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, 2006
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.)
|
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)
Securities
registered pursuant to Section 12(b) of the Exchange Act: None
Securities
registered pursuant to Section 12(g) of the
Exchange
Act:
Common
Stock, $0.0001 par value
Check
whether the issuer: (1) 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
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. 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
State
issuer’s revenues for its most recent fiscal year $0.00
State
the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of December 18, 2006: $7,641,963
(18,195,151 shares
at
$0.42 per share).
State
the
number of shares outstanding of each of the registrant's classes of common
equity, as of the latest practicable date: 28,625,164 shares issued and
outstanding as of December 18, 2006.
GAMMACAN
INTERNATIONAL, INC.
FORM
10-KSB
TABLE
OF CONTENTS
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Page
No.
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PART
I
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Item 1.
Business
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1
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Item 2.
Properties
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18
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Item 3.
Legal Proceedings
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18
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Item 4.
Submission of Matters to a Vote of Security Holders
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18
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PART
II
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Item 5.
Market for Common Equity and Related Stockholder Matters
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19
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Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of
Operation
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20
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Item 7.
Financial Statements and Supplementary Data
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29
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Item 8.
Change in and Disagreements with Accountants on Accounting and Financial
Disclosure
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54
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Item 8A.
Controls And Procedures
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54
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Item
8B. Other Information
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54
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PART
III
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Item 9.
Directors and Officers of the Registrant
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55
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Item 10.
Executive Compensation
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58
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Item 11.
Security Ownership of Certain Beneficial Owners and Management and
Related
Stockholder Matters
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64
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Item 12.
Certain Relationships and Related Transactions
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65
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Item 13.
Exhibits
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66
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Item 14.
Principal Accountant Fees and Services
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67
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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. Throughout
this
document we use IgG to refer to intravenous immunoglobulin therapy, unless
otherwise indicated. Others in the Industry use abbreviations such as IVIG
or
IVIg when referring to intravenous immunoglobulin therapy.
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. We engaged in several business models
and acquisition plans, until in June 2004, approximately 27% of our then
outstanding shares of common stock were acquired by Zeev Bronfeld and Vered
Caplan in a private transaction. Shortly thereafter, on August 14, we raised
approximately $900,000 in a private placement, and, pursuant to an agreement
for
the purchase and sale of intellectual property between our newly formed
subsidiary, GammaCan, Ltd., and ARP Biomed, Ltd. ("ARP"), GammaCan Ltd.
completed the purchase and sale of ARP’s intellectual property (the
"Intellectual Property") on August 17, 2004 in consideration for the issuance
to
ARP of 12.5% of the common shares of GammaCan, Ltd. As a result, we became
the
owner of 87.5% of GammaCan, Ltd., which in turn owns all of the Intellectual
Property consisting of intravenous immunoglobulin ("IgG") research and
development, patents and other intellectual property, which appears to hold
promising potential for the clinical treatment for various cancer types. At
the
same time, we also made a loan of $800,000 from the proceeds of the private
placement to GammaCan, Ltd. to finance its new business. On August 19, 2004,
we
changed the name of our company to GammaCan International, Inc. in the State
of
Delaware..
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 and/or exerts
a
direct effect on tumor cells. Our proposed treatment will be based on
intravenous immunoglobulin or IgG, a safe, minimally-toxic human plasma-based
product, currently used to treat a variety of immune deficiencies and autoimmune
diseases, by replacing missing 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 patients’ bloodstream. In preliminary
studies, IgG appears to boost and strengthen cancer patient's immune systems
or
antibody levels, which may be useful in fighting cancer. Although there can
be
no assurance, many experts currently view IgG 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).
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 metastases or spreading
of
cancer cells 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.
According
to Datamonitor, cancer therapeutics represent an over $30 billion market
opportunity. This market continues to grow in particular in response to the
introduction of new and more effective treatments, manufacturers’ ability to
command premium pricing for new treatments and governments’ willingness to
reimburse for the cost of cancer treatments. New products that have been
introduced to the market in recent years as well as broader use (additional
indications) of existing products seem to fuel this increased growth because
of
improved efficacy and new treatment regimens.
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 that seen 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 substances that stimulate the immune system during infections
and
other immune reactions. 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.
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.
IgG
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 patients would receive IgG for extended periods of time (possible for
five
years as is the case of Tamoxifen for the prevention of breast cancer
recurrence). IgG 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 IgG is a type of protein found in human blood that helps to fight off harmful
bacteria, viruses and other germs. IgG is a blood plasma-derived product
containing protective antibodies normally present in the blood of healthy
individuals. IgG 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 IgG therapy is a safe, non-toxic therapy with virtually
no
side effects.
According
to our consultants the US market for IgG is currently estimated at approximately
30 metric tons and is expected to grow at 5% to 10% over the next 2 to 5 years.
This translates into an $1.5 to $1.8 billion annual sales for the US. There
are
five major manufacturers of IgG products that serve the US market including
CSL,
Baxter Healthcare, Grifols, Octapharma, and Talecris. Three smaller players
are
beginning to target the US markets and they include BPL, Kedrion and Omrix.
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 IgG, and through the combining the blood
plasma of many individual donors, it is believed that the resulting combination
provides superior therapy than IgG from one individual exclusively.
The
largest producers of IgG for the US market are ZLB-Behring (a subsidiary of
CSL), Baxter Healthcare and Talecris (formerly Bayer).
IgG
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 IgG 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
IgG prescriptions are written for off-label indications and roughly deducting
the estimated use of IgG for the indicated uses from the total sales, indicate
that as much as 40-50% of uses could be off-label. Patients receiving IgG
therapy for primary immune deficiencies usually receive the therapy for life,
while patients receiving IgG therapy for autoimmune disorders receive the
therapy intermittently over a period of months, and sometimes years, depending
on their condition.
IgG
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 our consultant, U.S. prices range from
about
$50 per gram for lyophilized preparations to a high of about $60 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 IgG immunotherapy in treating cancer, and investigated the
effectiveness of IgG based treatments at various stages of disease progression
with varying dosages and routes of administration. They have made preliminary
progress in understanding the mechanisms whereby IgGs appear to fight
cancer.
While
these experiments showed promising results, they are preliminary. Use of IgG
based therapies 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 IgG based cancer immunotherapy
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 IgG based 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. IgG therapy
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 IgG therapy holds promise as an effective anti-cancer
treatment at much lower doses than is commonly used for treating immune
deficiencies.
In
these
preliminary experiments, IgG therapy 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 IgG for treating solid
tumors through two major U.S. patents (#5,562,902 and #5,965,130), Patent
coverage includes a wide range of matters including but not limited to: a novel
method of administering to a mammal a preparation of IgG for inhibiting tumor
metastasis, for treating primary tumors, and for a broad spectrum of cancerous
diseases. The
patents will both expire in November, 2014. The
IgG
preparation to be administered according to one 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 IgG 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.
In
addition we have pending applications for the use of IgG based therapies for
the
treatment of melanoma and other additional U.S. and international patents and
or
patent applications. In October 2006 we filed a patent application for the
utilization of IgG therapy as a potential treatment for Avian
Influenza.
We
also
rely on trade secrets and unpatentable know-how that we seek to protect,
in
part, by confidentiality agreements. Our policy is 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 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 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 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. Although we have conducted
freedom of use patent searches 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
IgG
immunotherapy in treating cancer. They have employed mouse 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 IgG
treatment at various stages of disease progression, using alternative dosages
and routes of administration. These pre-clinical and preliminary experiments
have shown that IgG treatment prevents metastases and tumor recurrence for
a
broad spectrum of cancers with little or no side effects.
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 IgG representing 1% (20 milligrams per
kilogram body weight) of the standard IgG dosage. These experiments suggest
that
IgG treatment could be affordably administered as a preventative measure. IgG
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). IgG 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 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.
IgG
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 a
maximally tolerated dose (MTD). Phase 2 studies are designed to determine
preliminary efficacy and establish dosing. 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
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, 32 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 during 2007, we may
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 may be used to enter into discussions with a major pharmaceutical partner
and plasma based product manufacturers to work with us to potentially
commercialize this IgG product. This commercialization will include the need
to
conduct Phase 3 clinical trials in accordance with local regulatory
requirements. Such trials may be long-term trials and may require substantial
financial resources that we do not presently possess.
We
are
also 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
collected from 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 melanoma patients further support the rationale underling
the VitiGam program. As
previously reported, we received the approval of the BIRD Foundation for a
$1,000,000 grant. Under this grant, we and Life Therapeutics, Inc. will partner
in a joint study of VitiGam.
We
have
spent approximately $1.5MM in the last two fiscal years on our research and
development.
The
Company intends to conduct a Phase 1/2 trial 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 and/or combinations 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 clinical trials, in
order
to attain broad-based regulatory approval.
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 agent. The Company's strategy
is
to collaborate with a suitable partner to support late stage (Phase 3) clinical
development, registration and sales for its IgG based cancer products.
Employees
During
the next 12 months, we plan to function with a small management staff. During
this time, we will focus on completing the ongoing Phase 2 clinical trials
of
GCAN 0101, filing a US IND for VitiGam, establishing preliminary relationships
with potential commercial partners and evaluation of new business opportunities.
Currently we have six employees, of which three are executives. Two employees
are full time and the remaining four are employed on a part time basis (ranging
70%-90%). In addition to our employees, we rely on advice from a number of
outside consultants and industry experts as well as on comments from members
of
our Scientific Advisory Board.
None
of
our employees are a party to any collective bargaining agreements with us.
We
consider our relationships with our employees to be good.
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.
Two
key
factors that influence the rate of progression of clinical trials include the
rate at which patients can be recruited to participate in the testing 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 in the
US.
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 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. There can be no assurance that we will become
profitable.
