UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 For the period ended June
30, 2008
[_] Transition report under section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period
from ___________________ to ______________
Commission File Number 000-22151
ORGANITECH USA, INC.
(Name of registrant in its charter)
Delaware 93-0969365
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
Yoqneam Industrial Area, P.O. Box 700, Yoqneam 20692, Israel
(Address of principal executive offices)
972-4-9935-840
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [_] (Do
not check if a smaller reporting company) Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company as defined in
Rule 12b-2 of the Exchange Act.
Yes[_] No [X]
As of June 30, 2008, the issuer had 36,632,642 shares of its common stock
outstanding.
Transitional Small Business Format: Yes [_] No [X]
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A amends the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2008, filed with the
Securities and Exchange Commission ("SEC") on August 5, 2008 (the "Original
Quarterly Report"). This Amendment revises management's conclusion as to the
effectiveness of the Company's disclosure controls and procedures as of the end
of period covered by the quarterly report and concludes that our disclosure
controls and procedures were not effective at the reasonable assurance level as
of the end of such period because of remaining material deficiencies in our
internal control over financial reporting which have not yet been remedied and
other factors referenced in the report. We have removed reference to our
management's report on internal control over financial reporting as of the prior
fiscal year end, and are filing amended Exhibit 31.1, Section 302 Certification
- - Principal Executive Officer and Exhibit 31.2, Section 302 Certification -
Principal Financial Officer.
Except as described above, no attempt has been made in this Amendment to
modify or update other disclosures presented in the Original Quarterly Report.
This Amendment does not reflect events occurring after the filing of the
Original Quarterly Report, or modify or update those disclosures, including the
exhibits to the Original Quarterly Report, affected by subsequent events.
Accordingly, this Amendment should be read in conjunction with our filings with
the SEC subsequent to the filing of the Original Quarterly Report, including any
amendments to those filings.
OrganiTECH USA, Inc.
Form 10-Q
TABLE OF CONTENTS
Part I
Item 1 Financial Information
Item 2 Management Discussion and Analysis of Financial Condition
Item 3 Quantitative and Qualitative Disclosure About Market Risk
Item 4 Controls and Procedures
Part II
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Submissions of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits
Signatures
2
PART I
ITEM 1 FINANCIAL STATEMENTS
--------------------
ORGANITECH USA, INC.
--------------------
CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
AS OF JUNE 30, 2008
(Unaudited)
--------------------
ORGANITECH USA, INC.
--------------------
CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
AS OF JUNE 30, 2008
(Unaudited)
CONTENTS
Page
----------
Condensed Consolidated Interim Balance Sheet F - 3
Condensed Consolidated Interim Statements of Operations F - 4
Condensed Interim Statements of Shareholders` Deficiency F - 5
Condensed Consolidated Interim Statements of Cash Flows F - 6
Notes to Condensed Consolidated Interim Financial Statements F - 7 - F - 12
F - 2
ORGANITECH USA, INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
- --------------------------------------------------------------------------------
IN U.S. DOLLARS (EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31,
2008 2007
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $ 351,062 $ 909,551
Restricted deposit 11,995 -
Trade receivables 23,547 115,001
Unbilled receivables - 76,306
Other receivables and prepaid expenses 124,839 36,391
Inventories - 70,545
------------ ------------
511,443 1,207,794
------------ ------------
LONG-TERM ASSETS:
Deposit in respect with long-term lease 7,321 13,372
Severance pay fund 96,172 86,851
------------ ------------
103,493 100,223
------------ ------------
PROPERTY AND EQUIPMENT, NET 50,787 92,860
------------ ------------
$ 665,723 1,400,877
============ ============
LIABILITES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIAIBLITIES:
Short-term bank credit $ 11,011 $ -
Trade payables 234,925 348,480
Other payables and accrued expenses 1,048,395 1,446,281
Convertible loan 357,500 357,500
Related parties 7,500 12,562
Customers advances in excess of costs incurred on contracts
in progress 349,237 -
------------ ------------
2,008,568 2,164,823
------------ ------------
LONG-TERM LIBILITIES:
Accrued severance pay 188,354 175,856
------------ ------------
SHARHOLDERS' DEFICIENCY
Common shares of $0.001 par value, authorized -
80,000,000 shares, issued and outstanding - 36,632,642
shares 36,633 36,633
Additional paid in capital 10,143,662 10,053,950
Accumulated deficit (11,711,494) (11,030,385)
------------ ------------
Total shareholders' deficiency (1,531,199) (939,802)
------------ ------------
$ 665,723 1,400,877
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
F - 3
ORGANITECH USA, INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
IN U.S. DOLLARS (EXCEPT SHARE DATA)
SIX MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------------- --------------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Revenues $ 330,667 $ 791,366 $ 282,881 $ 363,805
Cost of revenues 359,667 834,137 348,965 474,797
------------ ------------ ------------ ------------
Gross loss (29,000) (42,771) (66,084) (110,992)
------------ ------------ ------------ ------------
Research and development expenses 174,613 176,700 99,073 82,229
Selling and marketing expenses 174,928 304,821 69,460 169,873
General and administrative expenses 283,168 260,866 165,194 139,712
------------ ------------ ------------ ------------
Total operating expenses 632,709 742,387 333,727 391,814
------------ ------------ ------------ ------------
Operating loss (661,709) (785,158) (399,811) (502,806)
Financing expenses, net (19,400) (21,574) (15,772) (9,848)
------------ ------------ ------------ ------------
Net loss $ (681,109) $ (806,732) $ (415,583) $ (512,654)
============ ============ ============ ============
Basic and diluted net loss per common
share $ (0.02) $ (0.03) $ (0.01) $ (0.02)
============ ============ ============ ============
Weighted average number of common shares
outstanding
used in basic and diluted net loss per
share calculation 36,632,642 26,632,642 36,632,642 26,625,975
============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
F - 4
ORGANITECH USA, INC.
CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
- -------------------------------------------------------------------------------
IN U.S. DOLLARS (EXCEPT SHARE DATA)
NUMBER OF ADDITIONAL
OUTSTANDING COMMON PAID IN ACCUMULATED TOTAL SHAREHOLDERS'
COMMON SHARES SHARES CAPITAL CAPITAL DEFICIT DEFICIENCY
------------ ------------ ------------ ------------ ------------
IN THOUSANDS
------------
Balance as of January 1, 2007 26,633 $ 26,633 $ 7,987,627 $ (9,458,989) $ (1,444,729)
Common shares ($0.20) issued in July, net (*) 10,000 10,000 1,857,953 - 1,867,953
Amortization of stock-based compensation - - 203,007 - 203,007
Warrants granted to non employees - - 5,363 - 5,363
Cumulative impact of change in accounting
for uncertainties in income taxes (Fin 48) - - - (15,000) (15,000)
Net loss - - - (1,556,396) (1,556,396)
------------ ------------ ------------ ------------ ------------
Balance as of December 31, 2007 36,633 36,633 10,053,950 (11,030,385) (939,802)
Amortization of stock-based compensation - - 89,712 - 89,712
Net loss for the period - - - (681,109) (681,109)
------------ ------------ ------------ ------------ ------------
Balance as of June 30, 2008 (unaudited) 36,633 $ 36,633 $ 10,143,662 $(11,711,494) $ (1,531,199)
============ ============ ============ ============ ============
(*) Net of issuance expenses.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
F - 5
ORGANITECH USA, INC.
CONDENSED INTERIM STATEMTNS OF CASH FLOWS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
SIX MONTHS ENDED
JUNE 30,
--------------------------
2008 2007
--------- ---------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $(681,109) $(806,732)
--------- ---------
Adjustments to reconcile net loss to net cash used in operating activities :
Amortization of stock - based compensation 89,712 111,547
Depreciation 10,083 14,649
Profit from disposal of property and equipment (11,214) -
Changes in accrued severance pay, net 3,177 21,045
Decrease (increase) in trade receivables 330,355 (163,857)
Increase in other receivables and long term lease deposit (82,397) (13,210)
Decrease in inventories 1,932 208,786
Decrease in trade payables (113,555) (536,825)
Increase (decrease) in other payables and accrued expenses (430,543) 502,039
Increase (decrease) in customers advances 282,850 (208,986)
--------- ---------
Total adjustments 80,400 (64,812)
--------- ---------
Net cash used in operating activities (600,709) (871,544)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term deposits in banks (11,995) -
Proceeds from disposal of property and equipment 45,052 3,813
Purchase of property and equipment (1,848) -
--------- ---------
Net cash provided by investing activities 31,209 3,813
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES :
Proceeds from issuance of a convertible loan - 357,500
Increase in short-term credit 11,011 69,930
--------- ---------
Net cash provided by (used in) financing activities 11,011 427,430
--------- ---------
Decrease in cash and cash equivalents (558,489) (440,301)
Cash and cash equivalents at the beginning of the period 909,551 569,319
--------- ---------
Cash and cash equivalents at the end the period $ 351,062 $ 129,018
========= =========
SUPPLEMENTARY CASH FLOW INFORMATION :
Interest paid $ 16,088 $ 10,725
========= =========
Income tax paid $ 1,735 $ 1,445
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
F - 6
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 1 - GENERAL
A. OrganiTech USA Inc. ("the Company" or "OrganiTECH"), and its
subsidiary (collectively "the Group") design, develop, manufacture,
market and support Hydroponics solutions and platforms for the
Agriculture and Life-Science industries.
The Company's core business is conducted primarily through its
wholly-owned subsidiary, OrganiTECH Ltd. a company organized under the
laws of Israel. OrganiTECH Ltd. operates mainly in the Agriculture
Industrialization arena. Since its formation in 1999, it has been
developing, producing and marketing its leading proprietary technology
- a Self-contained, highly automated, robotic, sustainable
agricultural platforms designed to automatically seed, transplant and
harvest commercial quantities of hydroponics, pesticide free, green
leafy vegetables, while maintaining lowest production costs and making
optimal use of resources such as water, energy, labor and land/space.
B. The Company is devoting substantial efforts towards activities such as
marketing its products, financial planning and capital raising. In the
course of such activities, the Company and its subsidiary have
sustained operating losses. The Company and its subsidiary have not
achieved profitable operations or positive cash flows from operations
or positive working capital. The Company's accumulated deficit
aggregated to $11,711,494 through June 30, 2008. There is no assurance
that profitable operations, if ever achieved, could be sustained on a
continuing basis.
The Company plans to continue to finance its operations with a
combination of stock issuance and private placements and from its
revenues. There are no assurances, however, that the Company will be
successful in obtaining an adequate level of financing needed.
These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements
do not include any adjustments relating to the recoverability and
classification of recorded assets amounts or the amounts and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements
have been prepared as of June 30, 2008, in accordance with United
States generally accepted accounting principles relating to the
preparation of financial statements for interim periods. Accordingly,
they do not include all the information and footnotes required by
generally accepted accounting principles 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. These financial statements should be
read in conjunction with the Company's audited annual financial
statements accompanying notes as of December 31, 2007 and for the year
then ended. Operating results for the six-month and three-month
periods ended June 30, 2008 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2008.
