UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
x QUARTERLY
REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the Quarterly Period Ended June 30, 2006
o
TRANSITION REPORT UNDER
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.)
|
Kiryat
Ono Mall
Azorim
Center A
39
Jerusalem st.,
55423
Kiryat Ono, Israel
(Address
of principal executive offices)
972
3 7382616
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
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
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o No
x
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 August 9, 2006.
GAMMACAN
INTERNATIONAL, INC.
FORM
10-QSB
TABLE
OF CONTENTS
|
|
|
Page
No.
|
PART
I
|
|
Item 1.
Financial Statements
|
1
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operation
|
13
|
Item 3.
Controls And Procedures
|
19
|
PART
II
|
|
Item 1.
Legal Proceedings
|
20
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
20
|
Item 3.
Defaults Upon Senior Securities
|
20
|
Item 4.
Submission of Matters to a Vote of Security Holders
|
20
|
Item 5.
Other Information
|
20
|
Item 6.
Exhibits
|
22
|
Forward
Looking Statements
This
Form
10-QSB 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
1. - FINANCIAL STATEMENTS
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
INTERIM
FINANCIAL STATEMENTS
AS
OF
JUNE 30, 2006
TABLE
OF
CONTENTS
|
|
Page
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS:
|
|
|
Balance
sheets
|
|
2
|
Statements
of operations
|
|
3
|
Statements
of changes in stockholders’ equity
|
|
4
|
Statements
of cash flows
|
|
5
|
Notes
to financial statements
|
|
6-12
|
(A
Development Stage Company)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(US
$,
except share data)
|
|
June
30,
|
|
September
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
A
s s e t s
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
949,230
|
|
$
|
713,342
|
|
Prepaid
expenses
|
|
|
21,551
|
|
|
6,474
|
|
Other
|
|
|
16,793
|
|
|
22,029
|
|
T
o
t a l current assets
|
|
|
987,574
|
|
|
741,845
|
|
|
|
|
|
|
|
|
|
FUNDS
IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT
|
|
|
15,036
|
|
|
7,528
|
|
LONG
TERM DEPOSITS
|
|
|
22,210
|
|
|
5,145
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
17,422
|
|
|
10,269
|
|
T
o
t a l assets
|
|
$
|
1,042,242
|
|
$
|
764,787
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
278,738
|
|
$
|
159,379
|
|
Payroll
and related accruals
|
|
|
48,373
|
|
|
14,655
|
|
T
o
t a l current liabilities
|
|
|
327,111
|
|
|
174,034
|
|
|
|
|
|
|
|
|
|
LIABILITY
FOR EMPLOYEE RIGHTS UPON RETIREMENT
|
|
|
24,722
|
|
|
13,725
|
|
|
|
|
|
|
|
|
|
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;
|
|
|
|
|
|
|
|
28,453,732
and 26,231,510 shares issued and
|
|
|
|
|
|
|
|
outstanding
as of June 30, 2006 and September 30, 2005, respectively)
|
|
|
2,845
|
|
|
2,622
|
|
Additional
paid-in capital
|
|
|
3,021,021
|
|
|
1,767,601
|
|
Warrants
|
|
|
925,793
|
|
|
519,423
|
|
Deficit
accumulated during the development stage
|
|
|
(3,259,250
|
)
|
|
(1,712,618
|
)
|
T
o
t a l stockholders' equity
|
|
|
690,409
|
|
|
577,028
|
|
T
o
t a l liabilities and stockholders’ equity
|
|
$
|
1,042,242
|
|
$
|
764,787
|
|
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US
$,
except share data)
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
October
6, 1998*
|
|
|
|
Nine
months ended
|
|
Three
months ended
|
|
through
|
|
|
|
June
30
|
|
June
30
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
RESEARCH
AND
|
|
|
|
|
|
|
|
|
|
|
|
DEVELOPMENT
COSTS
|
|
$
|
719,153
|
|
$
|
299,985
|
|
$
|
119,610
|
|
$
|
184,987
|
|
$
|
1,432,073
|
|
GENERAL
AND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADMINISTRATIVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
853,591
|
|
|
508,075
|
|
|
398,403
|
|
|
160,194
|
|
|
1,879,232
|
|
FINANCIAL
INCOME
|
|
|
(36,203
|
)
|
|
(14,618
|
)
|
|
(12,416
|
)
|
|
(6,652
|
)
|
|
(56,906
|
)
|
FINANCIAL
EXPENSES
|
|
|
10,091
|
|
|
3,521
|
|
|
3,392
|
|
|
829
|
|
|
17,226
|
|
|
|
|
1,546,632
|
|
|
796,963
|
|
|
508,989
|
|
|
399,358
|
|
|
3,271,625
|
|
MINORITY
