UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
x
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended December 31, 2006
o
TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the Transition Period from _________ to _________
Commission
file number: 0-32835
GAMMACAN
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
33-0956433
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
Kiryat
Ono Mall
Azorim
Center A
39
Jerusalem st.,
55423
Kiryat Ono, Israel
(Address
of principal executive offices)
+
972 3 7382616
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
past 12 months (or for such shorter period that the registrant was required
to
file such reports), and (2) has been subject to such filing requirements for
the
past 90 days. Yes
x No
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o No
x
APPLICABLE
ONLY TO CORPORATE ISSUERS:
State
the
number of shares outstanding of each of the registrant's classes of common
equity, as of the latest practicable date: 28,625,164 shares issued and
outstanding as of February 5, 2007.
GAMMACAN
INTERNATIONAL, INC.
FORM
10-QSB
TABLE
OF CONTENTS
|
|
|
|
|
|
Page
No.
|
|
PART
I
|
|
|
|
Item 1.
Financial Statements
|
|
|
1
|
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operation
|
|
|
14
|
|
Item 3.
Controls And Procedures
|
|
|
21
|
|
|
|
|
|
|
PART
II
|
|
|
|
|
Item 1.
Legal Proceedings
|
|
|
22
|
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
|
22
|
|
Item 3.
Defaults Upon Senior Securities
|
|
|
22
|
|
Item 4.
Submission of Matters to a Vote of Security Holders
|
|
|
22
|
|
Item 5.
Other Information
|
|
|
22
|
|
Item 6.
Exhibits
|
|
|
23
|
|
Forward
Looking Statements
This
Form
10-QSB includes a number of forward-looking statements that reflect management's
current views with respect to future events and financial performance. Those
statements include statements regarding the intent, belief or current
expectations of GammaCan and members of its management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures
made
in this report and in our other reports filed with the Securities and Exchange
Commission. Important factors currently known to Management could cause actual
results to differ materially from those in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in the future operating results over time. GammaCan believes that its
assumptions are based upon reasonable data derived from and known about its
business and operations and the business and operations of GammaCan. No
assurances are made that actual results of operations or the results of
GammaCan's future activities will not differ materially from its
assumptions.
ITEM
1. - FINANCIAL STATEMENTS
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
INTERIM
FINANCIAL STATEMENTS
AS
OF
DECEMBER 31, 2006
TABLE
OF
CONTENTS
|
|
Page
|
|
|
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS:
|
|
|
Balance
sheets
|
|
2
|
Statements
of operations
|
|
3
|
Statements
of changes in stockholders’ equity
|
|
4
|
Statements
of cash flows
|
|
5
|
Notes
to financial statements
|
|
6-13
|
(A
Development Stage Company)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(US
$,
except share data)
|
|
December
31,
|
|
September
30,
|
|
|
|
2006
|
|
2006
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
A
s s e t s
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
516,545
|
|
$
|
538,738
|
|
Prepaid
expenses
|
|
|
33,750
|
|
|
-
|
|
Other
|
|
|
8,010
|
|
|
12,494
|
|
T
o
t a l current assets
|
|
|
558,305
|
|
|
551,232
|
|
|
|
|
|
|
|
|
|
FUNDS
IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT
|
|
|
26,735
|
|
|
21,071
|
|
LONG
TERM DEPOSITS
|
|
|
18,791
|
|
|
22,270
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
23,748
|
|
|
25,247
|
|
T
o
t a l assets
|
|
$
|
627,579
|
|
$
|
619,820
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' equity
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
383,956
|
|
$
|