At
present, our success depends solely on the successful commercialization of
IgG
based therapies for our proposed use as a cancer therapy alternative.
The
successful commercialization of IgG based cancer immunotherapies is crucial
for
our success. Our proposed products and their potential applications are in
an
early stage of clinical and manufacturing/process development and face a variety
of risks and uncertainties. Principally, these risks include the following:
|
•
|
future
clinical trial results may show that IgG based
therapy
is not well tolerated by the recipients at its effective doses
or is 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 our IgG based therapies are shown to be safe and effective for
their
intended purposes, 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 IgG
based
therapies 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 IgGs on a worldwide
basis.
|
|
•
|
even
if IgG products are successfully developed, commercially produced
and
receive all necessary regulatory approvals, there is no guarantee
that
there will be market acceptance of the products.
|
|
•
|
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 IgG 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, 2006 we raised $3,652,829 through private placements of our
securities. These amounts were used to fund our activities since incorporation.
Accordingly, our ability to continue develop and, if warranted, commercialize
our proposed IgG based products, will be dependent upon our ability to secure
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 have negative 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.
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 September 30, 2006 of $3,777,413, as
well as negative cash flow from operating activities. Presently, the company
does not have sufficient cash resources to meet its requirements in the twelve
months following October 1, 2006. These factors raise substantial doubt about
the company's ability to continue as a going concern
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, academic or government collaborators relating to the development,
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 covering IgG 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 future 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. Finally, we are planning to apply
for Orphan Drug Status for our melanoma program, If granted, this designation
provides for a seven or ten year market exclusivity in the US or EU,
respectively.
Even
if we are able to protect our proprietary rights we may suffer from off-label
use of other IgG 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 IgG 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
and
the European Union is governed by a variety of statutes and regulations in
these
geographies. These laws govern the development, testing, manufacture, safety,
efficacy, record keeping, labeling, 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 IgG products in development. If we are unable to
obtain necessary regulatory approvals, we may not be able to commercialize
our
products.
The
IgG
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 payers
-
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 payers 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 payers 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 and pharmaceuticals 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 marketing, sales or distribution capabilities. 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
IgG therapeutics. 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 IgG. If the third
party
suppliers were to cease production or otherwise fail to supply us with quality
IgG 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 Patrick Schnegelsberg, our 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 may become subject to volatility.
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, 2006 we had 5,917,775 outstanding warrants
and
options (1,510,000 for the year ended September 30, 2005) 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.
Most
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.
Fulfilling
our obligations incident to being a public company will be expensive and time
consuming.
As
a
public company, the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC, will require us to implement additional corporate
governance practices and adhere to a variety of reporting requirements and
complex accounting rules. Compliance with these public company obligations
will
increase our legal and financial compliance costs and place significant
additional demands on our finance and accounting staff and on our financial,
accounting and information systems.
In
particular, as a public company, our management will be required to conduct
an
annual evaluation of our internal controls over financial reporting and include
a report of management on our internal controls in our annual reports on
Form 10-
KSB.
Under current rules, we will be subject to this requirement beginning with
our
annual report on Form 10-KSB for our fiscal year ending September 30,
2008.
In
addition, we will be required to have our independent public accounting firm
attest to and report on management’s assessment of the effectiveness of our
internal controls over financial reporting. Under current rules, we will be
subject to this
requirement
beginning with our annual report on Form 10-KSB for our fiscal year ending
September 30, 2009. If we are unable to conclude that we have effective internal
controls over financial reporting or, if our independent auditors are unable
to
provide us with an attestation and an unqualified report as to the effectiveness
of our internal controls over financial reporting, investors could lose
confidence in the reliability of our financial statements, which could result
in
a decrease in the value of our common stock.
ITEM
2 - PROPERTIES
Our
principal executive offices are located in approximately 1337 square feet of
office space in Kiryat Ono, Israel. The lease commenced on August 10, 2006
and
is for a period of 36 months. The aggregate annual base rental for this space
is
$26,827.
We
are
leasing a suite in New York city since June 8, 2006 for the use of our CEO.
The
lease agreement is for a period of 12 months and the aggregate annual base
rental for this space is $21,600
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.
|
|
2006
|
|
2005
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
First
Quarter
|
|
|
1.75
|
|
|
1.01
|
|
|
2.20
|
|
|
1.50
|
|
Second
Quarter
|
|
|
1.72
|
|
|
1.05
|
|
|
1.92
|
|
|
1.45
|
|
Third
Quarter
|
|
|
1.69
|
|
|
0.71
|
|
|
1.85
|
|
|
0.90
|
|
Fourth
Quarter
|
|
|
1.20
|
|
|
0.53
|
|
|
1.45
|
|
|
0.85
|
|
As
of
December 18, 2006, there were approximately 28 holders of record of our common
stock and the closing bid quotation of our common stock was $0.42 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.
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
|
|
2,930,000
|
|
$1.24
|
|
2,070,000
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders (1),
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2,930,000
|
|
$1.24
|
|
1,570,000
|
ITEM
6 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATION
We
are a
development stage Company and currently have no revenue from operations. Other
than existing cash reserves and our intellectual property 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.
IgG
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 maximally
tolerated dose (MTD). Phase 2 studies are designed to determine preliminary
efficacy and establish dosing. 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
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, 32 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 during 2007, we may
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 may be used to enter into discussions with a major pharmaceutical partner
and plasma based product manufacturers to work with us to potentially
commercialize this IgG product. This commercialization will include the need
to
conduct Phase 3 clinical trials in accordance with local regulatory
requirements. Such trials may be long-term trials and may require substantial
financial resources that we do not presently possess.
We
are
also 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
collected from 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 melanoma patients further support the rationale underling
the VitiGam program.
The
Company intends to conduct a Phase 1/2 trial 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 conduct additional clinical trials to test new formulations
and/or combinations 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 clinical trials, in order to attain broad-based
regulatory approval.
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 agent. The Company's strategy
is
to collaborate with a suitable partner to support late stage (Phase 3) clinical
development, registration and sales for its IgG based cancer products.
Long
Term Business Strategy
As
noted
previously, if our IgG base cancer immunotherapies show significant promise
through clinical trials, we plan to ultimately seek a strategic commercial
partner, or partners, with extensive experience in the commercialization and
marketing of cancer drugs and or other infused therapeutic proteins. It is
envisioned that the partner, or partners, would be responsible or substantially
support late stage clinical trials (Phase 3) ensure regulatory approvals and
registrations in the appropriate territories in a timely manner. It is further
envisioned that the partner, or partners, would be responsible for sales and
marketing of our IgG immunotherapies in certain agreed upon territories. Such
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 regulatory requirements concerning future
clinical development in the US and elsewhere. Our 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.
Under certain circumstances, the Company may decide to develop any of its IgG
based cancer immunotherapies on its own, either world wide or in select
territories.
Other
Research and Development Plans
In
addition to conducting early-stage clinical trials, we plan to conduct
pre-clinical research to further deepen our understanding of the biology of
our
IgG products in cancer, develop alternative delivery systems, to determine
the
optimal dosage for different patient groups, to investigate alternative sources
of immunoglobulin other than human plasma, to develop novel IgG based therapies
and to develop next products to our current products. For example, 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,
|
|
·
|
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 future research
activities and to exploit any other means that may exist to protect our future
IgG anti-cancer therapies in the commercial markets. For example, we may seek
Orphan Drug Status for future IgG anti-cancer therapies for certain indications
in certain markets
Other
Strategic Plans
In
addition to developing our own IgG based anti-cancer therapies drug portfolio,
we are considering in-licensing and other means of obtaining additional lead
molecules of technologies to complement and/or expand our current 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
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 September 30, 2006 of $3,777,413, as
well as negative cash flow from operating activities. Presently, the company
does not have sufficient cash resources to meet its requirements in the twelve
months following October 1, 2006. These factors raise substantial doubt about
the company's ability to continue as a going concern Management
is in the process of evaluating various financing alternatives as the Company
will need to finance future research and development activities and general
and
administrative expenses through fundraising in
the
public or private equity markets. Although there is no assurance that the
Company will be successful with those initiatives, management is confident
that
it will be able to secure the necessary financing as a result of ongoing
financing discussions with third party investors and existing
shareholders..
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.
Valuation
of options and warrants
The
Company granted options to purchase common shares of our company to employees
and consultants as well as issue warrants in connection with fund
raising.
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. Under APB 25 compensation
costs for employees stock option plan is measured using the intrinsic value
based method of accounting. In accordance with FAS 123 - “Accounting for
Stock-Based Compensation” as amended by FAS 148 (“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 from
the
year beginning October 1, 2006 the company will adopt FAS 123 (revised
2004).
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.
The
company accounts for equity instruments issued to third party service providers
(non-employees) in accordance with the fair value method prescribed by FAS
123
and 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
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.
On
May 2,
2006 the company amended the vesting of the 350,000 options granted on October
6, 2005 to Chaime Orlev. The change matched the vesting schedule of these
options to the vesting schedule of all other options granted to employees and
directors of the Company.
Unrecognized
compensation as determined under FAS 123 as of September 30, 2006 totaled
$2,123,982.
Deferred
income taxes
Deferred
taxes are determined utilizing the assets and liabilities method based on the
estimated future tax effects of differences between the financial accounting
and
tax bases of assets and liabilities under the applicable tax laws. Deferred
tax
balances are computed using the tax rates expected to be in effect when those
differences reverse. A valuation allowance in respect of deferred tax assets
is
provided if, based upon the weight of available evidence, it is more likely
than
not that some or all of the deferred tax assets will not be realized. The
Company has provided a full valuation allowance with respect to its deferred
tax
assets.