INTERESTS IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSSES
OF SUBSIDIARY
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12,375
|
)
|
NET
LOSS FOR THE PERIOD
|
|
$
|
(1,546,632
|
)
|
$
|
(796,963
|
)
|
$
|
(508,989
|
)
|
$
|
(399,358
|
)
|
$
|
(3,259,250
|
)
|
BASIC
AND DILUTED LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER
1,000 COMMON
SHARES
|
|
$
|
(55.40
|
)
|
$
|
(30.59
|
)
|
$
|
(17.89
|
)
|
$
|
(12.94
|
)
|
|
|
|
WEIGHTED
AVERAGE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER
OF COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTING
BASIC AND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
LOSS PER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARE
|
|
|
27,918,176
|
|
|
26,055,177
|
|
|
28,453,732
|
|
|
26,231,510
|
|
|
|
|
*
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)
CONDENSED
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 (audited)
|
|
|
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 (audited)
|
|
|
56,281,500
|
|
|
5,628
|
|
|
|
|
|
3,007
|
|
|
(3,444
|
)
|
|
5,191
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,108
|
)
|
|
(3,108
|
)
|
Balance
at September 30, 2001
(audited)
|
|
|
56,281,500
|
|
|
5,628
|
|
|
|
|
|
3,007
|
|
|
(6,552
|
)
|
|
2,083
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,231
|
)
|
|
(4,231
|
)
|
Balance
at September 30, 2002 (audited)
|
|
|
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 (audited)
|
|
|
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 (audited)
|
|
|
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 (audited)
|
|
|
26,231,510
|
|
|
2,622
|
|
|
519,423
|
|
|
1,767,601
|
|
|
(1,712,618
|
)
|
|
577,028
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
666,666
|
|
|
67
|
|
|
82,784
|
|
|
367,149
|
|
|
|
|
|
450,000
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on December 20,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
1,555,556
|
|
|
156
|
|
|
323,586
|
|
|
776,258
|
|
|
|
|
|
1,100,000
|
|
Benefit
component in employees and consultants stock option plan
|
|
|
|
|
|
|
|
|
|
|
|
110,013
|
|
|
|
|
|
110,013
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,546,632
|
)
|
|
(1,546,632
|
)
|
Balance
at June 30, 2006 (unaudited)
|
|
|
28,453,732
|
|
$
|
2,845
|
|
$
|
925,793
|
|
$
|
3,021,021
|
|
$
|
(3,259,250
|
)
|
$
|
690,409
|
|
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US
$)
|
|
|
|
Period
from
|
|
|
|
|
|
October
6,
|
|
|
|
Nine
months ended
|
|
1998*
to
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
Unaudited
|
|
Unaudited
|
|
Unaudited
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,546,632
|
)
|
$
|
(796,963
|
)
|
$
|
(3,259,250
|
)
|
Adjustments
required to reconcile net loss to net cash used
|
|
|
|
|
|
|
|
|
|
|
in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Income
and expenses not involving cash flows:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,729
|
|
|
1,691
|
|
|
5,322
|
|
Common
stock issued for services
|
|
|
-
|
|
|
-
|
|
|
3,000
|
|
Minority
interests in losses of a subsidiary
|
|
|
-
|
|
|
-
|
|
|
(12,375
|
)
|
Write
off of in process research and development
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Benefit
component in employees and consultants stock option plan
|
|
|
110,013
|
|
|
18,653
|
|
|
207,205
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase
in prepaid expenses
|
|
|
(15,077
|
)
|
|
(9,678
|
)
|
|
(21,551
|
)
|
Decrease
(increase) in other current assets
|
|
|
5,236
|
|
|
(23,153
|
)
|
|
(16,793
|
)
|
Increase
(decrease) in current liabilities
|
|
|
153,077
|
|
|
(59,276
|
)
|
|
326,111
|
|
Increase
in liability for employee rights upon retirement
|
|
|
10,997
|
|
|
-
|
|
|
24,722
|
|
Net
cash used in operating activities
|
|
|
(1,279,657
|
)
|
|
(868,726
|
)
|
|
(2,643,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES -
|
|
|
|
|
|
|
|
|
|
|
Increase
in long term deposits
|
|
|
(17,065
|
)
|
|
-
|
|
|
(22,210
|
)
|
Funds
in respect of employee rights upon retirement
|
|
|
(7,508
|
)
|
|
-
|
|
|
(15,036
|
)
|
Purchase
of property and equipment
|
|
|
(9,882
|
)
|
|
(7,512