279,857
|
|
Convertible
promissory note
|
|
|
353,145
|
|
|
-
|
|
Payroll
and related accruals
|
|
|
57,637
|
|
|
49,242
|
|
T
o
t a l current liabilities
|
|
|
794,738
|
|
|
329,099
|
|
|
|
|
|
|
|
|
|
LIABILITY
FOR EMPLOYEE RIGHTS UPON RETIREMENT
|
|
|
38,339
|
|
|
31,531
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY (CAPITAL DEFICIENCY):
|
|
|
|
|
|
|
|
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;
|
|
|
|
|
|
|
|
28,496,590
and 28,453,732 shares issued and
|
|
|
|
|
|
|
|
outstanding
as of December 31, 2006 and September 30, 2006,
respectively)
|
|
|
2,849
|
|
|
2,845
|
|
Additional
paid-in capital
|
|
|
3,515,007
|
|
|
3,172,284
|
|
Warrants
|
|
|
861,474
|
|
|
861,474
|
|
Deficit
accumulated during the development stage
|
|
|
(4,584,828
|
)
|
|
(3,777,413
|
)
|
T
o
t a l stockholders' equity (capital deficiency)
|
|
|
(205,498
|
)
|
|
259,190
|
|
T
o
t a l liabilities and stockholders’ equity
|
|
$
|
627,579
|
|
$
|
619,820
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US
$,
except share data)
|
|
|
|
Period
from
|
|
|
|
|
|
October
6, 1998*
|
|
|
|
Three
months ended
|
|
through
|
|
|
|
December
31
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
RESEARCH
AND DEVELOPMENT COSTS
|
|
$
|
167,972
|
|
$
|
225,161
|
|
$
|
1,683,146
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
632,866
|
|
|
212,775
|
|
|
2,921,577
|
|
OPERATING
LOSS
|
|
|
800,838
|
|
|
437,936
|
|
|
4,604,723
|
|
FINANCIAL
INCOME
|
|
|
(4,827
|
)
|
|
(8,058
|
)
|
|
(69,660
|
)
|
FINANCIAL
EXPENSES
|
|
|
7,048
|
|
|
3,036
|
|
|
29,162
|
|
LOSS
BEFORE TAXES ON INCOME
|
|
|
803,059
|
|
|
432,914
|
|
|
4,564,225
|
|
TAXES
ON INCOME
|
|
|
4,356
|
|
|
-
|
|
|
32,978
|
|
LOSS
FROM OPERATIONS OF THE COMPANY AND ITS CONSOLIDATED
SUBSIDIARY
|
|
|
807,415
|
|
|
432,914
|
|
|
4,597,203
|
|
MINORITY
INTERESTS IN LOSSES OF A SUBSIDIARY
|
|
|
-
|
|
|
-
|
|
|
(12,375
|
)
|
NET
LOSS FOR THE PERIOD
|
|
$
|
(807,415
|
)
|
$
|
(432,914
|
)
|
$
|
(4,584,828
|
)
|
BASIC
AND DILUTED LOSS PER
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARES
|
|
$
|
(0.028
|
)
|
$
|
(0.016
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
SHARES
USED IN COMPUTING BASIC AND
|
|
|
|
|
|
|
|
|
|
|
DILUTED
LOSS PER COMMON SHARE
|
|
|
28,475,161
|
|
|
26,847,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Incorporation date, see note 1a.
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(CAPITAL
DEFICIENCY)
(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 (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (audited)
|
|
|
25,221,510
|
|
|
2,522
|
|
|
139,494
|
|
|
941,619
|
|
|
(514,086
|
)
|
|
569,549
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on November 11,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004,
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 (audited)
|
|
|
26,231,510
|
|
|
2,622
|
|
|
519,423
|
|
|
1,767,601
|
|
|
(1,712,618
|
)
|
|
577,028
|
|
Common
stock and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
for cash on October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005,
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 (audited)
|
|
|
28,453,732
|
|
|
2,845
|
|
|
861,474
|
|
|
3,172,284
|
|
|
(3,777,413
|
)
|
|
259,190
|
|
Common
stock issued
for services
|
|
|
*42,858
|
|
|
4
|
|
|
|
|
|
29,996
|
|
|
|
|
|
30,000
|
|
Employees
and consultants stock based compensation expenses
|
|
|
|
|
|
|
|
|
|
|
|
312,727
|
|
|
|
|
|
312,727
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(807,415
|
)
|
|
(807,415
|
)
|
Balance
at December 31, 2006 (unaudited)
|
|
|
28,496,590
|
|
$
|
2,849
|
|
$
|
861,474
|
|
$
|
3,515,007
|
|
$
|
(4,584,828
|
)
|
$
|
(205,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
The
Company issued a total of 171,432 shares. Shares presented in the
statement above represent issued shares in respect of services received
in
the three months ended December 31, 2006 (see also Note 4(b)).