F - 7
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
IMPACT OF RECENTLY ACCOUNTING STANDARS
(1) In November 2007, the EITF issued EITF Issue No. 07-1, Accounting for
Collaborative Arrangements Related to the Development and
Commercialization of Intellectual Property. Companies may enter into
arrangements with other companies to jointly develop, manufacture,
distribute, and market a product. Often the activities associated with
these arrangements are conducted by the collaborators without the
creation of a separate legal entity (that is, the arrangement is
operated as a "virtual joint venture"). The arrangements generally
provide that the collaborators will share, based on contractually
defined calculations, the profits or losses from the associated
activities. Periodically, the collaborators share financial
information related to product revenues generated (if any) and costs
incurred that may trigger a sharing payment for the combined profits
or losses. The consensus requires collaborators in such an arrangement
to present the result of activities for which they act as the
principal on a gross basis and report any payments received from (made
to) other collaborators based on other applicable GAAP or, in the
absence of other applicable GAAP, based on analogy to authoritative
accounting literature or a reasonable, rational, and consistently
applied accounting policy election. EITF Issue No. 07-1 is effective
for collaborative arrangements in place at the beginning of the annual
period beginning after December 15, 2008. The Company is currently
evaluating the impact that this pronouncement may have on its
consolidated financial statements.
(2) In June 2007, the Emerging Issues Task Force of the FASB ("EITF")
reached a consensus on Issue No. 07-3, Accounting for Nonrefundable
Advance Payments for Goods or Services Received for Use in Future
Research and Development Activities (EITF 07-3). EITF 07-3 requires
that non-refundable advance payments for goods or services that will
be used or rendered for future research and development activities
should be deferred and capitalized. The deferred amounts would be
recognized as an expense as the related goods are delivered or the
services are performed, or when the goods or services are no longer
expected to be provided. This pronouncement is effective for financial
statements issued for fiscal years beginning after December 15, 2007
and earlier application is permitted. EITF 07-3 is to be applied
prospectively for new contracts entered into on or after the effective
date. The Company is currently evaluating the impact that this
pronouncement may have on its consolidated financial statements.
NOTE 3 - CONTINGENCIES
Legal claims
In February 2000, OrganiTech Ltd. signed a distribution agreement with
Leami ("Leami"), whereby it granted Leami the exclusive right to market
OrganiTech Ltd's GrowTECH platforms in Israel. Under the terms of the
agreement, Leami agreed to purchase two GrowTECH platforms in consideration
for $100,000. In March 2000, OrganiTech Ltd. received an advance payment
from Leami in an amount of $60,000. In July 2000, OrganiTech Ltd. delivered
the two GrowTECH platforms to Leami.
OrganiTech Ltd. and Leami negotiated certain claims of Leami concerning the
GrowTECH platforms delivered and the distribution agreement. On February 2,
2005, Leami filed a lawsuit against OrganiTech Ltd. in the amount of
$295,500.
On April 20, 2005 the Company filed a counter lawsuit against Leami at the
amount of $148,800 claiming that Leami had not fulfilled its obligations
and commitments under the sale agreement signed and by not doing so and
taking other actions, it caused OrganiTech Ltd. to suffer damages and
expenses. A Regional Tribunal has held several preliminary hearings in
order to prepare the claim and counter-claim for trial.
F - 8
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 3 - CONTINGENCIES (CONT.)
Legal claims (cont.)
On July 3, 2008, during a sitting of the court, the judge recommended the
two parties to enter into a mediation procedure for solving the two
lawsuits both parties filed against each other. The Company's intention,
based on its legal counsel, is to accept the court's recommendation.
Company's management believes, based on the opinion of its legal counsel,
that this claim will not have material adverse effect on the Company's
financial condition.
NOTE 4 - OPTIONS
A. Options to Purchase Company Shares
(1) On December 3, 2006 the Company entered into a service agreement
with a consultant whereby the consultant will present the Company
to potential investors for a success-based consideration.
Following the receiving of the Convertible Loan on March 2, 2007,
the consultant is entitled to options for the purchase of 41,250
shares of the Company's common shares for exercise price of $0.26
per share. The options will expire on March 2, 2010. The fair
value of the options at the grant date was $5,363.
(2) On April 17, 2008, the Company entered into an agreement with its
CEO regarding her salary terms. Under the agreement, commencing
November 2007 and until December 2008 (the "Period"), each month
the Company will deduct NIS 10,000 from the CEO's gross salary.
In consideration for this deduction the CEO is entitled to
options from two kinds: the first warrant is for the purchase of
209,799 shares of the Company's common shares for an exercise
price of $0.001 per share and the second warrant is for the
purchase of 80,692 shares of the Company's common shares for an
exercise price of $0.26. The fair value of options at the grant
date was $0.05 and $0 per option, respectively. Both options were
granted on April 17, 2008 and shall vest during the Period in 14
equal monthly portions. The first warrant will expire on April
17, 2018 and the second warrant will expire on April 17, 2011. As
a result, the Company recorded compensation expenses in the
amount $5,994
B. Stock Option Plans
(1) On May 31, 2005, the Board of Directors approved a Stock Option
Plan ("SOP") for Company's executives, directors, key employees
and service providers comprising options to purchase up to
1,622,000 common shares of the Company. On February 19, 2006, the
Board of Directors approved the increasing of the SOP in
additional options to purchase up to additional 3,000,000 common
shares of the Company. As of March 31, 2008, 1,307,000 options of
the Company were still available for future grants.
