the antibodies in people who are
unable to produce them, thereby restoring an almost normal immune response
and
helping to prevent or reduce the severity of certain infections. It is widely
used in the treatment of certain autoimmune diseases. Extensive use over a
period of years has demonstrated that IVIG therapy is a safe, non-toxic therapy
with virtually no side effects.
According
to the Marketing Research Bureau, Inc, Orange, CT the annual world market for
IVIg is currently approximately 55 tons. There are in excess of 20 manufacturers
of IVIg products and typically, these companies manage pools of 1,000 to 20,000
blood donors who are carefully screened prior to being allowed to give blood.
This donated plasma is also extensively tested for pathogens prior to use.
It is
this donated blood plasma that is used to manufacture IVIG, and through the
combining the blood plasma of many individual donors, it is believed that the
resulting combination provides superior therapy than IVIG from one individual
exclusively.
The
largest producers of IVIG for the U.S. market are ZLB-Behring (a subsidiary
of
.Aventis), Alpha Therapeutics, Baxter Healthcare, and Bayer Biological Products.
IVIG
products became commercially available in the early 1980's. There are six
indications or uses approved by the U.S. Food and Drug Administration (the
"FDA"), but IVIG is also used to treat over seventy other "off-label" conditions
supported by a consensus of expert opinion, mostly primary immune deficiencies
or autoimmune neuromuscular disorders. Industry experts claim that many present
IVIG prescriptions are written for off-label indications and roughly deducting
the estimated use of IVIg for the indicated uses from the total sales, indicate
that as much as 40-50% of uses could be off-label. Patients receiving IVIG
therapy for primary immune deficiencies usually receive the therapy for life,
while patients receiving IVIG therapy for autoimmune disorders receive the
therapy intermittently over a period of months, and sometimes years, depending
on their condition.
IVIG
is
generally considered to be an expensive therapy, because it is a natural product
manufactured from whole human blood. A typical dose may consist of five
consecutive days of intravenous administration of 1 gram per kilogram of
patients' body weight. According to the International Blood/Plasma News, U.S.
prices range from about $39 per gram for lyophilized preparations to a high
of
about $55 per gram for a 5% liquid product.
Pre-Clinical
and Preliminary Experiments
ARP's
scientists have already conducted certain animal experiments to test the
effectiveness of IVIG immunotherapy in treating cancer, and investigated the
effectiveness of IVIG treatment at various stages of disease progression with
varying dosages and routes of administration. They have made preliminary
progress in understanding the mechanisms under which IVIG appears to fight
cancer.
While
these experiments showed promising results, they are preliminary. Use of IVIG
in
a commercial setting would be subject to much further substantial and
significant testing, and subject to certain clinical trials required by the
FDA
and similar regulatory bodies in other countries.
At
this
stage however, there can be no assurance that IVIG will evolve into a successful
commercial product, gain acceptance for general use or use as a replacement
for
existing therapeutic products, or even be approved for use by the regulatory
authorities.
These
early experiments have shown that IVIG treatment appears to reduce metastases
and tumor recurrence for a broad spectrum of cancers, with virtually no side
effects. However, much more testing must be completed. IVIG also appears to
show
promise to increase the chances for long term recovery by preventing the return
and spread of cancer. These preliminary experiments have also indicated that
IVIG therapy holds promise as an effective anti-cancer treatment at much lower
doses than is commonly used for treating immune deficiencies. This would serve
to make the treatment more affordable and may enable IVIG immunotherapy to
be
used as a cancer prevention measure in high risk populations.
In
these
preliminary experiments, IVIG also appears to be effective when administered
intravenously, or through several other methods of delivery into the patient's
body. Alternative routes of administration could dramatically improve
ease-of-use, lower the delivered price of treatments, and enable the treatment
of additional conditions.
Intellectual
Property
Our
success will depend in part on our ability to obtain patent protection for
our
Intellectual Property. Subsequent to our acquisition of the Intellectual
Property from ARP, we enjoy the patented protection of IVIG for treating solid
tumors through two major U.S. patents (#5,562,902 and #5,965,130), as well
as a
pending application for the use of IVIG on non-solid tumors and additional
U.S.
and international patent applications. On October 2005 we filed a provisional
patent for the utilization of IVIg therapy as a potential treatment for avian
flu using IVIg from previously infected patients and from those previously
immunized.
Patent
coverage includes a wide range of issues such as: a novel method of
administering to a mammal a preparation of IVIG for inhibiting tumor metastasis
or spreading, for treating primary tumors, and for a broad spectrum of cancerous
diseases. The IVIG preparation to be administered according to this invention
may contain intact or fragmented immunoglobulin molecules. The preparation
may
be administered intravenously, directly under the skin or subcutaneous routes,
directly into a cavity (such as an organ or stomach), either as a sole agent
or
in combination with other agents or methods, which are commonly used for cancer
treatment. We believe anyone selling IVIG for treatment of cancer is subject
to
these patents. However, the validity and breadth of claims in medical technology
patents involve complex legal and factual questions and, therefore, may be
highly uncertain. No assurance can be given that any patents based on pending
patent applications or any future patent applications by us will be issued,
that
the scope of any patent protection will exclude competitors or provide
competitive advantages to us, that any of the patents that have been or may
be
issued to us will be held valid if subsequently challenged or that others will
not claim rights in or ownership of the patents and other proprietary rights
held or licensed by us. Furthermore, there can be no assurance that others
have
not developed or will not develop similar products, duplicate any of our
technology or design around any patents that have been or may be issued to
us.
Since patent applications in the United States are maintained in secrecy for
the
initial period of time following filing, we also cannot be certain that others
did not first file applications for inventions covered by our pending patent
applications, nor can we be certain that we will not infringe any patents that
may be issued to others on such applications.
We
also
rely on trade secrets and unpatentable know-how that we seek to protect, in
part, by confidentiality agreements. It has not been, but is now our policy
to
require our employees, consultants, contractors, manufacturers, outside
scientific collaborators and sponsored researchers, board of directors,
technical review board and other advisors to execute confidentiality agreements
upon the commencement of employment or consulting relationships with us. These
agreements will provide that all confidential information developed or made
known to the individual during the course of the individual's relationship
with
us is to be kept confidential and not disclosed to third parties except in
specific limited circumstances. We also will commence to require signed
confidentiality or material transfer agreements from any company that is to
receive our confidential information. In the case of employees, consultants
and
contractors, the agreements will generally provide that all inventions conceived
by the individual while rendering services to us shall be assigned to us as
the
exclusive property of our company. There can be no assurance, however, that
all
persons who we desire to sign such agreements will sign, or if they do, that
these agreements will not be breached, that we would have adequate remedies
for
any breach, or that our trade secrets or unpatentable know-how will not
otherwise become known or be independently developed by competitors.
Our
success will also depend in part on our ability to commercialize our technology
without infringing the proprietary rights of others. We have not conducted
freedom of use patent searches and no assurance can be given that patents do
not
exist or could not be filed which would have an adverse affect on our ability
to
market our technology or maintain our competitive position with respect to
our
technology. If our technology components, products, processes or other subject
matter are claimed under other existing United States or foreign patents or
are
otherwise protected by third party proprietary rights, we may be subject to
infringement actions. In such event, we may challenge the validity of such
patents or other proprietary rights or we may be required to obtain licenses
from such companies in order to develop, manufacture or market our technology.
There can be no assurances that we would be able to obtain such licenses or
that
such licenses, if available, could be obtained on commercially reasonable terms.
Furthermore, the failure to either develop a commercially viable alternative
or
obtain such licenses could result in delays in marketing our proposed technology
or the inability to proceed with the development, manufacture or sale of
products requiring such licenses, which could have a material adverse affect
on
our business, financial condition and results of operations. If we are required
to defend ourselves against charges of patent infringement or to protect our
proprietary rights against third parties, substantial costs will be incurred
regardless of whether we are successful. Such proceedings are typically
protracted with no certainty of success. An adverse outcome could subject us
to
significant liabilities to third parties and force us to curtail or cease our
development and commercialization of our technology.
Research
and Development
Scientists
have conducted extensive pre-clinical research to test the effectiveness of
IVIG
immunotherapy in treating cancer. They have employed mice models of various
types of cancers as well as various types of human cancers introduced into
immune deficient (SCID) mice. They have investigated the effectiveness of IVIG
treatment at various stages of disease progression, using alternative dosages
and routes of administration. These pre-clinical and preliminary experiments
have shown that IVIG treatment prevents metastases and tumor recurrence for
a
broad spectrum of cancers with little or no side effects.
IVIG
treatment was shown to potentially work in conjunction with surgery to provide
long-term recovery. While surgery provides an effective short term mechanism
for
treating localized cancer tumors, IVIG treatment was shown to increase the
chances of long term recovery by preventing the return or spread of the cancer.
Parallel studies conducted in melanoma, carcinomas and sarcomas confirm these
results.
Most
pre-clinical experiments were conducted using a standard dosage of 2.0 grams
per
kilogram body weight. Additional experiments have shown that our proposed
therapy is effective with low doses of IVIG representing 1% (20 milligrams
per
kilogram body weight) of the standard IVIG dosage. These experiments suggest
that IVIG treatment could be affordably administered as a preventative measure.
IVIG has been shown in mice experiments to be effective when administered
subcutaneously, intravenously, or through intra-cavitary injection. The option
of alternative routes of administration dramatically improves ease-of-use and
enables the treatment of previously untreatable conditions such as
intra-peritoneal spread (i.e. ovarian carcinoma). IVIG has also been shown
to be
effective when administered as a whole molecule or as a fraction. All this
preclinical research was performed by ARP Biomed, Ltd., prior to the transaction
with Gammacan.
Product
Development
Our
initial focus over the next several years is to demonstrate efficacy of IVIG
cancer immunotherapy in human clinical trials. Efficacy is the ability of a
drug
or other treatment to produce the desired result when taken by its intended
users.
IVIG
immunotherapy will require regulatory approval before being commercially
marketed for human therapeutic use. Clinical trials generally include three
phases that together may take several years to complete. Phase 1 clinical
studies (toxicity trials) are primarily conducted to establish safety. Phase
2
studies are designed to determine preliminary efficacy. Phase 3 studies are
conducted to optimize therapeutic efficacy in a statistically significant manner
at the levels of optimal dose, method of delivery into the body or route, and
schedule of administration. Once clinical trials are completed successfully,
products may receive regulatory approval.
Since
IVIG is an established, safe therapy, we will not be required to conduct Phase
1
studies. Since July 2005, we have been conducting a Phase 2 clinical trial
in
humans to demonstrate clinical efficacy of IVIG immunotherapy in three major
cancers: colon, prostate and melanoma. To date, 27 patients have been enrolled,
out of which 22 have actually received the IVIG treatment. This phase 2 clinical
trial is being conducted at three medical centers in Israel and preliminary
results will likely be available during the first half of 2006. The trial is
due
to be completed by October 2006, but. We will probably continue to monitor
patients for a number of years after the trial in order to collect additional
evidence of efficacy and potential benefits or adverse effects of the IVIG
treatment. If successful or promising, and at this preliminary stage there
is no
assurance they will be, results of these clinical trials will be used to enter
into discussions with a major pharmaceutical partner and plasma based product
manufacturers to work with us to potentially commercialize the IVIG products.
This commercialization will include pivotal, Phase 3 clinical trials in
accordance with regulatory requirements. Such trials may be long-term trials
and
may require substantial financial resources that we do not presently possess.
We
are considering a trial in order to test the potential use of IVIg as a long
term treatment to prevent the recurrence of cancer in patient who have been
diagnosed and successfully treated. This trial, will take a number of years
since the end-point will be related to long-term effects.
Employees
During
the next 12 months, we plan to function with a small management staff. During
this time, we will focus on managing Phase 2 clinical trials and establishing
preliminary relationships with potential commercial partners. Currently we
have
five employees, of which two are executives and one is Director of Clinical
Affairs.
Competition
Competition
in the area of biomedical and pharmaceutical research and development is intense
and significantly depends on scientific and technological factors. These factors
include the availability of patent and other protection for technology and
products, the ability to commercialize technological developments and the
ability to obtain governmental approval for testing, manufacturing and
marketing. Our competitors include major pharmaceutical, medical products,
chemical and specialized biotechnology companies, many of which have financial,
technical and marketing resources significantly greater than ours. In addition,
many biotechnology companies have formed collaborations with large, established
companies to support research, development and commercialization of products
that may be competitive with ours. Academic institutions, governmental agencies
and other public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on
their
own or through joint ventures. We are aware of certain other products
manufactured or under development by competitors that are used for the treatment
of the diseases and health conditions that we have targeted for product
development. There can be no assurance that developments by others will not
render our technology obsolete or noncompetitive, that we will be able to keep
pace with new technological developments or that our technology will be able
to
supplant established products and methodologies in the therapeutic areas that
are targeted by us. The foregoing factors could have a material adverse affect
on our business, financial condition and results of operations. These companies,
as well as academic institutions, governmental agencies and private research
organizations, also compete with our company in recruiting and retaining highly
qualified scientific personnel and consultants.
Competition
within this sector itself is increasing, so we will encounter competition from
existing firms that offer competitive solutions in the cancer treatment
solutions. These competitive companies could develop products that are superior
to, or have greater market acceptance, than the products being developed by
our
company. We will have to compete against other biotechnology and pharmaceutical
companies with greater market recognition and greater financial, marketing
and
other resources.
Our
competition will be determined in part by the potential indications for which
our technology is developed and ultimately approved by regulatory authorities.
In addition, the first product to reach the market in a therapeutic or
preventive area is often at a significant competitive advantage relative to
later entrants to the market. Accordingly, the relative speed with which we,
or
our potential corporate partners, can develop products, complete the clinical
trials and approval processes and supply commercial quantities of the products
to the market are expected to be important competitive factors. Our competitive
position will also depend on our ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products, develop
and implement production and marketing plans, obtain and maintain patent
protection and secure adequate capital resources. We expect our technology,
if
approved for sale, to compete primarily on the basis of product efficacy,
safety, patient convenience, reliability, value and patent position.
Government
Regulations and Supervision
We
will
be using and developing biotechnology and pharmaceutical products for use in
treating human diseases. We will be directly affected by governmental
regulations from the United States Food and Drug Administration for these
products.
The
FDA
regulates clinical development and marketing approval of all medical products
intended for human use. The laws and regulations of the FDA place the burden
of
proof of safety and efficacy on the manufacture of the product. This agency
possesses extensive experience with its regulatory mechanisms and applies them
to all products, with differing statutes for various categories of products.
Other countries have comparable regulatory agencies to the FDA, although the
specific regulations may differ substantially.
The
principal activities which must be completed prior to obtaining approval for
marketing in the United States are as follows:
a) Pre-clinical
Studies. Pre-clinical
studies are conducted in animals to test pharmacology, efficacy and toxicology
and to do manufacturing and formulation work based on in
vivo results.
b) Phase
1 Clinical Trial. Phase
1
clinical trials consist of testing a product in a small number of humans for
its
safety (toxicity), dose tolerance and pharmacokinetic properties.
c) Phase
2 Clinical Trials. Phase
2clinical trials usually involve a larger patient population than is required
for Phase I trials and are conducted to evaluate the effectiveness of a product
in patients having the disease or medical condition for which the product is
indicated. These trials also serve to identify possible common short-term side
effects and risks in a larger group of patients.
d) Phase
3 Clinical Trials. Phase
3
clinical trials involve conducting tests in an expanded patient population
at
geographically dispersed test sites (i.e. multi-centre trials) in a controlled
and/or uncontrolled environment to establish clinical safety and effectiveness.
These trials also generate information from which the overall benefit-risk
relationship relating to the drug can be determined and provide a basis for
drug
labeling.
Since
IVIG is an established, safe therapy, we will not be required to conduct
Pre-Clinical and Phase 1 Clinical Trials. Two key factors that influence the
rate of progression of the remaining clinical trials are the rate at which
patients can be recruited to participate in the research program, and whether
effective treatments are currently available for the disease the drug is
intended to treat. Patient recruitment is largely dependent upon the incidence
and severity of the disease and the alternative treatments available. Regulatory
agencies can demand more patients and longer exposure if they deem it prudent,
so as to better assess the relative safety compared with the long-term efficacy
of the drug.