Regarding
the Israeli subsidiary, paragraph 9(f) of FAS 109,"Accounting for Income Taxes”,
prohibits the recognition of deferred tax liabilities or assets that arise
from
differences between the financial reporting and tax bases of assets and
liabilities that are measured from the local currency into dollars using
historical exchange rates, and that result from changes in exchange rates or
indexing for tax purposes. Consequently, the abovementioned differences were
not
reflected in the computation of deferred tax assets and liabilities
Results
of Operations
Years
ended September 30, 2006 and 2005
The
following table summarizes certain statement of operations data for the company
for the 12 months period ended September 30, 2006 and 2005 (in
US$):
|
|
Year
ended September 30,
|
|
|
|
2006
|
|
2005
|
|
Research
and development costs
|
|
$
|
802,254
|
|
$
|
545,928
|
|
General
and administrative expenses
|
|
|
1,263,070
|
|
|
666,477
|
|
Financial
income, net
|
|
|
(29,151
|
)
|
|
(13,873
|
)
|
Income
taxes
|
|
|
28,622
|
|
|
-
|
|
Net
loss for the period
|
|
$
|
(2,064,795
|
)
|
$
|
(1,198,532
|
)
|
Research
& development costs.
Research
and development expenses are the costs incurred in the process of our
pre-clinical and our clinical trials. Clinical trail and pre-clinical expenses
include regulatory consultants and fees, research expenses, purchase of plasma,
the cost of manufacturing IgG and payments to medical centers for patient
recruitment and treatment.
During
the year ended September 30, 2006 and 2005 the research and development expenses
included, among other, the clinical and pre-clinical trial expenses, consultants
compensation, costs related to the registered patents as well as salaries and
related expenses.
During
the year ended September 30, 2006 the research and development expenses totaled
$802,254, compared to $545,928 during the year ended September 30, 2005. The
increase is resulting from a research project relating to the mechanism of
action of IgG done by Tel Hashomer Medical Research Infrastructure and Services
Ltd. (“THM”) according to a research and licensing agreement signed with THM.
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, 2006 the General and administrative expense totaled
$1,263,070 compared to $666,477 for the year ended September 30, 2005. The
increase is contributed to the hiring of the Company’s new CEO, consulting
services provided in connection with financing and M&A activities, legal and
professional services as well an increase in the rent and maintenance expenses
due to change in the office facilities of the Company as well as the leasing
of
an office space in New York.
Salaries
and related expenses for the year ending September 30, 2006 totaled $567,785
compared with $245,197 for the year ending September 30, 2005.
Consulting
services increased from $0 in the year ending September 30, 2005 to $83,113
for
the year ending September 30, 2006.
During
the year ending September 30, 2006 we incurred $247,132 related to legal and
professional fees compared to $149,609 during the previous year.
Traveling
expenses for the year ending September 30, 2006 totaled $99,417 compared with
$66,993 for the year ending September 30, 2005.
Insurance
expense for the year ending September 30, 2006 totaled $57,481 compared with
$56,162 for the year ending September 30, 2005 and included the directors
and
officers insurance as well as office and equipment insurance.
Other
general and administrative expenses for the year ending September 30, 2006
totaled $113,356 compared to $48,205 for the year ending September 30, 2005.
The
increase is mainly contributed to the increase of rent and maintenance expenses.
Financial
income/expense, net
During
the year ending September 30, 2006 the company generated interest income on
available cash and cash equivalents balance.
Liquidity
and Capital Recourses
Financing
activities
Through
September 30, 2006, the Company has incurred losses in an aggregate amount
of
$3,777,413. We have financed our operation from private placement of common
stock. Through September 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
most
recent two years include the following.
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.
On
November 20, 2006 the Company issued a convertible promissory note, aggregate
principal amount of $350,000, which bears interest at 8% payable on maturity
of
the note and matures on November 20, 2007.
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 forfeited during
2005 due to their resignation.
In
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. Total options
granted - 200,000 .
In
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
forfeited during 2005 due to the employee resignation.
In
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. Total options granted - 150,000.
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 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 Josef Neuhaus.
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 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 following Shmuel Levi, Yair Aloni, Jean-Pierre Elisha Martinez, Lior
Soussan-Gutman and Josef
Neuhaus. Total options granted - 500,000.
On
October 3, 2006 we granted options to purchase up to 50,000 common shares of
our
company at an exercise price of $0.65 to a new member of our Scientific Advisory
Board.
On
November 7, 2006 we granted options to purchase up to 150,000 common shares
of
our company at an exercise price of $0.45 to each of Steven Katz and Albert
Passner. Total options granted - 300,000.
On
December 5, 2006 we granted options to purchase up to 50,000 common shares
of
our company at an exercise price of $0.50 to a new member of our Scientific
Advisory Board.
Summary
of financing activities
Through
September 30, 2006 we raised approximately $3.6 Million through private
placements of our securities. As of September 30, 2006 the cash and cash
equivalents totaled $538,738. Presently,
the company does not have sufficient cash resources to meet its requirements
in
the twelve months following October 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.
Planned
Expenditures
The
estimated 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
|
|
$
|
3,203,000
|
|
Marketing
and Business Development
|
|
|
378,000
|
|
General
& Administrative Expenses
|
|
|
1,215,000
|
|
Total
|
|
$
|
4,796,000
|
|
As
previously indicated we are in the process of applying for an IND with the
US
FDA for VitiGam, GammaCan’s second generation IgG based product and
first-in-class anti-cancer immunotherapy. VitiGam is slated to enter the clinic
pursuant to a US IND. VitiGam is designed to target metastatic melanoma patients
with stage III and IV melanoma. Our ability to proceed with the IND application
as well as the commencement of the required clinical trial is dependent on
several major factors one of which is the ability to attract sufficient
financing on acceptable terms.
Contractual
obligations
On
May
18, 2006 the Company executed an agreement for the lease of its office
facilities to which it entered on July 10, 2006, The new lease agreement is
for
a period of 36 months with an option to extend the lease for an additional
36
months period. The monthly lease payment is $2,236. The future rental payments,
on a fiscal year basis under the lease are
$26,827, 26,827 and 22,356 for the years ending September 30, 2007, 2008 and
2009 respectively.
On
June
7, 2006 the Company entered into a lease agreement for a office facilities
in
New-York. The lease agreement is for a 12 month period with an automatic option
to renew for another 60 days. The monthly lease payment is $1,800. As security
for its obligations under this agreement the Company provided a security deposit
in the amount of $4,500. The future lease payments under this lease are $14,400
for the year ending September 30, 2007
Rental
expenses for the years ended September 30, 2006 and 2005 were $18,307 and
$8,148, 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 (IgG) for the purposes of
the
clinical trial. The total purchase price was set at $332,500 ($35/gram) which
was paid according to a delivery schedule. As of September 30, 2006 the Company
has fulfilled its obligations under this agreement.
On
December 13, 2005, the company 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. As of
September 30, 2006 the company paid a total of $100,000 to THS under this
agreement. According to the agreement THM has granted the subsidiary an
exclusive world wide license to any resulting technology and know-how as
described in the above mentioned 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 IgG 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 provided at least 20 hours of service per week,
received 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.
On
April
15, 2006, Vered Caplan resigned from her position as the acting CEO of the
company, and continue to serve as the CEO of the subsidiary without change
in
her compensation.
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
TABLE
OF
CONTENTS
|
|
Page
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC
|
|
|
ACCOUNTING
FIRM - Report of Kesselman & Kesselman
|
|
30
|
REPORT
OF INDEPENDENT AUDITORS -
|
|
|
Report
of Armando C. Ibarra
|
|
31
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
|
|
Balance
sheets
|
|
32
|
Statements
of operations
|
|
33
|
Statements
of changes in stockholders’ equity
|
|
34
|
Statements
of cash flows
|
|
35
|
Notes
to financial statements
|
|
36-53
|
|
|
|
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
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) and its subsidiary as of September 30, 2006
and 2005, 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, 2006. 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 but included an emphasis of a matter. Our opinion, in so far as it
relates to amounts included for that period is based on the report of the other
independent auditors, mentioned above.