(2) In February 2008, the Board of Directors decided to modify the
expiration date of certain options. The modification resulted in
a new measurement date on the date of modification for all
options extended. The amount of compensation expenses was
calculated under SFAS 123(R) and is equal to the difference
between the fair value of the options immediately before and
after the modification. Compensation expense were recognized over
the vesting period of the options. There is no impact as a result
of the modification.
F - 9
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 4 - OPTIONS (CONT.)
B. Stock Option Plans (cont.)
(2) (cont.)
In addition, In February 2008, the Board of Directors decided to
accelerate the vesting period of certain options. As a result of
the acceleration compensation expense in the amount of $14,394
were recognized immediately.
(3) A summary of the Company's stock option activity with regards to
its employees, officers and directors, under the plan as of June
30, 2008 and June 30, 2007 is as follows:
JUNE 30, 2008
-------------------------------------------------------
WEIGHTED
AVERAGE
WEIGHTED REMAINING
AVERAGE CONTRACTUAL AGGREGATE
NUMBER OF EXERCISE TERM INTRINSIC
OPTIONS PRICE (YEARS) VALUE PRICE
---------- ---------- ---------- ----------
Outstanding as of January 1, 2008 3,706,508 $ 0.234 7.98 $ -
Granted 290,491 0.073
Forfeited (40,000) $ 0.187
----------
Outstanding as of
June 30 2008 3,956,999 $ 0.223 7.55 $ 14,476
========== ========== ========== ==========
Vested and expected to vest 3,908,524 $ 0.208 7.08 $ 14,166
========== ========== ========== ==========
Exercisable as of June 30, 2008 2,987,503 $ 0.241 7.39 $ 8,272
========== ========== ========== ==========
JUNE 30, 2007
------------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACTUAL INTRINSIC
OPTIONS PRICE TERM (YEARS) VALUE PRICE
---------- ---------- ---------- ----------
Outstanding as of January 1, 2007 3,276,508 $ 0.231
Granted 430,000 $ 0.26
----------
Outstanding as of
June 30, 2007 3,706,508 $ 0.253 8.47 $ 14,300
========== ========== ========== ==========
Vested and expected to vest 3,706,508 $ 0.253 8.47 $ 14,300
========== ========== ========== ==========
Exercisable as of June 30, 2007 1,851,508 $ 0.254 8.13 $ 8,320
========== ========== ========== ==========
F - 10
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 4 - OPTIONS (CONT.)
B. Stock Option Plans (cont.)
(4) A summary of the Company's stock option activity with regards to
its non-employees, as of June 30, 2008 and June 30, 2007 under
the plan is as follows:
JUNE 30, 2008
--------------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACTUAL INTRINSIC
OPTIONS PRICE TERM (YEARS) VALUE PRICE
---------- ---------- ---------- ----------
Outstanding as of January 1, 2008 145,000 $ 0.251 8.34 $ -
Forfeited (30,000) $ 0.187
----------
Outstanding as of
June 30, 2008 115,000 $ 0.268 7.93 $ -
========== ========== ========== ==========
Exercisable as of June 30, 2008 62,500 $ 0.261 7.90 $ -
========== ========== ========== ==========
JUNE 30, 2007
-------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACTUAL INTRINSIC
OPTIONS PRICE TERM (YEARS) VALUE PRICE
-------- -------- -------- --------
Outstanding as of
January 1, 2007 and
June 30, 2007 145,000 $ 0.251 8.84 $ 585
======== ======== ======== ========
Vested and expected to
be vest 145,000 $ 0.251 8.84 $ 585
======== ======== ======== ========
Exercisable as of
June 30, 2007 36,250 $ 0.251 8.84 $ 146
======== ======== ======== ========
(5) The aggregated intrinsic value in the tables above represents the
total intrinsic value (the difference between the Company's
closing stock price on the last trading day as of the relevant
period and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option
holders had all option holders exercised their options on the
last trading day of each period. This amount is changed based on
the fair market value of the Company's stock.
(6) As of June 30, 2008, the total unrecognized estimated
compensation costs related to non-vested stock options granted
prior to that date was $150,047, which is expected to be
recognized over a weighted average period of 0.82 years.
F - 11
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 4 - OPTIONS (CONT.)
B. Stock Option Plans (cont.)
(7) Compensation expenses were recognized during the three-month and
six-month periods ended June 30, 2008 and June 30, 2007,
respectively, as follows:
SIX MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ ------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Cost of revenues $ 11,065 $ 21,848 $ 5,837 $ 15,820
Research and development
expenses 8,589 13,058 4,828 9,145
Selling and marketing expenses 23,286 31,138 11,751 15,409
General and administration
expenses 40,778 45,503 12,930 25,343
--------- --------- --------- ---------
$ 83,718 $ 111,547 $ 35,346 $ 65,717
========= ========= ========= =========
F - 12
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following management's discussion and analysis or plan of operation should
be read in conjunction with our condensed interim unaudited consolidated
financial statements for the period ended June 30, 2008 thereto contained
elsewhere in this report and with our audited consolidated financial statements
and notes for the year ended December 31, 2007.
