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 September 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 September 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 September 30, 2008, filed with the
Securities and Exchange Commission ("SEC") on November 19, 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 revised our Management's
Discussion and Analysis for the period and revised our disclosure to address
changes in our internal control over financial reporting during the period. We
also 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
ITEM 1 FINANCIAL STATEMENTS
--------------------
ORGANITECH USA, INC.
--------------------
CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2008
(Unaudited)
--------------------
ORGANITECH USA, INC.
--------------------
CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2008
(Unaudited)
CONTENTS
Page
----
Condensed Consolidated Interim Balance Sheet F - 3
Condensed Consolidated Interim Statements of Operation 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)
DECEMBER 31 SEPTEMBER 30
2007 2008
------------ ------------
UNAUDITED
------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 909,551 $ 54,954
Restricted deposit - 4,418
Trade receivables 115,001 11,040
Unbilled receivables 76,306 -
Other receivables and prepaid expenses 36,391 107,897
Costs incurred on contracts in progress 70,545 -
------------ ------------
1,207,794 178,309
------------ ------------
LONG-TERM ASSETS:
Deposit in respect with long-term lease 13,372 4,473
Severance pay fund 86,851 100,072
------------ ------------
100,223 104,545
------------ ------------
PROPERTY AND EQUIPMENT, NET 92,860 47,916
------------ ------------
$ 1,400,877 $ 330,770
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIAIBLITIES:
Trade payables $ 348,480 $ 526,239
Other payables and accrued expenses 1,446,281 963,703
Convertible loan 357,500 357,500
Related parties 12,562 7,500
Customers advances in excess of costs incurred on contracts
in progress - 87,849
------------ ------------
2,164,823 1,942,791
------------ ------------
LONG-TERM LIABILITIES:
Accrued severance pay 175,856 196,808
------------ ------------
SHAREHOLDERS' 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 10,053,950 10,181,125
Accumulated deficit (11,030,385) (12,026,587)
------------ ------------
Total shareholders' deficiency (939,802) (1,808,829)
------------ ------------
$ 1,400,877 $ 330,770
============ ============
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)
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------------------- ------------------------------
2007 2008 2007 2008
----------- ---------- ---------- ----------
UNAUDITED
-----------------------------------------------------------------------
Revenues $ 1,205,569 $ 656,885 $ 414,203 $ 326,218
Cost of revenues 1,215,683 733,772 381,546 374,105
----------- ---------- ---------- ----------
Gross (loss) profit (10,114) (76,887) 32,657 (47,887)
----------- ---------- ---------- ----------
Research and development expenses 248,979 245,374 72,279 70,761
Selling and marketing expenses 471,291 260,544 166,470 85,616
General and administrative expenses 420,162 388,170 159,296 105,002
----------- ---------- ---------- ----------
Total operating expenses 1,140,432 894,088 398,045 261,379
----------- ---------- ---------- ----------
Operating loss (1,150,546) (970,975) (365,388) (309,266)
Financing (expenses) income, net 5,697 (25,227) 27,271 (5,827)
----------- ---------- ---------- ----------
Net loss $(1,144,849) $ (996,202) $ (338,117) $ (315,093)
=========== ========== ========== ==========
Basic and diluted net loss per common
share $ (0.04) $ (0.03) $ (0.01) $ (0.01)
=========== ========== ========== ==========
Weighted average number of common
shares outstanding used in basic and
diluted net loss per share calculation 29,316,466 36,632,642 34,654,620 36,632,642
=========== ========== ========== ==========
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 - - 127,175 - 127,175
Net loss for the period - - - (996,202) (996,202)
------------ ------------ ------------ ------------ ------------
Balance as of September 30, 2008 (unaudited) 36,633 $ 36,633 $ 10,181,125 $(12,026,587) $ (1,808,829)
============ ============ ============ ============ ============
(*) Net of issuance expenses.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS.
F - 5
ORGANITECH USA, INC.