|
)
|
|
(22,744
|
)
|
Net
cash used in investment activities
|
|
|
(34,455
|
)
|
|
(7,512
|
)
|
|
(59,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Contribution
to additional paid in capital
|
|
|
|
|
|
|
|
|
12,319
|
|
Issuance
of common stock and warrants
|
|
|
1,550,000
|
|
|
1,171,419
|
|
|
3,640,510
|
|
Net
cash provided by financing activities
|
|
|
1,550,000
|
|
|
1,171,419
|
|
|
3,652,829
|
|
INCREASE
IN CASH AND CASH EQUIVALENTS
|
|
|
235,888
|
|
|
295,181
|
|
|
949,230
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT
|
|
|
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
713,342
|
|
|
705,868
|
|
|
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
AT
END OF PERIOD
|
|
$
|
949,230
|
|
$
|
1,001,049
|
|
$
|
949,230
|
|
*
Incorporation date, see note 1a.
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONDENSED 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 results are anticipated during 2007. The Phase 2 clinical trial is due
to be
completed by the beginning of 2007.
The
Company is in the process of applying for an IND with the US FDA for VitiGam,
The Company’s second generation IgG product and first-in-class anti-cancer
immunotherapy. VitiGam is slated to enter the clinic under a US IND in the
near
future. VitiGam is designed to target metastatic melanoma patients with Stage
III and IV melanoma.
The
financial statements have been prepared assuming the Company will continue
as a
going concern. See note 3.
The
accompanying unaudited financial statements of the Company and the subsidiary
GammaCan Ltd. ("the Subsidiary") have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-QSB and Item 310
of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
In
the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine-month period ended June 30, 2006, are not necessarily
indicative of the results that may be expected for the year ended September
30,
2006. For further information, refer to the financial statements and footnotes
thereto included in the consolidated annual report on Form 10-KSB for the
year
ended September 30, 2005.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
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.
|
d.
|
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.
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.
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 5,967,775 for the nine months ended
June 30, 2006 (2,484,998 for the nine months ended June 30, 2005).
|
g. |
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”.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
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:
|
|
|
Nine
months ended
June
30,
|
|
|
|
|
2006
|
|
2005
|
|
|
Net
loss as reported
|
|
$
|
(1,546,632
|
)
|
$
|
(796,963
|
)
|
|
Deduct:
Stock based employee compensation expense
|
|
|
|
|
|
|
|
|
included
in net loss as reported
|
|
|
79,010
|
|
|
|
|
|
Add:
pro forma stock based employee compensation
|
|
|
|
|
|
|
|
|
expense
determined under fair value
|
|
|
|
|
|
|
|
|
method
for all awards, net of related tax effects
|
|
|
(573,927
|
)
|
|
(89,638
|
)
|
|
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
|
|
|
79,676
|
|
|
118,190
|
|
|
Pro
forma net loss
|
|
$
|
(1,961,873
|
)
|
$
|
(768,411
|
)
|
|
Net
loss per 1,000 common shares:
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per 1,000 shares - as reported
|
|
$
|
(55.40
|
)
|
$
|
(30.59
|
)
|
|
Basic
and diluted loss per 1,000 shares - pro forma
|
|
$
|
(70.27
|
)
|
$
|
(29.49
|
)
|
Certain
figures in respect of prior years have been reclassified to conform to the
current year presentation.
|
i.
|
Recently
issued accounting
pronouncements
|
In
February 2006, the FASB issued FAS 155, accounting for certain Hybrid Financial
Instruments, an amendment of FASB statements No.133 and 140. This statement
permits fair value measurement for any hybrid financial instrument that contains
an embedded derivative that otherwise would require bifurcation. This statement
is effective for all financial instruments acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15,
2006.
