PROTEOLOGICS LTD.
INTERIM FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 2013
UNAUDITED
INDEX
Page | |
Statement of Financial Position | 2 |
Statements of Operations | 3 |
Statements of Changes in Equity | 4 |
Statements of Cash Flows | 5 - 6 |
Notes to Condensed Financial Statements | 7 - 10 |
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PROTEOLOGICS LTD.
CONDENSED STATEMENT OF FINANCIAL POSITION |
September 30, | December 31, | |||||||||||
2013 | 2012 | 2012 | ||||||||||
Unaudited | Audited | |||||||||||
NIS in thousands | ||||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and cash equivalents | 12,049 | 8,335 | 10,437 | |||||||||
Financial assets at fair value through profit or loss | 10,821 | 27,644 | 22,421 | |||||||||
Bank deposits - restricted as to use | 365 | 334 | 364 | |||||||||
Accounts receivable | 123 | 820 | 416 | |||||||||
Assets held for sale | 628 | - | - | |||||||||
23,986 | 37,133 | 33,638 | ||||||||||
NON-CURRENT ASSETS: | ||||||||||||
Property, plant and equipment | - | 2,096 | 1,966 | |||||||||
Intangible assets | - | 210 | 166 | |||||||||
- | 2,306 | 2,132 | ||||||||||
Total assets | 23,986 | 39,439 | 35,770 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Liability for discontinued operation | 1,235 | - | - | |||||||||
Trade payables | 157 | 638 | 517 | |||||||||
Other accounts payable | 1,149 | 2,314 | 2,013 | |||||||||
Deferred revenues | - | 3,191 | 2,068 | |||||||||
2,541 | 6,143 | 4,598 | ||||||||||
NON-CURRENT LIABILITIES: | ||||||||||||
Employee benefit liabilities, net | - | 118 | 218 | |||||||||
Total liabilities | 2,541 | 6,261 | 4,816 | |||||||||
EQUITY: | ||||||||||||
Share capital and premium | 79,323 | 79,005 | 79,056 | |||||||||
Capital reserve | 26,384 | 26,384 | 26,384 | |||||||||
Options | 11,117 | 11,117 | 11,117 | |||||||||
Accumulated deficit | (95,379 | ) | (83,328 | ) | (85,603 | ) | ||||||
Total equity | 21,445 | 33,178 | 30,954 | |||||||||
Total liabilities and equity | 23,986 | 39,439 | 35,770 |
The accompanying notes are an integral part of the condensed financial statements.
November 25, 2013 | ||||||
Date of approval of the financial statements | Mordechai Menashe Chairman of the Board | Sagi Ben Ishai Chief Executive Officer | Eran Mazor Director *) |
* | The Company's Board at its meeting held on November 25, 2013, empowered this director to sign on these financial statements due to the fact that there is no senior financial officer in the Company. |
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PROTEOLOGICS LTD.
CONDENSED STATEMENTS OF OPERATIONS |
Nine months ended | Three months ended | Year ended | ||||||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2012 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
NIS in thousands (except per share data) | ||||||||||||||||||||
Revenues from rendering of research and development services | 3,638 | 10,649 | - | 4,153 | 13,436 | |||||||||||||||
Cost of revenues from rendering of research and development services | (1,935 | ) | (8,671 | ) | - | (2,836 | ) | (10,716 | ) | |||||||||||
Research and development expenses, net | (5,963 | ) | (5,399 | ) | (1,834 | ) | (1,335 | ) | (6,946 | ) | ||||||||||
General and administrative expenses | (2,433 | ) | (4,447 | ) | (180 | ) | (1,480 | ) | (5,645 | ) | ||||||||||
Expenses relating to discontinued operation | (2,253 | ) | - | (2,253 | ) | - | - | |||||||||||||
Capital gain | 4 | 1 | - | - | 1 | |||||||||||||||
Operating loss | (8,942 | ) | (7,867 | ) | (4,267 | ) | (1,498 | ) | (9,870 | ) | ||||||||||
Finance income | 763 | 1,512 | 146 | 372 | 1,464 | |||||||||||||||
Finance expenses | (1,241 | ) | (16 | ) | (371 | ) | (4 | ) | (429 | ) | ||||||||||
Finance income (expenses), net | (478 | ) | 1,496 | (225 | ) | 368 | 1,035 | |||||||||||||
Loss before taxes on income | (9,420 | ) | (6,371 | ) | (4,492 | ) | (1,130 | ) | (8,835 | ) | ||||||||||
Taxes on income | (4 | ) | - | (4 | ) | - | - | |||||||||||||
Comprehensive loss | (9,424 | ) | (6,371 | ) | (4,496 | ) | (1,130 | ) | (8,835 | ) | ||||||||||
Loss per share - basic and fully diluted (in NIS) | (0.63 | ) | (0.43 | ) | (0.30 | ) | (0.08 | ) | (0.60 | ) |
The accompanying notes are an integral part of the condensed financial statements.