The
results of the pre-clinical tests and clinical trials are submitted to the
FDA
in the form of a biologic license application for marketing approval. The
testing and approval process is likely to require substantial time and effort
and there can be no assurance that any approval will be granted on a timely
basis, if at all. Additional animal studies or clinical trials may be requested
during the FDA review period that may delay marketing approval. After FDA
approval for the initial indications, further clinical trials may be necessary
to gain approval for the use of the product for additional indications. The
FDA
requires that adverse affects be reported to the FDA and may also require
post-marketing testing to monitor for adverse affects, which can involve
significant expense.
The
growth in this industry over the last several decades has been accompanied
by
growth in the extent and complexity of the FDA statutes and regulations, and
of
the intensity of the FDA's regulations of the development, manufacturing,
distribution, marketing, promotion, advertising and use of regulated products.
In the last decade, the FDA legal and regulatory obstacles to product
commercialization and the penalties of non-compliance have been pivotal factors
in the success or failure of companies in our industry. This is particularly
true for small, emerging companies developing biopharmaceuticals and other
biotechnology products.
Risk
Related to Business
You
should carefully consider the following risk factors and all other information
contained herein as well as the information included in this Annual Report
in
evaluating our business and prospects. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties, other
than those we describe below, that are not presently known to us or that we
currently believe are immaterial, may also impair our business operations.
If
any of the following risks occur, our business and financial results could
be
harmed. You should refer to the other information contained in this Annual
Report, including our consolidated financial statements and the related
notes.
We
have a limited operating history.
We
have a
limited operating history and must be considered in the development stage.
Our
company's operations will be subject to all the risks inherent in the
establishment of a developing enterprise and the uncertainties arising from
the
absence of a significant operating history. No assurance can be given that
we
may be able to operate on a profitable basis.
At
present, our success depends solely on the successful commercialization of
IVIG
for our proposed use as a cancer therapy alternative.
The
successful commercialization of IVIG is crucial for our success. This proposed
product and its potential application is in an early stage of clinical and
manufacturing/process development. It faces a variety of risks and
uncertainties. Principally, these risks include the following:
|
• |
future
clinical trial results may show that IVIG at effective doses is not
well
tolerated by the recipients or not efficacious as compared to placebo.
|
|
• |
future
clinical trial results may be inconsistent with ARP's previous preliminary
testing results. Data from our earlier studies may be inconsistent
with
clinical data.
|
|
• |
even
if IVIG is shown to be safe and effective for its intended purpose,
we may
face significant or unforeseen difficulties in obtaining/manufacturing
sufficient quantities at or at reasonable prices.
|
|
• |
our
ability to complete the development and commercialization of IVIG
for our
intended use is significantly dependent upon our ability to obtain
and
maintain experienced and committed partners to assist us with obtaining
clinical and regulatory approvals for, and the manufacturing, marketing
and distribution of IVIG on a worldwide basis.
|
|
• |
even
if IVIG products are successfully developed, commercially produced
and
receive all necessary regulatory approvals, there is no guarantee
that
there will be market acceptance.
|
|
• |
our
competitors may develop therapeutics or other treatments which are
superior or less costly than our own with the result that our products,
even if they are successfully developed, manufactured and approved,
may
not generate significant revenues
|
If
we are
unsuccessful in dealing with any of these risks, or if we are unable to
successfully commercialize our IVIG products for some other reason, it would
likely seriously harm our business.
We
may require significant additional financing before our products may be
marketed.
Until
September 30, 2005 we raised approximately $2.0 Million through private
placements of our securities. These amounts were used to fund our activities
during 2005 and we anticipate that the remaining funds as well as additional
funds raised during October and December of 2005, as described in item 6 -
Management Discussion and Analysis will be sufficient to fund additional
operations for 12 months. Accordingly, our ability to continue develop and,
if
warranted, commercialize our proposed IVIG products, will be dependent upon
our
ability to raise significant additional financing. If we are unable to obtain
such financing, we will not be able to fully develop and commercialize our
technology. Our future capital requirements will depend upon many factors,
including:
-
continued scientific progress in our research and development programs;
-
costs
and timing of conducting clinical trials and seeking regulatory approvals and
patent prosecutions;
-
competing technological and market developments;
-
our
ability to establish additional collaborative relationships; and
-
the
effect of commercialization activities and facility expansions if and as
required.
We
have
limited financial resources and to date no cash flow from operations. There
can
be no assurance that we will be able to obtain financing on acceptable terms
in
light of factors such as the market demand for our securities, the state of
financial markets generally and other relevant factors.
Our
success depends on our ability to attract and retain collaborative partners
over
whom we have limited control.
Our
business will likely depend on our ability to enter into arrangements with
corporate and academic collaborators relating to the testing, manufacturing,
marketing and commercialization of our products. If successful, we are intending
to license or sublicense that property to others. We are planning to try to
have
our partners assume the obligation to manufacture, market and distribute the
resulting products. Consequently, our success depends upon our partners' ability
to perform these tasks. There can be no assurance that we will be able to
establish necessary arrangements on favorable terms, or at all, or that
collaborative agreements will be successful.
Our
success depends on our ability to protect our proprietary rights and operate
without infringing upon the proprietary rights of others.
We
plan
to continue to protect the technology that we consider important to the
development of our business by filing United States and selected foreign patent
applications. We currently hold several patents and pending patent applications
in the United States and corresponding patents and patent applications filed
in
certain other countries over IVIG and its proposed use in cancer therapeutics.
The
patent position of biopharmaceutical and biotechnology firms, is generally
uncertain and involves complex legal and factual questions. We do not know
whether any of our current or future patent applications will result in the
issuance of any patents. Even issued patents may be challenged, invalidated
or
circumvented. Patents may not provide a competitive advantage or afford
protection against competitors with similar technology. Competitors or potential
competitors may have filed applications for, or may have received patents and
may obtain additional and proprietary rights to compounds or processes used
by
or competitive with ours. In addition, laws of certain foreign countries do
not
protect intellectual property rights to the same extent as do the laws of the
United States or Canada.
Patent
litigation is becoming widespread in the biotechnology industry and we cannot
predict how this will affect our efforts to form strategic alliances, conduct
clinical testing or manufacture and market any products under development.
If
challenged, our patents may not be held valid. We could also become involved
in
interference proceedings in connection with one or more of our patents or patent
applications to determine priority of invention. If we become involved in any
litigation, interference or other administrative proceedings, we will likely
incur substantial expenses and the efforts of our technical and management
personnel will be significantly diverted. In addition, an adverse determination
could subject us to significant liabilities or require us to seek licenses
that
may not be available on favorable terms, if at all. We may be restricted or
prevented from manufacturing and selling our products in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to obtain
necessary licenses.
Our
commercial success will also depend significantly on our ability to operate
without infringing the patents and other proprietary rights of third parties.
Patent applications are, in many cases, maintained in secrecy until patents
are
issued. The publication of discoveries in the scientific or patent literature
frequently occurs substantially later than the date on which the underlying
discoveries were made and patent applications are filed. In the event of
infringement or violation of another party's patent, we may be prevented from
pursuing product development or commercialization.
In
addition to patents, we are planning to rely on trade secrets and proprietary
know-how to protect our intellectual property. We are planning to require our
employees, consultants, outside scientific collaborators and sponsored
researchers and other advisors to enter into confidentiality agreements. These
agreements may not provide meaningful protection or adequate remedies in the
event of unauthorized use or disclosure of our proprietary information. In
addition, it is possible that third parties could independently develop
proprietary information and techniques substantially similar to ours or
otherwise gain access to our trade secrets.
Even
if we are able to protect our proprietary rights we may suffer from off-label
use of other IVIG products
Off-label
use is the practice of prescribing drugs
for a
purpose outside the scope of the drug's approved label, most often concerning
the drug's indication. In the United
States,
the
Food
and
Drug Administration
(FDA)
requires numerous clinical trials to prove a drug's safety and efficacy in
treating a given disease or condition. If satisfied that the drug is safe and
effective, the drug's manufacturer and the FDA agree on specific language
describing dosage, route and other information to be included on the drugs
label. More detail is included in the drugs package insert. However, once the
FDA approves a drug for prescription use, they do not attempt to regulate the
practice of medicine and so the physician
makes
decisions based on her or his best judgment. It is entirely legal in the United
States and in many other countries to use drugs off-label.
There
can
be no assurance that IVIG produced for the use of other treatments will not
be
prescribed to cancer patients.
We
may not be able to obtain regulatory approvals that will be necessary to
commercialize our products.
The
manufacture and sale of therapeutic products in the United States and Canada
is
governed by a variety of statutes and regulations in both countries. These
laws
govern the development, testing, manufacture, safety, efficacy, record keeping,
labelling, storage, approval, advertising, promotion, sale and distribution
of
biopharmaceutical products. If our products are ultimately marketed abroad,
they
would also be subject to extensive regulation by foreign governments. There
can
be no assurance that we will be able to obtain the required regulatory approvals
or comply with the applicable regulatory requirements for any of our IVIG
products in development. If we are unable to obtain necessary regulatory
approvals, we may not be able to commercialize our products.
The
IVIG
products currently under development will require significant clinical testing
and investment of significant funds prior to commercialization. Securing
regulatory approval requires us to submit extensive clinical data and supporting
information for each indication to establish the product's efficacy. The process
of completing these processes is likely to take a number of years. Any delay
in
obtaining approvals may:
• adversely
affect the successful commercialization of our product(s) that we develop
• diminish
any
competitive advantages that we may obtain
• adversely
affect our receipt of revenues or royalties
Additionally,
if we fail to comply with applicable regulatory requirements at any stage during
the regulatory process, we may be subject to sanctions, including fines,
suspensions, product recalls, production suspensions, civil penalties and
criminal prosecution, among other actions.
Even
if we are able to commercialize our products, our products may not gain market
acceptance.
Whether
or not any our products gain market acceptance among the medical community
in
general, as well as the degree of market acceptance of any of our products,
will
depend on a number of factors, including:
-
establishment and demonstration of clinical usefulness and safety
-
cost-effectiveness of the products
-
their
potential advantage over alternative products
-
reimbursement policies of governments and third-party payors
-
marketing and distribution support for the products
The
success of other products in our market segment in establishing the market,
their pricing, their clinical usefulness or other potential advantages or
disadvantages, will very likely have a major impact on the success of our
product. If our products do not achieve significant market acceptance, our
business, financial condition and results of operations will be harmed. In
addition, third-party payors such as government health administration
authorities, managed care providers and private health insurers are increasingly
challenging the price and examining the cost effectiveness of medical products
and services. If these third-party payors fail to provide adequate coverage
for
our products, the market acceptance of the products may be adversely affected.
Competition
in our targeted markets is intense and developments by other companies could
render our products or technologies non-competitive.
The
biotechnology industry is highly competitive and subject to significant and
rapid technological change. Developments by other companies within the industry
could render our products or technologies non-competitive. Some of these
products may be more effective or have an entirely different approach or means
of accomplishing the desired effect than our products. We expect technological
competition from biotechnology companies and academic research institutions
to
increase over time.
Many
competitors and potential competitors have substantially greater product
development capabilities and financial, scientific, marketing and human
resources than we do. Our competitors may succeed in developing products earlier
and obtaining regulatory approvals and patent protection for such products
more
rapidly than we can.
Our
lack of commercial manufacturing experience means that we will have to incur
substantial costs to develop manufacturing facilities or contract with third
parties over whom we have limited control to develop our products.
In
order
to be successful, our products must be manufactured and/or obtained in
commercial quantities in compliance with regulatory requirements and at
acceptable costs. We do not have facilities to commercially manufacture our
products under development and we must initially obtain the small amounts of
products we require for clinical studies from contract manufacturing companies.
In order to manufacture our products in commercial quantities, we will need
to
develop manufacturing facilities or contract with third parties to manufacture
our products. We may not be able to develop or otherwise secure access to
appropriate facilities and manufacturing contracts with third parties may not
be
available to us on favorable terms, if at all.
Our
lack of marketing and sales experience means that we must rely on the efforts
of
others to commercialize our products.
We
do not
have a marketing, sales or distribution capability. We intend to enter into
arrangements with third parties to market and sell most of our products. We
may
not be able to enter into marketing and sales arrangements with others on
favorable terms, if at all. To the extent that we enter into marketing and
sales
arrangements with other companies, our revenues will depend on the efforts
of
others and which efforts may not be successful. If we are unable to enter into
satisfactory third-party arrangements, then we must develop a marketing and
sales force, which may need to be substantial in size, in order to achieve
commercial success for any product. We may not successfully develop or obtain
the necessary marketing and sales experience or have sufficient resources to
do
so. If we fail to establish successful marketing and sales capabilities or
to
enter into successful marketing arrangements with third parties, our business,
financial condition and results of operations will be materially adversely
affected.
Our
development programs and future products subject us to the risk of product
liability claims for which we may not be able to obtain adequate insurance
coverage.
Human
therapeutic products involve the risk of product liability claims and associated
adverse publicity. Currently, our principal risks relate to participants in
our
clinical trials who may become ill or suffer unintended consequences from our
IVIG therapeutic. If we ultimately are successful in commercializing a product,
claims might be made directly by consumers, healthcare providers or by
pharmaceutical companies or others selling or using our products. There can
be
no assurance that we will be able to obtain or maintain sufficient and
affordable insurance coverage for any of these claims and, without sufficient
coverage, any claim brought against us could have a materially adverse effect
on
our business, financial condition or results of operations.
Our
business may be harmed if we cannot obtain sufficient quantities of raw
materials.
We
will
be dependent on outside vendors for our entire supply of IVIG. If the third
party suppliers were to cease production or otherwise fail to supply us with
quality IVIG and we were unable to contract on acceptable terms for these
services with alternative suppliers, our ability to produce our products, and
to
conduct testing and clinical trials would be adversely affected.
If
we are unable to enroll sufficient patients and clinical investigators to
complete our clinical trials, our development programs could be delayed or
terminated.
The
rate
of completion of our clinical trials, and those of our collaborators, is
significantly dependent upon the rate of enrollment of patients and clinical
investigators. Patient enrollment is a function of many factors, including:
-
efforts
of the sponsor and clinical sites involved to facilitate timely enrollment
-
patient
referral practices of physicians
-
design
of the protocol
-
eligibility criteria for the study in question
-
perceived risks and benefits of the drug under study
-
the
size of the patient population
-
availability of competing therapies
-
availability of clinical trial sites
-
proximity of and access by patients to clinical sites
We
may
have difficulty obtaining sufficient patient enrollment or clinician
participation to conduct our clinical trials as planned, and we may need to
expend substantial additional funds to obtain access to resources or delay
or
modify our plans significantly. These considerations may lead us to consider
the
termination of ongoing clinical trials or development of a product for a
particular indication.
Our
collaborations with scientific advisors and academic institutions may be subject
to restriction and change.
We
plan
on working with scientific advisors and academic collaborators who will assist
us in our ongoing research and development efforts. These scientists will not
be
our employees and may have other commitments that limit their availability
to
us. If a conflict of interest arises between their work for us and their work
for another entity, we may lose their services. In addition, although we plan
on
our scientific advisors and academic collaborators signing non-disclosure
agreements, it is possible that valuable proprietary knowledge may become
publicly known which would compromise our competitive advantage.
We
are subject to intense competition for skilled personnel and the loss of key
personnel or the inability to attract and retain additional personnel could
impair our ability to conduct our operations.
We
will
be highly dependent on the principal members of our management and scientific
staff, especially Vered Caplan, our Acting Chief Executive Officer, and
Professor Yehuda Shoenfeld, M.D., the Chief Scientist of Gammacan, Ltd. The
loss
of whose services might adversely impact the achievement of our objectives
and
the continuation of existing collaborations. In addition, recruiting and
retaining qualified scientific personnel to perform future research and
development work will be critical to our success. There is currently a shortage
of employees with expertise in our areas of research and clinical and regulatory
affairs, and this shortage is likely to continue. Competition for skilled
personnel is intense and turnover rates are high. Our ability to attract and
retain qualified personnel may be limited.
"Penny
Stock" Rules may restrict the market for the Company's shares
Our
shares of common stock are subject to rules promulgated by the Securities and
Exchange Commission relating to "penny stocks," which apply to companies whose
shares are not traded on a national stock exchange or on the Nasdaq system,
trade at less than $5.00 per share, or who do not meet certain other financial
requirements specified by the Securities and Exchange Commission. These rules
require brokers who sell "penny stocks" to persons other than established
customers and "accredited investors" to complete certain documentation, make
suitability inquiries of investors, and provide investors with certain
information concerning the risks of trading in the such penny stocks. These
rules may discourage or restrict the ability of brokers to sell our shares
of
common stock and may affect the secondary market for our shares of common stock.