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, based upon our audits and the report of the other independent auditors,
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, 2006 and 2005, and the consolidated results
of
their operations and their cash flows for each of the years then ended and
cumulatively, for the period from October 1, 2003 to September 30, 2006, in
conformity with accounting principles generally accepted in the United States
of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has net losses for the period from inception
(October 6, 1998) through September 30, 2006 of $3,777,413 and presently
the Company does not have sufficient cash resources to meet its requirements
in
the twelve months following October 1, 2006. These reasons raise substantial
doubt about its ability to continue as a going concern. Management's plans
in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Kesselman
& Kesselman
|
|
Tel-Aviv,
Israel
|
December
20, 2006
|
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,
|
|
|
|
2006
|
|
2005
|
|
A
s s e t s
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
538,738
|
|
$
|
713,342
|
|
Prepaid
expenses
|
|
|
-
|
|
|
6,416
|
|
Other
|
|
|
12,494
|
|
|
22,029
|
|
T
o t a l current assets
|
|
|
551,232
|
|
|
741,787
|
|
|
|
|
|
|
|
|
|
FUNDS
IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT (Note
2)
|
|
|
21,071
|
|
|
7,528
|
|
LONG
TERM DEPOSITS (Note
3)
|
|
|
22,270
|
|
|
5,203
|
|
PROPERTY
AND EQUIPMENT, NET (Note
4)
|
|
|
25,247
|
|
|
10,269
|
|
T
o t a l assets
|
|
$
|
619,820
|
|
$
|
764,787
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
279,857
|
|
$
|
159,379
|
|
Payroll
and related accruals
|
|
|
49,242
|
|
|
14,655
|
|
T
o t a l current liabilities
|
|
|
329,099
|
|
|
174,034
|
|
|
|
|
|
|
|
|
|
LIABILITY
FOR EMPLOYEE RIGHTS UPON RETIREMENT
(Note 2)
|
|
|
31,531
|
|
|
13,725
|
|
COMMITMENTS
(Note
5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2006 and 2005,
respectively)
|
|
|
2,845
|
|
|
2,622
|
|
Additional
paid-in capital
|
|
|
3,172,284
|
|
|
1,767,601
|
|
Warrants
|
|
|
861,474
|
|
|
519,423
|
|
Deficit
accumulated during the development stage
|
|
|
(3,777,413
|
)
|
|
(1,712,618
|
)
|
T
o t a l stockholders' equity
|
|
|
259,190
|
|
|
577,028
|
|
T
o t a l liabilities and stockholders’ equity
|
|
$
|
619,820
|
|
$
|
764,787
|
|
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
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
RESEARCH
AND DEVELOPMENT COSTS (Note
8)
|
|
$
|
802,254
|
|
$
|
545,928
|
|
$
|
1,515,174
|
|
GENERAL
AND ADMINISTRATIVE
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
(Note
9)
|
|
|
1,263,070
|
|
|
666,477
|
|
|
2,288,711
|
|
OPERATING
LOSS
|
|
|
2,065,324
|
|
|
1,212,405
|
|
|
3,803,885
|
|
FINANCIAL
INCOME
|
|
|
(44,130
|
)
|
|
(20,703
|
)
|
|
(64,833
|
)
|
FINANCIAL
EXPENSES
|
|
|
14,979
|
|
|
6,830
|
|
|
22,114
|
|
LOSS
BEFORE TAXES ON INCOME
|
|
|
2,036,173
|
|
|
1,198,532
|
|
|
3,761,166
|
|
TAXES
ON INCOME
|
|
|
28,622
|
|
|
-
|
|
|
28,622
|
|
LOSS
FROM OPERATIONS OF THE COMPANY AND ITS CONSOLIDATED
SUBSIDIARY
|
|
|
2,064,795
|
|
|
1,198,532
|
|
|
3,789,788
|
|
MINORITY
INTERESTS IN LOSSES OF A SUBSIDIARY
|
|
|
-
|
|
|
-
|
|
|
(12,375
|
)
|
NET
LOSS FOR THE PERIOD
|
|
$
|
(2,064,795
|
)
|
$
|
(1,198,532
|
)
|
$
|
(3,777,413
|
)
|
BASIC
AND DILUTED LOSS PER
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARES
|
|
$
|
(0.074
|
)
|
$
|
(0.046
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
SHARES
USED IN COMPUTING BASIC AND
|
|
|
|
|
|
|
|
|
|
|
DILUTED
LOSS PER COMMON SHARE
|
|
|
28,052,065
|
|
|
26,099,260
|
|
|
|
|
*
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
|
|
|
|
|
|
Number
of
|
|
Stock
|
|
|
|
paid-in
|
|
development
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Warrants
|
|
capital
|
|
stage
|
|
Total
|
|
Changes
during the period from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
6, 1998 (date of incorporation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued for cash
|
|
|
57,506,498
|
|
$
|
5,750
|
|
$
|
139,494
|
|
$
|
782,141
|
|
$
|
-
|
|
$
|
927,385
|
|
Contributed
capital
|
|
|
|
|
|
|
|
|
|
|
|
7,025
|
|
|
|
|
|
7,025
|
|
Cancellation
of shares at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
8, 2004
|
|
|
(32,284,988
|
)
|
|
(3,228
|
)
|
|
|
|
|
3,228
|
|
|
|
|
|
|
|
Gain
on issuance of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock to third party
|
|
|
|
|
|
|
|
|
|
|
|
86,625
|
|
|
|
|
|
86,625
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
62,600
|
|
|
|
|
|
62,600
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(514,086
|
)
|
|
(514,086
|
)
|
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, net of issuance costs
|
|
|
978,000
|
|
|
97
|
|
|
367,892
|
|
|
766,630
|
|
|
|
|
|
1,134,619
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued for cash on January 25,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005, net of issuance costs
|
|
|
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
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued for cash on October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005, net of issuance costs
|
|
|
666,666
|
|
|
67
|
|
|
72,410
|
|
|
365,670
|
|
|
|
|
|
438,147
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued for cash on December 20,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005, net of issuance costs
|
|
|
1,555,556
|
|
|
156
|
|
|
269,641
|
|
|
804,998
|
|
|
|
|
|
1,074,795
|
|
Employees
and consultants stock based
compensation expenses
|
|
|
|
|
|
|
|
|
|
|
|
234,015
|
|
|
|
|
|
234,015
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,064,795
|
)
|
|
(2,064,795
|
)
|
Balance
at September 30, 2006
|
|
|
28,453,732
|
|
$
|
2,845
|
|
$
|
861,474
|
|
$
|
3,172,284
|
|
$
|
(3,777,413
|
)
|
$
|
259,190
|
|
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,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(2,064,795
|
)
|
$
|
(1,198,532
|
)
|
$
|
(3,777,413
|
)
|
Adjustments
required to reconcile net loss to net cash used
|
|
|
|
|
|
|
|
|
|
|
in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Income
and expenses not involving cash flows:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
4,299
|
|
|
2,534
|
|
|
6,892
|
|
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
|
|
Employees
and consultants stock based compensation expenses
|
|
|
196,957
|
|
|
34,592
|
|
|
294,149
|
|
Increase
in liability for employee rights upon retirement
|
|
|
17,806
|
|
|
13,725
|
|
|
31,531
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in prepaid expenses
|
|
|
6,416
|
|
|
4,613
|
|
|
-
|
|
Decrease
(increase) in other current assets
|
|
|
9,535
|
|
|
(16,058
|
)
|
|
(12,494
|
)
|
Increase
in current liabilities
|
|
|
155,065
|
|
|
16,816
|
|
|
328,099
|
|
Net
cash used in operating activities
|
|
|
(1,674,717
|
)
|
|
(1,142,310
|
)
|
|
(3,038,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES -
|
|
|
|
|
|
|
|
|
|
|
Increase
in long term deposits
|
|
|
(17,067
|
)
|
|
(5,203
|
)
|
|
(22,270
|
)
|
Funds
in respect of employee rights upon retirement
|
|
|
(13,543
|
)
|
|
(7,528
|
)
|
|
(21,071
|
)
|
Purchase
of property and equipment
|
|
|
(19,277
|
)
|
|
(8,904
|
)
|
|
(32,139
|
)
|
Net
cash used in investing activities
|
|
|
(49,887
|
)
|
|
(21,635
|
)
|
|
(75,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock and warrants net of issuance costs
|
|
|
1,550,000
|
|
|
1,171,419
|
|
|
3,652,829
|
|
Net
cash provided by financing activities
|
|
|
1,550,000
|
|
|
1,171,419
|
|
|
3,652,829
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(174,604
|
)
|
|
7,474
|
|
|
538,738
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT
|
|
|
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
713,342
|
|
|
705,868
|
|
|
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
AT
END OF PERIOD
|
|
$
|
538,738
|
|
$
|
713,342
|
|
$
|
538,738
|
|
Supplemental
information on financing activities not involving cash flow - issuance costs
paid by a grant of warrants to third parties who assisted in securing
subscription agreements totaled $37,058 for the year ending September 30,
2006.
*
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
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 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.
During
August 2004, the Company acquired, through it's then wholly-owned subsidiary,
GammaCan Ltd (“the Subsidiary”), 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 the Subsidiary 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.
Subsequent
to the transaction, 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 IgG cancer immunotherapy in human clinical trials. In July 2005, the company
commenced Phase 2 clinical trials in humans to demonstrate clinical efficacy
of
IgG 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 during 2007. Following analysis and publication of the results the
Company will decide on how to proceed with its future clinical work regarding
the use of IgG. The decision will be based on several factors including the
ability to attract strategic partners for co-development.
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
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 September 30, 2006 of $3,777,413, as
well as negative cash flow from operating activities. Presently, the company
does not have sufficient cash resources to meet its requirements in the twelve
months following October 1, 2006. These factors raise substantial doubt about
the company's ability to continue as a going concern. Management
is in the process of evaluating various financing alternatives as the Company
will need to finance future research and development activities and general
and
administrative expenses through fund raising in
the
public or private equity markets. Although
there is no assurance that the Company will be successful with those
initiatives, management is confident that it will be able to secure the
necessary financing as a result of ongoing financing discussions with third
party investors and existing shareholders.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
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.
The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles 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 inter-company 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.
(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.
The
Company has no other comprehensive loss components other than net loss for
the
reported periods.
Basic
and
diluted net losses per common share are computed by dividing the net loss for
the period by the weighted average number of common shares outstanding during
the period. 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 stock
options and warrants excluded from the calculation of diluted net loss was
5,917,775 for the year ended September 30, 2006 (1,510,000 for the year ended
September 30, 2005).
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
l.
|
Impairment
in value of long-lived
assets
|
Under
FAS
144 “Accounting for the Impairment or Disposal of Long- Lived Assets” (“FAS
144”), the Company reviews long-lived assets, to be held and used, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. Under FAS 144, if the
sum
of the expected future cash flows (undiscounted and without interest charges)
of
the long-lived assets is less than the carrying amount of such assets, an
impairment loss would be recognized, and the assets are written down to their
estimated fair values
|
m. |
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. Under APB 25 compensation
costs for employees stock option plan is measured using the intrinsic value
based method of accounting. In accordance with FAS 123 - “Accounting for
Stock-Based Compensation” as amended by FAS 148 (“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. The Company
expects to adopt the provisions of FAS 123 (revised 2004) on October 1, 2006
(see also note 1n).
The
company accounts for equity instruments issued to third party service providers
(non-employees) in accordance with the fair value based on an option-pricing
model, pursuant to the guidance in 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 fair value of the options granted is revalued
over the related service periods and recognized using the accelerated
method.