Earlier adoption is permitted as of the beginning of an entity's fiscal year,
provided that no interim period financial statements have been issued for
the
financial year. In the Company’s opinion, implementation of this standard is not
expected to have a material effect on its financial statements in future
periods.
In
March
2006 the Financial Accounting Standards Board (the "FASB") issued Statement
of
Financial Reporting No. 156 ("FAS 156"). This Statement amends FASB Statement
No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, with respect to the accounting for separately
recognized servicing assets and servicing liabilities, and is effective for
financial periods beginning after September 15, 2006. Since the Company does
not
currently engage in transfers of financial fixed assets , the company does
not
anticipate that the adoption of this statement will have a material impact
on
its financial statements.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
In
July
2006, the FASB issued FASB Interpretation (FIN) No. 48 Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement 109. FIN
48
prescribes a comprehensive model for recognizing, measuring, presenting and
disclosing in the financial statements tax positions taken or expected to
be
taken on a tax return, including a decision whether to file or not to file
in a
particular jurisdiction. FIN 48 is effective for fiscal years beginning after
December 15, 2006. If there are changes in net assets as a result of application
of FIN 48 these will be accounted for as an adjustment to retained earnings.
In
the Company’s opinion, implementation of this standard is not expected to have a
material effect on its financial statements in future periods.
NOTE
2 - LONG TERM DEPOSITS
Amount
represents deposits in respect of lease agreements for the company’s office
facilities and vehicles used by its employee
NOTE
3 - GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has net losses for the period
from
inception (October 6, 1998) through June 30, 2006 of $3,259,250. Presently,
the company does not have sufficient cash resources to meet its requirements
in
the twelve months following July 1, 2006. These factors raise substantial doubt
about the company's ability to continue as a going concern The
company's management estimates that it will be able to finance the company's
activities through future fund raising.
These
financial statements do not include any adjustments that may be necessary should
the company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent on its ability to obtain additional financing
as
may be required and ultimately to attain profitability.
NOTE
4 - STOCK TRANSACTIONS:
|
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 common 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 common 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 $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.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
4 - STOCK TRANSACTIONS (continued):
|
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 common share
which was
equivalent to 90% of the traded market price on the date of grant.
Compensation costs calculated in accordance with APB 25 totaled
$35,000.
|
As
to the
exercise terms of the options - see note j below.
The
fair
value of the above options on the date of grant estimated by using Black Scholes
option-pricing model is $283,757. 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.
|
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 common share
which was
equivalent to the traded market price on the date of
grant.
|
The
options may be exercised after vesting and in accordance with the
following:
|
1. |
25%
of the options - On the first anniversary commencing the grant
date
|
|
2.
|
75%
of the options - 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 $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 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 common 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 common Shares at
a
price of $1.25 per Share, and 66,666 warrants can be exercisable to 66,666
common Shares 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.
|
e.
|
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 common Share at
a price
of $1.15 per Share.
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
4 - STOCK TRANSACTIONS (continued):
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.
|
f.
|
On
December 21, 2005, 250,000 options were granted under the Stock Option
Plan. The exercise price has been determined at $1.34 per common
share
which was equivalent to the traded market price on the date of grant.
As
to the exercise terms of the options - see exercise terms in note
3c.
|
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.
|
g.
|
On
January 12, 2006, 50,000 options were granted under the Stock Option
Plan.
The exercise price has been determined at $1.10 per common share
which was
equivalent to the traded market price on the date of grant. As to
the
exercise terms of the options - see note k
below.
|
The
fair
Value of the above mentioned options on the date of the grant estimated by
using
the Black Scholes option-pricing model is $44,165. 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.
|
h.
|
On
March 15, 2006, 50,000 options were granted under the Stock Option
Plan.