This filing contains forward-looking statements. The words "anticipate,"
"believe," "expect," "plan," "intend," "seek," "estimate," "project," "will,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. These statements include, among others, information regarding future
operations, future capital expenditures, and future net cash flow. Such
statements reflect our management's current views with respect to future events
and financial performance and involve risks and uncertainties, including,
without limitation: (a) the timing of our sales could fluctuate and lead to
performance delays; (b) without additional equity or debt financing we cannot
carry out our business plan; (c) we operate internationally and are subject to
currency fluctuations, which could cause us to incur losses even if our
operations are profitable; (d) our research and development facilities are
located in Israel and we have important facilities and resources located in
Israel which could be negatively affected due to military or political tensions;
(e) certain of our officers and employees are required to serve in the Israel
defense forces and this could force them to be absent from our business for
extended periods; (f) the rate of inflation in Israel may negatively impact our
costs if we exceeds the rate of devaluation of the NIS against the Dollar.
Should one or more of these risks or uncertainties occur, or should underlying
assumptions prove to be incorrect, actual results may vary materially and
adversely from those anticipated, believed, estimated or otherwise indicated.
These forward-looking statements speak only as of the date of this Report.
Subject at all times to relevant federal and state securities law disclosure
requirements, we expressly disclaim any obligation or undertaking to disseminate
any update or revisions to any forward-looking statement contained herein to
reflect any change in our expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is based.
Consequently, all of the forward-looking statements made in this Report are
qualified by these cautionary statements and there can be no assurance of the
actual results or developments.
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions in certain circumstances that
affect amounts reported in the accompanying consolidated financial statements
and related footnotes. Actual results may differ from these estimates. To
facilitate the understanding of the business activities, described below are
certain of our accounting policies that are relatively more important to the
portrayal of the financial condition and results of operations and that require
management's subjective judgments. We base our judgments on our experience and
various other assumptions that management believes to be reasonable under the
circumstances.
The following listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result.
REVENUE RECOGNITION
We believe our most critical accounting policy relates to revenue recognition as
described below.
We generate revenues from long-term contracts which are recognized based on
Statement of Position 81-1 "Accounting for Performance of Construction-Type and
Certain Production-Type Contracts" ("SOP 81-1") according to which revenues are
recognized based on either the completed contract basis or the percentage of
completion basis.
Based on the percentage-of-completion method, sales and profits under long-term
fixed-price contracts which provide for a substantial level of development and
design efforts in relation to total contract efforts are recorded based on the
ratio of hours incurred by key personnel to estimated total hours required from
such key personnel at completion.
3
The percentage-of-completion method of accounting requires management to
estimate the cost and gross profit margin for each individual contract.
Estimated gross profit or loss from long-term contracts may change due to
changes in estimates resulting from differences between actual performance and
original estimated forecasts. Such changes in estimated gross profit are
recorded in results of operations when they are reasonably determinable by
management, on a cumulative catch-up basis. Anticipated losses on contracts are
charged to earnings when determined to be probable.
Penalties applicable to performance of contracts are considered in estimating
sales and profit rates and are recorded when there is sufficient information to
assess anticipated contract performance.
STOCK-BASED COMPENSATION
On January 1, 2006, we adopted Statement of Financial Accounting Standards No.
123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)") which requires the
measurement and recognition of compensation expense based on estimated fair
values for all share-based payment awards made to employees and directors. In
March 2005, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). We have applied the
provisions of SAB 107 in its adoption of SFAS 123(R).
SFAS 123(R) requires companies to estimate the fair value of equity-based
payment awards on the date of grant using an option-pricing model. The value of
the portion of the award that is ultimately expected to vest is recognized as an
expense over the requisite service periods in our consolidated statement of
operations.
We adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the accounting standard starting from January 1,
2006, the first day of our fiscal year 2006. Under that transition method,
compensation cost recognized in the year ended December 31, 2006, includes: (a)
compensation cost for all share-based payments granted prior to, but not yet
vested as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of Statement 123, and (b) compensation
cost for all share-based payments granted subsequent to January 1, 2006, based
on the grant-date fair value estimated in accordance with the provisions of
Statement 123(R). Results for prior periods have not been restated.
We recognize compensation expenses for the value of our awards, which have
graded vesting based on the straight line method over the requisite service
period of each of the awards.
The fair value of the options granted were estimated using a Black & Scholes
option pricing model. The expected volatility was calculated based upon actual
historical stock price movements over the most recent periods ending on the
grant date, equal to the expected option term. The expected option term
represents the period that our stock options are expected to be outstanding and
was determined based on simplified method permitted by SAB 107 as the average of
the vesting period and the contractual term. We have historically not paid
dividends and have no foreseeable plans to issue dividends. The risk-free
interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an
equivalent term.
We apply SFAS No. 123 and Emerging Issues Task Force No. 96-18 "Accounting for
Equity Instruments that are Issued to other than Employees for Acquiring, or in
conjunction with selling, goods or services" ("EITF 96-18"), with respect to
options and warrants issued to non-employees. SFAS No. 123 requires the use of
option valuation models to measure the fair value of the options and warrants at
the date of grant.
CONTINGENCIES
We are, from time to time, subject to claims arising in the ordinary course of
our business, including patent, product liability and other litigation. In
determining whether liabilities should be recorded for pending litigation
claims, we assess the allegations made and the likelihood that we will
successfully defend the suit. When management believes that it is probable that
we will not prevail in a particular matter, management then estimates the amount
of the liability based in part on advice of outside legal counsel.