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PROTEOLOGICS LTD.
CONDENSED STATEMENTS OF CHANGES IN EQUITY |
Share capital and premium | Capital reserve | Options | Accumulated deficit | Total equity | ||||||||||||||||
NIS in thousands | ||||||||||||||||||||
Balance at January 1, 2013 (audited) | 79,056 | 26,384 | 11,117 | (85,603 | ) | 30,954 | ||||||||||||||
Exercise of options | 267 | - | - | (35 | ) | 232 | ||||||||||||||
Comprehensive loss for the period | - | - | - | (9,424 | ) | (9,424 | ) | |||||||||||||
Cost of share-based payment | - | - | - | (317 | ) | (317 | ) | |||||||||||||
Balance at September 30, 2013 (unaudited) | 79,323 | 26,384 | 11,117 | (95,379 | ) | 21,445 | ||||||||||||||
Balance at January 1, 2012 (audited) | 75,643 | 26,384 | 14,400 | (77,841 | ) | 38,586 | ||||||||||||||
Expiration of options | 3,283 | - | (3,283 | ) | - | - | ||||||||||||||
Exercise of options | 79 | - | - | (10 | ) | 69 | ||||||||||||||
Comprehensive loss for the period | - | - | - | (6,371 | ) | (6,371 | ) | |||||||||||||
Cost of share-based payment | - | - | - | 894 | 894 | |||||||||||||||
Balance at September 30, 2012 (unaudited) | 79,005 | 26,384 | 11,117 | (83,328 | ) | 33,178 | ||||||||||||||
Balance at July 1, 2013 (unaudited) | 79,259 | 26,384 | 11,117 | (90,392 | ) | 26,368 | ||||||||||||||
Exercise of options | 64 | - | - | (8 | ) | 56 | ||||||||||||||
Comprehensive loss for the period | - | - | - | (4,496 | ) | (4,496 | ) | |||||||||||||
Cost of share-based payment | - | - | - | (483 | ) | (483 | ) | |||||||||||||
Balance at September 30, 2013 (unaudited) | 79,323 | 26,384 | 11,117 | (95,379 | ) | 21,445 | ||||||||||||||
Balance at July 1, 2012 (audited) | 79,005 | 26,384 | 11,117 | (82,438 | ) | 34,068 | ||||||||||||||
Comprehensive loss for the period | - | - | - | (1,130 | ) | (1,130 | ) | |||||||||||||
Cost of share-based payment | - | - | - | 240 | 240 | |||||||||||||||
Balance at September 30, 2012 (unaudited) | 79,005 | 26,384 | 11,117 | (83,328 | ) | 33,178 | ||||||||||||||
Balance at January 1, 2012 (audited) | 75,643 | 26,384 | 14,400 | (77,841 | ) | 38,586 | ||||||||||||||
Expiration of options | 3,283 | - | (3,283 | ) | - | - | ||||||||||||||
Exercise of options | 130 | - | - | (18 | ) | 112 | ||||||||||||||
Comprehensive loss for the period | - | - | - | (8,835 | ) | (8,835 | ) | |||||||||||||
Cost of share-based payment | - | - | - | 1,091 | 1,091 | |||||||||||||||
Balance at December 31, 2012 (audited) | 79,056 | 26,384 | 11,117 | (85,603 | ) | 30,954 |
The accompanying notes are an integral part of the condensed financial statements.