|
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC. AND SUBSIDIARY
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US
$)
|
|
|
|
Period
from
|
|
|
|
|
|
October
6,
|
|
|
|
Three
months ended
|
|
1998*
to
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
|
|
Unaudited
|
|
Unaudited
|
|
Unaudited
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(807,415
|
)
|
$
|
(432,914
|
)
|
$
|
(4,584,828
|
)
|
Adjustments
required to reconcile net loss to net cash used
|
|
|
|
|
|
|
|
|
|
|
in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Income
and expenses not involving cash flows:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,075
|
|
|
843
|
|
|
8,967
|
|
Common
stock issued for services
|
|
|
30,000
|
|
|
-
|
|
|
33,000
|
|
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
|
|
|
312,727
|
|
|
34,190
|
|
|
606,876
|
|
Increase
in liability for employee rights upon retirement
|
|
|
6,808
|
|
|
(2,709
|
)
|
|
38,339
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase
in prepaid expenses
|
|
|
(33,750
|
)
|
|
(39,405
|
)
|
|
(33,750
|
)
|
Decrease
(increase) in other current assets
|
|
|
7,755
|
|
|
(3,829
|
)
|
|
(8,010
|
)
|
Increase
in current liabilities
|
|
|
115,639
|
|
|
173,070
|
|
|
443,738
|
|
Net
cash used in operating activities
|
|
|
(366,161
|
)
|
|
(270,754
|
)
|
|
(3,408,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES -
|
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in long term deposits
|
|
|
208
|
|
|
(1,637
|
)
|
|
(18,791
|
)
|
Funds
in respect of employee rights upon retirement
|
|
|
(5,664
|
)
|
|
644
|
|
|
(26,735
|
)
|
Purchase
of property and equipment
|
|
|
(576
|
)
|
|
(384
|
)
|
|
(32,715
|
)
|
Net
cash used in investing activities
|
|
|
(6,032
|
)
|
|
(1,377
|
)
|
|
(78,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Issuance
of convertible promissory note
|
|
|
350,000
|
|
|
|
|
|
350,000
|
|
Issuance
of common stock and warrants net of issuance costs
|
|
|
|
|
|
1,550,000
|
|
|
3,652,829
|
|
Net
cash provided by financing activities
|
|
|
350,000
|
|
|
1,550,000
|
|
|
4,002,829
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(22,193
|
)
|
|
1,277,869
|
|
|
516,545
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS AT
|
|
|
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
538,738
|
|
|
713,342
|
|
|
|
|
BALANCE
OF CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
AT
END OF PERIOD
|
|
$
|
516,545
|
|
$
|
1,991,211
|
|
$
|
516,545
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Incorporation date, see note 1a.
The
accompanying notes are an integral part of the financial
statements.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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. 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 December 31, 2006 of $4,584,828, 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 January 1, 2007. 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.
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.
.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
The
accompanying unaudited financial statements of the Company and the subsidiary
GammaCan Ltd. ("the Subsidiary") have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-QSB and Item 310
of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
In
the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended December 30, 2006, are not necessarily
indicative of the results that may be expected for the year ended September
30,
2007. For further information, refer to the financial statements and footnotes
thereto included in the consolidated annual report on Form 10-KSB for the year
ended September 30, 2006.
|
c.
|
Use
of estimates in the preparation of financial
statements
|
The
preparation of the financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the financial statement date and the reported expenses during the reporting
periods. Actual results could differ from those estimates.
|
d.
|
Principles
of consolidation
|
The
consolidated financial statements include the accounts of the Company and its
subsidiary GammaCan Ltd. All material intercompany transactions and balances
have been eliminated in consolidation.
The
company considers all short term, highly liquid investments, which include
short-term deposits with original maturities of three months or less from the
date of purchase that are not restricted as to withdrawal or use and are readily
convertible to known amounts of cash, to be cash equivalents.