These rules could also hamper our ability to raise funds in the primary market
for our shares of common stock.
Our
share price will likely become highly volatile.
Factors
such as announcements of technological innovations, new commercial products,
patents, the development of technologies (by us or others), results of clinical
studies, regulatory actions, publications, financial results or public concern
over the safety of our products or other related products and other factors
could have a significant effect on the market price of our common shares.
Our
issuance of warrants and options to investors, employees and consultants and
the
registration rights for the underlying shares of common stock may have a
negative effect on the trading prices of our common stock as well as a dilutive
effect.
We
have
issued and may continue to issue warrants and options at or below the current
market price. As of September 30, 2005 we had 1,510,000 outstanding warrants
and
options (2,674,998 for the year ended September 30, 2004) to investors employees
and consultants, as more fully described in "Liquidity and Capital Resources"
and Item 10 - Executive compensation. In addition to the dilutive effect of
a
large number of shares and a low exercise price for the warrants and options,
there is a potential that a large number of underlying shares may be sold in
the
open market at any given time, which could place downward pressure on the
trading of our common stock.
Our
Principal Facilities as well as the medical centers were we conduct our clinical
trials are located in Israel, which has historically experienced military and
political unrest.
Our
principal facilities as well as the medical centers were conduct our clinical
trials are located in Israel. As a result, we are directly influenced by the
political, economic and military conditions affecting Israel. Any major
hostilities involving Israel, or the interruption or curtailment of trade
between Israel and its present trading partners, could significantly harm our
business, operating results and financial condition.
In
addition, certain of our officers and employees may be obligated to perform
annual reserve duty in the Israel defense forces and are subject to being called
up for active military duty at any time. All Israeli male citizens who have
served in the army are subject to an obligation to perform reserve duty until
they are between 40 and 51 years old, depending upon the nature of their
military service.
Because
some of our officers and directors are located in non-U.S. jurisdictions, you
may have no effective recourse against the management for misconduct and may
not
be able to enforce judgment and civil liabilities against our officers,
directors, experts and agents.
All
of
our directors and officers are nationals and/or residents of countries other
than the United States, and all or a substantial portion of their assets are
located outside the United States. As a result, it may be difficult for
investors to enforce within the United States any judgments obtained against
our
officers or directors, including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any U.S. state.
Lack
of Anti-Takeover Provisions
We
do not
currently have a shareholder rights plan or any anti-takeover provisions in
our
By-laws. Without any anti-takeover provisions, there is no deterrent for a
take-over of our company, which may result in a change in our management and
directors.
ITEM
2 - PROPERTIES
Our
principal executive offices are located in approximately 635 square feet of
office space in Givat Shmuel. The lease for such space expired on May 19, 2005.
However, we have an option to extend this lease for an additional two periods
of
12 months following May 19, 2005. During May 2005 we extended the agreement
for
a 12 month period ending May 19, 2006. The aggregate annual base rental for
this
space is approximately $8,000.
We
believe that our existing facilities are suitable and adequate to meet our
current business requirements.
ITEM
3 - LEGAL PROCEEDINGS
From
time
to time, the Company may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm the Company's business. The
Company is currently not aware of any such legal proceedings or claims that
we
believe will have, individually or in the aggregate, a material adverse affect
on our business, financial condition or operating results.
ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART
II
ITEM
5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market
Information
Our
common stock commenced trading on the over-the-counter bulletin board in June
2004 under the symbol "GCAN". The following table sets forth the range of the
high and low bid quotations for our common stock for the periods indicated.
Such
market quotations reflect inter-dealer prices, without mark-up, mark-down or
commission and may not necessarily represent actual transactions.
|
2005
|
2004
|
|
High
|
Low
|
High
|
Low
|
|
$
|
$
|
$
|
$
|
First
Quarter
|
2.17
|
1.50
|
-
|
-
|
Second
Quarter
|
1.90
|
1.50
|
-
|
-
|
Third
Quarter
|
1.65
|
0.90
|
0.76
|
0.51
|
Fourth
Quarter
|
1.45
|
0.93
|
2.50
|
0.75
|
As
of
December 28, 2005, there were approximately 62 holders of record of our common
stock and the closing bid quotation of our common stock was $1.30 per share.
Dividend
Policy
We
have
never paid any cash dividends on our capital stock and do not anticipate paying
any cash dividends on the Common Shares in the foreseeable future. We intend
to
retain future earnings to fund ongoing operations and future capital
requirements of our business. Any future determination to pay cash dividends
will be at the discretion of the Board and will be dependent upon our financial
condition, results of operations, capital requirements and such other factors
as
the Board deems relevant.
Issuance
of Securities
On
August
13, 2004 we entered into subscription agreements for the sale of 1,224,998
units
to 11 offshore and 3 accredited investors at a purchase price of $0.75 per
unit
for total proceeds of $918,750. Each Unit consisted of one share of our common
stock and one common stock purchase warrant, which entitles the holder to
purchase an additional common share for $1.50 on or before August 13, 2005.
On
November 11, 2004 we entered into subscription agreements for the sale of
978,000 units to 2 offshore investors and 5 accredited investors at a purchase
price of $1.25 per unit for total proceeds of $1,222,000. Each unit consisted
of
one common share and one common share purchase warrant. Each share purchase
warrant entitles the holder to purchase one additional common share for a period
of two years after the date of the subscription agreement at an exercise price
of $1.50 in the first 15 months and $2.00 for the next nine months.
On
January 25, 2005 the Company entered into a subscription agreement for the
sale
of 32,000 units to an accredited investor at a purchase price of $1.25 per
unit
for a total consideration of $40,000. Each unit consisted of one common share
and one share purchase warrant. Each share purchase warrant entitles the holder
to purchase one additional common share for a period of two years after the
date
of the subscription agreement at an exercise price of $1.50 in the first 15
months and $2.00 for the next nine months.
On
October 31, 2005 the company entered into subscription agreements for the sale
of 666,666 units to an offshore investor at a purchase price of $0.75 per unit
for a total consideration of $500,000. each unit comprising one share of the
Company's common stock and one common share purchase warrant exercisable for
three years for ½ (half) a share at a price of $1.00 per Share.
On
December 20, 2005 the company entered into a subscription agreement for the
sale
of 1,333,334 units to an accredited investor at a purchase price of $0.75 per
unit for a total consideration of $1,000,000. Each unit comprising one share
of
the Company's common stock and one common share purchase warrant exercisable
for
three years for one share at a price of $1.20 per share.
On
December 20, 2005 the company entered into a subscription agreement for the
sale
of 222,222 units to an accredited investor at a purchase price of $0.90 per
unit
for a total consideration of $200,000. each unit comprising one share of the
Company's common stock and one common share purchase warrant exercisable for
three years for ½ (half) a share at a price of $1.15 per share.
For
each
sale of these units we relied on either the exemption from registration provided
for accredited investors pursuant to Rule 506 of Regulation D, or Regulation
S
promulgated under the Securities Act of
1933,
as amended.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF
OPERATION
We
currently have no revenue from operations, we are in a start-up phase with
our
existing assets and we have no significant assets, tangible or intangible.
There
can be no assurance that we will generate revenues in the future, or that we
will be able to operate profitably in the future, if at all. We have incurred
net losses in each fiscal year since inception of our operations.
Our
initial focus over the next several years is to demonstrate efficacy of IVIG
cancer immunotherapy in human clinical trials. Efficacy is the ability of a
drug
or other treatment to produce the desired result when taken by its intended
users. If ultimately proven to be successful, and there can be no assurance
that
it will be, we could be well-positioned to enter a licensing agreement with
a
major pharmaceutical partner for commercial market development and sales.
Since
July 2005, we are conducting a Phase 2 clinical trial in humans to demonstrate
clinical efficacy of IVIG immunotherapy in three major cancers: colon, prostate
and melanoma. To date, 27 patients have been enrolled, out of which 22 have
actually received the IVIG treatment. This phase 2 clinical trial is being
conducted at three medical centers in Israel and preliminary results will likely
be available during the first half of 2006. The trial is due to be completed
by
October 2006, but we will probably continue to monitor patients for a number
of
years after the trial in order to collect additional evidence of efficacy and
potential benefits or adverse effects of the IVIG treatment.
If
successful or promising, and at this preliminary stage there is no assurance
they will be, results of these clinical trials will be used to enter into
discussions with a major pharmaceutical partner and plasma based product
manufacturers to work with us to potentially commercialize the IVIG products.
This commercialization will include pivotal, Phase 3 clinical trials in
accordance with regulatory requirements. Such trials may be long-term trials
and
may require substantial financial resources that we do not presently possess.
We
expect
that it will take a number of years to receive final approval and registration
of an IVIg preparation for use as an anti-cancer reagent. However, the company's
strategy is to collaborate with a suitable IVIg manufacturer and license them
the rights to use IVIg as an anti-cancer agent, wherefore the company's expected
revenue stream is not entirely dependent upon the registration of the IVIg
products.
We
are
also contemplating to conduct additional clinical trials to test new
formulations of IVIG and to test IVIG immunotherapies for different cancers
at
different stages of disease progression with varying dosages and routes of
administration. Our goal is to partner with a pharmaceutical company to conduct
these further Phase 2 and Phase 3 trials, in order to attain broad-based
regulatory approval.
Long
Term Business Strategy
As
noted
previously, if IVIG shows significant promise thorough clinical trials, we
plan
to ultimately seek a strategic commercial partner, or partners, with extensive
experience in commercialization and marketing of cancer drugs and or therapeutic
proteins. It is envisaged that the partner, or partners, would be responsible
for ensuring regulatory approvals and registrations in a timely manner and
for
the penetration of the IVIG immunotherapies to the market. . This planned
strategic partnership, or partnerships, could provide a marketing and sales
infrastructure for our products as well as financial and operational support
for
global trials and other FDA requirements concerning future clinical development.
Our future strategic partner, or partners, could also provide capital and
expertise that would enable the partnership to develop new formulations of
IVIG
cancer immunotherapy suitable for patients at different stages of disease
progression as well as IVIg derivatives.
Other
Research and Development Plans
In
addition to conducting early-stage clinical trials, we plan to conduct research
to develop alternative delivery systems, to determine the optimal dosage for
different patient groups and to investigate alternative sources of
immunoglobulin other than human plasma. We plan to conduct research to isolate
the fraction of IVIG, which is responsible for its anti-metastatic effects
and
to develop a potential synthetic version of IVIG. These formulations will be
suitable for:
· |
Low-dose,
preventative therapy for disease-free, high-risk individuals,
|
· |
Strong
dose for use in conjunction with surgery and other cancer treatments,
and
|
· |
Maintenance
dose for use to prevent recurrence of cancer
growth.
|
Our
plan
is to patent any successful inventions resulting from our further research
activities.
Other
Strategic Plans
We
are
considering in-licensing and other means of obtaining additional lead molecules
for our product portfolio. The aim of this is to create a well-balanced product
portfolio including lead molecules in different stages of development and
addressing different medical needs.
Critical
accounting policies and estimates
Management's
discussion and analysis of the financial condition and results of operations
is
based upon the consolidated financial statements, which have been prepared
in
accordance with accounting principals generally accepted in the United States
of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets and
liabilities, expenses and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates and judgments.
We
base our estimates on various factors, including historical experience that
we
believe to be reasonable under the circumstances, the results of which form
the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other resources. Actual results may differ
from these estimates under different assumptions or conditions.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.
Going
concern assumption
The
financial statements have been prepared assuming the Company will continue
as a
going concern. Through September 30, 2005, the Company has incurred losses
in an
aggregate amount of $1,712,618. Such losses have resulted from the Company’s
activities as a development stage company. We estimate that the cash reserves
available on September 30, 2005 as well as the funds raised during October
and
December will be sufficient to cover the planned expenses for the 12 months
period ending September 30, 2006.
Valuation
of options and warrants
We
granted options to purchase common shares of our company to employees and
consultants as well as issue warrants in connection with fund raising. The
fair
value of the options and warrants is estimated by using the Black Scholes
option-pricing model, and is based on certain assumptions regarding the expected
dividends, expected volatility, expected life of the options and warrant and
the
risk free interest rate.
Deferred
income taxes
Deferred
taxes are determined utilizing the assets and liabilities method based on the
estimated future tax effects of differences between the financial accounting
and
tax bases of assets and liabilities under the applicable tax laws. Deferred
tax
balances are computed using the tax rates expected to be in effect when those
differences reverse. A valuation allowance in respect of deferred tax assets
is
provided if, based upon the weight of available evidence, it is more likely
than
not that some or all of the deferred tax assets will not be realized. The
Company has provided a full valuation allowance with respect to its deferred
tax
assets.
Regarding
the Israeli subsidiary, paragraph 9(f) of FAS 109,"Accounting for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise
from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates or
indexing for tax purposes. Consequently, the abovementioned differences were
not
reflected in the computation of deferred tax assets and liabilities
Results
of Operations
Years
ended September 30, 2005 and 2004
The
following table summarizes certain statement of operations data for the company
for the 12 months period ended September 30, 2005 and 2004 (in
US$):
|
|
Year
ended September 30,
|
|
|
|
2005
|
|
2004
|
|
Research
and development costs
|
|
$
|
545,928
|
|
$
|
166,992
|
|
General
and administrative expenses
|
|
|
666,477
|
|
|
343,524
|
|
Financial
(income) expense, net
|
|
|
(13,873
|
)
|
|
305
|
|
|
|
|
1,198,532
|
|
|
510,821
|
|
Minority
interests in losses of a subsidiary
|
|
|
-
|
|
|
12,375
|
|
Net
loss for the period
|
|
$
|
(1,198,532
|
)
|
$
|
(498,446
|
)
|
Research
& development costs.
Research
and development expenses are the costs incurred in the process of our
pre-clinical trial and clinical trial.
During
the year ended September 30, 2005 the research and development expenses
included, among other, the clinical trial and pre-clinical trial expenses,
the
consultants compensation, costs related to the registered patents as well as
salaries and related expenses. During the year ended September 30, 2004 the
Research and development expenses included the acquisition of in process
research and development as well as the cost related to the registered
patents.
During
the year ended September 30, 2005 the research and development expenses totaled
$545,928, compared to $166,992 during the year ended September 30, 2004. Costs
incurred related to research and development in 2005 reflect a full year of
research and development activity whereas in 2004, the costs were incurred
subsequent to the August 2004 transaction.
The
costs
during the year ended September 30, 2004 was mainly related to the purchase
of
the in-process research and development as well as costs related to the
registered patents. During the year ending September 30, 2005 the costs included
expenses related to the clinical trial including salaries and related expense,
consulting, purchase of IVIg and payments to the medical centers.
General
and administrative expenses
The
general and administrative expense includes the salaries and related expenses
of
the company's management, consulting, legal and professional fees, traveling,
business development costs as well as insurance expenses.
For
the
year ending September 30, 2005 the General and administrative expense totaled
$666,477 compared to $343,524 for the year ended September 30, 2004. Costs
incurred related to general and administrative in 2005 reflect a full year
of
operation whereas in 2004, the costs were incurred subsequent to the August
2004
transaction.
Salaries
and related expenses for the year ending September 30, 2005 totaled $245,197
compared with $81,713 for the year ending September 30, 2004.
For
the
year ending September 30, 2004 consulting expenses totaled $102,579 and were
mainly related to the August 2004 transaction. For the year ending September
30,
2005 we did not incur consulting expenses.
During
the year ending September 30, 2005 we incurred $149,609 related to legal and
professional fees compared to 91,498 during the previous year.
Traveling
expenses for the year ending September 30, 2005 totaled $66,993 compared with
$55,887 for the year ending September 30, 2004.
Business
development costs increased from $5,267 in the year ending September 30, 2004
to
$100,311 for the year ending September 30, 2005 mainly due the increase in
the
company's activities.
Insurance
expense for the year ending September 30, 2005 totaled $56,162 and included
the
directors and officers insurance as well as office and equipment insurance.
The
company did not incur any insurance expenses during the year ending September
30, 2005.
Other
general and administrative expenses for the year ending September 30, 2005
totaled $48,205 compared to $6,580 for the year ending September 30, 2004.