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,
|
|
|
|
2006
|
|
2005
|
|
Net
loss as reported
|
|
$
|
(2,064,795
|
)
|
$
|
(1,198,532
|
)
|
Add
back: Stock based employee compensation expense
|
|
|
|
|
|
|
|
included
in net loss as reported
|
|
|
163,517
|
|
|
-
|
|
Deduct:
pro forma stock based employee compensation
|
|
|
|
|
|
|
|
expense
determined under fair value
|
|
|
|
|
|
|
|
method
for all awards
|
|
|
(1,107,201
|
)
|
|
(153,287
|
)
|
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
|
|
|
118,193
|
|
Pro
forma net loss
|
|
$
|
(2,928,803
|
)
|
$
|
(1,233,626
|
)
|
Net
loss per common shares:
|
|
|
|
|
|
|
|
Basic
and diluted loss per shares - as reported
|
|
$
|
(0.074
|
)
|
$
|
(0.046
|
)
|
Basic
and diluted loss per shares - pro forma
|
|
$
|
(0.104
|
)
|
$
|
(0.047
|
)
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
Unrecognized
compensation as determined under FAS 123 as of September 30, 2006 totaled
$2,123,982.
The
weighted average fair value of the options at the date of grant for options
granted during 2006 and 2005 was $1.19 and $0.90, respectively.
The
fair
value of each option grant is estimated on the date of grant using the Black
Scholes option-pricing model with the following weighted average
assumptions:
|
For
options granted in
|
|
Year
ended September 30,
|
|
2006
|
|
2005
|
Expected
option life (years)
|
7.85
|
|
7.88
|
Expected
stock price volatility
|
80.0%-85.1%
|
|
71.9%-87.0%
|
Risk
free interest rate
|
4.5%
|
|
4.0%
|
Expected
dividend yield
|
0.0%
|
|
0.0%
|
|
n.
|
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. In March 2005, the SEC issued
Staff
Accounting Bulletin No. 107 (SAB 107) regarding the SEC's interpretation
of FAS 123R. FAS 123R 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, which is October 1,
2006 for the Company.
|
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 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.
The
adaptation of FAS 123R is expected to have a material impact on the Company’s
financial statements and its results of operations.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
2)
|
In
June 2005, the Financial Accounting Standards Board issued FAS No.
154,
"Accounting Changes and Error Corrections - a replacement of APB
Opinion
No. 20 and FASB Statement No. 3". This Statement generally requires
retrospective application to prior periods' financial statements
of
changes in accounting principle. Previously, Opinion No. 20 required
that
most voluntary changes in accounting principle were recognized by
including the cumulative effect of changing to the new accounting
principle in net income of the period of the change. FAS 154 apply
to all
voluntary changes in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance that
the
pronouncement does not include specific transition provisions. When
a
pronouncement includes specific transition provisions, those provisions
should be followed. This Statement shall be applied to accounting
changes
and corrections of errors made in fiscal years beginning after December
15, 2005, which is the year beginning October 1, 2006 for the company.
|
|
3)
|
In
July 2006, the FASB issued FASB Interpretation (FIN) No. 48 “Accounting
for Uncertainty in Income Taxes” (FIN 48). 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 (year beginning October 1, 2007 for the Company).
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.
|
|
4)
|
In
September 2006, the FASB issued Statement of Financial Accounting
Standard
(SFAS) No. 157, "Fair Value Measurements" (“FAS 157”). FAS 157 defines
fair value, establishes a framework for measuring fair value in accordance
with generally accepted accounting principles, and expands disclosures
about fair value measurements. SFAS No. 157 will apply whenever another
standard requires (or permits) assets or liabilities to be measured
at
fair value. The standard does not expand the use of fair value to
any new
circumstances. SFAS No. 157 is effective for financial statements
issued
for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years, which is the year beginning October 1,
2008 for
the company.
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
5)
|
In
September 2006, the SEC issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements ("SAB No. 108").
SAB
No. 108 provides guidance on the consideration of the effects of
prior
year misstatements in quantifying current year misstatements for
the
purpose of a materiality assessment. SAB 108 establishes an approach
that
requires quantification of financial statement errors based on the
effects
of each of the company's balance sheet and statement of operations
and the
related financial statement disclosures. SAB No. 108 permits existing
public companies to record the cumulative effect of initially applying
this approach in the first year ending after
November 15, 2006 by recording the necessary correcting adjustments
to the
carrying values of assets and liabilities as of the beginning of
that year
with the offsetting adjustment recorded to the opening balance of
retained
earnings. Additionally, the use of the cumulative effect transition
method
requires detailed disclosure of the nature and amount of each individual
error being corrected through the cumulative adjustment and how and
when
it arose. The company does not expect this Statement to have a material
effect on the company’s financial statements or its results of
operations.
|
|
6)
|
In
September 2006, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standard No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans"
(FAS 158). FAS 158 requires employers to fully recognize the obligations
associated with single-employer defined benefit pension, retiree
healthcare and other postretirement plans in their financial statements.
The provisions of FAS 158 are effective as of the end of the fiscal
year
ending after December 15, 2006, which is the year beginning October
1,
2007 for the Company. In the Company’s opinion, implementation of this
standard is not expected to have a material effect on its financial
statements in future periods.
|
Certain
figures in respect of prior years have been reclassified to conform to the
current year presentation.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
2 - 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. The amounts funded are included in the balance
sheet 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, 2006 and
2005,
were $17,806 and $13,725
respectively.
|
|
c.
|
Cash
flow information regarding the Company’s liability for employee rights
upon retirement:
|
|
1.
|
The
Company expects to contribute to the insurance policies $20,694 in
respect
of severance pay for the year ended September 30,
2007.
|
|
2.
|
Due
to the relatively young age of the Company’s and its 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
3 - LONG TERM DEPOSITS
Amounts
represent deposits in respect of lease agreements for the company’s office
facilities and vehicles used by its employees (see also note 5).
NOTE
4 - PROPERTY AND EQUIPMENT, net
|
a.
|
Composition
of property and equipment, grouped by major classifications, is as
follows:
|
|
|
September
30,
|
|
|
|
2006
|
|
2005
|
|
Cost:
|
|
|
|
|
|
Office
furniture and equipment
|
|
$
|
14,287
|
|
$
|
7,400
|
|
Computers
and peripheral equipment
|
|
|
17,852
|
|
|
5,462
|
|
|
|
|
32,139
|
|
|
12,862
|
|
Less
- accumulated depreciation
|
|
|
6,892
|
|
|
2,593
|
|
|
|
$
|
25,247
|
|
$
|
10,269
|
|
|
b.
|
Depreciation
expense totaled $4,299 and $2,534 in the years ended September 30,
2006
and 2005, respectively.
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
5 - COMMITMENTS:
|
a.
|
On
May 18, 2006 the subsidiary entered into a new lease agreement for
its new
office facilities, to which it entered on August 10, 2006. The new
lease
agreement is for a period of 36 months with an option to renew the
lease
for an additional 36 month period. The monthly lease payment is $2,236
(the monthly lease payment per previous agreement was $679). The
future
lease payments under the lease are $26,827, 26,827 and 22,356 for
the
years ending September 30, 2007, 2008 and 2009
respectively.
|
As
security for its obligation under this lease agreement the Company provided
a
bank guarantee in an amount equal to six monthly lease payments, which is
secured by a long term bank deposit (see also note 3).
On
June
8, 2006 the Company entered into a lease agreement for the office facilities
it
currently occupies. The lease agreement is for a period of 12 months with an
automatic option to renew for another 60 days at the same monthly rate plus
an
increase of 14.83%. The monthly lease payment is $1,800. The future lease
payments under this lease are $14,400 for the year ending September 30, 2007.
Rental
expenses for the years ended September 30, 2006 and 2005 were $18,307 and
$8,148, respectively
|
b.
|
The
subsidiary has entered into operating lease agreements for vehicles
used
by its employees for a period of 3
years.
|
The
lease
expenses for the year ended September 30, 2006 and 2005 were approximately
$39,328 and $19,361, respectively. The future lease payments under the lease
agreement are $43,698, 28,443 and 4,990 for the years ending September 30,
2007,
2008 and 2009 respectively.
|
c.
|
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 subsidiary 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. As of September 30, 2006 the subsidiary paid
a
total of $100,000 to THS under this agreement. According to the agreement
THM has granted the subsidiary an exclusive worldwide license to
any
resulting technology and know-how as described in the above mentioned
agreement.
|
NOTE
6 - STOCK HOLDERS’ EQUITY:
The
Company’s shares are traded on the Over-The-Counter (“OTC”) Bulletin Board. The
quoted price per share, as of September 30, 2006 was US$0.60.
On
April
20, 2004 the Company affected a 16.5 to 1 reverse 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 reverse split the Company also reduced the authorized capital of its common
stock from 1,320,000,000 shares to 100,000,000 shares.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
6 - STOCK HOLDERS’ EQUITY (continued):
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
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 fair value of the options is recognized as
compensation expense in the amount of $62,600. The options were exercised on
August 17, 2004.
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.
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.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
6 - STOCK HOLDERS’ EQUITY (continued):
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
warrants to purchase common shares. Every warrant is exercisable for three
years
and can be exercisable to one Share at a price of $1.50 per Share.
The
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to the warrants estimated by using the Black
Scholes option-pricing model is $72,410. 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.
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
warrants to purchase common shares 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
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to all warrants estimated by using the Black
Scholes option-pricing model is $235,527. 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.
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
consideration was allocated to the shares and warrants issued based on relative
fair value. The value allocated to all warrants estimated by using the Black
Scholes option-pricing model is $34,114. 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.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
6 - STOCK HOLDERS’ EQUITY (continued):
|
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.
|
The
maximum term of the option is 10 years.