The exercise price has been determined at $1.37 per common share
which was
equivalent to the traded market price on the date of grant. As to
the
exercise terms of the options - see exercise terms in note c
above.
|
The
fair
Value of the above mentioned options on the date of grant estimated by using
the
Black Scholes option-pricing model is $54,712. The value was based on the
following assumptions: dividend yield of 0%; expected volatility of 84%;
risk-free interest rates of 4.5%; and expected lives of 7.85 years.
|
i.
|
On
April 17, 2006, 1,400,000 stock options were granted to the new CEO
under
the Stock Option Plan. The exercise price has been determined at
$1.29 per
common share which was equivalent to 90% of the average closing price
of
the common Stock of the company on the 30 days immediately preceding
the
date of grant. Compensation costs calculated in accordance with APB
25
totaled $434,000. As to the exercise terms of the options - see exercise
terms in note c above.
|
The
fair
Value of the above mentioned options on the date of grant estimated by using
the
Black Scholes option-pricing model is $1,832,296. The value was based on the
following assumptions: dividend yield of 0%; expected volatility of 83%;
risk-free interest rates of 4.5%; and expected lives of 7.85 years.
NOTE
4 - STOCK TRANSACTIONS (continued):
|
j.
|
On
May 2, 2006 the company amended the vesting of the 350,000 options
granted
on October 6, 2005.
|
The
options may be exercised after vesting and in accordance with the
following:
|
1.
|
25%
of the options - On the first anniversary commencing the grant
date
|
|
2.
|
75%
of the options - 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.
|
|
k.
|
On
May 2, 2006 the company amended the vesting of the 50,000 options
granted
on January 12, 2006.
|
|
1.
|
25%
of the options - On October 1,
2006.
|
|
2.
|
75%
of the options - On the last day of each of the 36 months following
October 1, 2006, the options shall vest in equal monthly
installments.
|
|
l.
|
On
May 4, 2006, 500,000 (100,000 for each of its five board members)
options
were granted under the Stock Option Plan. The exercise price has
been
determined at $1.29 per common share (see also note i above regarding
the
determined exercise price). Compensation costs calculated in accordance
with APB 25 totaled $105,000. As to the exercise terms of the options -
see exercise terms in note c above.
|
The
fair
Value of the above mentioned options on the date of grant estimated by using
the
Black Scholes option-pricing model is $605,909. The value was based on the
following assumptions: dividend yield of 0%; expected volatility of 83%;
risk-free interest rates of 4.5%; and expected lives of 7.85 years.
NOTE
5 - RELATED PARTIES - TRANSACTIONS:
|
a.
|
On
April 15, 2005, the CEO of the subsidiary who also served as the
Acting
CEO of the company had resigned from its position as the acting CEO
of the
company, and will continue as the CEO of the subsidiary.
|
|
b.
|
On
April 16, 2006, the Company entered into an employment agreement
(the
"Agreement") with its new CEO pursuant to which the new CEO will
serve as
CEO of the Company, effective April 15, 2006. Mr. Schnegelsberg shall
receive an annual salary of $200,000 and an annual bonus of up to
$200,000
upon achieving certain objectives. Pursuant to a separate agreement
between the company and the new CEO, the company agreed to indemnify
the
new CEO for substantially all liabilities he may incur as a result
of his
employment by or service to the
company.
|
ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
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.
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 IGg
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 have been conducting a Phase 2 clinical trial in humans to
demonstrate clinical efficacy of IGg immunotherapy in three major cancers:
colon, prostate and melanoma. To date, 31 patients have been enrolled, out
of
which 27 have actually received the IGg treatment. This phase 2 clinical trial
is being conducted at three medical centers in Israel and results will likely
be
available during 2007. The trial is due to be completed by the beginning of
2007, 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 IGg 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 IGg 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 IGg preparation for use as an anti-cancer reagent. However, the company's
strategy is to collaborate with a suitable IGg manufacturer and license them
the
rights to use IGg as an anti-cancer agent, wherefore the company's expected
revenue stream is not entirely dependent upon the registration of the IGg
products.
We
are in
the process of applying for an IND with the US FDA for VitiGam, GammaCan’s
second generation IGg product and first-in-class anti-cancer immunotherapy.
VitiGam is slated to enter the clinic under a US IND in the near future. VitiGam
is designed to target metastatic melanoma patients with Stage III and IV
melanoma.
VitiGam
is an intravenous IgG mixture derived from IGg manufactured from plasma of
donors with vitiligo, a benign autoimmune skin condition affecting up to 2%
of
the general population. GammaCan scientists have shown that vitiligo derived
IGg
(VitiGam) contains anti-melanoma activities in substantially higher quantities
than those found in IGg from other donors. This “enriched” vitiligo IGg
(VitiGam) has potent anti-melanoma activity in both in
vitro
and
in
vivo
melanoma
models. Preliminary data from the ongoing, open-label Phase 2 trial of GCAN
101
(“standard” IGg) in cancer patients (melanoma, prostate and colon) further
support the rationale underling the VitiGam program.