The
increase is also contributed to the increase in company's activities.
Financial
income/expense, net
During
the year ending September 30, 2005 the company generated interest income on
available cash and cash equivalents balance. No interest income was accrued
during the year ending September 30, 2004 due the fact that the funds were
raised in proximity to the year end.
Liquidity
and Capital Recourses
Financing
activities
Through
September 30, 2005, the Company has incurred losses in an aggregate amount
of
$1,712,618. We have financed our operation form private placement of common
stock. Through September 30, 2005 we raised a total of $2,090,510, net of
transaction cost, through private placements and we anticipate that additional
financing will be through similar sources. Our financing activates for the
most
recent two years include the following.
On
August
13, 2004 the Company entered into subscription agreements for the sale of
1,224,998 units at a purchase price of $0.75 per unit for a total consideration
of $918,750.
On
November 11, 2004 the Company entered into subscription agreements for the
sale
of 978,000 units at a purchase price of $1.25 per unit for a total consideration
of $1,222,500
On
January 25, 2005 the Company entered into a subscription agreement for the
sale
of 32,000 units at a purchase price of $1.25 per unit for a total consideration
of $40,000.
On
October 31, 2005, the company entered into subscription agreement for the sale
of 666,666 units at a purchase price of $0.75 per unit for a total consideration
of $500,000.
On
December 20, 2005, the company entered into subscription agreement for the
sale
of 1,333,334 units at a purchase price of $0.75 per unit for a total
consideration of $1,000,000.
On
December 20, 2005, the company entered into subscription agreement for the
sale
of 222,222 units at a purchase price of $0.90 per unit for a total consideration
of $200,000.
Employee's
stock options plan
On
August
17, 2004, our board of directors adopted the 2004 Employees and Consultants
Stock Option Plan in order to attract and retain quality personnel. Under the
2004 Employees and Consultants Stock Option Plan, 5,000,000 shares have been
reserved for the grant of options, which may be issued at the discretion of
our
board of directors from time to time.
On
August
17, 2004, we granted options to Dr. Dan J. Gelvan under the 2004 Employees
and
Consultants Stock Option Plan to allow Dr. Gelvan to purchase up to 1,400,000
common shares of our company at an exercise price of $1.30 per share. On the
same date, we also granted options to Ms. Tovi Ben Zeev under the 2004 Employees
and Consultants Stock Option Plan to allow Ms. Ben Zeev to purchase up to 50,000
common shares of our company at an exercise price of $1.30 per share. The
options granted to Dr. Gelvan and Ms. Ben Zeev are exercisable until August
17,
2014. The options granted to Dr. Gelvan and Ms. Ben Zeev were fortified during
2005 due to their resignation.
On
June,
2005 we granted options to purchase up to 50,000 common shares of our company
at
an exercise price of $1.15 per share, to each of the following Shmuel Levi,
Yair
Aloni, Jean-Pierre Elisha Martinez and Lior Soussan-Gutman.
On
June
2005 we granted options to purchase up to 100,000 common shares of our company
at an exercise price of $1.15 per share to an employee. These options were
fortified during 2005 due to the employee resignation.
On
June
2005 we granted options to purchase up to 50,000 common shares of our company
at
an exercise price of $1.15 per share to three members of our Scientific Advisory
Board.
On
October 6, 2005 we granted options to purchase up to 350,000 common shares
of
our company at an exercise price of $0.93 to Mr. Chaime Orlev.
On
October 20, 2005 we granted options to purchase up to 30,000 common shares
of
our company at an exercise price of $1.35 to an employee.
On
December 21, 2005 we granted options to purchase up to 250,000 common shares
of
our company at an exercise price of $1.34 to an employee.
Summary
of financing activities
Through
September 30, 2005 we raised approximately $2.0 Million through private
placements of our securities. As of the September 30, 2005 the cash and cash
equivalents totaled $713,342. We anticipate that these reserves as well as
the
funds raised during October and December of 2005 will be sufficient to fund
additional operation for 12 months. Continuation of our current operations
after
utilizing the mentioned reserves during the year ending September 30, 2006,
is
dependent upon obtaining financial support from investors until profitable
results are achieved.
Planned
Expenditures
The
estimate expenses referenced herein are in accordance with the business plan.
As
the technology is still in the development stage, it can be expected that there
will be changes in some budgetary items. Our planned expenditures for the next
12 months include:
Category
|
|
Amount
|
|
|
|
|
|
Research
&Development
|
|
$
|
1,077,000
|
|
Marketing
and Business Development
|
|
$
|
162,000
|
|
General
& Administrative Expenses
|
|
$
|
936,000
|
|
Total
|
|
$
|
2,175,000
|
|
We
are
considering an additional clinical trial to demonstrate clinical efficacy of
IVIG, sourced from a specific population, of Melanoma patients.
We will
begin initial process of this trial during 2006. The decision to proceed past
the initial process will be based on several major factors, one of which is
the
ability of our company to attract sufficient financing on acceptable terms.
If
we decide to continue this additional trial
past the
initial process, we anticipate that our related clinical trial costs over the
next 12 months would increase by approximately $850,000.
Contractual
obligations
The
Company signed an agreement for the lease of its office facilities, which was
due to expire on May 19, 2005, with an option to extend it for 2 additional
optional periods of 12 months each. During May 2005 the company extended the
agreement for a 12 month period ending May 19, 2006. The monthly payment is
$679. The future rental payments, on a fiscal year basis under the lease, are
$8,148 in the year ended September 30, 2006.
Rental
expenses for the years ended September 30, 2005 and 2004 were $8,148 and
$ 1,388, respectively
On
February 2, 2005 the company entered into an agreement with Kamada Ltd. pursuant
to which the company ordered 9.5Kg of Vigam Liquid (IVIg) for the purposes
of
the clinical trial. The total purchase price was set at $332,500 ($35/gram)
which is paid according to a delivery schedule. For the year ending September
30, 2005 the company paid a total of $181,650 (for 5.19Kg) under this
agreement.
Israeli
labor laws and agreements require payment of severance pay upon dismissal of
an
employee or upon termination of employment in certain other circumstances.
The
subsidiary's severance pay liability to its employees mainly based upon length
of service and the latest monthly salary (one month’s salary for each year
worked). The liability is partly funded by purchase of insurance policies.
The
policies are the Company’s assets and under labor agreements, subject to certain
limitations, they may be transferred to the ownership of the beneficiary
employees.
Related
party transactions
Mr.
Yair
Aloni, a director of our company, and Professor Yehuda Shoenfeld, M.D., the
Chief Scientist of our subsidiary, Gammacan, Ltd., are authorized signatories
of
ARP Biomed Ltd. for the Intellectual Property Purchase and Sale Agreement we
entered into with ARP Biomed Ltd. on June 11, 2004. Mr. Aloni is the Chief
Executive Officer of ARP and Mr. Shoenfeld is an advisor to ARP.
On
November 4, 2004, Gammacan Ltd. entered into a consulting agreement with PBD
Ltd., a company controlled by Vered Caplan, a principal shareholder of Gammacan
International, Inc. Pursuant to the terms of the agreement, Gammacan Ltd. will
pay PBD a total fee of $50,000 for the services provided as detailed in the
agreement. The services include:
· |
Summary
of pre-clinical data and collection of historical research
data.
|
· |
Preparation
of
clinical trial.
|
· |
Oncologists
survey for cancer indication.
|
· |
Survey
of complementary technologies
|
· |
Survey
of potential IVIg collaborators
|
· |
Initiation
of
contacts with potential partners.
|
On
March
1, 2005, Gammacan International, Inc. and its subsidiary, Gammacan, Ltd.,
entered into an agreement appointing Vered Caplan as Vice President of Business
Development. Ms. Caplan, who will provide at least 20 hours of service per
week,
shall receive a salary of $4,000 per month.
On
June
6, 2005, the Company and Gammacan, Ltd. appointed Vered Caplan as acting Chief
Executive Officer of both companies, effective July 2, 2005. Vered Caplan will
devote approximately 70% of her business time to the affairs of Gammacan, Ltd.
and the Company. Vered Caplan shall receive a salary of $6,475 per
month.
Forward
Looking Statements
This
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements that reflect
management's current views with respect to future events and financial
performance. Those statements include statements regarding the intent, belief
or
current expectations of Gammacan and members of its management team as well
as
the assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures
made
in this report and in our other reports filed with the Securities and Exchange
Commission. Important factors currently known to Management could cause actual
results to differ materially from those in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in the future operating results over time. Gammacan believes that its
assumptions are based upon reasonable data derived from and known about its
business and operations and the business and operations of Gammacan. No
assurances are made that actual results of operations or the results of
GammaCan's future activities will not differ materially from its
assumptions.
ITEM
7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
2005
ANNUAL REPORT
TABLE
OF
CONTENTS
|
|
Page
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC
|
|
|
ACCOUNTING
FIRM - Report of Kesselman & Kesselman
|
|
27
|
REPORT
OF INDEPENDENT AUDITORS -
|
|
|
Report
of Armando C. Ibarra
|
|
28
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
|
|
Balance
sheets
|
|
29
|
Statements
of operations
|
|
30
|
Statements
of changes in stockholders’ equity
|
|
31
|
Statements
of cash flows
|
|
32
|
Notes
to financial statements
|
|
33-46
|
![](logo.jpg) |
|
|
Kesselman
& Kesselman
Certified
Public Accountants (Isr.)
Trade
Tower, 25 Hamered Street
Tel
Aviv 68125 Israel
P.O
Box 452 Tel Aviv 61003
Telephone
+972-3-7954555
Facsimile
+972-3-7954556
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of
GammaCan
International Inc.
(A
Development Stage Company)
We
have
audited the accompanying consolidated balance sheets of GammaCan International
Inc. (A Development Stage Company; hereafter - the "Company") and its subsidiary
as of September 30, 2005 and 2004, and the related consolidated statements
of
operations, changes in stockholders’ equity and cash flows for each of the two
years then ended and cumulatively, for the period from October 1, 2003 to
September 30, 2005. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the cumulative totals
of the Company for the period from October 6, 1998 (date of incorporation)
to
September 30, 2003, which totals reflect a deficit of $15,640 accumulated during
the development stage. Those cumulative totals were audited by other independent
auditors, whose report, dated November 17, 2003, expressed an unqualified
opinion on the cumulative amounts.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit includes assessing the accounting principles
used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company
and
its subsidiary as of September 30, 2005 and 2004, and the consolidated results
of operations, changes in stockholders’ equity and cash flows for each of the
years then ended and cumulatively, for the period from October 1, 2003 to
September 30, 2005, in conformity with accounting principles generally accepted
in the United States of America.
As
explained in note 1a to the financial statements, subsequent to September 30,
2006, the Company may be dependent on obtaining additional funding in order
to
continue its research and development activity.
Kesselman
& Kesselman
|
|
Tel-Aviv,
Israel
|
December
29, 2005
|
ARMANDO
C. IBARRA
Certified
Public Accountants
A
Professional Corporation
Armando C. Ibarra, C.P.A. |
|
Members of the California Society
of |
|
|
Certified Public
Accountants |
Armando Ibarra, Jr., C.P.A.,
JD |
|
Members of the American Institute
of |
|
|
Certified Public
Accountants |
|
Members of the Better
Business Bureau since 1997 |
To
the
Board of Directors of
San
Jose
International, Inc.
(A
Development Stage Company)
We
have
audited the statements of operations, changes in stockholders' equity and cash
flows for the period from October 6, 1998 (date of inception) through September
30, 2003 of San Jose International, Inc. (A Development Stage Company). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on
our audit.
We
conducted our audits in accordance with auditing standards generally accepted
in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of San Jose
International, Inc. for the period from October 6, 1998 (date of inception)
through September 30, 2003 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has had significant losses since inception. This condition raises
substantial doubt as to its ability to continue as a going concern. Management's
plans regarding those matters are also described in Note 1. These financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
|
/s/
Armando C. Ibarra,
CPA-APC |
|
|
Armando C. Ibarra,
CPA-APC |
|
November
17, 2003
Chula
Vista, California
371
'E'
Street, Chula Vista, CA 91910 Tel: (619) 422-1348 Fax: (619) 422-1465
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
(US
$,
except share data)
|
|
September
30,
|
|
|
|
2005
|
|
2004
|
|
A
s s e t s
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
713,342
|
|
$
|
705,868
|
|
Prepaid
expenses
|
|
|
11,619
|
|
|
11,029
|
|
Other
|
|
|
22,029
|
|
|
5,971
|
|
T
o
t a l current assets
|
|
|
746,990
|
|
|
722,868
|
|
|
|
|
|
|
|
|
|
FUNDS
IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT (Note
3)
|
|
|
7,528
|
|
|
-
|
|
PROPERTY
AND EQUIPMENT, NET (Note
2)
|
|
|
10,269
|
|
|
3,899
|
|
T
o
t a l assets
|
|
$
|
764,787
|
|
$
|
726,767
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
159,379
|
|
$
|
140,901
|
|
Payroll
and related accruals
|
|
|
14,655
|
|
|
16,317
|
|
T
o
t a l current liabilities
|
|
|
174,034
|
|
|
157,218
|
|
|
|
|
|
|
|
|
|
LIABILITY
FOR EMPLOYEE RIGHTS UPON RETIREMENT
(Note 3)
|
|
|
13,725
|
|
|
-
|
|
COMMITMENTS
(Note
4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
Preferred
stock, $ 0.0001 par value (20,000,000 shares
|
|
|
|
|
|
|
|
authorized;
none issued and outstanding)
|
|
|
|
|
|
|
|
Common
stock, $ 0.0001 par value (100,000,000 authorized shares
|
|
|
|
|
|
|
|
;
26,231,510 and 25,221,510 shares issued and
|
|
|
|
|
|
|
|
outstanding
as of September 30, 2005 and 2004, respectively)
|
|
|
2,622
|
|
|
2,522
|
|
Additional
paid-in capital
|
|
|
1,767,601
|
|
|
941,619
|
|
Warrants
|
|
|
519,423
|
|
|
139,494
|
|
Deficit
accumulated during the development stage
|
|
|
(1,712,618
|
)
|
|
(514,086
|
)
|
T
o
t a l stockholders' equity
|
|
|
577,028
|
|
|
569,549
|
|
T
o
t a l liabilities and stockholders’ equity
|
|
$
|
764,787
|
|
$
|
726,767
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
(US
$,
except share data)
|
|
Period
from
|
|
|
|
October
6,
|
|
|
Year
ended
|
|
1998*
to
|
|
|
September
30
|
|
September
30
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
RESEARCH
AND DEVELOPMENT COSTS (Note
7)
|
|
$
|
545,928
|
|
$
|
166,992
|
|
$
|
712,920
|
|
GENERAL
AND ADMINISTRATIVE
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
(Note
8)
|
|
|
666,477
|
|
|
343,524
|
|
|
1,025,641
|
|
FINANCIAL
INCOME
|
|
|
(20,703
|
)
|
|
-
|
|
|
(20,703
|
)
|
FINANCIAL
EXPENSES
|
|
|
6,830
|
|
|
305
|
|
|
7,135
|
|
|
|
|
1,198,532
|
|
|
510,821
|
|
|
1,724,993
|
|
MINORITY
INTERESTS IN LOSSES OF A SUBSIDIARY
|
|
|
-
|
|
|
(12,375
|
)
|
|
(12,375
|
)
|
NET
LOSS FOR THE PERIOD
|
|
$
|
(1,198,532
|
)
|
$
|
(498,446
|
)
|
$
|
(1,712,618
|
)
|
BASIC
AND DILUTED LOSS PER 1000
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARES
|
|
$
|
(45.92
|
)
|
$
|
(10.91
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
SHARES
USED IN COMPUTING BASIC AND
|
|
|
|
|
|
|
|
|
|
|
DILUTED
LOSS PER COMMON SHARE
|
|
|
26,099,260
|
|
|
45,672,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Incorporation date, see note 1a.