4
COMPARISON OF THE QUARTER ENDED JUNE 30, 2008 TO THE QUARTER ENDED JUNE 30, 2007
SUMMARY
SIX-MONTH PERIOD ENDED JUNE 30, THREE-MONTH PERIOD ENDED JUNE 30,
--------------------------- ---------------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues $ 330,667 $ 791,366 $ 282,881 $ 363,805
Net Loss $(681,109) $(806,732) $(415,583) $(512,654)
Net Loss per Common Share $ (0.02) $ (0.03) $ (0.01) $ (0.02)
Dividends per Common Share $ 0 $ 0 $ 0 $ 0
RESULTS OF OPERATIONS
REVENUES
Revenues decreased by 58% to $330,677 in the six months ended June 30, 2008 from
$791,366 in the six months ended June 30, 2007. Revenues in the six months ended
June 30, 2008 derived primarily from a European customer with which we started a
project in Q2-2008 - as compared to the six months ended June 30, 2007 where
revenues were derived from one large scale project that was executed with a
Spanish customer. Both projects were recognized based on the
percentage-of-completion method. In the three months ended June 30, 2008
revenues decreased by 22% to $282,881 from $363,805 in the three months ended
June 30, 2007.
COST OF REVENUES AND GROSS PROFIT (LOSS)
Cost of revenues decreased by 57% to $359,667 in the six months ended June 30,
2008 from $834,137 in the six months ended June 30, 2007. Cost of revenues for
the six months ended June, 2008 consisted mainly of (i) materials, labor and
sub-contractors' expenses and provisions recorded for royalties and warranty
obligations that were related to the recognized revenues; (ii) an adjustment to
a provision for royalties ; (iii) a cancellation of provisions for warranty and
commissions of two of our projects; and (iv) a one-time conservative write-off
of capitalized costs related to one of our projects in the amount of $113,400.
Cost of revenues for the six months ended June 30, 2007 consisted of the same
items as in (i) above As a percentage of revenues, our cost of revenues were
109% in the six months ended June 30, 2008 compared to 105% in the six months
ended June 30, 2007.
In the three months ended June 30, 2008 cost of revenues decreased by 27% to
$348,965 from $474,797 in the three months ended June 30, 2007. The decrease was
primarily due to a decrease in the expenses related to the projects we
performed, that were smaller at Q2-2008 as compared to Q2-2007, offset by a
one-time conservative write-off of capitalized costs related to one of our
projects in the amount of $113,400.
For the reasons described above, we had gross loss of $29,000 in the six months
ended June 30, 2008 compared to a gross loss of $42,771 in the six months ended
June 30, 2007. For the same reasons described above, in the three months ended
June 30, 2008 we had gross loss of $66,084.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses weren't materially changed in the six months
ended June 30, 2008 as compared to the six months ended June 30, 2007 ($174,613
at H1-2008 versus $176,700 at H1-2007). As a percentage of revenues, our
research and development expenses were 53% in the six months ended June 30,
2008. Research and development expenses for both periods consisted mainly of
payroll costs.
In the three months ended June 30, 2008 research and development expenses
increased by 20% to $99,073 from $82,229 in the three months ended June 30,
2007. The increase was primarily due to increased payroll costs due to increased
hours spent on research and development activity. As a percentage of revenues,
our research and development expenses were 35% in the three months ended June
30, 2008.
5
We expect to continue to incur research and development costs (which will be
limited to our available financial resources), related to our continued
development of the GrowTECH2500 and to a lesser extent, our continued
development of bio-tech product lines.
SALES AND MARKETING EXPENSES
Sales and marketing expenses decreased by 43% to $174,928 in the six months
ended June 30, 2008 from $304,821 in the six months ended June 30, 2007. The
decrease in sales and marketing expenses is primarily attributable to decreased
wage expenses, commissions related to recognized revenues and to the decrease of
amortization expenses of demo sites. As a percentage of revenues, our sales and
marketing expenses were 53% in the six months ended June 30, 2008.
In the three months ended June 30, 2008 selling and marketing expenses decreased
by 59% to $69,460 from $169,873 in the three months ended June 30, 2007. The
decrease was primarily due to decreased payroll costs and a decrease of
amortization expenses of demo sites. As a percentage of revenues, our selling
and marketing expenses were 25% in the three months ended June 30, 2008.
We expect to continue to incur increased sales and marketing expenses (limited
to our available financial resources), as we believe that the need for our
products is worldwide and our sales volume is directly influenced by the sales
and marketing efforts invested.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by 9% to $283,168 in the six
months ended June 30, 2008 from $260,866 in the six months ended June 30, 2007.
The increase in general and administrative expenses was due to a decrease of
$65,250 (25%) in the wage expenses, professional services and other general and
administrative expenses which was offset by a one-time conservative cancellation
of an unbilled receivable in the amount of $87,552. As a percentage of revenues,
our general and administrative expenses were 86% in the six months ended June
30, 2008.
In the three months ended June 30, 2008 general and administrative expenses
increased by 18% to $165,194 from $139,712 in the three months ended June 30,
2007. The increase in general and administrative expenses was due to a decrease
of $62,070 (56%) in the wage expenses, professional services and other general
and administrative expenses which was offset by a one-time conservative
cancellation of an unbilled receivable in the amount of $87,552. As a percentage
of revenues, general and administration expenses were 58% in the three months
ended June 30, 2008.
We expect to maintain this level of general and administrative expenses, limited
to our available financial resources.
FINANCING EXPENSES
Financing expenses decreased to $19,400 in the six months ended June 30, 2008
from $21,574 in the six months ended June 30, 2007. During the six months ended
June 30, 2008 financing expenses consisted primarily of interest on a
convertible loan and financial institutions' fees, off-set by income related to
currency exchange rates, whereas during the six months ended June 30, 2007
financing expenses consisted primarily of interest on a convertible loan,
financial institutions' fees and expenses related to currency exchange rates.