The
Company intends to conduct a Phase 1/2 under a US IND to evaluate VitiGam in
patients with stage III and IV melanoma. As described under the Planned
Expenditure section, the estimated costs of this Phase 1/2 are substantial;
the
timing of initiation of the Phase 1/2 trials will be based on several major
factors, including the ability of the Company to attract sufficient financing
on
acceptable terms.
We
are
also contemplating to conduct additional clinical trials to test new
formulations of IGg and to test IGg immunotherapies for different cancers at
different stages of disease progression with varying dosages and routes of
administration. To achieve this we may elect 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 IGg shows significant promise in clinical trials, we may 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 our IGg immunotherapies to the market. Any such 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. Putative
future strategic partner, or partners, could also provide capital and expertise
that would enable the partnership to develop new formulations of IGg cancer
immunotherapy suitable for patients at different stages of disease progression
as well as IGg derivatives and to develop novel methods for the delivery for
IGg
based therapies.
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 IGg, which is responsible for its anti-metastatic effects and
to
develop a potential synthetic version of IGg. These formulations will be
suitable for:
|
·
|
Low-dose,
preventative therapy for disease-free, high-risk individuals,
|
|
·
|
High
dosages 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
If
appropriate, we will consider in-licensing and other means of obtaining access
to additional compounds for our product portfolio. The aim of this is to create
a well-balanced product portfolio that includes compounds at 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 June 30, 2006, the Company has incurred losses in an
aggregate amount of $3,259,250. Such losses have resulted from the Company’s
activities as a development stage company. These factors raise substantial
doubt
about the company's ability to continue as a going concern. We estimate that
the
cash reserves available on June 30, 2006 will be sufficient to cover the planned
expenses through September 30, 2006. The Company's continuation as a going
concern is dependent on its ability to meet its obligations, to obtain
additional financing as may be required and ultimately to attain profitability.
Valuation
of options and warrants
We
granted options to purchase common shares of our company to employees and
consultants as well as issue warrants in connection with fund raising. The
fair
value of the options and warrants is estimated by using the Black Scholes
option-pricing model, and is based on certain assumptions regarding the expected
dividends, expected volatility, expected life of the options and warrant and
the
risk free interest rate.
Results
of Operations
Nine
months ended June 30, 2006 and 2005
The
following table summarizes certain statement of operations data for the company
for the six months period ended June 30, 2006 and 2005 (in US$):
|
|
Nine
months ended
June
30,
|
|
|
|
2006
|
|
2005
|
|
Research
and development costs
|
|
$
|
719,153
|
|
$
|
299,985
|
|
General
and administrative expenses
|
|
|
853,591
|
|
|
508,075
|
|
Financial
income net
|
|
|
(26,112
|
)
|
|
(11,097
|
)
|
Net
loss for the period
|
|
$
|
1,546,632
|
|
$
|
796,963
|
|
Research
and development costs.
Research
and development expenses are the costs incurred in the process of our
pre-clinical trial and clinical trial.
During
the nine months ended June 30, 2006 and June 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 nine months ended June 30, 2006 the research and development expenses
totaled $719,153, compared to $299,985 during the nine months ended June 30,
2005. The increase in costs is due to the conducted Phase 2 trial whereas during
the nine months ended June 30, 2005 the costs were related to the pre-clinical
activity.
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
nine months ending June 30, 2006 the General and administrative expense totaled
$853,591 compared to $508,075 for the nine months ended June 30, 2005. Costs
incurred related to general and administrative in the nine months ended June
30,
2006 reflect an increase in activities as well as increased number of employees
as compared to the nine months period ending June 30, 2005.
Financial
income/expense, net
During
the nine months ending June 30, 2006 and June 30, 2005, the company generated
interest income on available cash and cash equivalents balance.
Liquidity
and Capital Recourses
Financing
activities
Through
June 30, 2006, the Company has incurred losses in an aggregate amount of
$3,259,250. We have financed our operation from private placement of common
stock. Through June 30, 2006 we raised a total of $3,652,829, net of transaction
cost, through private placements and we anticipate that additional financing
will be through similar sources. Our financing activates for the nine months
period ending June 30, 2006 include the following:
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
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.