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PROTEOLOGICS LTD.
CONDENSED STATEMENTS OF CASH FLOWS |
Nine months ended | Three months ended | Year ended | ||||||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2012 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
NIS in thousands | ||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Comprehensive loss | (9,424 | ) | (6,371 | ) | (4,496 | ) | (1,130 | ) | (8,835 | ) | ||||||||||
Adjustments to reconcile comprehensive loss to net cash used in operating activities: | 421 | (5,419 | ) | 1,815 | (1,998 | ) | (5,458 | ) | ||||||||||||
Net cash used in operating activities | (9,003 | ) | (11,790 | ) | (2,681 | ) | (3,128 | ) | (14,293 | ) | ||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchase of property, plant and equipment | (36 | ) | (236 | ) | - | (17 | ) | (356 | ) | |||||||||||
Purchase of intangible assets | (13 | ) | (30 | ) | - | (17 | ) | (30 | ) | |||||||||||
Proceeds from sale of property, plant and equipment | 23 | 3 | - | - | 3 | |||||||||||||||
Proceeds from sale of financial assets at fair value through profit or loss, net | 10,940 | 10,937 | 1,700 | 2,860 | 16,054 | |||||||||||||||
Investment in deposits restricted as to use, net | (1 | ) | (4 | ) | (1 | ) | (1 | ) | (34 | ) | ||||||||||
Net cash provided by investing activities | 10,913 | 10,670 | 1,699 | 2,825 | 15,637 | |||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from exercise of options | 232 | 69 | 56 | - | 112 | |||||||||||||||
Net cash provided by financing activities | 232 | 69 | 56 | - | 112 | |||||||||||||||
Increase (decrease) in cash and cash equivalents | 2,142 | (1,051 | ) | (926 | ) | (303 | ) | 1,456 | ||||||||||||
Cash and cash equivalents at the beginning of the period | 10,437 | 9,192 | 13,226 | 8,664 | 9,192 | |||||||||||||||
Exchange differences on cash and cash equivalents | (530 | ) | 194 | (251 | ) | (26 | ) | (211 | ) | |||||||||||
Cash and cash equivalents at the end of the period | 12,049 | 8,335 | 12,049 | 8,335 | 10,437 |
The accompanying notes are an integral part of the condensed financial statements.
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PROTEOLOGICS LTD.
CONDENSED STATEMENTS OF CASH FLOWS |
Nine months ended September 30, | Three months ended September 30, | Year ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2012 | ||||||||||||||||||
Unaudited | Audited | |||||||||||||||||||||
NIS in thousands | ||||||||||||||||||||||
(a) | Adjustments to reconcile comprehensive loss to net cash used in operating activities: | |||||||||||||||||||||
Income and expenses not involving cash flows: | ||||||||||||||||||||||
Loss (gain) from fair value change in financial assets at fair value through profit or loss | 660 | (351 | ) | 53 | (277 | ) | (245 | ) | ||||||||||||||
Depreciation and amortization | 1,532 | 619 | 1,202 | 179 | 794 | |||||||||||||||||
Employee benefit liabilities, net | (218 | ) | 38 | (248 | ) | 7 | 138 | |||||||||||||||
Decrease (increase) in accounts receivable | 293 | (21 | ) | 368 | (144 | ) | 383 | |||||||||||||||
Exchange differences on cash and cash equivalents | 530 | (194 | ) | 251 | 26 | 211 | ||||||||||||||||
Capital gain from property, plant and equipment, net | (4 | ) | (1 | ) | - | - | (1 | ) | ||||||||||||||
Cost of share-based payment | (317 | ) | 894 | (483 | ) | 240 | 1,091 | |||||||||||||||
2,476 | 984 | 1,143 | 31 | 2,371 | ||||||||||||||||||
Changes in operating asset and liability items: | ||||||||||||||||||||||
Liability for Company's discontinued operation | 1,235 | - | 1,235 | - | - | |||||||||||||||||
Decrease in trade payables | (360 | ) | (565 | ) | (208 | ) | (855 | ) | (567 | ) | ||||||||||||
Decrease in other accounts payable | (862 | ) | (254 | ) | (355 | ) | (475 | ) | (555 | ) | ||||||||||||