In the three months ended June 30, 2008 financial expenses increased by 60% to
$15,772 from $9,848 in the three months ended June 30, 2007. The increase was
primarily due to expenses related to currency exchange rates.
OPERATING LOSS AND NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
Our operating loss decreased by 16% to $661,709 in the six months ended June 30,
2008 from $785,158 in the six months ended June 30, 2007 and our net loss
decreased as well by 16% to $681,109 in the six months ended June 30, 2008 from
$806,732 in the six months ended June 30, 2007.
In the three months ended June 30, 2008 our operating loss decreased by 20% to
$399,811 from $502,806 in the three months ended June 30, 2007 and our net loss
decreased by 19% to $415,583 in the three months ended June 30, 2008 from
$512,654 in the three months ended June 30, 2007.
6
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2008, we had cash and cash equivalents totaling $351,062 compared
to $909,551 as of December 31, 2007 and $129,018 as of June 30, 2007.
Since our inception in 1999, we have financed our operations through private
sales of shares of our common stock and convertible loans, which have totaled as
of June 30, 2008 $9.0 million (net of issuance expenses). We have used the
proceeds of the sale of all securities for working capital and other general
corporate purposes.
Until we are able to generate sufficient cash from operations, we intend to use
our existing cash resources to finance our operations. Based on our existing
monthly expenses, we may not have sufficient cash to satisfy our operational and
development requirements over the next 12 months. Our consolidated financial
statements for the period ended June 30, 2008 and for the fiscal year ended
December 31, 2007 include an explanatory paragraph which states that we have
suffered recurring losses from operations and a negative cash flow from
operating activities that raise substantial doubt about our ability to continue
as a going concern.
For the six months ended June 30, 2008, we had $600,709 cash used in operating
activities compared with $871,544 for the six months ended June 30, 2007. The
operating cash outflow for the six months ended June 30, 2008, was primarily a
result of our net loss of $681,109 and a decrease in trade payables, other
payables and accrued expenses and by an increase in other receivables. The cash
outflow was partially offset by a increase in customers advances, by a decrease
in trade receivables, and by amortization of deferred stock-based compensation.
For the six months ended June 30, 2008 we had a net cash inflow provided by
investment activities of $31,209 that resulted from proceeds from the disposal
of property and equipment, partially off-set by an increase in short-term
deposits in banks and by a purchase of equipment, whereas for the six months
ended June 30, 2007 we had a net cash inflow provided by investment activities
of $3,813 that resulted from proceeds from the disposal of property and
equipment.
Our net cash inflow from financing activities for the six months ended June 30,
2008 was $11,011 compared with a net cash inflow of $427,430 for the six months
ended June 30, 2007. The net cash inflow from financing activities in the six
months ended June 30, 2008 was generated from an increase in short-term credit
from financial institutions, whereas in the six months ended June 30, 2007 the
net cash inflow was generated primarily from the proceeds from the issuance of a
convertible loan, and by an increase in short-term credit from financial
institutions.
Other than as otherwise mentioned in this quarterly report, there were no
material long term loans, commitments or off-balance sheet guarantees as of June
30, 2008.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
future condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4 CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, including our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this report. Based on that evaluation,
our management concluded that our disclosure controls and procedures as of the
end of the period covered by this report were effective such that the
information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to our management, including our President, as appropriate to allow
timely decisions regarding disclosure. A controls system cannot provide absolute
assurance, however, that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.
7
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING FOR
DECEMBER 31, 2007
Our management is responsible for establishing and maintaining disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) for us.
In order to ensure whether our internal control over financial reporting is
effective, management has assessed such controls for its financial reporting as
of December 31, 2007. This assessment was based on criteria for effective
internal control over financial reporting described in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission ("COSO").
In performing this assessment, management has identified the following material
weaknesses:
Absence of adequate segregation of duties relating to oversight and management
of our systems. This resulted primarily from the fact that a certain part of the
work of our chief financial officer is not monitored or reviewed. The absence of
adequate segregation of duties may have an affect on the systems which we use in
the evaluation and processing of certain accounts and areas and in the posting
and recording of journal entries into certain accounts, as described below:
o REVENUE & RECEIVABLES PROCESS - There was a material weakness in the
sub-process of `Expenses/Costs Related To Recognized Revenues' which
resulted from the fact that there are certain calculations (such as
(i) processing of purchase orders or other commercial engagements
signed with customers, and (ii) distribution & delivery of goods sold
to customers) that are made by our chief financial officer and which
are not reviewed or approved by anyone else.
o PURCHASING & INVENTORY PROCESSES in Relation to the Allocations
between Expense and Inventory - There was a material weakness in the
sub-processes of `Purchasing and Recording Inventory' which resulted
from the fact that there are certain calculations in relation to
capitalizations of purchasing to Inventory, that are made by our chief
financial officer and which are not reviewed by anyone else.
o FINANCIAL STATEMENTS CLOSING PROCESS- There was a material weakness in
the process of closing our financial statements which resulted from
the fact that the work of our chief financial officer in this process
(starting with processing the trial balance, through the evaluation
and implementation of policies and accounting issues, until the
complete production of comprehensive financial statements) is not
reviewed by anyone else.
o TREASURY AND CASH PROCESS - There was a material weakness in the
sub-process of debt management which resulted from the fact that our
chief financial officer manages, evaluates, and discloses all matters
which relate to debts, convertible loans, hybrid debts, issuance
expenses, interest, etc. whose work is not reviewed by anyone else.