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(US
$,
except share data)
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
|
|
|
Common
|
|
|
|
Additional
|
|
during
|
|
|
|
|
|
Common
|
|
Stock
|
|
|
|
paid-in
|
|
development
|
|
|
|
|
|
Stock
|
|
Amount
|
|
Warrants
|
|
capital
|
|
stage
|
|
Total
|
|
Beginning
balance
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Stock
issued for cash on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
6, 1998
|
|
|
1,650,000
|
|
|
165
|
|
|
|
|
|
(155
|
)
|
|
|
|
|
10
|
|
Stock
issued for cash on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
9, 1998
|
|
|
2,722,500
|
|
|
272
|
|
|
|
|
|
(107
|
)
|
|
|
|
|
165
|
|
Stock
issued for cash on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
10, 1998
|
|
|
198,000
|
|
|
20
|
|
|
|
|
|
100
|
|
|
|
|
|
120
|
|
Stock
issued for services on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
1, 1998
|
|
|
9,900,000
|
|
|
990
|
|
|
|
|
|
2,010
|
|
|
|
|
|
3,000
|
|
Stock
issued for cash on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
7, 1999
|
|
|
561,000
|
|
|
56
|
|
|
|
|
|
284
|
|
|
|
|
|
340
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,444
|
)
|
|
(3,444
|
)
|
Balance
at September 30, 1999
|
|
|
15,031,500
|
|
|
1,503
|
|
|
|
|
|
2,132
|
|
|
(3,444
|
)
|
|
191
|
|
Stock
issued for cash on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2000
|
|
|
41,250,000
|
|
|
4,125
|
|
|
|
|
|
875
|
|
|
|
|
|
5,000
|
|
Balance
at September 30, 2000
|
|
|
56,281,500
|
|
|
5,628
|
|
|
|
|
|
3,007
|
|
|
(3,444
|
)
|
|
5,191
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,108
|
)
|
|
(3,108
|
)
|
Balance
at September 30, 2001
|
|
|
56,281,500
|
|
|
5,628
|
|
|
|
|
|
3,007
|
|
|
(6,552
|
)
|
|
2,083
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,231
|
)
|
|
(4,231
|
)
|
Balance
at September 30, 2002
|
|
|
56,281,500
|
|
|
5,628
|
|
|
|
|
|
3,007
|
|
|
(10,783
|
)
|
|
(2,148
|
)
|
Contributed
capital
|
|
|
|
|
|
|
|
|
|
|
|
7,025
|
|
|
|
|
|
7,025
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,857
|
)
|
|
(4,857
|
)
|
Balance
at September 30, 2003
|
|
|
56,281,500
|
|
|
5,628
|
|
|
|
|
|
10,032
|
|
|
(15,640
|
)
|
|
20
|
|
Cancellation
of shares at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
8, 2004
|
|
|
(32,284,988
|
)
|
|
(3,228
|
)
|
|
|
|
|
3,228
|
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
62,600
|
|
|
|
|
|
62,600
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on August 13,
|
|
|
1,224,998
|
|
|
122
|
|
|
139,494
|
|
|
779,134
|
|
|
|
|
|
918,750
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on issuance of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
on August 17, 2004 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
third
party
|
|
|
|
|
|
|
|
|
|
|
|
86,625
|
|
|
|
|
|
86,625
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(498,446
|
)
|
|
(498,446
|
)
|
Balance
at September 30, 2004
|
|
|
25,221,510
|
|
|
2,522
|
|
|
139,494
|
|
|
941,619
|
|
|
(514,086
|
)
|
|
569,549
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on November 11,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
978,000
|
|
|
97
|
|
|
367,892
|
|
|
766,630
|
|
|
|
|
|
1,134,619
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on January 25,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
32,000
|
|
|
3
|
|
|
12,037
|
|
|
24,760
|
|
|
|
|
|
36,800
|
|
Issuance
of warrants to Consultants'
|
|
|
|
|
|
|
|
|
|
|
|
34,592
|
|
|
|
|
|
34,592
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,198,532
|
)
|
|
(1,198,532
|
)
|
Balance
at September 30, 2005
|
|
|
26,231,510
|
|
|
2,622
|
|
|
519,423
|
|
|
1,767,601
|
|
|
(1,712,618
|
|
|
577,028
|
|
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(US
$)
|
|
|
Period
from
|
|
|
|
October
6,
|
|
Year
ended
|
|
1998*
to
|
|
September
30
|
|
September
30,
|
|
2005
|
|
2004
|
|
2005
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,198,532
|
)
|
$
|
(498,446
|
)
|
$
|
(1,712,618
|
)
|
Adjustments
required to reconcile net loss to net cash used
|
|
|
|
|
|
|
|
|
|
|
in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Income
and expenses not involving cash flows:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,534
|
|
|
59
|
|
|
2,593
|
|
Common
stock issued for services
|
|
|
|
|
|
|
|
|
3,000
|
|
Minority
interests in losses of a subsidiary
|
|
|
-
|
|
|
(12,375
|
)
|
|
(12,375
|
)
|
Write
off of in process research and development
|
|
|
-
|
|
|
100,000
|
|
|
100,000
|
|
Warrants
granted to consultants
|
|
|
34,592
|
|
|
62,600
|
|
|
97,192
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase
in prepaid expenses
|
|
|
(590
|
)
|
|
(11,029
|
)
|
|
(11,619
|
)
|
Increase
in other current assets
|
|
|
(16,058
|
)
|
|
(5,971
|
)
|
|
(22,029
|
)
|
Increase
(decrease) in current liabilities
|
|
|
16,816
|
|
|
156,218
|
|
|
173,034
|
|
Increase
in liability for employee rights upon retirement
|
|
|
13,725
|
|
|
|
|
|
13,725
|
|
Net
cash used in operating activities
|
|
|
(1,147,513
|
)
|
|
(208,944
|
)
|
|
(1,369,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES -
|
|
|
|
|
|
|
|
|
|
|
funds
in respect of employee rights upon retirement
|
|
|
(7,528
|
)
|
|
-
|
|
|
(7,528
|
)
|
Purchase
of property and equipment
|
|
|
(8,904
|
)
|
|
(3,958
|
)
|
|
(12,862
|
)
|
Net
cash used in investment activities
|
|
|
(16,432
|
)
|
|
(3,958
|
)
|
|
(20,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Contribution
to additional paid in capital
|
|
|
|
|
|
|
|
|
12,319
|
|
Issuance
of common stock and warrants
|
|
|
1,171,419
|
|
|
918,750
|
|
|
2,090,510
|
|
Net
cash provided by financing activities
|
|
|
1,171,419
|
|
|
918,750
|
|
|
2,102,829
|
|
INCREASE
IN CASH AND CASH EQUIVALENTS
|
|
|
7,474
|
|
|
705,848
|
|
|
713,342
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT
|
|
|
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
705,868
|
|
|
20
|
|
|
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
AT
END OF PERIOD
|
|
$
|
713,342
|
|
$
|
705,868
|
|
$
|
713,342
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Incorporation date, see note 1a.
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES:
GammaCan
International Inc. (A Development Stage Company; "the Company") was incorporated
on October 6, 1998, under the laws of the State of Delaware, under the name
of
San Jose International, Inc. The Company has no significant revenues and no
material operations and in accordance with Statement of financial Accounting
Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage
enterprises”, the Company is considered a development stage
company.
On
August
19, 2004, the name of the company was changed from "San Jose International,
Inc." into "GammaCan International, Inc.".
At
this
point in the development stage, the company's focus is to demonstrate efficacy
of IVIG cancer immunotherapy in human clinical trials. In July 2005, the company
commenced Phase 2 clinical trials in humans to demonstrate clinical efficacy
of
IVIG immunotherapy in three major cancers: colon, prostate and melanoma. These
Phase 2 clinical trials are being conducted at three medical centers in Israel
and preliminary results are anticipated during the first half of 2006. The
Phase
2 clinical trial is due to be completed by October 2006.
The
financial statements have been prepared assuming the Company will continue
as a
going concern. Through September 30, 2005, the Company has incurred losses
in an
aggregate amount of $1,712,618. Such losses have resulted from the Company’s
activities as a development stage company. The Company’s management estimates
that it would be able to finance its operations from its current reserves and
the cash raised in October 2005 and in December 2005 (see note 10) for the
coming year. Continuation of the Company’s current operations after utilizing
the mentioned reserves during the year ending September 30, 2006, is dependent
upon obtaining financial support from investors until profitable results are
achieved.
During
August 2004, the Company acquired, through it's then wholly-owned subsidiary,
GammaCan Ltd, all of the in-process research and development ("IPR&D") of
ARP Biomed, Ltd. ("ARP"), an Israeli Company. The IPR&D was acquired for the
purpose of continuing research related to the clinical treatment of various
types of cancer. The purchase price was $100,000 which was settled with the
issuance of 12.5% of GammaCan Ltd's issued and outstanding common shares Under
the terms of the agreement, the Company was required to lend $800,000 to its
subsidiary, to finance the clinical trials and conduct further research and
development utilizing the acquired IPR&D, which was valued at
$100,000.
In
accordance with SAB 51, the gain on issuance of the subsidiary’s stock, totaling
$86,625, was recorded as an addition to paid in capital within “Stockholders’
Equity” due to the fact that there is no certainty of the realization of this
gain.
Costs
of
registered patents, paid by the Company in connection with acquisition of the
in
process research and development, were expensed to research and development
expense.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
On
June
21, 2004, a company owned by the Company's sole officer and director at that
time, was granted an option by one of the shareholders to purchase 100,000
options at $0.01 per share. The economic fair value of the options is recognized
as compensation expense in the amount of $62,600. The options were exercised
on
August 17, 2004.
The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in the United States of
America (“U.S. GAAP”).
|
c. |
Use
of estimates in the preparation of financial
statements
|
The
preparation of the financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the financial statement date and the reported expenses during the reporting
periods. Actual results could differ from those estimates.
The
currency of the primary economic environment in which the operations of the
Company and its subsidiary are conducted is the US dollar (“$” or
“dollar”).
Most
of
the Company’s research and development cost are incurred in dollars. A
significant part of the Company’s capital expenditures and most of its financing
is in dollars.
Thus,
the
functional currency of the Company and its subsidiary is the
dollar.
Transactions
and balances originally denominated in dollars are presented at their original
amounts. Balances in foreign currencies are translated into dollars using
historical and current exchange rates for non-monetary and monetary balances,
respectively. For foreign transactions and other items reflected in the
statements of operations, the following exchange rates are used: (1) for
transactions - exchange rates at transaction dates or average rates and (2)
for
other items (derived from non-monetary balance sheet items such as depreciation)
- historical exchange rates. The resulting transaction gains or losses are
carried to financial income or expenses, as appropriate.
|
e. |
Principles
of consolidation
|
The
consolidated financial statements include the accounts of the Company and its
subsidiary GammaCan Ltd. All material intercompany transactions and balances
have been eliminated in consolidation.
|
f. |
Property
and equipment
|
Property
and equipment are recorded at cost and depreciated by the straight-line method
over the estimated useful lives of the assets.
Annual
rates of depreciation are as follows:
|
|
%
|
Computers
and peripheral equipment
|
|
33
|
Office
furniture and equipment
|
|
6-15
|
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
Deferred
taxes are determined utilizing the assets and liabilities method based on the
estimated future tax effects of differences between the financial accounting
and
tax bases of assets and liabilities under the applicable tax laws. Deferred
tax
balances are computed using the tax rates expected to be in effect when those
differences reverse. A valuation allowance in respect of deferred tax assets
is
provided if, based upon the weight of available evidence, it is more likely
than
not that some or all of the deferred tax assets will not be realized. The
Company has provided a full valuation allowance with respect to its deferred
tax
assets.
Regarding
the Israeli subsidiary, paragraph 9(f) of FAS 109,"Accounting for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise
from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates or
indexing for tax purposes. Consequently, the abovementioned differences were
not
reflected in the computation of deferred tax assets and liabilities
|
h. |
Research
and development
|
Research
and development costs are expensed as incurred.
Acquisition
of in process research and development and the costs of registered patents
that
have not yet reached technological feasibility and have no alternative future
use, are expensed as incurred.
The
company considers all short term, highly liquid investments, which include
short-term deposits with original maturities of three months or less from the
date of purchase that are not restricted as to withdrawal or use and are readily
convertible to known amounts of cash, to be cash equivalents.
|
j. |
Comprehensive
income (loss)
|
The
Company has no other comprehensive income (loss) components other than net
loss
for the reported periods.
Basic
and
diluted net losses per common share are presented in accordance with FAS No.
128
“Earning per share” (“FAS128”), for all periods presented. Outstanding stock
options and warrants have been excluded from the calculation of the diluted
loss
per share because all such securities are anti-dilutive for all periods
presented. The total number of common stocks options and warrants excluded
from
the calculations of diluted net loss was 1,510,000 for the year ended September
30, 2005 (2,674,998 for the year ended September 30, 2004).
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
l. |
Stock
based compensation
|
The
Company accounts for employee stock based compensation in accordance with
Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to
Employees” (“APB 25”) and related interpretations. In accordance with FAS 123 -
“Accounting for Stock-Based Compensation” (“FAS 123”), the Company discloses pro
forma data assuming the Company had accounted for employee stock option grants
using the fair value-based method defined in FAS 123.
As
to
services from consultants, the Company applies EITF 96-18 “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services”.
The
following table illustrates the pro - forma effect on net loss and loss per
common share assuming the Company had applied the fair value recognition
provisions of FAS 123 to its stock-based employee compensation:
|
|
Year
ended September 30,
|
|
|
|
2005
|
|
2004
|
|
Net
loss as reported
|
|
$
|
(1,198,532
|
)
|
$
|
(498,446
|
)
|
Add:
pro forma stock based employee compensation
|
|
|
|
|
|
|
|
expense
determined under fair value
|
|
|
|
|
|
|
|
method
for all awards, net of related tax effects
|
|
|
(153,287
|
)
|
|
(122,411
|
)
|
Recognize
the reversal of the pro forma stock based employee compensation
expense
|
|
|
|
|
|
|
|
determined
under fair value method due to forfeiture
|
|
|
|
|
|
|
|
of
awards granted to employees (see note 5b)
|
|
|
118,193
|
|
|
|
|
Pro
forma net loss
|
|
$
|
(1,233,626
|
)
|
$
|
(620,857
|
)
|
Net
loss per 1000 common shares:
|
|
|
|
|
|
|
|
Basic
and diluted loss per 1000 shares - as reported
|
|
$
|
(45.92
|
)
|
$
|
(10.91
|
)
|
Basic
and diluted loss per 1000 shares - pro forma
|
|
$
|
(47.27
|
)
|
$
|
(13.59
|
)
|
|
m.
|
Recently
issued accounting
pronouncements:
|
|
1) |
In
December 2004, the Financial Accounting Standards Board ("FASB")
issued
the revised Statement of Financial Accounting Standards ("FAS") No.
123,
Share-Based
Payment (FAS 123R),
which addresses the accounting for share-based payment transactions
in
which the Company obtains employee services in exchange for (a) equity
instruments of the Company or (b) liabilities that are based on the
fair
value of the Company’s equity instruments or that may be settled by the
issuance of such equity instruments. This Statement eliminates the
ability
to account for employee share-based payment transactions using APB
Opinion
No. 25, Accounting
for Stock Issued to Employees,
and requires instead that such transactions be accounted for using
the
grant-date fair value based method. This Statement will be effective
as of
the beginning of the first annual reporting period that begins after
December 15, 2005, for small business issuers (October 1, 2006 for
the Company). Early adoption of FAS 123R is encouraged.
|
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
This
Statement applies to all awards granted or modified after the Statement’s
effective date. In addition, compensation cost for the unvested portion of
previously granted awards that remain outstanding on the Statement’s effective
date shall be recognized on or after the effective date, as the related services
are rendered, based on the awards’ grant-date fair value as previously
calculated for the pro-forma disclosure under FAS 123.
The
Company expects that upon the adoption of FAS 123R, the Company will apply
the
modified prospective application transition method, as permitted by the
Statement. Under such transition method, upon the adoption of FAS 123R, the
Company’s financial statements for periods prior to the effective date of the
Statement will not be restated.
|
2) |
On
June 7, 2005, FASB issued Statement No. 154, “Accounting Changes
and Error Corrections, a replacement of APB Opinion No. 20,
Accounting Changes, and Statement No. 3, Reporting Accounting Changes
in Interim Financial Statements” (“SFAS No. 154”). SFAS No. 154
changes the requirements for the accounting for, and reporting of,
a
change in accounting principle. Previously, most voluntary changes
in
accounting principles were required to be recognized by way of a
cumulative effect adjustment within net income during the period
of the
change. SFAS No. 154 requires retrospective application to prior
periods’ financial statements, unless it is impracticable to determine
either the period-specific effects or the cumulative effect of the
change.