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.
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.
On
October 6, 2005, 350,000 options were granted to an employee 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.
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.
On
October 20, 2005, 30,000 options were granted to an employee 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
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.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
6 - STOCK HOLDERS’ EQUITY (continued):
On
December 21, 2005, 250,000 options were granted to an employee 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.
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.
On
January 12, 2006, 50,000 options were granted to an employee 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.
The
fair
Value of the above mentioned options on the date of the grant estimated by
using
the Black Scholes option-pricing model is $44,163. 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.
On
March
15, 2006, 50,000 options were granted to a director 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.
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
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 the resolution.
Compensation costs calculated in accordance with APB 25 totaled $434,000.
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.
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 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
the
resolution. Compensation costs calculated in accordance with APB 25 totaled
$105,000. 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 82%;
risk-free interest rates of 4.5%; and expected lives of 7.85 years.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
6 - STOCK HOLDERS’ EQUITY (continued):
A
summary
of the status of the company’s plan as of September 30, 2006 and 2005, and
changes during the years ended on those dates, is presented below:
|
|
Year
ended September 30
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Number
|
|
average
|
|
Number
|
|
average
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
|
price
|
|
|
|
price
|
|
|
|
|
|
$
|
|
|
|
$
|
|
For
options granted to
|
|
|
|
|
|
|
|
|
|
employees:
|
|
|
|
|
|
|
|
|
|
Options
outstanding at
|
|
|
|
|
|
|
|
|
|
beginning
of year
|
|
|
350,000
|
|
$
|
1.17
|
|
|
1,450,000
|
|
$
|
1.30
|
|
Changes
during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
- at market price
|
|
|
380,000
|
|
|
1.31
|
|
|
300,000
|
|
|
1.15
|
|
Granted
- at an exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price less then market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
price
|
|
|
2,250,000
|
|
|
1.23
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
(150,000
|
)
|
|
1.20
|
|
|
(1,400,000
|
)
|
|
1.30
|
|
Expired
|
|
|
-
|
|
|
|
|
|
-
|
|
|
-
|
|
Options
outstanding at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
2,830,000
|
|
|
1.24
|
|
|
350,000
|
|
|
1.17
|
|
Options
exercisable at end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
82,292
|
|
|
|
|
|
-
|
|
|
|
|
Weighted
average fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value
of options granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during
the year
|
|
$
|
1.19
|
|
|
|
|
$
|
0.90
|
|
|
|
|
The
following table presents summary information concerning the options outstanding
as of September 30, 2006:
Options
outstanding
|
|
Options
exercisable
|
|
|
Number
|
|
Weighted
|
|
Weighted
|
|
Number
|
|
Weighted
|
Range
|
|
outstanding
|
|
average
|
|
average
|
|
exercisable
|
|
average
|
of
|
|
at
|
|
remaining
|
|
exercise
|
|
at
|
|
exercise
|
exercise
|
|
September
30,
|
|
contractual
|
|
price
|
|
September
30,
|
|
price
|
prices
|
|
2006
|
|
life
|
|
|
|
2006
|
|
|
$
|
|
|
|
Years
|
|
$
|
|
|
|
$
|
0.93
to 1.37
|
|
2,830,000
|
|
9.36
|
|
1.24
|
|
82,292
|
|
1.15
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
6 - STOCK HOLDERS’ EQUITY (continued):
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 $92,383,
and
was based on the following assumptions: dividend yield of 0% for all years;
expected volatility of 91%; risk-free interest rates of 4.5%; and expected
lives
of 7.88 years.
During
September 2006 50,000 of these options were forfeited do to the departure of
one
of the scientific advisor. Expenses
in respect of options forfeited due to non- performance is
reversed.
The
Company recorded stock compensation of $33,440 and $34,590 during the year
ended
September 2006 and 2005 respectively, related to consulting
services.
The
company did not grant options to non employees other then to its scientific
advisors, as described above.
As
to
grants of stock options subsequent to September 30, 2006, see note
11.
NOTE
7 - TAXES ON INCOME:
|
a.
|
Deferred
income taxes:
|
|
|
September
30,
|
|
|
|
2006
|
|
2005
|
|
In
respect of:
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
431,165
|
|
$
|
268,935
|
|
Research
and development expenses
|
|
|
145,840
|
|
|
-
|
|
Start-up
costs
|
|
|
142,932
|
|
|
-
|
|
Other
|
|
|
6,209
|
|
|
-
|
|
Less
- Valuation allowance
|
|
|
(726,146
|
)
|
|
(268,935
|
)
|
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.
|
b.
|
Corporate
taxation in the U.S.
|
Taxes
on
income included in the consolidated statements of operations represent current
taxes due to taxable income of the US Company.
The
applicable corporate tax rate for the Company is 22%.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
7 - TAXES ON INCOME
(continued):
|
c.
|
Corporation
taxation in Israel
|
The
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.
The
regular corporate tax rate in Israel for 2006 is 31%. The corporate tax rates
for 2007 and thereafter are as follows: 2007 - 29%, 2008 - 27%, 2009 - 26%
and
for 2010 and thereafter - 25%.
As
of
September 30, 2006, the subsidiary has an accumulated tax loss carryforward
of
approximately $1,724,661 (September 30, 2005 approximately - $1,151,579). Under
Israeli tax laws, carryforward tax losses are linked to the Israeli CPI. The
Israeli loss carryforwards have no expiration date.
|
d.
|
Reconciliation
of the theoretical tax expense to actual tax
expense
|
The
main
reconciling items, between the statutory tax rate of the Company and the
subsidiary and the effective rate are the non deductible expenses and the
non-recognition of tax benefits from carryforward tax losses due to the
uncertainty of the realization of such tax benefits (see above).
NOTE
8 - RESEARCH AND DEVELOPMENT COSTS:
|
|
Year
ended
|
|
|
|
September
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Clinical
trials
|
|
$
|
390,717
|
|
$
|
239,200
|
|
Consulting
|
|
|
142,404
|
|
|
127,082
|
|
Salaries
and related expenses
|
|
|
155,116
|
|
|
91,337
|
|
Costs
of registered patents
|
|
|
79,982
|
|
|
50,916
|
|
Compensation
costs in respect of warrants granted to
|
|
|
|
|
|
|
|
consultants
|
|
|
33,440
|
|
|
34,590
|
|
Other
|
|
|
595
|
|
|
2,803
|
|
|
|
$
|
802,254
|
|
$
|
545,928
|
|
NOTE
9 - GENERAL AND ADMINISTRATIVE EXPENSES
|
|
Year
ended
|
|
|
|
September
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Payroll
and related expenses
|
|
$
|
567,785
|
|
$
|
245,197
|
|
Consulting
|
|
|
83,113
|
|
|
-
|
|
Travel
|
|
|
99,417
|
|
|
66,993
|
|
Professional
services
|
|
|
247,132
|
|
|
149,609
|
|
Insurance
|
|
|
57,481
|
|
|
56,162
|
|
Business
development
|
|
|
94,786
|
|
|
100,311
|
|
Other
|
|
|
113,356
|
|
|
48,205
|
|
|
|
$
|
1,263,070
|
|
$
|
666,477
|
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
10 - RELATED PARTIES - TRANSACTIONS:
|
a.
|
On
November 4, 2004, the Subsidiary entered into a consulting agreement
with
PBD Ltd. (the "Consultant"), a company controlled by a principal
shareholder of the Company. 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
costs" for the year ended September 30,
2005.
|
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 advise
on
the specifics of the protocol, for a total cost that will not exceed $8,000,
were approved by the Subsidiary.
|
b.
|
On
March 1, 2005 the Company and its Subsidiary, entered into an agreement
appointing a principal shareholder as Vice President of Business
Development, in consideration of a salary of $4,000 per month, commencing
February 2005 and ended July 2,
2005.
|
|
c.
|
Effective
July 2, 2005, a related party served 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.
|
|
d.
|
On
April 15, 2006, 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 continued as the CEO of the subsidiary.
|
|
e.
|
Payroll
and related expenses in respect of the related party, mentioned above
(b,c,d), for the year ended September 30, 2006 and 2005 was $111,610
and
$53,330 respectively.
|
|
f.
|
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. The CEO 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.
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
11 - SUBSEQUENT EVENTS:
|
a.
|
On
October 12, 2006 50,000 options were granted under the Stock Option
Plan
to a new member of the scientific advisory board, an outside party.
The
exercise price has been determined at $0.65 per share, which was
equivalent to the traded market price on the date of grant. As for
the
vesting period see note 6b above. The fair value of the above options
is
estimated by using Black Scholes option-pricing model as $27,055,
and was
based on the following assumptions: dividend yield of 0% for all
years;
expected volatility of 91%; risk-free interest rates of 4.65%; and
expected lives of 7.88 years.
|
|
b.
|
On
October 18, 2006 the Company entered into a Strategic Alliance Agreement
with UTEK Corporation (“UTEK”), pursuant to which UTEK would assist the
Corporation in identifying technology acquisition opportunities.
As
consideration for the services being provided to the Corporation
by UTEK,
the Corporation has agreed to issue UTEK an aggregate of 171,432
shares of
common stock, par value $0.0001 per share, of the Corporation, which
will
vest in 12 equal monthly instalments of 14,286
shares.
|
|
c.
|
On
November 13, 2006 150,000 options were granted under the Stock Option
Plan
to each of the Company’s two new board members (total - 300,000
options).
|
The
exercise price has been determined at $0.45 per share, which was equivalent
to
the traded market price on the date of grant. As for the vesting period see
note
6b above. The fair value of the above options on the date of grant was estimated
by using Black Scholes option-pricing model as $111,654, and was based on the
following assumptions: dividend yield of 0%; expected volatility of 90%;
risk-free interest rates of 4.65%; and expected lives of 7.88 years.
|
d.
|
On
November 20, 2006 the Company issued a convertible promissory note,
aggregate principal amount of $350,000, which bears interest at 8%
payable
on maturity of the note and matures on November 20, 2007. At the
discretion of the lender, in the event that the Company raises debt
or
equity financing during the 12 month period following the issuance
of the
note, the principal and interest due under the note is convertible
on the
same terms as such financing.
|
|
e.
|
On
December 5, 2006 50,000 options were granted under the Stock Option
Plan
to a new member of the scientific advisory board, an outside party.