Basic
and
diluted net losses per common share are presented in accordance with FAS No.
128
“Earning per share” (“FAS128”), for all periods presented. Outstanding stock
options and warrants have been excluded from the calculation of the diluted
loss
per share because all such securities are anti-dilutive for all periods
presented. The total number of common stocks options and warrants excluded
from
the calculations of diluted net loss was 6,317,775 for the three months ended
December 31, 2006 (3,967,775 for the three months ended December 31,
2005).
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
g.
|
Stock
based compensation
|
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 remaining options shall vest in equal monthly
installments.
|
The
maximum term of the option is 10 years.
A
summary
of the status of the company’s plan as of December 31, 2006, and changes during
the three months period ending on this date, is presented below:
|
|
Three
months ended
|
|
|
|
December
31, 2006
|
|
|
|
|
|
Weighted
average
|
|
|
|
Number
|
|
exercise
price
|
|
|
|
|
|
$
|
|
For
options granted to employees:
|
|
|
|
|
|
Options
outstanding at beginning of the period
|
|
|
2,830,000
|
|
$
|
1.24
|
|
Changes
during the period:
|
|
|
|
|
|
|
|
Granted
- at market price
|
|
|
300,000
|
|
|
0.45
|
|
Granted
- at an exercise price less then
|
|
|
|
|
|
|
|
market
price
|
|
|
-
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
-
|
|
Options
outstanding at end of the period
|
|
|
3,130,000
|
|
|
1.16
|
|
Options
exercisable at end of the period
|
|
|
282,708
|
|
|
|
|
Weighted
average fair value of options granted
|
|
|
|
|
|
|
|
during
the period
|
|
$
|
0.37
|
|
|
|
|
The
following table presents summary information concerning the options outstanding
as of December 31, 2006:
Options
outstanding
|
|
Options
exercisable
|
|
|
|
Number
|
|
Weighted
|
|
Weighted
|
|
Number
|
|
Weighted
|
|
Range
|
|
outstanding
|
|
average
|
|
average
|
|
exercisable
|
|
average
|
|
of
|
|
at
|
|
remaining
|
|
exercise
|
|
at
|
|
exercise
|
|
exercise
|
|
December
31,
|
|
contractual
|
|
price
|
|
December
31,
|
|
price
|
|
prices
|
|
2006
|
|
life
|
|
|
|
2006
|
|
|
|
$
|
|
|
|
Years
|
|
$
|
|
|
|
$
|
|
0.45
to 0.93
|
|
|
300,000
|
|
|
9.85
|
|
|
0.45
|
|
|
-
|
|
|
-
|
|
0.93
to 1.37
|
|
|
2,830,000
|
|
|
9.10
|
|
|
1.24
|
|
|
282,708
|
|
|
1.12
|
|
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
Unrecognized
compensation as determined under FAS 123R as of December 31, 2006 totaled
$1,924,230, to be depreciated over the next 39 months.
Until
September 30, 2006 the Company accounted for employee stock based compensation
in accordance with Accounting Principles Board Opinion No. 25 “Accounting for
Stock Issued to Employees” (“APB 25”) and related interpretations. In accordance
with FAS 123 - “Accounting for Stock-Based Compensation” (“FAS 123”), the
Company disclosed pro forma data assuming the Company had accounted for employee
stock option grants using the fair value-based method defined in FAS
123.
On
October 1, 2006 the Company adopted 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. 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 is 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 applied 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 is not restated.
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.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
The
following table illustrates the pro - forma effect on net loss and loss per
common share assuming the Company had applied the fair value recognition
provisions of FAS 123 to its stock-based employee:
|
|
Three
months ended
December
31,
|
|
|
|
2005
|
|
Net
loss as reported
|
|
$
|
(432,914
|
)
|
Deduct:
Stock based employee compensation expense
|
|
|
|
|
included
in net loss as reported
|
|
|
4,365
|
|
Add:
pro forma stock based employee compensation
|
|
|
|
|
expense
determined under fair value
|
|
|
|
|
method
for all awards, net of related tax effects
|
|
|
(62,726
|
)
|
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
|
|
Pro
forma net loss
|
|
$
|
(411,599
|
)
|
Net
loss per common shares:
|
|
|
|
|
Basic
and diluted loss per share - as reported
|
|
$
|
(0.016
|
)
|
Basic
and diluted loss per share - pro forma
|
|
$
|
(0.015
|
)
|
|
h.
|
Recently
issued accounting
pronouncements
|
|
1.
|
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.
|
|
2.
|
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
|
3.
|
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.