SFAS No. 154 is effective for accounting changes made in fiscal years
beginning after December 15, 2005; however, SFAS No. 154 does
not change the transition provisions of any existing accounting
pronouncements. The Company does not believe adoption of SFAS No. 154
will have a material effect on its consolidated financial position,
results of operations or cash flows.
|
Certain
figures in respect of prior years have been reclassified to conform to the
current year presentation.
NOTE
2 - PROPERTY AND EQUIPMENT, net
|
a. |
Propertyand
equipment are composed as follows:
|
|
|
September
30,
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
Office
furniture and equipment
|
|
$
|
7,400
|
|
$
|
2,068
|
|
Computers
and peripheral equipment
|
|
|
5,462
|
|
|
1,890
|
|
|
|
|
12,862
|
|
|
3,958
|
|
Less
- accumulated depreciation
|
|
|
2,593
|
|
|
59
|
|
|
|
|
10,269
|
|
$
|
3,899
|
|
|
b. |
Depreciation
expense totaled $2,534 and $59 in the years ended September 30, 2005
and
2004, respectively.
|
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
3 - EMPLOYEE RIGHTS UPON RETIREMENT
|
a. |
Israeli
labor laws and agreements require payment of severance pay upon dismissal
of an employee or upon termination of employment in certain other
circumstances. The subsidiary's severance pay liability to its employees,
mainly based upon length of service and the latest monthly salary
(one
month’s salary for each year worked), is reflected by the balance sheet
accrual under the “liability for employee rights upon retirement”. The
Company records the liability as if it was payable at each balance
sheet
date on an undiscounted basis. The liability is partly funded by
purchase
of insurance policies and the amounts funded are included in the
balance
sheet under investments and long-term receivables, as “funds in respect of
employee rights upon retirement”. The policies are the Company’s assets
and under labor agreements, subject to certain limitations, they
may be
transferred to the ownership of the beneficiary employees.
|
|
b. |
The
severance pay expenses for the years ended September 30, 2005, were
$13,725.
|
|
c. |
Cash
flows information regarding the company’s liability for employee rights
upon retirement:
|
1. |
The
Company expects to contribute $20,000 in respect of severance pay
in
2006.
|
2. |
Due
to the relatively young age of the subsidiary's employees, benefit
payments to employees reaching retirement age in the next 10 years,
are
not material. The amounts were determined based on the employees’ current
salary rates and the number of service years that will accumulate
upon
their retirement date. These amounts do not include amounts that
might be
paid to employees who will cease working for the subsidiary before
their
normal retirement age.
|
NOTE
4 - COMMITMENTS:
|
a. |
The
Company signed an agreement for the lease of its office facilities,
which
expired on May 19, 2005, with an option to extend it for 2 additional
optional periods of 12 months each. During May 2005 the company extended
the agreement for a 12 month period ending May 19, 2006. The monthly
payment is $679. The future rental payments, on a fiscal year basis
under
the lease, are $8,148 in the year ended September 30, 2006.
|
Rental
expenses for the years ended September 30, 2005 and 2004 were $8,148 and $1,388,
respectively
|
b. |
On
February 2, 2005 the company entered into an agreement with Kamada
Ltd.
pursuant to which the company ordered 9.5Kg of Vigam Liquid (IVIg)
for the
purposes of the clinical trial. The total purchase price was set
at
$332,500 ($35/gram) which is paid according to a delivery schedule.
For
the year ending September 30, 2005 the company paid a total of $181,650
(for 5.19Kg) under this agreement.
|
|
c. |
As
to the employment agreement with the acting CEO of the Company, see
note
9e.
|
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
5 - STOCK HOLDERS’ EQUITY:
The
Company’s shares are on the over-the-counter bulletin board. The quoted price
per share, as of September 30, 2005 was US$1.02.
On
April
20, 2004 the Company affected a 16.5 to 1 forward stock split of its Common
Stock. All shares and per share amounts have been retroactively restated to
reflect the 16.5 to 1 stock split.
Following
the forward split the Company also reduced the authorized capital of its common
stock from 1,320,000,000 shares to 100,000,000 shares.
On
June
8, 2004, the Company's former main stockholder returned 32,284,988 shares of
common stock to the treasury for cancellation. Accordingly, an amount of $3,228
was deducted from the "Common stock amount" balance and transferred to the
"Additional paid in capital" balance.
On
August
13, 2004 the Company entered into subscription agreements for the sale of
1,224,998 units at a purchase price of $0.75 per unit for a total consideration
of $918,750. Each unit consisted of one Common Share in the Company and one
share purchase warrant, which entitles the holder to purchase an additional
Common Share for $1.50 on or before August 13, 2005. The fair value of the
warrants estimated by using the Black Scholes option-pricing model is $139,494,
and is based on the following assumptions: dividend yield of 0% for all years;
expected volatility of 103%; risk-free interest rates of 5.4%; and expected
lives of 1 year.
On
November 11, 2004 the Company entered into subscription agreements for the
sale
of 978,000 units at a purchase price of $1.25 per unit for a total consideration
of $1,222,500 (“The November issuance”). Each unit consisted of one common share
and one share purchase warrant. Each share purchase warrant entitles the holder
to purchase one additional common share for a period of two years after the
date
of the subscription agreement at an exercise price of $1.50 in the first 15
months and $2.00 for the next nine months. The consideration was allocated
to
the shares and options issued based on relative fair value. The fair value
allocated to the warrants, estimated by using the Black Scholes option-pricing
model is $367,892, which is based on the following assumptions: dividend yield
of 0% for all years; expected volatility of 105%; risk-free interest rates
of
5.4%; and expected lives of 2 year.
Transaction
costs of $87,881 were paid in connection with this subscription agreement.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
5 - STOCK HOLDERS’ EQUITY (continued):
On
January 25, 2005 the Company entered into a subscription agreement for the
sale
of 32,000 units at a purchase price of $1.25 per unit for a total consideration
of $40,000. Each unit consisted of one common share and one share purchase
warrant. Each share purchase warrant entitles the holder to purchase one
additional common share for a period of two years after the date of the
subscription agreement at an exercise price of $1.50 in the first 15 months
and
$2.00 for the next nine months. The consideration was allocated to the shares
and options issued based on relative fair value. The fair value allocated to
the
warrants estimated by using the Black Scholes option-pricing model is $12,037,
based on the same assumptions that used in the November issuance.
Transaction
costs of $3,200 were paid in connection with this subscription
agreement.
As
to the
subscription agreements entered to in October and December 2005, see note
10.
|
b.
|
Summary
of the company’s stock options
plans
|
On
August
17, 2004, the company’s board of directors adopted the 2004 Employees and
Consultants Stock Option Plan (hereafter - the Stock Option Plan). Under the
Plan 5,000,000 shares have been reserved for the grant of options, which may
be
issued at the discretion of the Company’s board of directors from time to time.
Under this Plan, each option is exercisable to purchase one common share of
$
0.0001 par value of the Company.
The
options may be exercised after vesting and only in accordance with the
following:
1. |
On
the first anniversary commencing the grant date - 25% of the
options.
|
2. |
On
the last day of each of the 36 months following the first anniversary
of
the grant date, the options shall vest in equal monthly
installments.
|
In
August
2004, 1,450,000 options were granted under the plan (of which 1,400,000 were
granted to the Company’s CEO). These options were forfeited during June and
October 2005 due to the resignation of the related employees.
The
exercise price has been determined at $1.3 per share. The fair value of the
above options on the date of grant was estimated by using Black Scholes
option-pricing model as $1,662,964, and was based on the following assumptions:
dividend yield of 0%; expected volatility of 103%; risk-free interest rates
of
5.4%; and expected lives of 7.88 years.
In
June
2005, 50,000 options were granted under the Stock Option Plan to each of four
board members (total - 200,000 options).
The
exercise price has been determined at $1.15 per share, which was equivalent
to
the traded market price on the date of grant. The fair value of the above
options on the date of grant was estimated by using Black Scholes option-pricing
model as $186,588, and was based on the following assumptions: dividend yield
of
0%; expected volatility of 87%; risk-free interest rates of 4%; and expected
lives of 7.88 years.
In
June
2005, 100,000 options were granted under the Stock Option Plan to an employee
of
the subsidiary. These options were forfeited during October 2005 due to the
resignation of the employee.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
5 - STOCK HOLDERS’ EQUITY (continued):
The
exercise price has been determined at $1.15 per share, which was equivalent
to
the traded market price on the date of grant. The fair value of the above
options on the date of grant was estimated by using Black Scholes option-pricing
model as $84,464, and was based on the following assumptions: dividend yield
of
0%; expected volatility of 72%; risk-free interest rates of 4%; and expected
lives of 7.88 years.
A
summary
of the status of the company’s plan as of September 30, 2005 and 2004, and
changes during the years ended on those dates, is presented below:
|
|
Year
ended September 30
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
|
price
|
|
|
|
price
|
|
|
|
|
|
$
|
|
|
|
$
|
|
For
options granted to
|
|
|
|
|
|
|
|
|
|
employees:
|
|
|
|
|
|
|
|
|
|
Options
outstanding at
|
|
|
|
|
|
|
|
|
|
beginning
of year
|
|
|
1,450,000
|
|
$
|
1.3
|
|
|
-
|
|
$
|
-
|
|
Changes
during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
300,000
|
|
|
1.15
|
|
|
1,450,000
|
|
|
1.3
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,400,000
|
)
|
|
1.3
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Options
outstanding at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
350,000
|
|
|
0.82
|
|
|
1,450,000
|
|
|
1.3
|
|
Options
exercisable at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Weighted
average fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value
of options granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during
the year
|
|
$
|
0.90
|
|
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
of
the outstanding options were exercisable at the end of each year.
In
June
2005, 50,000 options were granted under the Stock Option Plan to each of three
scientific advisors (total - 150,000 options).
The
exercise price has been determined at $1.15 per share, which was equivalent
to
the traded market price on the date of grant. The fair value of the above
options is estimated by using Black Scholes option-pricing model as $117,475,
and was based on the following assumptions: dividend yield of 0% for all years;
expected volatility of 80%; risk-free interest rates of 4.5%; and expected
lives
of 7.88 years.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
5 - STOCK HOLDERS’ EQUITY (continued):
In
accordance with SFAS 123 and EITF 96-18, options granted to consultants and
Scientific Advisory Board members (non-employees) are recorded at fair value
based on an option-pricing model and periodically revalued over the related
service periods. The Company recorded stock compensation of $34,590 during
the
year ended September 2005, related to consulting services.
The
company did not grant options to non-employees prior to the year ended September
30, 2005. The only options granted to non-employees during the year ended
September 30, 2005, were to its scientific advisors, as described above.
As
to
grants of stock options in October and December of 2005, see note
10.
NOTE
6 - TAXES ON INCOME
|
a. |
Deferred
income taxes:
|
|
September
30,
|
|
2005
|
2004
|
|
|
|
Tax
loss carryforwards
|
$268,935
|
$100,369
|
Valuation
allowance
|
(268,935)
|
(100,369)
|
Net
deferred tax assets
|
$-
|
$-
|
Realization
of deferred tax assets is dependent upon sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income. As the achievement of required future
taxable income is uncertain, the Company recorded a full valuation
allowance.
As
of
September 30, 2005, the Company has an accumulated tax loss carryforward of
approximately $439,046 (September 30, 2004 - $240,000), which will expire 20
years from the date the loss was incurred.
The
Israeli subsidiary is taxed in accordance with Israeli tax laws.
Under
the
Income Tax (Inflationary Adjustments) Law, 1985, results for tax purposes are
measured in real terms, in accordance with the changes in the Israeli consumer
price index (“CPI”). The Israeli subsidiary is taxed under this
law.
As
of
September 30, 2005, the Company’s Israeli subsidiary has an accumulated tax loss
carryforward of approximately $1,151,579 (September 30, 2004 approximately
-
$200,000). Under Israeli tax laws, carryforward tax losses are linked to the
Israeli CPI. The Israeli loss carryforwards have no expiration date.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
7 - RESEARCH AND DEVELOPMENT COSTS:
|
|
Year
ended
|
|
|
|
September
30,
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Clinical
trials
|
|
$
|
239,200
|
|
$
|
-
|
|
Consulting
|
|
|
127,082
|
|
|
7,500
|
|
Acquisition
of in process research and development
|
|
|
-
|
|
|
100,000
|
|
Salaries
and related expenses
|
|
|
91,337
|
|
|
-
|
|
Costs
of registered patents
|
|
|
50,916
|
|
|
39,554
|
|
Compensation
costs in respect of warrants granted to
|
|
|
|
|
|
|
|
consultants
|
|
|
34,590
|
|
|
-
|
|
Other
|
|
|
2,803
|
|
|
19,938
|
|
|
|
$
|
545,928
|
|
$
|
166,992
|
|
NOTE
8 - GENERAL AND ADMINISTRATIVE EXPENSES
|
|
Year
ended
|
|
|
|
September
30,
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Payroll
and related expenses
|
|
$
|
245,197
|
|
$
|
81,713
|
|
Consulting
|
|
|
-
|
|
|
102,579
|
|
Travel
|
|
|
66,993
|
|
|
55,887
|
|
Professional
services
|
|
|
149,609
|
|
|
91,498
|
|
Insurance
|
|
|
56,162
|
|
|
-
|
|
Business
development
|
|
|
100,311
|
|
|
5,267
|
|
Other
|
|
|
48,205
|
|
|
6,580
|
|
|
|
$
|
666,477
|
|
$
|
343,524
|
|
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
9 - RELATED PARTIES - TRANSACTIONS:
|
a. |
As
to the employment contract with the Company’s CEO see e below.
Payroll
and related expenses in respect of the Company’s CEO for the year ended
September 30, 2005 total $53,330.
|
b.
|
As
to options granted to the former Company’s CEO, see note
5b.
|
Payroll
and related expenses in respect of the former Company’s CEO for the year ended
September 30, 2005 total $114,877.
c. |
On
November 4, 2004, the Subsidiary entered into a consulting agreement
with
PBD Ltd., a company controlled by a principal shareholder of the
Company,
who effective July 2, 2005 was the CEO (see note e below) (the
"Consultant"). Pursuant to the terms of the agreement, the Subsidiary
paid
the Consultant a total fee of $50,000 for the services provided as
detailed in the agreement. Mainly the services include summary
of pre-clinical data and collection of historical research data,
preparation of clinical trial, oncologist's survey for cancer indication,
a survey of complementary technologies, a survey of potential IVIg
collaborators and initiation of contacts with potential partners.
The
amount paid to the Consultant is included in "Research & development
expenses".
|
The
Subsidiary also reimbursed the Consultant for out of pocket expenses incurred
in
connection with performance under the agreement only if it has been approved
in
writing by the Subsidiary. The expenses of hiring a clinical expert to advice
on
the specifics of the protocol, for a total cost that will not exceed $8,000,
were approved by the Subsidiary.
d. |
On
March 1, 2005 the Company and its Subsidiary, entered into an agreement
appointing a related party as Vice President of Business Development,
in
consideration of a salary of $4,000 per month, commencing February
2005.
|
e. |
Effective
July 2, 2005, a related party will serve as the CEO of the Subsidiary
and
as acting CEO of the Company, devoting approximately 70% of her business
time to the affairs of the Company and its subsidiary for a monthly
salary
of $6,475.
|
NOTE
10 - SUBSEQUENT EVENTS:
a. |
On
October 31, 2005, the company entered into subscription agreement
for the
sale of 666,666 units at a purchase price of $0.75 per unit for a
total
consideration of $500,000. Each unit comprising one share of the
Company's
common stock and one common share purchase warrant exercisable for
three
years. Every 2 warrants can be exercisable to one Share at a price
of
$1.00 per Share.
|
In
connection with the subscription agreement the company paid $50,000 cash fee
to
a third party which assisted in securing the agreement, as well as issued 66,666
units, each comprising of one common share purchase warrant exercisable for
three years. Every warrant can be exercisable to one Share at a price of $1.50
per Share.
The
value
allocated to the warrants estimated by using the Black Scholes option-pricing
model is $82,784. The value was based on the following assumptions: dividend
yield of 0%; expected volatility of 80%; risk-free interest rates of 4.4%;
and
expected lives of 3 years.
b. |
On
October 6, 2005, 350,000 options were granted under the Stock Option
Plan.