The
exercise price has been determined at $0.50 per share, which was
equivalent to the traded market price on the date of grant. As for
the
vesting period see note 6b above. The fair value of the above options
is
estimated by using Black Scholes option-pricing model as $20,779,
and was
based on the following assumptions: dividend yield of 0% for all
years;
expected volatility of 91%; risk-free interest rates of 4.65%; and
expected lives of 7.88 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
controls and procedures. Based on management's evaluation as of
the end
of the period covered by this Annual Report, our chief executive officer and
chief financial officer concluded that as of the end of the period covered
by
this report, our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act")) were effective in ensuring 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.
ITEM
8B - OTHER INFORMATION
None
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
|
Patrick
Schnegelsberg
|
Chief
Executive Officer of our company
|
42
|
April
16, 2006
|
Vered
Caplan
|
Chief
Executive Officer of GammaCan, Ltd.
|
38
|
March
1, 2005
|
Steven
Katz
|
Chairman
of the Board of our company
|
58
|
November
6, 2006
|
Albert
Passner
|
Director
of our company
|
68
|
November
6, 2006
|
Yair
Aloni
|
Director
of our company and GammaCan, Ltd.
|
56
|
August
17, 2004
|
Shmuel
Levi
|
Director
of our company and GammaCan, Ltd.
|
56
|
August
17, 2004
|
Josef
Neuhaus
|
Director
of our company and GammaCan, Ltd.
|
43
|
March
14, 2006
|
Chaime
Orlev
|
Chief
Financial Officer of our company and GammaCan, Ltd.
|
36
|
October
6, 2005
|
Prof.
Yehuda Shoenfeld, M.D.
|
Chief
Scientist of GammaCan, Ltd.
|
57
|
August
17, 2004
|
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.
Mr.
Patrick Schnegelsberg
Mr.
Schnegelsberg brings well over a decade of industry experience and expertise
to
GammaCan. Most recently, he served as Director of Investment Banking for Global
Capital Markets Group since April 2005, and prior to that as Director of
Investment Banking at Rodman & Renshaw since March 2004. In these posts, he
led M&A and private transactions for a host of companies in the life
sciences arena. Prior to entering investment banking, Patrick acted as a
buy-side analyst and portfolio manager for Mehta Partners, a leading healthcare
hedge fund since March 2002. He joined Mehta Partners after having worked for
several years in the consulting industry with tenures at Booz Allen Hamilton’s
New York healthcare practice and at Boston-based Global Prior Art, where he
founded and fostered the growth of the company’s Life Science Practice for
intellectual property consulting. The client roster included top tier
pharmaceutical and biotechnology companies as well as some of the top US and
EU
IP law-firms
Patrick
graduated from Harvard Medical School and conducted extensive Ph.D. thesis
research in the laboratory of Dr. Rudolf Jeanisch at the Whitehead
Institute/M.I.T. He published his first peer-reviewed paper as an undergraduate
and since then his work has been published in peer reviewed journals including
Cell and Nature.
Ms.
Vered Caplan
Ms.
Caplan is the 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.
Steven Katz
Mr.
Katz
is the president of Steven Katz & Associates, Inc., a health
care and technology based management consulting firm specializing in strategic
planning, corporate development, new product planning, technology licensing
and
structuring and securing various forms of financing and has been the president
since 1982.
From
January 2000 to October 2001 Mr. Katz was also President, Chief Operating
Officer and a director of Senesco Technologies, Inc., an American Stock Exchange
listed company engaged in the identification and development of proprietary
gene
technology with application to human, animal and plant systems. From 1983 to
1984 Mr. Katz was a co-founder and Executive Vice President of S.K.Y. Polymers,
Inc., a bio-materials company. Prior to this, Mr. Katz was Vice President and
General Manager of a non-banking division of Citicorp. From 1976 to 1981 he
held
various senior management positions at National Patent Development Corporation,
including President of three subsidiaries. Prior positions were with Revlon,
Inc. (1975) and Price Waterhouse & Co. (1969 to 1974). Mr. Katz received a
Bachelors of Business Administration degree in Accounting from the City College
of New York in 1969. Mr. Katz is presently a member of the Board of Directors
of
the following publicly-held corporations Biophan Technologies, Inc., Nanoscience
Technologies, Inc., NaturalNano, Inc. and USA Technologies, Inc. and the
following private companies Expert Real Estate Services, Inc. and MDSERVE,
Inc.
Mr.
Albert Passner
Mr.
Passner has been an independent consultant since 2001. In addition, Mr. Passner
has been a member of the board of directors of Nanoscience Technologies, Inc.
since 2005 and a member of the board of directors of USA Technologies, Inc.
since 2006. From 1969 through 2001 Mr. Passner was a member of the technical
staff of Lucent (AT&T) Bell Laboratories. Mr. Katz Passner a Bachelors of
Science in Physics from the City College of New York in 1960 and a Masters
of
Science in Physics from New York University in 1966.
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.
Mr.
Josef Neuhaus
Mr.
Neuhaus brings vast experience as a senior executive in a number of companies.
He has been CFO of ATAC (Advanced Technology Acquisition Corp.) since August
2006. From 2004 he is an independent consultant. His engagements have included
leading AxisMobile Ltd. (London AIM: “AXIS.L”), a company engaged in consumer
mobile mail solutions, to a listing on the London AIM Exchange and the strategic
turnaround of a global private company in Israel. 2003 - CEO of RoadEye FLR
G.P.
and MD of Gintec Active Safety Ltd. both private dealing with collision
avoidance systems. 2000 to 2001 CFO of PassCall Advanced Technologies Ltd.
a
startup dealing with wireless Internet. 1998 to 2000 MD and CFO, ITA
(International Tourist Attractions) Ltd. a private company that initiates and
builds tourist attractions. From 1995 to 1998, he served as the CFO of ICTS
International NV (Nasdaq: "ICTS"). Prior to 1995, Mr. Neuhaus worked as a senior
auditor at the Somekh Chaikin (KPMG in Israel). Mr. Neuhaus received both his
M.B.A (Executive program, Leon Recanati Graduate School of Business
Administration), and B.A., Accounting and Economics at the Tel Aviv University.
He is an Israeli CPA.
Mr.
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.
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.
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 an unrelated, outside member with no other affiliation with
us and is independent as defined by the rules of the SEC. The Board has
determined that Messrs Shmuel Levi and Josef Neuhaus are an “audit committee
financial expert” as defined by the SEC. 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 2006, we believe that during fiscal year 2006,
other
that as set forth below, 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.
Mr.
Chaime Orlev’s Form 3 filing following his appointment as Chief Financial
Officer on October 6, 2005, was filed delayed on December 5, 2005.
Mr.
Patrick Schnegelsberg’s Form 4 filing following the grant of certain stock
option to him on April 17, 2006, was filed delayed on May 8, 2006.
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
10. EXECUTIVE COMPENSATION
The
following table sets forth in summary form the compensation received during
the
fiscal years ended September 30, 2006, 2005 and 2004 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 2006 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
|
|
Patrick
Schnegelsberg Chief Executive Officer
|
|
|
2006
|
|
|
99,084
|
|
|
Nil
|
|
|
Nil
|
|
|
1,400,000
|
|
|
Nil
|
|
|
Nil
|
|
Vered
Caplan, (1)
Active Chief Executive Officer
|
|
|
2006
|
|
|
96,385
|
|
|
Nil
|
|
|
15,225
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Vered
Caplan, (1)
Active
Chief Executive Officer
|
|
|
2005
|
|
|
49,538
|
|
|
Nil
|
|
|
3,792
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Dr.
Dan J. Gelvan, (2)
Former Chief Executive Officer
|
|
|
2005
|
|
|
102,283
|
|
|
Nil
|
|
|
12,594
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Dr.
Dan J. Gelvan, (2)
Former Chief Executive Officer
|
|
|
2004
|
|
|
14,620
|
|
|
Nil
|
|
|
2,290
|
|
|
1,400,000
|
|
|
Nil
|
|
|
Nil
|
|
(1)
Ms.
Caplan resigned from her position as Acting Chief Executive Officer on April
15,
2006
(2)
Dr. Dan
J. Gelvan resigned for his position as our Chief Executive Officer on June
2,
2005 and his options were forfeited.
Option
Grants during 2005 Fiscal Year
The
following table provides information related to options granted to certain
directors and employees (none of which was a named executive officer) by
GammaCan International during the 2005 fiscal year. There
were
no
option grants to named executive officers in the 2005 fiscal year. The Company
does not have any 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.
**
- the
options were forfeited on September 19, 2006 due to employee
resignation
Option
Grants during 2006 Fiscal Year
The
following table provides information related to options granted to certain
directors and employees (of which only Mr. Schnegelsberg is a named executive
officer) by GammaCan International during the 2006
fiscal
year. Except with respect to Mr. Schnegelsberg, there were no option grants
to
named executive officers in the 2006 fiscal year. The Company does not have
any
stock appreciation rights.