As a result of these material weaknesses in our internal control over financial
reporting, our management concluded that our internal control over financial
reporting, as of December 31, 2007, was not effective based on the criteria set
forth by COSO in Internal Control - Integrated Framework. A material weakness in
internal control over financial reporting is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company's annual or
interim financial statements will not be prevented or detected on a timely
basis.
MANAGEMENT'S PLAN FOR REMEDIATION OF MATERIAL WEAKNESSES -
In light of the conclusion that our internal control over financial reporting
was not effective, our management is in the process of implementing a plan
intended to remediate such ineffectiveness and to strengthen our internal
controls over financial reporting through the implementation of certain remedial
measures, which include:
o Improving the control and oversight of the duties relating to the
systems we use in the evaluation and processing of certain accounts
and areas and in the posting and recording of journal entries into
certain accounts (in which material weaknesses have been identified as
described above);
8
o The segregation of duties relating to the processing of accounts and
the recording of journal entries into certain accounts; and
o Obtaining the assistance of experienced financial personnel to enhance
our financial reporting capabilities by overseeing and reviewing the
chief financial officer's work
We have commenced implementing controls to address the segregation of duties
relating to the systems we use in the evaluation and processing of certain
accounts and areas and in the posting and recording of journal entries into
certain accounts (in which material weaknesses have been identified as described
above). Additionally, we intend to actively obtain the assistance of experienced
financial personnel to enhance our financial reporting capabilities by
reviewing/overseeing the chief financial officer's work.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company has evaluated, with the participation of the Chief
Executive Officer of the Company, any change in the Company's internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the period covered by this Report. There were
no changes in our internal control over the financial reporting identified in
that evaluation that occurred during the period covered by this Report that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. However, since January 1, 2008, we have
commenced implementing controls to address the segregation of duties relating to
the systems we use in the evaluation and processing of certain accounts and
areas and in the posting and recording of journal entries into certain accounts
(in which material weaknesses have been identified as described above).
Additionally, we intend to actively obtain the assistance of experienced
financial personnel to enhance our financial reporting capabilities by
reviewing/overseeing the chief financial officer's work.
INHERENT LIMITATIONS ON EFFECTIVENESS OF INTERNAL CONTROLS
Our management, including our chief executive officer and chief financial
officer, do not expect that our disclosure controls or our internal control over
financial reporting will prevent or detect all errors and all fraud that could
occur. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives
will be met. The design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Further, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within our company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls is based in part on certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of compliance with
policies or procedures.
9
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 1A RISK FACTORS
Not applicable
ITEM 2 UNRESGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) During the period covered by this Report, neither we nor our wholly owned
subsidiary engaged in the sale of any of our unregistered equity securities.
(b) None
(c) Not applicable
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
Since March 2008, our Board of Directors has commenced a reduction of the number
of its members, in order to facilitate an improvement in its functioning.
Mr. Ohad Hessel resigned from our Board of Directors on March 6, 2008. Mr.
Hessel served as our director from our inception in 1999. Mr. Yossi Levi, who
was appointed by Keren Katzir Debenture for Investment Ltd., one of our
affiliates, to serve on our Board of Directors resigned from the Board on May
11, 2008.
On April 27, 2008, Mr. Josef Noyman was appointed by the members our Board of
Directors to serve as an independent director. Mr. Noyman has 30 years
experience in industrial management in Israel. Since 2000, Mr. Noyman has worked
as an independent business consultant and serves as chairman of the board of
directors of several Israeli companies, including Kapro Industries Ltd, P.V.Ran
Plastic Works Ltd, Migvan Graphic Facilities (1993) Ltd. Since 2007 Mr. Noyman
has been serving as a director of Extra Plastic Ltd (TASE: EXTR). Mr. Noyman
earned a degree in Economics and Agriculture from the Hebrew University in
Israel and has completed additional studies in Entrepreneurship in Haifa
University, Israel.
ITEM 6 EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------
3.1 Certificate of Incorporation of the Company. (1)
3.2 Bylaws of the Company (1)
3.3 Certificate of Incorporation of OrganiTECH Ltd. (English
Translation). (2)
10
3.4 Bylaws of OrganiTECH Ltd. (English Translation). (2)
10.1 Securities Purchase Agreement between the Company and Keren
Katzir Debenture for Investment Ltd., dated July 10, 2007(4)
10.2 Registration Rights Agreement between the Company and Keren
Katzir Debenture for Investment Ltd., dated July 10, 2007(4)
10.3 Warrant issued to Keren Katzir Debenture for Investment Ltd.,
dated July 10, 2007(4)
21.1 Subsidiaries of the Registrant. (3)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 +
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 +
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 +
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 +
(1) Incorporated by reference to exhibits filed with the Company's Form 8-K,
filed with the Commission on February 22, 2001.
(2) Incorporated by reference to exhibits filed with the Company's Form
10-KSB/A, filed with the Commission on August 23, 2005.
(3) Incorporated by reference to exhibits filed with the Company's Form 10-KSB,
filed with the Commission on March 30, 2006.
(4) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K filed with the Commission on July 23, 2007.
+Filed herewith.
Our current reports on Form 8-K filed since April 1, 2008 are as follows:
MONTH FILING DATES
- -------------------------- -------------------------
May 2008 May 16, 2008
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on April 2, 2009.
ORGANITECH USA, INC.
By: /s/ Rachel Ben-Nun
- -----------------------
Rachel Ben-Nun, Chief Executive Officer
By: /s/ Oren Bloch
- -----------------------
Oren Bloch, Principal Financial Officer
11