CONDENSED CONSOLIDATED INTERIM STATEMTNS OF CASH FLOWS
- --------------------------------------------------------------------------------
IN U.S. DOLLARS
NINE MONTHS ENDED SEPTEMBER 30
----------- -----------
2007 2008
----------- -----------
UNAUDITED
------------------------------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $(1,144,849) $ (996,202)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating activities :
Amortization of stock - based compensation 162,572 127,175
Depreciation 21,049 13,961
Profit from disposal of property and equipment - (11,214)
Changes in accrued severance pay, net 9,136 7,731
Decrease (increase) in trade receivables (337,639) 180,267
Increase in other receivables and long term lease deposit (79,539) (62,607)
Decrease (increase) in Costs incurred on contracts in progress 70,774 (125,056)
Increase (decrease) in trade payables (178,326) 177,759
Increase (decrease) in other payables and accrued expenses 257,614 (352,640)
Increase (decrease) in customers advances (449,280) 148,450
----------- -----------
Total adjustments (523,639) 103,826
----------- -----------
Net cash used in operating activities (1,668,488) (892,376)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term deposits in banks - (4,418)
Proceeds from disposal of property and equipment 3,813 45,052
Purchase of property and equipment - (2,855)
----------- -----------
Net cash provided by investing activities 3,813 37,779
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES :
Issuance of shares, net of issuance expenses 1,883,120 -
Proceeds from issuance of a convertible loan 357,500 -
Decrease in short-term credit (1,574) -
----------- -----------
Net cash provided by financing activities 2,239,046 -
----------- -----------
Decrease in cash and cash equivalents 574,371 (854,597)
Cash and cash equivalents at the beginning of the period 569,319 909,551
----------- -----------
Cash and cash equivalents at the end the period $ 1,143,690 $ 54,954
=========== ===========
SUPPLEMENTARY CASH FLOW INFORMATION :
Interest paid
$ 18,769 $ 16,088
=========== ===========
Income tax paid $ 2,167 $ 2,594
=========== ===========
F - 6
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 $12,026,587 through September 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 September 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 nine-month and three-month
periods ended September 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 (UNAUDITED)
- --------------------------------------------------------------------------------
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 (UNAUDITED)
- --------------------------------------------------------------------------------
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. The fair
value of the options at the grant date was $10,490.
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 September 30,
2008, 947,000 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 (UNAUDITED)
- --------------------------------------------------------------------------------
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 September 30,
2008 and September 30, 2007 is as follows:
SEPTEMBER 30, 2008
---------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACT INTRINSIC
OPTIONS PRICE TERM (YEARS VALUE PRICE
--------- --------- --------- ---------
Outstanding as of January 1, 2008 3,706,508 $ 0.234
Granted 290,491 0.073
Forfeited (40,000) $ 0.187
---------
Outstanding as of
September 30, 2008 3,956,999 $ 0.223 7.26 $ 8,182
========= ========= ========= =========
Vested and expected to vest 3,911,637 $ 0.208 6.80 $ 8,094
========= ========= ========= =========
Exercisable as of September 30,
2008 3,049,751 $ 0.242 7.16 $ 6,429
========= ========= ========= =========
SEPTEMBER 30, 2008
---------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACT 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
September 30, 2007 3,706,508 $ 0.234 8.22 $ -
========= ========= ========= =========
Vested and expected to vest 3,706,508 $ 0.234 8.22 $ -
========= ========= ========= =========
Exercisable as of September 30,
2007 1,851,508 $ 0.254 7.89 $ -
========= ========= ========= =========
F - 10
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 4 - OPTIONS (CONT.)
B. Stock Option Plans (cont.)
(3) (cont.)
WEIGHTED
AVERAGE
OPTIONS FOR REMAINING
EXERCISE PRICE ORDINARY CONTRACTUAL TERM OPTIONS
PER SHARE SHARES (IN YEARS) EXERCISABLE
--------- --------- --------- ---------
$ 0.001 209,799 9.08 164,842
$ 0.187 - 0.20 2,560,000 7.25 2,020,000
$ 0.25 - 0.26 760,692 7.48 553,401
$ 0.28 330,000 7.75 215,000
$ 1.00 96,508 1.75 96,508
------ ---- ------
3,956,999 7.30 3,049,751
========= ==== =========
(4) A summary of the Company's stock option activity with regards to its
non-employees, as of September 30, 2008 and September 30, 2007 under
the plan is as follows:
SEPTEMBER 30, 2008
-------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACT INTRINSIC
OPTIONS PRICE TERM (YEARS VALUE PRICE
--------- --------- --------- ---------
Outstanding as of
January 1, 2008 145,000 $ 0.251
Forfeited (40,000) $ 0.187
---------
Outstanding as of
September 30, 2008 105,000 $ 0.276 7.73 $ -
========= ========= ========= =========
Exercisable as of
September 30, 2008 52,500 $ 0.276 7.73 $ -
========= ========= ========= =========
SEPTEMBER 30, 2008
-------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING AGGREGATE
NUMBER OF EXERCISE CONTRACT INTRINSIC
OPTIONS PRICE TERM (YEARS) VALUE PRICE
------- ------- ------- -------
Outstanding as of
January 1, 2007 and
September 30, 2007 145,000 $ 0.251 8.59 $ -
======= ======= ======= =======
Vested and expected to
be vest 145,000 $ 0.251 8.59 $ -
======= ======= ======= =======
Exercisable as of
September 30, 2007 36,250 $ 0.251 8.59 $ -
======= ======= ======= =======
F - 11
ORGANITECH USA, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
IN U.S. DOLLARS
NOTE 4 - OPTIONS (CONT.)