The exercise price has been determined at $0.93 per share which was
equivalent to 90% of the traded market price on the date of grant.
|
The
options may be exercised after vesting and only in accordance with the
following:
|
1. |
On
the first anniversary commencing the grant date - 30,000
options.
|
|
2.
|
On
the last day of each of the 36 months following the first anniversary
of
the grant date, the options shall vest in equal monthly
installments.
|
The
fair
value of the above options on the date of grant estimated by using Black Scholes
option-pricing model is $283,262. The value was based on the following
assumptions: dividend yield of 0%; expected volatility of 80%; risk-free
interest rates of 4.5%; and expected lives of 7.59 years.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
10 - SUBSEQUENT EVENTS
(continued):
c. |
On
October 20, 2005, 30,000 options were granted under the Stock Option
Plan.
The exercise price has been determined at $1.35 per share which was
equivalent to the traded market price on the date of grant. As to
the
exercise terms of the options - see note
5b.
|
The
fair
value of the above options on the date of grant estimated by using Black Scholes
option-pricing model is $32,637. The
value
was based on the following assumptions: dividend yield of 0%; expected
volatility of 85%; risk-free interest rates of 4.5%; and expected lives of
7.85
years.
d. |
On
December 13, 2005, the subsidiary entered into a Research and Licensing
Agreement with Tel Hashomer Medical Research Infrastructure and Services
Ltd. (“THM”), pursuant to which the Company has agreed to provide THM with
$200,000 in funding for THM to conduct a research project relating
to the
mechanism of action for IVIg, hyper-immune IVIg and use of IVIg as
an
anti-cancer treatment. In exchange THM has granted the subsidiary
an
exclusive license to any resulting technology and information.
|
e. |
On
December 20, 2005, the company entered into subscription agreement
for the
sale of 1,333,334 units at a purchase price of $0.75 per unit for
a total
consideration of $1,000,000. Each unit comprising one share of the
Company's common stock and one common share purchase warrant exercisable
for three years. Every warrant can be exercisable to one Share at
a price
of $1.20 per Share.
|
In
connection with the subscription agreement the company paid $100,000 cash fee
to
third parties who assisted in securing the agreement, as well as issued 133,332
units, each comprising of one common share purchase warrant exercisable for
three years. 66,666 warrants can be exercisable to 66,666 Share at a price
of
$1.25 per Share, and 66,666 warrants can be exercisable to 66,666 Share at
a
price of $1.50 per Share.
The
value
allocated to all warrants estimated by using the Black Scholes option-pricing
model is $294,443. The value was based on the following assumptions: dividend
yield of 0%; expected volatility of 81%; risk-free interest rates of 4.4%;
and
expected lives of 3 years.
f. |
On
December 20, 2005, the company entered into subscription agreement
for the
sale of 222,222 units at a purchase price of $0.90 per unit for a
total
consideration of $200,000. Each unit comprising one share of the
Company's
common stock and one common share purchase warrant exercisable for
three
years. Every 2 warrants can be exercisable to one Share at a price
of
$1.15 per Share.
|
The
value
allocated to all warrants estimated by using the Black Scholes option-pricing
model is $29,143. The value was based on the following assumptions: dividend
yield of 0%; expected volatility of 81%; risk-free interest rates of 4.4%;
and
expected lives of 3 years.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
10 - SUBSEQUENT EVENTS
(continued):
g. |
On
December 21, 2005, 250,000 options were granted under the Stock Option
Plan. The exercise price has been determined at $1.34 per share which
was
equivalent to the traded market price on the date of grant. As to
the
exercise terms of the options - see note
5b.
|
The
fair
Value of the above mentioned options on the date of the grant estimated by
using
the Black Scholes option-pricing model is $269,449. The value was based on
the
following assumptions: dividend yield of 0%; expected volatility of 85%;
risk-free interest rates of 4.5%; and expected lives of 7.85 years.
ITEM
8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL
DISCLOSURE.
None
ITEM
8A - CONTROLS AND PROCEDURES
Evaluation
of disclosure controls and procedures.
An
evaluation was performed under the supervision and with the participation of
our
management, including the chief executive officer and the chief financial
officer, of the effectiveness of the design and operation of our disclosure
procedures. Based on management's evaluation as of the
end
of the period covered by this Annual Report, our principal executive officer
and
chief financial officer have concluded that our disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act")) were sufficiently
effective to ensure that the information required to be disclosed by us in
the
reports that we file under the Exchange Act is gathered, analyzed and disclosed
with adequate timeliness, accuracy and completeness.
Changes
in internal controls.
There
were no changes in the Company’s internal controls over financial reporting,
that occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially effect, the Company’s internal
control over financial reporting.
PART
III
ITEM
9 - DIRECTORS AND OFFICERS OF THE REGISTRANT
The
following persons are our executive officers and directors as of the date
hereof:
Name
|
Position
Held with our Company
|
Age
|
Date
First
Elected
or Appointed
|
Vered
Caplan
|
Acting
Chief Executive Officer of our company and Gammacan, Ltd.
|
37
|
March
1, 2005
|
Shmuel
Levi
|
Director
of our company and Gammacan, Ltd.
|
55
|
August
17, 2004
|
Yair
Aloni
|
Director
of our company and Gammacan, Ltd.
|
55
|
August
17, 2004
|
Prof.
Yehuda Shoenfeld, M.D.
|
Chief
Scientist of Gammacan, Ltd.
|
56
|
August
17, 2004
|
Jean-Pierre
Elisha Martinez
|
Director
of our company and Gammacan, Ltd.
|
53
|
January
7,2005
|
Dr.
Lior Soussan-Gutman
|
Director
of our company and Gammacan, Ltd.
|
41
|
February
13,2005
|
Chaime
Orlev
|
Chief
Financial Officer of our company and Gammacan, Ltd.
|
35
|
October
6, 2005
|
The
appointment of the directors is valid until the next annual shareholders
meeting.
Business
Experience
The
following is a brief account of the education and business experience during
at
least the past five years of each director, executive officer and key employee,
indicating the principal occupation during that period, and the name and
principal business of the organization in which such occupation and employment
were carried out.
Vered
Caplan
Ms.
Caplan is Acting CEO of GammaCan International, Inc. and CEO of GammaCan Ltd.
Ms. Caplan is very active entrepreneur in the Israeli life-science arena. She
has been involved in the founding and management of more than ten ventures
and
brings to the company a highly developed network as well as profound business
development capabilities. Ms. Caplan holds a B.Sc. in mechanical engineering,
a
M.Sc. in Bio-medical engineering
Mr.
Yair Aloni
Mr.
Aloni
is a director of our company and our subsidiary, Gammacan, Ltd. He brings over
25 years experience as a senior executive in a number of companies. From 2002
to
present, he has served as the Chief Executive Officer of Solidimension Ltd.,
a
private company specializing in 3D printers. From 1996 to 2002, Mr. Aloni served
as the Chief Executive Officer of Avnan Yazamut Ltd., a company involved in
the
investments in companies in the fields of high technology, biotechnology and
electronics. Prior to 1996, Mr. Aloni worked as an executive or senior manager
of several electronic and auto parts companies.
Mr.
Shmuel Levi
Mr.
Levi
is a director of our company and our subsidiary, Gammacan, Ltd. He has held
senior level financial management positions for over 28 years, for major
organizations, high tech and start-up companies in Israel. These include serving
as the Chief Financial Officer of Rafael Group from 1996 to 1999, the Corporate
Finance Manager of Strauss Group from 1991 to 1996 and a Senior Vice President
for Finance of North Hills Israel Ltd. For the last 5 years, Mr. Levi
concentrated in high-tech and start-up companies using his expertise in
performing due diligence, fundraising, public offerings and structuring
financial and legal transactions. From 2003 to 2004, he acted as the Chief
Financial Officer of Pluristem Life Systems, Inc., a biotechnology company
whose
shares are quoted on the NASD Over the Counter Bulletin Board. Mr. Levi received
a M.Sc. and B.Sc. in Economics and Management from the Technion, Israel
Institute of Technology in 1976.
Prof.
Yehuda Shoenfeld, M.D.
Prof.
Shoenfeld is the Chief Scientist of our subsidiary, Gammacan, Ltd. He is one
of
Israel's leading physicians and scientists in the field of immunology. Since
1989, Prof. Shoenfeld has lead the Department of Internal Medicine "B", and
the
Research Center for Autoimmune Diseases at the Sheba Medical Center, Israel's
largest hospital. In 1990, Dr. Shoenfeld was appointed a Professor of Medicine
at Tel Aviv University and incumbent of the Laura Schwartz-Kipp Chair for
Autoimmunity. He is the author of more than 1,000 scientific papers and more
than 40 scientific books.
Mr.
Jean-Pierre Elisha Martinez
Jean-Pierre
Elisha Martinez is a director of our company and our subsidiary, Gammacan,
Ltd.
Mr. Martinez, age 53, is a biomedical researcher at the Tel-Aviv University,
specializing in cellular engineering and bio-fluid dynamics. From September
1999
through November 2004, Mr. Martinez was a researcher and lecturer at Tel Aviv
University as a PhD student, with a focus on Cellular Engineering (human cells)
and Bio-fluid dynamics in physiology and pathology. From March 2002 to August
2002, Mr. Martinez was a Consultant for "Barnev", for the development of
biological binding methods of electronic devices to human tissues. From October
2001 to August 2002, he worked on marketing initiatives for Statice Sante SA
(France). From February 2001to April 2001, Mr. Martinez was a consultant for
Paper Power Ltd. for medical applications. From September 1999 to October 2001,
he was project manager at Slo-Flo Ltd., for the development of an intra-vaginal
delivery device and from March 1999 to July 2001, Mr. Martinez was project
manager and integrator at "Meduck" for multi-disciplinary medical
instrumentation. Mr. Martinez headed the R&D department and was a director
of Elcam Plastics, a world leader in medical disposables.
Dr.
Lior Soussan-Gutman
Dr.
Lior
Soussan-Gutman, age 40, has managed Teva Pharmaceuticals' Oncotest unit since
January 2003. Dr. Soussan-Gutman was the founder and CEO of Oncotest Ltd.,
a
company offering specialized cancer diagnostic services to the oncology
community based on a network of laboratories around the world. Dr.
Soussan-Gutman founded Oncotest Ltd. in 1998 and acted as CEO from that time
until January 2003. Dr. Soussan-Gutman holds a Ph.D. in Neurobiochemistry from
the Tel-Aviv University and she did Post-doctorate research in molecular biology
at the Weizmann Institute of Science. Dr. Soussan-Gutman will not be appointed
to any Board committees at this time.
Chaime
Orlev
Mr.
Orlev
is the Chief Financial Officer. Mr. Orlev is a certified public accountant
in
Israel . Prior to joining Gammacan, Mr. Orlev acted as Chief Financial Officer
for Solel Solar Systems an Israeli-based company specializes in the development,
manufacturing and marketing of solar energy systems and related equipment as
well as coatings of different substances. From 2001 through 2004 Mr. Orlev
was
Vice President Finance and Chief Financial Officer of Huntleigh , a provider
of
airport services to carriers. From 1999 trough 2001 he served as Financial
Controller and Acting Chief Financial Officer for ICTS International N.V.
(NASDAQ:ICTS) a leading provider of aviation security services.
Board
of Directors
All
of
our directors hold office until the next annual meeting of stockholders and
the
election and qualification of their successors.
Committees
of the Board
We
have
two committees of our Board of Directors.
Audit
Committee. The
Audit
Committee is responsible for determining the adequacy of our internal accounting
and financial controls, reviewing the results of our audit performed by the
independent public accountants, and recommending the selection of independent
public accountants. The Board has determined that each of the members of the
Audit Committee is unrelated, an outside member with no other affiliation with
us and is independent as defined by the rules of the SEC. The Board has
determined that Mr. Shmuel Levi is an “audit committee financial expert” as
defined by the SEC. The other audit committee member is Mr. Elisha Martinez.
The
Audit Committee was formed on January 11, 2005.
Compensation
Committee. The
Compensation Committee determines matters pertaining to the compensation of
certain of our executive officers and administers our stock option, and
incentive compensation. The Compensation Committee is comprised of Messrs.
Yair
Aloni and Shmuel Levi. The Compensation Committee was formed on January 11,
2005.
Section
16(a) Beneficial Ownership Reporting Compliance
Based
solely upon a review of Forms 3, 4 and 5, and amendments thereto, furnished
to
us during fiscal year 2005, we believe that during fiscal year 2005, our
executive officers, directors and all persons who own more than ten percent
of a
registered class of our equity securities complied with all Section 16(a) filing
requirements, except Chaime Orlev filed his Form 3 late.
ITEM
10. EXECUTIVE COMPENSATION
The
following table sets forth in summary form the compensation received during
the
fiscal years ended September 30, 2005, 2004, and 2003 by the Company's Chief
Executive Officer and each of the Company’s four other most highly compensated
executive officers based on salary and bonus earned during the 2004 fiscal
year.
Summary
Compensation Table
|
|
Annual
Compensation
|
Long
Term
Compensation
|
Pay-
outs
|
|
Name
and Principal
Position
|
Year
|
Salary
|
Bonus
|
Other
Annual
Compen-
sation
|
Securities
Under
Options/
SAR's
Granted
|
Restricted
Shares
or
Restricted
Share
Units
|
LTIP
Pay-
outs
|
|
Vered
Caplan, Active Chief Executive Officer
|
2005
|
49,538
|
Nil
|
3,792
|
Nil
|
Nil
|
Nil
|
|
Dr.
Dan J. Gelvan, (1)
Former Chief Executive Officer
|
2005
|
102,283
|
Nil
|
12,594
|
Nil
|
Nil
|
Nil
|
|
Dr.
Dan J. Gelvan, (1)
Former Chief Executive Officer
|
2004
|
14,620
|
Nil
|
2,290
|
Nil
|
Nil
|
Nil
|
|
Christopher
Greenwood (2)
Former
President & Director
|
2003
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
(1)
Dr. Dan
J. Gelvan resigned as our Chief Executive Officer on June 2, 2005.
(2)
Mr.
Christopher Greenwood resigned as our President and director on June 21, 2004.
Option
Grants during 2004 Fiscal Year
The
following table provides information related to options granted to the named
executive officers by Gammacan International during the 2004 fiscal year. The
Company does not have any outstanding stock appreciation rights.
Name
|
No.
of Securities Underlying Options Granted (#)
|
%
of Total Options Granted to Employees in
Fiscal
Year
|
Exercise
Price
($/Sh)
|
Expiration
Date
|
Dan
Gelvan *
|
1,400,000
|
96.6
|
1.3
|
August
17, 2014
|
Tovi
Ben Zeev *
|
50,000
|
3.4
|
1.3
|
August
17, 2014
|
*
- the
options were fortified during 2005 due to employee resignation.
On
June
21, 2004, a company owned by our sole officer and director at that time, David
Stephens, was granted an option by one of our shareholders to purchase 100,000
shares at $0.01 per share. We have determined that the economic value of this
option should be presented as an expense on behalf of Gammacan International
Inc
in the amount of $62,600. The option was exercised on August 17, 2004. The
issuance of this option has not been included in the disclosure of options
issued by Gammacan International Inc.
Option
Grants during 2005 Fiscal Year
The
following table provides information related to options granted to the named
executive officers by Gammacan International during the 2005 fiscal year. The
Company does not have any outstanding stock appreciation rights.
Name
|
No.
of Securities Underlying Options Granted (#)
|
%
of Total Options Granted to Employees in
Fiscal
Year
|
Exercise
Price
($/Sh)
|
Expiration
Date
|
Shmuel
Levi
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
Yair
Aloni
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
Jean-Pierre
Elisha Martinez
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
Lior
Soussan-Gutman
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
Adi
Avidar *
|
100,000
|
22.3
|
1.15
|
June
21, 2015
|
David
Sidransky
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
Yosef
Yarden
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
Dan
Shochat
|
50,000
|
11.1
|
1.15
|
June
21, 2015
|
|
|
|
|
|
*
- the
options were forfeited on October 27, 2005 due to employee
resignation.