.
NOTE
2 - LONG TERM DEPOSITS:
Amount
represents deposits in respect of lease agreements for the company’s office
facilities and vehicles used by its employees.
NOTE
3 - CONVERTIBLE PROMISSORY NOTE:
On
November 20, 2006 the Company issued a convertible promissory note, in a
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.
The
option to convert the amount into equity is measured by its fair value. The
fair
value allocated to the option estimated by using the Black Scholes
option-pricing model is $109,705. The value was based on the following
assumptions: dividend yield of 0%; expected volatility of 90%; risk-free
interest rates of 5.2%; and expected lives of 0.7 years.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
4 - STOCK TRANSACTIONS:
Following
are transactions that took place during the quarter ending December 30,
2006:
|
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.
|
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 remaining options shall vest in equal monthly
installments
|
The
fair
value of the above options is estimated by using Black Scholes option-pricing
model as $15,553, 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
Company in identifying technology acquisition opportunities. Per
the
agreement in consideration for the services being provided to the
Company
by UTEK, the Company shall pay $120,000 in the form of 171,432
unregistered shares of common stock. The Company had the option of
paying
UTEK $10,000 per month. The Company has agreed to issue UTEK an aggregate
of 171,432 shares of common stock, par value $0.0001 per share, of
the
Company, which will vest in 12 equal monthly instalments of 14,286
shares. If
the agreement is terminated any unvested shares will be returned
to the
Company.
|
The
shares presented in the statement of changes in shareholders equity represent
issued shares in respect of service received up to December 31,2006, since
the
rest of the shares are not considered issued for accounting purposes.
|
c.
|
On
November 13, 2006 150,000 options were granted under the Stock Option
Plan
to each of the Company’s two board members who joined the board on
November 6, 2006 (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.
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 remaining options shall vest in equal monthly
installments
|
The
fair
value of the above options on the date of grant was estimated by using Black
Scholes option-pricing model as $111,859, 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.
GAMMACAN
INTERNATIONAL INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE
4 - STOCK TRANSACTIONS (continued):
|
d.
|
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.
|
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 remaining options shall vest in equal monthly
installments
|
The
fair
value of the above options is estimated by using Black Scholes option-pricing
model as $16,138, and was based on the following assumptions: dividend yield
of
0% for all years; expected volatility of 90%; risk-free interest rates of 4.65%;
and expected lives of 7.88 year
NOTE
5 -SUBSEQUENT EVENT:
|
1.
|
On
January 30, 2007, Gammacan, Ltd., a subsidiary of the Company (the
"Subsidiary") entered into a Master Services Agreement with BioSolutions
Services, LLC (“BioSolutions”), pursuant to which the subsidiary will from
time-to-time engage BioSolutions for various projects to assist the
Corporation with the commercialization of its anti-cancer immunotherapy
to
treat metastatic cancer. The services to be performed under the Master
Services Agreement will be specified in separate work orders, which
will
set forth the scope of the work, schedule and costs.
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Work
order 1 relates to regulatory consulting services to be provided by Biosolutions
in connection with the application for an IND with the US FDA for VitiGam.
As
compensation for the services the Subsidiary will pay BioSolutions a cash fee
between $170,000 to $290,000 based on several factors, and the Company will
issue to BioSolutions a warrant to purchase 434,783 shares of its common stock
at a purchase price of the lower of $0.48 per share or the average trading
price
of the preceding 30 days from the date of grant. The warrant shall be vested
as
follows: 1) 33% upon signature of a definitive agreement with a manufacturer,
2)
33% upon IND filing and 3) 34% when IND has been approved by the
FDA.
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2.