B. Stock Option Plans (cont.)
(4) (cont.)
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
EXERCISE PRICE OPTIONS FOR TERM OPTIONS
PER SHARE ORDINARY SHARES (IN YEARS) EXERCISABLE
- ------------ ------- ---- -------
$ 0.187 5,000 7.25 2,500
$ 0.28 100,000 7.75 50,000
------- ---- -------
105,000 7.73 52,500
======= ==== =======
(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 September 30, 2008, the total unrecognized estimated
compensation costs related to non-vested stock options granted prior
to that date was $116,357, which is expected to be recognized over a
weighted average period of 0.63 years.
(7) Compensation expenses were recognized during the three-month and
nine-month periods ended September 30, 2008 and September 30, 2007,
respectively, as follows:
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
----------------------- -----------------------
2007 2008 2007 2008
-------- -------- -------- --------
UNAUDITED
-----------------------------------------------------
Cost of revenues $ 28,865 $ 17,900 $ 7,017 $ 6,835
Research and development
expenses 16,539 12,025 3,481 3,436
Selling and marketing
expenses 50,110 39,257 18,972 12,974
General and administration
expenses 67,058 57,993 21,555 14,218
-------- -------- -------- --------
$162,572 $127,175 $ 51,025 $ 37,463
======== ======== ======== ========
F - 12
PART I
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 September 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 SEPTEMBER 30, 2008 TO THE QUARTER ENDED
SEPTEMBER 30, 2007
SUMMARY
NINE-MONTH PERIOD ENDED SEPTEMBER 30, THREE-MONTH PERIOD ENDED SEPTEMBER 30,
------------------------------ ------------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Revenues $ 656,885 $ 1,205,569 $ 326,218 $ 414,203
Net Loss $ (996,202) $(1,144,849) $ (315,093) $ (338,117)
Net Loss per Common Share $ (0.03) $ (0.04) $ (0.01) $ (0.01)
Dividends per Common Share $ 0 $ 0 $ 0 $ 0
RESULTS OF OPERATIONS
REVENUES
Revenues decreased by 46% to $656,885 in the nine months ended September 30,
2008 from $1,205,569 in the nine months ended September 30, 2007. Revenues in
the nine months ended September 30, 2008 derived primarily from a European
customer with which we started a project in the second quarter of 2008 - as
compared to the nine months ended September 30, 2007 where revenues were derived
from two projects: a large scale project that was executed with a Spanish
customer and a medium scale project that was executed with an Israeli customer.
All the projects were recognized based on the percentage-of-completion method.
In the three months ended September 30, 2008 revenues decreased by 21% to
$326,218 from $414,203 in the three months ended September 30, 2007.
COST OF REVENUES AND GROSS PROFIT (LOSS)
Cost of revenues decreased by 40% to $733,772 in the nine months ended September
30, 2008 from $1,215,683 in the nine months ended September 30, 2007. Cost of
revenues for the nine months ended September, 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 nine months ended
September 30, 2007 consisted of the same items as in (i) above. As a percentage
of revenues, our cost of revenues were 112% in the nine months ended September
30, 2008 compared to 101% in the nine months ended September 30, 2007.
In the three months ended September 30, 2008 cost of revenues decreased by 2% to
$374,105 from $381,546 in the three months ended September 30, 2007. The
decrease was primarily due to a decrease in the expenses related to the projects
we performed, that were smaller in the third quarter of 2008 as compared to the
third quarter of 2007.