Name
|
No.
of Securities Underlying Options Granted (#)
|
%
of Total Options Granted to Employees in
Fiscal
Year
|
Exercise
Price
($/Sh)
|
Expiration
Date
|
Chaime
Orlev
|
350,000
|
13.3
|
0.93
|
October
6, 2015
|
Liat
Ben David
|
30,000
|
1.1
|
1.35
|
October
20, 2015
|
Jacob
Nusbacher
|
250,000
|
9.5
|
1.34
|
December
20, 2015
|
Yaron
Cherny
|
50,000
|
1.9
|
1.10
|
January
12, 2016
|
Josef
Neuhaus
|
50,000
|
1.9
|
1.37
|
March
15, 2016
|
Patrick
Schnegelsberg
|
1,400,000
|
53.3
|
1.29
|
April
17, 2016
|
Shmuel
Levi
|
100,000
|
3.8
|
1.29
|
May
4, 2016
|
Yair
Aloni
|
100,000
|
3.8
|
1.29
|
May
4, 2016
|
Jean-Pierre
Elisha Martinez
|
100,000
|
3.8
|
1.29
|
May
4, 2016
|
Lior
Soussan-Gutman
|
100,000
|
3.8
|
1.29
|
May
4, 2016
|
Josef
Neuhaus
|
100,000
|
3.8
|
1.29
|
May
4, 2016
|
|
|
|
|
|
Aggregated
Option Exercises During 2006 Fiscal
Year
and Fiscal
Year-End
Option Values
There
have been no option exercises during fiscal year 2006.
EMPLOYMENT
AGREEMENTS
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 provided at least 20 hours of service per week,
had
received 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
April
15, 2006 Ms. Caplan has resigned as Acting Chief Financial Officer of the
Company, effective April 15, 2006.
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.
On
April
16, 2006, the Company agreed to amend the employment agreement of Mr. Orlev
effective April 1, 2006. The amendment to the employment agreement provides
for
an increase in monthly compensation to $6,500 per month.
On
May 2,
2006 the company amended the vesting of the period of the options granted to
Mr.
Orlev such that 25% of the options shall vest the first anniversary commencing
the grant date and the remaining 75% of the options shall vest in 36 equal
monthly installments thereafter.
On
April
16, 2006,the Company entered into an employment agreement with Patrick
Schnegelsberg pursuant to which Mr. Schnegelsberg will serve as Chief Executive
Officer of the Corporation, 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
Corporation and Mr. Schnegelsberg, the Corporation agreed to indemnify Mr.
Schnegelsberg for substantially all liabilities he may incur as a result of
his
employment by or service to the Corporation. Mr. Schnegelsberg will be granted
up to 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 installments thereafter.
In
addition to the compensation to be provided in accordance with their respective
employment agreements, we have adopted a a bonus plan, pursuant to which
our executive officers would be able to obtain additional cash compensation
upon
the achievement of certain milestones. If we achieve the
following goals by December 31, 2006, our executive officers will receive
the additional compensation set forth below:
|
1.
|
we
have received an aggregate of $3,000,000 in equity investments by
unrelated third parties, who are not currently
our shareholders,
|
|
2.
|
we
have executed an agreement for a sufficient supply of Intra-Venous
Immunoglobulin in order to conduct a clinical trial regarding melanoma,
and
|
|
3.
|
we
have submitted a completed Investigational New Drug application to
the US
Food and Drug Administration, in connection with clinical trails
of
VitiGam.
|
If
such
foregoing milestones are met, Patrick Schnegelsberg will receive $100,000,
Vered
Caplan will receive up to six month of salary and Chaime Orlev will receive
up
to four months salary.
We
have
also set the following goals to be achieved by December 31, 2007 in order for
the eligibility to obtain additional bonuses in an amount to be determined
by
our board:
|
1.
|
we
have received an aggregate of $10,000,000 in equity investments by
unrelated third parties, who are not currently
our shareholders,
|
|
2.
|
we
have begun phase 2 of our clinical trials of VitiGam, and
|
|
3.
|
we
have closed a merger or acquisition with another entity that has
technology which is complementary to
our.
|
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 and until October 1, 2006, members of the Board of Directors
are being paid a fee of $500 for each Board meeting attended. Directors are
entitled to reimbursement for reasonable travel and other out-of-pocket expenses
incurred in connection with attendance at meetings of our board of directors.
Effective October 1, 2006 each outside director shall be entitled to receive
as
remuneration for his or her service as a member of the Board of Directors a
sum
equal to US$ 8,000 per annum, to be paid quarterly and shortly after the close
of each quarter. 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 forfeited during
June and October 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
forfeited 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.
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 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 Josef Neuhaus.
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 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 following Shmuel Levi, Yair Aloni, Jean-Pierre Elisha Martinez, Lior
Soussan-Gutman and Josef
Neuhaus.
On
October 3, 2006 we granted options to purchase up to 50,000 common shares of
our
company at an exercise price of $0.65 to a new member of our Scientific Advisory
Board.
On
November 7, 2006 we granted options to purchase up to 150,000 common shares
of
our company at an exercise price of $0.45 to each of Steven Katz and Albert
Passner.
On
December 5, 2006 we granted options to purchase up to 50,000 common shares
of
our company at an exercise price of $0.50 to a new member of our Scientific
Advisory Board.
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
|
(2)306,047
common shares
|
1.07%
|
Yehuda
Shoenfeld
Chief
Scientist of GammaCan, Ltd.
26
Sapir St.
Ramat
Gen
Israel
|
699,996
common shares
|
2.45%
|
Zeev
Bronfeld
6
Uri St.
Tel
Aviv, Israel
|
3,900,006
common shares
|
13.62%
|
Vered
Caplan
Chief
Executive Officer of GammaCan, Ltd.
69
Deganya St.
Pardes
Hanna Karkur, Israel
|
3,900,006
common shares
|
13.62%
|
Shmuel
Levi
Director
of the company
14
Hanita St.
Naharia,
Isreal
|
(3)26,042
common shares
|
0.09%
|
Chaime
Orlev
Chief
Financial Officer of the Coampny and GammaCan, Ltd.
10
Hameyasdim St.
Kiryat-Ono,
Israel
|
(3)116,667
common shares
|
0.41%
|
Vantech
Securities Ltd.
1305
1090 West Georgia St.
Vancouver,
B.C. V6E 3V7 Canada
|
1,650,000
common shares
|
5.76%
|
Directors
and Executive Officers as a Group
|
(4)5,048,757
common shares
|
17.53%
|
(1) Based
on
28,625,164 shares of common stock issued and outstanding as of December 18,
2006. 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.
(2) Includes
280,005 common shares and 26,042 shares
of
common stock subject to options or warrants currently exercisable, or
exercisable within 60 days.
(3) Shares
of
common stock subject to options or warrants currently exercisable, or
exercisable within 60 days.
(4) Including
168,750 Shares of common stock subject to options or warrants currently
exercisable, or exercisable within 60 days.
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 IgG 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 provided at least 20 hours of service per week,
had
received 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.
On
April
15, 2006, Vered Caplan resigned from her position as the acting CEO of the
company, and continue to serve as the CEO of the subsidiary without change
in
her compensation.
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
|
|
|
Stock
Purchase Warrant in the name of Bank Sal. Oppenheim jr. & Cie.
(Switzerland) Ltd. dated October 31, 2005,
incorporated by reference from Form 8-K, dated as of November
3, 2005
|
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.
|
10.14
|
|
Indemnity
Agreement between GammaCan International, Inc. and Josef Neuhaus,
dated as
of March 15, 2006, incorporated by reference to Form 8-K dated as
of March
20, 2006
|
10.15
|
|
Employment
Agreement between GammaCan, Ltd. and Patrick Schnegelsberg, dated
as of
April 16, 2006, incorporated by reference to Form 8-K dated as of
April
19, 2006
|
10.16
|
|
Indemnity
Agreement between GammaCan International, Inc. and Patrick Schnegelsberg,
dated as of April 17, 2006, incorporated by reference to Form 8-K
dated as
of April 19, 2006
|
10.17
|
|
Form
of Addendum to Indemnity Agreement, incorporated by reference to
Form 8-K
dated as of April 26, 2006
|
10.18
|
|
Indemnity
Agreement between GammaCan International, Inc. and Steven Katz, dated
as
of November 13, 2006, incorporated by reference to Form 8-K dated
as of
November 13, 2006
|
10.19
|
|
Indemnity
Agreement between GammaCan International, Inc. and Albert Passner,
dated
as of November 13, 2006, incorporated by reference to Form 8-K dated
as of
November 13, 2006
|
|
|
|
|
|
|
14
|
|
Code
of Ethics
|
31.1
|
|
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
|
31.2
|
|
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
|
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 FEES 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, 2006 and 2005, and for the reviews of the financial statements
included in our Quarterly Reports on Form 10-QSB during that fiscal year were
$74,000, and $56,000, respectively.
Audit
Related Fees. We incurred no fees for audit related fees during the fiscal
year
ended September 30, 2006 and 2005.
Tax
Fees.
We incurred fees to auditors of $5,000 and $4,000 respectively for tax
compliance, tax advice or tax planing services during the fiscal year ended
September 30, 2006 and 2005.
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, 2006 and 2005.
The
Audit
Committee 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/
PATRICK SCHNEGELSBERG
Patrick
Schnegelsberg,
Chief
Executive Officer
(principal
executive officer)
/s/
CHAIME ORLEV
Chaime
Orlev,
Chief
Financial Officer
(principal
accounting officer)
Date:
December 20, 2006
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 20, 2006.
/s/
STEVE
KATZ
Steve
Katz,
Chairmen
of the Board
/s/
ALBERT
PASSNER
Albert
Passner,
Director
/s/
YAIR
ALONI
Yair
Aloni,
Director
/s/
SHMUEL
LEVI
Shmuel
Levi,
Director
/s/
JOSEF
NEUHAUS
Josef
Neuhaus,
Director