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On
February 1, 2007 the Subsidiary entered into a Cooperation and Project
Funding Agreement with Cooperation and Project Funding (the “BIRD
Foundation”) and Life Therapeutics (“Life”), pursuant to which the BIRD
Foundation will provide the Subsidiary and Life with funding of the
lesser
of $1,000,000 or 50% of expenditures on the development of an anti-cancer
immunotherapy to treatment for metastatic cancer. The funding will
be
repaid to the BIRD Foundation if the development work goes beyond
a Phase
2 clinical trial.
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ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION
As
used
in this current report, the terms "we", "us", "our", "the Company" and
"GammaCan" mean GammaCan International, Inc. and our subsidiary, GammaCan,
Ltd.,
unless otherwise indicated.
All
dollar amounts refer to US dollars unless otherwise indicated.
We
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.
Plan
of Operation
Short
Term Business Plan
Our
initial focus over the next several years is to demonstrate efficacy of
Immunoglobulin G (“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 the safety and
determine the 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 Investigational New Drug Application
(“IND”) with the US FDA for VitiGam, GammaCan’s second generation IgG product
and first-in-class anti-cancer immunotherapy. We expect that VitiGam will enter
the clinic under a US IND with in the next 12 months. 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) to 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 successor 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 goal 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 principles 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 December 31, 2006 of $4,584,828, 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 January 1, 2007. 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.
The
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 financings
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 and issued warrants in connection with fund
raising.
Until
September 30, 2006 the Company accounted for employee stock based compensation
in accordance with Accounting Principles Board Opinion No. 25 “Accounting for
Stock Issued to Employees” (“APB 25”) and related interpretations. In accordance
with FAS 123 - “Accounting for Stock-Based Compensation” (“FAS 123”), the
Company disclosed pro forma data assuming the Company had accounted for employee
stock option grants using the fair value-based method defined in FAS
123.
On
October 1, 2006 the Company adopted 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. 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 is 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.
FASB
123R
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 applied 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 is not restated.
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.
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
Three
months ended December 31, 2006 and 2005
The
following table summarizes certain statement of operations data for the company
for the three months period ended December 31, 2006 and 2005 (in
US$):
|
|
Three
months ended
December
31,
|
|
|
|
2006
|
|
2005
|
|
Research
and development costs
|
|
$
|
167,972
|
|
$
|
225,161
|
|
General
and administrative expenses
|
|
|
637,222
|
|
|
212,775
|
|
Financial
expenses (income), net
|
|
|
2,221
|
|
|
(5,022
|
)
|
Net
loss for the period
|
|
$
|
(807,415
|
)
|
$
|
(432,914
|
)
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Research
and development costs.
Research
and development expenses are the costs incurred in the process of our
pre-clinical and our clinical trials. Clinical trial 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 three months ended December 31, 2006 and December 31, 2005 the research
and
development expenses included, among others, the clinical trial and pre-clinical
trial expenses, the consultants compensation, costs related to the registered
patents as well as salaries and related expenses.
During
the three months ended December 31, 2006 the research and development expenses
totaled $167,972, compared to $225,161 during the three months ended December
31, 2005. The decrease in cost is attributable to the final stages of the Phase
2 clinical trial we are currently conducting.
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
three months ending December 31, 2006 the General and administrative expenses
totaled $637,222 compared to $212,775 for the three months ended December 31,
2005. Costs incurred related to general and administrative activities in the
three months ended December 31, 2006 reflect an increase in the number of
employees as compared to the three months period ending December 31, 2005.
During the three months ended December 31, 2006 the company incurred $348,751
of
costs due to the implementation of FAS 123R related to stock options granted
to
employees, $329,542 of these costs were classified to the General and
administrative expenses. The company did not incur similar costs in the three
months ended December 31, 2005.
Financial
income/expense, net
During
the three months ending December 31, 2006 and December 31, 2005, the company
generated interest income on available cash and cash equivalents balance and
incurred interest expenses related to its issued convertible promissory note.