For the reasons described above, we had gross loss of $76,887 in the nine months
ended September 30, 2008 compared to a gross loss of $10,114 in the nine months
ended September 30, 2007. For the same reasons described above, in the three
months ended September 30, 2008 we had gross loss of $47,887.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were not materially changed in the nine months
ended September 30, 2008 as compared to the nine months ended September 30, 2007
($245,374 versus $248,979, respectively). As a percentage of revenues, our
research and development expenses were 37% in the nine months ended September
30, 2008. Research and development expenses for both periods consisted mainly of
payroll costs.
Research and development expenses were not materially changed in the three
months ended September 30, 2008 as compared to the three months ended September
30, 2007 ($70,761 versus $72,279, respectively). As a percentage of revenues,
our research and development expenses were 22% in the three months ended
September 30, 2008. Research and development expenses for both periods consisted
mainly of payroll costs.
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 45% to $260,544 in the nine months
ended September 30, 2008 from $471,291 in the nine months ended September 30,
2007. The decrease in sales and marketing expenses is primarily attributable to
decreased payroll costs, decreased overseas travel expenses and to the decrease
of amortization expenses of demo-sites. As a percentage of revenues, our sales
and marketing expenses were 40% in the nine months ended September 30, 2008.
In the three months ended September 30, 2008 sales and marketing expenses
decreased by 49% to $85,616 from $166,470 in the three months ended September
30, 2007. The decrease was primarily due to decreased payroll costs, decreased
overseas travel expenses and a decrease of amortization expenses of demo sites.
As a percentage of revenues, our selling and marketing expenses were 26% in the
three months ended September 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 decreased by 8% to $388,170 in the nine
months ended September 30, 2008 from $420,162 in the nine months ended September
30, 2007. The decrease in general and administrative expenses was due to a
decrease in the payroll costs, 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 59% in the nine months ended
September 30, 2008.
In the three months ended September 30, 2008 general and administrative expenses
decreased by 34% to $105,002 from $159,296 in the three months ended September
30, 2007. The decrease in general and administrative expenses was due to
decreased payroll costs, decreased professional services expenses and other
general and administrative expenses. As a percentage of revenues, general and
administration expenses were 32% in the three months ended September 30, 2008.
We expect to maintain this level of general and administrative expenses, limited
to our available financial resources.
FINANCING EXPENSES
Financing expenses were $25,227 in the nine months ended September 30, 2008
compared to a financing income of $5,697 in the nine months ended September 30,
2007. During the nine months ended September 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 nine months ended September 30, 2007 financing income
consisted primarily of income related to currency exchange rates and income from
interest, off-set by interest on a convertible loan and financial institutions'
fees.
In the three months ended September 30, 2008 financing expenses were $5,827
compared to financing income of $27,271 in the three months ended September 30,
2007. The change in the financing item was primarily due to a decrease in income
related to currency exchange rates and a decrease in income from interest.
OPERATING LOSS AND NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
Our operating loss decreased by 16% to $970,975 in the nine months ended
September 30, 2008 from $1,150,546 in the nine months ended September 30, 2007
and our net loss decreased by 13% to $996,202 in the nine months ended September
30, 2008 from $1,144,849 in the nine months ended September 30, 2007.
In the three months ended September 30, 2008 our operating loss decreased by 15%
to $309,266 from $365,388 in the three months ended September 30, 2007 and our
net loss decreased by 7% to $315,093 in the three months ended September 30,
2008 from $338,117 in the three months ended September 30, 2007.
6
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2008, we had cash and cash equivalents totaling $54,954
compared to $909,551 as of December 31, 2007 and $1,143,690 as of September 30,
2007.
Since our inception in 1999, we have financed our operations through private
sales of shares of our common stock and convertible loans, for an aggregate
amount of $9.0 million (net of issuance expenses) as of September 30, 2008. 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 September 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 nine months ended September 30, 2008, we had $892,376 cash used in
operating activities compared with $1,668,488 for the nine months ended
September 30, 2007. The operating cash outflow for the nine months ended
September 30, 2008, was primarily a result of our net loss of $996,202 and a
decrease in other payables and accrued expenses and by an increase in
inventories and in other receivables. The cash outflow was partially offset by a
decrease in trade receivables, by an increase in customers advances and in trade
payables and by an amortization of deferred stock-based compensation.
For the nine months ended September 30, 2008 we had a net cash inflow provided
by investment activities of $37,779 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
nine months ended September 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.
For the nine months ended September 30, 2008 we have no cash inflow or outflow
from financing activities, compared with a net cash inflow of $2,239,046 for the
nine months ended September 30, 2007. The net cash inflow from financing
activities in the nine months ended September 30, 2007 was generated primarily
from issuance of shares and from proceeds from the issuance of a convertible
loan.