Decrease in deferred revenues | (2,068 | ) | (5,584 | ) | - | (699 | ) | (6,707 | ) | |||||||||||||
(2,055 | ) | (6,403 | ) | 672 | (2,029 | ) | (7,829 | ) | ||||||||||||||
421 | (5,419 | ) | 1,815 | (1,998 | ) | (5,458 | ) | |||||||||||||||
(b) | Information on investing and financing activities not involving cash flows: | |||||||||||||||||||||
Purchase of property, plant and equipment on credit | - | 119 | - | 119 | - | |||||||||||||||||
(c) | Cash paid and received during the period for: | |||||||||||||||||||||
Taxes paid | 3 | 4 | - | 1 | 21 | |||||||||||||||||
Interest received | 759 | 1,120 | 146 | 217 | 1,305 |
The accompanying notes are an integral part of the condensed financial statements.
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PROTEOLOGICS LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS |
NOTE 1:- GENERAL
a. | These financial statements have been prepared in a condensed format as of September 30, 2013 and for the nine and three months periods then ended. These financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2012 and for the year then ended and accompanying notes. |
b. | On August 21, 2013, the Company's Board directed the Company's management, among others (a) to act to locate potential buyers for the Company's activity in the Ubiquitin field which then was the Company's main area of activity; (b) to form immediately an action plan to the Company which derives from the accepted decision. It was further decided to empower the Board's sub-committee to examine as soon as possible and to bring before the Board its recommendations regarding alternative businesses for the Company. |
The above decisions were accepted, among others, because the products that the Company develops in the Ubiquitin field are in early development stages and the Board anticipates that the financing sources that are currently available for the Company are no longer sufficient to bring these products to a significant milestone.
c. | On September 20, 2013, the control over the Company was transferred from a former significant shareholder, XTL Biopharmaceuticals Ltd., to ZMIHA Investment House Ltd., a public company whose shares are traded on the TASE while all Company's directors, except outside directors, resigned and other directors were nominated in their place. On October 31, 2013, Mr. Sagi Ben Ishai was nominated as the Company's CEO (replacing Mr. Joshua Josh Levine who also resigned on September 20, 2013) and on November 3, Mr. Eliyahu Yoresh was appointed as the Company's chairman of the Board. |
In furtherance to the above decision from August 21, 2013, the Company's Board and management accepted at their meetings held during the third quarter of 2013, decisions the key elements of which are as followed: (a) to discontinue the Company's activity, including the main activity in the Ubiquitin field; (b) to act to conclude the existing engagements of the Company in connection with its activity, including termination of all contracts and commitments relating to the Ubiquitin activity; (c) to act to release from the lease agreement for the Company's offices in Rehovot, among others, through early termination, assignment or lease to a sub-lessee; (d) to dismiss all of the Company's employees; (e) to continue the search attempts for potential buyers to the IP and the property, plant and equipment used by the Company's activity; (f) to convene the Board as soon as possible to discuss ways to continue the Company.
As a result of the above, during the nine and three months periods ended September 30, 2013, the Company recorded expenses relating to discontinued operation of approximately NIS 2,253 thousand (of which an amount of NIS 1,046 thousand in respect of depreciation of property, plant and equipment).