Aggregated
Option Exercises During 2005 Fiscal
Year
and Fiscal
Year-End
Option Values
The
following table provides information related to employee options exercised
by
the named executive officers during the 2005 and 2004 fiscal years and number
and value of such options held at fiscal year-end.
|
|
|
|
Number
of Securities Underlying Unexercised Options at Fiscal Year- End
(#)
|
|
Value
of Unexercised In-the-Money Options at Fiscal Year- End ($)
(1)
|
Name
|
Shares
Acquired on Exercise (#)
|
Value
Realized
|
|
Exercisable
|
Unexercisable
|
|
Exercisable
|
Unexercisable
|
None.
|
|
|
|
|
|
|
|
|
EMPLOYMENT
AGREEMENTS
On
August
17, 2004, we entered into a written employment agreement with Dr. Dan J. Gelvan.
The agreement was amended on October 12, 2004. Dr. Gelvan served as our Chief
Executive Officer and the Chief Executive Officer of our subsidiary. Dr. Gelvan
received a monthly salary of $8,000 for the first three months of his services
and received a monthly salary of $9,250 thereafter. Dr. Gelvan received options
under the 2004 Employees and Consultant Stock Option Plan to purchase up to
1,400,000 common shares of our company at the exercise price of $1.30 per share.
On
June
2, 2005, Dan J. Gelvan resigned as Chief Executive Officer, effective as of
July
2, 2005.
On
August
17, 2004, we also entered into a written employment agreement with Ms. Tovi
Ben
Zeev, which was amended on October 12, 2004. Ms. Ben Zeev served as the Chief
Financial Officer of our company and our subsidiary, Gammacan, Ltd. on a part
time basis. Ms. Ben Zeev received a monthly salary of $1,300 for her services
as
the Chief Financial Officer of Gammacan, Ltd. On January 11, 2005, effective
November 1, 2004, Ms. Ben Zeev’s monthly salary was raised to $4,000. Ms. Ben
Zeev will received options under the 2004 Employees and Consultant Stock Option
Plan to purchase up to 50,000 common shares of our company at the exercise
price
of $1.30 per share.
On
August
11, 2005, Tovi Ben Zeev resigned as Chief Financial Officer, effective of
October 5, 2005.
On
August
17, 2004, we entered into a services agreement with Professor Yehuda Shoenfeld,
M.D., who will serve as the Chief Scientist of our subsidiary, Gammacan, Ltd.,
commencing on September 1, 2004. Prof. Shoenfeld will receive a monthly
compensation in the amount of approximately $5,000 USD, for his services as
the
Chief Scientist of Gammacan, Ltd. Either Prof. Shoenfeld or our company may
terminate the services agreement with Prof. Shoenfeld without cause, for any
reason whatsoever, with 30 days notice.
On
March
1, 2005, Gammacan International, Inc. and its subsidiary, Gammacan, Ltd.,
entered into an agreement appointing Vered Caplan as Vice President of Business
Development. Ms. Caplan, who will provide at least 20 hours of service per
week,
shall receive a salary of $4,000 per month.
On
June
6, 2005, the Company and Gammacan, Ltd. appointed Vered Caplan as acting Chief
Executive Officer of both companies, effective July 2, 2005. Vered Caplan will
devote approximately 70% of her business time to the affairs of Gammacan, Ltd.
and the Company. Vered Caplan new monthly salary shall be $6,475 per
month.
On
September 6, 2005, Gammacan, Ltd. entered into an employment agreement with
Chaime Orlev pursuant to which Mr. Orlev will serve as Chief Financial Officer
of Gammacan, Ltd., and Gammacan International Inc. effective October 6, 2005.
Mr. Orlev shall receive a salary of 25,000 NIS per month (which equals
approximately US $5,534.65, as of the date hereof). Mr. Orlev will be granted
up
to 350,000 stock options of the Corporation, pursuant to the Corporation's
2004
Stock Option Plan, adopted by the Board on August 17, 2004. Options will be
exercisable at an exercise price, being 90% of the market price of the common
stock on the date of grant, such that 30,000 Options shall vest on the first
anniversary from their date of grant, and the remaining Options shall vest
in 36
equal monthly installments thereafter.
We
do not
have any material bonus or profit sharing plans pursuant to which cash or
non-cash compensation is or may be paid to our directors or executive
officers.
DIRECTOR
COMPENSATION
We
reimburse our directors for expenses incurred in connection with attending
board
meetings but did not pay director's fees or other cash compensation for services
rendered as a director in the year ended September 30, 2004. Effective as of
January 11, 2005, members of the Board of Directors are being paid a fee of
$500
for each Board meeting attended. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our board of directors. The board of directors may
award special remuneration to any director undertaking any special services
on
behalf of our company other than services ordinarily required of a director.
Other than indicated in this annual report, no director received and/or accrued
any compensation for his or her services as a director, including committee
participation and/or special assignments.
Stock
Option Plan
On
August
17, 2004, our board of directors adopted the 2004 Employees and Consultants
Stock Option Plan in order to attract and retain quality personnel. Under the
2004 Employees and Consultants Stock Option Plan, 5,000,000 shares have been
reserved for the grant of options, which may be issued at the discretion of
our
board of directors from time to time.
Stock
Options/SAR Grants
There
were no grants of stock options under a stock option plan or stock appreciation
rights to any officers, directors, consultants or employees of our company
during the fiscal year ended September 30, 2003.
On
August
17, 2004, we granted options to Dr. Dan J. Gelvan under the 2004 Employees
and
Consultants Stock Option Plan to allow Dr. Gelvan to purchase up to 1,400,000
common shares of our company at an exercise price of $1.30 per share. On the
same date, we also granted options to Ms. Tovi Ben Zeev under the 2004 Employees
and Consultants Stock Option Plan to allow Ms. Ben Zeev to purchase up to 50,000
common shares of our company at an exercise price of $1.30 per share. The
options granted to Dr. Gelvan and Ms. Ben Zeev are exercisable until August
17,
2014. The options granted to Dr. Gelvan and Ms. Ben Zeev were fortified during
2005 due to their resignation.
On
June,
2005 we granted options to purchase up to 50,000 common shares of our company
at
an exercise price of $1.15 per share, to each of the following Shmuel Levi,
Yair
Aloni, Jean-Pierre Elisha Martinez and Lior Soussan-Gutman.
On
June
2005 we granted options to purchase up to 100,000 common shares of our company
at an exercise price of $1.15 per share to an employee. These options were
fortified during 2005 due to the employee resignation.
On
June
2005 we granted options to purchase up to 50,000 common shares of our company
at
n exercise price of $1.15 per share to three members of our Scientific Advisory
Board.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth information about the shares of the Company's common
Stock that may be issued upon the exercise of options granted to employees
under
the 2004 Stock Option Plan, which were approved by the Board of Directors,
as
well as shares that may be issued upon the exercise of options under the 2004
Stock Option Plan, that were issued to consultants, which were not approved
by
the Board of Directors.
Plan
Category
|
|
(a)
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
|
(b)
Weighted-average
exercise price of outstanding options, warrants and rights
|
|
(c)
Number
of securities remaining available for future issuance under equity
compensation plans excluding securities reflected in column (a)
(1)
|
Equity
compensation plans approved by security holders
|
|
500,000
|
|
$1.17
|
|
4,500,000
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders (1),
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
500,000
|
|
$1.17
|
|
4,500,000
|
Code
of Ethics
We
have
adopted a Code of Ethics for our officers, directors and employees. A copy
of
the Code of Ethics is attached hereto as exhibit 14.
ITEM
11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The
following table sets forth certain information, according to information
supplied to the Company regarding the number and percentage of the Company's
common stock beneficially owned by (i) each person who is beneficial owner
of
more than 5% of the common stock; (ii) by each director; (iii) by each executive
officer; and (iv) by all directors and executive officers as a group. Unless
otherwise indicated, the stockholders listed possess sole voting and investment
power with respect to the shares listed.
Name
and Address of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership (1)
|
Percentage
of
Class (1)
|
|
Yair
Aloni
Director
of our company
12A
Shabazy St.
Tel
Aviv, Israel
|
280,005
common shares
|
0.98%
|
|
Yehuda
Shoenfeld
Chief
Scientist of Gammacan, Ltd.
26
Sapir St.
Ramat
Gen
Israel
|
699,996
common shares
|
2.46%
|
|
Zeev
Bronfeld
6
Uri St.
Tel
Aviv, Israel
|
3,900,006
common shares
|
13.71%
|
|
Vered
Caplan
69
Deganya St.
Pardes
Hanna Karkur
Israel
|
3,900,006
common shares
|
13.71%
|
|
L.H.
Osterloh
1305
1090 West Georgia St.
Vancouver,
B.C. V6E 3V7 Canada
|
1,650,000
common shares
|
5.80%
|
|
Vantech
Securities Ltd.
1305
1090 West Georgia St.
Vancouver,
B.C. V6E 3V7 Canada
|
1,650,000
common shares
|
5.80%
|
|
Directors
and Executive Officers as a Group
|
4,880,007
common shares
|
17.15%
|
|
(1) Based
on
28,453,732 shares of common stock issued and outstanding as of December 28,
2005. Except as otherwise indicated, we believe that the beneficial owners
of
the common stock listed above, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject
to
community property laws where applicable. Beneficial ownership is determined
in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage ownership of the person
holding such option or warrants, but are not deemed outstanding for purposes
of
computing the percentage ownership of any other person.
ITEM
12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Except
as
otherwise indicated below, we have not been a party to any transaction, proposed
transaction, or series of transactions in which the amount involved exceeds
$60,000, and in which, to its knowledge, any of its directors, officers, five
percent beneficial security holder, or any member of the immediate family of
the
foregoing persons has had or will have a direct or indirect material interest:
Mr.
Yair
Aloni, a director of our company, and Professor Yehuda Shoenfeld, M.D., the
Chief Scientist of our subsidiary, Gammacan, Ltd., are authorized signatories
of
ARP Biomed Ltd. for the Intellectual Property Purchase and Sale Agreement we
entered into with ARP Biomed Ltd. on June 11, 2004. Mr. Aloni is the Chief
Executive Officer of ARP and Mr. Shoenfeld is an advisor to ARP.
On
November 4, 2004, Gammacan Ltd. entered into a consulting agreement with PBD
Ltd., a company controlled by Vered Caplan, a principal shareholder of Gammacan
International, Inc. Pursuant to the terms of the agreement, Gammacan Ltd. will
pay PBD a total fee of $50,000 for the services provided as detailed in the
agreement. The services include:
· |
Summary
of pre-clinical data and collection of historical research
data.
|
· |
Preparation
of
clinical trial.
|
· |
Oncologists
survey for cancer indication.
|
· |
Survey
of complementary technologies
|
· |
Survey
of potential IVIg collaborators
|
· |
Initiation
of
contacts with potential partners.
|
On
March
1, 2005, Gammacan International, Inc. and its subsidiary, Gammacan, Ltd.,
entered into an agreement appointing Vered Caplan as Vice President of Business
Development. Ms. Caplan, who will provide at least 20 hours of service per
week,
shall receive a salary of $4,000 per month.
On
June
6, 2005, the Company and Gammacan, Ltd. appointed Vered Caplan as acting Chief
Executive Officer of both companies, effective July 2, 2005. Vered Caplan will
devote approximately 70% of her business time to the affairs of Gammacan, Ltd.
and the Company. Vered Caplan new monthly salary shall be $6,475.
ITEM
13. EXHIBITS
Exhibits:
Number
|
|
Exhibit
|
3.1
|
|
Certificate
of Incorporation, with amendments, filed as an exhibit to the Company’s
Registration Statement on Form 10SB, dated June 4, 2001, and incorporated
herein by reference.
|
3.2
|
|
By-Laws,
filed as an exhibit to the Company’s Registration Statement on Form 10SB,
dated June 4, 2001, and incorporated herein by
reference.
|
4.1
|
|
2004
Employees and Consultants Stock Compensation Plan, incorporated by
reference from Form 8-K, dated as of August 17, 2004
|
10.1
|
|
Sale
of Intellectual Property Agreement dated June 11, 2004 between Gammacan,
Ltd. and ARP Biomed, Ltd., incorporated by reference from the Company’s
Form 8-K, dated as of June 21, 2004
|
10.2
|
|
Employment
Agreement dated August 17, 2004 between Gammacan Ltd. and Dr. Dan
J.
Gelvan, incorporated by reference from Form 8-K, dated as of August
17,
2004.
|
10.3
|
|
Addendum
to Employment Agreement between Gammacan, Ltd. and Dr. Dan J.
Gelvan,
dated as of October 12, 2004, incorporated by reference from Form
8-K
dated as of October 12, 2004
|
10.4
|
|
Indemnity
Agreement between Gammacan International, Inc. and Dr. Dan J.
Gelvan,
dated as of October 12, 2004, incorporated by reference from Form
8-K
dated as of October 12, 2004
|
10.5
|
|
Employment
Agreement dated August 17, 2004 between Gammacan Ltd. and Ms. Tovi
Ben
Zeev, incorporated by reference from Form 8-K, dated as of August
17,
2004
|
10.6
|
|
Addendum
to Employment Agreement between Gammacan, Ltd. and Tovi
Ben-Zeev,
dated as of October 12, 2004, incorporated by reference from Form
8-K
dated as of October 12, 2004
|
10.7
|
|
Indemnity
Agreement between Gammacan International, Inc. and Tovi
Ben-Zeev,
dated as of October 12, 2004, incorporated by reference from Form
8-K
dated as of October 12, 2004.
|
10.8
|
|
Services
Agreement dated August 17, 2004 between Gammacan, Ltd. and Prof.
Yehuda
Shoenfeld, M.D., incorporated by reference from Form 8-K, dated as
of
August 17, 2004
|
10.9
|
|
Consulting
agreement between Gammacan Ltd. and PBD Ltd., dated as of November
4,
2004,
incorporated by reference to Form 8-K dated as of November 4,
2004
|
10.10
|
|
Employment
Agreement between Gammacan, Ltd. and Vered Caplan, dated as of June
21,
2005, incorporated by reference to Form 8-K dated as of June 27,
2005
|
10.11
|
|
Indemnity
Agreement between Gammacan International, Inc. and Vered Caplan,
dated as
of June 27, 2005.
|
10.12
|
|
Employment
Agreement between Gammacan, Ltd. and Chaime Orlev, dated as of September
6, 2005, incorporated by reference to Form 8-K dated as of September
12,
2005
|
10.13
|
|
Indemnity
Agreement between Gammacan International, Inc. and Chaime Orlev,
dated as
of September 12, 2005.
|
14
|
|
Code
of Ethics
|
31.1
|
|
Certification
of
Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended |
31.2
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14 and Rule
15d-14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended
|
32.1
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer)
|
32.2
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer)
|
ITEM
14. PRINCIPAL ACCOUNTANT FEEES AND SERVICES
Audit
Fees. The aggregate fees billed by our auditors, for professional services
rendered for the audit of our annual financial statements for the year ended
September 30, 2005 and 2004, and for the reviews of the financial statements
included in our Quarterly Reports on Form 10-QSB during that fiscal year were
$49,000, and $45,200, respectively.
Audit
Related Fees. We did not incur any audit related fees billed by auditors for
services rendered to the Company, other than the services covered in "Audit
Fees" for the fiscal year ended September 30, 2005 and 2004.
Tax
Fees.
We incurred fees to auditors of 4,000 and $1,100 respectively for tax
compliance, tax advice or tax compliance services during the fiscal year ended
September 30, 2005 and 2004.
All
other
fees. We did not incur any other fees billed by auditors for services rendered
to the Company, other than the services covered in "Audit Fees" for the fiscal
year ended September 30, 2005 and 2004.
The
Board
of Directors has considered whether the provision of non-audit services is
compatible with maintaining the principal accountant's
independence.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
of
1934, the Registrant has duly caused this Report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
GAMMACAN
INTERNATIONAL, INC.
/s/
VERED CAPLAN
Vered
Caplan,
Acting
Chief Executive Officer
(principal
executive officer)
/s/
CHAIME ORLEV
Chaime
Orlev,
Chief
Financial Officer
(principal
accounting officer)
Date:
December 29, 2005
Pursuant
to the requirements of the Securities and Exchange Act of 1934, this report
has
been signed below by the following persons on behalf of the registrant in the
capacities as on December 29, 2005.
/s/
SHMUEL LEVI
Shmuel
Levi,
Director
/s/
YAIR ALONI
Yair
Aloni,
Director
/s/
JEAN-PIERRE ELISHA MARTINEZ
Jean-Pierre
Elisha Martinez,
Director
/s/
LIOR SOUSSAN-GUTMAN
Lior
Soussan-Gutman,
Director