Other than as otherwise mentioned in this quarterly report, there were no
material long term loans, commitments or off-balance sheet guarantees as of
September 30, 2008.
We are focusing on taking three primary steps in order to manage the potential
short-fall in our cash position: Firstly, we our discussing with certain of our
shareholders the possibility of a private equity investment in our company in
order to alleviate our immediate cash concerns; secondly, we are discussing with
a current customer the possibility of additional major contracts in Europe; and
thirdly, we have undertaken major reductions in our expenses, including the
termination of several of our employees and salary reductions. We have also
entered into discussions with the holder of our $375,000 convertible loan for
the delay of repayment of the loan and its interest payments.
Given the current global financial uncertainties, and the relatively expensive
nature of our individual products many of our existing and potential clients may
find it difficult or impossible to locate sufficient funds to purchase new
systems from us. These uncertainties may also impact on the ability as well as
the desire of our shareholders to invest additional amounts in our company.
Should these uncertainties continue, then given our financial position, we do
not know how we will be able to meet our known future financial commitments and
may have to cease our operations.
7
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. The term "disclosure
controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by the company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Company's management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives, and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on that evaluation, our management
concluded that our disclosure controls and procedures required by paragraph (b)
of Rules 13a-15 or 15d-15 were not effective at the reasonable assurance level
because of (a) the material weaknesses in our internal control over financial
reporting identified in our annual report on Form 10-KSB for the fiscal year
ended December 31,2 007, which have not been fully remedied, (b) the 302
certifications of our principal executive officer and our principal financial
officer filed as exhibits to our Form 10-KSB for the fiscal year ended December
31, 2007 and quarterly reports, which inadvertently omitted certain required
language and (c) the audit report of our independent registered public
accounting firm for the fiscal year ended December 31, 2007, which included
language that inaccurately referred to the standards applicable to such report.
Efforts we have taken to remedy weaknesses in internal control over financial
reporting during the last fiscal quarter are disclosed below. The Company has
also engaged a law firm to assist us in preparing and filing corporate documents
and reviewing the adequacy and accuracy of our certifications and audit reports.
The Company has submitted amendments to this Form 10-KSB and quarterly reports
during 2008 to remedy those deficiencies discussed above.
8
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING FOR
DECEMBER 31, 2007.
Not Applicable.
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. In light
of our previous 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 Implementing improvements to the control and oversight of the duties
relating to the systems we use in the evaluation and processing of
accounts which exceed $5,000 and in the posting and recording of
journal entries into such accounts (in which material weaknesses have
been identified as described above); In this connection, our chief
accounting officer reviewed for every month every journal entry which
exceeds $5,000 and personally approved it. In the event that upon
review a journal entry over $5,000 was determined to be incorrect, the
journal entry was corrected accordingly.
o Imposing strict procedures in relation to our purchase orders and our
suppliers. In this connection our accounting department together with
our personnel who were responsible for issuing purchase orders
documented thoroughly each issued purchase order. We paid to suppliers
only those invoices which had been confirmed by the employee who was
responsible for initiating the related purchase. Additionally, our
accounting department together with our chief accounting officer
investigated any discrepancies between purchase orders and their
related invoices. Where a discrepancy was discovered, the reasons for
such discrepancy were checked and mistakes were rectified.
o Implementing improvements to our debt collection methods. We reviewed
the accounts receivable each week and conducted a strict follow-up in
order to maximize the collection of debts.
INHERENT LIMITATIONS ON EFFECTIVENESS OF INTERNAL CONTROLS
Our management, including our chief executive officer and chief accounting
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
Mr. Amnon Sudri who was nominated to serve on our Board of Directors by Keren
Katzir Debenture for Investment Ltd., one of our affiliates, resigned from our
Board of Directors on August 17, 2008.
On November 18, 2008, Yaron Shalem resigned as our Chief Financial Officer.
Neither of the resignations was the result of any disagreement with our company
or its management.
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)
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
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 Accounting 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 Accounting 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.
We have not filed any current reports on Form 8-K filed since July 1, 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, 2008.
ORGANITECH USA, INC.
By: /s/ Rachel Ben-Nun
- ----------------------
Rachel Ben-Nun, Chief Executive Officer
By: /s/ Oren Bloch
- ----------------------
Oren Bloch, Principal Financial Officer
11