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PROTEOLOGICS LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS |
NOTE 1:- GENERAL (Cont.)
d. | As of the date of the issuance of this report, the Company dismissed all of its employees (except pregnant or postnatal employees in respect of whom the Company addressed the officer in charge of women employment to receive a permit to dismiss them). |
e. | As of the date of the approval of the financial statements, the Company has no significant business activity, except holding of securities. As a result, since October 1, 2013, the Company is a "public shell" without significant business activity. |
Since its inception, the Company was engaged in the research and development of therapeutics through knowhow and expertise it possessed in the Ubiquitin system.
f. | On November 11, 2013, the Company filed with the Tel-Aviv District Court an application for a creditors' arrangement under section 350 to the Companies Law, 1999 whose purpose is to cause that all of the Company's debts in respect of the discontinued operation will be paid to its creditors and it will be discharged from all its liabilities, including contingent liabilities whose cause as of the date of the approval of the creditors' arrangement. |
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. | Preparation format of the interim financial statements: |
The interim financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting" and in accordance with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970
b. | New standards, interpretations and amendments applied for the first time by the company: |
The significant accounting policies and methods of computation adopted in the preparation of the interim financial statements are consistent with those adopted in the preparation of the annual financial statements, except as noted below.
Non-current asset or group of assets held for sale:
Non-current asset or group of assets is classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the assets must be available for immediate sale in their present condition, the Company must be committed to sell, there must be a program to locate a buyer and it is highly probable that a sale will be completed within one year from the date of classification. From the date of such initial classification, these assets are no longer depreciated and are presented separately as current assets at the lower of their carrying amount and fair value less costs to sell.
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PROTEOLOGICS LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS |
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
IAS 19 (Revised 2011), "Employee Benefits":("IAS 19(R)")
In June 2011, the IASB issued IAS 19 (Revised) which is to be applied commencing January 1, 2013. The key amendments address the accounting treatment of defined benefit plans. The first-time application of IAS 19(R) did not have a material effect on the Company's financial statements.
IFRS 13, "Fair Value Measurement":
IFRS 13 establishes guidance for the measurement of fair value, to the extent that such measurement is required according to IFRS. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value takes into account the market participant's ability to generate economic benefits by using the asset in its highest and best use. Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in the absence of a principal market, in the most advantageous market. The provisions of IFRS 13 are applied prospectively as from January 1, 2013 and they do not apply to comparative figures.
The first-time application of IFRS 13 did not have a material effect on the Company's financial statements.
NOTE 3:- ADDITIONAL SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
a. | Addressing the Chief Scientist in connection with the agreement between the Company and GlaxoSmithKline LLC: |
The Company and the Chief Scientist at the Ministry of Industry and Trade ("the Scientist") had a dialogue with the purpose of putting an end to a dispute regarding the Scientist demand to receive royalties from all Company's revenues, including from revenues whose source is the collaboration with GSK. For the meantime, the parties halted, with no time frame, mutual procedures in order to allow the clarification of the dispute in the right spirit.
The Company's maximal exposure varies between 3% and 4% (by periods) of total Company's revenues from GSK ranges between NIS 947 thousand and NIS 1,262 thousand in respect of the Company's revenues from GSK agreement.
Currently, the Company can not assess the potential effects of the above on the Company. Accordingly, no provision was recorded in the Company's financial statements.
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PROTEOLOGICS LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS |
NOTE 3:- ADDITIONAL SIGNIFICANT EVENTS DURING THE REPORTING PERIOD (Cont.)
b. | During the nine months period ended September 30, 2013, 266,679 options were exercised into 266,679 shares for a cumulative amount of NIS 232 thousand. |
c. | On July 30, 2013, the Israeli Parliament (the Knesset) approved the second and third readings of the Economic Plan for 2013-2014 ("the Budget Law") which consists, among others, of fiscal changes whose main aim is to enhance the collection of taxes in those years. |
These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5% and taxing revaluation gains effective from January 1, 2014.
These changes had no effect on the Company's financial statements.
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