Liquidity
and Capital Recourses
Financing
activities
Through
December 31, 2006, the Company has incurred losses in an aggregate amount of
$4,584,828. We have financed our operation from private placement of common
stock and loans received. Through December 31, 2006 we raised a total of
$3,652,829, net of transaction cost, through private placements and received
a
total of $350,000 in loans and we anticipate that additional financing will
be
through similar sources. Our financing activates for the three months period
ending December 31, 2006 include the following:
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
October 12, 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 13, 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, its two new Board members. Total options granted to purchase 300,000
common shares were granted.
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.
Planned
Expenditures
The
estimated expenses referenced herein are in accordance with our 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
|
|
|
4,045,000
|
|
General
& Administrative Expenses
|
|
|
2,078,000
|
|
Finance
income, net
|
|
|
(49,000
|
)
|
Total
|
|
|
6,074,000
|
|
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
trial phase 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.
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
June
6, 2005, the Company and GammaCan, Ltd. appointed Vered Caplan as acting Chief
Executive Officer of both companies, effective July 2, 2005. Vered Caplan will
devote approximately 70% of her business time to the affairs of GammaCan, Ltd.
and the Company. Vered Caplan shall receive a salary of $6,475 per month. On
April 15, 2006 Vered Caplan has resigned form her position as the acting Chief
Executive Officer of the company. Vered Caplan will remain as the Chief
Executive Officer of GammaCan, Ltd.
On
April
16, 2006, the Company entered into an employment agreement (the "Agreement")
with Patrick Schnegelsberg pursuant to which Mr. Schnegelsberg will serve as
Chief Executive Officer of the Company, effective April 15, 2006. Mr.
Schnegelsberg shall receive a salary of $200,000 and an annual bonus of up
to
$200,000 upon achieving certain objectives. Pursuant to a separate agreement
between the Company and Mr. Schnegelsberg, the Company agreed to indemnify
Mr.
Schnegelsberg for substantially all liabilities he may incur as a result of
his
employment by or service to the Company. Mr. Schnegelsberg was granted 1,400,000
stock options of the Corporation, pursuant to the Corporation's 2004 Stock
Option Plan, adopted by the Board on August 17, 2004. Options are exercisable
at
an exercise price of $1.29 per share. 350,000 of the Options shall vest on
the
first anniversary from their date of grant, and the remaining Options shall
vest
in 36 equal monthly instalments thereafter.
ITEM
3. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures. As of December 31, 2006, the Company’s
management carried out an evaluation, under the supervision of the Company’s
Chief Executive Officer and the Chief Financial Officer, of the effectiveness
of
the design and operation of the Company’s system of disclosure controls and
procedures (as defined by Rule 13a-15(e) and 15d-15(e) under the Security and
Exchange Act of 1934, as amended (“the Exchange Act”). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company’s disclosure controls and procedures were effective, as of the
date of their evaluation, for the purposes of recording, processing, summarizing
and timely reporting material information required to be disclosed in reports
filed by the Company under the Exchange Act.
Changes
in internal controls. There were no changes in the Company’s internal controls
over financial reporting, that occurred during the period covered by this report
that have materially affected, or are reasonably likely to materially effect,
the Company’s internal control over financial reporting.
PART
II
ITEM
1 LEGAL
PROCEEDINGS
From
time
to time the Company is subject to litigation incidental to its business. Such
claims, if successful, could exceed applicable insurance coverage. The Company
is not currently a party to any material legal proceedings.
ITEM
2 UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On
October 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.
ITEM
3
DEFAULTS UPON SENIOR SECURITIES
Not
applicable.
ITEM
4 SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not
applicable.
ITEM
5 OTHER
INFORMATION
Not
applicable.
ITEM
6 EXHIBITS
31.1
-
Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule
15d-14(a), promulgated under the Securities and Exchange Act of 1934, as
amended
31.2
-
Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule
15d 14(a), promulgated under the Securities and Exchange Act of 1934, as
amended
32.1
-
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
32.2
-
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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GAMMACAN
INTERNATIONAL, INC.
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|
|
|
|
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February
9, 2007
|
|
/s/
CHAIME
ORLEV
|
|
|
Chaime
Orlev,
|
|
|
Chief
Financial Officer
|