On
January 12, 2006 we granted options to purchase up to 50,000 common shares
of
our company at an exercise price of $1.10 to an employee.
On
March
15, 2006 we granted options to purchase up to 50,000 common shares of our
company at an exercise price of $1.37 to a director of the company.
On
April
17, 2006 we granted options to purchase up to 1,400,000 common shares of our
company at an exercise price of $1.29 to Mr. Patrick Schnegelsberg.
On
May 4,
2006 we granted options to purchase up to 100,000 common shares of our company
at an exercise price of $1.29 to each of the five members of the board for
a
total of 500,000 options.
Summary
of financing activities
Through
June 30, 2006 we raised approximately $3.6 Million through private placements
of
our securities. As of June 30, 2006 the cash and cash equivalents totaled
$949,230. We anticipate that these reserves will be sufficient to fund operation
through September 30, 2006. 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
|
|
|
1,207,000
|
|
|
Business
Development
|
|
|
211,000
|
|
|
General
& Administrative Expenses
|
|
|
1,345,000
|
|
|
Total
|
|
|
2,763,000
|
|
We
are
planning to conduct an additional clinical trial to demonstrate clinical
efficacy of VitiGam an IGg sourced from a specific population, in patients
with
stage III or IV melanoma. We began initial process of planning this trial during
the fist half of 2006. The decision to proceed past the initial process will
be
based on several major factors, one of which is the ability of the company
to
attract sufficient financing on acceptable terms. If we elect to continue this
VitiGam trial past the initial process, we anticipate that our related clinical
trial costs over the next 12 months would increase by approximately
$3,000,000.
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.
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. On
April 15, 2006 Vered Caplan has resigned form her position as the acting Chief
Executive Officer of the company. Vered Capalan will remain as the Chief
Executive Officer of Gammacan, Ltd.
On
April
16, 2006, the Company entered into an employment agreement (the "Agreement")
with Patrick Schnegelsberg pursuant to which Mr. Schnegelsberg will serve as
Chief Executive Officer of the Company, effective April 15, 2006. Mr.
Schnegelsberg shall receive a salary of $200,000 and an annual bonus of up
to
$200,000 upon achieving certain objectives. Pursuant to a separate agreement
between the Company and Mr. Schnegelsberg, the Company agreed to indemnify
Mr.
Schnegelsberg for substantially all liabilities he may incur as a result of
his
employment by or service to the Company. Mr. Schnegelsberg was granted 1,400,000
stock options of the Corporation, pursuant to the Corporation's 2004 Stock
Option Plan, adopted by the Board on August 17, 2004. Options are exercisable
at
an exercise price of $1.29 per share. 350,000 of the Options shall vest on
the
first anniversary from their date of grant, and the remaining Options shall
vest
in 36 equal monthly instalments thereafter
ITEM
3. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures. As of June 30, 2006, the Company’s
management carried out an evaluation, under the supervision of the Company’s
Chief Executive Officer and the Chief Financial Officer, of the effectiveness
of
the design and operation of the Company’s system of disclosure controls and
procedures pursuant to the Securities and Exchange Act , Rule 13a-15(d) and
15d-15(d) under the Exchange Act. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were effective, as of the date of their
evaluation, for the purposes of recording, processing, summarizing and timely
reporting material information required to be disclosed in reports filed by
the
Company under the Securities Exchange Act of 1934.
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
II
ITEM
1 LEGAL
PROCEEDINGS
From
time
to time the Company is subject to litigation incidental to its business. Such
claims, if successful, could exceed applicable insurance coverage. The Company
is not currently a party to any material legal proceedings.
ITEM
2 UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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
3
DEFAULTS UPON SENIOR SECURITIES
Not
applicable.
ITEM
4 SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not
applicable.
ITEM
5 OTHER
INFORMATION
Not
applicable.
ITEM
6 EXHIBITS
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)
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
GAMMACAN
INTERNATIONAL, INC. |
|
|
|
|
|
|
|
|
|
August
9, 2006
|
|
/s/
CHAIME
ORLEV
|
|
|
|
Chaime
Orlev,
|
|
|
|
Chief
Financial Officer
|